<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-Q


[X]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended June 30, 1998

                                       or

[ ]            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 1-6862

                       DONALDSON, LUFKIN & JENRETTE, INC.
          ------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                   Delaware                                13-1898818
   ---------------------------------------             -------------------
       (State or other jurisdiction of                  (I.R.S. Employer
        incorporation or organization)                 Identification No.)

     277 Park Avenue, New York, New York                      10172
   ---------------------------------------             -------------------
   (Address of principal executive office)                 (Zip Code)

       Registrant's telephone number, including area code: (212) 892-3000

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 than the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( ).

As of August 7, 1998, the latest practicable date, there were 122,563,252
shares of Common Stock, $0.10 par value, outstanding.

                                       1
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
                                   FORM 10-Q
                      FOR THE QUARTER ENDED JUNE 30, 1998

                               TABLE OF CONTENTS


Part I  FINANCIAL INFORMATION

                                                                    Page Number
        Item 1. Financial Statements

                Condensed Consolidated Statements of Financial
                Condition at June  30,  1998 and December 31, 1997
                (Unaudited)............................................   3

                Condensed Consolidated Statements of Income for
                the three and six months ended June 30, 1998
                and 1997 (Unaudited) ..................................   5

                Condensed Consolidated Statements of Changes in
                Stockholders' Equity for the year ended December 31,
                1997 and the six months ended June 30, 1998
                (Unaudited) ...........................................   6

                Condensed Consolidated Statements of Cash Flows for
                the six months ended June 30, 1998 and 1997
                (Unaudited)............................................   7

                Notes to Condensed Consolidated Financial
                Statements (Unaudited).................................   9

        Item 2. Management's Discussion and Analysis of Financial
                Condition and Results of Operations....................  14

        Item 3. Quantitative and Qualitative Disclosures About
                Market Risk............................................  19


Part II OTHER INFORMATION

        Item 1. Legal Proceedings......................................  21

        Item 2. Changes in Securities and Use of Proceeds..............  22

        Item 6. Exhibits and Reports on Form 8-K.......................  22

                Signature..............................................  23

                                       2

<PAGE>

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

      Condensed Consolidated Statements of Financial Condition (Unaudited)
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                      June 30,          December 31,
                                                                                        1998                1997
                                                                                      --------          ------------
                                     ASSETS
<S>                                                                                 <C>                <C>         
Cash and cash equivalents....................................................       $    459,353       $    273,164
Cash and securities segregated for regulatory purposes or deposited with
   clearing organizations....................................................            348,784            832,093
Collateralized short-term agreements:
   Securities purchased under agreements to resell...........................         21,663,789         22,628,782
   Securities borrowed.......................................................         24,220,198         20,598,639
Receivables:
   Customers.................................................................          6,740,818          4,397,668
   Brokers, dealers and other................................................          4,571,661          3,162,970
Financial instruments owned, at value:
   U.S. government and agency................................................          8,567,615          6,834,996
   Corporate debt............................................................          5,330,002          5,577,023
   Foreign sovereign debt....................................................          2,000,004          1,624,235
   Mortgage whole loans......................................................            923,531          1,555,685
   Equity and other..........................................................          1,992,194            943,782
   Long-term corporate development investments...............................            454,265            315,774
Office facilities, at cost, (net of accumulated depreciation and amortization
   of $248,527 and $216,230, respectively)...................................            426,520            388,677
Other assets ................................................................          1,861,104          1,372,357
                                                                                    ------------       ------------
Total Assets.................................................................       $ 79,559,838       $ 70,505,845
                                                                                    ============       ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

      Condensed Consolidated Statements of Financial Condition (Unaudited)
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                      June 30,         December 31,
                                                                                        1998               1997
                                                                                    ------------       ------------
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                                <C>                <C>          
Commercial paper and short-term borrowings......................................   $   2,337,938      $   1,121,352
Collateralized short-term financings:
    Securities sold under agreements to repurchase..............................      36,692,568         36,006,656
    Securities loaned...........................................................       8,530,793          7,687,416
Payables:
    Customers...................................................................       5,795,471          5,071,653
    Brokers, dealers and other..................................................       4,597,280          2,912,218
Financial instruments sold not yet purchased, at value:
    U.S. government and agencies................................................       9,215,199          7,671,498
    Corporate debt..............................................................         935,499            854,155
    Foreign sovereign debt......................................................         371,491            553,852
    Equities & other............................................................       2,406,461          1,376,395
Accounts payable and accrued expenses...........................................       2,218,308          2,119,131
Other liabilities...............................................................       1,156,856            741,870
                                                                                    ------------       ------------
                                                                                      74,257,864         66,116,196
Long-term borrowings............................................................       2,563,206          2,128,159
                                                                                    ------------       ------------
         Total liabilities......................................................      76,821,070         68,244,355
                                                                                    ------------       ------------
Company-obligated mandatorily redeemable preferred securities
    of subsidiary trust holding solely debentures of the Company................         200,000            200,000
                                                                                    ------------       ------------
Stockholders' Equity:
    Preferred stock, 50,000,000 shares authorized:
       Series A Preferred Stock, at $50.00 per share liquidation
         preference (4,000,000 shares issued and outstanding)...................         200,000            200,000
       Series B Preferred Stock, at $50.00 per share liquidation
         preference (3,500,000 shares  issued and outstanding)..................         175,000                  -
    Common stock ($0.10 par value; 300,000,000 shares
       authorized; 117,355,060 and 111,852,762 shares issued
       and outstanding, respectively)...........................................          11,736             11,185
    Restricted stock units (10,358,294 units authorized; 2,082,876
       and 6,562,414 units issued and outstanding, respectively)................          21,339             67,255
    Paid-in capital.............................................................         537,906            440,926
    Retained earnings...........................................................       1,589,295          1,338,220
    Accumulated other comprehensive income......................................           3,492              3,904
                                                                                    ------------       ------------
         Total stockholders' equity.............................................       2,538,768          2,061,490
                                                                                    ------------       ------------
Total Liabilities and Stockholders' Equity......................................    $ 79,559,838       $ 70,505,845
                                                                                    ============       ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

            Condensed Consolidated Statements of Income (Unaudited)
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                   Three Months Ended                Six Months Ended
                                                                        June 30,                         June 30,
                                                                1998             1997             1998            1997
                                                             ----------       ----------       ----------      ----------
<S>                                                          <C>              <C>              <C>            <C>        
Revenues:
    Commissions.........................................     $  201,942       $  158,346       $  400,466     $   326,696
    Underwritings.......................................        352,675          181,538          673,474         357,360
    Fees................................................        318,436          176,695          573,807         322,827
    Interest, net of interest to finance U.S. govern-
      ment, agency and mortgage-backed securities
      of $782,747, $751,917, $1,548,818 and             
        $1,365,794, respectively........................        590,264          369,992        1,155,053         689,720
    Principal transactions-net:
      Trading...........................................         30,420           92,892          134,723         247,308
      Investment........................................         47,195           63,533           88,493          64,380
    Other...............................................         15,813           18,184           24,150          34,292
                                                             ----------       ----------       ----------      ----------
       Total revenues...................................      1,556,745        1,061,180        3,050,166       2,042,583
                                                             ----------       ----------       ----------      ----------
Costs and Expenses:
    Compensation and benefits...........................        672,966          442,330        1,317,050         865,779
    Interest............................................        378,241          247,006          752,107         465,177
    Brokerage, clearing, exchange fees and other........         72,916           51,305          129,237         109,785
    Occupancy and equipment.............................         64,614           45,335          124,048          85,305
    Communications......................................         21,658           15,927           41,159          29,771
    Other operating expenses............................        115,850           92,277          238,815         175,766
                                                             ----------       ----------       ----------      ----------
       Total costs and expenses.........................      1,326,245          894,180        2,602,416       1,731,583
                                                             ----------       ----------       ----------      ----------
Income before provision for income taxes................        230,500          167,000          447,750         311,000
                                                             ----------       ----------       ----------      ----------
Provision for income taxes..............................         88,200           66,800          171,300         124,400
                                                             ----------       ----------       ----------      ----------
Net income..............................................     $  142,300       $  100,200       $  276,450      $  186,600
                                                             ==========       ==========       ==========      ==========
Dividends on preferred stock............................     $    5,289       $    2,970       $   10,732      $    6,204
                                                             ==========       ==========       ==========      ==========
Earnings applicable to common shares....................     $  137,011       $   97,230       $  265,718      $  180,396
                                                             ==========      ===========       ==========      ==========
Earnings per share:
    Basic...............................................     $     1.17       $     0.88       $     2.29      $     1.65
    Diluted.............................................     $     1.05       $     0.79       $     2.05      $     1.47
                                                             ==========       ==========       ==========      ==========
Weighted average common shares:
    Basic...............................................        117,394          110,234          116,244         109,180
    Diluted.............................................        130,661          124,106          129,795         122,634
                                                             ==========       ==========       ==========      ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

                Condensed Consolidated Statements of Changes in
                        Stockholders' Equity (Unaudited)

  For the Year Ended December 31, 1997 and the Six Months Ended June 30, 1998
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                                              Restricted                                 Other
                                      Preferred    Common        Stock       Paid-in    Retained     Comprehensive
                                        Stock       Stock        Units       Capital    Earnings         Income         Total
                                       --------    -------      --------    --------   ----------        ------       ----------
<S>                                    <C>         <C>          <C>         <C>        <C>               <C>          <C>       
Balances at December 31, 1996.......   $200,000    $10,659      $104,167    $360,660   $  969,856        $1,897       $1,647,239

Net income...........................         -          -             -           -      408,250             -          408,250
Dividends:
   Common stock ($0.25 per share)....         -          -             -           -      (27,742)            -          (27,742)
   Preferred stock...................         -          -             -           -      (12,144)            -          (12,144)
Common stock issued upon the
   exercise of stock options,
   including related tax benefits....         -         30             -       6,428            -             -            6,458
Conversion of restricted stock
   units to common stock,
   including related tax benefits....         -        358       (36,756)     45,041            -             -            8,643
Forfeiture of restricted stock units.         -          -          (156)        156            -             -                -
Conversion of debentures.............         -        138             -      28,641            -             -           28,779
Translation adjustment...............         -          -             -           -            -         2,007            2,007
                                       --------    -------      --------    --------   ----------        ------       ----------

Balances at December 31, 1997.......   $200,000    $11,185      $ 67,255    $440,926   $1,338,220        $3,904       $2,061,490

Net income...........................         -          -             -           -      276,450             -         276,450
Dividends:
   Common stock ($0.125 per
      share).........................         -          -             -           -      (14,643)            -          (14,643)
   Preferred stock ..................         -          -             -           -      (10,732)            -          (10,732)
Issuance of Series B Preferred
  Stock.............................    175,000          -             -           -            -             -          175,000
Common stock issued upon the
  exercise of  stock options,
  including related tax benefits....          -        103             -      26,085            -             -           26,188
Conversion of restricted stock
   units to common stock,
   including related tax benefits....         -        448       (45,891)     70,870            -             -           25,427
Forfeiture of restricted stock units.         -          -           (25)         25            -             -                -
Translation adjustment...............         -          -             -           -            -          (412)           (412)
                                       --------    -------      --------    --------   ----------        ------       ----------
Balances at June 30, 1998...........   $375,000    $11,736      $ 21,339    $537,906   $1,589,295        $3,492       $2,538,768
                                       ========    =======      ========    ========   ==========        ======       ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

          Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)

                For the Six Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                             1998               1997
                                                                                         ------------       ------------
<S>                                                                                      <C>                <C>         
Cash flows from operating activities:
  Net income.......................................................................      $    276,450       $    186,600
                                                                                         ------------       ------------
  Adjustments to reconcile net income to net cash (used in) provided by
   operating activities:
     Depreciation and amortization.................................................            42,478             27,981
     Deferred taxes................................................................            (7,003)            10,643
     Decrease in unrealized depreciation of long-term corporate
       development  investments....................................................            (2,042)           (23,571)
                                                                                         ------------       ------------
                                                                                              309,883            201,653
   (Increase) decrease in operating assets:
     Cash and securities segregated for regulatory
       purposes or deposited with clearing organizations...........................           483,309            (31,126)
     Securities purchased under agreements to resell...............................        (4,135,727)        (4,340,640)
     Securities borrowed...........................................................        (3,621,559)        (4,414,529)
     Receivables from customers....................................................        (2,343,150)          (836,106)
     Receivables from brokers, dealers and other...................................        (1,408,691)        (1,531,088)
     Financial instruments owned, at value.........................................        (2,277,625)        (1,909,207)
     Other assets..................................................................          (221,259)          (175,123)
   Increase (decrease) in operating liabilities:
     Securities sold under agreements to repurchase................................         4,135,727          4,340,640
     Securities loaned.............................................................           843,377          1,688,736
     Payables to customers.........................................................           723,818          1,052,776
     Payables to brokers, dealers and other........................................         1,685,062            328,050
     Financial instruments sold not yet purchased, at value........................         2,472,750          1,379,440
     Accounts payable and accrued expenses.........................................            99,177           (184,365)
     Other liabilities and deferred amounts .......................................           450,818            126,358
     Translation adjustment........................................................              (412)             1,671
                                                                                         ------------       ------------
Net cash used in operating activities..............................................      $ (2,804,502)      $ (4,302,860)
                                                                                         ------------       ------------
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

          Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)

                For the Six Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                           1998                 1997
                                                                                        -----------         ----------- 
<S>                                                                                     <C>                 <C>         
Cash flows from investing activities: Net (payments for) proceeds from:
    Purchases of long-term corporate development investments....................        $  (308,286)        $   (78,415)
    Sales of long-term corporate development investments........................            171,837              53,742
    Office facilities...........................................................            (76,522)            (67,113)
    Other assets................................................................           (262,901)            (81,634)
                                                                                        -----------         ----------- 
Net cash used in investing activities...........................................           (475,872)           (173,420)
                                                                                        -----------         ----------- 
Cash flows from financing activities: Net proceeds from (payments for):
    Short-term financings.......................................................          2,867,491           4,309,601
    Senior notes................................................................            643,076                   -
    Subordinated revolving credit agreement.....................................           (325,000)            118,500
    Medium-term notes...........................................................            124,562              89,805
    Other long-term debt........................................................             (8,248)             17,526
    Dividends...................................................................            (25,375)            (19,977)
    Issuance of Series B preferred stock........................................            175,000                   -
    Exercise of stock options...................................................             15,057                 145
                                                                                        -----------         ----------- 
Net cash provided by financing activities.......................................          3,466,563           4,515,600
                                                                                        -----------         ----------- 
Increase in cash and cash equivalents...........................................            186,189              39,320
Cash and cash equivalents at beginning of period................................            273,164             158,831
                                                                                        -----------         ----------- 
Cash and cash equivalents at end of period......................................        $   459,353         $   198,151
                                                                                        ===========         ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       8
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

        Notes to Condensed Consolidated Financial Statements (Unaudited)

                                 June 30, 1998


1.  Basis of Presentation

The condensed consolidated financial statements include Donaldson, Lufkin &
Jenrette, Inc. and its subsidiaries ("DLJ" or the "Company"). All significant
intercompany balances and transactions have been eliminated. The Company is a
majority owned subsidiary of The Equitable Companies Incorporated and its
subsidiaries (together, "Equitable"). The Company's separate financial
statements reflect Equitable's cost basis established at the time of
Equitable's acquisition of the Company in 1985.

Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
but is not required for interim reporting purposes has been condensed or
omitted. These condensed consolidated financial statements reflect, in the
opinion of management, all adjustments (consisting of normal, recurring
accruals) necessary for a fair presentation of the condensed consolidated
financial position and results of operations for the interim periods presented.
The results of operations for interim periods are not necessarily indicative of
results for the entire year. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto as of
and for the year ended December 31, 1997 included on Form 10-K filed by the
Company under the Securities Exchange Act of 1934.

The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the condensed consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Certain reclassifications have been made to prior year
financial statements to conform to the 1998 presentation.

2.  Common Stock Split

In February 1998, the Board of Directors declared a two-for-one stock split
(the "stock split") of the Company's common stock, subject to stockholder
approval, to increase the number of authorized common shares. In April 1998,
stockholders approved an amendment to the Company's Certificate of
Incorporation whereby the amount of total authorized shares of common stock was
increased to 300 million shares and the amount of total authorized shares of
preferred stock was increased to 50 million. The stock split was effected in
the form of a 100% stock dividend to stockholders of record on April 27, 1998,
and was paid on May 11, 1998. The par value of the common stock remained at
$.10 per share. Accordingly, an adjustment from paid-in capital to common stock
was made to preserve the value of the post-split shares. All common share, per
common share, restricted stock unit and option data have been restated for the
effect of the stock split in the accompanying condensed consolidated financial
statements.

3.  Income Taxes

Income taxes for interim period condensed consolidated financial statements
have been accrued using the Company's estimated effective tax rate. Federal
income taxes paid for the six months ended June 30, 1998 and 1997 were $14.7
and $45.2 million including net Federal income tax equivalents paid to
Equitable of $1.7 million and of $7.1 million, respectively for the same
period.

4.  Borrowings

Short-term borrowings are generally demand obligations, at interest rates
approximating Federal fund rates from banks and other financial institutions.
Such borrowings are generally used to finance securities inventories, to
facilitate the financial instruments settlement process and to finance
financial instruments purchased by customers on margin. In January 1998, the
Company commenced a $1.0 billion commercial paper program. Obligations issued
thereunder (the "Notes") are exempt from registration under the Securities Act
of 1933, as amended. The Notes rank pari passu with the Company's other
unsecured and unsubordinated indebtedness. At June 30, 1998, $661.1 million of
Notes were outstanding under this program.

                                       9
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

        Notes to Condensed Consolidated Financial Statements (Unaudited)


Long-term borrowings, including current maturities of $1.1 million and $32.8
million at June 30, 1998 and December 31, 1997, respectively, consist of the
following: June 30, December 31, 1998 1997 (In thousands)

<TABLE>
<S>                                                                   <C>            <C>        
Medium-term notes, 5.625%-6.90%  due various dates through 2016....   $   822,046    $   697,310
Senior subordinated revolving credit agreement due in 2000.........             -        325,000
Global floating rate notes, due in 2002............................       348,133        347,909
Subordinated exchange notes, 9.58%  due in 2003....................       225,000        225,000
Senior notes, 6 7/8% due in 2005...................................       497,646        497,484
Senior notes, 6 1/2% due in 2008...................................       643,173              -
Other..............................................................        27,208         35,456
                                                                      -----------    -----------
     Total long-term borrowings....................................   $ 2,563,206    $ 2,128,159
                                                                      ===========    ===========
</TABLE>

During the six months ended June 30, 1998, the Company issued $650.0 million of
6 1/2% Senior Notes which mature in 2008 and $125.0 million medium-term notes
that bear interest at rates ranging from 6.11% - 6.28% and mature at various
dates through 2003.

In May 1998, the Company repaid its $325 million senior subordinated revolving
credit agreement and terminated the related credit facility.

Subordinated exchange notes due in 2003 include $20.0 million due to a
subsidiary of Equitable at June 30, 1998.

During the second quarter of 1998, the Company amended its $2.0 billion
revolving credit facility to increase the aggregate commitment of banks
thereunder to $2.75 billion, of which $1.65 billion may be unsecured. There
were no borrowings outstanding under this agreement at June 30, 1998.

Interest paid on all borrowings and financing arrangements amounted to $2.3
billion and $1.8 billion for the six months ended June 30, 1998 and 1997,
respectively.

5.  Long-term Corporate Development Investments

Long-term corporate development investments represent the Company's involvement
in private debt and equity investments which generally have no readily
available market or may otherwise be restricted as to resale under the
Securities Act of 1933, as amended. Accordingly, these investments are carried
at estimated fair value as determined by the Finance Committee of the Board of
Directors. The cost of these investments was $459.7 million and $323.2 million
at June 30, 1998 and December 31, 1997, respectively. The decrease in net
unrealized depreciation for the six months ended June 30, 1998 and 1997
amounted to $2.0 million and $23.6 million, respectively. Changes in unrealized
appreciation (depreciation) arising from changes in fair value or upon
realization are reflected in revenues, principal transactions-net, investment
in the condensed consolidated statements of income.

6.  Net Capital

The Company's principal wholly-owned subsidiary, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC"), is a registered broker-dealer, a registered
futures commission merchant and member firm of The New York Stock Exchange,
Inc. (the "NYSE") and, accordingly, is subject to the minimum net capital
requirements of the Securities and Exchange Commission, NYSE and the
Commodities Futures Trading Commission. As such, it is subject to NYSE's net
capital rule which conforms to the Uniform Net Capital Rule pursuant to rule
15c3-1 of the Securities Exchange Act of 1934. Under the alternative method
permitted by this rule, the required net capital, as defined, shall not be less
than two percent of aggregate debit balances arising from customer
transactions, as defined, or four percent of segregated funds, as defined,
whichever is greater. The NYSE may also require a member firm to reduce its
business if its net capital is less than four percent of aggregate debit
balances and may prohibit a member firm from expanding its business and
declaring cash dividends if its net capital is less than five percent of
aggregate debit balances. At June 30, 1998, DLJSC's net capital of
approximately $929.1million was 14.6 percent of aggregate debit balances and in
excess of the minimum requirement by approximately $789.3 million.

                                      10
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

        Notes to Condensed Consolidated Financial Statements (Unaudited)


Certain of the Company's London-based broker-dealer subsidiaries are subject to
the requirements of the Securities and Futures Authority, a self-regulatory
organization established pursuant to the United Kingdom Financial Services Act
of 1986. Other U.S. and foreign broker-dealer subsidiaries of the Company are
subject to net capital requirements of their respective regulatory agencies. At
June 30, 1998, the Company and its broker-dealer subsidiaries were in
compliance with all applicable regulatory capital adequacy requirements.

7.  Earnings Per Share

Basic and diluted earnings per common share amounts have been calculated by
dividing earnings applicable to common shares (net income less preferred
dividends) by the weighted average common shares outstanding. Diluted earnings
per common share also include the dilutive effects of shares of common stock
issuable under the Restricted Stock Unit Plan and options under the treasury
stock method. All earnings per share amounts have been restated for the effect
of the stock split.

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per common share computations:

<TABLE>
<CAPTION>
                                                     Three Months Ended                   Six Months Ended
                                                          June 30,                            June 30,
                                                  1998              1997              1998             1997
                                                ---------         --------          ---------        --------
                                                                        (in thousands)
<S>                                             <C>               <C>                <C>             <C>     
Earnings applicable to Common Shares-Basic      $ 137,011         $ 97,230           $ 265,718       $180,396

Effect of Dilutive Securities:
        Convertible Debt                                -              216                  -             216
                                                ---------         --------          ---------        --------
Earnings applicable to Common Shares- Diluted   $ 137,011         $ 97,446          $ 265,718        $180,612
                                                =========         ========          =========        ========

Weighted Average Common Shares- Basic             117,394          110,234            116,244         109,180

Effect of Dilutive Securities:
       Restricted Stock Units                       1,929            6,522              2,746           7,577
       Stock Options                               11,338            5,980             10,805           5,188
       Convertible Debt                                 -            1,370                  -             689
                                                ---------         --------          ---------        --------
Weighted Average Common Shares- Diluted           130,661          124,106            129,795         122,634
                                                =========         ========          =========        ========
</TABLE>

8.  Stockholders' Equity

In January 1998, the Company issued 3.5 million shares of Fixed/Adjustable Rate
Cumulative Preferred Stock, Series B, with a liquidation preference of $50 per
share ($175.0 million aggregate liquidation value). Dividends are payable
quarterly at a rate of 5.30% per annum, subject to adjustment after January
2003.

In February 1998, approximately 4.4 million restricted stock units (after
giving effect to the stock split) vested and were converted into the Company's
common stock from the authorized and unissued shares. Approximately 1.95
million of such shares (after giving effect to the stock split) were deposited
in a grantor trust pursuant to the Executive Deferred Compensation Plan.

In July 1998, the Company sold an aggregate of five million shares of newly
issued common stock to Equitable and AXA Holdings (Belgium), an affiliate of
AXA UAP for $300.0 million in a transaction exempt from the registration
requirement of the Securities Act of 1933, under Section 4(2). As a result,
Equitable and its affiliates beneficial ownership of the Company increased to
approximately 73 percent on an undiluted basis.

                                      11
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

        Notes to Condensed Consolidated Financial Statements (Unaudited)


9.  Comprehensive Income

The components of comprehensive income for the three and six months ended June
30, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                    Three Months Ended             Six Months Ended
                                                                         June 30,                       June 30,
                                                                    1998          1997             1998         1997
                                                                 ---------     ---------        ---------    ---------
                                                                                    (In thousands)

<S>                                                              <C>           <C>              <C>          <C>      
Net income.................................................      $ 142,300     $ 100,200        $ 276,450    $ 186,600
  Other comprehensive income:
  Foreign currency translation adjustments.................            150           988             (412)       1,671
                                                                 ---------     ---------        ---------    ---------
Total comprehensive income.................................      $ 142,450     $ 101,188        $ 276,038    $ 188,271
                                                                 =========     =========        =========    =========
</TABLE>

10. Derivative Financial Instruments

The Company enters into certain contractual agreements referred to as
derivatives or off-balance sheet financial instruments involving options,
forwards and futures and swap agreements. Substantially all of the Company's
activities related to derivatives are, by their nature, trading activities
which are primarily for the purpose of customer accommodations. The Company's
option activities consist primarily of writing over-the-counter ("OTC") options
to accommodate its customers' needs. Forward and futures contracts primarily
represent commitments to purchase or sell U.S. government and agency issued or
guaranteed securities, money market instruments and foreign currency. The
Company enters into swap transactions to manage foreign currency, interest rate
and equity risks. The Company's involvement in commodity derivative instruments
is not significant. Although the Company may enter into certain derivative
instruments to provide an economic hedge against certain risks, all realized
and unrealized gains and losses on these instruments are recorded currently in
the condensed consolidated statements of income.

Accounting Policies for Derivatives
Changes in unrealized gains or losses as well as realized gains and losses at
settlement on all derivative instruments (options, forward and futures
contracts and swaps) are included in the condensed consolidated statements of
income in principal transactions-net, trading. Related offsetting amounts are
presented as receivables or payables from brokers, dealers and other in the
condensed consolidated statements of financial condition. Fair value of certain
options includes the unamortized premiums which are deferred and are included
in payables to brokers, dealers and other in the condensed consolidated
statements of financial condition. Such premiums are recognized over the life
of the option contracts on a straight-line basis. Cash flows from derivative
instruments are presented as operating activities in the condensed consolidated
statements of cash flows.

The Company also enters into swap transactions as an end-user for non-trading
purposes to modify the interest rate and foreign currency exposure associated
with certain liabilities and assets. Such transactions are accounted for on an
accrual basis. Under the accrual basis, the net amount to be received or paid
under the swap agreement is accrued as part of interest expense in the
condensed consolidated statements of income.

Options contracts are typically written for a duration of less than 13 months.
The notional (contract) values of written options contracts outstanding was
approximately $7.9 billion and $5.4 billion at June 30, 1998 and December 31,
1997, respectively. Such options contracts are substantially covered by various
financial instruments that the Company has purchased or sold on a proprietary
basis.

The notional amounts of forward and futures contracts are treated as
off-balance sheet items. The notional contract and market values of such
contracts at June 30, 1998 and December 31, 1997, were as follows:

<TABLE>
<CAPTION>
                                                                             June 30, 1998                 December 31, 1997
                                                                             -------------                 -----------------
                                                                        Purchases       Sales          Purchases         Sales
                                                                        ---------       -----          ---------         -----
                                                                                          (In millions)
<S>                                                                     <C>            <C>             <C>             <C>     
Forward Contracts
 (Notional Contract Value).......................................       $ 33,814       $ 37,750        $ 18,366        $ 27,028
                                                                        ========       ========        ========        ========
Futures Contracts and Options on Futures Contracts
  (Market Value).................................................       $  1,560       $  3,441        $    988        $  2,767
                                                                        ========       ========        ========        ========
</TABLE>

                                      12
<PAGE>

              DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

        Notes to Condensed Consolidated Financial Statements (Unaudited)


The notional (contract) value of swap agreements was approximately $2.1 billion
and $553.8 million at June 30, 1998 and December 31, 1997, respectively.

The notional or contract amounts indicate the extent of the Company's
involvement in the derivative instruments noted above. They do not measure the
Company's exposure to market or credit risk and do not represent the future
cash requirements of such contracts.

11. Commitments and Contingencies

At June 30, 1998, the Company was contingently liable for unsecured letters of
credit of approximately $258.2 million.

The Company has outstanding commitments, expiring on March 16, 2000, to provide
financings to third parties in the total amount of $150.0 million which would
be secured by mortgage loans on real estate properties. At June 30, 1998,
unfunded commitments outstanding under this facility amounted to $53.5 million.
In addition, the Company enters into commitments to extend credit in connection
with the origination and syndication of senior bank debt of non-investment
grade borrowers. At June 30, 1998, unfunded senior bank loan commitments
outstanding amounted to $514.7 million.

The Company has commitments to invest on a side by side basis with merchant
banking partnerships in the amount of $781.0 million at June 30, 1998.

As a securities broker and dealer, risk is an inherent part of the Company's
business activities. The principal types of risks involved in the Company's
activities are market risk, credit or counterparty risk and transaction risk.
The Company has developed an infrastructure designed to control, monitor and
manage each type of risk. For a further discussion of these matters, refer to
Notes 8, 9 and 10 of the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.

12. Legal Proceedings

Certain significant legal proceedings and matters have been previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. With respect to the litigation in the National Gypsum case,
DLJSC has appealed the Bankruptcy Court's ruling in January 1998 that the State
Court plaintiff's claims were not barred by the NGC plan of reorganization
insofar as they alleged nondisclosure of certain cost reductions. On May 7,
1998, DLJSC and others were named as defendants in a second action filed in a
Texas State Court brought by the NGC Settlement Trust. The allegations of this
second Texas State Court action are substantially similar to those of the
earlier class action pending in State Court.

In addition to the significant proceedings and matters referred to above, the
Company has been named as a defendant in a number of actions relating to its
various businesses including various civil actions and arbitrations arising out
of its activities as a broker-dealer in securities, as an underwriter and as an
employer and arising out of alleged employee misconduct. Some of the actions
have been brought on behalf of various classes of claimants and seek damages of
material or indeterminate amounts. The Company is also involved, from time to
time, in proceedings with, and investigations by, governmental agencies and
self regulatory organizations. Although there can be no assurance that such
other actions, proceedings, investigations and litigation will not have a
material adverse effect on the results of operations of the Company in any
future period, depending in part on the results for such period, in the opinion
of management of the Company the ultimate resolution of any such other actions,
proceedings, investigations and litigation against the Company will not have a
material adverse effect on the consolidated financial condition and/or results
of operations of the Company.

                                      13
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The following analysis of the consolidated results of operations and financial
condition of Donaldson, Lufkin & Jenrette, Inc. and Subsidiaries (the
"Company") should be read in conjunction with the Condensed Consolidated
Financial Statements and the related Notes to Condensed Consolidated Financial
Statements included elsewhere herein, and with the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's 1997 Annual Report on Form 10-K.

BUSINESS ENVIRONMENT

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

         The U.S. economy remained strong for the first six months of 1998,
despite potential weakening due to the spillover from Asia's economic crisis.
U.S. interest rates and inflation remained low, with the last increase in
interest rates by the Federal Reserve Board occurring in March 1997. The bond
markets rallied during the latter half of the second quarter when the 30-year
Treasury bond reached new record lows. Underwriting volumes for both equity and
high-yield strengthened over the prior year due to increased stock prices and
attractive yields. Trading activity on major exchanges continued to increase to
record volume levels. The Dow Jones Industrial Average and Standard & Poor's
500 Index increased 13.2% and 16.8%, respectively for the first six months of
1998.

Global financial market conditions were generally favorable during the quarter.
European interest rates and currencies have stabilized in anticipation of
economic and monetary union ("EMU"). However, U.S. interest rate policy will
continue to be a primary factor in determining whether the European capital
markets will remain buoyant.

RECENT DEVELOPMENTS

         During the six months ended June 30, 1998, the Company issued $650.0
million of 6 1/2% Senior Notes and $125.0 million medium-term notes that bear
interest at rates ranging from 6.11%-6.28%. In addition, the Company repaid its
$325 million senior subordinated revolving credit agreement and terminated the
related facility.

         In July 1998, the Company sold an aggregate of five million shares of
newly issued common stock to Equitable and AXA Holdings (Belgium), an affiliate
AXA UAP for $300.0 million in a transaction exempt from the registration
requirement of the Securities Act of 1933, under Section 4(2). As a result,
Equitable and its affiliates beneficial ownership of the Company increased to
approximately 73 percent on an undiluted basis.

RESULTS OF OPERATIONS

QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997

         Total revenues for the quarter ended June 30, 1998 were $1.6 billion,
an increase of $495.6 million or 46.7% over the quarter ended June 30, 1997.
Revenues increased in the second quarter of 1998 due primarily to an increase
in net interest income, underwriting and fees.

         Commission revenues increased by $43.6 million or 27.5% to $201.9
million due to increased business in all areas and is generally consistent with
the overall growth in listed share volume on major equity exchanges.

         Underwriting revenues increased by $171.1 million or 94.3% to $352.7
million. The Company and the industry experienced increases in equity, fixed
income and high-yield underwriting during the second quarter of 1998.

         Fee revenues increased by $141.7 million or 80.2% to $318.4 million.
Overall, merger and acquisition, asset management and other advisory services
activities have increased during the second quarter of 1998.

         Interest, net of interest expense to finance U.S. government, agency
and mortgage-backed securities, increased by $220.3 million or 59.5% to $590.3
million. The largest increases took place in the stock loan/borrowed business.
In addition, there were increases in domestic and foreign margin balances and
higher levels of fixed-income securities in the Company's Fixed Income and
Emerging Markets business. The Emerging Markets business operates under a
trading strategy whereby profits are realized as net interest revenues rather
than as trading gains.

                                      14
<PAGE>

         Principal transactions-net, trading revenues decreased by $62.5
million or 67.3% to $30.4 million, primarily from the emerging markets trading
strategy referred to above. Such decreases are offset by the increases in net
interest revenues from the Company's Emerging Markets business.

         Principal transactions-net, investment revenues decreased by $16.3
million or 25.7% to $47.2 million. Realized gains on investments were $50.9
million. Net unrealized carrying values decreased by $3.7 million, which
includes the elimination of net unrealized depreciation of $1.1 million on
investments sold and an increase in net unrealized depreciation of $4.8 million
on retained investments.

         Other revenues, consisting primarily of dividends and miscellaneous
transaction revenues, decreased by $2.4 million or 13.0% to $15.8 million.

         Total costs and expenses for the second quarter of 1998 were $1.3
billion, an increase of $432.1 million or 48.3% over the second quarter of
1997.

         Compensation and benefits increased $230.6 million or 52.1% to $673.0
million. Incentive and production-related compensation increased by 55.5% in
1998 due to higher revenues and operating results. Base compensation, including
benefits and all payroll taxes, increased by 42.2% due to continued hiring of
senior level executives in various business groups. At June 30, 1998, full-time
personnel totaled 7,710 compared to 6,468 at June 30, 1997, an increase of
1,242 or 19.2 %.

         Interest expense increased $131.2 million or 53.1% to $378.2 million.
Most of this increase was related to the financing of domestic and foreign
stock loan/borrowed business as well as expanded levels of inventory of
fixed-income related products including foreign local fixed-income securities.

         All other expenses, as noted below, increased by $70.2 million or
34.3% to $275.0 million for the second quarter of 1998.

         Brokerage, clearing, exchange fees and other expenses increased by
$21.6 million due to increased volume related expense and underwriting
activity. Occupancy and equipment costs increased by $19.3 million as a result
of the expansion of the Company's principal office in the U.S. and the
expansion of the Company's other domestic and overseas offices. Communications
costs increased by $5.7 million due to expanded facilities and growth in
professional staff. All other operating expenses increased by $23.6 million.
Included therein are professional fees, travel and entertainment, and printing
and stationery which increased due to an overall increase in the level of
business activity. Data processing costs increased due to expansion of the
Company's international operations and the implementation and development of
new systems. In addition, these costs increased due to the overhaul of the
online customer trading and information system for the Company's correspondent
brokerage network as well as costs relating to the Year 2000 project.

         The Company's income tax provision for the second quarter of 1998 and
1997 was $88.2 million and $66.8 million, respectively, which represented a
38.3% and 40% effective tax rate, respectively.

         Net income for the quarter ended June 30, 1998 was $142.3 million, up
$42.1 million or 42.0% from the comparable 1997 period. Basic and diluted
earnings per common share using the treasury stock method were $1.17 and $1.05
and $0.88 and $0.79 for the second quarter of 1998 and 1997, respectively.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

         Total revenues for the six months ended June 30, 1998 were $3.1
billion, an increase of $1.0 billion or 49.3% over the six months ended June
30, 1997. Revenues increased primarily due to increases in fees and net
interest income during 1998.

         Commission revenues increased by $73.8 million or 22.6% to $400.5
million due to increased business in all areas and is generally consistent with
the overall growth in listed share volume on major equity exchanges.

         Underwriting revenues increased by $316.1 million or 88.5% to $673.5
million. The Company and the industry experienced increases in equity fixed
income and high yield underwriting during the six months ended June 30, 1998.

         Fee revenues increased by $251.0 million or 77.7% to $573.8 million.
Overall, merger and acquisition, asset management and other advisory services
activities have increased during the first six months of 1998.

         Interest, net of interest expense to finance U.S. government, agency
and mortgage-backed securities, increased by $465.3 million or 67.5% to $1.2
billion. The largest increases took place in the stock loan/borrowed business.
In addition, there were increases in domestic and foreign margin balances and
higher levels of foreign fixed-income securities in the Company's Fixed Income
and Emerging Markets business. The Emerging Markets business operates under a
trading strategy whereby profits are realized as net interest revenues rather
than as trading gains.

                                      15
<PAGE>

         Principal transactions-net, trading revenues decreased by $112.6
million or 45.5% to $134.7 million primarily from the emerging markets trading
strategy referred to above. Such decreases are offset by the increases in net
interest revenues from the Company's Emerging Markets business.

         Principal transactions-net, investment revenues increased by $24.1
million or 37.5% to $88.5 million. Realized gains on investments were $86.5
million. Net unrealized carrying values increased by $2.0 million, which
includes the elimination of net unrealized depreciation of $5.4 million on
investments sold and an increase in net unrealized depreciation of $3.4 million
on retained investments.

         Other revenues, consisting primarily of dividends and miscellaneous
transaction revenues, decreased by $10.1 million or 29.6% to $24.2 million.

         Total costs and expenses for the six months ended June 30, 1998 were
$2.6 billion, an increase of $870.8 million or 50.3% over the six months ended
1997. During 1998, the Company launched an international equities group, opened
an office in Moscow and established a high-yield business in London. In
addition, the Investment Banking Group expanded coverage in the financial
services, technology and telecommunications industries.

         Compensation and benefits increased $451.3 million or 52.1% to $1.3
billion. Incentive and production-related compensation increased by 55.2% in
1998 due to higher revenues and operating results. Base compensation, including
benefits and all payroll taxes, increased by 43.0% due to the hiring of more
senior level executives in various business groups. In addition, the first
quarter of 1998 includes a $29 million one-time provision for costs associated
primarily with the Company's plans for significant expansion in Europe.. At
June 30, 1998, full-time personnel totaled 7,710 compared to 6,468 at June 30,
1997, an increase of 1,242 or 19.2%.

         Interest expense increased $286.9 million or 61.7% to $752.1 million.
Most of this increase was related to the financing of Pershings domestic and
foreign stock loan/borrowed business as well as expanded levels of inventory of
fixed-income related products including foreign local fixed-income securities.

         All other expenses, as noted below, increased by $132.6 million or
33.1% to $533.3 million for the first six months of 1998.

         Brokerage, clearing, exchange fees and other expenses increased by
$19.5 million due to increased share volume and transaction fee payments.
Occupancy and equipment costs increased by $38.7 million as a result of the
expansion of the Company's principal office in the U.S. and the expansion of
the Company's other domestic and overseas offices. Communications costs
increased by $11.4 million due to expanded facilities and growth in
professional staff. All other operating expenses increased by $63.0 million.
Included therein are professional fees, travel and entertainment, and printing
and stationery which increased due to an overall increase in the level of
business activity. Data processing costs increased due to expansion of the
Company's international operations and the implementation and development of
new systems. In addition, these costs increased due to the overhaul of the
online customer trading and information system for the Company's correspondent
brokerage network as well as costs relating to the Year 2000 project.

         The Company's income tax provision for the six months ended June 30,
1998 and 1997 was $171.3 million and $124.4 million, respectively, which
represented a 38.3% and 40% effective tax rate, respectively.

         Net income for the six months ended June 30, 1998 was $276.5 million,
up $89.9 million or 48.2% from the comparable 1997 period. Basic and diluted
earnings per common share using the treasury stock method were $2.29 and $2.05
and $1.65 and $1.47 for the six months ended June 30, 1998 and 1997,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's assets are highly liquid with the majority consisting of
securities inventories and collateralized receivables, both of which fluctuate
depending on the levels of proprietary trading and customer business. Such
collateralized receivables consist primarily of resale agreements and
securities borrowed, both of which are secured by U.S. government and agency
securities, and marketable corporate debt and equity securities. In addition,
the Company has significant receivables from customers, brokers and dealers
which turn over frequently. As a securities dealer, the Company may carry
significant levels of trading inventories to meet client needs. As such, the
Company's total assets or the individual components of total assets vary
significantly from period to period because of changes relating to customer
needs, economic and market conditions and proprietary trading strategies. A
relatively small percentage of total assets is fixed or held for a period of
longer than one year. The Company's total assets at June 30, 1998 and December
31, 1997 were $79.6 billion and $70.5 billion, respectively.

         The majority of the Company's assets are financed through daily
operations by repurchase agreements, financial instruments sold not yet
purchased, securities loaned, bank loans, and through payables to brokers and
dealers. Short-term funding is generally obtained at rates related to Federal
funds, LIBOR and money market rates. Other borrowing costs are negotiated
depending upon prevailing market conditions. The Company monitors

                                      16
<PAGE>

overall liquidity by tracking the extent to which unencumbered marketable
assets exceed short-term unsecured borrowings.

         During the second quarter of 1998, the Company amended its $2.0
billion revolving credit facility to increase the aggregate commitment of banks
thereunder to $2.75 billion, of which $1.65 billion may be unsecured. There
were no borrowings outstanding under this agreement at June 30, 1998.

         Certain of the Company's businesses are capital intensive. In addition
to normal operating requirements, capital is required to cover financing and
regulatory charges on securities inventories, merchant banking investments and
investments in fixed assets. The Company's overall capital needs are
continually reviewed to ensure that its capital base can appropriately support
the anticipated needs of its business units as well as the regulatory capital
requirements of subsidiaries. Based upon these analyses, management believes
that the Company's debt and equity base is adequate for current operating
levels. The Company has been active in raising additional long-term financing,
including the issuance of $650.0 million of 6 1/2% Senior Notes and $125.0
million medium-term notes during the six months ended June 30, 1998. In
addition, in May 1998, the Company repaid its $325 million senior subordinated
revolving credit agreement and terminated the related credit facility.

         In January 1998, the Company issued 3.5 million shares of
Fixed/Adjustable Rate Cumulative Preferred Stock, Series B, with a liquidation
preference of $50 per share ($175.0 million aggregate liquidation value).

         In January 1998, the Company commenced a $1.0 billion commercial paper
program. Obligations issued thereunder (the "Notes") are exempt from
registration under the Securities Act of 1933, as amended. The Notes rank pari
passu with the Company's other unsecured and unsubordinated indebtedness. At
June 30, 1998, the $661.1 million of Notes were outstanding under this program.

The Company's current credit ratings of its long-term debt and commercial paper
are as follows:

                                         Long-Term Debt        Commercial Paper
                                         --------------        ----------------
         Duff & Phelps                         A                     D-1
         Fitch IBCA                            A                     F-1
         Moody's                               A3                    P-2
         Standard & Poors                      A-                    A-2
         Thomson Bank Watch                    A+                   TBW-1

         The Company's principal wholly-owned subsidiary, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") is subject to the capital
requirements of the Securities and Exchange Commission, the New York Stock
Exchange, Inc., the Commodities Futures Trading Commission and the Chicago
Board of Trade, all of which should ensure the general capital adequacy and
liquidity of broker-dealers and/or futures commission merchants. DLJSC has
consistently maintained capital substantially in excess of the minimum
requirements of such capital rules. At June 30, 1998, DLJSC had aggregate
regulatory "net capital," after adjustments required by Rule 15c3-1 under the
Securities Exchange Act of 1934, of approximately $929.1 million, which
exceeded minimum net capital requirements by $789.3 million and which exceeded
the net capital required by DLJSC's most restrictive debt covenants by $514.7
million. Certain of the Company's London-based broker-dealer subsidiaries are
subject to the requirements of the Securities and Futures Authority, a
self-regulatory organization established pursuant to the United Kingdom
Financial Services Act of 1986. Other U.S. and foreign broker-dealer
subsidiaries of the Company are subject to net capital requirements of their
respective regulatory agencies. At June 30, 1998, the Company and its
broker-dealer subsidiaries were in compliance with all applicable regulatory
capital adequacy requirements.

         The Company's overall capital and funding needs are continually
reviewed to ensure that its capital base can support the estimated needs of its
business units.

         The Company continues to explore potential acquisition opportunities
as a means of expanding its business. Such opportunities may involve
acquisitions which are material in size and may require the raising of
additional capital.

CASH FLOWS

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

Six Months Ended June 30, 1998 and 1997

         Cash and cash equivalents at June 30, 1998 and 1997, totaled $459.4
million and $198.2 million, respectively, an increase of $186.2 million and
$39.3 million, respectively for the comparable periods.

                                      17
<PAGE>

         Cash used in operating activities totaled $2.8 billion and $4.3
billion for the six months ended June 30, 1998 and 1997, respectively, and
reflects primarily an increase in operating assets. In the first six months of
1998, there were increases in assets including securities borrowed of $3.6
billion, receivables from customers of $2.3 billion and financial instruments
owned of $2.3 billion. These increases were partially offset by increases in
liabilities including financial instruments sold not yet purchased of $2.5
billion and payables to brokers, dealers and other of $1.7 billion. In the
first six months of 1997, there were increases in assets including securities
borrowed of $4.4 billion, financial instruments owned of $1.9 billion and
receivables from brokers, dealers and other of $1.5 billion. These increases
were partially offset by increases in securities loaned of $1.7 billion,
financial instruments sold not yet purchased of $1.4 billion and payables to
customers of $1.1 billion.

         For the six months ended June 30, 1998 and 1997, cash of $475.9
million and $173.4 million, respectively, was used in investing activities.
These generally consist of purchases of long-term corporate development
investments and office facilities. Additionally, in 1997, cash was used for the
purchase of net assets related to the Phoenix acquisition.

         For the first six months of 1998 and 1997, net cash provided by
financing activities totaled $3.5 billion and $4.5 billion, respectively, of
which, $2.9 billion and $4.3 billion was provided by short-term financings
(principally repurchase agreements). Additionally, in 1998, $643.1 million was
provided by the issuance of Senior Notes, $175.0 million was provided from the
issuance of Series B preferred stock and $325.0 million was used to repay the
Company's senior subordinated revolving credit facility.

DERIVATIVE FINANCIAL INSTRUMENTS

         The Company's derivative activities are not as extensive as many of
its competitors. Instead, the Company has focused its derivative activities on
writing over-the-counter ("OTC") options contracts to accommodate its
customers' needs, trading in forward contracts in U.S. government and agency
issued or guaranteed securities, trading in futures contracts on equity-based
indices, interest rate instruments and foreign currencies and entering into
swap transactions. As a result, the Company's involvement in derivative
products is related primarily to revenue generation through the provision of
products to its clients as opposed to covers of the Company's own positions.
The Company's involvement in commodity derivative instruments is not
significant.

         Options Contracts:

         Options contracts are typically written for a duration of less than 13
months. Revenues from these activities (net of related interest expenses) were
approximately $40.8 million and $42.2 million for the six months ended June 30,
1998 and 1997, respectively. Option writing revenues are primarily from the
amortization of option premiums.

         The notional value of written options contracts outstanding was
approximately $7.9 billion and $6.5 billion at June 30, 1998 and 1997,
respectively. Such written options contracts are substantially covered by
various financial instruments that the Company has purchased or sold as
principal. The overall increase in the notional value of all options was due
primarily to increases in customer activity related to U.S. government and
mortgage-backed securities and currency forward contracts.

         Forward and Futures Contracts:

         As part of the Company's trading activities, including trading
activities in the related cash instruments, the Company enters into forward and
futures contracts primarily involving securities, foreign currencies, indices
and forward rate agreements, as well as options on futures contracts. Such
forward and futures contracts are entered into as part of the Company's
covering transactions and generally are not used for speculative purposes.

         Net trading gains (losses) on forward contracts were $45.5 million and
$(47.7) million and net trading losses on futures contracts were $(26.2)
million and $(25.7) million for the six months ended June 30, 1998 and 1997,
respectively.

         The notional contract and market values of the forward and futures
contracts at June 30, 1998 and 1997 were as follows: 

<TABLE>
<CAPTION>
                                                    June 30, 1998                June 30, 1997
                                                    -------------                -------------
                                                Purchases     Sales          Purchases      Sales
                                                ---------     -----          ---------      -----
                                                                  (In millions)
<S>                                              <C>         <C>              <C>          <C>     
Forward Contracts
 (Notional Contract Value)................       $ 33,814    $ 37,750         $  15,622    $ 20,572
                                                 ========    ========         =========    ========
Futures Contracts and Options on
 Futures Contracts (Market Value).........       $  1,560    $   3,441        $   2,669    $  5,668
                                                 ========    =========        =========    ========
</TABLE>

                                      18
<PAGE>

         Swap Agreements:

     The Company enters into swap agreements to manage foreign currency,
interest rate and equity risk.

     The notional (contract) value of swap agreements was approximately $2.1
billion at June 30, 1998. The Company's involvement in swap contracts at June
30, 1997 was not significant.

The notional or contract amounts indicate the extent of the Company's
involvement in the derivative instruments noted above. They do not measure the
Company's exposure to market or credit risk and do not represent the future
cash requirements of such contracts.

MERCHANT BANKING AND BRIDGE LENDING ACTIVITIES

         The Company's merchant banking activities include investments in
various partnerships, for which subsidiaries of the Company act as general
partner, as well as direct investments in connection with its merchant banking
activities. As of June 30, 1998 the Company had investments of $370.1 million
and has commitments to invest up to an additional $781.0 million in connection
with these merchant banking activities.

         The Company is the sponsor of the $1.25 billion DLJ Bridge Fund which
provides short-term loans in connection with DLJ's merchant banking and
financial advisory businesses. The Bridge Fund has a commitment of subordinated
debt from Equitable. Any loans made by the DLJ Bridge Fund would be expected to
be refinanced, and the outstanding amounts repaid, within a short-term period.
At June 30, 1998, the DLJ Bridge Fund had extended $337.1 million of short-term
bridge loans.

HIGH-YIELD AND OTHER NON-INVESTMENT GRADE DEBT

         The Company participates in the underwriting, trading, sales and
holding of high-yield and other non-investment-grade debt. Non-investment-grade
debt is defined as loans to companies rated BB+ or lower as well as non-rated
loans. These instruments generally involve greater risk than investment-grade
debt holdings due to credit considerations, liquidity of secondary trading
markets and vulnerability to general economic conditions. In the second quarter
of 1998, the Company's high-yield and other non-investment grade debt increased
due to the demand for higher-yielding instruments, expansion of the Company's
senior bank debt activities and increased investment activities of the Emerging
Markets Division.

            The Company accounts for its high-yield financial instruments at
market value and other non-investment grade holdings generally at market or
fair value, with unrealized gains and losses recognized currently in earnings.
At June 30, 1998 and December 31, 1997 the Company had long and short financial
instruments (excluding derivatives and structured notes) as follows:

<TABLE>
<CAPTION>
                                                           June 30,                         December 31,
                                                             1998                                1997
                                                      ------------------                 ------------------
                                                                          (In millions)
                                                    Long               Short           Long               Short
                                                    ----               -----           ----               -----

<S>                                               <C>                 <C>            <C>                 <C>    
 High-Yield Debt............................      $   829.9           $ 375.8        $   645.6           $ 389.6
 Senior Bank Debt...........................        1,126.2                 -            864.1                 -
 Foreign Sovereign Debt.....................        1,995.7             317.4          1,615.4             543.3
 Mortgage Whole Loans ......................          921.3                 -          1,555.7                 -
 Convertible Debt...........................          396.1              16.6            320.3               3.1
 Other Non-Investment Grade.................          127.5              26.9             44.4               4.9
                                                  ---------           -------        ---------           -------
Totals......................................      $ 5,396.7           $ 736.7        $ 5,045.5           $ 940.9
                                                  =========           =======        =========           =======
</TABLE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISK MANAGEMENT AND VALUE AT RISK

         For a description of the Company's risk management policies and
procedures and value-at-risk ("VAR") model, including such model's assumptions
and limitations, refer to the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 1997 Annual
Report on form 10-K.

                                      19
<PAGE>

The Company-wide VAR was approximately $19 million and $11 million at June 30,
1998 and December 31, 1997, respectively. The Company-wide VAR is less than the
sum of the individual components below due to the benefit of diversification
among the risks presented below. The VAR for the three main components of
market risk, expressed in terms of theoretical fair values at June 30, 1998 and
December 31, 1997 is as follows:

<TABLE>
<CAPTION>
                                                  June 30,        December 31,
                                                    1998              1997
                                                -------------   ---------------
                                                         (In millions)
<S>                                                  <C>              <C>
 Interest rate risk.........................         $  9             $ 8
 Equity risk................................         $ 16             $ 8
 Foreign currency exchange risk.............         $  4             $ 1
</TABLE>

YEAR 2000

         As a result of the Company's recent expansion, entry into new product
markets and its move to new corporate headquarters, many of the Company's newer
communications and data processing systems are Year 2000 compliant. The
Company, however, has undertaken a project to identify and modify non-Year 2000
compliant communications and data processing systems in anticipation of the
Year 2000. Many of the non-Year 2000 compliant systems process transactions
using two-digit date fields for the year of a transaction, rather than the full
four digits. If these systems are not identified and reconfigured, Year 2000
transactions would be processed as year "00," which could lead to processing
inaccuracies and potential inoperability and could have a material adverse
effect on the Company's business. At the present time, the Company expects that
most of its significant Year 2000 corrections should be tested and in
production by the end of 1998. Full integration testing of these systems and
testing of interfaces with third party providers will continue through 1999.
However, there can be no assurance that such schedule will be met or the
systems of other companies on which the Company's business is dependent also
will be timely converted or that any such failure to convert by another company
would not have an adverse effect on the Company's business. The total cost of
the project through the end of 1998 is currently estimated to be between $80
and $90 million. Costs related to this project are expensed and the Company has
incurred approximately $63 million of such costs at June 30, 1998.

RECENT ACCOUNTING DEVELOPMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
all derivatives to be recognized in the statement of financial condition at
fair value. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 and should be applied prospectively. Earlier application is permitted.
Since most of the Company's derivatives are carried at fair value, the adoption
of this statement is not expected to have a material impact on the Company's
results of operations or its consolidated statement of financial condition.

FORWARD-LOOKING STATEMENTS

The Company has made in this report, and from time to time may otherwise make
in its public filings, press releases and discussions with Company management,
forward looking statements concerning the Company's operations, economic
performance and financial condition. Such forward looking statements are
subject to various risks and uncertainties and the Company claims the
protection afforded by the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those currently anticipated due to a number of factors
in addition to those discussed elsewhere herein and in the Company's other
public filings, press releases and discussions with Company management,
including (i) the volatile nature of the securities business, (ii) the
competitive nature of the securities business, (iii) the effect of extensive
federal, state and foreign regulation on the Company's business, (iv) market,
credit and liquidity risks associated with the Company's underwriting,
securities trading, market-making and arbitrage activities, (v) potential
losses that could result from the Company's merchant banking activities as a
result of its capital intensive nature, (vi) risks associated with the
Company's use of derivative financial instruments, (vii) the availability of
adequate financing to support the Company's business, (viii) potential
restrictions on the business of, and withdrawal of capital from, certain
subsidiaries of the Company due to net capital requirements (ix) potential
liability under federal and state securities and other laws and (x) the effect
of any future acquisitions.

                                      20
<PAGE>

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


         Certain significant legal proceedings and matters have been previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. With respect to the litigation involving Dayton Monetary
Associates and Charles Davison, DLJSC's motions for summary judgments were
denied in April 1998. In the National Gypsum case, DLJSC has appealed the
Bankruptcy Court's ruling in January 1998 that the State Court plaintiff's
claims were not barred by the NGC plan of reorganization insofar as they
alleged nondisclosure of certain cost reductions. On May 7, 1998, DLJSC and
others were named as defendants in a second action filed in a Texas State Court
brought by the NGC Settlement Trust. The allegations of this second Texas State
Court action are substantially similar to those of the earlier class action
pending in State Court.

         In addition to the significant proceedings and matters referred to
above, the Company has been named as a defendant in a number of actions
relating to its various businesses including various civil actions and
arbitrations arising out of its activities as a broker-dealer in securities, as
an underwriter and as an employer and arising out of alleged employee
misconduct. Some of the actions have been brought on behalf of various classes
of claimants and seek damages of material or indeterminate amounts. The Company
is also involved, from time to time, in proceedings with, and investigations
by, governmental agencies and self regulatory organizations. Although there can
be no assurance that such other actions, proceedings, investigations and
litigation will not have a material adverse effect on the results of operations
of the Company in any future period, depending in part on the results for such
period, in the opinion of management of the Company the ultimate resolution of
any such other actions, proceedings, investigations and litigation against the
Company will not have a material adverse effect on the consolidated financial
condition and/or results of operations of the Company.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         On July 22, 1998, the Company sold an aggregate of five million shares
of newly issued common stock to its parent companies, The Equitable Companies
Incorporated, Equitable Life Assurance Society of the United States and AXA
Holdings (Belgium), an affiliate of AXA UAP in a private placement. Proceeds
from the sale were $300 million. The shares are exempt from registration under
Section 4(2) of the Securities Act of 1933.

                                      21
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits.

3.1     Amended and Restated Certificate of Incorporation. (Incorporated herein
        by reference to Exhibit 3.1 to the Company's Quarterly Report on 
        Form 10-Q for the period ended March 31, 1998.)

3.2     By-Laws. (Incorporated herein by reference to Exhibit 3.2 to the
        Company's Registration Statement on Form S-1, File No. 33-96276).

4.1     Certificate of Designation of 3,500,000 shares of Fixed/Adjustable Rate
        Cumulative Preferred Stock, Series B. (Incorporated herein by reference
        to Exhibit 99.1 to the Company's Form 8-K, dated January 8, 1998;
        Item 5).

10.85   Purchase and Sale Agreement, dated July 16, 1998 among the Company, The
        Equitable Companies Incorporated and AXA Holdings (Belgium).

10.91   First Amended and Restated Credit Agreement, dated May 29, 1998 among
        the Company, a syndicate of banks, Chase Securities, Inc. the Chase
        Manhattan Bank, the Bank of New York and The First National Bank of
        Chicago.

10.92   Agreement of Lease between USF Nominees Limited, Landlord, DLJ UK
        Properties Limited, Tenant, 111 Old Broad Street, London and the
        Company, Surety, dated as of June 3, 1998.

10.93   Sublease Agreement between Furman Selz, LLC, Sublandlord and the
        Company, Subtenant, 280 Park Avenue, New York, New York, dated as of
        June 16, 1998.

11      Statement re: computation of basic earnings per share.

11.1    Statement re: computation of diluted earnings per share.

27      Financial Data Schedule

(b)     Reports on Form 8-K

        1.    Form 8-K dated June 22, 1998; Items 5 and 7

                                      22
<PAGE>

                                   Signature



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.


                                       DONALDSON, LUFKIN & JENRETTE, INC.


August 14, 1998                        /s/ Anthony F. Daddino
                                       ------------------------------
                                       Anthony F. Daddino
                                       Executive Vice President and Chief
                                         Financial Officer
                                       (On behalf of the Registrant and as
                                       Principal Financial Officer)

                                      23
<PAGE>

                                 EXHIBIT INDEX

3.1     Amended and Restated Certificate of Incorporation. (Incorporated herein
        by reference to Exhibit 3.1 to the Company's Quarterly Report on 
        Form 10-Q for the period ended March 31, 1998.)

3.2     By-Laws. (Incorporated herein by reference to Exhibit 3.2 to the
        Company's Registration Statement on Form S-1, File No. 33-96276).

4.1     Certificate of Designation of 3,500,000 shares of Fixed/Adjustable Rate
        Cumulative Preferred Stock, Series B. (Incorporated herein by reference
        to Exhibit 99.1 to the Company's Form 8-K, dated January 8, 1998;
        Item 5).

10.85   Purchase and Sale Agreement, dated July 16, 1998 among the Company, The
        Equitable Companies Incorporated and AXA Holdings (Belgium).

10.91   First Amended and Restated Credit Agreement, dated May 29, 1998 among
        the Company, a syndicate of banks, Chase Securities, Inc. the Chase
        Manhattan Bank, the Bank of New York and The First National Bank of
        Chicago.

10.92   Agreement of Lease between USF Nominees Limited, Landlord, DLJ UK
        Properties Limited, Tenant, 111 Old Broad Street, London and the
        Company, Surety, dated as of June 3, 1998.

10.93   Sublease Agreement between Furman Selz, LLC, Sublandlord and the
        Company, Subtenant, 280 Park Avenue, New York, New York, dated as of
        June 16, 1998.

11      Statement re: computation of basic earnings per share.

11.1    Statement re: computation of diluted earnings per share.

27      Financial Data Schedule

                                      24