10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_____________________________________________

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended February 28, 2006
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_____________________________________________

Commission file number 1-8527

State of Incorporation: DELAWARE • I.R.S. Employer Identification No.: 43-1288229
One North Jefferson Avenue, St. Louis, Missouri 63103
Registrant’s telephone number, including area code: (314) 955-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
COMMON STOCK, $1 PAR VALUE	NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No __.

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes __ No [X].

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __.

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer [X]           Accelerated filer __          Non-accelerated filer __

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

     As of August 31, 2005, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was approximately $3.5 billion.

At May 1, 2006, there were 76,555,527 shares of A.G. Edwards, Inc. common stock, $1 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the A.G. Edwards, Inc. Proxy Statement filed with the Securities and Exchange Commission (“SEC”) in connection with the Company’s Annual Meeting of Stockholders to be held June 22, 2006, (the “Company’s 2006 Proxy Statement”) are incorporated by reference into Part III hereof, as indicated. Other documents incorporated by reference in this report are listed in the Exhibit Index of this Form 10-K.

A.G. EDWARDS, INC.

TABLE OF CONTENTS

		Page
Part I
Item 1	Business	3
Item 1A	Risk Factors	7
Item 1B	Unresolved Staff Comments	8
Item 2	Properties	9
Item 3	Legal Proceedings	9
Item 4	Submission of Matters to a Vote of Security Holders	11
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6	Selected Financial Data	15
Item 7	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	16
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	33
Item 8	Financial Statements and Supplementary Data	33
Item 9	Changes in and Disagreements With Accountants on Accounting
	and Financial Disclosure	55
Item 9A	Controls and Procedures	55
Item 9B	Other Information	58
Part III
Item 10	Directors and Executive Officers of the Registrant	58
Item 11	Executive Compensation	58
Item 12	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	59
Item 13	Certain Relationships and Related Transactions	59
Item 14	Principal Accountant Fees and Services	59
Part IV
Item 15	Exhibits and Financial Statement Schedules	59

PART I

ITEM 1. BUSINESS.

(a) General Development of Business

     A.G. Edwards, Inc., a Delaware corporation, is a financial services holding company incorporated in 1983 whose principal subsidiary, A.G. Edwards & Sons, Inc. (“Edwards”), is the successor to a partnership founded in 1887. A.G. Edwards, Inc. and its directly owned and indirectly owned subsidiaries (collectively referred to as the “Company”) provide securities and commodities brokerage, investment banking, trust, asset management, financial and retirement planning, insurance products, and other related financial services to individual, corporate, governmental, municipal and institutional clients through one of the industry’s largest retail branch distribution systems.

     Edwards is a securities broker-dealer whose business, primarily with individual clients, is conducted through one of the largest retail branch office networks (based upon number of offices and financial consultants) in the United States. No single client accounts for a significant portion of Edwards’ business. Edwards is a member, has trading privileges or has access to all major securities exchanges in the United States, and is a member of the National Association of Securities Dealers, Inc. (“NASD”) and the Securities Investor Protection Corporation (“SIPC”). In addition, Edwards has memberships on several domestic commodity exchanges and is registered with the Commodity Futures Trading Commission (“CFTC”) as a futures commission merchant (“FCM”).

     A.G. Edwards Trust Company FSB (“Trust Company”) is a federally chartered savings bank that provides investment advisory, portfolio management and trust services. A.G. Edwards & Sons (U.K.) Limited is a securities broker-dealer located in London, England, with an office located in Geneva, Switzerland. A.G. Edwards Capital, Inc. serves as general partner to four private equity partnerships that invest in portfolios of venture capital funds, buy-out funds, and direct investments. A.G. Edwards Technology Group, Inc. provides information technology services to the Company. Beaumont Insurance Company is a Vermont captive insurance company that centralizes certain risk management functions and provides access to reinsurance markets. On October 1, 2005, the Company incorporated a new subsidiary, Gallatin Asset Management, Inc. (“Gallatin”), which provides separately managed account and other services to Edwards and markets its investment-management services to unaffiliated mutual-fund firms, pension-fund providers, insurance companies and other financial institutions, including banks and brokerage firms.

(b) Financial Information About Industry Segments

     The Company operates and is managed as a single business segment providing investment services to its clients. These services are provided using the same sales and distribution personnel, support services and facilities, and all are provided to meet the needs of its clients. The Company does not identify or manage assets, revenues or expenses resulting from any service, or class of services, as a separate business segment. Financial information related to the Company’s single business segment for each of the fiscal years ended February 28, 2006 and 2005, and February 29, 2004, is included in the consolidated financial statements and notes thereto, such information is hereby incorporated by reference.

(c) Narrative Description of Business

     The total amount of revenue by class of products or services that accounted for 10% or more of consolidated net revenues are set forth under Item 6 of this Form 10-K under the caption “Consolidated Five-Year Summary.”

Asset Management and Service Fees

     Asset management and service fee revenues consist primarily of revenues earned for providing support and services in connection with assets under third-party management, including mutual funds, managed futures funds, money market funds, annuities and insurance contracts, as well as revenues from assets under management by the Company. These revenues include fees based on the amount of client assets under management and transaction-related fees as well as fees related to the administration of custodial and other specialty accounts.

     The Company manages client assets through the Trust Company and through Gallatin. The Company offers a non-discretionary advisory program, known as Portfolio Advisor and a discretionary advisory program known as FC Advisor. The Company also offers fee-based fund advisory programs that allow clients to select from

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recommended, established asset allocation models or customize their own models in certain programs. The fund advisory programs are known individually as AGE Allocation Advisors, AGE Pathways, and AGE Professional Fund Advisor. Additionally, the Company offers separately managed accounts and markets its investment-management services to unaffiliated mutual funds, pension-fund providers, insurance companies, and other financial institutions, including banks and brokerage firms. The Company, in addition to its advisory programs, offers a fee-based brokerage service known as Client Choice.

     Edwards offers the UltraAsset Account, Total Asset Account® and the Cash Convenience Account, which combine a full-service brokerage account with a money market fund. These programs provide for the automatic investment of customer free credit balances in one of several money market funds. Interest is not paid on uninvested credit balances held in client accounts. In addition, the UltraAsset and Total Asset Accounts allow clients access to their margin and money market accounts through the use of debit cards and checking account services provided by an unaffiliated major bank. The UltraAsset Account offers additional advanced features and special investment portfolio reports. Clients are provided the opportunity to apply for an A.G. Edwards credit card provided by an unaffiliated major bank.

     Edwards also provides custodial services to its clients for the various types of self-directed individual retirement accounts as provided under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

Commissions

     Commission revenues arise from activities in transaction-based accounts in listed and over-the-counter securities, mutual funds, insurance products, futures, and options. As commissions are transaction-based revenues, they are influenced by the number, size, and market value of client transactions and by product mix.

     Listed and Over-the-Counter Securities. A significant portion of the Company’s net revenue is derived from commissions generated on securities transactions executed by Edwards, as a broker, in common and preferred stocks and debt instruments on exchanges or in the over-the-counter markets. Edwards’ brokerage clients are primarily individual investors; however, resources continue to be directed to further the development of its institutional business. Edwards’ commission rates for brokerage transactions vary with the size and complexity of the transactions, among other factors.

     Mutual Funds. Edwards distributes mutual fund shares in continuous offerings of open-end funds. Income from the sale of mutual funds is derived significantly from the standard dealer’s discount, which varies as a percentage of the client’s purchase price depending on the size of the transaction and terms of the selling agreement. Revenues derived from mutual fund sales continue to be a significant portion of net revenues. Edwards does not sponsor its own mutual fund products.

     Insurance. As agent for several unaffiliated life insurance companies, Edwards distributes life insurance and tax-deferred annuities.

     Futures. Edwards acts as broker in the purchase and sale of managed futures, futures contracts, and options on futures contracts. These contracts cover agricultural products, precious metals, currency, interest rate, energy and stock index futures.

     Options. Edwards acts as broker in the purchase and sale of option contracts to buy or sell securities, primarily common stocks and stock indexes.

Principal Transactions

     Client transactions in the equity and fixed-income over-the-counter markets may be effected by Edwards acting as principal. Principal transactions, including market making, require maintaining inventories of securities to satisfy customer order flow. These securities are valued in the Company’s consolidated financial statements at fair value, and unrealized gains or losses are included in the Company’s results of operations.

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Investment Banking

     Edwards is an underwriter for public offerings of corporate and municipal securities as well as corporate and municipal unit investment trusts and closed-end investment companies. Edwards’ public finance activities include areas of specialization for municipal and governmental entities in primary and secondary schools, sports and entertainment, municipal finance, housing, higher education, health care, and public utilities. Corporate finance activities are focused on three industry groups: financial institutions and real estate, energy, and emerging growth. As an underwriter, usually in conjunction with other broker-dealers, Edwards purchases securities for resale to its clients. Edwards acts as an adviser to corporations and municipal entities in reviewing capital needs and determining the most advantageous means for raising capital. It also advises clients in merger and acquisition activities and acts as agent in private placements.

Margin Financing

     Securities transactions are executed on a cash or margin basis. In margin transactions, Edwards extends credit to its clients for a portion of the purchase price, and the clients’ securities are held as collateral. The amount of credit is limited by the initial margin regulations issued by the Board of Governors of the Federal Reserve System. The current prescribed minimum initial margin for equity securities is equal to 50% of the value of equity securities purchased. The regulations of the various exchanges require minimum maintenance margins, which are below the initial margin. Edwards’ maintenance requirements generally exceed the exchanges’ requirements. Such requirements are intended to reduce the risk that a market decline will reduce the value of the collateral below that of the client’s indebtedness before the collateral can be liquidated.

     Edwards utilizes a variety of sources to finance client margin accounts, including its stockholders’ equity, customer free credit balances and, to the extent permitted by regulations, cash received from loans of the clients’ collateral to other brokers and borrowings from banks, either unsecured or secured by the clients’ collateral.

Private Client Services

     Edwards’ Private Client Services group assists individuals and businesses with a wide range of financial and investment needs. Individual investors can receive tailored asset allocation; tax- and risk-reduction strategies; portfolio reviews of stocks, bonds and mutual funds (including concentrated equity strategies); and comprehensive financial and estate planning recommendations. Closely held and publicly traded business clients can access services for business insurance, employee benefit programs (retirement plans and key employee compensation), and ownership succession.

Investment Activities

     The Company’s investment activities primarily include investing in equity and equity-related securities in connection with private investment transactions, either for the accounts of Company-sponsored private equity partnerships or for its own account. These activities include mutual fund investments, including those made in connection with its deferred compensation plan, venture capital investments, and investments in portfolio and operating companies. A.G. Edwards Capital, Inc. is a general partner to the Company-sponsored private equity partnerships and provides them with investment advisory and administrative services. The fair value of the private investments is subject to a higher degree of volatility and management’s judgment and may include significant risks of loss while attempting to obtain higher returns than those available from publicly traded securities.

Research

     Edwards provides both technical market and fundamental analysis of numerous industries and individual securities for use by its financial consultants and clients. In addition, review and analysis of general economic conditions, along with asset allocation recommendations, are available. These services are provided by Edwards’ research analysts, economists, and market strategists.

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Competition

     All aspects of the Company’s business are highly competitive. The Company competes with large, well capitalized providers of financial services. Those companies include other securities firms and affiliates of banks and insurance companies. The Company also competes with a number of discount brokerage firms that offer lower levels of services. The Company believes its competitive advantages lie in its client-first philosophy, service, product offerings, quality of employees and strong reputation.

     The Company’s success is largely dependent on its ability to attract and retain qualified employees. These employees, particularly financial consultants, in turn bring new assets and capital management opportunities to the Company.

Employees

     At February 28, 2006, the Company had 738 locations in 50 states, the District of Columbia, London, England, and Geneva, Switzerland and 15,480 full-time employees, including 6,824 financial consultants providing services for approximately 3,200,000 active client accounts.

Regulation

     Edwards, as a broker-dealer, and a FCM, is subject to various federal and state laws that specifically regulate its activities as a broker-dealer in securities and commodities, as an investment adviser, and as an insurance agent. Edwards is also subject to various regulatory requirements imposed by the securities and commodities exchanges, the NASD, and other self regulatory organizations. The primary purpose of these requirements is to enhance the protection of customer assets. These rules and regulations affect all aspects of Edwards’ operations, including capital requirements, financial reporting requirements, approval of qualifications of personnel engaged in various aspects of its business, record-keeping and business practices, the handling of its clients’ funds resulting from securities and commodities transactions, and the extension of credit to clients on margin transactions. Infractions of these rules and regulations may include suspension or monetary penalties against individual employees or their supervisors, termination of employees and limitations on certain aspects of Edwards’ regulated businesses, as well as censures and fines or proceedings of a civil or criminal nature that could result in a temporary or permanent suspension of a part or all of Edwards’ activities.

     Margin lending by Edwards is regulated by the Federal Reserve Board’s restrictions on lending in connection with customer and proprietary purchases and short sales of securities, as well as securities borrowing and lending activities. Edwards is also required by NASD and NYSE rules to impose maintenance requirements on the value of securities contained in margin accounts. In many cases, Edwards’ margin policies are more stringent than these rules.

     As a registered broker-dealer and FCM, Edwards is subject to net capital rules administered by the SEC, CFTC, and various exchanges. Compliance with the capital requirements may limit Edwards’ operations requiring the use of capital. Such requirements restrict the Company’s ability to withdraw capital from Edwards, which in turn may limit its ability to pay dividends, repay debt or redeem or purchase shares of its own outstanding stock. Any change in such rules or the imposition of new rules affecting the scope, coverage, calculation, or amount of capital requirements, or a significant operating loss or any unusually large charge against capital, could adversely affect the Company’s ability to pay dividends or to expand or maintain present business levels. In addition, such rules may require the Company to make substantial capital infusions into Edwards in order for Edwards to comply with such rules, either in the form of cash or subordinated loans made in accordance with the requirements of the SEC’s net capital rule. At February 28, 2006, Edwards’ net capital of $588 million was 27 percent of aggregate debit items and $544 million in excess of the minimum required.

     A.G. Edwards & Sons (U.K.) Limited is registered under the laws of the United Kingdom and is regulated as a securities broker-dealer by the Financial Services Authority. The Trust Company, a federally chartered savings bank, is regulated by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and by the SEC as an investment adviser. The Trust Company and A.G. Edwards & Sons (U.K.) Limited are also subject to minimum capital requirements by their respective regulators that may restrict the payment of cash dividends and advances to the Company. A.G. Edwards Capital, Inc. and Gallatin are registered with the SEC as investment advisers. Beaumont Insurance Company is regulated by the Vermont Department of Banking, Insurance, Securities and Health Care Administration.

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(d) Financial Information About Geographic Areas

     Revenues from the Company’s non-U.S. operations are currently not material. See Note 12 (Enterprise Wide Disclosure) of the Notes to Consolidated Financial Statements.

(e) Available Information

     The Company files annual, quarterly, and current reports, proxy statements, and other information with the SEC.

     The public may read and copy the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to these reports filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. This information may also be obtained from the SEC’s web site at www.sec.gov.

The Company’s web site is www.agedwards.com. The public can access the Company’s Investor Relations’ web page by clicking on About A.G. Edwards and the Investor Relations link. The public can also access the Investor Relations web page directly at www.agedwards.com/public/content/sc/aboutage/ir/index.html. The Company makes available free of charge its most recent annual reports on Form 10-K, its quarterly reports on Form 10-Q for the current fiscal year, and its most recent proxy statement on its Investor Relations web page. In some cases, these documents may not be available on the Company’s web site as soon as they are available on the SEC’s web site. The Company also makes available, through its Investor Relations web page, via a link to the SEC’s web site, current reports on Form 8-K and statements of beneficial ownership of the Company’s equity securities filed by its directors, officers and others under Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”).

ITEM 1A. RISK FACTORS.

The Company could be exposed in the course of conducting its business operations to a variety of risks that are inherent to the financial services business. A summary of some of the major risks that could affect the Company’s financial condition and results of operations is included below and should be considered carefully.

The Company’s business operations and profitability might be adversely affected by market and economic conditions.

     Overall market and economic conditions, which are beyond the Company’s control and cannot be predicted with great certainty, generally have a direct impact on client asset valuations and trading activity. In an environment of adverse or uncertain market or economic conditions, the Company could experience decreased trading volumes, decreased fee-based and commission revenue, and decreased profitability.

The Company may not be able to successfully compete against the other companies within the financial services industry.

     The financial services industry has been, and will likely continue to be, intensely competitive. The Company competes for business with companies having greater financial resources and with companies offering online and discount brokerage services. The Company generally competes on the basis of its strong reputation, quality advice and superior service, quality of employees, and product offerings. In the event that the Company is not able to successfully compete on one or more of these factors, it may face a reduction in market share, a reduction in revenues, and/or a reduction in profitability.

The Company may not be able to attract, develop, and retain highly qualified and productive employees.

     The Company’s employees are its most important assets, and competition for qualified employees is fiercely competitive, especially for financial consultants. If the Company cannot continue to attract and retain quality employees, or if the costs to attract and retain quality employees rise due to the competition, the Company’s business operations and financial performance could be adversely impacted.

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The Company’s business may be adversely affected if its reputation is damaged.

     As a participant in the financial services industry, the Company must maintain a high-quality reputation in order to attract and retain customers and employees. If the Company fails, or appears to fail, to properly deal with the various issues (e.g., potential conflicts of interest or customer privacy) that could potentially harm its reputation, the Company could experience adverse effects to its business operations and its financial results.

The Company’s business operations and financial condition could be adversely affected if it is unable to access funds in a timely or cost-effective manner.

     Efficient access to funds is critical to the Company’s business operations, particularly margin lending. The Company’s funding needs are primarily met through cash generated from operations and cash obtained from external sources (e.g., bank lending and securities lending). The Company’s access to this financing could be impaired by Company-specific factors, such as weakened opinion of the Company by external financing sources, or by factors affecting the financial services industry in general, such as a severe market disruption. An inability to access the necessary funds could negatively impact the Company’s business activities and financial condition.

Failures in technology or operational processes could expose the Company to business disruptions, reduced financial results, litigation, and regulatory actions.

     The Company relies on its systems and operational processes to help process numerous transactions on a daily basis across various different markets. In addition, the Company contracts with third-party vendors to conduct significant portions of its trade processing and back office processing. In the event of a breakdown in an operational process (e.g., human error or employee misconduct), a malfunction of the Company’s systems or the third-party vendors’ systems, or external events beyond the Company’s control, such as a natural disaster, that could impact both the operational processes and systems, the Company could suffer business and financial losses and be subject to litigation and regulatory actions.

The Company could suffer financial losses if its securities inventories decline in value.

     The Company maintains inventories of fixed-income and equity securities in order to facilitate customer securities transactions. While holding these securities in inventory, the Company is exposed to fluctuations in value of the security positions. If the valuations of the security positions decline while carried in the Company’s inventory, the Company’s financial performance could be adversely affected.

The Company could suffer adverse impacts to its business activities, financial performance, and reputation if it is subject to one or more significant regulatory actions.

     As a member of the financial services industry, the Company’s activities are subject to extensive regulation by federal and state regulatory bodies, securities exchanges, and other self-regulatory organizations. This regulation has been increasing and becoming more complex in recent years. One or more significant regulatory actions brought against the Company could result in censures, fines, civil or criminal liability, or temporary or permanent prohibition from participating in certain types of business activities, any of which could have material adverse impacts on the Company’s business operations, financial results, and reputation. New laws or regulations or changes to existing laws or regulations could also adversely impact the Company’s business.

The Company could be negatively impacted as a result of litigation.

     In the ordinary course of business, the Company is subjected to various legal actions. These include claims of recommending unsuitable investments to clients, unauthorized or excessive trading on behalf of clients, or human resource related claims by current or former employees. In the event that the Company is liable for significant settlements or awards, the Company’s business operations, financial performance, and reputation could be adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2. PROPERTIES.

     The Company’s headquarters are located at One North Jefferson Avenue, St. Louis, Missouri, 63103. It consists of several buildings owned by the Company, which contain approximately 2,600,000 square feet of general office space as well as underground and surface parking and two parking garages. In addition, the Company owns an office building in the St. Louis area, which is used primarily as a contingency planning facility. The Company also leases 26,800 square feet in lower Manhattan and 7,000 square feet in downtown Chicago for the Company’s security and commodity trade-processing activities. The Company occupies 738 locations, which are, with a few exceptions, leased premises, throughout the United States as well as in London, England, and Geneva, Switzerland.

ITEM 3. LEGAL PROCEEDINGS.

(a) Litigation

     The Company is a defendant in a number of lawsuits, in some of which plaintiffs claim substantial amounts, relating primarily to its securities and commodities business. Management has determined that it is likely that ultimate resolution in favor of the plaintiffs will result in losses to the Company on certain of these claims and as a result, establishes accruals for potential litigation losses. The Company also is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, certain of which may result in adverse judgments, fines or penalties. Factors considered by management in estimating the Company’s reserves for these matters are the loss and damages sought by the plaintiffs, the merits of the claims, the total cost of defending the litigation, the likelihood of a successful defense against the claims, and the potential for fines and penalties from regulatory agencies. Management, based on its understanding of the facts, reasonably estimates a range of loss and accrues what it considers appropriate to reserve against probable loss for certain claims and regulatory matters. While results of litigation and investigations and proceedings by governmental and self-regulatory agencies or the resulting judgments, fines or penalties cannot be predicted with certainty, management, after consultation with counsel, believes that resolution of all such matters will not have a material adverse effect on the consolidated balance sheet, statement of earnings or statement of cash flows of the Company, but could be material to the operating results in one or more periods.

     The SEC, the NASD, the NYSE and other regulators, including several states, as well as Congress, have examined or are examining the manner in which mutual funds compensate broker-dealers in connection with the sale of mutual funds. Edwards has provided information in connection with certain related examinations. Regulatory changes have and may require additional disclosures by mutual fund companies, broker-dealers or both and may affect the methods of compensating broker-dealers for mutual fund sales. The SEC adopted rules, effective December 13, 2004, prohibiting mutual funds from paying for the distribution of their shares with brokerage commissions. Certain mutual fund companies have notified Edwards that they have changed the amount of compensation they will pay for brokerage transactions. Edwards continues to compete actively for transaction business from institutional clients. Edwards is not able to predict the impact of changes related to mutual funds, including changes to date, additional changes that may occur in regulations, or changes caused by the actions of mutual fund companies. However, the effect could be significant and adverse.

     Edwards has received information requests or subpoenas from the SEC, the NASD, the NYSE, several states and the United States Department of Justice with respect to mutual fund transactions that involve market timing, late trading or both. The SEC, the NASD and certain states have examined certain branch offices and have or will take statements from employees of Edwards in connection with such mutual fund transactions. In addition, Edwards has responded to requests for information concerning timing of mutual fund transactions in variable annuity sub accounts. The staff of the SEC has informed Edwards that it intends to recommend that a civil injunctive action be brought against Edwards with respect to mutual fund transactions occurring prior to October 2003 and alleged to involve market timing. Edwards has made a Wells submission stating why Edwards believes such action should not be brought.

     The Commonwealth of Massachusetts filed in February 2005 an administrative complaint against Edwards concerning certain mutual fund transactions in Edwards’ Boston-Back Bay office. The complaint alleges violations of securities laws by mutual fund market timing transactions and seeks a cease and desist order, an administrative fine in an unspecified amount, compensation to mutual fund holders for losses alleged to have resulted from market timing, and other relief. Other regulatory actions or claims may occur related to market timing or other mutual fund activities.

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     Edwards has been named as a defendant in a lawsuit that seeks class-action status filed in the state of Missouri that alleges, among other matters, that mutual fund transactions with certain customers were influenced by undisclosed shared revenue payments. Edwards is currently defending itself against the suit.

     The NASD has advised Edwards that it has made a preliminary determination to recommend that disciplinary action be brought against Edwards concerning the sale of mutual fund class-B shares and class-C shares based upon, it is believed, the grounds for recommending such sales, suitability violations, and Edwards supervisory procedures. The NASD orally proposed a settlement, including a fine, an offer to customers to switch to class-A shares and reimbursement for any disadvantage based on actual performance and the retention of an independent consultant to review supervisory procedures. Edwards is currently reviewing the allegations.

     The NASD filed in November 2005 an administrative complaint against Edwards concerning the sale of certain mutual funds to IRA accounts in 2001 and 2002 for which certain mutual fund companies made additional cash payments alleged to total $630,958 to Edwards for sales. The complaint seeks unspecified sanctions and restitution. Edwards is defending itself against the charges.

     The Attorney General of South Carolina, Securities Division, filed an administrative proceeding in August 2005 against Edwards and two former employees in connection with actions taken from 1995 until 2002 involving securities transactions with residents of South Carolina by financial consultants in Edwards’ Augusta, Georgia branch. In March 2004, Edwards agreed under a consent order with the Georgia Secretary of State’s Securities and Business Regulation Division to make certain payments to the State of Georgia and to customers related to transactions in the Augusta, Georgia branch. Edwards has made payments in excess of $37.1 million to customers and to the State of Georgia related to these matters. Edwards believes the actions involved in these matters were isolated to one branch and a limited number of financial consultants formerly with Edwards and had no connection with any other Edwards’ office.

     The NYSE and Edwards have reached preliminary agreement to resolve issues arising from examinations by the NYSE of Edwards from 2002 through 2005. The issues from the examinations include alleged failure to supervise charges related to the firm’s Augusta, Georgia branch related to the matters described above, alleged failure to properly report customer complaints, and alleged failures to supervise Edwards’ Client Choice accounts, including supervision of accounts with limited trading activity and accounts with concentrations of mutual funds. Client Choice accounts are brokerage accounts for which a fee, rather than commissions, are charged. The preliminary agreement, if it becomes final, would require Edwards without admitting or denying guilt to be subject to a censure, pay $500,000 (a $900,000 fine reduced by $400,000 as a result of previously made payments pursuant to the consent order with the State of Georgia described above) and provide restitution to customers relating to overpayments in connection with Client Choice accounts which Edwards’ currently estimates would be less than $1 million.

     Edwards and other financial services firms have been asked by the SEC to voluntarily review the supervision and operation of certain auction rate securities transactions. Edwards has performed its review. Regulatory actions or claims may result from the information developed during the review.

     Edwards and other financial services firms have received and responded to information requests from the NYSE with respect to delivery of prospectuses to customers. Regulatory actions or claims may result from the information developed during the review.

     The Division of Enforcement of the NASD has informed Edwards that it is considering recommending disciplinary action against the firm in connection with what is alleged to be the failure to establish adequate supervisory procedures related to the suitability of variable annuity products. Edwards has been offered the opportunity to submit a Wells-type submission to the NASD.

     Edwards and other firms in the industry were asked by a number of regulators and exchanges to assess their policies, procedures and filings in response to electronic “blue sheet” inquiries. Blue sheet inquiries are inquiries concerning trading in particular securities. Edwards has filed its assessment. Regulatory actions or claims may result from information developed during the assessment.

     A former employee has filed an action against the Company seeking class certification alleging, among other matters, violations of the Employee Retirement Income Security Act (“ERISA”) by allegedly failing to minimize fees paid in connection with investments in the Company’s Retirement and Profit Sharing Plan and by the selection of mutual funds for investments in the plan. The Company is defending itself against the suit.

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     Edwards is a defendant in a complaint filed in the United States District Court for the Southern District of California that seeks to be a class action on behalf of all financial consultants and trainees who worked for Edwards in California after June 30, 2000. The action, among other relief, seeks overtime pay for financial consultants, including trainees, on the basis that the financial consultants should be classified as non-exempt employees under California law, restitution of amounts that were deducted from commissions owed to financial consultants to repay advances made in prior months, payment for meal and rest breaks to which financial consultants are claimed to be entitled, and reimbursement for certain alleged business-related expenses paid by financial consultants. Edwards is defending itself against the suit. Several other financial services firms have been sued in California in similar actions, some of which have settled the actions for substantial amounts.

      (b)  Proceedings Terminated During the Fourth Quarter of the Fiscal Year Covered by This Report

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended February 28, 2006.

Executive Officers of the Company

     The following table sets forth the executive officers of the Company as of May 1, 2006, as determined by the Board of Directors.

			Year First
			Appointed Executive
			Officer of the
Name	Age	Office and Title	Company
Robert L. Bagby	62	Chairman of the Board and Chief Executive Officer of the	1991
		Company and Edwards since 2001. Vice Chairman of the
		Board of the Company and Edwards, Executive Vice
		President and Director of the Branch Division of Edwards
		prior to 2001. Employee of Edwards for 31 years. Director
		of Edwards since 1979.
Ronald J. Kessler	58	Vice Chairman of the Board of the Company and Edwards	1996
		since 2001. Executive Vice President of Edwards. Director
		of the Operations Division. Employee of Edwards for 38
		years. Director of Edwards since 1989.
Mary V. Atkin	51	Director of the Staff Division of Edwards since 2005.	1999
		Executive Vice President of Edwards since 2001. Director
		of Corporate Strategy from November 2003 to February
		2005. President of A.G. Edwards Technology Group, Inc.
		from 2001 to 2003. Director of A.G. Edwards Technology
		Group Inc. since 1999. Employee of Edwards for 28 years.
		Director of Edwards since 1993.
Gene M. Diederich	47	Executive Vice President of Edwards since 2005. Director	2005
		of the Branch Division of Edwards since March 2005.
		Regional Manager of Edwards from 2002 to 2005. Branch
		Manager of Edwards from 1996 to 2002. Employee of
		Edwards for 22 years. Director of Edwards since 2003.
Charles J. Galli	65	Senior Vice President of Edwards. Regional Manager.	2001
		Employee of Edwards for 27 years. Director of
		Edwards since 1990.
Alfred E. Goldman	72	Corporate Vice President of Edwards, Director of Market	1991
		Analysis of Edwards. Employee of Edwards for 46 years.
		Director of Edwards since 1967.

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			Year First
			Appointed Executive
			Officer of the
Name	Age	Office and Title	Company
Richard F. Grabish	57	Chairman and Chief Executive Officer of	2001
		A.G. Edwards Trust Company since 2001. President of
		A.G. Edwards Trust Company since 2005 and from 1987 to
		2001. Senior Vice President of Edwards. Assistant
		Director of the Sales and Marketing Division of Edwards.
		Employee of Edwards for 25 years. Director of Edwards
		since 1988.
Douglas L. Kelly	57	Vice President, Secretary, Chief Financial Officer and	1994
		Treasurer of the Company since 2001. Executive Vice
		President, Secretary, Director of the Law and Compliance
		Division of Edwards since 1994. Chief Financial Officer,
		Treasurer and Director of the Administration Division of
		Edwards since 2001. Employee of Edwards for 12 years.
		Director of Edwards since 1994.
Thomas H. Martin Jr.	46	Assistant Treasurer of the Company since 1999. Vice	1999
		President of the Company since 2002. Controller of the
		Company and Edwards. Vice President of Edwards.
		Employee of Edwards for 25 years.
Peter M. Miller	48	Executive Vice President and Director of the Sales	2002
		and Marketing Division of Edwards since 2002. Regional
		Manager of Edwards from 1995 to 2002. Employee of
		Edwards for 17 years. Director of Edwards since 1997.
John C. Parker	46	Executive Vice President of Edwards since 2003. Director	2003
		and President of A.G. Edwards Technology Group, Inc.
		since November 2003. Senior Vice President of
		A.G. Edwards Technology Group, Inc. from 2001 to 2003.
		Employee of Edwards for four years.
		Employed as Vice President of Information Services for
		Northwest Airlines from 1999 to 2001 and with Delta
		Airlines for 17 years in various positions. Director of
		Edwards since 2002.
Paul F. Pautler	60	Executive Vice President and Director of the Capital	2000
		Markets Division of Edwards since 2001. Senior Vice
		President and Director of the Investment Banking
		Division of Edwards from 2000 to 2001. Director of
		Corporate Finance of Edwards from 1999 to 2001.
		Employee of Edwards for eight years. Director of
		Edwards since 2000.
Joseph G. Porter	45	Assistant Treasurer and Assistant Secretary of the	1999
		Company since 1999. Vice President of the Company
		since 2002. Principal Accounting Officer of the Company
		and Edwards. Senior Vice President and Assistant
		Director of the Administration Division of Edwards.
		Employee of Edwards for 23 years. Director of Edwards
		since 2001.

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PART II

ITEM 5.  MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Quarterly Financial Information
(Unaudited)

	Dividends		Stock Price	Net		Earnings		Net		Earnings
	Declared		Trading Range	Revenues		Before Tax		Earnings		Per Share
	per Share		High-Low	(In millions)		(In millions)		(In millions)		Diluted		Basic
Fiscal 2006 by Quarter
First	$	0.16	$45.70 - $38.66	$	652.9	$	80.4	$	54.6	$	0.71	$	0.71
Second	$	0.16	$47.00 - $40.94	$	672.5	$	78.5	$	49.8	$	0.64	$	0.65
Third	$	0.20	$46.73 - $38.41	$	674.1	$	80.2	$	54.4	$	0.71	$	0.71
Fourth	$	0.20	$48.04 - $43.86	$	740.6	$	121.5	$	79.5	$	1.04	$	1.05
Fiscal 2005 by Quarter
First	$	0.16	$40.50 - $34.40	$	665.9	$	73.3	$	46.3	$	0.57	$	0.58
Second	$	0.16	$37.46 - $31.09	$	614.3	$	63.1	$	40.6	$	0.52	$	0.52
Third	$	0.16	$39.74 - $33.46	$	638.0	$	77.9	$	49.2	$	0.63	$	0.64
Fourth	$	0.16	$44.09 - $39.10	$	689.5	$	80.1	$	50.4	$	0.65	$	0.66

     See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

Issuer Purchases of Equity Securities

     The following table presents the number of shares purchased monthly under the Company’s stock repurchase programs for the three-month period ended February 28, 2006.

			Total Number	Maximum
			of Shares	Number of
			Purchased	Shares That
	Total		as Part of	May Yet Be
	Number		Publicly	Purchased
	of Shares	Average Price Paid	Announced	Under the
Period	Purchased	Per Share	Plans	Plans
December
(12/1/05 – 12/31/05 )	434,848	$45.68	434,848	12,177,705
January
(1/1/06 – 1/31/06 )	452,374	$46.86	452,374	11,725,331
February
(2/1/06 – 2/28/06 )	420,266	$45.96	420,266	11,305,065
Total	1,307,488	$46.18	1,307,488

     In November 2004, the Board of Directors authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding common stock during the period November 19, 2004, through December 31, 2006. In May 2005, the Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company’s outstanding common stock solely to effect employee stock transactions in the Company’s Retirement and Profit Sharing Plan during the period May 24, 2005, through May 31, 2008. As of February 28, 2006, there were 6,458,086 shares and 4,846,979 shares available to repurchase under the November 2004 and May 2005 plans, respectively.

     On June 23, 2005, the Board of Directors determined not to renew the Stockholder Rights Plan, which expired by its terms on June 25, 2005. If a stockholder rights plan is adopted by the Board of Directors without prior stockholder approval, the Company has established a policy that such plan will expire within 12 months of its effective date unless ratified by the Company’s stockholders.

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Annual Meeting

     The 2006 Annual Meeting of Stockholders (the “Annual Meeting”) will be held at the Company’s headquarters, One North Jefferson, St. Louis, Missouri, on Thursday, June 22, 2006, at 10 a.m. CDT. The Notice of Annual Meeting, Proxy Statement and Proxy Voting Card are mailed on or around May 16, 2006, to each stockholder of record at the close of business on May 1, 2006. The Proxy Statement describes the items of business to be voted on at the Annual Meeting and provides information on the Board of Directors’ nominees for director and their principal affiliations with other organizations as well as other information about the Company.

Dividend Payment

     The next four anticipated dividend payment dates are July 3 and October 2, 2006, and January 2 and April 2, 2007. However, the payment and rate of dividends on the Company’s common stock is subject to several factors including operating results, financial requirements of the Company, and the availability of funds from the Company’s subsidiaries, which may be subject to restrictions under the net capital rules of the SEC and NYSE. Such restrictions have never become applicable with respect to the Company’s dividend payments. See Note 6 (Net Capital Requirements) of the Notes to Consolidated Financial Statements for more information on the capital restrictions placed on the Company and its subsidiaries.

Stock Exchange Listing

     The Company’s stock is traded on the NYSE under the symbol AGE. The approximate number of stockholders on February 28, 2006, was 20,100. The approximate number of equity security holders of record includes customers who hold the Company’s stock in their accounts on the books of Edwards.

Registrar/Transfer Agent
The Bank of New York
Shareholder Relations Department–11E
P.O. Box 11258
Church Street Station
New York, New York 10286-1258
(800) 524-4458
www.stockbny.com

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ITEM 6. SELECTED FINANCIAL DATA.

Consolidated Five-Year Summary

	February 28,		February 28,		February 29,		February 28,		February 28,
Year Ended	2006		2005		2004		2003		2002
	(In thousands, except per share amounts)
Revenues
Asset management and service fees:
Distribution fees	$	571,573	$	498,026	$	366,735	$	336,636	$	377,923
Fee-based accounts		386,585		323,769		246,943		225,888		220,315
Service fees		104,714		97,282		109,708		90,493		79,694
Total		1,062,872		919,077		723,386		653,017		677,932
Commissions:
Listed securities		449,401		440,680		448,035		387,483		403,921
Mutual funds		242,883		259,179		260,518		201,567		214,339
Insurance		195,476		192,019		205,622		185,249		174,281
Over-the-counter securities		81,545		94,478		115,425		70,864		111,065
Futures		24,632		25,536		27,758		19,331		13,289
Options		23,779		22,274		23,669		23,485		28,453
Total		1,017,716		1,034,166		1,081,027		887,979		945,348
Principal transactions:
Debt securities		131,284		178,395		217,224		252,688		246,131
Equities		78,826		75,504		79,662		58,436		73,553
Total		210,110		253,899		296,886		311,124		319,684
Investment banking:
Underwriting fees and selling concessions		168,963		174,555		240,094		184,220		186,839
Management fees		65,434		71,067		81,767		66,960		69,590
Total		234,397		245,622		321,861		251,180		256,429
Interest:
Margin account balances		138,466		107,611		74,662		86,189		150,365
Securities owned and deposits		42,871		21,132		21,470		20,474		23,451
Total		181,337		128,743		96,132		106,663		173,816
Other		44,334		30,288		6,384		10,239		6,592
Total Revenues		2,750,766		2,611,795		2,525,676		2,220,202		2,379,801
Interest expense		10,653		4,114		2,859		5,850		27,415
Net Revenues		2,740,113		2,607,681		2,522,817		2,214,352		2,352,386
Non-Interest Expenses
Compensation and benefits		1,741,588		1,699,156		1,642,999		1,448,199		1,551,898
Communication and technology		236,379		241,830		272,047		282,603		295,353
Occupancy and equipment		144,114		151,426		137,617		134,149		133,240
Marketing and business development		71,635		65,682		53,262		45,649		47,434
Floor brokerage and clearance		21,073		21,341		22,495		22,464		21,912
Other		164,705		133,839		149,123		109,854		128,029
Restructuring		—		—		—		—		82,462
Total Non-Interest Expenses		2,379,494		2,313,274		2,277,543		2,042,918		2,260,328
Earnings Before Income Taxes		360,619		294,407		245,274		171,434		92,058
Income Taxes		125,058		107,933		85,789		52,606		20,557
Earnings before cumulative effect of accounting
change		235,561		186,474		159,485		118,828		71,501
Cumulative effect of accounting change,
net of $1,655 of income taxes		2,768		—		—		—		—
Net earnings	$	238,329	$	186,474	$	159,485	$	118,828	$	71,501

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	February 28,			February 28,			February 29,			February 28,			February 28,
Year Ended	2006			2005			2004			2003			2002
	(In thousands, except per share amounts)
Earnings per diluted share:
Earnings before cumulative effect of accounting
change	$	3.06		$	2.37		$	1.97		$	1.46		$	0.88
Cumulative effect of accounting change, net of
income taxes*		0.04			—			—			—			—
Earnings per diluted share	$	3.10		$	2.37		$	1.97		$	1.46		$	0.88
Per Share Data:
Cash dividends	$	0.72		$	0.64		$	0.64		$	0.64		$	0.64
Book Value	$	25.13		$	23.21		$	22.08		$	20.92		$	20.42
Other Data:
Total Assets	$	4,664,269		$	4,687,797		$	4,436,085		$	3,980,094		$	4,187,170
Stockholders’ Equity	$	1,899,249		$	1,787,691		$	1,778,319		$	1,688,537		$	1,647,796
Cash Dividends	$	54,896		$	49,392		$	51,007		$	51,034		$	51,043
Pre-tax Return on Average Equity		19.8	%		16.5	%		14.1	%		10.3	%		5.6%
Return on Average Equity		12.9	%		10.5	%		9.2	%		7.1	%		4.4%
Pre-tax Net Earnings as a Percent of Net
Revenues		13.2	%		11.3	%		9.7	%		7.7	%		3.9%
Average Common and Common Equivalent
Shares Outstanding (Diluted)		76,984			78,766			80,990			81,177			81,282

*See Note 2 (Employee Stock Plans) of the Notes to Consolidated Financial Statements for a detailed discussion of the Company’s Stock-Based Compensation Plan.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(Year references, including those in charts, are to fiscal years ended February 28(29) unless otherwise specified)

Introduction

     Headquartered in St. Louis, Missouri, A.G. Edwards, Inc. is a financial services holding company whose primary subsidiary is the national investment firm of A.G. Edwards & Sons, Inc. (“Edwards”), that is a successor to a partnership founded in 1887. A.G. Edwards, Inc. and its operating subsidiaries (collectively, the “Company”), provide securities and commodities brokerage, investment banking, trust, asset management, retirement and financial planning, insurance products, and other related financial services. The total number of full-time employees increased by 90 to end the year at 15,480 (1 percent).

     The Company’s client base is comprised mostly of individual investors and includes corporations, governments, municipalities and financial institutions. The Company serves its clients through one of the securities industry’s largest branch-office networks with locations in all 50 states, the District of Columbia, London, England and Geneva, Switzerland. The Company added 17 locations during 2006, increasing its total to 738.

     The Company’s total number of financial consultants declined 66 to end the year at 6,824. Total client assets at the end of 2006 were $343 billion, an increase of $24 billion (8 percent) when compared to the end of 2005. Average client assets per financial consultant at the end of 2006 were $50.3 million, an increase of $4 million (9 percent).

Executive Summary

Economic/Market Conditions

     During 2006, the financial markets experienced a variety of significant events that contributed to their volatility and general lack of direction for much of the year, in spite of the fact the U.S. gross domestic product grew 3.5 percent in calendar 2005. Among those events, the Federal Reserve lengthened its string of interest-rate increases, nearly doubling the Fed Funds rate from 2.5 percent to 4.5 percent during the Company’s fiscal year and

16

causing some investors to wonder about the longer-term health of the U.S. economy. These worries were further compounded in late December when yields on two-year U.S. Treasury notes became higher than those of 10-year U.S. Treasury notes, a situation known as an inverted yield curve and one that has preceded several economic recessions. Oil prices also weighed heavily on the financial markets, as crude oil spiked from roughly $52 per barrel at the start of fiscal 2006 to nearly $71 at its peak before settling to $61 at the end of the fiscal year. During the August-September timeframe, oil prices and economic concerns were agitated by the impact of hurricanes that severely affected the Gulf Coast region. The markets were also faced with reacting to terrorist actions in England, Iraq, Jordan and other parts of the Middle East.

     While the major market indices posted increases at the end of the fiscal year, they did not make their most significant gains until the fourth quarter. The Standard & Poor’s 500 Index (“S&P 500”) increased 77 points (6 percent), but increased 31 points in the fourth quarter alone to finish the fiscal year at 1,281. The Dow Jones Industrial Average was essentially flat through the first three quarters before rising 227 points (2 percent) for the fiscal year to close at 10,993. Only the Nasdaq Composite Index showed steady increases throughout the fiscal year, gaining 230 points (11 percent) to close at 2,281.

Regulatory Environment

     During 2006, the Securities and Exchange Commission (“SEC”), the New York Stock Exchange (“NYSE”), the National Association of Securities Dealers (“NASD”) and other federal and state regulators added or revised various rules and regulations for the securities industry. Of particular note, the SEC adopted rules effective April 15, 2005, with compliance dates between April 15, 2005, and January 31, 2006, concerning when broker-dealers providing advice will and will not be exempted from the Investment Advisers Act of 1940 (the “Advisers Act”). The rules require additional disclosures for certain brokerage accounts at Edwards and may make certain accounts and services subject to the Advisers Act that were not previously subject to the act or require changes in such accounts and services. Accounts and services subject to the Advisers Act are subject, among other things, to additional disclosures, a fiduciary standard of care and restrictions on certain transactions.

     Many firms in the securities industry were either required to enhance or voluntarily enhanced disclosures on the various forms of compensation earned in connection with the sale of certain investment products such as mutual funds, annuities, 529 college savings plans and insurance. Additionally, the Company implemented new NYSE and NASD rules governing the securities industry’s documentation, testing and reporting of supervisory internal controls, which are designed to prevent fraud, minimize errors, promote operating efficiency and reasonably ensure compliance with regulatory requirements and established Company policies.

     As with most other publicly held companies, the Company was subject to the requirements of the Sarbanes-Oxley Act of 2002, particularly as it pertained to internal control over financial reporting. (See the “Controls and Procedures” section, Part II, Item 9A, for a detailed discussion of the Company’s report on internal control over financial reporting.)

Company Performance Summary

     Overall, for 2006, the Company posted its fourth consecutive year of increased net earnings, earnings per share, pre-tax profit margin and pre-tax return on average equity, and experienced its third consecutive year of increased net revenues.

17

     In 2006, the Company saw for the first time in its history a year in which commission revenues were not the largest component of net revenues. Asset-management and service-fee revenues became the largest revenue source, contributing 39 percent of the Company’s net revenues as compared to commissions, which contributed 37 percent. In addition to growing fee revenue from client assets in certain individual investments, the Company believes this change reflects a natural migration by clients toward fee-based programs and services to diversify their portfolios. The Company has responded to clients’ interests by broadening its array of fee-based programs and services to enhance the value of the full-service brokerage relationship.

     During 2006, client assets in fee-based accounts grew 22 percent, more than double the growth rate of total client assets, which increased 8 percent.

     Additionally on the revenue side, the Company’s 2006 results were positively influenced by growth in net interest revenues, which benefited from multiple increases in the prime rate, resulting in higher interest rates charged on client-margin balances although client margin balances declined modestly.

     On the expense side, compensation and benefits expenses in 2006 increased as a result of higher earnings and higher commissionable revenue generated by the Company’s financial consultants. As a partial offset to this increase, the Company posted its fourth consecutive year of declines in its communication and technology expenses. The 2006 communication and technology expense decline primarily was driven by the completion and implementation of various technology projects under the Company’s Gateway Initiative (see the “Liquidity and Capital Resources” section for additional discussion about the Gateway Initiative).

The Company’s results for 2006 compared to those for 2005:
Net earnings – Increased $52 million (28 percent) to $238 million
Diluted earnings per share – Increased $0.73 (31 percent) to $3.10
Net revenues – Increased $132 million (5 percent) to $2.7 billion
Pre-tax profit margin – Increased from 11.3 percent to 13.2 percent

The Company’s results for 2005 compared to those for 2004:
Net earnings – Increased $27 million (17 percent) to $186 million
Diluted earnings per share – Increased $0.40 (20 percent) to $2.37
Net revenues – Increased $85 million (3 percent) to $2.6 billion
Pre-tax profit margin – Increased from 9.7 percent to 11.3 percent

The results for 2006 included $5 million in revenue for gains on the sale of shares in the Chicago Board of Trade (“CBOT”), $8 million of gains on Chicago Mercantile Exchange shares, and a $3 million gain on the sale of real estate. The 2006 results also reflected $6 million in tax benefits resulting from the resolution of certain tax matters, including $3 million in tax benefits from the resolution of tax matters related to technology research and development tax credits associated with the Company’s Gateway Initiative.

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     In addition, the Company previously disclosed its March 1, 2005, early adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share Based Payment” (“SFAS No. 123R”). As a result of this adoption, the Company was required to recognize in the first quarter of 2006 a one-time, $3 million after-tax benefit related to estimated future forfeitures of previously issued restricted-stock awards that were unvested as of March 1, 2005. The adoption of SFAS No. 123R additionally resulted in no expense for stock awards being recognized in 2006. Stock awards granted related to 2006 will be expensed over their service period, generally three years, beginning in 2007. See Note 2 (Employee Stock Plans) of the Notes to Consolidated Financial Statements for further discussion. The operating results for 2005 and 2004 included restricted stock-award expense of $35 million and $31 million, respectively.

     The results for 2005 additionally included a $10 million charge in occupancy and equipment expenses, which represents the cumulative effect of correcting the recognition period for rent-escalation clauses and free-rent periods included in certain branch-office leases. The results for 2005 also included an $8 million credit in other expenses to correctly recognize state-registration fees for Edwards’ financial consultants over the registration period. The correcting entries were recorded in the fourth quarter of 2005 and were not material to the quarter, the year, or any prior period’s consolidated financial information.

     In both the 2006 vs. 2005 and the 2005 vs. 2004 comparisons, the Company’s results followed similar patterns: a general increase in net revenues paced by record results in asset-management and service-fee revenues, and growing net interest revenues, coupled with a decrease in communication and technology expenses. Compensation expenses increased in both year-over-year comparisons based on higher commissionable revenue and the Company’s increased profitability. A detailed discussion of the Company’s results of operations follows.

Results of Operations

     The following table and discussion summarize the changes in major categories of revenues and expenses for the past two fiscal years (dollars in thousands):

Increase (Decrease)	2006 vs. 2005					2005 vs. 2004
Revenues
Asset management and service fees	$	143,795		16	%	$	195,691		27	%
Commissions		(16,450	)	(2	)		(46,861	)	(4	)
Principal transactions		(43,789	)	(17	)		(42,987	)	(14	)
Investment banking		(11,225	)	(5	)		(76,239	)	(24	)
Interest		52,594		41			32,611		34
Other		14,046		46			23,904		374
Total Revenues		138,971		5			86,119		3
Interest expense		6,539		159			1,255		44
Net Revenues	$	132,432		5	%	$	84,864		3	%
Non-Interest Expenses
Compensation and benefits	$	42,432		2	%	$	56,157		3	%
Communication and technology		(5,451	)	(2	)		(30,217	)	(11	)
Occupancy and equipment		(7,312	)	(5	)		13,809		10
Marketing and business development		5,953		9			12,420		23
Floor brokerage and clearance		(268	)	(1	)		(1,154	)	(5	)
Other		30,866		23			(15,284	)	(10	)
Total Non-Interest Expenses	$	66,220		3	%	$	35,731		2	%

     The Company generates revenues primarily through Edwards. These revenues can be categorized into five main components: asset-management services, commission-based transactions, principal transactions, investment banking revenues and net interest revenue.

     Many factors affect the Company’s net revenues and profitability, including economic and market conditions, the level and volatility of interest rates, inflation, political events, investor sentiment, legislative and regulatory developments, and competition. Because many of these factors are unpredictable and beyond the Company’s control, earnings may fluctuate significantly from year to year.

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The following table illustrates the composition of the Company’s net revenues for 2006, 2005 and 2004:

	2006		2005		2004
Asset management and service fees	39	%	35	%	28	%
Commissions	37	%	40	%	43	%
Principal transactions	8	%	10	%	12	%
Investment banking	9	%	9	%	13	%
Net interest	6	%	5	%	4	%
Other	1	%	1	%	—	%

     Following are descriptions of the Company’s revenue and expense components and its operational results in each:

Asset Management and Service Fees

     Revenues from asset-management services are based principally on the amount of certain client assets held by or through the Company. These assets may be managed by the Company or by third-party investment managers, including mutual funds, managed futures funds, money market funds, annuities and insurance companies. The Company manages certain client assets through A.G. Edwards Trust Company FSB, a wholly owned subsidiary and federally chartered savings bank that provides investment advisory, portfolio management and trust services. In addition, the Company offers a non-discretionary advisory program known as Portfolio Advisor and a discretionary advisory program known as FC Advisor.

     The Company also offers fee-based fund advisory programs that allow clients to select from recommended, established asset allocation models or customize their own models in certain programs. The fund advisory programs are known individually as AGE Allocation Advisors, AGE Pathways and AGE Professional Fund Advisor. The Company, in addition to its advisory programs, offers a fee-based brokerage account known as Client Choice.

     Effective October 1, 2005, the Company incorporated a new subsidiary, Gallatin Asset Management, Inc. (“Gallatin”), which combines what had been Edwards’ asset-management services and Edwards’ asset-manager research and performance-evaluation functions. Gallatin provides separately managed account and other services to Edwards and markets its investment-management services to unaffiliated mutual-fund firms, pension-fund providers, insurance companies and other financial institutions, including banks and brokerage firms. Gallatin receives management fees for its services. Gallatin’s revenue contribution was not material to the Company’s 2006 results of operations.

     Asset-management and service-fee revenues reached an annual record of $1.1 billion in 2006, an increase of $144 million (16 percent). Fees received from third-party mutual funds, managed futures and insurance providers increased $78 million (21 percent) mainly as a result of increased asset values in these investment products. Service-fee revenues increased $7 million (8 percent) due to greater revenue from the Company’s asset accounts and investment-research services. These results were partially offset by a $4 million (3 percent) decline in fees received from the distribution of certain money funds, due mainly to a decrease in client assets in those money funds.

     The growth was also driven by a $63 million (19 percent) increase in revenue from the Company’s fee-based programs, generated in part by a 22 percent increase in the number of client accounts in these programs under third-party management or through the Company’s fee-based transaction accounts and trust services.

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     Revenues from fee-based programs generally maintained a steady increase throughout 2006, largely ignoring market volatility. The Company’s fund-advisory programs were particularly strong, posting the highest asset-growth percentage among client assets in fee-based accounts (see table below). The number of client accounts in fund-advisory programs increased 40 percent during 2006, and the majority of new sales in fund-advisory programs were in portfolios entirely or largely comprised of equity-based investments.

     Client assets in fee-based accounts increased $7 billion (22 percent) from February 28, 2005, to February 28, 2006, and increased $3 billion (13 percent) from February 29, 2004, to February 28, 2005. An analysis of assets in fee-based accounts from these time periods is detailed below (dollars in millions):

	February 28,		February 28,				February 29,
Assets in fee-based accounts	2006		2005		2006 vs. 2005		2004		2005 vs. 2004
Fund advisory programs	$	14,059	$	9,871	42	%	$	7,096	39	%
Separately managed accounts		12,030		11,438	5	%		10,997	4	%
Company-managed and other fee-based
accounts		11,357		9,443	20	%		9,182	3	%
Total assets in fee-based accounts	$	37,446	$	30,752	22	%	$	27,275	13	%

     In 2005, asset-management and service-fee revenues increased $196 million (27 percent) over 2004 primarily based on the same reasons as those discussed in comparing 2006 to 2005. The 2005 results additionally reflect a $43 million (146 percent) increase in revenues from fees received in connection with the distribution of certain third-party money market funds offered by the Company. In the third quarter of 2004, shareholders in these money market funds voted to lift the funds’ expense caps.

     Edwards announced that, effective March 15, 2006, it increased by $0.50 the postage and handling fee on stock, option, bond, commodity and certain mutual fund transactions to $5.50. The impact of these changes on the Company’s future results of operations cannot be determined with certainty and will be based primarily on client activity in these types of investments.

Commissions

     The Company generates commission revenues when acting as an agent for client activities in transaction-based accounts in listed and over-the-counter securities, mutual funds, insurance products, futures and options. These revenues can be affected by trading volumes, by the dollar value of individual transactions, by market and economic conditions, and by investor sentiment because the Company’s clients are primarily retail-oriented.

     Commission revenues for 2006 declined $16 million (2 percent) from 2005. While commissions from listed-stock transactions increased $9 million (2 percent), commissions in over-the-counter equities declined $13 million (14 percent). Meanwhile, commissions from transactions in mutual funds declined $16 million (6 percent) and commissions from commodities and financial futures decreased $1 million (4 percent). These declines were partially offset by a $2 million (7 percent) increase in revenues from options transactions and a $3 million (2 percent) increase in transaction revenues from insurance products.

     When comparing equity and mutual fund transaction revenues to the S&P 500, the Company noticed a generally consistent pattern of increased revenues from these areas in months when the S&P 500 reached various peaks and client activity followed suit, specifically in March, August and January. Revenues from insurance products were generally steady from quarter to quarter, as clients sought these products to help diversify their portfolios. Additionally, the strong pace of asset growth in fee-based programs suggested greater client interest in these programs versus individual transactions.

     The reasons above generally apply for the $47 million (4 percent) decrease in commission revenues from 2005 to 2004, with the exception of a $14 million (7 percent) decrease in variable annuities resulting from decreased client interest.

     Edwards announced that, effective March 15, 2006, it increased commissions on agency equity and option transactions in the aggregate by approximately 5 percent. The impact of these changes on the Company’s future results of operations cannot be determined with certainty and will be based primarily on client activity in these types of investments.

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Principal Transactions

     The Company maintains inventories of fixed-income and equity securities to satisfy client demand and, therefore, effects certain transactions with its clients by acting as a principal. Realized and unrealized gains and losses resulting from the sale and holding of securities positions for resale to clients are included in principal transaction revenues.

     Principal-transaction revenues in 2006 decreased $44 million (17 percent). The overall decline in this revenue category was driven almost entirely by a slowdown in client activity in the fixed-income markets, as evidenced by a $17 million (19 percent) decrease in revenue from municipal-bond transactions, a $17 million (39 percent) decrease in corporate-debt transactions and a $13 million (29 percent) decrease in revenue from government-debt transactions. These decreases were partially offset by a $3 million (4 percent) increase in revenues from transactions in equity securities held in the Company’s inventory.

     As noted earlier, yields on two-year U.S. Treasury notes became higher than those of 10-year U.S. Treasury notes, a situation known as an inverted yield curve and one that has preceded several economic recessions. The pending – and eventual, as it occurred in December 2005 – inversion of these yields, coupled with a steady increase in the federal funds rate, prompted clients either to decrease their activity in fixed-income securities or direct their assets into shorter-maturity securities, both of which had a dampening effect on the Company’s principal-transaction revenues. As an exception to the overall decrease in this revenue line, equity revenues from principal transactions displayed their strongest periods in the months of August, September, December and January.

     Principal-transaction revenues in 2005 decreased $43 million (14 percent). The reasons behind the 2005 vs. 2004 results for the Company’s principal-transaction revenues generally match those noted in the 2006 vs. 2005 comparison, with the exception of a $4 million (5 percent) decrease in revenues from equity transactions, which reflected decreased activity in over-the-counter equity markets.

Investment Banking

     Investment banking revenues result primarily from bringing new issues of securities, both equity-based and fixed income-based, to the market for issuers. The issuers are generally corporate or municipal clients but may be institutional clients of Edwards in the case of exchange-traded funds and related products. Investment banking revenues vary depending on the number and size of transactions successfully completed and generally are received in the form of underwriting fees or selling concessions. Additionally, the Company receives fees for financial advisory services, including advice on mergers and acquisitions, restructurings, and other strategic advisory needs.

     Investment banking revenues in 2006 decreased $11 million (5 percent). While underwriting fees and selling concessions from corporate-equity products were essentially flat for the year, underwriting fees and selling concessions from corporate-debt products decreased $7 million (23 percent) and government-debt products decreased $4 million (66 percent). Management fees in 2006 decreased $6 million (8 percent). These results were partially offset by a $5 million (28 percent) increase in underwriting fees and selling concessions from municipal-debt products.

     The flatness in revenue from corporate-equity products largely resulted from a lower number of closed-end funds available to underwrite, offset by the Company maintaining a solid underwriting presence in the areas of energy, real estate and healthcare.

     The decrease in revenue from underwriting corporate-debt products was due largely to alternative financing sources serving as a deterrent for corporations to issue new debt. The decrease in revenue from underwriting government-debt products was due mainly to the lack of available issues in this area.

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     For municipal underwritings, the Company benefited from municipal issuers nationwide taking advantage of the interest-rate environment either to refinance existing debt, as interest rates were generally lower than when the debt was originally issued, or to issue new debt offerings ahead of anticipated interest-rate increases. The Company’s results in this area were led by a 31 percent increase in the number of lead-managed, municipal-debt underwritings in 2006 compared to 2005.

     When comparing 2005 to 2004, revenues from investment banking activities decreased $76 million (24 percent). The reasons for the decline in 2005 are generally the same as those for 2006, with the exception of a $3 million (16 percent) decrease in underwriting fees and selling concessions from municipal-debt products, as the rising interest-rate environment caused many municipalities not to issue new debt.

Net Interest Revenue

     Interest revenue is derived primarily from financing clients’ margin transactions. These revenues are based largely on the amount of client margin balances and the rate of interest charged on these balances. The Company also earns revenue from interest and dividend payments on inventory held for sale to clients.

     Interest revenue net of interest expense increased $46 million (37 percent) in 2006. While average client margin balances declined from $2.1 billion to $1.9 billion during the year, a 36 percent increase in the prime rate – the base rate the Company uses for charging interest on average margin balances – largely accounted for a $31 million (29 percent) increase in revenue from margin balances. The decline in average margin balances is believed to be, in part, the by-product of more client assets moving to fee-based programs, most of which do not allow clients to have margin accounts. Higher interest rates also benefited revenues from the Company’s short-term investments, which increased $10 million (172 percent) in 2006. Additionally, the average inventory of securities held for clients, particularly fixed-income securities, saw temporary increases during the year. These increases, along with higher interest rates and dividend payments from equity securities held in inventory, contributed to an $11 million (76 percent) revenue increase from this inventory.

     The following charts detail the average client margin balances during each quarter of 2006 and the average rate charged on those balances:

     In 2005, interest revenue net of interest expense increased $31 million (34 percent). In addition to the reasons cited for the 2006 increase in revenues from this category, the Company changed in January 2004 the base rate upon which margin interest is calculated from the broker call rate to the prime rate. The Company also saw slight increases in average client margin balances in 2005.

Other Revenue

     Other revenue increased $14 million (46 percent) in 2006. The 2006 results included a $5 million gain on the sale of shares in the Chicago Board of Trade (“CBOT”) that the Company was not required to own for CBOT membership. Other revenue also included a $3 million gain on the sale of real estate and a $13 million increase in revenue from the Company’s private-equity investments. The increase was partially offset by a $2 million decrease in gains the Company recorded in 2006 versus 2005 for the sale of shares in the Chicago Mercantile Exchange (“CME”) and the mark-to-market on other CME shares the Company currently holds. Both the 2005 and 2006 sales of CME shares resulted from lowered shareholding requirements for CME membership.

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     Other revenue in 2005 increased $24 million over 2004, reflecting gains of $10 million on the sale of CME shares and the mark-to-market on other CME shares the Company held above CME’s membership requirement. Other revenue for 2005 additionally reflected a $6 million insurance settlement as a result of business interruptions following September 11, 2001, and a $10 million increase in private-equity valuations.

Expenses

     The Company’s expenses are categorized into six components: compensation and benefits, communication and technology, occupancy and equipment, marketing and business development, floor brokerage and clearance and other expenses.

Compensation and Benefits

     Compensation and benefits expenses comprise the largest components of the Company’s overall expenses. Most of these expenses are variable in nature and relate to commissionable revenue, which refers to revenue upon which commissions are paid to the Company’s financial consultants based upon transaction-based or asset-management services, and to incentive compensation, which is largely based on the profitability of the Company. This expense category also includes employee healthcare insurance costs.

     Compensation and benefits expenses in 2006 increased $42 million (2 percent). Commission expense increased $11 million (1 percent). Incentive compensation increased $4 million (1 percent). Administrative salaries increased $6 million (2 percent), and healthcare insurance costs increased $5 million (9 percent).

     The increase in commission expense was primarily the result of higher commissionable revenue from fee-based programs. The increase in incentive compensation was due mainly to two factors: 1) the Company’s 28 percent increase in net earnings during 2006, and 2) top-producing financial consultants qualifying for larger sales bonuses based on their 2006 revenue-production levels. The increase in administrative salaries largely reflected general salary increases and a net increase of 200 support employees during 2006. The increase in healthcare insurance costs also was mainly a reflection of generally higher individual claims during the year.

     As an offset to other incentive-compensation expenses, the Company’s early adoption of SFAS No. 123R resulted in no expense for stock awards being recognized in 2006. Stock option and restricted stock awards granted for 2006 will be expensed over their service period, generally three years, beginning in 2007. See Note 2 (Employee Stock Plans) of the Notes to Consolidated Financial Statements for further discussion.

     Compensation and benefits expenses in 2005 increased $56 million (3 percent). Commissions paid to the Company’s financial consultants and incentive compensation increased $32 million (3 percent) as a result of increased sales and earnings. Administrative salaries and other fixed components increased $24 million (5 percent) as a result of general wage increases and higher medical costs. Compensation and benefits expenses for 2005 and 2004 included restricted stock-award expense of $35 million and $31 million, respectively. Under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations, the Company did not recognize any associated compensation expense related to stock options in 2005 and 2004.

     Edwards announced that, effective April 3, 2006, it lowered the commission payout schedule to its financial consultants on transactions of listed equities, over-the-counter equities, mutual funds, new issues, life insurance and annuities. The payout changes vary depending on the type of investment transaction, along with the dollar amount of individual transactions. The impact of these changes on the Company’s future results of operations cannot be predicted with certainty and will be based on client activity in these types of investments and the overall revenue productivity of Edwards’ financial consultants.

Communication and Technology

     Communication and technology expenses represent those costs associated with operating the Company’s back-office systems and technology infrastructure, which includes computer software and hardware – and the amortization and depreciation of each – along with data and trade processing. This expense line also includes costs for outside technology consultants assigned to the Company’s various technology projects and needs. Additionally, account-statement printing and mailing, telephone service, and technology repairs and maintenance all fall under this expense category.

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     The Company has focused on making a larger portion of its non-compensation expenses more variable in nature, particularly those expenses related to its back-office systems. A significant step toward this objective was taken with the May 2005 migration of the Company’s core securities-processing operations to an application service provider.

     Communication and technology expenses declined $5 million (2 percent) in 2006. As the Company completed several projects under its Gateway Initiative during 2006, it was able to decrease professional expenses for outside technology consultants by $20 million (52 percent). Amortization and depreciation expenses decreased $7 million (9 percent) as a result of several technology assets becoming fully depreciated. Partially offsetting these decreases were an $11 million increase from securities-processing expenses associated with the conversion of securities-processing operations to an application service provider and a $14 million (40 percent) increase in data-processing, postage and mailing expenses associated with data-processing services provided by an outside service provider.

     Communication and technology expenses decreased $30 million (11 percent) in 2005 largely resulting from decreased depreciation and lower leasing costs associated with financial consultants’ workstations and lower amortization of the development costs associated with the Company’s online account access service. These decreases were partially offset by increased professional expenses for outside technology consultants working on the Company’s Gateway Initiative.

Occupancy and Equipment

     Occupancy and equipment expenses relate mainly to the leases for the Company’s branch-office locations and the amortization and depreciation expenses associated with equipment and leasehold improvements in those locations.

     In 2006, occupancy and equipment expenses decreased $7 million (5 percent). The decrease was primarily due to the $10 million charge in 2005 recorded to correct the recognition period for rent-escalation clauses and lease incentives in certain branch-office leases. The decrease was partially offset by a $3 million (8 percent) increase in amortization expenses for leasehold improvements.

     In 2005, occupancy and equipment expenses increased $14 million (10 percent) primarily due to the $10 million charge recorded to correct the recognition period for rent-escalation clauses and lease incentives included in certain branch-office leases.

Marketing and Business Development

     Marketing and business development expenses are mainly related to the Company’s branding initiative, local-branch advertising and promotional efforts, and travel and entertainment expenses.

     Marketing and business development expenses increased $6 million (9 percent) in 2006 primarily due to a $6 million (23 percent) increase in advertising expenses associated with the Company’s branding initiative and other business promotion expenses. Expenses related to the Company’s branding initiative totaled $23 million in 2006.

     In 2005, marketing and business development expenses increased $12 million (23 percent) primarily as a result of additional advertising expenses associated with the Company’s branding initiative.

All Other Expenses

     All remaining operational expenses are largely related to professional expenses for legal, regulatory and audit consulting services, reserves and settlements for legal and regulatory matters, licensing and registration fees, publication and subscription expenses, and floor brokerage expenses.

     All remaining operational expenses in 2006 increased $31 million (20 percent) due largely to a $10 million (34 percent) increase in reserves and settlements for various legal and regulatory matters, a $10 million (21 percent) increase in professional expenses for legal and regulatory consulting services, and a $9 million (165 percent) increase in registration fees due mainly to an $8 million credit recorded in 2005 to correctly recognize state registration fees for the Company’s financial consultants over the registration period.

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     All remaining operational expenses in 2005 decreased $16 million (10 percent). The decline was due primarily to charges in 2004 related to the Georgia consent order described in Item 3. “Legal Proceedings”, mutual fund breakpoint discount reserves and the $8 million credit for state registration fees referenced above. These were partially offset by a $17 million increase in legal and consulting service expenses as a result of additional resources needed to address various regulatory changes, investigations and legal matters.

Income Taxes

     The Company’s effective tax rate was 34.7 percent for 2006 compared with 36.7 percent in 2005. The decrease in the effective tax rate was due in part to the recognition of $6 million in tax benefits from the resolution of certain tax matters during 2006, including $3 million in tax benefits from the resolution of tax matters related to technology research and development tax credits associated with the Company’s Gateway Initiative.

Future Impact of NYSE-Archipelago Merger

     On March 7, 2006, the New York Stock Exchange (“NYSE”) and Archipelago Holdings, Inc. (“Archipelago”) closed a merger agreement and formed a new holding company, NYSE Group, Inc. (“NYSE Group”). In the merger, NYSE members were entitled, and the Company elected, to receive $404,640 and 78,601 shares of NYSE Group common stock for each NYSE membership seat. The shares are subject to certain restrictions that expire ratably over a three-year period, unless the NYSE Group board of directors removes or reduces the transfer restrictions earlier. The NYSE Group board of directors authorized a secondary distribution, and the Company sold 58,943 shares in the offering, at a price of $60.27 per share. The Company may sell additional shares pursuant to the underwriters’ over-allotment option, which expires June 5, 2006. In addition, Edwards will have to purchase trading licenses through a modified Dutch auction process every year in order to receive the right to trade securities on the floor of the exchange. On January 4, 2006, Edwards purchased four NYSE trading licenses at a price of $49,290 each.

     At February 28, 2006, Edwards had four NYSE membership seats included in other assets on the consolidated balance sheet at a total cost of $491,000. Factoring in the Company’s cost basis for the four seats and the transfer restrictions on the remaining shares, the Company expects to record a significant gain in the first quarter of 2007. Subsequent gains or losses will be recorded as transfer restrictions expire and the share price of NYSE Group stock fluctuates.

Impact of Change in Accounting Principle for Stock Awards to Retirement Eligible Employees

     Effective March 1, 2006 the Company changed its accounting for restricted-stock and stock-options awards (collectively referred to as the “Awards”) granted to retirement-eligible employees from expense recognition on grant date to expense recognition over the fiscal year the Award is earned. As a result of this accounting change and starting in 2007, the Company will accrue an expense throughout each fiscal year representing an estimate of Awards to be granted to retirement-eligible employees as a result of such fiscal year’s service rather than recognize the expense on grant date, which occurs in the first quarter of the subsequent fiscal year. The accounting for Awards to non retirement-eligible employees will not change and will be recognized over the service period, generally three years from grant date.

     Due to this change in the Company’s accounting policy, Awards to retirement-eligible employees for 2006 totaling approximately $19 million will be accounted for in accordance with SFAS No. 154 “Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3.” This amount, net of taxes, will be retrospectively applied to 2006 financial statements, including interim financial statements. This means that beginning with 2007, an adjustment will be made to the opening balances as if the change in accounting for Awards to retirement eligible employees had been in effect in prior periods. The result will be that the opening balance of retained earnings will be reduced by the amount of the Award, net of taxes, for retirement-eligible employees for 2006.

     Employees, including retirement-eligible employees, were granted 1,030,024 restricted shares with a market value of approximately $53 million, and 308,170 options on April 17, 2006.

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Litigation and Regulatory Matters

     The Company is a defendant in a number of lawsuits, in some of which plaintiffs claim substantial amounts, relating primarily to its securities and commodities business. Management has determined that it is likely that ultimate resolution in favor of the plaintiffs will result in losses to the Company on certain of these claims and as a result, establishes accruals for potential litigation losses. The Company also is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, certain of which may result in adverse judgments, fines or penalties. Factors considered by management in estimating the Company’s reserves for these matters are the loss and damages sought by the plaintiffs, the merits of the claims, the total cost of defending the litigation, the likelihood of a successful defense against the claims, and the potential for fines and penalties from regulatory agencies. Management, based on its understanding of the facts, reasonably estimates a range of loss and accrues what it considers appropriate to reserve against probable loss for certain claims and regulatory matters. While results of litigation and investigations and proceedings by governmental and self-regulatory agencies or the resulting judgments, fines or penalties cannot be predicted with certainty, management, after consultation with counsel, believes that resolution of all such matters will not have a material adverse effect on the consolidated balance sheet, statement of earnings or statement of cash flows of the Company, but could be material to the operating results in one or more periods.

See Item 3.  “Legal Proceedings” for further discussion of legal and regulatory matters.

Liquidity and Capital Resources

     The Company’s assets fluctuate in the normal course of business, primarily due to the timing of certain transactions. The Company monitors and evaluates the composition and size of its balance sheet. A substantial portion of the Company’s total assets consist of short-term receivables mainly resulting from margin loans to clients, along with highly liquid marketable securities. The principal sources for financing the Company’s business are stockholders’ equity, cash generated from operations, short-term bank loans and securities-lending arrangements. The Company has no long-term debt. Average short-term bank loans of $28 million and $32 million and average securities-lending arrangements of $144 million and $196 million for the years ended February 28, 2006 and 2005, respectively, were primarily used to finance customer margin transactions.

     The Company is engaged in a major business process and technology transformation program, the Gateway Initiative, which, when fully developed and implemented, is designed to update the Company’s technology infrastructure, streamline its back-office processing and strengthen its data management capabilities. The Company has currently designated up to $193 million, including internal development costs, to fund this program. Total costs through February 28, 2006, were $178 million, of which $49 million was capitalized. In May 2005, the Company completed the most significant aspect of the project, which was the conversion of securities-processing functions to an application service provider. Since the conversion, an application service provider has provided the software and computer operations that support substantially all of the Company’s securities processing functions. Under the terms of the Hosting and Services Agreement with the application service provider, which became effective in May 2005, minimum payments are $11 million a year with an expected range of payments of between $18 million and $22 million a year.

     The Company has substantially completed the major components of the Gateway Initiative and its designated budget. Additionally, approximately $10 million of the $15 million remaining in the Gateway Initiative budget is related to a conditional payment based on the terms of the Hosting and Services Agreement with the application service provider. This payment, if incurred, is at the Company’s discretion and would not be made any earlier than 2012. Therefore, the Company will no longer provide budgetary updates on this program. Expenses related to the Gateway Initiative, the Hosting and Services Agreement and other technology projects will continue to be reflected in the Communication and Technology and the Compensation and Benefits expense reporting lines as appropriate.

     While the Company’s migration of its back-office systems is intended to better align trade-processing expenses with client transaction activity, the Company intends to maintain certain of its existing back-office systems for a transitional period that began in May 2005 and has approximately 15 to 18 months remaining. The full benefit of the Gateway Initiative will not be realized until this transition is completed.

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     In November 2004, the Company’s Board of Directors authorized the repurchase of up to 10 million shares of the Company’s outstanding stock during the period November 19, 2004, through December 31, 2006. In November 2002, the Company’s Board of Directors authorized the repurchase of up to 10 million shares of the Company’s outstanding common stock during the period of January 1, 2003, through December 31, 2004. The Company purchased 3,204,769 shares at an aggregate cost of $142 million during the year ended February 28, 2006 and purchased 7,026,392 shares at an aggregate cost of $250 million during the year ended February 28, 2005. At February 28, 2006, the Company had up to 6,458,086 shares available for repurchase under the November 2004 stock-repurchase authorization.

     In May 2005, the Company’s Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company’s outstanding stock solely to effect employee stock transactions in the Company’s Retirement and Profit Sharing Plan during the period May 24, 2005, through May 31, 2008. The Company purchased 153,021 shares at an aggregate cost of $7 million during the year ended February 28, 2006. At February 28, 2006, the Company had up to 4,846,979 shares available for repurchase under this authorization.

Tabular Disclosure of Contractual Obligations

     The following table summarizes information about the Company’s long-term contractual commitments and obligations as of February 28, 2006 (dollars in thousands):

									More than 5
Contractual Obligations	Total		2007		2008-2009		2010-2011		years
Operating lease obligations	$	452,200	$	89,200	$	154,400	$	105,000	$	103,600
Communications, technology, and other
service commitments		222,000		86,000		93,800		28,600		13,600
	$	674,200	$	175,200	$	248,200	$	133,600	$	117,200

     The Company had committed $117 million to various private equity investments, of which $35 million remained unfunded at February 28, 2006. These commitments are subject to calls by the partnerships, as funds are needed.

     In November 2005, the Company’s Board of Directors authorized an increase in the quarterly dividend from $0.16 per share to $0.20 per share. The most recent quarterly dividend payouts reflecting the increase were made on January 3, 2006, and April 3, 2006, to shareholders of record on December 9, 2005, and March 10, 2006, respectively.

     Management believes the Company has adequate sources of credit available, if needed, to finance customer-trading volumes, expansion of its branch system, stock repurchases, dividend payments and major capital expenditures. Currently the Company, with certain limitations, has access to $1.1 billion in uncommitted lines of credit as well as the ability to increase its securities lending activities.

     Edwards is required by the SEC to maintain specified amounts of liquid net capital to meet its obligations to clients. At February 28, 2006, Edwards’ net capital of $588 million was $544 million in excess of the minimum requirement.

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Critical Accounting Policies

     The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, management makes use of certain estimates and assumptions. See Note 1 (Summary of Significant Accounting Policies) of the Notes to Consolidated Financial Statements. The Company believes that of its significant accounting policies, the following critical policies, estimates and assumptions may involve a higher degree of judgment and complexity and are the most susceptible to significant fluctuations in the near term.

Valuation of Investments

     The fair value of investments, for which a quoted market or dealer price is not available, is based on management’s estimate. Among the factors considered by management in determining the fair value of investments are cost, terms and liquidity of the investment, the sale price of recently issued securities, the financial condition and operating results of the issuer, earnings trends and consistency of operating cash flows, the long-term business potential of the issuer, the quoted market price of securities with similar quality and yields that are publicly traded, information as to any transactions or offers with respect to the security, existence of merger proposals or tender offers affecting the securities, and other factors generally pertinent to the valuation of investments.

Legal Reserves and Regulatory Matters

     The Company is a defendant in a number of lawsuits, in some of which plaintiffs claim substantial amounts, relating primarily to its securities and commodities business. Management has determined that it is likely that ultimate resolution in favor of the plaintiffs will result in losses to the Company on certain of these claims and as a result, establishes accruals for potential litigation losses. The Company also is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, certain of which may result in adverse judgments, fines or penalties. Factors considered by management in estimating the Company’s reserve for these matters are the loss and damages sought by the plaintiffs, the merits of the claims, the total cost of defending the litigation, the likelihood of a successful defense against the claims, and the potential for fines and penalties from regulatory agencies. Management, based on its understanding of the facts, reasonably estimates a range of loss and accrues what it considers appropriate to reserve against probable loss for certain claims and regulatory matters. While results of litigation and investigations and proceedings by governmental and self-regulatory agencies or the results of judgments, fines or penalties cannot be predicted with certainty, management, after consultation with counsel believes, that resolution of all such matters are not expected to have a material adverse effect on the consolidated balance sheets, statements of earnings or statements of cash flows of the Company, but could be material to the operating results in one or more periods.

See Item 3.  “Legal Proceedings” for further discussion of legal and regulatory matters.

Allowance for Doubtful Accounts From Customers

     Receivables from customers consist primarily of floating rate loans collateralized by margin securities. Management estimates an allowance for doubtful accounts to reserve for potential losses from unsecured and partially secured customer accounts deemed uncollectible. The facts and circumstances surrounding each receivable and the number of shares, price and volatility of the underlying collateral are considered by management in determining the allowance. Management continually evaluates its receivables from customers for collectibility and possible write-off. The Company manages the credit risk associated with its receivables from customers through credit limits and continuous monitoring of collateral. 

Income Taxes

     The Company operates in multiple taxing jurisdictions, and as a result, accruals for tax contingencies require management to make estimates and judgments with respect to the ultimate tax liability in any given year. Actual results could vary from these estimates. In management’s opinion, adequate provisions for income taxes have been made for all years.

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Software Development Costs

     The Company applies the provisions of American Institute of Certified Public Accountants Statement of Position No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” to account for costs associated with internally developed software. The Company capitalizes the costs associated with software development based on guidance provided in the statement. The primary factors considered in determining the amount to capitalize include the stage of the development effort and the type of work being performed. Only costs incurred during the application development stage are capitalized. When placed in service, these costs are typically amortized over three years and are included in Communication and Technology expense on the Company’s consolidated statements of earnings.

Valuation of Stock Options

     Effective March 1, 2005, the Company early adopted SFAS No. 123R of equity instruments to account for awards to employees. SFAS No. 123R requires measurement of the cost of employee services received in exchange for an award based on the fair value of the award on the grant date. Prior to the adoption of SFAS No. 123R, the Company applied the provisions of APB Opinion No. 25, and related interpretations to account for options granted under its Incentive Stock Plan. Based on the provisions of this plan, no compensation expense had been recognized for options issued under this plan. The fair value of the stock options is estimated using expected dividend yields of the Company’s stock, the expected volatility of the stock, the expected length of time the options remain outstanding, and risk-free interest rates. Changes in one or more of these factors may significantly affect the estimated fair value of the stock options. Additionally, SFAS No. 123R requires the Company to estimate the number of instruments for which the required service is expected to be rendered. The Company estimates forfeitures using historical forfeiture rates for previous grants of equity instruments.

Recent Accounting Pronouncements

     In March 2005, Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies that SFAS No. 143, “Accounting for Asset Retirement Obligations,” requires that an entity recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on the consolidated financial statements.

     In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3,” (“SFAS No. 154”). SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. Beginning March 1, 2006, the Company will apply SFAS No. 154 as appropriate, on a prospective basis.

     In June 2005, the FASB ratified the consensus reached by the EITF on issue 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” which provides guidance in determining whether a general partner controls a limited partnership. The provisions of EITF 04-5 are not applicable to limited partnerships or similar entities accounted for as variable interest entities (VIEs) pursuant to FASB Interpretation No. 46 (revised December 2003) (“FIN 46(R)”). Therefore, the Company has determined that EITF 04-5 will have no impact on the Company’s consolidated financial statements as of February 28, 2006, as the investment in partnerships in which the Company is General Partner have been determined to be VIEs and have been accounted for pursuant to the provisions of FIN 46(R).

Risk Management

General

     Risk is an inherent part of the Company’s business operations, and the business activities of the Company expose it to a variety of risks. The principal risks to the Company are operational, legal and regulatory, credit and market risk. Since these risks cannot be completely eliminated, the effective and efficient management of these risks is critical to the financial stability and long-term profitability of the Company. Company management 

30

oversees the identification and assessment of the various risks and the development of appropriate risk mitigation activities, which primarily consist of internal controls, policies, and procedures. The execution of the risk mitigation activities is carried out at the business-unit level. Furthermore, the Internal Audit Department, reporting directly to the Audit Committee, provides independent assessments on the effectiveness of the risk management activities occurring throughout the Company. The following discussion highlights the principal risks faced by the Company and provides examples of how these risks are managed.

Operational Risk

     Operational risk refers to the risk of loss resulting from inadequate or failed processes, people and systems, or from external events. This includes, but is not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in the Company’s operating systems, and inadequacies or breaches in the Company’s control processes. The Company operates in diverse markets and is reliant on the ability of its employees, its internal systems, and the systems of its third-party vendors to process a large number of transactions. In the event of a breakdown or improper operation of the Company’s or third-party’s systems or improper actions by employees, the Company could suffer financial loss, regulatory sanctions and damage to its reputation.

     In order to mitigate and control operational risk, the Company has developed, and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization. For example, the Company has procedures that require that all transactions are accurately recorded and properly reflected in the Company’s books and records and are confirmed on a timely basis, that position valuations are subject to periodic independent review procedures, and that collateral and adequate documentation (e.g., master agreements) are obtained from counterparties in appropriate circumstances. Additionally, business continuity plans have been developed and are periodically tested for critical processes and systems, and appropriate controls have been implemented to provide oversight of the activities conducted by third-party vendors.

Legal and Regulatory Risk

     Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements, the risk of adverse legal judgments against the Company, and the risk that a counterparty’s performance obligations will be unenforceable. The Company is subject to extensive regulation in the different jurisdictions in which it conducts its business, and this regulatory scrutiny has been significantly increasing over the last several years. The Company has established and continues to enhance procedures based on legal and regulatory requirements that are reasonably designed to ensure compliance with all applicable statutory and regulatory requirements. In connection with its business, the Company has various procedures addressing significant topics such as regulatory capital requirements, sales and trading practices, new products, use and safekeeping of customer funds and securities, extension of credit, money laundering, privacy, and record keeping. The Company also has established procedures that are designed to ensure that senior management’s policies relating to conduct, ethics and business practices are followed.

Credit Risk

     Credit risk is the risk of loss resulting from a client or counterparty failing to satisfy its contractual obligations with the Company or from the value of collateral held by the Company to secure obligations proving to be insufficient. The Company is primarily exposed to credit risk in its role as a lender to its customers and as a trading counterparty to dealers and customers.

     The primary source of the Company’s credit exposure is through customer margin accounts, which are collateralized in accordance with internal and regulatory guidelines and monitored on a daily basis. Additional collateral is requested from customers when necessary to maintain compliance with internal and regulatory guidelines. Large customer margin loans and those margin loans related to concentrated or restricted positions are evaluated by the Company’s Credit Committee, and the collateral requirements are increased if deemed necessary.

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     The Company is also exposed to credit risk by providing clearing services for securities transactions in its client accounts and by participating in the securities lending business. The Company has an obligation to settle transactions with clearing organizations and other financial institutions and is exposed to loss if a client or counterparty fails to meet its obligations to the Company. The Company executes securities lending activity in order to obtain financing and securities to support its business activities and its customers’ trading activities. In most cases, the customer or counterparty has provided financial instruments as collateral for these transactions. The collateral value is monitored and additional collateral is obtained when appropriate.

     See Note 11 (Financial Instruments — Off-Balance Sheet Risk and Concentration of Credit Risk) of the Notes to Consolidated Financial Statements for additional information related to credit risk.

Market Risk

     Market risk is the risk of loss resulting from fluctuations in interest rates and/or equity prices. The Company is exposed to market risk to the extent it maintains positions in fixed-income and equity securities. The Company’s primary exposure to market risk comes from maintaining an inventory of security positions to provide investment products for its clients. The Company purchases only inventory that it believes it can readily sell to its clients, thus reducing the Company’s exposure to liquidity risk but not market fluctuations.

     The Company primarily manages its market risk through the establishment and monitoring of trading policies and securities inventory guidelines and through the implementation of control and review procedures. On a daily basis, management monitors trading results, current inventory levels, concentrated inventory positions, and aged inventory positions. Any exceptions are carefully monitored by management. Real-time inventory data allows for intraday inventory management, and there is daily communication between trading department management and senior management regarding the Company’s inventory positions and risk profile.

     The Company does not act as a dealer, trader or end-user of complex derivative products such as swaps, collars and caps. The Company provides advice and guidance on complex derivative products to selected clients; however, this activity does not involve the Company acquiring a position or commitment in these products. The Company will occasionally hedge a position in its debt inventory through the use of financial futures contracts and treasury securities. These transactions are not material to the Company’s consolidated financial condition or results of operations.

     Interest Rate Risk. Interest rate risk refers to the risk of changes in the level or volatility of interest rates, in the speed of payments on mortgage-backed securities, in the shape of the yield curve and in credit spreads. The Company is exposed to this risk as a result of maintaining inventories of interest-rate-sensitive financial instruments. This is the Company’s primary market risk.

     The Company elects to use a sensitivity analysis approach to express the potential decrease in the fair value of the Company’s debt inventory consisting of interest-rate-sensitive financial instruments. The Company calculated the potential loss in fair value of its debt inventory by calculating the change in the offering price of each inventory item resulting from a 10 percent increase in either the Treasury yield curve for taxable products or the Municipal Market Data Corporation’s AAA rated yield curve for tax-exempt products. Using this method, if such a 10 percent increase occurred, the Company calculated a potential loss in fair value of its debt inventory of $10 million at February 28, 2006, and $4 million at February 28, 2005.

     Equity Price Risk. Equity price risk refers to the risk of changes in the level or volatility of the price of equity securities. The Company is exposed to this risk as a result of its market making activities and other investment activities. At February 28, 2006, and February 28, 2005, the potential daily loss in the fair value of equity securities related to the Company’s market-making activities was not material.

     Included in Investments are $151 million in mutual funds that the Company uses to hedge its deferred compensation liability. The potential daily gain or loss in the fair value of these mutual funds is offset by a similar potential change in the value of the deferred compensation liability. Also included in Investments are $158 million in private equity investments that are subject to a high degree of volatility and management estimates, and may be susceptible to significant fluctuations particularly in the near term.

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Forward-Looking Statements

     The Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-K contain forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to the Company and those specific to the industry, which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, general economic conditions, government monetary and fiscal policy, the actions of competitors, changes in and effects of marketing strategies, client interest in specific products and services, regulatory changes and actions, changes in legislation, risk management, legal claims, technology changes, compensation changes, price adjustments, the impact of outsourcing agreements, the impact of SFAS No. 123R, the future impact of the merger between the NYSE and Archipelago, implementation and effects of expense-reduction strategies, and efforts to make more of non-compensation expenses variable in nature. See Item 1A. “Risk Factors” of this Form 10-K for additional discussion surrounding Risk Factors. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Form 10-K. The Company does not undertake any obligation to publicly update any forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The information required by this item is contained in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Risk Management – Market Risk” of this Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Supplemental Data

     The quarterly financial data required by this item is included under Item 5 of Part II of this Form 10-K under the caption “Quarterly Financial Information.”

33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
A.G. Edwards, Inc.
St. Louis, Missouri

We have audited the accompanying consolidated balance sheets of A.G. Edwards, Inc. and subsidiaries (the “Company”) as of February 28, 2006 and 2005, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended February 28, 2006. Our audits also included the financial statement schedule listed in the Index as Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of A.G. Edwards, Inc. and subsidiaries as of February 28, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, effective March 1, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of February 28, 2006, based on Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 2, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
 
St. Louis, Missouri 
May 2, 2006

34

Financial Statements

A.G. Edwards, Inc.
Consolidated Balance Sheets

	February 28,		February 28,
	2006		2005
	(Dollars in thousands,
	except per share amounts)
Assets
Cash and cash equivalents	$	178,173	$	209,039
Cash and government securities deposited with clearing organizations or
segregated under federal and other regulations		272,881		392,241
Securities purchased under agreements to resell		195,000		235,540
Securities borrowed		205,774		117,302
Receivables:
Customers, less allowance for doubtful accounts of $2,600 and $8,045		2,084,278		2,236,170
Brokers and dealers		187,092		37,387
Clearing organizations		809		1,514
Fees, dividends and interest		118,465		104,605
Securities inventory, at fair value:
State and municipal		284,539		190,150
Government and agencies		71,188		152,532
Corporate debt		35,638		20,662
Equities		22,788		36,859
Investments		367,822		337,394
Property and equipment, at cost, net of accumulated depreciation and
amortization of $723,054 and $715,328		485,287		503,976
Deferred income taxes		99,740		60,189
Other assets		54,795		52,237
	$	4,664,269	$	4,687,797
Liabilities and Stockholders’ Equity
Checks payable	$	313,448	$	299,120
Short-term bank loans		—		16,400
Securities loaned		200,988		207,012
Payables:
Customers		1,102,040		749,901
Brokers and dealers		118,403		655,486
Clearing organizations		37,561		80,252
Securities sold but not yet purchased, at fair value:
State and municipal		5,055		9,509
Government and agencies		21,041		21,366
Corporate debt		18,174		2,970
Equities		1,372		2,594
Employee compensation and related taxes		476,217		440,833
Deferred compensation		228,548		223,821
Income taxes		22,453		7,378
Other liabilities		219,720		183,464
Total Liabilities		2,765,020		2,900,106
Stockholders’ Equity:
Preferred stock, $25 par value:
Authorized, 4,000,000 shares; none issued		—		—
Common stock, $1 par value:
Authorized, 550,000,000 shares; issued, 96,463,114 shares		96,463		96,463
Additional paid-in capital		293,362		295,478
Retained earnings		2,306,147		2,137,114
		2,695,972		2,529,055
Less: Treasury stock, at cost (20,872,779 and 19,442,437 shares)		796,723		741,364
Total Stockholders’ Equity		1,899,249		1,787,691
	$	4,664,269	$	4,687,797

See Notes to Consolidated Financial Statements.

35

A.G. Edwards, Inc.
Consolidated Statements of Earnings

	February 28,		February 28,		February 29,
Year Ended	2006		2005		2004
	(Dollars in thousands, except per share amounts)
Revenues
Asset management and service fees	$	1,062,872	$	919,077	$	723,386
Commissions		1,017,716		1,034,166		1,081,027
Principal transactions		210,110		253,899		296,886
Investment banking		234,397		245,622		321,861
Interest		181,337		128,743		96,132
Other		44,334		30,288		6,384
Total Revenues		2,750,766		2,611,795		2,525,676
Interest expense		10,653		4,114		2,859
Net Revenues		2,740,113		2,607,681		2,522,817
Non-Interest Expenses
Compensation and benefits		1,741,588		1,699,156		1,642,999
Communication and technology		236,379		241,830		272,047
Occupancy and equipment		144,114		151,426		137,617
Marketing and business development		71,635		65,682		53,262
Floor brokerage and clearance		21,073		21,341		22,495
Other		164,705		133,839		149,123
Total Non-Interest Expenses		2,379,494		2,313,274		2,277,543
Earnings Before Income Taxes		360,619		294,407		245,274
Income Taxes		125,058		107,933		85,789
Earnings before cumulative effect of accounting change		235,561		186,474		159,485
Cumulative effect of accounting change, net of
$1,655 of income taxes		2,768		—		—
Net Earnings	$	238,329	$	186,474	$	159,485
Earnings per diluted share:
Earnings before cumulative effect of
accounting change	$	3.06	$	2.37	$	1.97
Cumulative effect of accounting change,
net of income taxes		0.04		—		—
Earnings per diluted share	$	3.10	$	2.37	$	1.97
Earnings per basic share:
Earnings before cumulative effect of
accounting change	$	3.07	$	2.39	$	1.99
Cumulative effect of accounting change,
net of income taxes		0.04		—		—
Earnings per basic share	$	3.11	$	2.39	$	1.99

See Notes to Consolidated Financial Statements.

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A.G. Edwards, Inc.
Consolidated Statements of Stockholders’ Equity
Three Years Ended February 28, 2006

			Additional									Total
	Common		Paid-In			Retained			Treasury			Stockholders’
	Stock		Capital			Earnings			Stock			Equity
	(Dollars in thousands, except share and per share amounts)
Balances, March 1, 2003	$	96,463	$	289,028		$	1,943,325		$	(640,279	)	$	1,688,537
Net Earnings							159,485						159,485
Dividends declared - $0.64
per share							(51,007	)					(51,007	)
Treasury stock acquired										(105,455	)		(105,455	)
Stock Issued:
Employee stock purchase/
option plans				3,883			(22,241	)		79,284			60,926
Restricted stock				(212	)					26,045			25,833
Balances, February 29, 2004		96,463		292,699			2,029,562			(640,405	)		1,778,319
Net Earnings							186,474						186,474
Dividends declared - $0.64
per share							(49,392	)					(49,392	)
Treasury stock acquired										(250,123	)		(250,123	)
Stock Issued:
Employee stock purchase/option plans.				1,761			(25,436	)		112,582			88,907
Restricted stock				1,018			(4,094	)		36,582			33,506
Balances, February 28, 2005		96,463		295,478			2,137,114			(741,364	)		1,787,691
Net Earnings							238,329						238,329
Dividends declared - $0.72
per share							(54,894	)					(54,894	)
Treasury stock acquired										(148,834	)		(148,834	)
Stock Issued:
Employee stock purchase/
option plans				4,287			(13,671	)		90,104			80,720
Restricted stock				(6,403	)		(731	)		3,371			(3,763	)
Balances, February 28, 2006	$	96,463	$	293,362		$	2,306,147		$	(796,723	)	$	1,899,249

See Notes to Consolidated Financial Statements.

37

A.G. Edwards, Inc.
Consolidated Statements of Cash Flows

	February 28,			February 28,			February 29,
Year Ended	2006			2005			2004
	(Dollars in thousands)
Cash Flows From Operating Activities:
Net earnings	$	238,329		$	186,474		$	159,485
Cumulative effect of accounting change, net of $1,655 of income taxes		(2,768	)		—			—
Noncash and nonoperating items included in earnings:
Depreciation and amortization		103,612			111,519			127,296
Stock based compensation		702			33,076			29,384
Deferred income taxes		(41,206	)		34,002			(416	)
(Gain) Loss on investments, net		(33,826	)		(21,798	)		598
(Gain) Loss on disposal of property and equipment		(2,169	)		242			(430	)
Allowance for doubtful accounts		588			(916	)		1,274
(Increase) decrease in operating assets:
Cash and government securities deposited with clearing organizations or
segregated under federal and other regulations		119,360			(18,515	)		(270,012	)
Securities purchased under agreements to resell		40,540			(213,185	)		197,645
Securities borrowed		(88,472	)		(11,268	)		(28,904	)
Receivable from customers		151,304			137,753			(313,603	)
Receivable from brokers and dealers		(149,705	)		(23,499	)		7,304
Receivable from clearing organizations		705			(709	)		472
Fees, dividends and interest receivable		(13,860	)		(14,552	)		(30,002	)
Securities inventory		(13,950	)		6,447			13,384
Trading investments, net		(5,748	)		(11,134	)		(43,478	)
Other assets		(2,558	)		(12,723	)		11,504
Increase (decrease) in operating liabilities:
Checks payable		14,328			41,554			21,041
Securities loaned		(54,515	)		68,224			(19,824	)
Payable to customers		352,139			(375,113	)		164,335
Payable to brokers and dealers		(537,083	)		612,038			(15,615	)
Payable to clearing organizatons		(42,691	)		(29,751	)		34,155
Securities sold but not yet purchased		9,203			(8,469	)		9,468
Employee compensation and related taxes		35,384			69			94,472
Deferred compensation		4,727			17,087			36,044
Income taxes		15,075			(1,521	)		(1,582	)
Other liabilities		33,350			21,711			30,535
Net cash from operating activities		130,795			527,043			214,530
Cash Flows From Investing Activities:
Purchase of property and equipment		(85,837	)		(117,031	)		(99,185	)
Purchase of other investments		(23,158	)		(22,008	)		(27,004	)
Proceeds from sale of a subsidiary		—			10,830			—
Proceeds from disposal of property and equipment		3,083			—			—
Proceeds from sale or maturity of other investments		32,304			22,620			8,626
Net cash from investing activities		(73,608	)		(105,589	)		(117,563	)
Cash Flows From Financing Activities:
Short-term bank loans, net		(16,400	)		(11,900	)		(11,700	)
Securities loaned		48,491			(92,650	)		23,906
Employee stock transactions		76,991			84,648			57,323
Tax benefit associated with stock-based awards		3,686			—			—
Cash dividends paid		(51,987	)		(49,955	)		(51,028	)
Purchase of treasury stock		(148,834	)		(250,123	)		(105,455	)
Net cash from financing activities		(88,053	)		(319,980	)		(86,954	)
Net Increase (Decrease) in Cash and Cash Equivalents		(30,866	)		101,474			10,013
Cash and Cash Equivalents, at Beginning of Year		209,039			107,565			97,552
Cash and Cash Equivalents, at End of Year	$	178,173		$	209,039		$	107,565
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Income taxes	$	147,777		$	75,006		$	87,668
Interest, net of amounts capitalized of $431, $612 and $925	$	10,768		$	3,954		$	2,616
Non-Cash Financing Activity:
Restricted stock awards granted	$	—		$	35,062		$	30,637

See Notes to Consolidated Financial Statements.

38

A.G. Edwards, Inc.

     Notes to Consolidated Financial Statements
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies

Business Description

     A.G. Edwards, Inc. and its wholly-owned subsidiaries (collectively referred to as the “Company”) operate and are managed as a single business segment providing investment services to its clients.  The Company’s principal operating subsidiary is A.G. Edwards & Sons, Inc., (“Edwards”). The Company offers a wide range of services designed to meet clients’ individual investment needs, including securities and commodities brokerage, investment banking, trust, asset management, retirement and financial planning, insurance products, and other related financial services to individual, corporate, governmental, municipal and institutional clients through one of the industry’s largest retail branch distribution systems. These services are provided by the Company’s 6,824 financial consultants in 738 locations. Because these services are provided using the same sales and distribution personnel, support services and facilities, and all are provided to meet the needs of its clients, the Company does not identify or manage assets, revenues or expenses resulting from any service, or class of services, as a separate business segment. With headquarters in St. Louis, the Company has offices in 50 states, the District of Columbia, London, England and Geneva, Switzerland.

Basis of Financial Information

     The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America. All material intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

     In preparing these consolidated financial statements, management makes use of estimates concerning certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and certain revenues and expenses during the reporting period. Management considers its significant estimates, which are most susceptible to change, to be the fair value of investments, accruals for litigation and income taxes. Actual results could differ from these estimates.

Cash and Cash Equivalents

     Cash and cash equivalents consist of cash and highly liquid investments with maturities of 90 days or less at the date of acquisition.

Securities Transactions

     Securities purchased under agreements to resell (Resale Agreements) and securities sold under agreements to repurchase are recorded at the contractual amounts that the securities will be resold/repurchased, including accrued interest. The Company’s policy is to obtain possession or control of securities purchased under Resale Agreements and to obtain additional collateral when necessary to minimize the risk associated with this activity.

39

A.G. Edwards, Inc.

     Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies (Continued)

     Securities borrowed and securities loaned are recorded at the amount of the cash collateral provided for securities borrowed transactions and received for securities loaned transactions, respectively. The adequacy of the collateral is continuously monitored and adjusted when considered necessary to minimize the risk associated with this activity. Substantially all of these transactions are executed under master netting agreements, which give the Company right of offset in the event of counterparty default.

     Customer securities transactions are recorded on settlement date. Revenues and related expenses for transactions executed but unsettled are accrued on a trade-date basis. Receivables from and payables to customers include amounts due on cash and margin transactions. Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected on the consolidated balance sheets.

Asset Management and Service Fees

     Asset management and service fee revenues consist of fees based on the value of client assets under professional management by third parties as well as the Company’s asset management services, transaction-related service fees and fees related to the administration of custodial and other specialty accounts. These revenues are recognized over the periods for which services are rendered.

Investment Banking

     Investment banking revenues, which include underwriting fees, selling concessions and management fees, are recorded when services for the transaction are substantially completed. Transaction-related expenses are deferred and later expensed to match revenue recognition.

Allowance for Doubtful Accounts

     Receivables from customers, primarily consisting of floating rate loans collateralized by margin securities, are charged interest at rates similar to other such loans made throughout the industry. Management estimates an allowance for doubtful accounts to reserve for potential losses from unsecured and partially secured customer accounts deemed uncollectible. The facts and circumstances surrounding each receivable from customers and the number of shares, price and volatility of the underlying collateral are considered by management in determining the allowance. Management continually evaluates its receivables from customers for collectibility and possible write-off. The Company manages the credit risk associated with its receivables from customers through credit limits and continuous monitoring of collateral. The allowance for doubtful accounts may be susceptible to significant fluctuations in the near term.

Fair Value

     Securities inventory, securities sold but not yet purchased, and securities segregated under federal and other regulations are recorded on a trade-date basis and are carried at fair value. Fair value is based on quoted market or dealer prices, pricing models, or management’s estimates. Realized and unrealized gains are reflected in principal transactions on a trade date basis.

     The fair value of investments, for which a quoted market or dealer price is not available, is based on management’s estimate. Among the factors considered by management in determining the fair value of investments are the cost of the investment, terms and liquidity, developments since the acquisition of the investment, the sales price of recently issued securities, the financial condition and operating results of the issuer, earnings trends and consistency of operating cash flows, the long-term business potential of the issuer, the quoted market price of securities with similar quality and yield that are publicly traded, and other factors generally pertinent to the valuation of investments. The fair value of these investments is subject to a high degree of volatility and management’s judgment and may be susceptible to significant fluctuations in the near term.

40

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies (Continued)

Investments

     Investments consist of private equity investments, mutual funds, U.S. government securities and other investments. Private equity investments are held by investment company subsidiaries, which are outside the scope of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and are carried at fair value. The Company classifies mutual fund investments as trading securities in accordance with SFAS No. 115. Trading securities are recorded at fair value. U.S. government securities are classified as held-to-maturity and are held at amortized cost as the Company has the intent and ability to hold the securities to maturity. The majority of other investments include securities held by the Company’s broker-dealer subsidiary and are recorded at fair value. The unrealized gains and losses of investment securities are reflected in other revenue.

Property and Equipment

     Property and equipment are carried at cost less accumulated depreciation and amortization; land is recorded at cost. Depreciation of buildings is provided using the straight-line method over estimated useful lives of 20 to 40 years. Leasehold improvements are amortized over the lesser of the life of the lease or estimated useful life of the improvement, generally five to 10 years. Equipment, primarily consisting of office equipment and building components, is depreciated over estimated useful lives of three to 15 years using accelerated methods of depreciation. Computer hardware, including servers and mainframes, and satellite equipment are depreciated over estimated useful lives of three to five years using the straight-line method. Internally developed applications and purchased software meeting the criteria for capitalization are amortized over their estimated useful lives, generally not exceeding three years, using the straight-line method. The Company periodically evaluates and adjusts the carrying value of its property and equipment when impairment exists.

     The Company applies the provisions of American Institute of Certified Public Accountants Statement of Position No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” to account for costs associated with internally developed software. The Company capitalizes the costs associated with software development based on guidance provided in the statement. The primary factors considered in determining the amount to capitalize include the stage of the development effort and the type of work being performed. Only costs incurred during the application development stage are capitalized. When placed in service, these costs are typically amortized over three years and are included in communication and technology expense on the Company’s consolidated statements of earnings.

Stock-Based Compensation

     The Company applies the provisions of SFAS No. 123 (revised 2004), “Share–Based Payment” (“SFAS No. 123R”), and related interpretations to account for its 1988 Incentive Stock Plan, as amended, which consists of stock options and restricted stock. The Company early adopted SFAS No. 123R on March 1, 2005. Based on the provisions of the Incentive Stock Plan, the Company uses the grant date fair value for stock options and restricted stock to determine its cost and recognizes the related expense over the service period of the award, generally three years following the award. Prior to the adoption of SFAS No. 123R, the Company applied Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) to account for its stock based awards. See Note 2 (Employee Stock Plans) for additional information related to stock-based compensation.

41

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

1. Summary of Significant Accounting Policies (Continued)

Income Taxes

     Income tax expense is provided for using the asset and liability method, under which deferred tax assets and liabilities are determined based upon the temporary differences between the financial statement and income tax bases of assets and liabilities, using current tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Comprehensive Earnings

     Comprehensive earnings for each of the three years in the period ended February 28, 2006, was equal to the Company’s net earnings.

Recent Accounting Pronouncements

     In March 2005, FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies that SFAS No. 143, “Accounting for Asset Retirement Obligations,” requires that an entity recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material impact on the consolidated financial statements.

     In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3,” (“SFAS No. 154”). SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. Beginning March 1, 2006, the Company will apply SFAS No. 154, as appropriate, on a prospective basis.

     In June 2005, the FASB ratified the consensus reached by the EITF on issue 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” which provides guidance in determining whether a general partner controls a limited partnership. The provisions of EITF 04-5 are not applicable to limited partnerships or similar entities accounted for as variable interest entities (VIEs) pursuant to FASB Interpretation No. 46 (revised December 2003) (“FIN 46(R)”). Therefore, the Company has determined that EITF 04-5 will have no impact on the Company’s consolidated financial statements as of February 28, 2006, as the investment in partnerships in which the Company is General Partner have been determined to be VIEs and have been accounted for pursuant to the provisions of FIN 46(R).

2. Employee Stock Plans

     Effective March 1, 2005, the Company early adopted SFAS No. 123R. SFAS No. 123R requires recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). SFAS No. 123R also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. SFAS No. 123R also amends SFAS No. 95, “Statement of Cash Flows,” to require that excess tax benefits be reported as financing cash inflows, rather than as a reduction of taxes paid, which is included within operating cash flows. 

     Upon adoption of SFAS No. 123R using the modified prospective approach, the Company recognized a $4,423 benefit ($2,768 after-tax) as the cumulative effect of a change in accounting principle resulting from the requirement to estimate forfeitures of restricted stock awards at the date of grant instead of recognizing them as incurred. The cumulative benefit, net of tax, increased both basic and diluted earnings per share by $0.04. 

42

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

2. Employee Stock Plans (Continued)

     In addition, as a result of adopting SFAS No. 123R, the Company did not recognize any compensation expense in fiscal year 2006 for incentive stock awards as all compensation expense related to outstanding awards had already been recognized or disclosed in the consolidated financial statements of previous periods. Awards related to fiscal year 2006 were granted on April 17, 2006, and the related expense will be recognized over the subsequent service period or vesting period, generally three years. 

     Prior to March 1, 2005, the Company applied the provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” to account for stock options granted under employee stock plans and accordingly did not reflect any associated compensation expense in its statement of earnings. The Company grants options to employees utilizing two shareholder approved plans: The Employee Stock Purchase Plan is a qualified plan as defined under section 423 of the Internal Revenue Code and is used to grant options to purchase the Company’s stock at a discount from market to a broad base of employees; the Incentive Stock Plan is a non-qualified plan and is used to grant options and restricted stock at market value to certain officers and key employees. Compensation expense related to restricted stock was reflected in net earnings for the periods presented below. If compensation expense associated with these plans was determined in accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, the Company’s net earnings and earnings per share would have been as follows for 2005 and 2004:

	2005			2004
Net earnings, as reported	$	186,474		$	159,485
Add back compensation related to Incentive Stock Plans
included in net earnings		21,720			19,560
Deduct effect of stock option based employee compensation:
Employee Stock Purchase Plan		(8,776	)		(14,570	)
Incentive Stock Plan		(25,125	)		(25,022	)
Pro forma net earnings	$	174,293		$	139,453
Earnings per share, as reported:
Diluted	$	2.37		$	1.97
Basic	$	2.39		$	1.99
Pro forma earnings per share:
Diluted	$	2.20		$	1.72
Basic	$	2.24		$	1.74
Pro forma net earnings	$	174,293		$	139,453
Add back reduction in incentive compensation funding formulas		3,349			5,117
Pro forma net earnings after reduction for incentive compensation plans	$	177,642		$	144,570
Pro forma earnings per share:
Diluted	$	2.24		$	1.79
Basic	$	2.28		$	1.81

     The Black-Scholes option pricing model was used to calculate the estimated fair value of the options.

43

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

2. Employee Stock Plans (Continued)

Employee Stock Purchase Plan

     The Company amended the terms of its 2002 Employee Stock Purchase Plan effective October 1, 2004. The discount from the market under the plan was reduced to 5% from 15% and the one year look-back period for the options issued under the plan was eliminated. As a result of these changes, the options granted under this plan are no longer considered compensatory for purposes of the pro forma earnings disclosed above or under SFAS No. 123R.

     The Company’s Board of Directors authorized up to 1,875,000 shares of common stock to be purchased by employees under the 2002 Employee Stock Purchase Plan, as amended. These shares are exercisable in monthly installments at 95 percent of the market price on the last business day of each month. Employees purchased an aggregate of 875,828 shares at an average price of $41.56 per share of common stock during 2006. Employees purchased an aggregate of 359,555 shares at an average price of $38.78 per share of common stock on the last business days of October 2004 through February 2005. Treasury shares were utilized for all of the shares issued.

     Under the 2002 Employee Stock Purchase Plan, prior to its most recent amendment, employees purchased 1,843,334 shares at $29.54 per share in 2005; and 1,818,057 shares at $27.79 per share in 2004 by exercising one-year options granted annually in October. The fair value of options granted in 2004 and 2003 was $9.26 and $8.44 per option, respectively, estimated using the following assumptions: dividend yield of 1.83 percent and 1.79 percent; an expected life of one year; expected volatility of 29 percent and 36 percent; and risk-free interest rates of 0.95 percent and 1.43 percent. Treasury shares were utilized for all of the shares issued. The pro forma disclosure in the preceding table reflects the fair values of the options over the period when the options from each grant date were outstanding.

Restricted Stock and Stock Options

     Under the Company’s Incentive Stock Plan, three types of benefits may be granted to officers and key employees: restricted stock, stock options and stock appreciation rights. Such grants are subject to forfeiture upon termination of employment during a restricted period, generally three years from the award date. Through February 28, 2006, no stock appreciation rights had been granted.

     Restricted stock grants are made, and shares issued, without cash payment by the employee. At February 28, 2005, and February 29, 2004, the grants were 792,544 and 778,963 shares, respectively, with corresponding market values of $35,062 and $30,637. Treasury shares were utilized for these grants.

44

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

2. Employee Stock Plans (Continued)

     Nonqualified stock options are granted to purchase common stock at 100 percent of market value at date of grant. Such options are exercisable beginning three years from date of grant and expire eight years from date of grant for options granted prior to 2003 and 10 years for awards granted in 2003 and after or earlier upon termination of employment. The fair value of each option grant was estimated at the date of grant using the following assumptions for 2005 and 2004, respectively: dividend yield of 1.72 percent and 1.83 percent; expected lives of seven years for 2005 and 2004; expected volatility of 37 percent and 43 percent; risk-free interest rates of 4.27 percent and 3.67 percent; and a forfeiture rate of 10 percent and 10 percent. The fair value of options granted under this plan in 2005 and 2004 was $17.08 and $16.16, respectively.

     A summary of the status of the Company’s stock options as of February 28, 2006, February 28, 2005, and February 29, 2004, and changes during the years ended on those dates is presented as follows:

			2006				2005				2004
			Weighted				Weighted				Weighted
			Average				Average				Average
	Shares		Exercise		Shares		Exercise		Shares		Exercise
	(000)		Price		(000)		Price		(000)		Price
Outstanding, beginning of year	4,764		$	37.08	5,041		$	34.96	4,911		$	33.61
Granted	—		$	0.00	354		$	44.24	578		$	39.33
Exercised	(849	)	$	40.48	(605	)	$	27.83	(390	)	$	18.20
Forfeited	(28	)	$	37.51	(26	)	$	35.95	(58	)	$	33.94
Expired	(25	)	$	43.06	—				—
Outstanding, end of year	3,862		$	36.29	4,764		$	37.08	5,041		$	34.96
Treasury shares utilized for exercises	849				605				390

     The following table summarizes information about outstanding stock options at February 28, 2006:

	Options Outstanding				Options Exercisable
		Weighted
		Average	Weighted			Weighted
Range of	Number	Remaining	Average		Number	Average
Exercise	Outstanding	Contractual	Exercise		Exercisable	Exercise
Prices	(000)	Life (years)	Price		(000)	Price
$26-$30	717	7.00	$	25.75	—	$	0.00
$31-$35	491	1.00	$	32.50	491	$	32.50
$36-$40	1,911	4.06	$	38.27	1,362	$	37.84
$41-$45	743	6.33	$	43.90	397	$	43.60
	3,862				2,250

     The Company granted employees 1,030,024 shares of restricted stock and 308,170 options in fiscal year 2007. These awards were for service performed in fiscal year 2006 and will be expensed, as appropriate, over the service period or vesting period, generally three years.

45

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

3. Employee Profit Sharing Plans

     The Company has a defined contribution plan, the A.G. Edwards Inc. Retirement and Profit Sharing Plan (the “Retirement Plan”), covering substantially all employees, whereby the Company is obligated to make contributions, in specified amounts as defined therein, based on the compensation of eligible employees. Additional contributions may be made at the discretion of the Company and are generally based on the Company’s pre-tax earnings. The Company expensed $94,047 in 2006, $77,942 in 2005 and $76,017 in 2004, in connection with the Retirement Plan.

     The Company has an unfunded, nonqualified deferred compensation plan, the A.G. Edwards Inc. Excess Profit Sharing Plan, that provides benefits to participants whose contributions from the Company in the Retirement Plan are subject to plan limitations. The Company expensed $23,978 in 2006, $20,095 in 2005 and $14,921 in 2004 in connection with this plan. Participants may choose to base their return on the performance of one or more of a combination of mutual funds as designated by the Company, treasury securities or, in limited cases, the broker call rate. Participants have no ownership in the mutual funds or treasury securities. Included in Investments are $151,358 in 2006 and $145,610 in 2005 in mutual funds that were purchased by the Company to hedge its liability to the participants that choose to base the performance of their return on the mutual fund option, with the exception of those who choose to base the performance of the return on money market mutual funds.

4. Property and Equipment

At February 28, 2006 and February 28, 2005, property and equipment consisted of:

	2006			2005
Land	$	20,152		$	20,163
Building and leasehold improvements		473,503			465,638
Equipment and computer hardware		476,198			531,461
Software and software applications		234,970			161,902
Software development in progress		1,712			38,329
Construction in progress		1,806			1,811
Total property and equipment		1,208,341			1,219,304
Less: Accumulated depreciation and amortization		(723,054	)		(715,328	)
Total property and equipment, net	$	485,287		$	503,976

5. Short-Term Financing

     The Company’s short-term financing is generally obtained through the use of securities-lending arrangements and bank loans. The interest rates on such short-term borrowings reflect market rates of interest or rebates at the time of the transactions. The average securities-lending arrangements outstanding that were utilized in financing activities were $144,000 in 2006, $196,000 in 2005 and $181,000 in 2004, at average effective interest rates of 2.9 percent in 2006, 1.4 percent in 2005 and 1.0 percent in 2004. Customer securities were utilized in these arrangements. Bank loans are short-term borrowings that are payable on demand and may be unsecured or collateralized by customer-owned securities held in margin accounts. The average of such bank loans was $28,000 in 2006, $32,000 in 2005 and $75,000 in 2004, at average effective interest rates of 3.6 percent, 1.7 percent and 1.3 percent, respectively. At February 28, 2006, there were no outstanding short-term bank loans, at February 28, 2005, there were outstanding short-term bank loans of $16,400. At February 28, 2006, the Company, with certain limitations, had access to $1,145,000 in uncommitted lines of credit as well as the ability to increase its securities-lending activities.

46

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

6. Net Capital Requirements

     As a registered broker-dealer, Edwards is subject to net capital rules administered by the Securities Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). Under such rules, this subsidiary must maintain net capital of not less than 2 percent of aggregate debit items, as defined, arising from customer transactions and would be restricted from expanding its business or paying cash dividends or advancing loans to affiliates if its net capital were less than 5 percent of such items. These rules also require Edwards to notify and sometimes obtain approval of the NYSE and other regulatory organizations for substantial withdrawals of capital or loans to affiliates. At February 28, 2006, the subsidiary’s net capital of $587,710 was 27 percent of aggregate debit items and $544,002 in excess of the minimum required.

     Certain other subsidiaries are also subject to minimum capital requirements that may restrict the payment of cash dividends and advances to the Company. These subsidiaries have consistently operated in excess of their capital adequacy requirements. The only restriction with regard to the payment of cash dividends by the Company is its ability to obtain cash through dividends and advances from its subsidiaries, if needed.

7. Income Taxes

     The provisions (benefits) for income taxes consist of:

	2006			2005		2004
Current
Federal	$	147,771		$	65,402	$	81,531
State and local		18,287			8,073		4,082
Non-U.S.		206			456		592
		166,264			73,931		86,205
Deferred		(41,206	)		34,002		(416	)
Cumulative effect of accounting change		1,655			—		—
		(39,551	)		34,002		(416	)
	$	126,713		$	107,933	$	85,789

     The Company operates in multiple taxing jurisdictions, and as a result, accruals for tax contingencies require management to make estimates and judgments with respect to the ultimate tax liability in any given year. Actual results could vary from these estimates. In management’s opinion, adequate provisions for income taxes have been made for all years.

     Deferred income taxes reflect temporary differences in the bases of the Company’s assets and liabilities for income tax purposes and for financial reporting purposes, using current tax rates. These temporary differences result in taxable or deductible amounts in future years.

     As of February 28, 2006, the Company adopted a plan to repatriate foreign earnings of $3,500 attributable to a foreign subsidiary. The Company has accrued for income taxes on the repatriated earnings. All remaining earnings of the foreign subsidiary were indefinitely invested.

47

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

7. Income Taxes (Continued)

     Significant components of deferred tax assets and liabilities at February 28, 2006, and February 28, 2005, are as follows:

	2006		2005
Deferred Tax Assets:
Employee benefits	$	138,341	$	126,149
Other		21,492		17,744
		159,833		143,893
Deferred Tax Liabilities
Receivables		—		18,410
Investments		40,648		22,868
Property and equipment		11,775		20,600
Prepaid expenses		4,144		20,686
Other		3,526		1,140
		60,093		83,704
	$	99,740	$	60,189

     The Company expects to fully realize these deferred tax assets given its historical level of earnings and related taxes paid; accordingly, no valuation allowance has been established.

     A reconciliation of the effective tax rate and the federal statutory rate for February 28, 2006, February 28, 2005, and February 29, 2004 is as follows:

	2006		2005		2004
Federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal tax benefit	2.4		2.5		2.0
Resolution of tax matters	(1.8	)	(0.3	)	(1.2	)
Municipal bond interest	(0.9	)	(0.7	)	(0.8	)
Meal and entertainment expenses	0.4		0.5		0.6
Other	(0.4	)	(0.3	)	(0.6	)
	34.7	%	36.7	%	35.0	%

The resolution of tax matters is primarily related to technology research and development tax credits associated with the Company’s Gateway Initiative.

8. Investments

Investments at February 28 consisted of:

	2006		2005
Private equity	$	157,782	$	140,864
Mutual funds		184,707		174,819
U.S. government securities		16,496		14,813
Other		8,837		6,898
Total Investments	$	367,822	$	337,394

48

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

8. Investments (Continued)

     Private equity consists of investments in a privately held investment management company and in Company-sponsored private equity funds. The Company committed $113,900 to various private equity investments, of which $35,254 remains unfunded at February 28, 2006. A portion of the Company’s mutual fund and U.S. government security investments are utilized to hedge certain liabilities under its deferred compensation plan and also include qualified investments by its trust company subsidiary. The Company primarily invests in U.S. government securities through its trust company subsidiary, and the majority of other investments include securities held by Edwards.

9. Stockholders’ Equity

Earnings Per Share

The following table presents the computations of basic and diluted earnings per share:

	2006		2005		2004
Earnings before cumulative effect of accounting change	$	235,561	$	186,474	$	159,485
Cumulative effect of accounting change, net of
$ 1,655 of income taxes		2,768		—		—
Net earnings available to common stockholders	$	238,329	$	186,474	$	159,485
Shares (in thousands):
Weighted average shares outstanding		76,684		77,908		80,031
Dilutive effect of employee stock plans		300		858		959
Total weighted average diluted shares		76,984		78,766		80,990
Diluted earnings per share:
Earnings before cumulative effect of accounting change	$	3.06	$	2.37	$	1.97
Cumulative effect of accounting change, net of income taxes		0.04		—		—
Diluted earnings per share	$	3.10	$	2.37	$	1.97
Basic earnings per share:
Earnings before cumulative effect of accounting change	$	3.07	$	2.39	$	1.99
Cumulative effect of accounting change, net of income taxes		0.04		—		—
Basic earnings per share:	$	3.11	$	2.39	$	1.99

     At year-end 2006, 2005 and 2004, there were 0, 944,942, and 1,865,277 options, respectively, that were considered antidilutive and thus were not included in the above calculations.

Stock Repurchase Programs

     In November 2004, the Company’s Board of Directors authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding stock during the period November 19, 2004, through December 31, 2006. In November 2002, the Company’s Board of Directors authorized the repurchase of up to 10,000,000 shares of the Company’s outstanding common stock during the period of January 1, 2003, through December 31, 2004. The Company purchased 3,204,769 shares at an aggregate cost of $141,966 in 2006; 7,026,392 shares at an aggregate cost of $250,123 in 2005; and 3,102,854 shares at an aggregate cost of $105,455 in 2004 under these authorizations and other previously authorized plans. The Company had up to 6,458,086 shares available for repurchase under the November 2004 authorization.

     In May 2005, the Company’s Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company’s outstanding stock solely to effect employee stock transactions in the Company’s Retirement and Profit Sharing Plan during the period May 24, 2005, through May 31, 2008. The Company purchased 153,021 shares at an aggregate cost of $6,868 in 2006. At February 28, 2006, the Company had up to 4,846,979 shares available for repurchase under this authorization.

49

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

9. Stockholders’ Equity (Continued)

Stockholder Rights Plan

     On June 23, 2005, the Board of Directors determined not to renew the Stockholder Rights Plan, which expired by its terms on June 25, 2005. If a stockholder rights plan is adopted by the Board of Directors without prior stockholder approval, the Company has established a policy that such plan will expire within 12 months of its effective date unless ratified by the Company’s stockholders.

10. Commitments and Contingent Liabilities

     The Company has long-term operating leases and commitments related to office space, equipment and service agreements. Minimum commitments under all such noncancelable leases and service agreements, some of which contain escalation clauses and renewal options, at February 28, 2006, are as follows:

Year ending February 28 (29),
2007	$	175,200
2008		139,400
2009		108,800
2010		74,300
2011		59,300
Later years		117,200
	$	674,200

     Rental expense under all operating leases and service agreements was $157,335 in 2006, $128,706 in 2005 and $125,177 in 2004.

     The Company accounts for operating leases in accordance with the provisions of SFAS No. 13 “Accounting for Leases,” FASB Technical Bulletin 85-3 “Accounting for Operating Leases with Scheduled Rent Increases” and FASB Technical Bulletin 88-1 “Issues Relating to Accounting for Leases.” As such, the costs of leasehold improvements, whether provided by the landlord or the Company, are amortized over the shorter of the lease term or the economic life of the improvement. In addition, rent escalations and lease incentives are included with the total commitment under each operating lease to calculate an average occupancy expense, which is recognized on a straight-line basis over the full lease term. Included in occupancy and equipment expenses in 2005 is a $10,064 charge representing the cumulative effect of correcting the recognition period for rent-escalation clauses and lease incentives in certain branch-office leases. 

     The Company is engaged in a major business process and technology transformation program, the Gateway Initiative, which, when fully developed and implemented, is designed to update the Company’s technology infrastructure, streamline its back-office processing and strengthen its data management capabilities. The Company has currently designated up to $193,200, including internal development costs, to fund this program. Total costs through February 28, 2006, were $178,400, of which $48,700 was capitalized. In May 2005, the Company completed the most significant aspect of the project, which was the conversion of securities-processing functions to an application service provider. Since the conversion, an application service provider has provided the software and computer operations that support substantially all of the Company’s securities processing functions. Under the terms of the Hosting and Services Agreement with the application service provider, which became effective in May 2005, minimum payments are $10,700 a year with an expected range of payments of between $18,000 and $22,000 a year.

50

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

10. Commitments and Contingent Liabilities (Continued)

     While the Company’s migration of its back-office systems is intended to better align securities-processing expenses with client transaction activity, the Company intends to maintain certain of its existing back-office systems for a transitional period that began in May 2005 and has approximately 15 to 18 months remaining. The full benefit of the Gateway Initiative will not be realized until this transition is completed.

     In the normal course of business, Edwards enters into when-issued and underwriting commitments and delayed delivery transactions. Settlement of these transactions at February 28, 2006, would not have had a material effect on the consolidated financial statements.

     The Company had outstanding letters of credit of $61,306 at February 28, 2006, and $58,156 at February 28, 2005, principally to satisfy margin deposit requirements with the Options Clearing Corporation.

     The Company also provides guarantees to securities clearing houses and exchanges under their standard membership agreements, which require members to guarantee the performance of other members. Under these agreements, if a member becomes unable to satisfy its obligations to the clearing houses and exchanges, all other members would be required to meet any shortfall. The Company’s liability under these agreements is not quantifiable and may exceed the cash and securities it has posted as collateral. However, the potential requirement for the Company to make payments under these agreements is remote. Accordingly, no liability has been recognized for these transactions.

     The Company is a defendant in a number of lawsuits, in some of which plaintiffs claim substantial amounts, relating primarily to its securities and commodities business. Management has determined that it is likely that ultimate resolution in favor of the plaintiffs will result in losses to the Company on certain of these claims and as a result, establishes accruals for potential litigation losses. The Company also is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, certain of which may result in adverse judgments, fines or penalties. Factors considered by management in estimating the Company’s reserves for these matters are the loss and damages sought by the plaintiffs, the merits of the claims, the total cost of defending the litigation, the likelihood of a successful defense against the claims, and the potential for fines and penalties from regulatory agencies. Management, based on its understanding of the facts, reasonably estimates a range of loss and accrues what it considers appropriate to reserve against probable loss for certain claims and regulatory matters. While results of litigation and investigations and proceedings by governmental and self-regulatory agencies or the resulting judgments, fines or penalties cannot be predicted with certainty, management, after consultation with counsel, believes that resolution of all such matters will not have a material adverse effect on the consolidated balance sheet, statement of earnings or statement of cash flows of the Company, except that the Company believes, based on current knowledge and after consulting with counsel, that the impact of the matters could be material to the operating results in one or more periods.

     Edwards has received information requests or subpoenas from the SEC, the NASD, the NYSE, several states and the United States Department of Justice with respect to mutual fund transactions that involve market timing, late trading or both. The SEC, the NASD and certain states have examined certain branch offices and have or will take statements from employees of Edwards in connection with such mutual fund transactions. In addition, Edwards has responded to requests for information concerning timing of mutual fund transactions in variable annuity sub accounts. The staff of the SEC has informed Edwards that it intends to recommend that a civil injunctive action be brought against Edwards with respect to mutual fund transactions occurring prior to October 2003 and alleged to involve market timing. Edwards has made a Wells submission stating why Edwards believes such action should not be brought.

     The Commonwealth of Massachusetts filed in February 2005 an administrative complaint against Edwards concerning certain mutual fund transactions in Edwards’ Boston-Back Bay office. The complaint alleges violations of securities laws by mutual fund market timing transactions and seeks a cease and desist order, an administrative fine in an unspecified amount, compensation to mutual fund holders for losses alleged to have resulted from market timing, and other relief. Other regulatory actions or claims may occur related to market timing or other mutual fund activities. 

51

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

10. Commitments and Contingent Liabilities (Continued)

     The Attorney General of South Carolina, Securities Division, filed an administrative proceeding in August 2005 against Edwards and two former employees in connection with actions taken from 1995 until 2002 involving securities transactions with residents of South Carolina by financial consultants in Edwards’ Augusta, Georgia branch. In March 2004, Edwards agreed under a consent order with the Georgia Secretary of State’s Securities and Business Regulation Division to make certain payments to the State of Georgia and to customers related to transactions in the Augusta, Georgia branch. Edwards has made payments in excess of $37.1 million to customers and to the State of Georgia related to these matters. Edwards believes the actions involved in these matters were isolated to one branch and a limited number of financial consultants formerly with Edwards and had no connection with any other Edwards office.

     Edwards is a defendant in a complaint filed in the United States District Court for the Southern District of California that seeks to be a class action on behalf of all financial consultants and trainees who worked for Edwards in California after June 30, 2000. The action, among other relief, seeks overtime pay for financial consultants, including trainees, on the basis that the financial consultants should be classified as non-exempt employees under California law, restitution of amounts that were deducted from commissions owed to financial consultants to repay advances made in prior months, payment for meal rest breaks to which financial consultants are claimed to be entitled, and reimbursement for certain alleged business-related expenses paid by financial consultants. Edwards is defending itself against the suit. Several other financial services firms have been sued in California in similar actions, some of which have settled the actions for substantial amounts.

11. Financial Instruments

Off-Balance Sheet Risk and Concentration of Credit Risk

     The Company records customer transactions on a settlement date basis, generally three business days after trade date. The risk of loss on unsettled transactions is identical to that of settled transactions and relates to customers’ and other counterparties’ inability to fulfill their contracted obligations.

     In the normal course of business, the Company also executes customer transactions involving the sale of securities not yet purchased, the purchase and sale of futures contracts, and the writing of option contracts on both securities and futures. In the event customers or other counterparties, such as broker-dealers or clearing organizations, fail to satisfy their obligations, the Company may be required to purchase or sell financial instruments in order to fulfill its obligations at prices that may differ from amounts recorded in the consolidated balance sheets.

     Customer financing and securities settlement activities generally require the Company to pledge customer securities as collateral in support of various financing sources. In addition, customer securities may be pledged as collateral to satisfy margin deposits at various clearing organizations. To the extent these counterparties are unable to fulfill their contracted obligation to return securities pledged, the Company is exposed to the risk of obtaining securities at prevailing market prices to meet its customer obligations.

52

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

11. Financial Instruments (Continued)

     Securities sold but not yet purchased represent obligations of the Company to deliver specified securities at contracted prices. Settlement of such obligations may be at amounts greater than those recorded on the consolidated balance sheets.

     A substantial portion of the Company’s assets and obligations result from transactions with customers and other counterparties who have provided financial instruments as collateral. Volatile trading markets could impair the value of such collateral and affect the ability of customers and other counterparties to satisfy their obligations to the Company.

     The Company manages its risks associated with the aforementioned transactions through position and credit limits and the continuous monitoring of collateral. Additional collateral is requested from customers and other counterparties when appropriate.

     The Company receives collateral in connection with resale agreements, securities borrowed transactions, customer margin loans and other loans. Under many agreements, the Company is permitted to sell or repledge these securities held as collateral and use these securities to enter into securities lending arrangements or to deliver to counterparties to cover short positions. At February 28, 2006, the fair value of securities received as collateral where the Company is permitted to sell or repledge the securities was $2,786,656, and the fair value of the collateral that had been sold or repledged was $403,198.

Derivatives

     The Company does not act as dealer, trader or end-user of complex derivatives such as swaps, collars and caps. The Company provides advice and guidance on complex derivative products to selected clients; however, this activity does not involve the Company acquiring a position or commitment in these products. The Company will occasionally hedge a portion of its debt inventory through the use of financial futures contracts. These transactions are not material to the Company’s consolidated financial condition or results of operations.

Fair Value Consideration

     Substantially all of the Company’s financial instruments are carried at fair value or amounts that approximate fair value. Customer receivables, primarily consisting of floating rate loans collateralized by margin securities, are charged interest at rates similar to other such loans made throughout the industry. The Company’s remaining financial instruments are generally short-term in nature and liquidate at their carrying values.

12. Enterprise Wide Disclosure

     The Company provides investment services to its clients through its financial consultants in its network of branch offices in the United States; London, England; and Geneva, Switzerland. Revenues from the Company’s non-U.S. operations are currently not material. Transaction services include commissions and sales credits earned by executing or facilitating the execution of security and commodity trades. Asset management fees are earned by providing portfolio advisory services through third-party managers, including mutual funds, managed future funds, annuities and insurance contracts, and the Company’s in-house portfolio managers. The Company earns interest revenue principally from financing its customer margin accounts, debt securities carried for resale and short-term investments.

53

A.G. Edwards, Inc.

Notes to Consolidated Financial Statements (Continued)
Three years ended February 28, 2006
(Dollars in thousands, except share and per share amounts)

12. Enterprise Wide Disclosure (Continued)

     The following table presents the Company’s net revenues by type of service for the years ended February 28(29):

	2006	2005	2004
Transaction services	$1,487,597	$1,559,718	$1,726,560
Asset management services	958,158	821,795	613,678
Interest	170,684	124,629	93,273
Other	123,674	101,539	89,306
	$2,740,113	$2,607,681	$2,522,817

13. Subsequent Event

     On March 7, 2006, the New York Stock Exchange (“NYSE”) and Archipelago Holdings, Inc. (“Archipelago”) closed a merger agreement and formed a new holding company, NYSE Group, Inc. (“NYSE Group”). In the merger, NYSE members were entitled, and the Company elected, to receive $404,640 and 78,601 shares of NYSE Group common stock for each NYSE membership seat. The shares are subject to certain restrictions that expire ratably over a three-year period, unless the NYSE Group board of directors removes or reduces the transfer restrictions earlier. The NYSE Group board of directors authorized a secondary distribution, and the Company sold 58,943 shares in the offering at a price of $60.27 per share. The Company may sell additional shares pursuant to the underwriters’ over-allotment option, which expires June 5, 2006. In addition, Edwards will have to purchase trading licenses through a modified Dutch auction process every year in order to receive the right to trade securities on the floor of the exchange. On January 4, 2006, Edwards purchased four NYSE trading licenses at a price of $49,290 each.

     At February 28, 2006, Edwards had four NYSE membership seats included in other assets on the consolidated balance sheet at a total cost of $491,000. Factoring in the Company’s cost basis for the four seats and the transfer restrictions on the remaining shares, the Company expects to record a significant gain in the first quarter of 2007. Subsequent gains or losses will be recorded as transfer restrictions expire and the share price of NYSE Group stock fluctuates.

* * * * *

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ITEM  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

None.

ITEM 9A.  CONTROLS AND PROCEDURES.

CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONROLS AND
PROCEDURES

     As of the end of the period covered by this report, the Company evaluated the effectiveness of its disclosure controls and procedures (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

     Disclosure Controls are controls and other procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (the “SEC”) rules and forms. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. The Disclosure Controls include components of the Company’s internal control over financial reporting, which consist of control processes designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements in conformity with generally accepted accounting principles in the U.S. To the extent that components of the Company’s internal control over financial reporting are included within the Company’s Disclosure Controls, they are included in the scope of the Company’s quarterly Controls Evaluation.

     The Company’s management, including the CEO and CFO, does not expect that the Disclosure Controls or the Company’s internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

     Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

     The Controls Evaluation included a review of the controls’ objectives and design, the Company’s implementation of the controls, and the effect of the controls on the information generated for use in this Annual Report. In the course of the Controls Evaluation, management sought to identify data errors, controls problems or acts of fraud and confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and CFO, concerning controls effectiveness can be reported in the Company’s Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. Many of the components of the Company’s Disclosure Controls are also evaluated on an ongoing basis by the Internal Audit Department and by other personnel of the Company who evaluate them in connection with determining their auditing procedures. The overall goals of these various evaluation activities are to monitor Disclosure Controls and to modify them as necessary. The Company intends to maintain the Disclosure Controls as dynamic systems that change as conditions warrant.

     Based upon the Controls Evaluation, the CEO and CFO have concluded that at the reasonable assurance level, as of the end of the period covered by this Annual Report, the Disclosure Controls were effective to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that

55

material information relating to the Company and its consolidated subsidiaries required to be disclosed in such reports is made known to management, including the CEO and CFO, particularly during the period when the periodic reports are being prepared.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).

     Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2006. In making this assessment Company management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Management has concluded that, as of February 28, 2006, the Company’s internal control over financial reporting is effective based on those criteria.

     All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

     The Company’s independent registered public accounting firm audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of February 28, 2006, as stated in their report appearing on the following page, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of February 28, 2006.

May 3, 2006

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
A.G. Edwards, Inc.
St. Louis, Missouri

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that A.G. Edwards, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of February 28, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of February 28, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 28, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended February 28, 2005 of the Company and our report dated May 2, 2006 expressed an unqualified opinion which includes an explanatory paragraph related to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” on those consolidated financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP
St. Louis, Missouri
May 2, 2006

57

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the fiscal quarter ended February 28, 2006 that materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting. However, during the first quarter ended May 31, 2005, the Company migrated to an application service provider. The application service provider is supplying the software and computer operations that support the Company’s securities processing functions. Securities processing is a significant business process affecting a number of the Company’s significant financial statement accounts. In addition, the services provided are a part of the Company’s internal control over financial reporting. For these reasons, the CEO and CFO concluded the migration to the application service provider materially affected the Company’s internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION. 

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 

     The information required by this item is included under the caption “Election of Directors – Nominees for Directors” in the Company’s 2006 Proxy Statement and under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s 2006 Proxy Statement, and such information is hereby incorporated by reference, and in Part I of this Form’s 10-K under the caption “Executive Officers of the Company.”

Information relating to the Board of Directors’ determination regarding the service of an audit committee financial expert on the Board’s Audit Committee and the name and the determination by the Board of the independence of such expert are set forth under the captions “Committees and Meetings of the Board of Directors - Audit Committee,” and is hereby incorporated by reference. Information relating to the identity of the members of the Board’s Audit Committee is also set forth under this caption and is hereby incorporated by reference. The information regarding the procedures by which shareholders may recommend nominees to the Board of Directors is set forth in the Company’s Proxy Statement under the caption titled “Stockholder Proposals.” The “Nominating and Corporate Governance Committee Charter” is available on the Company’s web site at www.agedwards.com and may be accessed by entering the Company’s web site and clicking the “About A.G. Edwards” link, then the “Corporate Governance” link.

     The Company’s Code of Ethical Conduct (“Code”) and Corporate Governance Guidelines (“Guidelines”) set forth the fundamental principles and key policies and procedures that govern the conduct of all of the Company’s directors, officers and employees. Additionally, the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller, Director of Regulatory Accounting and Director of Tax (“Senior Financial Officers”) are required to conduct their personal and professional affairs in a manner that is consistent with the ethical and professional standards set forth in the Company’s Financial Code of Ethical Conduct (“Financial Code”). In 2004, the Board of Directors adopted the Financial Code that was designated as the Company’s code of ethics for Senior Financial Officers in performing their duties. A copy of the Code and the Financial Code were filed as exhibits 14.1 and 14.2, respectively, in the Company’s Annual Report on Form 10-K for the 2004 fiscal year. The Company will post on its web site any amendments to the Code, Financial Code and/or Guidelines and any waivers that are required to be disclosed by the rules of the SEC or NYSE.

     The Company has included as exhibits to this Annual Report on Form 10-K for the 2006 fiscal year filed with the SEC certificates of its Chief Executive Officer and Chief Financial Officer certifying the quality of the Company’s public disclosure. The Company submitted to the New York Stock Exchange as of July 21, 2005, a certification made by its Chief Executive Officer that he is not aware of any violation by the Company of their corporate governance listing standards.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by this item is included under the caption titled “Compensation” in the Company’s 2006 Proxy Statement. Such information is hereby incorporated by reference.

58

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

     The information required by this item is contained in the Company’s 2006 Proxy Statement under the caption “Beneficial Ownership of the Company’s Common Stock,” And “Equity Compensation Plans.” Such information is hereby incorporated by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this item is contained in the Company’s 2006 Proxy Statement under the caption titled “Certain Transactions.” Such information is hereby incorporated by reference.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     The information required by this item is contained in the Company’s 2006 Proxy Statement under the captions titled “Pre-Approval of Services Provided by the Company’s Independent Registered Public Accounting Firm” and “Principal Accounting Firm Fees.” Such information is hereby incorporated by reference.

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. 

			PAGE
		INDEX	NUMBER
(a)	1.	Financial Statements
		Management’s Report on Internal Control Over Financial Reporting	56
		Reports of Independent Registered Public Accounting Firm	34 and 57
		Consolidated balance sheets	35
		Consolidated statements of earnings	36
		Consolidated statements of stockholders’ equity	37
		Consolidated statements of cash flows	38
		Notes to consolidated financial statements	39
	2.	Financial Statement Schedules
		Schedule II – Valuation and Qualifying Accounts	63

     All other schedules are omitted due to the absence of conditions under which they are required or because the required information is provided in the consolidated financial statements or notes thereto.

3.         Exhibits*

     Some of the following exhibits were previously filed as exhibits to other reports or registration statements filed by the Registrant and are incorporated by reference as indicated below.

3(i)	Certificate of Incorporation filed as Exhibit 3(i) to the Registrant’s Form 10-K for the fiscal year ended February 28, 1993, as amended by the Certificate of Amendment of Certificate of Incorporation filed as Exhibit 3(i)(a) to the Registrant’s Form 10-Q for the quarter ended May 31, 1998.
3(ii)	By laws, as amended, filed as Exhibit 3(ii) to the Registrant’s Form 10-K for the fiscal year ended February 28, 1994.
4(i)	Reference is made to Articles IV, V, X, XII, XIII and XV of the Certificate of Incorporation filed as Exhibit 3(i) to this Form 10-K.
4(ii)	Reference is made to Article II, Article III Sections 1 and 15, Article IV Sections 1 and 3, Article VI and Article VII Sections 1-3 of the By laws filed as Exhibit 3(ii) to this Form 10-K.
10.1	A.G. Edwards, Inc. 1988 Incentive Stock Plan (2005 Restatement and First Amendment) filed as Exhibit 10.1 to this form 10-K.**

59

10.2	A.G. Edwards, Inc. Non Employee Director Stock Compensation Plan (as amended and restated) filed as Exhibit 10 to Registrant’s Form 10-Q for the fiscal quarter ended May 31, 2005.**
10.3	A. G. Edwards, Inc. Retirement and Profit Sharing Plan (2005 restatement and Amendments) filed as Exhibit 10.2 to this form 10-K.**
10.4	A.G. Edwards, Inc. Corporate Executive Bonus Plan filed as Exhibit 10.4 to Registrant’s Form 10-K for the fiscal year ended February 28, 2005.**
10.5	A.G. Edwards, Inc. 2004 Performance Plan for Executives filed as Exhibit 10.5 to Registrant’s Form 8-K dated March 1, 2005.**
10.6	A.G. Edwards, Inc. Excess Profit Sharing Plan filed as Exhibit 10.4 to Registrant’s Form 8-K dated March 1, 2005.**
10.7	Hosting and Services Agreement between A.G. Edwards Technology Group, Inc. and BETA Systems, a division of Thomson Financial Inc. filed as Exhibit 10 to Registrant’s Form 10-Q for the period ended November 30, 2004.
11	Computation of per share earnings is set forth in Note 9 (Stockholders’ Equity) of the Notes to Consolidated Financial Statements under the caption “Earnings Per Share” in this Form 10-K.
14.1	A.G. Edwards, Inc. Code of Ethical Conduct filed as Exhibit 14.1 to Registrant’s Form 10-K for the fiscal year ended February 29, 2004.
14.2	A.G. Edwards, Inc. Financial Code of Ethical Conduct filed as Exhibit 14.2 to Registrant’s Form 10-K for the fiscal year ended February 29, 2004.
21	Registrant’s Subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
24	Power of Attorney (included on the signature page of this Form 10-K).
31(i)	Principal Executive Officer Certification as required by Rule 13a-14(a)/15d-14(a).
31(ii)	Principal Financial Officer Certification as required by Rule 13a-14(a)/15d-14(a).
32(i)	Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(ii)	Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

____________________

*	Numbers correspond to document numbers in the Exhibit Table of Item 601 of Regulation S-K.
**	Compensatory plan or arrangement under which executive officers or directors of the Company may participate.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	A.G. EDWARDS, INC.
	(Registrant)
Date: May 3, 2006	By	/s/ Robert L. Bagby
	Robert L. Bagby
	Chairman of the Board, President and
	Chief Executive Officer

61

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert L. Bagby, and Douglas L. Kelly and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Report, any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Robert L. Bagby	Chairman of the Board, President and	May 3, 2006
Robert L. Bagby	Chief Executive Officer
/s/ Ronald J. Kessler	Vice Chairman of the Board	May 3, 2006
Ronald J. Kessler
/s/ Dr. E. Eugene Carter	Director	May 3, 2006
Dr. E. Eugene Carter
/s/ Vicki B. Escarra	Director	May 3, 2006
Vicki B. Escarra
/s/ Samuel C. Hutchinson Jr.	Director	May 3, 2006
Samuel C. Hutchinson Jr.
/s/ Peter B. Madoff	Director	May 3, 2006
Peter B. Madoff
/s/ Mark S. Wrighton	Director	May 3, 2006
Mark S. Wrighton
/s/ Douglas L. Kelly	Treasurer, Chief Financial Officer	May 3, 2006
Douglas L. Kelly	and Secretary
/s/ Thomas H. Martin Jr.	Controller	May 3, 2006
Thomas H. Martin Jr.
/s/ Joseph G. Porter	Principal Accounting Officer	May 3, 2006
Joseph G. Porter

62

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

A.G. EDWARDS, INC.
(Dollars in thousands)

			Additions
	Balance at		Charged to				Balance
	Beginning		Costs and				at End
Description	of Period		Expenses		Deductions*		of Period
Year ended February 28, 2006
Deducted from asset account:
Allowance for doubtful accounts	$	8,045	$	680	$	6,125	$	2,600
Year ended February 28, 2005
Deducted from asset account:
Allowance for doubtful accounts	$	45,593	$	2,262	$	39,810	$	8,045
Year ended February 29, 2004
Deducted from asset account:
Allowance for doubtful accounts	$	44,508	$	1,490	$	405	$	45,593

____________________
(*) Write-offs net of recoveries.

63

EXHIBIT INDEX

Exhibit	Description
10.1	A.G. Edwards, Inc. 1988 Incentive Stock Plan (as amended and restated) (available upon request)
10.2	A. G. Edwards, Inc. Retirement and Profit Sharing Plan (as amended and restated) (available upon request)
21	Registrant’s Subsidiaries
23	Consent of Independent Registered Public Accounting Firm
24	Power of Attorney (included on signature page of this Form 10-K)
31 (i)	Principal Executive Officer Certification as required by Rule 13a-14(a)/15d-14(a)
31 (ii)	Principal Financial Officer Certification as required by Rule 13a-14(a)/15d-14(a)
32 (i)	Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
	Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32 (ii)	Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
	Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

64

EX-10.1

EXHIBIT 10.1

A.G. EDWARDS, INC.

1988 INCENTIVE STOCK PLAN

2005 Restatement

Recitals

This Plan originally became effective in April 1988. It was amended in (1) June 1990 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 4,060,000 shares (which number has since been adjusted to 7,612,500 shares to reflect a 50% and a 25% stock dividend, treated as a stock split), (2) April 1992 by the Board of Directors to comply with changes under Section 16(b) of the Exchange Act; (3) June 1992 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 13,862,500 shares (which number has since been adjusted to 17,328,125 to reflect a 25% stock dividend, treated as a stock split); (4) June 1995 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 26,328,125 shares (which number has since been adjusted to 39,492,188 to reflect a 50% stock dividend, treated as a stock split); (5) June 1999 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 54,492,188 shares; (6) September, 1999 by the Board of Directors to modify the eligibility requirements and restate the Plan, (7) February, 2001 by the Board of Directors to modify the definition of Market Value, modify the provisions governing elections between Options and Restricted Stock, modify the provisions governing awards to Senior Participants for Options and Restricted Stock, comply with changes under Section 16(b) of the Exchange Act and restate the plan; (8) February, 2002 by the Board of Directors to modify the provisions (a) applicable to non-reporting persons, (b) governing eligibility for an award, (c) governing elections between Options and Restricted Stock, (d) governing the period of time in which Options must be exercised and (e) limiting the maximum amount of awards, (9) November 2003 by stockholders of the Company to delete the Stock Purchase Plan that is Section 8; and (10) January 2005 by the Board of Directors to comply with Standard FAS 123R.

NOW, THEREFORE, effective March 1, 2005, the Plan is hereby amended and restated in its entirety as follows:

1. Purpose.

The purpose of the A.G. Edwards, Inc. 1988 Incentive Stock Plan (the "Plan") is to motivate employees of A.G. Edwards, Inc. (the "Company") and its subsidiaries through added incentives to make a maximum contribution to Company objectives.

2. Definitions.

As used in the Plan, the following words shall have the following meanings:

"Administrator" has the meaning ascribed to it in Section 3(a) of the Plan.

"Award " has the meaning ascribed to it in Section 5 of the Plan.

"Benefits" means the benefits awarded to Participants as described in Sections 5 through 10 of the Plan. Benefits may be awarded separately or in any combination.

"Board of Directors" means the Board of Directors of the Company.

"Business Day" means any day on which the New York Stock Exchange is open for business.

"Change in Control" means the occurrence of any of the following events without the prior approval of the Board of Directors: (a) a merger, consolidation or reorganization of the Company in which the Company does not survive as an independent entity; (b) a sale of all or substantially all of the assets of the Company; (c) the first purchase of shares of Common Stock of the Company pursuant to a tender or exchange offer for more than 20% of the Company's outstanding shares of Common Stock; or (d) any change in control of a nature that, in the opinion of the Board of Directors, would be required to be reported under the federal securities laws; provided that such a change in control shall be deemed to have occurred if (i) any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute a majority thereof unless the election of any director, who was not a director at the beginning of the period, was approved by a vote of at least 70% of the directors then still in office who were directors at the beginning of the period.

"Code" means the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include: (a) that section and any comparable section or sections of any future legislation that amends, supplements or supersedes that section, and (b) any rules or regulations promulgated under such section.

"Common Stock" means shares of common stock par value $1.00 per share of the Company, either authorized but unissued, or stock that has been issued previously but is held in the treasury of the Company, together with the Common Stock Purchase Rights (as described in the Rights Agreement, as amended) associated with such common stock.

"Company" has the meaning ascribed to it in Section 1 of the Plan.

"Competition with the Company" means, with respect to any individual, owning, managing, controlling, participating in or becoming connected with, as an officer, employee, partner, stockholder, consultant or otherwise, any business, individual, partnership or corporation that is engaged significantly, or is planning to become engaged significantly, in a business which, directly or indirectly, competes with a business of the Company or a Subsidiary; provided, merely acquiring or holding

shares of any business entity that has its securities listed on a national securities exchange or quoted in the daily listing of over-the-counter market securities shall not constitute such competition so long as such individual and members of such individual's family do not own more than 1% of the voting securities of such an entity.

"Date of Grant" has the meaning ascribed to it in Section 8(b) of the Plan.

"Deferred Award Date" has the meaning ascribed to it in Section 7(d) of the Plan.

"Disability" means a total and permanent disability that renders a Participant unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than three years.

"Disinterested Administrator" means an Administrator comprised of the Board of Directors or a committee of two or more directors of the Company, each of whom is a a Non-Employee Director.

"Eligible Employee" has the meaning ascribed to it in Section 4 of the Plan.

"Employee" means any individual who is employed by the Employer.

"Employee Stock Purchase Plan" has the meaning ascribed to it in Section 8 of the Plan.

“Employer” means the Company and its Subsidiaries, while a Subsidiary.

"Exchange Act" means the Securities Exchange Act of 1934, as amended. Reference to a section of the Exchange Act shall include: (a) that section and any comparable section or sections of any future legislation that amends, supplements or supersedes that section, and (b) any rules or regulations promulgated under such section.

"Exercise Price" has the meaning ascribed to it in Section 6(b) of the Plan.

"Incentive Stock Options" has the meaning ascribed to it in Section 9 of the Plan.

"Market Value" means, with respect to a share of Common Stock on a particular date, the average of the highest and lowest quoted selling prices on the particular date. If there are no sales on that date, the Market Value shall be the average of the highest and lowest quoted selling prices on the next trading date.

“Non-Employee Director” has the meaning set forth in Rule 16b-3(b)(3)(i) promulgated under Section 16 of the Exchange Act or any successor rule thereto.

"Offered Shares" has the meaning ascribed to it in Section 8(b) of the Plan.

"Offering" has the meaning ascribed to it in Section 8 of the Plan.

"Offering Period" has the meaning ascribed to it in Section 8(e) of the Plan.

"Option Award Date" has the meaning ascribed to it in Section 6(a) of the Plan.

"Option Awards" has the meaning ascribed to it in Section 6(a) of the Plan.

"Option Determination Date" has the meaning ascribed to it in Section 6(a) of the Plan.

"Options" has the meaning ascribed to it in Section 6(a) of the Plan.

"Over 60 Participant" has the meaning ascribed to it in Section 7(d) of the Plan.

"Participant" means each Eligible Employee who receives a Benefit or an award of Benefits under the Plan.

"Phantom Stock Credits" has the meaning ascribed to it in Section 7(d) of the Plan.

"Plan" has the meaning ascribed to it in Section 1 of the Plan.

"Purchase Price" has the meaning ascribed to it in Section 8(d) of the Plan.

"Reporting Person" means any person who is a director of the Company or any officer of the Company as that term is defined in Rule 16a-1(f), promulgated under Section 16 of the Exchange Act or any successor rule thereto.

"Restricted Period" has the meaning ascribed to it in Section 7(b)(1) of the Plan.

"Restricted Share Award Date" has the meaning ascribed to it in Section 7(a) of the Plan.

"Restricted Share Awards" has the meaning ascribed to it in Section 7(a) of the Plan.

"Restricted Share Determination Date" has the meaning, ascribed to it in Section 7(a) of the Plan.

"Restricted Shares" has the meaning ascribed to it in Section 7(a) of the Plan.

"Rule l6b-3" means Rule 16b-3 promulgated under Section 16 of the Exchange Act, or any successor rule thereto.

"Section 423 Options" has the meaning ascribed to it in Section 8(a) of the Plan.

"Senior Participant" has the meaning ascribed to it in Section 6(d) of the Plan.

"Stock Purchase Plan Eligible Employee" has the meaning ascribed to it in Section 8(a)

of the Plan.

"Subsidiary" means any corporation, partnership, joint venture or business trust, control of which is owned, directly or indirectly, by the Company; provided, for the purpose of any Incentive Stock Options and options granted pursuant to the Employee Stock Purchase Plan, "Subsidiary" shall have the same meaning as the term "subsidiary corporation" as defined in Section 424 of the Code.

"Termination of Employment," whether or not capitalized when used herein, or any other similar phrase used herein to refer to the employment of an Employee with the Employer being terminated means the Employee ceases to be employed by the Employer whether the cessation of employment is voluntary or involuntary and regardless of whether the employment of the Employee with the Employer ceases because the Employee quits, is discharged, retires, is disabled or dies.

"Termination for Aggravated Cause" means a Termination of Employment (whether voluntary or involuntary) because any of the following acts or events have occurred: any action or failure to act by a Participant that results in or is likely to result in detriment to the Employer, employees or customers; violation of any securities law; dishonesty whether or not resulting in a direct or indirect monetary loss; insubordination; drunkenness; use of harmful drugs; willful destruction of property; provocation or continuous agitation of the Employer’s customers or employees; or conviction of a felony or a misdemeanor.

"Vesting Period" has the meaning ascribed to it in Section 6(b) of the Plan.

3. Administration.

(a) Appointment. The Plan shall be administered by the Board of Directors of the Company or by one or more committees the members of which need not be members of the Board of Directors (collectively, the "Administrator") appointed by the Board of Directors. Such a committee may be appointed by designating another committee, such as the Compensation Committee of A.G. Edwards & Sons, Inc., to serve as Administrator. All of the duties of the Administrator may be assigned to one committee or, if the Board of Directors appoints more than one committee to serve as Administrator, the Board of Directors may allocate the specific duties of the Administrator among such committees. A particular committee to whom a specific duty is so allocated shall have the sole responsibility and authority for carrying out such duty. A committee shall continue to serve in its appointed role until its role is terminated or changed by the Board of Directors.

(b) Duties. Subject to the provisions of the Plan, the Administrator shall have exclusive authority to interpret and administer the Plan (including, without limitation, developing or approving forms to implement all or any part of the Plan), to delegate its authority and duties under the Plan, and to take all such steps and make all such rules or determinations in connection with the Plan and any of the Benefits provided by the Plan as it may deem necessary or advisable (including, without limitation, rules relating to any tax withholding requirements, designation of beneficiaries, ownership of shares in joint names and restoration of awards for rehired

Participants); provided, however, the Administrator shall not have the authority to change the amount, price or timing of any Benefits awarded by the terms of the Plan; provided, further, with respect to the forfeiture of any Benefits, only a Disinterested Administrator may make a determination that a Reporting Person has incurred a Termination for Aggravated Cause.

4. Eligibility.

"Eligible Employee" shall include any individual who is an Employee of the Employer at the time Benefits under the Plan are awarded and who satisfies the eligibility requirements established by the Administrator, from time to time, taking into account such factors as the Administrator may consider relevant (which may include, but need not include, the nature of services rendered by the Employee or the capacity of the Employee to contribute to the success of the Employer).

5. Award.

Determination of Awards. The award ("Award"), if any, of Options and Restricted Shares (as hereinafter defined) or both to which an Eligible Employee is entitled for any specific fiscal year of the Company shall be determined by the Administrator. No Eligible Employee shall be entitled to an Award absent a determination by the Administrator which shall be made at the discretion of the Administrator.

The Administrator in its discretion, shall establish how the Award, if any, shall be allocated between Options or Restricted Shares or both.

6. Stock Options.

(a) Grant and Time of Award. Subject to Section 5, awards of options ("Options") to purchase shares of Common Stock from the Company shall be granted to Eligible Employees as determined by the Administrator. Options shall be in the form of "Nonqualified Stock Options," which are not intended to qualify as incentive stock options within the meaning of Section 422 of the Code. Awards of Options ("Option Awards") shall be made for each fiscal year of the Company during the term of the Plan as of the last day of each such fiscal year (an "Option Award Date"). The amount of the Option Awards, if any, on a specific Option Award Date shall be determined as soon as administratively practical after the end of each such fiscal year (an "Option Determination Date").

(b) Exercise. Options shall entitle a Participant to purchase shares of Common Stock at a price (an "Exercise Price") per share equal to the Market Value of the Common Stock on the applicable Option Determination Date. Options shall become exercisable three (3) years after the applicable Option Award Date (a "Vesting Period"), and must be exercised no later than ten (10) years, unless extended, after the applicable Option Award Date. Any Vesting Period shall be extended by the length of any leave of absence, except a leave of absence for medical reasons approved in writing by the Administrator. Options that are not exercised within ten (10) years (unless extended) after the applicable Option Award Date will lapse. A Participant may exercise all of his vested Options in any order and at one time or at different times for less than the total

amount until all of his vested Options have been exercised. A Participant may exercise his Options only by giving the Administrator written notice of his intent to exercise his Options. The written notice must be in a form acceptable by the Administrator. When a Participant exercises an Option, the applicable Exercise Price is payable to the Company in full in cash; provided, the Administrator (or a Disinterested Administrator in the case of a Reporting Person) may permit a Participant to pay for all or any part of the Common Stock purchased on exercise of an Option with shares of Common Stock (valued at their Market Value on the date of the exercise) already owned by the Participant or acquired pursuant to the exercise of his Options.

(c) Restrictions.

(1) Assignment. During a Participant's lifetime, Options shall be exercisable only by the Participant. A Participant cannot transfer or assign his Options awarded under the Plan other than by will or by the laws of descent and distribution.

(2) Forfeiture. A Participant will forfeit his unvested Options if his employment with the Employer is terminated for any reason other than death or Disability on or before the end of any applicable Vesting Period. A Termination of Employment shall not be deemed to occur if a Participant merely transfers from the Company to a Subsidiary, from one Subsidiary to another Subsidiary or from a Subsidiary to the Company.

If a Participant is reemployed by the Company within one year after a termination of employment, Options forfeited on account of such a termination of employment shall be restored. The three-year vesting period for such Options shall be extended by the length of absence from employment; but the original expiration date of such Option shall not be extended.

(3) Termination of Restrictions.

(A) If a Participant's employment is terminated before the end of any applicable Vesting Period because of death or Disability, his unvested Options may be exercised by him (or his beneficiary, personal representative or distributee, as applicable) during a seven-year exercise period beginning as of the date of such Termination of Employment, but in no event later than the expiration of the applicable original exercise period.

(B) Any Vesting Period shall end and all unvested Options shall become exercisable immediately upon a Change in Control.

(4) No Rights as a Stockholder. No person entitled to exercise any Option granted under the Plan shall have any of the rights or privileges of a stockholder of the Company with respect to shares issuable upon exercise of such Option until certificates representing such shares shall have been issued and delivered to such person.

(d) Awards for Senior Participants. The terms of this Section 6(d) shall apply to any

unvested Options held by a Participant age 55 or older (a "Senior Participant"). Shares subject to any unvested Option held by a Senior Participant shall not be forfeited (but shall remain subject to any applicable Vesting Period) merely because such Senior Participant's employment with the Employer is terminated (other than a Termination for Aggravated Cause).

Upon a Termination for Aggravated Cause, a Senior Participant shall forfeit all unvested Options. A Senior Participant who engages in Competition with the Employer within any Vesting Period shall forfeit his unvested Options at the time such Competition with the Employer commences. All of the Options of a Senior Participant shall become fully vested immediately upon a Change in Control. Any restrictions, terms or conditions in this Section 6 applicable to Options generally shall apply to a Senior Participant's Options to the extent they are not inconsistent with the provisions of this Section 6(d).

7. Restricted Shares.

(a) Time of Award. "Restricted Shares" are shares of Common Stock that are subject to certain restrictions on their disposition and to the rights of the Company to reacquire such shares upon the occurrence of certain events, all on the terms specified in the Plan. Subject to Section 5), Restricted Shares shall be awarded to Eligible Employees as determined by the Administrator. Awards of Restricted Shares ("Restricted Share Awards") shall be made for each fiscal year of the Company during the term of the Plan as of the last day of each such fiscal year (a "Restricted Share Award Date"). The amounts of the Restricted Share Awards, if any, shall be determined as soon as administratively practical after the end of each such fiscal year (a "Restricted Share Determination Date").

(b) Restrictions.

(1) Restricted Period. Restricted Shares shall be subject to the restrictions described herein for three (3) years from their applicable Restricted Share Award Date (a "Restricted Period"). Any Restricted Period shall be extended by the length of any leave of absence, except a leave of absence for medical reasons approved in writing by the Administrator. During any Restricted Period, a Participant will have the entire beneficial ownership and the right to vote his Restricted Shares and receive any dividends thereon; provided, however, a Participant may not sell, transfer, pledge or otherwise dispose of or encumber his Restricted Shares (other than by will or by the laws of descent and distribution) during any applicable Restricted Period. A Participant shall not be entitled to delivery of a certificate representing shares of Common Stock until the expiration of the Restricted Period applicable to such shares as Restricted Shares.

(2) Forfeiture. A Participant will forfeit his Restricted Shares if his employment with the Employer is terminated for any reason other than death or Disability within any Restricted Period. A termination of employment shall not be deemed to occur if a Participant merely transfers from the Company to a Subsidiary, from one Subsidiary to another Subsidiary or from a Subsidiary to the Company.

If a Participant is reemployed by the Company within one year after a termination of

employment, Restricted Shares forfeited on account of such a termination of employment shall be returned to the Participant. The restricted period for such Restricted Shares shall be extended by the length of absence from employment. The Participant shall not be entitled to any dividends, the record date of which ocurred during such absence.

(3) Termination of Restrictions.

(A) If a Participant's employment with the Employer is terminated during any Restricted Period because of death or Disability, the restrictions on his Restricted Shares will end and he (or his beneficiary, personal representative or distributee, as applicable) will be entitled to receive and retain his Restricted Shares.

(B) A Restricted Period shall end, and Participants shall have a nonforfeitable right to their Restricted Shares, immediately upon a Change in Control.

(c) Awards for Senior Participants. The terms of this Section 7(c) shall apply to any Restricted Shares held by a Senior Participant, except as may be provided in Section 7(d). Restricted Shares held by a Senior Participant shall not be forfeited (but shall remain subject to their restrictions during any applicable Restricted Period) merely because such Senior Participant's employment with the Employer is terminated (other than a Termination for Aggravated Cause). Upon a Termination for Aggravated Cause, a Senior Participant shall forfeit all of his Restricted Shares still subject to a Restricted Period at the time of termination. A Senior Participant who engages in Competition with the Employer during any Restricted Period shall forfeit all of his Restricted Shares subject to a Restricted Period at the time such Competition with the Employer commences. A Restricted Period applicable to a Senior Participant's Restricted Shares shall end upon a Change in Control. Any restrictions, terms or conditions in this Section 7 applicable to Restricted Shares generally shall apply to a Senior Participant's Restricted Shares to the extent they are not inconsistent with the provisions of this Section 7(c).

(d) Phantom Stock Credits. An Eligible Employee who is 60 years of age or older (an "Over 60 Participant") on any Restricted Share Award Date, and who is awarded Restricted Shares as all or part of his Award, shall not be awarded Restricted Shares on that date. Instead, such an Over 60 Participant shall be awarded "Phantom Stock Credits" which will serve as the basis for an award of Restricted Shares two years after such a Restricted Share Award Date (a "Deferred Award Date"), with each Phantom Stock Credit representing the right to receive one share of Restricted Stock. An account shall be established for each Over 60 Participant to show the number of Phantom Stock Credits allocated to him. The award of Phantom Stock Credits allocated to such an account for any specific fiscal year of the Company shall be in an amount that will entitle such Over 60 Participant to the number of Restricted Shares to which such Over 60 Participant would have been Awarded if such Over 60 Participant had been younger than 60 years of age on the applicable Restricted Share Award Date.

The number of Phantom Stock Credits in an Over 60 Participant's account shall be adjusted to reflect dividends on the Common Stock on each dividend record date after the

applicable Restricted Share Determination Date. The number of additional Phantom Stock Credits allocated to an Over 60 Participant's account for a cash dividend shall equal the total amount of each such dividend imputed to such Over 60 Participant (the per share dividend multiplied by the number of Phantom Stock Credits in such Over 60 Participant's account before such increase) divided by the Market Value of the Common Stock on the record date of the dividend. The number of additional Phantom Stock Credits allocated to an Over 60 Participant's account for a stock dividend shall equal the number of additional shares of Common Stock to which such Over 60 Participant would have been entitled if he had been the holder of a number of shares of Common Stock equal in number to the number of Phantom Stock Credits allocated to his account as of that dividend record date before such increase. The number of Phantom Stock Credits allocated to an Over 60 Participant's account instead of dividends will be added to the total number of such Over 60 Participant's Phantom Stock Credits for calculating future amounts to be allocated in lieu of dividends.

Over 60 Participants cannot transfer or assign their Phantom Stock Credits awarded under the Plan other than by will or by the laws of descent and distribution. If an Over 60 Participant's employment is terminated (other than a Termination for Aggravated Cause), he shall not forfeit the right to an award of Restricted Shares on any Deferred Award Date, nor shall he forfeit Restricted Shares awarded on any Deferred Award Date, merely because of such a termination. If an Over 60 Participant's employment is terminated before any Deferred Award Date because of death or Disability, such Over 60 Participant (or his beneficiary, personal representative or distributee, as applicable) shall be entitled to receive at the time of such termination a stock certificate for the whole number of shares of Common Stock equal to the number of Phantom Stock Credits then credited to his account (rounded down to the nearest whole number of shares). Any Deferred Award Date shall occur and any applicable Restricted Period for Restricted Shares awarded shall end immediately upon a Change in Control.

If an Over 60 Participant's termination is a Termination for Aggravated Cause, he shall forfeit the right to an award of Restricted Shares based on any Phantom Stock Credits attributable to his account and shall forfeit all shares of Restricted Shares still subject to a Restricted Period at the time of his Termination for Aggravated Cause. An Over 60 Participant who engages in Competition with the Employer before any Deferred Award Date or the end of any Restricted Period shall forfeit his Phantom Stock Credits and Restricted Shares.

As of any specific Deferred Award Date, each Over 60 Participant shall be awarded that number of shares of Restricted Shares equal to the number of Phantom Stock Credits (rounded down to the nearest whole share) then credited to his account for the applicable award year. Restricted Shares awarded as of any Deferred Award Date shall be subject to all of the previously described terms and restrictions applicable to Restricted Shares, to the extent they are not inconsistent with the provisions of this Section 7(d), except that any applicable Restricted Period shall be for only nine months unless extended during a leave of absence. Over 60 Participants have no rights as stockholders with respect to their Phantom Stock Credits until their Restricted Shares are awarded.

8. Deleted June 20, 2002

9. Other Benefits.

A Disinterested Administrator may award Common Stock or the right to acquire Common Stock to any Employee upon such terms and conditions as such Disinterested Administrator in its discretion shall determine. Such awards may consist of any single Benefit, or a combination of the Benefits, described in the preceding sections (in addition to the award of any such Benefits pursuant to the terms, conditions and formulae contained in such preceding sections), or any other right to acquire Common Stock (including, without limitation, options granted in the form of "Incentive Stock Options" which are intended to qualify as incentive stock options within the meaning of Section 422 of the Code or stock appreciation rights), and may be subject to any conditions such Disinterested Administrator may prescribe, such as a right of first refusal by the Company to repurchase the shares; provided, however, that any Benefit awarded in accordance with the provisions of the Plan which grants the right to purchase shares of Common Stock, except any Benefit which is subject to restrictions that in the aggregate would amount to a substantial risk of forfeiture for purposes of Section 83 of the Code, shall require that the price at which the Participant may purchase such shares shall be at least 85% of the Market Value of such shares as determined by such Disinterested Administrator at the time such benefit is awarded.

The Administrator may make any type of awards that can be made by a Disinterested Administrator; provided, unless the Plan is amended as provided below, such awards are made only to Employees who are not Reporting Persons. The Board of Directors may amend the Plan, from time to time as provided or limited herein, (i) to change any terms, conditions or formulae pursuant to which an award of Benefits as described in the preceding sections may be awarded (either increasing or decreasing the amount of such awards); provided, such changes comply with Rule 16b-3 and/or (ii) to provide terms, conditions and a formula (complying with Rule 16b-3) pursuant to which any right to acquire Common Stock (including, without limitation, Incentive Stock Options and stock appreciation rights) may be awarded, in addition to the Benefits described in the preceding sections. If any such amendments are made, the awards of Benefits authorized by such amendments may be administered by the Administrator.

10. Shares Subject to Plan.

Subject to the provisions of Section 11 (relating to adjustment for changes in capital stock), the maximum number of shares that may be issued under the Plan shall not exceed in the aggregate fifty seven million two hundred ninety two thousand one hundred eighty eight (57,292,188) shares of Common Stock of the Company. Such shares may be unissued shares or treasury shares.

If there is a lapse, expiration, termination or cancellation of any Benefit without the issuance of shares, or if shares are issued in connection with any Benefit and later are reacquired by the Company pursuant to rights reserved on issuance, the shares subject to or reserved for such Benefit may again be used in connection with the grant of any of the Benefits described in this Plan; provided, that in no event may the number of shares of Common Stock issued under this Plan exceed sixty million four hundred ninety two thousand one hundred eighty eight

(57,292,188), subject to adjustment as described in Section 11.

11. Adjustment Upon Changes in Stock.

If any change is made in the shares of Common Stock of the Company by reason of any merger, consolidation, reorganization, recapitalization, stock dividend, split up, combination of shares, exchange of shares, change in corporate structure, or otherwise, appropriate adjustments shall be made by the Administrator to: (a) the kind and maximum number of shares subject to the Plan, (b) the kind and number of shares and price per share of stock subject to each outstanding Benefit, (c) the number of Offered Shares referred to in Section 8(b) and (d) any other amount herein which is so indicated. Any increase in the shares, or the right to acquire shares, as the result of such an adjustment shall be subject to the same terms and conditions that apply to the Benefit for which such increase was received. No fractional shares of Common Stock shall be issued under the Plan on account of any such adjustment, and rights to shares always shall be limited after such an adjustment to the lower full share.

12. Amendment of the Plan.

Except as provided below, the Board of Directors of the Company may at any time amend the Plan (including the provisions of the Employee Stock Purchase Plan); provided, the Board may not, without approval (within twelve months before or after the date of such change) of such number of the stockholders as may be required by either federal income tax or securities law for any particular amendment: (a) increase the maximum number of shares of Common Stock in the aggregate which may be issued under the Plan, except as may be permitted under the adjustment provisions of Section 11, or (b) adopt any other amendment for which shareholder approval is required by federal income tax or securities laws. The Board of Directors may not alter or impair any Benefit previously granted under the Plan without the consent of the person to whom the Benefit was granted.

If required to qualify the Plan under Rule l6b-3, no amendment to the Plan shall be made more than once every six months that would change the amount, price or timing of any Benefits awarded by the terms of any formula contained in the Plan, other than to comport with changes in the Code, the Employment Retirement Income Security Act of 1974 (as amended), or the rules thereunder.

13. Termination of the Plan.

The Plan shall continue in force until it is terminated by the Board of Directors. The Board of Directors may terminate or suspend the Plan (including the Employee Stock Purchase Plan) at any time. No Benefit shall be awarded after termination of the Plan. Rights and obligations under a Benefit awarded while the Plan is in effect shall not be altered or impaired by termination or suspension of the Plan except by consent of the person to whom the Benefit was awarded.

14. Withholding Tax.

The Company shall have the right to withhold with respect to any payments made to Participants under the Plan any taxes required by law to be withheld because of such payments.

15. Rules of Construction.

The terms of the Plan shall be construed in accordance with the laws of the State of Missouri; provided, that the terms of the Plan as they relate to Incentive Stock Options shall be construed first in accordance with the meaning under and in a manner that will result in the Plan satisfying the requirements of the provisions of the Code governing incentive stock options; provided, further, that the terms of Section 8 of the Plan shall be construed first in accordance with the meaning under, and in a manner that will result in the Employee Stock Purchase Plan satisfying the requirements of, the Code governing such plans. The Plan is intended to qualify under Rule 16b-3 and shall be interpreted and administered in a manner consistent with such intention. Unless otherwise expressly provided, any calculation required by any provision of the Plan shall be rounded down to the nearest whole number. Any word contained in the text of the Plan shall be read in the singular or plural or as masculine, feminine or neuter as may be applicable or permissible in the particular context.

16. Nontransferability.

Each Option or similar right (including a Stock Appreciation Right) granted under this Plan shall not be transferable other than by will or by the laws of descent and distribution, and shall be exercisable during the holder's lifetime only by the holder or the holder's guardian or legal representative.

17. Effective Date.

The Plan originally became effective as of April 21, 1988. The Plan as currently revised and restated shall become effective on the date stated on the first page hereof.

CERTIFICATION

The undersigned hereby certifies that the foregoing A.G. Edwards, Inc. 1988 Incentive Stock Plan (as amended and restated) is restated in a form that reflects separate amendments thereto duly adopted by the Board of Directors of A.G. Edwards, Inc. and by the stockholders of A.G. Edwards, Inc., through June 23, 2005.

IN WITNESS WHEREOF, the undersigned has executed this Certification as of June 27, 2005.

/s/Douglas L. Kelly 

Douglas L. Kelly, Secretary 

FIRST AMENDMENT
A.G. EDWARDS, INC.
1988 INCENTIVE STOCK PLAN
2005 RESTATEMENT

This Plan originally became effective in April 1988. It was amended in (1) June 1990 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 4,060,000 shares (which number has since been adjusted to 7,612,500 shares to reflect a 50% and a 25% stock dividend, treated as a stock split), (2) April 1992 by the Board of Directors to comply with changes under Section 16(b) of the Exchange Act; (3) June 1992 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 13,862,500 shares (which number has since been adjusted to 17,328,125 to reflect a 25% stock dividend, treated as a stock split); (4) June 1995 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 26,328,125 shares (which number has since been adjusted to 39,492,188 to reflect a 50% stock dividend, treated as a stock split); (5) June 1999 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 54,492,188 shares; (6) September 1999 by the Board of Directors to modify the eligibility requirements and restate the Plan; (7) February 2001 by the Board of Directors to modify the definition of Market Value, modify the provisions governing elections between Options and Restricted Stock, modify the provisions governing awards to Senior Participants for Options and Restricted Stock, comply with changes under Section 16(b) of the Exchange Act and restate the Plan; (8) February 2002, by the Board of Directors to modify the provisions (a) applicable to non-reporting persons, (b) governing eligibility for an award and the amount of the award, (c) governing elections between Options and Restricted Stock, (d) governing the period of time in which Options must be exercised, (e) limiting the maximum amount of awards; (9) November 2003 to delete the Stock Purchase Plan that is Section 8; (10) January 2005 by the Board of Directors to comply with SFAS 123R; and (11) June 2005 by the stockholders of the Company to increase the number of shares of Common Stock available under the Plan to 57,292,188 shares and restate the Plan.

A.G. Edwards, Inc., now wishes to amend the Plan to amend the definition of “Market Value”.

NOW THEREFORE, the Plan is hereby amended as follows:

1. Effective March 1, 2005, for awards for fiscal years 2006 and after, the definition of Market Value in Section 2, shall read as follows:

“Market Value” means, with respect to a share of Common Stock on a particular date, the greater of (i) the average of the highest and lowest quoted selling price on the particular date or, if there are no sales on that date, on the next trading date, (ii) the amount per share, if any, established upon the Award of Options or Restricted Stock, or (iii) book value per share most recently publicly

reported by the Company.

IN WITNESS WHEREOF, the undersigned as Secretary of A.G. Edwards, Inc. hereby certifies that this First Amendment was duly adopted by A.G. Edwards, Inc.

By:	/s/ Douglas L. Kelly
	Douglas L. Kelly
	Corporate Secretary
Date:	April 3, 2006

EX-10.3

EXHIBIT 10.3

A.G. EDWARDS, INC.

RETIREMENT AND PROFIT SHARING PLAN

2005 Restatement

A.G. EDWARDS, INC.
RETIREMENT AND PROFIT SHARING PLAN
2005 Restatement

Table of Contents

		Page
HISTORY OF THE PLAN		1
ARTICLE I - STATEMENT OF PURPOSE		2
ARTICLE II - EFFECTIVE DATE		3
2.1	Effective Date of Plan	3
2.2	Effective Date of Amendment	3
2.3	Structure and Type of Plan	3
ARTICLE III - DEFINITIONS		3
3.1	Affiliate	3
3.2	Annuity Starting Date	3
3.3	Basic Compensation	3
3.4	Beneficiary	3
3.5	Code	3
3.6	Compensation	3
3.7	Controlled Group	4
3.8	Covered Compensation	4
3.9	Covered Service	4
3.10	Deductible Employee Contributions	4
3.11	Eligible Spouse or Eligible Surviving Spouse	4
3.12	Eligible Surviving Spouse	4
3.13	Employee	5
3.14	Employer	5
3.15	Employer Contributions	5
3.16	Employer Stock Fund	5
3.17	ERISA	5
3.18	ESOP Stock Account	5
3.19	Excess Compensation	5
3.20	Fiscal Year	5
3.21	Highly Compensated Employee	5
3.22	Leased Employee	6
3.23	Named Fiduciary	6
3.24	Non-Resident Alien	6
3.25	Normal Retirement Age	6

3.26	Participant	6
3.27	Plan	7
3.28	Plan Administrator	7
3.29	Plan Year	7
3.30	Predecessor Plan	7
3.31	Roth Employee Contributions	7
3.32	Sponsor	7
3.33	Termination of Employment	7
3.34	Trust Agreement	7
3.35	Trust or Fund	7
3.36	Trustee	7
3.37	Total Disability	7
ARTICLE IV - SERVICE		7
4.1	Period of Service	7
4.2	Service Definitions	8
4.3	Absence in Military Service	8
4.4	Maternity Absence	8
4.5	Creditation of Years of Service	8
4.6	Transitional Rule	9
ARTICLE V - PARTICIPATION		10
5.1	Eligibility Date: General Rule	10
5.2	Rehired Former Employee	10
5.3	Election Not to Participate	10
5.4	Transfer to Uncovered Service	10
ARTICLE VI - CONTRIBUTIONS		10
6.1	Deductible Employee Contributions	10
6.2	Roth Employee Contributions	10
6.3	Election Procedures	11
6.4	Limitation on Amount of Deferrals	11
6.5	Required Employer Non-matching Contributions	12
6.6	Discretionary Employer Non-matching Contributions	12
6.7	Form of Contributions	13
6.8	Limits on Contributions	13
6.9	Correction of Excess Contributions	13
6.10	Correction of Excess Matching Contributions	14
6.11	Exclusive Benefit of Participants	15
6.12	Return of Employer Contributions	15
6.13	Allocation of Contributions Among Employers	16
6.14	Rollover Contributions	16
6.15	Make-Up Allocations	17

ARTICLE VII – INDIVIDUAL ACCOUNTS		17
7.1	Employee Accounts	17
7.2	Roth Accounts	17
7.3	Firm Accounts	17
7.4	Rollover Accounts	17
7.5	Allocation of Required Employer Non-matching Contribution	17
7.6	Allocation of Discretionary Employer Non-matching Contribution	18
7.7	Limitation on Maximum Contributions	19
ARTICLE VIII – INVESTMENT OF FUNDS		19
8.1	Directed Accounts	19
8.2	Permissible Investments	20
8.3	Investment Committee	21
8.4	Manner of Direction	21
8.5	Investment of Contributions	22
8.6	Change of Investments	22
8.7	Charges to Accounts	22
8.8	Investment of Transferred Assets	23
8.9	Investment of Death Benefits	23
8.10	Investments in Treasury Zeros	23
ARTICLE IX – VALUATION OF ACCOUNTS		25
9.1	Valuation of Fund	25
9.2	Value of Participants’ Benefits	25
ARTICLE X - VESTING		25
10.1	General Rule	25
10.2	Termination for Aggravated Cause	26
10.3	Fully Vested Accounts	27
10.4	Change in Control	27
ARTICLE XI - FORFEITURES		27
11.1	Reduction of Employer Contribution	27
11.2	Allocation of Forfeitures	27
11.3	Forfeiture Restoration	27
ARTICLE XII – WITHDRAWALS DURING EMPLOYMENT		28
12.1	Right of Withdrawal - Employee Account	28
12.2	Senior Employee Withdrawal Option	28
12.3	Withdrawal of A.G. Edwards, Inc. Vested Dividends	29
12.4	Availability of Loans	29

ARTICLE XIII – WITHDRAWALS AFTER EMPLOYMENT		30
13.1	Withdrawals After Employment	30
ARTICLE XIV – PAYMENT OF BENEFITS		30
14.1	Disability and Fully Vested Over Age 59½	30
14.2	Fully Vested Under Age 59½	30
14.3	Partially Vested	30
14.4	Time of Payment	31
14.5	Form of Payment	32
14.6	Forfeitures	32
14.7	Accounts of Former Employees	32
14.8	Direct Rollover of Eligible Rollover Distributions	32
14.9	Protected Options	34
ARTICLE XV – PAYMENT OF DEATH BENEFITS		34
15.1	Death Benefits	34
15.2	Form of Payment	34
15.3	Designation of Beneficiary	35
15.4	Failure to Designate	35
15.5	Renunciation of Death Benefit	35
15.6	Minor Beneficiaries	36
15.7	Transitional Designation	36
15.8	Distribution of Annuity Contracts	36
ARTICLE XVI – LATEST TIME OF PAYMENT		37
16.1	60 Day Rule	37
16.2	Latest Time for Payment	37
ARTICLE XVII – CLAIMS AND REVIEW PROCEDURE		41
17.1	Claims for Benefits	41
17.2	Written Denials of Claims	41
17.3	Appeal of Denial	42
ARTICLE XVIII - ADMINISTRATION		43
18.1	Plan Administrator	43
18.2	Allocation of Fiduciary Duties	43
18.3	Furnish Information	44
18.4	Appointment of Administrators	44
18.5	Compensation of Fiduciaries	44
18.6	Expenses of Administration	44
18.7	Delegation of Authority	44

18.8	Standard of Review	45
ARTICLE XIX – TRUST AGREEMENT		45
19.1	Trust Agreement	45
ARTICLE XX – AMENDMENT AND TERMINATION		45
20.1	Amendment	45
20.2	Termination	45
ARTICLE XXI – MISCELLANEOUS		46
21.1	Anti-Assignation	46
21.2	Rights of Employees	46
21.3	Source of Benefits	46
21.4	Actions by Corporation	46
21.5	Rules of Construction	46
21.6	Payments to Legal Incompetents	47
21.7	Plan Mergers	47
21.8	Missing Participants	47
21.9	Payments Under a Qualified Domestic Relations Order	48
21.10	Adoption of Plan by an Affiliate	49
21.11	Acceptance of Transfers	49
ARTICLE XXII – TOP-HEAVY REQUIREMENTS		49
22.1	Top-Heavy Determination	49
22.2	Determination Date	50
22.3	Valuation of Fund as of Determination Date	50
22.4	Key Employee	50
22.5	Vesting Requirements	50
22.6	Minimum Benefits	50
22.7	EGTRRA Amendments	51
ARTICLE XXIII – SPECIAL ESOP PROVISIONS		52
23.1	Share Purchase Loans	52
23.2	Release from Loan Suspense Account	52
23.3	Use of Loan Proceeds and Dividends	53
23.4	Allocation of Shares Released From Suspense Account	53
23.5	Separate Accounting for Multiple Loans	54
23.6	Valuation	54
23.7	Nonallocation Provision	55
23.8	Latest Time of Payment for Company Stock	55

A.G. EDWARDS, INC.
RETIREMENT AND PROFIT SHARING PLAN

2005 Restatement

HISTORY OF THE PLAN

As of September 30, 1967, A.G. Edwards & Sons, Inc. and the limited partnership A.G. Edwards & Sons adopted an Amendment to the Trust Agreements which had established the Profit Sharing Plans “A” and “B” of the Partnership which provided, among other things, for the consolidation of such existing separate Profit Sharing Plans of the Partnership into a single Profit Sharing Plan of A.G. Edwards & Sons, Inc. as the successor to the Partnership. Under an Agreement dated July 5, 1972, A.G. Edwards & Sons, Inc. adopted the A.G. Edwards & Sons, Inc. Estate Accumulation Plan. A.G. Edwards & Sons, Inc. replaced the A.G. Edwards & Sons, Inc. Profit Sharing Plan and the A.G. Edwards & Sons, Inc. Estate Accumulation Plan by consolidating such plans as amended into a new Retirement and Profit Sharing Plan (the “Plan”) effective as of January 1, 1978.

The Plan was amended by a First Amendment adopted December 27, 1977, a Second Amendment adopted March 30, 1978, a Third Amendment adopted August 1, 1978, a Fourth Amendment adopted December 26, 1978, and a Fifth Amendment adopted November 27, 1979.

The Plan was amended and completely restated effective January 1, 1980, and was amended by a First Amendment dated June 18, 1981, and a Second Amendment dated October 18, 1983; and was amended and completely restated effective January 1, 1984.

The Plan was amended and completely restated effective January 1, 1985, and was amended by a First Amendment dated July 8, 1986, a Second Amendment dated November 21, 1986, a Special Amendment adopted September 24, 1987, and a Special Amendment adopted October 28, 1987.

The Plan was amended and completely restated effective January 1, 1987, and was later amended by the 1989 Withdrawal Amendment.

The Plan was amended and completely restated effective January 1, 1989, to comply with the Tax Reform Act of 1986.

The Plan was amended and completely restated effective January 1, 1990, to expand investment options.

The Plan was amended and completely restated effective January 1, 1991, and was amended by a First Amendment dated August 26, 1992.

The Plan was amended and completely restated effective January 1, 1993, to change investment provisions and update the Plan to conform to changes in the law. The 1993 Restatement was amended by a First Amendment dated December 24, 1994, and a Second Amendment dated November 20, 1995.

The Plan was amended and completely restated effective January 1, 1997, to make numerous changes related to the change to a daily valuation system and other plan design changes.

The Plan was amended and completely restated effective January 1, 1998 to provide for the conversion of the Plan from a profit sharing plan only to a money purchase pension plan and a profit sharing plan for purposes of Section 401(a) of the Internal Revenue Code of 1986 effective at a designated future date, and to make other technical changes. Because of a change in the tax law, the money purchase pension plan features were never implemented.

The Plan was amended and completely restated effective January 1, 2002 to accelerate the eligibility waiting period. The 2002 Restatement was amended by First, Second, Third and Fourth Amendments.

A.G. Edwards, Inc. now wishes to amend and completely restate the Plan to incorporate all amendments into a restated plan document, provide for an Investment Committee with responsibility for certain plan investments, add a Roth contribution feature beginning Plan Year 2006, and make changes reflecting recent changes in the tax law.

NOW, THEREFORE, the A.G. Edwards, Inc. Retirement and Profit Sharing Plan is hereby amended and completely restated in the form of the following instrument, which is referred to as the “2005 Restatement.”

ARTICLE I – STATEMENT OF PURPOSE

The Plan set forth herein is intended to provide a means whereby the Employer, through a base contribution and sharing its profits with its qualified Employees on a deferred basis, may encourage them to establish a regular method of savings and thereby create a fund available for their use at retirement or in the event of disability. It is intended that the Plan shall qualify as a profit sharing plan with a cash or deferred 401(k) feature under Section 401 of the Code and as an Employee Stock Ownership Plan as defined in Section 4975(e)(7) of the Code.

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ARTICLE II – EFFECTIVE DATE

2.1 Effective Date of Plan. Except as otherwise explicitly provided in the Plan, the rights and benefits, if any, of each Participant shall be determined pursuant to the provisions of the Plan or Predecessor Plan as in effect on the date of the applicable event.

2.2 Effective Date of Amendment. The amendments made by this 2005 Restatement generally are effective March 1, 2005, with the exception of the addition of the Roth contribution feature effective January 1, 2006 and except as otherwise explicitly provided in the Plan.

2.3 Structure and Type of Plan. Effective on and after January 1, 2002, amounts invested in the Employer Stock Fund shall constitute an Employee Stock Ownership Plan as defined in Section 4975(e)(7) of the Code. The Employee Stock Ownership Plan is designed to invest primarily in the common stock of A.G. Edwards, Inc. Amounts invested in Treasury Zeros and all other funds, including the equity funds, shall constitute a profit sharing plan under Section 401 of the Code.

ARTICLE III – DEFINITIONS

3.1 Affiliate means (1) any corporation or other business entity that from time to time is, along with A.G. Edwards, Inc., a member of a controlled group of businesses (as defined in Section 414 of the Code) and (2) any other corporation that adopts this Plan with the approval of the Board of Directors of A.G. Edwards, Inc. and maintains this Plan for the benefit of its Employees. A business entity is an Affiliate only while a member of such group.

3.2 Annuity Starting Date means the first day on which payment of an account balance of a Participant is actually made.

3.3 Basic Compensation means the Compensation (as defined in Section 3.6) for Covered Service of an Employee for a Plan Year regardless of whether the Participant has an election in effect to make Deductible Employee Contributions when such Compensation is earned or paid, excluding the Excess Compensation of such Employee for such year.

3.4 Beneficiary means the person or persons designated as such by a Participant in accordance with the Plan.

3.5 Code means the Internal Revenue Code of 1986. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

3.6 Compensation means, except as provided in the following sentence, the total amount paid to an Employee during a Plan Year by an Employer in the form of salary, commissions, overtime pay, finder’s fees and bonuses (including corporate executive bonus, merit bonus, institutional bonus, branch manager’s bonus or total production bonus); plus the

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amount of salary reduction as a result of an election pursuant to a plan or plans governed by Section 401(k), Section 403(b), Section 457, Section 132(f)(4) or Section 125 of the Code. Notwithstanding the above, Compensation shall not include: (1) amounts attributable to other sources such as, for example, contest awards, reimbursement of moving expenses, life insurance premiums, tuition reimbursements, and amounts attributable to stock options or restricted stock; or (2) any payment characterized as deferred compensation for purposes of Section 404 of the Code (either when earned or when paid).

Compensation of each Participant taken into account under the Plan shall in no event exceed the amount specified in Section 401(a)(17) of the Code as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code ($210,000 for 2005).

3.7 Controlled Group means the Sponsor and each Affiliate.

3.8 Covered Compensation means Compensation paid for Covered Service to a Participant during such time period with respect to which the Participant has an election in effect to make Deductible Employee Contributions pursuant to Section 6.1 or Roth Employee Contributions pursuant to Section 6.2, regardless of whether such contributions have been discontinued during such period because of the dollar limitation in accordance with Section 6.3.

3.9 Covered Service means service performed by an Employee while classified by an Employer as an employee of the Employer for purposes of this Plan (regardless of classification for other purposes, such as a retroactive classification as an employee for payroll tax purposes), other than service as a temporary employee. A temporary Employee is any Employee hired by an Employer for a limited period of time and classified by the Employer as a temporary employee in accordance with the employment policies of the Employer. Service as a non-employee contract worker and service as a Leased Employee is not Covered Service. Service as a Non-Resident Alien is not Covered Service.

3.10 Deductible Employee Contributions means before-tax contributions made by the Employer on behalf of a Participant in accordance with Section 6.1 as a result of a salary reduction election.

3.11 Eligible Spouse means the person to whom a Participant is lawfully married at the Participant’s Annuity Starting Date.

3.12 Eligible Surviving Spouse, in the case of a Participant who dies before such time, means the person to whom the Participant is lawfully married on the date of death of the Participant, provided that a former spouse shall be treated as the Eligible Spouse or the Eligible Surviving Spouse to the extent provided under a qualified domestic relations order, as defined in Section 414(p) of the Code.

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3.13 Employee means any individual who is employed by a member of the Controlled Group. Any Leased Employee shall also be treated as an Employee, but service as a Leased Employee is not Covered Service.

3.14 Employer means A.G. Edwards, Inc., a Delaware corporation and any Affiliate that is not a “foreign” entity, as defined in Section 7701 of the Code. An Affiliate that makes contributions to the Plan on behalf of its eligible Employees shall be deemed to have adopted the Plan. An Affiliate that is an Employer consents to all future amendments to the Plan by the Sponsor, agrees to make contributions to the Plan for its Employees in Covered Service in accordance with the terms of the Plan, and agrees to all interpretations and actions of the Plan Administrator.

3.15 Employer Contributions means contributions to the Trust by an Employer from an Employer’s funds in accordance with the Plan, but shall not include Deductible Employee Contributions or Roth Employee Contributions.

3.16 Employer Stock Fund means a fund the assets of which are invested in the common stock of the Sponsor, as specified in Section 8.2.

3.17 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a section of ERISA shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

3.18 ESOP Stock Account means the portion, if any, of the Accounts of a Participant, expressed in shares of common stock of A.G. Edwards, Inc., from time to time invested in the Employer Stock Fund.

3.19 Excess Compensation means, with respect to each Plan Year, the total Compensation for Covered Service of an Employee for a Plan Year, regardless of whether the Participant has an election in effect to make Deductible Employee Contributions or Roth Employee Contributions when such Compensation is earned or paid, in excess of the maximum amount which, with respect to said year, may be considered wages under Section 3121(a)(1) of the Code (Social Security wage base) paid to an Employee during said Plan Year.

3.20 Fiscal Year means the accounting year of an Employer for federal income tax purposes.

3.21 Highly Compensated Employee for a Plan Year means a Highly Compensated active Employee or a Highly Compensated former Employee.

A Highly Compensated active Employee includes any Employee who (a) performs services for the Sponsor or an Affiliate during the Plan Year and who had Compensation in excess of the amount specified in Section 414(q)(1)(B) of the Code, as adjusted by the Secretary for increases in the cost of living ($95,000 for 2005) for the preceding Plan Year, or (b) is a five

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(5%) percent owner, as defined in Section 416(i) of the Code, at any time during the Plan Year or the preceding Plan Year.

Highly Compensated Employees shall be limited to Employees in the group consisting of the top twenty (20%) percent of Employees when ranked on the basis of compensation paid in such prior Plan Year.

A Highly Compensated former Employee includes any Employee who separated from service (or was deemed to have separated prior to the Plan Year), performs no service for the Sponsor or an Affiliate during the Plan Year, and was a Highly Compensated active Employee for either the year of separation or any Plan Year ending on or after the Employee’s fifty-fifth (55^th) birthday.

The determination of who is a Highly Compensated Employee will be made in accordance with Section 414(q) of the Code and the regulations thereunder.

3.22 Leased Employee means any individual other than a common law employee, who pursuant to an agreement between any member of the Controlled Group and any other person, has performed services for such member, or for any person related to the member, as defined in Section 414(n)(6) of the Code, on a substantially full-time basis for a period of at least one year and such services are performed under the primary direction or control of such member. An individual who becomes a Leased Employee (determined without regard to the one year service requirement) shall be deemed to be an Employee for the purpose of eligibility to participate and vesting at the time the individual first begins performing services for a member of the Controlled Group. An individual covered by a money purchase pension plan providing a non-integrated employer contribution of at least ten percent (10%) of compensation, immediate participation and full and immediate vesting, as defined in Section 414(n)(5) of the Code shall not be treated as a Leased Employee, provided that Leased Employees (determined without regard to this sentence) do not constitute more than twenty percent (20%) of the recipient’s non-Highly Compensated work force.

3.23 Named Fiduciary means the Plan Administrator named in accordance with Article XVIII.

3.24 Non-Resident Alien means an individual who is neither a citizen of the United States nor a resident of the United States, as defined in Section 7701 of the Code.

3.25 Normal Retirement Age means sixty-five (65) years of age.

3.26 Participant means any Employee who has reached his Eligibility Date, as defined in Section 5.1, and any former Employee who has an amount credited to his account in accordance with the Plan. Except for purposes of eligibility for contributions in accordance with Article VI, such term also includes an individual who has an amount credited to his account on account of a rollover from another plan pursuant to Section 6.14 or on account of a transfer from another plan pursuant to Section 21.11.

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3.27 Plan means the A.G. Edwards, Inc. Retirement and Profit Sharing Plan as set forth herein and effectuated by the Trust Agreement.

3.28 Plan Administrator means the person named by the Sponsor in accordance with Article XVIII.

3.29 Plan Year means any twelve (12) consecutive month period commencing January 1^st and ending the next following December 31^st.

3.30 Predecessor Plan means the A.G. Edwards & Sons, Inc. Profit Sharing Plan as amended from time to time up to December 31, 1977, the A.G. Edwards & Sons, Inc. Estate Accumulation Plan, as amended from time to time up to December 31, 1977; or both.

3.31 Roth Employee Contributions means after-tax contributions made by the Employer on behalf of a Participant in accordance with Section 6.2 as a result of a salary reduction election.

3.32 Sponsor means A.G. Edwards, Inc.

3.33 Termination of Employment means severance from employment with the Controlled Group. Transfer from an Employer to an Affiliate or from an Affiliate to an Employer or from one Affiliate to another Affiliate shall not constitute a Termination of Employment.

3.34 Trust Agreement means the trust agreement or agreements entered into by and between A.G. Edwards & Sons, Inc. or A.G. Edwards, Inc. and the Trustee or Trustees in accordance herewith.

3.35 Trust or Fund means all of the assets held by the Trustee in accordance with the Trust Agreement.

3.36 Trustee means the person or persons from time to time acting as trustee under the Trust Agreement.

3.37 Total Disability means such permanent physical or mental disability as renders a person incapable of continuing to render satisfactory services to an Employer. Whether a person has incurred a Total Disability shall be determined upon the basis of competent medical advice.

ARTICLE IV – SERVICE

4.1 Period of Service. The Period of Service of an Employee means the period of time beginning on an Employment Commencement Date of an Employee and ending on the Severance from Service Date of the Employee that next follows such an Employment

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Commencement Date. Nonconsecutive Periods of Service shall be aggregated and three-hundred-sixty-five (365) days of service shall equal a whole year of service. If an Employee performs an Hour of Service within twelve (12) months of a Severance from Service Date, the Employee’s Period of Service shall include the time which elapsed between the Severance from Service Date and such date of re-employment.

4.2 Service Definitions.

(A)	“Employment Commencement Date” shall mean the date the Employee first performs an Hour of Service; provided that, if an Employee incurs a Break in Service of at least one year, the new Employment Commencement Date of the Employee shall be the first day on which the Employee performs an Hour of Service after incurring such a Break in Service.
(B)	“Break in Service” means the period following a Severance from Service Date extending until the Employee again completes an Hour of Service.
(C)	“Hour of Service” means an hour for which an Employee is paid, or entitled to payment, for the performance of duties for a member of the Controlled Group.
(D)	“Severance from Service Date” means the earlier of (1) the date the Employee retires, dies, resigns from or is discharged from a member of the Controlled Group, or (2) the first anniversary of the date on which the Employee begins a period of absence, with or without pay, with the Controlled Group. For purposes of the preceding sentence, the term discharge includes the cessation of membership in the Controlled Group of the employer of the Employee.
(E)	“Year of Service” means a Period of Service of one year.

4.3 Absence in Military Service. Effective after December 12, 1994, notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to military service will be provided in accordance with Section 414(u) of Code.

4.4 Maternity Absence. In the event an Employee is absent from work beyond the first anniversary of the date on which the Employee began a period of absence on account of the pregnancy or birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of the child, or for purposes of caring for a child following such a birth or placement, solely for purposes of determining whether a Break in Service occurs, the Severance from Service Date shall mean the second anniversary of the date the Employee was first absent from work by reason of maternity or paternity as described above.

4.5 Creditation of Years of Service. A Participant shall be credited with all whole Years of Service for purposes of vesting, whether or not such Periods of Service were completed consecutively, except as follows:

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(A)	With respect to any determination made as of any date after December 31, 1984, which ascertains the Years of Service of a Participant for purposes of vesting, including determinations made with respect to a Participant who terminated employment before January 1, 1985, a Participant’s Years of Service completed after such Participant incurs a Break in Service of at least five consecutive years after a Termination of Employment shall be disregarded for purposes of determining the nonforfeitable percentage of the account balance of such Participant which accrued on or before the date upon which such break in service occurred; and
(B)	The Period of Service completed by an Employee before such Employee attains eighteen (18) years of age shall be disregarded (the Employment Commencement Date of such an Employee shall be deemed to be the Employee’s eighteenth (18th) birthday).
(C)	The Plan Administrator may determine the extent to which prior service with an entity acquired by A.G. Edwards, Inc. or an Affiliate is taken into account for purposes of vesting for Employees employed by such an entity before such an acquisition, on a uniform and nondiscriminatory basis with respect to all such employees of each such entity. Such a determination shall be in writing, and shall be part of this Plan.
(D)	Any Participant whose participation in the Plan is terminated because of the sale of CPI Qualified Plan Consultants, Inc. by A.G. Edwards, Inc., shall be granted immediate vesting of their Firm Account.

4.6 Transitional Rule. An individual who was an Employee on December 31, 1996, (whose service was determined on the basis of completing a requisite number of hours of service, rather than on the basis of elapsed time) shall be credited with the service to which such Employee was entitled under the Plan on the basis of the Plan provisions in effect on December 31, 1996 for the period through December 31, 1996; and for the period beginning January 1, 1997 such Employee shall be credited with service pursuant to this Article as if the Employment Commencement Date of such Employee was January 1, 1997.

The length of a Break in Service of a Participant who was not an Employee on January 1, 1997, for purposes of a Break in Service that began before such date, shall be determined on the basis of the Break in Service provisions of the Plan in effect at the time of the last Termination of Employment of the Participant prior to January 1, 1997.

An individual who was an Employee on December 31, 1996, shall be deemed to have completed a whole Year of Service in his or her final year of employment if such Employee incurs a Termination of Employment after May 31^st of such Plan Year.

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ARTICLE V – PARTICIPATION

5.1 Eligibility Date: General Rule. The Eligibility Date of an Employee shall be the first day of the first payroll period beginning on or after such Employee completes at least one hour of Covered Service.

5.2 Rehired Former Employee. The Eligibility Date of a rehired former Employee shall be the first day of the first payroll period during which such Employee completes at least one hour of Covered Service.

5.3 Election Not to Participate. An Employee eligible to participate in the Plan pursuant to Article V may elect not to make, or to discontinue making, Deductible Employee Contributions or Roth Employee Contributions, or both, in accordance with procedures established by the Plan Administrator. An Employee who makes such an election shall not be entitled to have such contributions made on his behalf, nor shall the Employee be entitled to receive any Employer Matching Contributions, for the effective period of the election.

In addition, an Employee may elect not to receive any Employer Non-matching Contributions for a Plan Year by notifying the Plan Administrator in accordance with procedures established by the Plan Administrator.

5.4 Transfer to Uncovered Service. With respect to transfers before June 1, 1998, a Participant who is transferred from Covered Service to uncovered service during a Plan Year shall be eligible to contribute to the Plan for the remainder of that year. A Participant who is not in Covered Service on January 1, 1998 shall be ineligible to contribute to the Plan in accordance with Article VI through May 31, 1998.

With respect to transfers after May 31, 1998, a Participant who is transferred from Covered Service to uncovered service during a Plan Year shall be ineligible to contribute to the Plan beginning on the first day of the first payroll period after such a transfer.

ARTICLE VI – CONTRIBUTIONS

6.1 Deductible Employee Contributions. Subject to the provisions of Article VI and Article VII, each Participant may elect to reduce his or her compensation through uniform payroll deductions and have the Employer contribute to the Plan on his or her behalf on a before-tax basis an amount expressed in whole percentages up to fifty percent (50%) of his Covered Compensation. Such before-tax salary reduction contributions are referred to in this Plan as Deductible Employee Contributions.

6.2 Roth Employee Contributions. Subject to the provisions of Article VI and Article VII, each Participant may elect to reduce his or her compensation through uniform payroll deductions and have the Employer contribute to the Plan on his or her behalf on an after-tax basis an amount expressed in whole percentages up to fifty percent (50%) of his Covered

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Compensation. Such before-tax salary reduction contributions are referred to in this Plan as Roth Employee Contributions.

6.3 Election Procedures. An election to initiate, change or discontinue contributions must be made in accordance with the procedures established by the Plan Administrator. Such procedures shall prescribe the time or times, and the manner, of making such elections, and shall apply to similarly situated participants in a uniform and non-discriminatory manner.

Effective on and after the date this paragraph is activated by prior written notice to the Participants by the Plan Administrator, a Participant who does not make an affirmative election to the contrary shall be deemed to have elected to make Deductible Employee Contributions of three percent (3%) of his Covered Compensation.

The Employer shall remit all Deductible Employee Contributions and Roth Employee Contributions withheld from the Compensation of Participants through payroll deductions to the Trustee as soon as practical.

6.4 Limitation on Amount of Deferrals. Subject to the age fifty (50) catch-up contribution exception in the next paragraph, in no event may the combination of Deductible Employee Contributions and Roth Employee Contributions exceed the amount specified in Section 402(g) of the Code, as adjusted annually for any applicable increases in the cost of living in accordance with Section 415(d) of the Code ($14,000 for 2005). The Plan Administrator in its discretion may from time to time decrease or curtail the percentage of a Participant’s Deductible Employee Contributions and Roth Employee Contributions in order to comply with the limits imposed by this paragraph and to assure that such contributions shall be withheld approximately ratably throughout the Plan Year.

Participants who are eligible to make Deductible Employee Contributions and Roth Employee Contributions under this Plan and who have attained age fifty (50) before the close of the Plan Year shall be eligible to make such contributions in the form of catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions.

Should an amount in excess of the amounts specified in the first paragraph of this section be contributed to the Plan on behalf of a Participant, not later than the first April 15^th following the close of the tax year of the Participant in which such excess amount was contributed, the Plan Administrator may distribute such excess amount (and any income attributable thereto) to the Participant. A refund of such an excess amount shall be made from the Employee Account and the Roth Account, if any, of a Participant in the reverse order in which such contributions were credited to the Participant’s Account. Any Matching Contribution that was in fact already made on behalf of such a Participant who was a Highly Compensated Employee for the Plan Year for

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which the Matching Contribution was made that is attributable to the distributed amount shall be forfeited.

6.5 Required Employer Non-matching Contributions. Each Employer shall contribute to the Trust for each Plan Year an amount equal to at least five percent (5%) of the Compensation for Covered Service for a Plan Year, regardless of whether the Participant has an election in effect to make Deductible Employee Contributions or Roth Employee Contributions when such Compensation is earned or paid, of each Employee of the Employer who is a Participant and who did not incur a Termination of Employment before the last business day of that Plan Year.

Compensation of each Participant taken into account under this section shall not exceed $170,000 for any Plan Year.

An Employer may pay the Required Employer Non-matching Contributions for a Plan Year to the Trustee after the end of the Plan Year. Amounts contributed for a Plan Year pursuant to this section shall be deemed paid as of the last day of the Plan Year. The Employer shall designate the Plan Year for which each such Required Employer Contribution is made.

6.6 Discretionary Employer Non-matching Contributions. An Employer may, but shall not be required to, contribute to the Trust for a Plan Year an amount, if any, as the Sponsor in its sole discretion shall determine, on behalf of each Participant who was in the employ of an Employer on the last business day of the Plan Year, in addition to the Required Employer Contributions, which the Sponsor shall designate as the “Basic Discretionary Employer Non-matching Contribution” (which shall be allocated solely with respect to Basic Compensation in accordance with Section 7.6). Such Basic Discretionary Employer Non-matching Contributions may be made for a Plan Year without regard to whether the Employer makes any FICA Discretionary Employer Non-matching Contributions for that year.

Subject to Section 7.6, an Employer may, but shall not be required to, contribute to the Trust for a Plan Year an amount, if any, in addition to the Required Employer Contributions, as the Sponsor in its sole discretion shall determine, which the Sponsor shall designate as the “FICA Discretionary Employer Non-matching Contribution” (which shall be allocated solely with respect to Excess Compensation in accordance with Section 7.6). Except as otherwise provided in Section 7.6, such FICA Discretionary Employer Non-matching Contributions may be made for a Plan Year without regard to whether the Employer makes any Basic Discretionary Employer Non-matching Contributions for that year.

Compensation of each Participant taken into account under this section shall not exceed $170,000 for any Plan Year.

An Employer may pay the Discretionary Employer Non-matching Contributions for a Plan Year to the Trustee after the end of the Plan Year. Amounts contributed for a Plan Year pursuant to this section shall be deemed paid as of the last day of the Plan Year. The Employer shall designate the Plan Year for which each such Discretionary Employer Contribution is made.

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6.7 Form of Contributions. Contributions generally shall be in the form of cash. The Sponsor, in its sole discretion, may direct that up to twenty-five percent (25%) of the Employer Non-matching Contributions for a Plan Year be in the form of common stock of A.G. Edwards, Inc.

6.8 Limits on Contributions. The Deductible Employee Contributions and Roth Employee Contributions in the aggregate must satisfy the actual deferral percentage test of Section 401(k)(3) of the Code, and the Employer Matching Contributions, if any, shall satisfy the actual contribution percentage test of Section 401(m) of the Code. For this purpose, catch-up contributions described in Section 6.4 are not treated as Deductible Employee Contributions or Roth Employee Contributions. Sections 401(k)(3) and 401(m) of the Code and the regulations (including regulations issued in the future) thereunder are hereby incorporated by reference. Such tests shall be applied using the prior year testing method.

For purposes of explanation, the actual deferral percentage test (“ADP”) generally provides that the average percentage which the Deductible Employee Contribution and Roth Employee Contributions constitutes of the testing compensation of highly-compensated Employees may not exceed such an average for the non-Highly Compensated Employees by a multiple of more than 1.25, or alternately, by a multiple of more than 2.0 with a maximum spread of two (2) percentage points. The actual contribution percentage test (“ACP”) of Section 401(m) of the Code provides a similar limitation on the Employer Matching Contributions allocable to the accounts of highly-compensated Employees.

The multiple use test described in Treas. Reg. §1.401(m)-2 shall not apply to Plan Years beginning after December 31, 2001.

Deductible Employee Contributions and Roth Employee Contributions of Highly Compensated Employees in excess of the amount permitted by the actual deferral percentage test of Section 401(k)(3) of the Code are hereby referred to as “Excess Contributions,” and Employer Matching Contributions allocable to Highly Compensated Employees in excess of the actual contribution percentage test of Section 401(m) of the Code are hereby referred to as “Excess Matching Contributions.”

6.9 Correction of Excess Contributions. Deductible Employee Contributions and Roth Employee Contributions otherwise classified as Excess Contributions shall be treated as catch-up contributions for Participants eligible to make catch-up contributions in accordance with Section 6.4, subject to the limits of such section.

The Plan Administrator may, in its sole discretion, reduce the amount of Deductible Employee Contributions and Roth Employee Contributions that any Highly Compensated Employee may contribute for the Plan Year to avoid Excess Contributions.

Alternately, the Employer may, in its sole discretion, make an additional Matching Contribution on behalf of Participants who are non-Highly Compensated Employees up to such

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an amount that, when allocated to such Participants’ accounts, the resulting allocations will satisfy the actual deferral percentage test. Such additional Matching Contribution shall be allocated to the Participants’ Employee Account as of the last day of the Plan Year for which the contribution was made.

Alternately, the Plan Administrator may, in its sole discretion, specify that a portion of the Employer Matching Contribution allocated to the accounts of non-Highly Compensated Employees be designated as a qualified non-elective contribution to the extent required to satisfy the actual deferral percentage test of Section 401(k) of the Code pursuant to Treas. Reg. §1.401(k)-1(b)(3); provided that such a designation satisfies the non-discrimination requirements of Treas. Reg. §§1.401(k) and 1.401(m).

In the event the actual deferral percentage test of Section 401(k) of the Code is not satisfied after application of such correction devices for a Plan Year, the Plan Administrator may, in its sole discretion, direct a refund of the Excess Contributions and income attributable thereto at such times and in such manner as is permitted by the Code and Treasury Regulations. The aggregate dollar amount of such Excess Contributions shall be determined by reducing the percentage of Deductible Employee Contributions of Highly Compensated Employees beginning with the individuals with the highest compensation percentage, all only to the extent necessary to cause the actual deferral ratio to equal the highest permitted actual deferral ratio, in accordance with Treas. Reg. §1.401(k)(f)(2). The aggregate amount so determined shall be distributed to Highly Compensated Employees on the basis of the amount of Deductible Employee Contributions of each such Employee, reducing the highest dollar amount of the respective Highly Compensated Employee as necessary to refund such aggregate amount. After such refunds are made the Plan is treated as meeting the actual deferral percentage test regardless of whether the Plan would satisfy such ADP test if recalculated. Any Matching Contribution that was in fact already made on behalf of such a Participant that is attributable to such a refunded Excess Contribution shall be forfeited. Income attributable to any refund shall be determined in accordance with a method that satisfies Treas. Reg. §1.401(k)-1(f)(4)(ii). A refund of such an excess amount shall be made from the Employee Account and the Roth Account, if any, of a Participant in the reverse order in which such contributions were credited to the Participant’s Account.

The Plan Administrator, in its sole discretion, may apply the correction devices described in this section in any combination and in any order, except that the Plan must retain Deductible Employee Contributions and Roth Employee Contributions treated as catch-up contributions because they exceed the average deferral percentage test of Section 410(k)(3) of the Code before Excess Contributions may be refunded.

For purposes of this section, Excess Contributions for a Plan Year shall first be reduced by amounts previously distributed in accordance with Section 6.4.

6.10 Correction of Excess Matching Contributions. The Plan Administrator may, in its sole discretion, specify that all or a portion of the Deductible Employee Contributions of non-Highly-Compensated Employees may be treated as an Employer Matching Contribution in

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accordance with Treas. Reg. §1.401(m)-1(b)(5) to the extent required to satisfy the actual contribution percentage test of Section 401(m) of the Code. Such recharacterized amounts shall remain credited to the Employee Account.

Alternately, the Employer may, in its sole discretion, make an additional Employer Matching Contribution on behalf of Participants who are non-Highly Compensated Employees, which shall be allocated in proportion to their Deductible Employee Contributions, up to an amount necessary to satisfy the actual contribution percentage test of Section 401(m) of the Code.

In the event the actual contribution percentage test of Section 401(m) of the Code is not satisfied after application of such corrective devices for a Plan Year, the Plan Administrator may, in its sole discretion, distribute the Excess Matching Contributions and any income attributable thereto. The aggregate dollar amount of such Excess Matching Contributions shall be determined by reducing the percentage of Employer Matching Contributions, and recharacterized Deductible Employee Contributions, if any, of Highly Compensated Employees beginning with the individuals with the highest compensation percentage, all only to the extent necessary to cause the actual contribution ratio to equal the highest permitted actual contribution ratio, in accordance with Treas. Reg. §1.401(m)-1(e)(2). The aggregate amount so determined shall be distributed to Highly Compensated Employees on the basis of the amount of contribution by each such Employee, reducing the highest dollar amount of the respective Highly Compensated Employee as necessary to refund such aggregate amount. After such refunds are made the Plan is treated as meeting the actual contribution percentage test regardless of whether the Plan would satisfy such ACP test if recalculated. Income attributable to any distribution shall be determined in accordance with a method that satisfies Treas. Reg. §1.401(m)-1(e)(3). Such distributions shall be made within twelve (12) months after the close of the Plan Year for which such Excess Matching Contributions were made and shall be made on the basis of the respective portions of such amounts attributable to each Highly Compensated Participant.

The Plan Administrator, in its sole discretion, may apply the corrective devices described in this section in any combination and in any order.

6.11 Exclusive Benefit of Participants. All contributions under this Plan shall be paid to the Trustee and deposited in the Trust Fund. All assets of the Trust Fund, including investment income, shall be held for the exclusive benefit of Participants and Beneficiaries and shall be used to pay benefits to such persons or to pay administrative expenses of the Plan and Trust Fund and shall not be diverted to or used for any other purpose or revert to or inure to the benefit of any Employer except as provided in Section 6.12.

6.12 Return of Employer Contributions. In the event an Employer Contribution is made by reason of a mistake of fact, the excess of the amount contributed over the amount that would have been contributed had there not occurred a mistake of fact (without earnings attributable to such excess, but after reduction of losses attributable thereto) may be returned to the contributing Employer within one year of such a mistaken payment. For purposes of this section, a contribution which cannot be allocated to the account of a Participant pursuant to

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Section 7.7 shall be considered to be made because of a mistake of fact. Also, the excess of an amount contributed for a Plan Year over the amount that would have been contributed for such year had there not occurred a mistake in determining the amount deductible for such year under Section 404 of the Code (without earnings attributable to such excess, but after reduction of losses attributable thereto) may be returned to the contributing Employer within one year after disallowance of the deduction. Notwithstanding anything to the contrary in this section, if the return of the amount attributable to a mistaken contribution would cause the balance of an Account of any Participant to be reduced to less than the balance which would have been in the account had the mistaken amount not been contributed, the amount to be returned to the Employer shall be limited to the extent necessary to avoid such a reduction.

6.13 Allocation of Contributions Among Employers. Each of the respective Employers maintaining the Plan shall pay that portion of the total aggregate Employer Contribution (Required and Discretionary) for each Plan Year that is allocated to the accounts of the Participants for such year on the basis of the Compensation paid by such Employer. For purposes of this section, each Employer of an Employee concurrently employed by two or more Employers shall be deemed to have paid that portion of the Basic Compensation for a Plan Year and that portion of the Excess Compensation for a Plan Year which the total Compensation paid to such Employee for such year by such Employer bears to the total aggregate Compensation paid to such Employee for that year by all Employers.

The amount payable by each Employer shall be paid directly to the Trustee by such Employer or to the Sponsor as reimbursement to the Sponsor for contributions paid to the Trustee by the Sponsor on behalf of such Employer acting as agent for such Employer.

6.14 Rollover Contributions. The Trustee, in the sole discretion of the Plan Administrator in each case, may accept from an Employee rollover contributions or direct rollovers of distributions made after December 31, 2001, from the types of plans as follows: a qualified plan described in Section 401(a) or 403(a) of the Code; an annuity contract described in Section 403(b) of the Code; or an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The Trustee, in the sole discretion of the Plan Administrator in each case, also may accept a rollover contribution of the portion of a distribution from an individual retirement account or annuity described in Section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income.

A separate Rollover Account shall be established for each such contribution, which shall be treated in accordance with the provisions of this Plan governing Employee Accounts; except that a Participant may, upon notice received by the Plan Administrator (in a form suitable to the Plan Administrator), withdraw all or any portion of the assets held in such a Rollover Account without incurring any penalty under the Plan. If a rollover contribution is made by an Employee who is not a Participant in this Plan, such Employee shall be treated as a Participant solely for purposes of such account. In the event an amount contributed to this Plan pursuant to this section shall be determined not to qualify as a rollover contribution as defined above, the

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balance credited to such Rollover Account shall be distributed to the Employee who made the contribution thereto.

6.15 Make-Up Allocations. In the event that a Participant who shall have been entitled under the terms of this Plan to an allocation of Deductible Employee Contributions, Roth Employee Contributions or Employer Contributions to his account for a prior Plan Year was denied or failed to receive such an allocation, and it is subsequently demonstrated or discovered that such Participant shall have been entitled to such an allocation, at the direction of the Plan Administrator, in addition to the regular contribution for the Plan Year, the Employer shall contribute an amount equal to the amount of the allocation to which Participant was otherwise entitled but failed to receive for the prior year and such amount shall be allocated to the appropriate account of such Participant.

ARTICLE VII – INDIVIDUAL ACCOUNTS

7.1 Employee Accounts. The Plan Administrator shall establish on the books of the Plan a separate account (“Employee Account”) for each Participant who prior to January 1, 1987, made an after-tax Employee Contribution and for each Participant who on or after January 1, 1987, made Deductible Employee Contributions, to which such contributions and any income, loss, appreciation and depreciation attributable thereto shall be credited.

7.2 Roth Accounts. The Plan Administrator shall establish on the books of the Plan a separate account (“Roth Account”) for each Participant made an after-tax Roth Employee Contribution, to which such contributions and any income, loss, appreciation and depreciation attributable thereto shall be credited. Roth Accounts shall be treated the same as Employee Accounts for purposes of all functional provisions of this Plan, including but not limited to vesting and time of distribution. However, the tax accounting for such accounts, and taxation of distributions from such accounts, shall be treated separately by the Plan Administrator in accordance with the rules of the Internal Revenue Code and related IRS regulations and rulings governing Roth contributions to 401(k) plans.

7.3 Firm Accounts. The Plan Administrator shall also establish on the books of the Plan a separate account (“Firm Account”) for each Participant to which his share of an Employer’s Contributions and any income, loss, appreciation and depreciation attributable thereto shall be credited.

7.4 Rollover Accounts. The Plan Administrator shall also establish on the books of the Plan a separate account (“Rollover Account”) for each Participant who shall have made a rollover contribution to the Plan in accordance with Section 6.14, to which such contribution and all income, loss, appreciation and depreciation shall be credited.

7.5 Allocation of Required Employer Non-matching Contribution. Subject to the limitations of Section 7.7, as of the last day of each Plan Year, the Plan Administrator shall allocate to the Firm Account of each Participant who was an Employee on the last business day

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of such Plan Year that portion of the Required Employer Non-matching Contributions for that Plan Year which the Compensation for Covered Service of such Participant for that Plan Year bears to the total such Compensation for Covered Service of all such Participants for that Plan Year.

     Compensation of each Participant taken into account under this section shall not exceed $170,000 for any Plan Year.

     For purposes of this section, Participant means any Employee who has reached his Eligibility Date, regardless of whether the Participant has an election in effect to make Deductible Employee contributions, but excluding Employees who have elected not to participate in Non-matching Contributions pursuant to Section 5.3.

     7.6 Allocation of Discretionary Employer Non-matching Contribution. Subject to the limitations of Section 7.7, as of the last day of each Plan Year, the Plan Administrator shall allocate to the Firm Account of each Participant who was an Employee on the last business day of such Plan Year that portion of the Basic Discretionary Employer Non-matching Contribution for that Plan Year which the Basic Compensation of such Participant for that Plan Year bears to the total Basic Compensation of all such Participants for that Plan Year.

     Furthermore, subject to the limitations of Section 7.7, as of the last day of each Plan Year, the Plan Administrator shall allocate to the Firm Account of each Participant who was an Employee on the last business day of such Plan Year that portion of the FICA Discretionary Employer Non-matching Contribution for that Plan Year which the Excess Compensation of such Participant for that Plan Year bears to the total Excess Compensation of all such Participants for that Plan Year.

     Compensation of each Participant taken into account under this section shall not exceed $170,000 for any Plan Year.

     For purposes of this section, Participant means any Employee who has reached his Eligibility Date, regardless of whether the Participant has an election in effect to make Deductible Employee contributions, but excluding Employees who have elected not to participate in Non-matching Contributions pursuant to Section 5.3.

     In no event shall the percentage of Excess Compensation allocated to the Retirement and Firm Accounts of a Participant for a Plan Year as a result of non-matching Employer Contributions exceed the lesser of: (1) twice the percentage of Basic Compensation allocated to the Retirement and Firm Accounts of a Participant for a Plan Year as a result of non-matching Employer Contributions and (2) the percentage of Basic Compensation allocated to the Retirement and Firm Accounts of a Participant for a Plan Year as a result of non-matching Employer Contributions plus the greater of (a) five and seven-tenths percent (5.7%) and (b) the percentage of the OASDI Rate in effect on the first day of the applicable Plan Year which is attributable to old-age insurance.

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     7.7 Limitation on Maximum Contributions. Subject to the age fifty (50) catch-up contribution exception in Section 6.4, in no event shall the sum of the Employer Contributions, employee contributions (other than Rollover contributions) and forfeitures allocated to the account of a Participant for the Plan Year exceed the lesser of:

(A)	The amount specified in Section 415(c)(1)(A) of the Code, as adjusted annually for any applicable increases in the cost of living in accordance with Section 415(d) of the Code, as in effect as of the last day of the Plan Year ($42,000 for 2005); and
(B)	One hundred percent (100%) of the Participant’s compensation for such year.

     For purposes of this section, compensation shall mean wages within the meaning of Section 3401(a) of the Code (for purposes of income tax withholding at the source) but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exceptions for agricultural labor and services performed outside the United States), plus the amount of salary reduction as a result of an election pursuant to a plan or plans governed by Section 125, Section 132(f)(4), Section 457, Section 401(k) or Section 403(b) of the Code (inclusively).

     Section 415 of the Code, which limits the benefits and contributions under qualified plans, is hereby incorporated by reference. The limitation year shall be the Plan Year.

     Employer Contributions and forfeitures under this Plan that cannot be credited to the account of a particular Participant for a Plan Year because of the limitations imposed by this section shall be disposed of as follows: first, unmatched Deductible Employee Contributions, if any, shall be returned to the respective Participants who made the contributions to the extent the distribution would reduce the excess in the Participant’s account; and secondly, any remaining excess Employer Contribution and forfeitures allocable to the Employee Accounts of the Participant shall be held in a separate account established and maintained by the Plan Administrator (the “Suspense Account”). Amounts credited to the Suspense Account shall be used to reduce Employer Contributions for the next Plan Year (and succeeding Plan Years, if necessary) on behalf of such Participant if such Participant is covered by the Plan as of the last day of the Plan Year. If such Participant is not covered by the Plan as of the end of the Plan Year, then such excess amounts must be held unallocated in the Suspense Account for the Plan Year and allocated and reallocated in the next Plan Year to the accounts of the remaining Participants as an Employer Contribution for such year. Amounts in Suspense Accounts must be used to reduce employer contributions for all remaining Participants and may not be distributed. Deductible Employee Contributions refunded in accordance with this paragraph shall include any income attributable thereto.

ARTICLE VIII – INVESTMENT OF FUNDS

     8.1 Directed Accounts. The Trustee shall hold contributions made pursuant to the terms of this Plan in segregated accounts for the respective Participants. The Plan Administrator

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shall instruct the Trustee on the portion of each contribution to be allocated to each investment account of each respective Participant. Each Participant shall be entitled to direct the manner in which assets credited to his accounts shall be invested and reinvested at the times and in the manner provided by this Article.

     8.2 Permissible Investments. A Participant may direct investment of amounts credited to his segregated accounts and reinvestment of assets held in his segregated accounts in any one or a combination of the investments available for the Plan (the “Funds”) and communicated in writing to Plan Participants.

     The Funds shall include the Employer Stock Fund, which shall be invested exclusively in the common stock of A.G. Edwards, Inc. The Trustee shall apply cash transferred to the Employer Stock Fund to purchase common stock of A.G. Edwards, Inc. as soon as reasonably possible.

     The Investment Committee from time to time may designate one or more investment funds, in addition to the Employer Stock Fund into which Participants may direct investment of all or a designated portion of their Individual Accounts. The Investment Committee shall have no responsibility or authority over the Employer Stock Fund.

     If the Investment Committee establishes or designates Participant directed investment options:

(A)	It shall select a range of investment options sufficient to provide Participants and Beneficiaries with a reasonable opportunity to choose investment alternatives which in the aggregate enable a Participant or Beneficiary to structure a portfolio with risk and return characteristics appropriate to that person;
(B)	Each Participant shall be entitled to direct the manner in which assets credited to his Individual Account shall be invested and reinvested at the times and in the manner provided in this Article; and
(C)	The Plan Administrator shall provide investment information to Participants and Beneficiaries in accordance with regulations under Section 404(c) of ERISA.

     Directed Investments under this Plan are intended to comply with Section 404(c) of ERISA such that fiduciaries of the Plan are relieved of liability for any losses attributable to Participant directed investments.

     The Investment Committee reserves the right to change any investment fund options which may be established pursuant to this Article, including the right to eliminate particular funds, at any time; except that the Investment Committee shall have no responsibility or authority over the Employer Stock Fund.

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     8.3 Investment Committee. The Compensation Committee of A.G. Edwards & Sons, Inc. shall appoint an Investment Committee to serve at its pleasure. The members of the Investment Committee may be a corporation (including the Sponsor), one or more an individuals or any combination of the above. The Compensation Committee of A.G. Edwards & Sons, Inc. may change such appointments from time to time provided that such changes are published to the extent of enabling interested parties to ascertain the person or persons responsible for operating the Plan.

     In the absence of such an appointment, the Compensation Committee of A.G. Edwards & Sons, Inc. shall serve as the Investment Committee.

     Any member serving on the Investment Committee may, but need not, be an employee, and may, but need not, be a Participant. Any member shall serve, in the case of natural persons until his death, resignation or removal and in the case of a corporation until its liquidation, resignation or removal. The Compensation Committee of A.G. Edwards & Sons, Inc., in its sole discretion, may remove any member of the Investment Committee at any time. A member serving on the Investment Committee may resign by delivering a written resignation to the Compensation Committee of A.G. Edwards & Sons, Inc.

     All resolutions and other actions of the Investment Committee may be adopted and effected by a majority of a quorum of the Investment Committee at the time of such action. A quorum of the Investment Committee shall be comprised of no fewer than fifty percent (50%) of the members then serving. An action of the Investment Committee also shall be valid if concurred in by unanimous written consent in lieu of a meeting. A member may participate in a meeting by means of conference telephone or similar communications equipment.

     The Investment Committee may appoint one or more of its members to carry out any particular duty or duties or to execute any and all documents. Any documents so executed shall have the same effect as if executed by all such persons. Such appointment shall be made by an instrument in writing that specifies which duties and powers are so allocated and to whom each such duty or power is so allocated.

     8.4 Manner of Direction. Individual investment directions shall specify the particular securities in which the amount credited to each of the accounts of a Participant shall be invested. A Participant may direct investment of amounts held in a particular account in a manner different from assets held in some other account maintained for such Participant. For example, a Participant can direct investment of assets allocated to his Employee Account in a manner different from investment of assets allocated to his Firm Account, if any.

     Such investment directions by a Participant shall cover the full amount allocated to each of his accounts. Assets initially will be invested in accordance with the investment directions made by the Participant upon enrollment in the Plan. Changes in the investment of any account balance of a Participant will be made only on the affirmative direction of the Participant. In the event a Participant fails to direct the manner in which assets allocated to his accounts shall be

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invested, the Trustee shall invest the assets for which no Participant investment direction is effective in the money-market fund.

     Amounts credited to the Firm Account of the Participant may be invested in the Employer Stock Fund; provided that no more than twenty-five percent (25%) of the total amount allocated to all of the accounts of the Participant as of the investment date may be invested in the Employer Stock. Amounts credited to the other Accounts of the Participant may not be invested in the Employer Stock Fund.

     Subject to the above, the Plan Administrator in its sole discretion may establish conditions, rules and procedures for directing investments by Participants. Such conditions, rules and procedures shall be disseminated in a manner reasonably determined to be available to all affected Plan Participants a reasonable time before the effective date of such condition, rule or procedure.

     8.5 Investment of Contributions. Each Participant, at the time he elects to become a Participant, shall direct investment of contributions made to his respective accounts in one or more of the Funds. From time to time, at such times and upon such effective dates as the Plan Administrator may determine, a Participant may change his direction governing investment of contributions to be made to his respective accounts upon notice in the manner determined by the Plan Administrator.

     Once given, an investment direction shall be deemed to be a continuing direction until explicitly changed by the Participant by a subsequent direction delivered in the manner determined by the Plan Administrator. The direction in effect at the time of receipt by the Trustee of contributions on behalf of a Participant shall govern the manner of investment of such contributions.

     8.6 Change of Investments. In addition to directing the manner of the initial investment of contributions made to his respective accounts, a Participant may direct reinvestment of existing assets held in his respective accounts in accordance with the procedures established by the Plan Administrator.

     The Plan Administrator in its sole discretion may establish “black-out” periods, when specified changes are not permitted, to facilitate changes in the available Funds or recordkeeping system.

     8.7 Charges to Accounts. Brokerage commissions, transfer taxes and other charges and expenses in connection with the purchase or sale for each segregated account of the investments described in Section 8.2 shall be added to the cost of such securities or be deducted from the proceeds thereof, as the case may be; and expenses directly allocable to the execution of such transactions and administration with respect to such a segregated account, including charges of mutual fund managers and underwriters, shall be charged to such segregated account.

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     8.8 Investment of Transferred Assets. Unless specific directions governing such investment are given to the Trustee prior to the time the Trustee receives such transferred assets, assets transferred to the account of a Participant from another plan shall be invested in one or more of the Funds described in Section 8.2 in accordance with the directions governing investment of contributions to the respective accounts of such Participant to which such assets are credited which are in effect at the time the Trustee receives such transferred assets. Employees who do not contribute to this Plan but who are entitled to a transfer from another plan shall have the right to direct investment of such transferred assets at a reasonable time after the transfer. Assets for which no Participant investment direction is effective shall be invested in the money-market fund.

     8.9 Investment of Death Benefits. Assets held in the accounts of a deceased Participant that are scheduled for distribution as soon as administratively feasible after the death of the Participant in a lump sum payment shall continue to be invested in the same manner in which such assets were invested at the time of the death of the Participant until such assets are distributed to the Beneficiary or Beneficiaries of the Participant in accordance with the Plan. The Beneficiary of all or a designated portion of an account of a deceased Participant that is scheduled for distribution in the form of installments pursuant to Section 15.2(B) shall be treated as a Participant for purposes of this Article and thus may direct investment of such assets in the same manner as if such Beneficiary were a Participant.

     8.10 Investments in Treasury Zeros. Effective March 1, 2001, in addition to the Funds described in Section 8.2, a Participant who has completed five (5) Years of Service for vesting or who has attained his Normal Retirement Age may direct reinvestment of funds credited to his Firm Account, and any Participant may direct reinvestment of funds credited to his Employee Account and his Rollover Account regardless of whether the Participant has completed five (5) Years of Service for vesting, in United States Treasury Zero Coupon Bonds or Notes (Treasury Zeros) at the time, in the manner and subject to the conditions provided by this section.

(A)

Treasury Zeros. “Treasury Zeros” are selected Treasury Securities maintained by the Federal Reserve Banks, which represent direct ownership of future principal and interest payments on United States Treasury Bonds or Notes. The Treasury Zeros available for purchase shall be those obtainable from time to time through A.G. Edwards & Sons, Inc.

(B)

Manner of Direction. An eligible Participant shall deliver a direction to purchase or sell Treasury Zeros to A.G. Edwards & Sons, Inc. at the time, in the manner and on the form acceptable to the Plan Administrator. An eligible Participant who wishes to purchase Treasury Zeros shall specify the particular Zero or Zeros, including the maturity date or dates to be purchased, the quantity, the cusip number(s) of each such Treasury Zero to be purchased and the Fund or Funds to be sold to fund the purchase. The Plan Administrator may require that the proceeds from the Fund or Funds which are liquidated to fund the purchase be transferred to the money market fund prior to the Purchase Date; provided that such transfer need not be at the end of a month, nor shall it be considered a

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	change of investment for purposes of Section 8.6. The minimum amount of any such investment shall be $1,000 principal.
	An eligible Participant who wishes to sell Treasury Zeros shall specify the particular Zero or Zeros, including maturity date or dates to be sold, the quantity and the cusip number(s) of each such Treasury Zero to be sold. The proceeds from the sale shall be reinvested in a Fund or Funds as directed by the Participant; or, in the absence of such a direction, in the money market fund.
	The Plan Administrator in its sole discretion may establish conditions, rules and procedures for purchasing and selling Treasury Zeros by Participants. Such conditions, rules and procedures shall be disseminated in a manner reasonably determined to be available to all affected Participants in a reasonable time before the effective date of such condition, rule or procedure.
(C)	Execution. The Treasury Zero trustee shall execute purchase and sale directions made in accordance with this section on, or as soon as practical after, the trade date, and a separate Account shall be maintained for the Participant. The Treasury Zero trustee shall purchase or sell a Treasury Zero at the price established on the actual day of purchase for that Treasury Zero by A.G. Edwards & Sons, Inc., or by a primary government bond dealer who reports to the Federal Reserve Board designated by the Treasury Zero trustee, whichever is less. The Treasury Zero shall be priced for one day settlement.
(D)	Administrative Cost. Administrative costs, transfer taxes and other expenses in connection with the purchase, sale, redemption or distribution of such Treasury Zeros may be added to the cost of such Treasury Zeros or be deducted from the proceeds thereof, as the case may be, and expenses directly allocable to the execution of such transactions may be charged to such separate Account.
(E)	Proceeds at Maturity or Sale. In the event that a Treasury Zero matures or is sold while it is held by the Treasury Zero Trustee for a Participant, notwithstanding anything to the contrary in this Article, the Participant shall be able to direct the reinvestment of the proceeds in any of the Funds available pursuant to Section 8.2 or the Participant shall be able to direct the reinvestment of the proceeds in Treasury Zeros.
	In the event that the Participant does not direct reinvestment of such proceeds at maturity or the sale of the Treasury Zeros, the proceeds automatically shall be reinvested in the money market fund for the account of the Participant.
(F)	Form of Distribution. Should the Participant be entitled to a distribution of assets invested in a Treasury Zero, the Treasury Zero may be distributed in kind (which may be effected by a transfer to the Participant’s account), or in cash, at the election of the Participant.

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ARTICLE IX – VALUATION OF ACCOUNTS

     9.1 Valuation of Fund. The Plan Administrator shall determine the fair market value of the Trust Fund and of the respective Participant accounts as of the last day of each Plan Year and at such other times that the Plan Administrator in its discretion shall determine.

     9.2 Value of Participants’ Benefits. The benefit of a Participant under this Plan as of any particular date shall be equal to the sum of (1) the fair market value of the assets held by the Trustees for a Participant in his respective, Employee, Firm and Rollover Accounts, if any, as of such date, plus (2) the amount of any Contribution (Employer and Employee), if any, payable to the Trustee for each such respective Account of such Participant in accordance with Article VI as of such date.

ARTICLE X – VESTING

     10.1 General Rule. The vested percentage of the amount credited to the Firm Account of a Participant from time to time, shall be determined by the number of Years of Service then credited to such Participant under Section 4.5 in accordance with the following schedule:

Before Five Years of Service	0%
After Five Years of Service	100%

     Notwithstanding the above, the vested percentage of the amount credited to the Firm Account of a grandfathered Participant from time to time, shall be determined by the number of Years of Service then credited to such Participant under Section 4.5 in accordance with the following schedule:

After One Year of Service	10%
After Two Years of Service	20%
After Three Years of Service	30%
After Four Years of Service	40%
After Five Years of Service	100%

For purposes of this section, a grandfathered Participant means a Participant described in any of the following three categories:

(A)	Participants who were actively employed on December 31, 1997;
(B)	Participants who had an amount allocated to their account on December 31, 1997; and
(C)	Former Participants who completed at least three Years of Service before 1998, received distribution of their vested account balance before 1998 (with a corresponding forfeiture of the unvested portion), and are rehired before incurring a Break in Service of five (5) consecutive years.

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     In no event shall the vested percentage of a Participant on the date on which an amendment to this Plan is adopted or becomes effective, whichever is later, be less than the vested percentage immediately before such date.

     Solely in the case of a grandfathered Participant whose vested percentage is determined by the pre-1998 graded vesting schedule, notwithstanding anything to the contrary in the Plan, no portion of the Firm Account of a Participant with less than five (5) Years of Service shall be vested if such Participant incurs a Termination for Aggravated Cause.

     Furthermore, no portion of the Firm Account of a Participant shall be vested in the event such Participant shall incur a Termination of Employment because of a Voluntary Termination before completion of at least five (5) Years of Service and such Participant shall be determined by the Employer to have engaged in competition with the Employer before such amount becomes payable.

     A Voluntary Termination shall mean a Termination of Employment resulting solely from the initiative of the Participant without undue influence, coercion or duress on the Participant caused by the Employer. A resignation by a Participant which, in the discretion of the Plan Administrator, is an alternative to immediate Termination for Aggravated Cause by the Employer is not, however, a Voluntary Termination.

     A Participant shall be deemed to engage in competition with the Employer for purposes of this section if the Plan Administrator determines that the Participant owns, manages, controls or participates in or becomes connected with, as an officer, employee, partner, stockholder, consultant or otherwise, any business, individual, partnership, or corporation that is engaged significantly, or is planning to become engaged significantly, in a business which, directly or indirectly, competes with a business of the Employer; provided that, acquiring or holding shares of any business entity which has its securities listed on a national securities exchange or quoted in the daily listing of over-the-counter market securities shall not constitute such competition so long as the Participant and members of the Participant’s family do not own more than one percent (1%) of the voting securities of such an entity.

     Notwithstanding the above, a Participant who engages in competition as described in the immediately preceding paragraph shall not incur a forfeiture on account of such competition if the Participant is rehired by the Employer before the second January 1^st following such a Separation from Service.

     10.2 Termination for Aggravated Cause means a Termination of Employment (whether a discharge or quit) because of any of the following acts or events which the Plan Administrator in his discretion determines have occurred: any action or failure to act by the Employee that results in or is likely to result in a detriment to the Employer or any of its employees or customers, violation of any securities law, dishonesty whether or not resulting in a direct or indirect monetary loss, insubordination, drunkenness, use of harmful drugs, willful

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destruction of property, provocation or continuous agitation of Employer’s customers or employees, or conviction of a felony or a misdemeanor.

     10.3 Fully Vested Accounts. The amount credited to the Firm Account of a Participant who has completed five (5) Years of Service or has attained Normal Retirement Age, whichever shall first occur, and the amount credited to the Employee Account and Rollover Account of any Participant shall be fully vested and nonforfeitable at all times and in all events.

     10.4 Change in Control. Notwithstanding anything to the contrary in the Plan, the balance credited to the Firm Account of each Participant shall become fully vested and nonforfeitable immediately upon a Change in Control.

     For purposes of this section, “Change in Control” means the occurrence of any of the following events without the prior approval of the Board of Directors: (a) a merger, consolidation or reorganization of A.G. Edwards, Inc. in which A.G. Edwards, Inc. does not survive as an independent entity; (b) a sale of all or substantially all of the assets of A.G. Edwards, Inc.; (c) the first purchase of shares of common stock of A.G. Edwards, Inc. pursuant to a tender or exchange offer for more than twenty percent (20%) of A.G. Edwards, Inc.’s outstanding shares of common stock; or (d) any change in control of a nature that, in the opinion of the Board of Directors, would be required to be reported under the federal securities laws; provided that such a change in control shall be deemed to have occurred if (i) any person is or becomes the beneficial owner, directly or indirectly, of securities of A.G. Edwards, Inc. representing forty percent (40%) or more of the combined voting power of A.G. Edwards, Inc.’s then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of A.G. Edwards, Inc. cease for any reason to constitute a majority thereof unless the election of any director, who was not a director at the beginning of the period, was approved by a vote of at least seventy percent (70%) of the directors then still in office who were directors at the beginning of the period.

ARTICLE XI – FORFEITURES

     11.1 Reduction of Employer Contribution. The forfeitures for a Plan Year (to the extent not previously applied to reduce Employer Contributions) shall be applied as part of the Employer Contribution required under Section 6.5 for the Plan Year. In addition, at the discretion of the Plan Administrator, forfeitures that occur in a Plan Year before the Employer Contribution for the preceding Plan Year is actually made may be applied as part of the Employer Contribution required under Section 6.5 for such preceding Plan Year.

     11.2 Allocation of Forfeitures. Forfeitures for a Plan Year shall be applied in accordance with Section 11.1 as if such amounts were part of the Employer Contribution for that Plan Year.

     11.3 Forfeiture Restoration. In the event the account of a Participant was reduced in accordance with Section 14.3, and the Participant is re-employed before such Participant incurs a

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Break in Service of five consecutive years, the amount previously so forfeited shall be restored to the Firm Account of the Participant as of the last day of the Plan Year in which such Participant first completes a Year of Service after re-employment. Such a restored forfeiture may be funded by an additional Employer Contribution or out of forfeitures for that Plan Year.

     Notwithstanding anything to the contrary in Article X, if a grandfathered Participant (as defined in Section 10.1) receives a restoration of a previously forfeited amount in accordance with the preceding paragraph, and subsequently incurs a Termination of Employment before the Participant is fully vested, the vested portion of the amount credited to the Firm Account of the Participant shall be

P(AB + D) -D, where: 

                   P is the vested percentage at the relevant time; 

                   AB is the account balance at the relevant time; and 

                   D is the amount of the previous distribution.

ARTICLE XII – WITHDRAWALS DURING EMPLOYMENT

     12.1 Right of Withdrawal - Employee Account. A Participant may, upon notice received by the Plan Administrator or its delegate, withdraw without penalty all or a portion of the lesser of the two (2) amounts, as follows:

(A)	The assets then held in the Employee Account of such Participant, or
(B)	The aggregate amount of the after-tax Employee Contributions made by the Participant prior to January 1, 1987, reduced by any prior distributions charged against such contributions.

Assets so withdrawn shall be distributed to the withdrawing Participant as soon as practical after the effective date of the withdrawal.

     12.2 Senior Employee Withdrawal Option. A Participant may elect to withdraw all or any portion of his Plan benefit while the Participant is still employed by the Employer (the “Withdrawal Date”) if on such date the Participant satisfied both of the following two conditions:

(A)	The Participant was at least fifty-nine and one-half (59½) years of age; and
(B)	The Participant was fully vested in accordance with Section 10.1.

     Such an election must be received by the Plan Administrator (in a form suitable to the Plan Administrator) prior to such Withdrawal Date.

     The amount so withdrawn shall be distributed to the withdrawing Participant as soon as practical after the Withdrawal Date.

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     A Participant shall not be subject to penalty for a withdrawal made pursuant to this section.

     12.3 Withdrawal of A.G. Edwards, Inc. Vested Dividends. Notwithstanding the preceding paragraph, a Participant shall have the right to elect to receive dividends with respect to shares credited to such Participant’s fully vested Employer Stock Fund account paid in cash directly to the Participant. An election to receive dividends in cash shall be made in accordance with procedures established by the Plan Administrator, and the Plan Administrator shall designate the times and effective dates for such elections. Any dividend payments to Participants will be paid, in the sole discretion of the Plan Administrator, by the Sponsor’s disbursing agent: (1) to the Trustee, and then distributed by the Trustee or by a disbursing agent for the Trustee, to Participants; or (2) to the Company’s Payroll Department as agent for the Participant. Such dividend payments shall be made not later than ninety (90) days following the close of the Plan Year in which such dividends are paid by the Company. This option to receive dividends directly in cash shall apply only to dividends on shares credited to an account that is fully vested.

     12.4 Availability of Loans. A Participant who is an Employee may apply in writing to the Plan Administrator to borrow from the Trust Fund up to the vested portion of their accounts. If the application is approved, the Plan Administrator shall direct the Trustee to make the loan in a lump sum cash payment to the Participant. Loans shall be granted in a uniform and non-discriminatory manner without regard to the level of compensation, race, color, religion, age, sex or national origin of the Participant. The Plan Administrator shall determine the terms of such loans, and shall adopt rules for administering loans hereunder, including prescribing processing fees, and may revise such rules from time to time; provided such terms and rules apply to Participants in a uniform and non-discriminatory manner. Loan rules shall be set forth in such documents, including electronic format, as the Plan Administrator may determine.

     A loan made in accordance with this section in excess of (when added to the outstanding balance of all other loans from the Plan to such Participant) the lesser of:

(A)	$50,000 or such lower amount determined by the Plan Administrator (reduced by the excess of the highest outstanding loan balance from the Plan during the one (1) year period ending on the day before the date on which the loan is made over the outstanding loan balance from the Plan on the date the loan is made); and
(B)	One-half (1/2) of the vested portion of the account balance of the Participant immediately preceding the application for the loan (adjusted for any distributions or contributions made after such Valuation Date)

shall be treated as taxable income to the Participant.

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ARTICLE XIII – WITHDRAWALS AFTER EMPLOYMENT

     13.1 Withdrawals After Employment. In the event a Participant shall incur a Termination of Employment under circumstances such that the Participant is not entitled to receive payment of his benefits under the Plan immediately upon such Termination of Employment, such Participant may, upon notice in a manner suitable to the Plan Administrator, request withdrawal of an amount equal to (1) the fair market value of assets held in the Employee Account and Rollover Account of such Participant, plus (2) the amount, if any, of Employee contributions payable to the Trustee for each such account in accordance with Article VI. An amount so withdrawn shall be paid to the withdrawing Participant as soon as practical after the Plan Administrator receives the notice in a form suitable to the Plan Administrator.

ARTICLE XIV – PAYMENT OF BENEFITS

     14.1 Disability and Fully Vested Over Age 59½. If a Participant incurs a Termination of Employment because of Total Disability, or if a Participant incurs a Termination of Employment after such Participant shall have attained the age of fifty-nine and one-half (59½) years, the entire vested benefit of such Participant, if any, determined in accordance with Section 9.2, shall become distributable after the employment of such Participant with the Employers so terminated.

     14.2 Fully Vested Under Age 59½. If a Participant incurs a Termination of Employment for reasons other than death or Total Disability before such Participant shall have attained the age of fifty-nine and one-half (59½) years, and the Firm Account of such Participant is fully vested at the time of such termination, the entire benefit of such Participant, if any, determined in accordance with Section 9.2, shall become distributable as soon as practical after the second December 31^st which occurs after the date of such Termination of Employment; provided that the benefit of a Participant whose employment with the Employers is so terminated shall not become distributable on account of a Termination of Employment if such Participant is re-employed before such December 31^st, except that a Participant who is re-employed only in uncovered Service may elect before (but not after) such December 31^st to receive such distribution; provided that, the entire benefit of (A) a Participant who receives severance benefits or an alternate payment in accordance with Appendix A or Appendix B of the A.G. Edwards Severance Benefit Plan in connection with the workforce reduction implemented in the first three months of the year 2002 and (B) a Participant who receives severance benefits or a departure bonus in accordance with Appendix D of the A.G. Edwards Severance Benefit Plan in connection with the workforce reduction implemented in the first three months of the year 2004 and (C) a Participant whose participation in the Plan is terminated because or the sale of CPI Qualified Plan Consultants, Inc. by A.G. Edwards, Inc. shall become distributable as soon as practical after the Termination of Employment of the Participant.

     14.3 Partially Vested. If a Participant incurs a Termination of Employment for reasons other than death or Total Disability before the Firm Account of such Participant is fully vested, the benefit of such Participant shall be held in Trust until the second December 31^st which occurs

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after the date on which his employment with the Employers is so terminated. As soon as practical after such December 31^st the vested portion of such benefit, if any, shall become distributable; provided that the amount credited to the accounts of a Participant whose employment with the Employers is so terminated shall not become distributable on account of a Termination of Employment if such Participant is re-employed in Covered Service before such December 31^st; provided that, the entire benefit of (A) a Participant who receives severance benefits in accordance with Appendix A or Appendix B of the A.G. Edwards Severance Benefit Plan in connection with the workforce reduction implemented in the first three months of the year 2002 and (B) a Participant who receives severance benefits or an alternative payment in accordance with Appendix D of the A.G. Edwards Severance Benefit Plan in connection with the workforce reduction implemented in the first three months of the year 2004 and (C) a Participant whose participation in the Plan is terminated because or the sale of CPI Qualified Plan Consultants, Inc. by A.G. Edwards, Inc. shall become distributable as soon as practical after the Termination of Employment of the Participant.

     As of the earlier of (A) the date as of which benefits are distributed to the Participant, or (B) the date on which the Participant incurs a Break in Service of at least five (5) consecutive years, the unvested portion of the account balance of the Participant shall be forfeited. For this purpose, if the value of the vested portion of an Employee’s account balance is zero upon his Termination of Employment, the Employee shall be deemed to have received a distribution of such vested account as of his or her Termination of Employment.

     If a Participant incurs a Termination of Employment for reasons other than death or Total Disability during or after the calendar year in which such Participant attains the age of fifty-five (55) and before the Participant attains the age of fifty-nine and one-half (59½) years, before the Firm Account of such Participant is fully vested, the Participant may elect to withdraw all or any portion of his or her vested Plan benefit prior to the Participant reaching the age of fifty-nine and one-half (59½) years. Such an election must be received by the Plan Administrator in a form suitable to the Plan Administrator. The amount so withdrawn shall be distributed to the withdrawing Participant in the form specified by this Article as soon as practical after such election is received.

     14.4 Time of Payment. As soon as practicable after a benefit becomes distributable in accordance with Section 14.1, Section 14.2, or the first paragraph of Section 14.3, such benefit shall be distributed to the Participant entitled thereto in the form specified by this Article.

     Effective March 28, 2005, notwithstanding the above, if the vested portion of the balance credited to a Participant’s accounts exceeds $1,000 at the time of the distribution to the Participant (regardless of such value at any previous time), and the Participant has not attained his Normal Retirement Age, the Participant must consent in writing, or the functional equivalent of writing, before any portion of such accounts may be distributed to him. For this purpose, the value of a Participant’s vested account balance shall be determined without regard to that portion of the account balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code.

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     The Plan Administrator shall furnish to each such Participant entitled to receive a distribution a written explanation of the right to defer receipt of the distribution. Such a notice shall be provided to the Participant no less than thirty (30) days and no more than ninety (90) days before the date of the distribution.

     Such distribution may commence less than thirty (30) days after the notice required by the preceding paragraph is provided, provided that:

(A)	the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and
(B)	the Participant, after receiving the notice, affirmatively elects a distribution.

The written consent to the distribution may not be made before the Participant receives the notice and must not be made more than ninety (90) days before the date of distribution.

     14.5 Form of Payment. The amount credited to the Employee Account, Firm Account and Rollover Account, if any, of a Participant shall be made in cash; except that such account balances invested in Treasury Zeros may be distributed in kind at the direction of the Participant, and Firm account balances may be distributed in the form of shares of A.G. Edwards, Inc. at the direction of the Participant. Assets invested in mutual funds may be made in kind if the system established by the Plan Administrator or its agent for effecting distributions can reasonably accommodate distributions of mutual fund shares.

     14.6 Forfeitures. The amount by which the account of a Participant is reduced in accordance with Section 14.3 shall be a forfeiture. Such amount shall be held in a temporary fund until such amount is allocated and credited to Participant accounts in accordance with Article XI.

     14.7 Accounts of Former Employees. The assets held in the account of a Participant, if any, after Termination of Employment of such Participant shall be valued in accordance with Article IX as of each valuation date following such Termination of Employment until distribution of the entire benefit of such Participant under this Plan. Former Employees may direct investment of amounts credited to their accounts in accordance with Article VIII. Distribution of the balance of the benefit of a Participant determined in accordance with Section 9.2 shall constitute payment in full of the benefits of such Participant hereunder.

     14.8 Direct Rollover of Eligible Rollover Distributions.

(A)      Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this section, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover

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distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. 

(B)      Definitions.

(1)	Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten (10) years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and, any hardship distribution described in Section 401(k)(2)(B)(i)(IV).
(2)	Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee’s eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an Individual Retirement Account or Individual Retirement Annuity.
(3)	Distributee: A distributee includes an employee or former employee. In addition, the employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse.
(4)	Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee.

     For purposes of this section, an eligible retirement plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Section 414(p) of the Code. Any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an eligible retirement plan. A portion of a distribution shall not fail

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to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

     14.9 Protected Options. In addition to any form of benefits specified in this Article, a Participant who has not received a distribution of the entire amount credited to his Accounts as of an Amendment Date shall be entitled to a distribution of the amount credited to his account as of such Amendment Date paid in any optional form of payment available to such Participant under the Plan as in effect immediately before such Amendment Date. Amendment Date means the date on which an amendment to this Plan is adopted or becomes effective, whichever is later.

ARTICLE XV – PAYMENT OF DEATH BENEFITS

     15.1 Death Benefits. The amount credited to the Accounts of a deceased Participant shall be distributed to the Beneficiary of the Participant in the form provided in this Article, with payments commencing as soon as administratively feasible after the death of the Participant (but never later than the time prescribed in Article XVI).

     15.2 Form of Payment. The balance of the Accounts, if any, of a deceased Participant shall be paid to the Beneficiary of the deceased Participant in any one or a combination of the following forms as the Beneficiary may elect:

(A)	In one lump-sum payment (which may represent either all of such Participant’s benefit or only the portion remaining after distribution of a portion thereof pursuant to subsection (B) hereof and which may take the form of lump-sum payments to multiple Beneficiaries);
(B)	In substantially equal annual installments over a period not exceeding five (5) years. A Beneficiary receiving such an installment payout of an account may elect to accelerate distribution of all or any portion of the balance of such account at any time and from time to time, but may not elect to defer distributions beyond the scheduled time of payment initially elected by the Beneficiary; or
(C)	An annuity contract that satisfies the requirements of Section 15.8.

     Notwithstanding the above, the entire balance credited to the accounts of a deceased Participant shall be distributed, or applied to purchase an annuity contract that is distributed, no later than the end of the fifth (5^th) calendar year beginning after the date of death of the Participant.

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     The remaining balance of an account being paid in installment payments may be paid in a lump sum in the event of the termination of the Plan, a spin-off of a portion of the Plan that includes such account, or any other structural change to the Plan.

     15.3 Designation of Beneficiary. Each Participant from time to time on a form acceptable to the Plan Administrator may designate any person or persons, including a trust or trusts, (including a trust or an Individual Retirement Account of which the Participant’s spouse is treated as the depositor) (concurrently, contingently or successively) to whom the Participant’s benefits under the Plan are to be paid if he dies before receiving all of such benefits. A beneficiary designation form shall be effective only when the form is filed in writing with the Plan Administrator by the Participant while the Participant is alive, and shall cancel all beneficiary designation forms previously signed and filed by the Participant.

     The designation of a nonspouse Beneficiary shall be valid only if: the Eligible Surviving Spouse of the Participant shall have consented in writing to such designation; the consent specifies the non-spouse Beneficiary designated by the Participant, the consent acknowledges the effect of the designation; and the consent is witnessed by a Plan representative or a notary public.

     Any designation of a non-spouse Beneficiary may be revoked or changed by the Participant by a subsequent designation made in accordance with this section prior to the Participant’s Annuity Starting Date. The designation may be revoked, but not changed, without the consent of the Eligible Spouse. The Eligible Spouse may not revoke a consent to a valid Beneficiary designation.

     15.4 Failure to Designate. If a Participant shall not have designated a Beneficiary, or no Beneficiary or Beneficiaries entitled to receive distribution of all of the amount payable under this Plan survives the Participant, then that portion of the amount payable as to which there is no surviving qualified Beneficiary shall be paid to the Eligible Surviving Spouse of the Participant, and if the Participant leaves no Eligible Surviving Spouse, to the Beneficiary of the Participant under the A.G. Edwards Basic Group Insurance Plan, and if no such beneficiary, to the estate of the Participant or the distributees thereof. In the event the Plan Administrator shall be in doubt with respect to the right to distribution of a spouse or Beneficiary, the Plan Administrator may cause the entire account of a Participant or any portion thereof to be distributed to the estate of the Participant, and the Trustee or Plan Administrator shall have no further responsibility or liability with respect to such amount.

     15.5 Renunciation of Death Benefit. A Beneficiary of a Participant entitled to a benefit under this Plan may disclaim his right to all or any portion of such benefit by filing a written irrevocable and unqualified refusal to accept such a benefit with the Plan Administrator before payment to him of any such benefit but no later than nine (9) months after the death of such Participant. Any benefit so disclaimed shall be distributable to the person or persons (and in the proportions) to which such benefit would have been distributable if the Beneficiary who so disclaims such benefit had predeceased such Participant.

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     15.6 Minor Beneficiaries. In the event a Beneficiary has not attained the age of majority under the applicable state law, the Plan Administrator shall in his sole discretion pay such benefits to or on behalf of the minor individual or to the guardian of the person of such individual. Such payment shall constitute a full and adequate distribution, and the Plan Administrator need not see to the proper application or use of such proceeds by such recipient.

     15.7 Transitional Designation. In the event of the death of a Participant who shall not have designated a Beneficiary under this Plan, but who shall have designated a Beneficiary under the A.G. Edwards & Sons, Inc. Profit Sharing Plan effective as of December 31, 1977, the Beneficiary so designated under the A.G. Edwards & Sons, Inc. Profit Sharing Plan shall be deemed to be the Beneficiary designated under this Plan.

     15.8 Distribution of Annuity Contracts. A Beneficiary entitled to a distribution from the Plan on account of the death of a Participant may elect to receive the distribution in the form of an annuity contract.

     In the event a Beneficiary shall elect to receive distribution in the form of an annuity, at the direction of the Plan Administrator, the Trustee shall purchase a non-transferable annuity contract from an insurance company with the amount credited to the Account of such Beneficiary. Selection of such an annuity contract shall be made by the Beneficiary for whom such an annuity contract is to be purchased.

     An annuity contract is non-transferable if the owner cannot sell, assign, discount or pledge as collateral for any loan or as security for the performance of an obligation or for any other purposes his interest in the contract to any person other than the issuer thereof.

     Any annuity contract purchased by the Trustee shall satisfy all of the terms and conditions of this Plan. Such an annuity contract shall provide payment options that conform to those provided by the terms of this Plan, so that payment pursuant to the contract satisfies the terms of the Plan as if paid directly by the Plan.

     The Plan Administrator shall direct the Trustee to transfer such an annuity contract to the Beneficiary if annuity payments under the contract have commenced, or, in the case of a deferred annuity, if the contract by its terms provides that the insurance company that issued the contract will administer the notice and election provisions relating to optional forms of payment. The insurance company that issues such a contract is hereby designated as the Plan Administrator with respect to administering notice and election requirements of a deferred annuity contract.

     Neither the Trustee, the Plan Administrator nor any Employer shall be responsible for the failure on the part of an insurance company issuing such an annuity contract to pay annuities if and when the payments shall become due and payable. When the Trustee shall have purchased an annuity contract for a Beneficiary and distributed the contract to such person, the Beneficiary shall have no further right or claim to receive payments from the Trust Fund to the extent that the balance in his account was applied to the purchase of an annuity contract.

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ARTICLE XVI – LATEST TIME OF PAYMENT

     This Article does not contain the general rules of the Plan governing the time and form of distributions. In particular, this Article in and of itself does not give any right to a Participant to defer distributions beyond the time of distribution provided in the preceding Articles. The provisions of this Article, which are included to comply with the Code, in certain limited circumstances as specifically provided in this Article, merely may accelerate the time of distribution provided by the preceding Articles.

     16.1 60 Day Rule. Unless the Participant elects otherwise in writing, the latest date on which payment of benefits must commence shall be the sixtieth (60^th) day after the close of the Plan Year in which the latest of the following events occurs:

(A)	The Participant attains Normal Retirement Age;
(B)	The Participant incurs a Termination of Employment; or
(C)	Ten (10) years have elapsed from the time the Participant commenced participation in the Plan.

     If payment in full is not feasible within the time limits prescribed by the preceding paragraph, the Plan Administration may direct interim payments from Accounts of such Participant.

     16.2 Latest Time for Payment. The following provisions of this Section 16.2 will apply for purposes of determining required minimum distributions under Section 401(a)(9) of the Code. The requirements of this section will take precedence over any inconsistent provisions of the Plan. All distributions required under this section will be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Code. Notwithstanding the other provisions of this section, distributions may be made under a designation made before January 1, 1984 in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.

(A)	Required Beginning Date. The Participant’s entire interest will be distributed, or will begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.
(B)	Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:
	(1)	If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and if the Participant or Beneficiary elects the life expectancy rule in

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	accordance with Section 16.2(G), then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age seventy and one-half (70½), if later.
(2)	If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, and if the Participant or Beneficiary elects the life expectancy rule in accordance with Section 16.2(G), then distributions to the designated Beneficiary will begin by December 31st of the calendar year immediately following the calendar year in which the Participant died.
(3)	If there is no designated Beneficiary as of September 30th of the year following the year of the Participant’s death, or if the Participant or Beneficiary does not elect the life expectancy rule in accordance with Section 16.2(G), the Participant’s entire interest will be distributed by December 31st of the calendar year containing the fifth (5th) anniversary of the Participant’s death.
(4)	If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 16.2(B), other than Section 16.2(B)(1), will apply as if the surviving spouse were the Participant.

For purposes of Sections 16.2(B), 16.2(D) and 16.2(E), unless Section 16.2(B)(4) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If Section 16.2(B)(4) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 16.2(B)(1). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 16.2(B)(1)), the date distributions are considered to begin is the date distributions actually commence.

Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with Sections 16.2(C), 16.2(D) and 16.2(E). If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations.

(C)	Required Minimum Distributions During Participant’s Lifetime. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:
	(1)	the quotient obtained by dividing the Participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in Treas. Reg.

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	§1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or
(2)	if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s account balance by the number in the Joint and Last Survivor Table set forth in Treas. Reg. §1.401(a)(9)-9, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.
Required minimum distributions will be determined under this Section 16.2(C) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

(D)	Required Minimum Distributions After Participant’s Death on or After Date Distributions Begin.
	(1)	Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:
		(a)	The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.
		(b)	If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one (1) for each subsequent calendar year.
		(c)	If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one (1) for each subsequent year.
	(2)	No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30th of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the

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		quotient obtained by dividing the Participant’s account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one (1) for each subsequent year.
(E)	Required Minimum Distributions After Participant’s Death Before Date Distributions Begin.
	(1)	Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, and if the Participant or Beneficiary elects the life expectancy rule in accordance with Section 16.2(G), the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in Section 16.2(D). If the Participant dies before the date distributions begin and there is a designated Beneficiary, and if neither the Participant nor Beneficiary elects the life expectancy rule in accordance with Section 16.2(G), distribution of the Participant’s entire interest will be completed by December 31st of the calendar year containing the fifth (5th) anniversary of the Participant’s death.
	(2)	No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30th of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31st of the calendar year containing the fifth anniversary of the Participant’s death.
	(3)	Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 16.2(B)(1), this Section 16.2(E)(3) will apply as if the surviving spouse were the Participant.
(F)	Definitions.
	(1)	Designated Beneficiary: The individual who is designated as the Beneficiary under Section 15.3 of the Plan and is the designated Beneficiary under Section 401(a)(9) of the Code and Treas. Reg. §1.401(a)(9)-1, Q&A-4.
	(2)	Distribution calendar year: A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 16.2(B). The required minimum distribution for the Participant’s first distribution calendar

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		year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31st of that distribution calendar year.
	(3)	Life expectancy: Life expectancy as computed by use of the Single Life Table in Treas. Reg. §1.401(a)(9)-9.
	(4)	Participant’s account balance: The Participant’s account balance as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.
	(5)	Required Beginning Date: April 1 of the calendar year following the later of (a) the calendar year in which the Participant attains seventy and one-half (70½) years of age; and (b) if the Participant is not a five percent (5%) owner, as defined in Section 416(i) of the Code, the calendar year in which the Participant incurs a Termination of Employment.
(G)	Election of Life Expectancy Rule. If the Plan permits distribution of death benefits in the form of an annuity contract or installment payments over a period longer than five years, a Participant or Beneficiary who has elected distribution in the form of an annuity contract or installment payments, may elect the life expectancy rule in Sections 16.2(B) and 16.2(E) to apply to distributions after the death of a Participant who has a designated Beneficiary. The election must be made no later than the earlier of September 30th of the calendar year in which distribution would be required to begin under Section 16.2(B), or by September 30th of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death.

ARTICLE XVII – CLAIMS AND REVIEW PROCEDURE

     17.1 Claims for Benefits. A Participant or Beneficiary who believes that he is entitled to benefits under the Plan may file a written request for such benefits with the Plan Administrator setting forth his claim.

     17.2 Written Denials of Claims. Within ninety (90) days after receipt of the request, the Plan Administrator shall provide to every claimant who is denied a claim for benefits, written notice setting forth in a manner calculated to be understood by the claimant:

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(A)	The specific reason or reasons for the denial;
(B)	Specific reference to pertinent Plan provisions on which the denial is based;
(C)	A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
(D)	An explanation of the claim review procedure and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.
	If special circumstances require an extension of time beyond the initial ninety (90) day period, prior to the end of such initial ninety (90) day period the Plan Administrator shall provide to the claimant written notice of the extension, the special circumstances requiring the extension, and the date by which the Plan Administrator expects to render the final decision. In no event shall such extension exceed a period of ninety (90) days from the end of the initial ninety (90) day period. If the Plan Administrator does not furnish a response within the initial ninety (90) day or extended period, the claimant shall be deemed to have exhausted the claims and appeals process set forth in this Article XV and is entitled to file suit in state or federal court.

     17.3 Appeal of Denial. If a claimant receives notice from the Plan Administrator that a claim for benefits has been denied in whole or in part, the claimant or the claimant’s duly authorized representative may, within sixty (60) days after receipt of notice of such denial:

(A)	Make written application to the Plan Administrator for a review of the decision. Such application shall be made on a form specified by the Plan Administrator and submitted with such documentation as the Plan Administrator shall prescribe;
(B)	Review, upon request and free of charge, all documents, records and other information in the possession of the Plan Administrator which are relevant to the claim; and
(C)	Submit written comments, documents, records and other information relating to the claim.

     If the claimant or his duly authorized representative fails to file such appeal within sixty (60) days after the claim is denied, the claimant shall be deemed to have waived any right to appeal the denial of the claim.

     If review of a decision is requested, such review shall be made by the Plan Administrator who shall review all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

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     The Plan Administrator shall furnish a written decision on review not later than sixty (60) days after the notice of appeal is filed by the claimant. If special circumstances require an extension of time beyond the initial sixty (60) day period, prior to the end of such initial sixty (60) day period the Plan Administrator shall provide to the claimant, written notice of the extension, the special circumstances requiring the extension, and the date by which the Plan Administrator expects to render the final decision. In no event shall such extension exceed a period of sixty (60) days from the end of the initial sixty (60) day period.

     Any denial shall inform the claimant of the specific reason or reasons for the denial, refer to the specific Plan provisions on which the denial is based, state that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim, and state that the claimant has a right to bring a civil action under Section 502(a) of ERISA.

ARTICLE XVIII – ADMINISTRATION

     18.1 Plan Administrator. The Plan shall be administered by a Plan Administrator. The Plan Administrator may participate in benefits under the Plan; provided he is otherwise eligible to do so.

     18.2 Allocation of Fiduciary Duties. The Plan Administrator shall have the duty and power to administer this Plan in all its details, except the duty and power to invest and reinvest Trust assets, which is assigned to the Trustee under Article XIX. The duties and powers of the Plan Administrator shall include, but not be limited to, the following:

(A)	To establish and maintain a separate account for each Participant and allocate benefits thereto in accordance with Article VII;
(B)	To keep accurate and detailed records of the administration of the Plan, which records shall be open to inspection by the Employer at all reasonable times, and, with respect to records pertaining to his accounts, open to inspection by each Participant;
(C)	To interpret the Plan provisions and to decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan;
(D)	To authorize the payment of benefits;
(E)	To establish and enforce such rules, regulations and procedures as it shall deem necessary or proper for the efficient administration of the Plan;
(F)	To furnish the reports and Plan descriptions to the Secretary of Labor and to each Participant as required by Part I of Title I of the Employee Retirement Income Security Act of 1974; and

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(G) To delegate to any agents such duties and powers, both ministerial and discretionary as it deems appropriate by an instrument in writing which specifies which such duties are so delegated and to whom each duty is so delegated.

     18.3 Furnish Information. Each Participant shall furnish the Plan Administrator any requested information, as needed to administer the Plan. The Employers and the Trustee also shall furnish the Plan Administrator with the information needed to administer the Plan.

     18.4 Appointment of Administrators. The Sponsor shall appoint a Plan Administrator to serve at its pleasure. The Plan Administrator may be a corporation (including the Employer) or corporations, an individual or individuals or any combination of the above. One such person may serve as Plan Administrator. The Sponsor may change such appointments from time to time provided that such changes are published to the extent of enabling interested parties to ascertain the person or persons responsible for operating the Plan. In absence of such an appointment, the Compensation Committee of A.G. Edwards & Sons, Inc. shall serve as Plan Administrator provided that, if such Compensation Committee serves as Plan Administrator, it may designate specified individuals or other persons to carry out specified fiduciary responsibilities under the Plan in such a manner and to such an extent that Employees and other interested parties are able to ascertain the person or persons responsible for operating the Plan.

     18.5 Compensation of Fiduciaries. Any Trustee or Plan Administrator may receive reasonable compensation for services rendered on behalf of the Plan or Trust.

     18.6 Expenses of Administration. All expenses of administering the Plan that are owed to third parties, such as compensation to a Trustee and compensation to a third party recordkeeper for plan accounting and reporting services, as may be determined from time to time by agreement between the Sponsor and such a third party, and all other expenses of administration and taxes of this Plan including the compensation of any employee or counsel employed by the Trustee or the Employers, shall be paid out of the Trust and charged ratably to Participant’s accounts, unless voluntarily paid by the Employer, except expenses incurred in connection with the purchase or sale of investments shall be charged against Accounts in accordance with Section 8.7.

     18.7 Delegation of Authority. The Plan Administrator may delegate to an agent or agents any or all of the duties and responsibilities assigned by the Plan to the Plan Administrator. Such a delegation shall be made by an instrument in writing that specifies which duties and powers are so delegated and to whom each such duty or power is so delegated.

     In the event the Plan Administrator shall consist of more than one person, the Plan Administrator may appoint one or more of the persons acting as Plan Administrator to carry out any particular duty or duties or to execute any and all documents on behalf of the Plan Administrator. Any document so executed shall have the same effect as though executed by all such persons. Such appointment shall be made by an instrument in writing that specifies which duties and powers are so allocated and to whom each such duty or power is so allocated.

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     18.8 Standard of Review. The Plan Administrator shall perform its duties as the Plan Administrator in its sole discretion shall determine is appropriate in light of the reason and purpose for which the Plan is established and maintained. In particular, the interpretation of all plan provisions, and the determination of whether a Participant or Beneficiary is entitled to any benefit pursuant to the terms of the Plan, shall be exercised by the Plan Administrator in its sole discretion. Any construction of the terms of the Plan for which there is a rational basis shall be final and legally binding on all parties.

     Any interpretation of the Plan or other action of the Plan Administrator made in its sole discretion shall be subject to review only if such an interpretation or other action is without a rational basis. Any review of a final decision or action of the Plan Administrator shall be based only on such evidence presented to or considered by the Plan Administrator at the time it made the decision that is the subject of the review. Any Employer that adopts and maintains this Plan, and any Employee who performs services for an Employer that are or may be compensated for in part by benefits payable pursuant to this Plan, hereby consents to actions of the Plan Administrator made in its sole discretion and agrees to the narrow standard of review prescribed in this section.

ARTICLE XIX – TRUST AGREEMENT

     19.1 Trust Agreement. The funds accumulated under the Plan shall be held in trust for the exclusive benefit of the Participants of the Plan and their Beneficiaries under a trust agreement or agreements between the Sponsor and one or more Trustees appointed by the Sponsor which separate agreement or agreements together constitute one Trust Agreement and which form a part of the Plan.

ARTICLE XX – AMENDMENT AND TERMINATION

     20.1 Amendment. The Sponsor reserves the right at any time and from time to time to modify or amend the Plan in whole or in part by adopting a written amendment; provided that, no such modification or amendment shall operate to modify, amend or diminish any rights of Participants accrued to the date of such modification or amendment, and, further, that no amendment shall increase or materially change the duties of the Trustee without the specific agreement of the Trustee.

     20.2 Termination. The Sponsor reserves the right at any time to terminate the Plan in its entirety by delivering to the Trustee a copy of the notice of termination. All rights shall vest as of the effective date of the termination or a complete discontinuance of contributions by the Employers, and there shall be no forfeitures thereafter. In the event of a partial termination, all rights to benefits with respect to which the Plan terminated shall be fully vested and nonforfeitable as of the date of such partial termination.

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ARTICLE XXI – MISCELLANEOUS

     21.1 Anti-Assignation. The payments, benefits or interest provided for under the Plan shall not be subject to any claim of any creditor of any Participant in law or in equity and shall not be subject to attachment, garnishment, execution or other legal process by any such creditor; nor shall the Participant have any right to assign, transfer, encumber, anticipate or otherwise dispose of any such payments, benefits or interest.

	Notwithstanding anything in this section to the contrary, the Administrator may:
(A)	Comply with a “qualified domestic relations order,” as defined in Section 414(p) of the Code, to the extent it does not alter the amount or form of benefit specified under the Plan except as required by law; and
(B)	Surrender to the government of the United States of America any portion of the Trust Fund which is subject to a federal tax levy made pursuant to Section 6331 of the Code.

     If any portion of the Trust Fund which is attributable to the benefits, rights or interest of any Participant is transferred to any other entity pursuant to subsection (A) or (B) to satisfy a debt or other obligation of such Participant, the amount credited to the account of such Participant shall be reduced by the amount so transferred.

     21.2 Rights of Employees. Neither the action of an Employer in establishing the Plan, nor any action taken by an Employer or the Trustee nor any provision of the Plan, shall be construed as giving to any Employee the right to be retained in its employ, or the right to any payments other than those expressly provided for in the Plan to be paid from the Fund. Each Employer expressly reserves the right at any time to dismiss any Employee without any liability for any claim against the Employer or against the Fund other than with respect to the benefits provided for by the Plan.

     21.3 Source of Benefits. All benefits to be paid under the Plan shall be paid solely out of the Fund, and the Employers assume no liability or responsibility therefor.

     21.4 Actions by Corporation. Whenever under the terms of this Plan a corporation is permitted or required to take some action, such action may be taken by an instrument in writing executed by the President of the corporation, or by any other method by an officer of the corporation as duly authorized by the Board of Directors of the corporation.

     21.5 Rules of Construction. The terms and provisions of this Plan shall be construed according to the principles, and in the priority, as follows: first, in accordance with the meaning under, and which will bring the Plan into conformity with the Internal Revenue Code of 1986, as amended, and the Employee Retirement Income Security Act of 1974; and secondly, in accordance with the laws of the State of Missouri. The Plan shall be deemed to contain the provisions necessary to comply with such laws. If any provision of this Plan shall be held illegal

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or invalid, the remaining provisions of this Plan shall be construed as if such provision had never been included. Wherever applicable, the masculine pronoun as used herein shall mean the feminine, and the singular the plural.

     21.6 Payments to Legal Incompetents. In the event any person entitled to receive any distribution hereunder of a benefit or installment thereof shall, in the opinion of the Plan Administrator, be legally incapable of giving a valid receipt and discharge for distribution of such benefit, and another person or institution is then maintaining or has custody of such person, and no guardian or other representative of the estate of such person shall have been duly appointed, then such benefit or installment thereof may, at the option of the Plan Administrator, be distributed to such other person or institution. Distribution to such other person or institution shall be in complete discharge of liability under the Plan for the distribution of such benefit or installment thereof and there shall be no responsibility on the Trustee, any Employer, or anyone else to see to the application of such benefit or installment thereof distributed to such person or institution.

     21.7 Plan Mergers. In the event of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Participant in the Plan shall be entitled to a benefit immediately after the merger, consolidation, or transfer if the Plan then terminated which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had then been terminated.

     21.8 Missing Participants. If the Plan Administrator is unable to make a payment to a Participant or a Beneficiary because the whereabouts or the identity of the Participant or the Beneficiary cannot be ascertained by mailing to the last known address shown on the records of the Employer or the Trustee, the Plan Administrator shall dispose of the benefit otherwise payable to the Participant as follows:

(A)

If the amount payable to the Participant or Beneficiary does not exceed the sum of One Thousand Dollars ($1,000), the benefit of such Participant shall be forfeited as of the last day of the Plan Year in which the Plan Administrator determines that the identity or location of such person cannot be ascertained, and shall be disposed of in accordance with Section 11.2; and

(B)

If the amount payable to the Participant or Beneficiary exceeds the sum of One Thousand Dollars ($1,000), the amount payable to the Participant or Beneficiary shall be invested in the existing investments and held until the identity or the location of the Participant or the Beneficiary is ascertained by the Plan Administrator; provided that, if the identity or location of the Participant or Beneficiary is not determined before the end of the Plan Year in which the Participant would have attained sixty-five (65) years of age, the amount credited to the account of the Participant at the end of such year shall be forfeited as of the end of such year and shall be disposed of in accordance with Section 11.2.

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     In the event a Participant or Beneficiary whose benefit was forfeited pursuant to the provisions of this section shall later validly claim the benefits so forfeited, the amount so forfeited shall be paid to such person by the Employer.

21.9 Payments Under a Qualified Domestic Relations Order.

(A)	Early Payment Option. In addition to the payment options otherwise available in the Plan, pursuant to a domestic relations order, distribution of all or any portion of the account balance of a Participant may be paid to an Alternate Payee (as defined in Section 414(p) of the Code) in an amount specified in such domestic relations order in a lump-sum payment as soon as practical after the Plan Administrator determines that the domestic relations order is a Qualified Domestic Relations Order (as defined in Section 414(p) of the Code) (a “QDRO”); provided that, the full amount allocated to the Firm Account of the Participant is fully vested and not subject to forfeiture by the Participant in any event.
	In accordance with the QDRO, the Plan Administrator shall make a lump-sum payment to the Alternate Payee in the amount specified in the QDRO to the extent that the Participant named in the QDRO has assets allocated to his account; provided that, the Alternate Payee consents to such distribution.
(B)	Delayed Payment: Segregated Accounts. To the extent that the QDRO or the Plan requires payment of a portion of the account of a Participant to an Alternate Payee at a later time, such amount shall be segregated into a separate account for such Alternate Payee and such amount shall be invested as directed by the Alternate Payee in accordance with Article VIII.
(C)	Allocation of Basis and Risk of Forfeiture. If the Alternate Payee is the spouse or former spouse of the Participant, the Participant’s basis in his account, if any, shall be apportioned between the Participant and the Alternate Payee based on the percentage of the Participant’s account to which each is entitled pursuant to the QDRO. If the Alternate Payee is not the spouse or former spouse of the Participant, the Participant’s basis in his account, if any, need not be apportioned.
(D)	Reduction of Participant’s Accounts. With respect to any amount paid to an Alternate Payee pursuant to Section 22.9(A) or any amount allocated to a segregated account for an Alternate Payee pursuant to Section 22.9(B), the Participant’s accounts shall be debited so that the risk of forfeiture, if any, and the Participant’s basis in his account, if any, shall be apportioned between the Participant and the Alternate Payee based on the percentage of the Participant’s account to which each is entitled pursuant to the QDRO. Alternately, if the Alternate Payee is not the spouse or former spouse of the Participant, the Participant may direct the Plan Administrator as to which of his accounts, if any, that are fully vested and not subject to forfeiture in any event shall be debited.

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(E)	Liquidation of Investments. The Participant’s investments in the mutual funds and the A.G. Edwards Stock fund shall be liquidated pro rata, and the Treasury Zeros will be liquidated only if there is an insufficient amount in the mutual funds and the A.G. Edwards Stock fund.
(F)	Suspension Penalties. Notwithstanding anything to the contrary in the Plan, a Participant who is actively employed at the time a QDRO payment or allocation is made on his behalf, shall not be subject to any suspension penalties merely because of such early QDRO payment or allocation.

     21.10 Adoption of Plan by an Affiliate. With the consent of the Sponsor, any Affiliate legally eligible to do so may adopt this Plan and thereby become an Employer and become bound as an Employer by all of the terms of the Plan as herein provided with respect to such of its Employees who are eligible to participate in this Plan. Any such Affiliate may adopt the Plan by executing and filing with the Sponsor an adoption agreement. An Affiliate will be deemed to have adopted the Plan by making contributions to the Plan.

     21.11 Acceptance of Transfers. The Plan Administrator may accept, but is not required to accept, a transfer on behalf of a Participant from the trustee of a plan which meets the requirements of Section 401(a). For purposes of this section a rollover contribution is not considered a transfer.

     In the event any optional form of benefit under this Plan permits a distribution prior to the Participant’s retirement, death, disability, or Termination of Employment, and prior to plan termination, the optional form of benefit is not available with respect to benefits attributable to assets (including any post-transaction earnings thereon) that are transferred to this Plan from a money purchase pension plan qualified under Section 401(a) of the Code (other than any portion of those assets attributable to voluntary employee contributions).

ARTICLE XXII – TOP-HEAVY REQUIREMENTS

     22.1 Top-Heavy Determination. For purposes of this Article, the Plan will be determined to be Top-Heavy for a Plan Year if, as of the Determination Date, the aggregate value of the accounts of Key Employees under the Plan exceeds sixty percent (60%) of the aggregate value of the accounts of all Participants under the Plan as determined in accordance with Section 416(g) of the Code.

     Payments made within the five (5) Plan Years immediately preceding such Plan Year shall be added to the account balances or the present value of the cumulative accrued benefits with respect to a defined benefit plan in determining whether this Plan is Top-Heavy. The preceding sentence shall also apply to payments from a terminated plan which would have been included in this Plan if it had not been terminated. The account balance or present value of the cumulative accrued benefits with respect to a defined benefit plan of a Participant who is not a Key Employee with respect to the Plan Year but who was a Key Employee in a prior year shall

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be disregarded. The account balance or present value of the cumulative accrued benefits with respect to a defined benefit plan of a Participant who has not performed services for an Employer during the five Plan Years immediately preceding such Plan Year shall be disregarded.

     All plans qualified under Section 401(a) of the Code and adopted by any member of the Controlled Group shall be aggregated and treated as one plan (the “Plan”) for purposes of this Article.

     22.2 Determination Date. The Determination Date, with respect to any Plan Year, shall be the last day of the immediately preceding Plan Year.

     22.3 Valuation of Fund as of Determination Date. The value of the Fund, and of the respective Participant accounts which together constitute the Fund, shall be determined as of the Determination Date in accordance with Article IX.

     22.4 Key Employee. “Key Employee” means an Employee, former employee or Employee’s Beneficiary who, at any time during the Plan Year or any of the four preceding Plan Years, is:

(A)	An officer of an Employer having an annual compensation greater than $135,000 (as adjusted under Section 416(i)(1) of the Code for any such Plan Year;
(B)	One of the ten (10) Employees having annual compensation from an Employer of more than the limitation in effect under Section 415(c)(1)(A) of the Code and owning (or considered as owning within the meaning of Section 318 of the Code) the largest interests in the Employer;
(C)	A five percent (5%) owner of an Employer; or

A one percent (1%) owner of an Employer having an annual compensation from the Employer of more than One Hundred Fifty Thousand Dollars ($150,000); as defined in accordance with Section 416(i)(1) of the Code.

     22.5 Vesting Requirements. If the Plan is determined to be Top-Heavy for a Plan Year in accordance with Section 22.1, the vested percentage of the amount credited to the Firm Account of a Participant as of such Plan Year and all subsequent Plan Years in accordance with Section 10.1 and Section 10.3 shall be redetermined in accordance with the following schedule:

After Two Years of Service	20%
After Three Years of Service	40%
After Four Years of Service	60%
After Five Years of Service	100%

     22.6 Minimum Benefits. If the Plan is determined to be Top-Heavy for a Plan Year in accordance with Section 22.1, the Employers shall contribute on behalf of each Participant who

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is not a Key Employee (in addition to the Employee’s Deductible Contribution) the lesser of three percent (3%) of such Participant’s Compensation for such Plan Year and the highest percentage of Compensation allocated to the account of a Key Employee for that year (including Deductible Contributions).

     On and after January 1, 2002, Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Section 401(m) of the Code.

     22.7 EGTRRA Amendments. This section shall apply for purposes of determining whether the plan is a top-heavy plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This section amends the preceding sections of this Article.

(A)	Determination of top-heavy status.
	Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the employer having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a five percent (5%) owner of the employer, or a one percent (1%) owner of the employer having annual compensation of more than One Hundred Fifty Thousand Dollars ($150,000). For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a key employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
	The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the plan and any plan aggregated with the plan under Section 416(g)(2) of the Code during the one-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than Termination of Employment, death, or disability, this provision shall be applied by substituting “five-year period” for “one-year period.”
	The accrued benefits and accounts of any individual who has not performed services for the employer during the one-year period ending on the determination date shall not be taken into account.

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(B) Minimum benefits. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and the plan. The preceding sentence shall apply with respect to matching contributions under the plan or, if the plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Section 401(m) of the Code.

ARTICLE XXIII – SPECIAL ESOP PROVISIONS¹

     This Article contains provisions required to qualify the Employee Stock Ownership Plan as a plan described in Section 4975(e)(7) of the Code. So long as (a) the Company does not extend credit to the Plan, (b) there is no sale of employer securities to the Plan in a tax-free rollover transaction described in Section 1042 of the Code (which does not apply to publicly-traded stock), and (c) Participants are entitled to receive distribution of their ESOP accounts as soon as administratively feasible after termination of employment, the provisions of this Article will not have any operative effect.

     23.1 Share Purchase Loans. At the direction of the Plan Administrator, the Trustee may from time to time enter into a loan (a “Share Purchase Loan”) for the purpose of acquiring shares of A.G. Edwards, Inc. (“Shares”) that constitute “employer securities” within the meaning of Section 409(l) of the Code or for the purpose of repaying all or any portion of any outstanding Share Purchase Loan. The terms of any Share Purchase Loan shall be subject to the conditions and restrictions set forth herein. Shares acquired with the proceeds of a Share Purchase Loan shall be credited to a “Loan Suspense Account” until released in accordance with the following section. All loans that are incurred as part of an integrated transaction shall be treated as a single Share Purchase Loan for all purposes of the Plan.

     23.2 Release from Loan Suspense Account. Subject to the following provisions of this section, for each Plan Year throughout the duration of a Share Purchase Loan, a portion of the Shares acquired with the proceeds of such Share Purchase Loan shall be withdrawn from the Loan Suspense Account and allocated to Participants’ ESOP Stock Accounts in accordance with the provisions of this Article.

     As of the last day of each Plan Year, the number of Shares that shall be released from the Loan Suspense Account shall be equal to the product of the number of Shares that are then held in the Loan Suspense Account multiplied by a fraction, the numerator of which is the amount of principal and interest paid on the related Share Purchase Loan for that Plan Year and the denominator of which is the amount of principal and interest paid or payable on the related Share Purchase Loan for that Plan Year and for all future years. For purposes of determining the denominator of the fraction described in the preceding sentence for any Plan Year, if the interest

____________________
¹ Article XVIII effective 1/1/01

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rate under the Share Purchase Loan is variable, the interest rate to be paid in future years shall be assumed to be equal to the interest rate applicable as of the last day of that Plan Year. Notwithstanding the foregoing provisions of this section, the number of Shares attributable to a Share Purchase Loan that are withdrawn from the Loan Suspense Account shall be proportionate to principal payments only, if:

(A)	Such release is consistent with the provisions of the Share Purchase Loan with respect to the release of Shares as collateral, if any, for such loan;
(B)	The Share Purchase Loan provides for annual payments of principal and interest at a cumulative rate that is not less rapid at any time than level annual payments of such amounts for ten (10) years;
(C)	Interest is disregarded for purposes of determining such release only to the extent that it would be determined to be interest under standard loan amortization tables; and
(D)	The term of the Share Purchase Loan, together with any renewal, extension or refinancing thereof, does not exceed ten (10) years.
	In the event that more than one (1) Share Purchase Loan is outstanding at any time, the number of Shares that is released from encumbrance at any time under this paragraph shall be based solely on the repayment of the Share Purchase Loan to which such Shares are attributable.

     23.3 Use of Loan Proceeds and Dividends. The proceeds of a Share Purchase Loan shall be used within a reasonable time after receipt to acquire Shares or to repay all or any portion of such Share Purchase Loan or any outstanding Share Purchase Loan. Cash dividends with respect to Shares acquired with the proceeds of a Share Purchase Loan that are not allocated to Participants’ Stock Accounts, and earnings thereon, shall, at the direction of the Plan Administrator, be used to make payments on such Share Purchase Loan. Such cash dividends, and earnings thereon, that are not applied to make payments on Share Purchase Loans in accordance with the foregoing provisions of this section shall be invested in the Company Stock Fund.

     23.4 Allocation of Shares Released From Suspense Account. Participants’ accounts shall be adjusted for dividends paid on Company Stock, as follows:

(A) Dividends Used to Repay Share Purchase Loans and Attributable to Allocated Shares - As of the last day of the Plan Year, Shares released from the Loan Suspense Account that year by reason of dividends paid with respect to Shares allocated to Participants’ Stock Accounts, if any, shall be allocated among and credited to the accounts of Participants, pro rata, according to the number of Shares held in such accounts on the date the dividends are paid. The Shares so allocated shall have a fair market value as of the date allocated equal to such dividends (the “Dividend Replacement Value”), and if the shares initially allocated in accordance with the immediately preceding sentence do not have a

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	fair market value at least equal to the Dividend Replacement Value, then additional Shares shall be allocated to Participants’ Stock Accounts until the fair market value of the total number of shares allocated under this subsection (A) equals the Dividend Replacement Value. Shares released from the Loan Suspense Account during the Plan Year by reason of the use of dividends on unallocated Shares to make payments of principal and interest on a Share Purchase Loan shall be used first for this purpose and, to the extent that additional Shares are required, Shares contributed by the Employer or acquired with employer contributions (other than employer contributions used to make payments of principal and interest on Share Purchase Loans) during such Plan Year shall be applied for such purpose. Dividends paid with respect to Shares allocated to Participants’ accounts that are used to repay a Share Purchase Loan shall be charged to the accounts pro rata, according to the number of Shares held in the accounts of such Participants on the date the dividends are paid.
(B)	Dividends Used to Repay Share Purchase Loans and Attributable to Unallocated Shares - Shares released from the Loan Suspense Account during the Plan Year by reason of the use of dividends on unallocated Shares to make payments of principal and interest on a Share Purchase Loan (reduced by any such Shares required to be allocated under subsection (A) above) shall be allocated to the accounts in proportion to the subaccounts attributable to dividends on unallocated shares, employer contributions and earnings thereon; and such subaccounts shall be debited in the same proportion.
(C)	Other Amounts Used to Repay Share Purchase Loans - Shares released from the Loan Suspense Account during the Plan Year by reason of the use of contributions and earnings thereon to make payments of principal and interest on a Share Purchase Loan (reduced by any such shares required to be allocated under subsection (A) above) shall be allocated to the Participants’ accounts in proportion to the subaccounts attributable to dividends on unallocated shares, employer contributions and earnings thereon; and such subaccounts shall be debited in the same proportion. For this purpose, Shares released from the Loan Suspense Account after the end of a Plan Year on account of payments on a Share Purchase Loan with contributions for such Plan Year, but that were made after the end of such Plan Year, shall be deemed to have been released on the last day of such Plan Year.

     23.5 Separate Accounting for Multiple Loans. The Plan Administrator shall establish recordkeeping procedures and maintain such Participant subaccounts or other records as are necessary to determine which Shares were acquired with the proceeds of each Share Purchase Loan or were acquired other than with the proceeds of a Share Purchase Loan for purposes of complying with the terms of the Plan, including its terms relating to the use of dividends on Shares, the release of Shares from the Loan Suspense Account and the distribution of Shares acquired with the proceeds of a Share Purchase Loan.

     23.6 Valuation. The fair market value of Shares and all other Plan assets shall be determined as of each valuation date. If the Shares are not readily tradable on an established

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securities market, the fair market value shall be determined by an independent appraiser within the meaning of Section 401(a)(28)(C) of the Code.

     23.7 Nonallocation Provision. Notwithstanding any other provision of this Plan, no portion of the assets of the Plan attributable to Shares acquired by the Plan in a sale to which Section 1042 of the Code applies may accrue or be allocated directly or indirectly during a Nonallocation Period to:

(A)	Any Employee who sells Shares to the Plan in a transaction to which Section 1042 of the Code applies;
(B)	Any individual who is related to such an Employee within the meaning of Section 267(b) of the Code, except as otherwise provided by Section 409(n)(3)(A) of the Code; and
(C)	Any other individual owning (either directly or indirectly) more than twenty-five percent (25%) of (i) any class of outstanding stock of the Employer, or any corporation which is a member of the same controlled group of corporations within the meaning of Section 409(l)(4) of the Code, or (ii) the total value of any class of outstanding stock of such corporation. For purposes of the preceding sentence, an individual shall be treated as twenty-five percent (25%) shareholder (1) at any time during the one (1) year period ending on the date of the sale to which Section 1042 of the Code applies or (2) on the dates as of which any Shares sold to the Plan on a transaction to which Section 1042 of the Code applies are allocated to the accounts of Participants. In the event the individual’s situation is described in number (1) of the preceding sentence, such individual shall continue to be treated as a twenty-five percent (25%) shareholder until all of the Shares acquired by the Plan in a transaction to which Section 1042 of the Code applies have been allocated. If, however, an individual first becomes a twenty-five percent (25%) shareholder at such time as described in number (2) above, such an individual shall only be treated as a twenty-five percent (25%) shareholder with respect to those Shares acquired in a transaction to which Section 1042 of the Code applies which are allocated as of the date or dates on which an individual is a twenty-five percent (25%) shareholder.
	The Nonallocation Period is the period beginning on the date of the sale and ending on the date that is ten (10) years after the later of (1) the date of the sale of the Shares to the Plan in a transaction to which Section 1042 of the Code applies, or (2) the date of the Plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such a sale.

     23.8 Latest Time of Payment for Company Stock. Any contrary provision of this Plan notwithstanding, unless a Participant elects that the special distribution provisions of this section not apply, the portion of his vested account attributable to Shares credited to his account shall be distributed no later than as follows:

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(A)	Such portion shall be paid in substantially equal periodic payments (not less frequently than annually) over a period not longer than five (5) years, or, if the value of such accounts exceeds five hundred thousand dollars ($500,000) (or such greater amount as may be in effect under Section 409(o)(1)(C)) of the Code, five (5) years plus one (1) additional year (but not more than five (5) additional years) for each one hundred thousand dollars ($100,000) (or such greater amount as may be in effect under Section 409(o)(1)(C)) of the Code or fraction thereof by which the value of such accounts exceeds five hundred thousand dollars ($500,000) (or such greater amount as may be in effect under Section 409(o)(1)(C)) of the Code.
(B)	Except as provided below, payments under (a) shall commence not later than one (1) year after the end of the following:
	(1)	In the case of a Participant whose employment terminates after he attains age sixty-five (65), or at any age by reason of Death or permanent disability, the Plan Year in which his employment terminates.
	(2)	In the case of a Participant whose employment terminates under circumstances not described in (i), the fifth (5th) Plan Year following the year in which his employment terminates, provided that, this subsection shall not apply if the Participant is reemployed before the end of such fifth (5th) Plan Year.
	Commencement prior to the date on which a Participant attains Normal Retirement Age shall be subject to the Participant’s consent in accordance with Article XIV, and, if a Participant does not consent, commencement shall occur as soon as practicable after the Participant attains age sixty-five (65).

     IN WITNESS WHEREOF, the undersigned hereby certifies that the foregoing Restatement was duly adopted by the Board of Directors of A.G. Edwards, Inc. on November 18, 2005.

By:	/s/ Douglas L. Kelly
Title:	Corporate Secretary

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FIRST AMENDMENT
A.G. EDWARDS, INC.
RETIREMENT AND PROFIT SHARING PLAN
2005 RESTATEMENT

     The A.G. Edwards, Inc. Retirement and Profit Sharing Plan (the “Plan”) originally was adopted September 30, 1967. The Plan has been amended from time to time, most recently in the form of a restated plan document dated November 18, 2005 (the “2005 Restatement”).

     A.G. Edwards, Inc., now wishes to amend the plan to provide distribution elections for Participants pursuant to the Katrina Emergency Tax Relief Act of 2005 and the Gulf Opportunity Zone Act of 2005.

     NOW THEREFORE, the Plan is hereby amended as follows:

     1. Effective November 18, 2005, a new Section, 12.4, is added to the Plan to read in its entirety as follows:

     12.4 KETRA Withdrawal Option. A Participant who is an Employee may, upon notice received by the Plan Administrator or its delegate, withdraw aggregate distributions up to $100,000 from August 25, 2005 until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Katrina Emergency Tax Relief Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Katrina and whose principal place of abode on August 28, 2005 was in the Hurricane Katrina disaster area.

     2. Effective November 18, 2005, a new Section, 13.2, is added to the Plan to read in its entirety as follows:

     13.2 KETRA Withdrawal Option. In the event a Participant shall incur a Termination of Employment under circumstances such that the Participant is not entitled to receive payment of his benefits under the Plan immediately upon such Termination of Employment, such Participant may, upon notice in a manner suitable to the Plan Administrator, withdraw aggregate distributions up to $100,000 from August 25, 2005 until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Katrina Emergency Tax Relief Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Katrina and whose principal place of abode on August 25, 2005 was in the Hurricane Katrina disaster area.

     3. Effective February 23, 2006, a new Section, 12.5, is added to the Plan to read in its entirety as follows:

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     12.5 Gulf Opportunity Zone Act Withdrawal Option. A Participant who is an Employee may, upon notice received by the Plan Administrator or its delegate, withdraw aggregate distributions up to $100,000 from September 23, 2005 until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Gulf Opportunity Zone Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Rita and whose principal place of abode on September 23, 2005 was in the Hurricane Rita disaster area.

A Participant who is an Employee may, upon notice received by the Plan Administrator or its delegate, withdraw aggregate distributions up to $100,000 from October 23, 2005 until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Gulf Opportunity Zone Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Wilma and whose principal place of abode on October 23, 2005 was in the Hurricane Wilma disaster area.

     4. Effective November 18, 2005, a new Section, 13.3, is added to the Plan to read in its entirety as follows:

     13.3 Gulf Opportunity Zone Withdrawal Option. In the event a Participant shall incur a Termination of Employment under circumstances such that the Participant is not entitled to receive payment of his benefits under the Plan immediately upon such Termination of Employment, such Participant may, upon notice in a manner suitable to the Plan Administrator, withdraw aggregate distributions up to $100,000 from September 23, until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Gulf Opportunity Zone Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Rita and whose principal place of abode on September 23, 2005 was in the Hurricane Rita disaster area.

In the event a Participant shall incur a Termination of Employment under circumstances such that the Participant is not entitled to receive payment of his benefits under the Plan immediately upon such Termination of Employment, such Participant may, upon notice in a manner suitable to the Plan Administrator, withdraw aggregate distributions up to $100,000 from October 23, until December 31, 2006 of employee contributions and vested firm contributions pursuant to the Gulf Opportunity Zone Act of 2005 that allows distributions to an individual who has sustained an economic loss from Hurricane Wilma and whose principal place of abode on October 23, 2005 was in the Hurricane Wilma disaster area.

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     IN WITNESS WHEREOF, the undersigned as Secretary of A.G. Edwards, Inc. hereby certifies that this First Amendment was duly adopted by A.G. Edwards, Inc.

By:	/s/ Douglas L. Kelly
Title:	Corporate Secretary

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SECOND AMENDMENT
A.G. EDWARDS, INC.
EXCESS PROFIT SHARING
DEFERRED COMPENSATION PLAN
2002 RESTATEMENT

     The A.G. Edwards, Inc. Excess Profit Sharing Deferred Compensation Plan (the “Plan”) was originally effective beginning with the 1983 calendar year. The Plan has been amended from time to time, most recently in the form of a restated plan document dated August 22, 2002 (the “2002 Restatement”) and a First Amendment to such Restatement.

     A.G. Edwards, Inc. now wishes to amend the Plan.

     NOW THEREFORE, the Plan is hereby amended as follows:

     1. The first paragraph of existing Paragraph 6 is restated as follows:

     Plan Year Account Return Options – Post 1986. On and after June 1, 2000, participants may base the return of a post-1986 Plan Year Account on the performance of one or a combination of securities (the “Funds”) designated from time to time by the Investment Committee. Participants will have no ownership interest in the Funds, but their Plan Year Account balance shall increase or decrease based on the performance of the designated Fund(s). The Funds’ performance will be determined by industry acceptable performance measurement standards as determined by the Investment Committee. Effective December 26, 2001, the broker call rate is eliminated as a basis for determining the return for any unvested Plan Year Account.

     The Investment Committee in its sole discretion may from time to time add or delete Funds or other return options from the list of Funds or other return options which participants may base the return for a Plan Year Account.

     2. The following paragraph is added as the second to last paragraph of existing Paragraph 9:

     Vesting After Age 65. The full amount credited to the B Account of the participant shall become fully vested on December 31 of the year in which the participant attains sixty-five (65) years of age and all subsequent amounts credited to the B Account of the participant shall vest on December 31 of the year awarded in which the amount is credited to the B Account.

     3. The last paragraph of Paragraph 9 is restated as follows:

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     Accelerated Vesting at Normal Retirement. Upon the Termination of Employment of the participant on or after the participant attains age sixty-five (65) years of age, the unvested balance of the B Account of the participant shall become fully vested upon the first anniversary of such Termination of Employment regardless of the number of years of service of the participant at such time. In the event a participant who so retires subsequently engages in competition, as defined in Paragraph 23 of this Plan, the B Account balance of the participant that is not fully vested at the time the participant first so engages in competition shall be forfeited, unless the participant is rehired by the Company on or before the first anniversary of his or her retirement date. The balance credited to the B Account of a participant that becomes fully vested after the participant so retires shall (so long as the participant is not rehired) be paid as such time or times provided below as if the participant had incurred a Termination of Employment on the day the B Account becomes fully vested.

4. Change the heading of existing Paragraph 11 to read: Payment of A Accounts -- Pre-1999 Plan Years.

5. Add Paragraph 12 as follows and renumber remaining Paragraphs as applicable:

Payment of A Accounts – Post 1998 Plan Years.

     Normal Time of Payment. Benefits payable under this Plan attributable to a Plan Year A Account shall become payable upon vesting and paid as soon as administratively practical after such time; provided that Benefits for a Plan year of a participant who incurs a Termination of Employment after attaining sixty-five (65) years of age shall become payable one (1) year after the Termination of Employment. Subject to the deferral election provisions below, such benefits shall be paid to the participant in one-lump sum payment as soon as practical after such time.

     Upon Termination of Employment of a participant after the participant attains age fifty-five (55); or after the combination of full years of age plus full years of service of the participant exceeds 70, but before the participant attains sixty-five (65) years of age (“early retirement”), the balance credited to a Plan Year A Account of the participant that becomes fully vested after the participant takes early retirement shall (so long as the participant is not rehired) become payable upon vesting and paid as soon as administratively practical after such time.

     General Deferral Election. A participant may elect to defer payment of a Plan Year A Account balance in a lump sum payment for a period of at least five (5) years from the normal time of payment. Such an election shall be made no later than twelve (12) months before the normal time of payment. A participant

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may again elect a further deferred payment date that is at least five years later than the previously scheduled payment date. Such a subsequent election also shall be made no later than twelve (12) months before the previously scheduled payment date.

     Election Procedures. An election to defer a benefit pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election. A participant may elect a payment with respect to each Plan Year A Account independently of any other Plan Year A Account.

     A payment scheduled to be made after the end of a Plan Year shall be made as soon as administratively practicable after the end of the year.

     Notwithstanding any of the payment provisions noted in this Paragraph, a participant will receive payment of all vested monies the earlier of 1) 5 years following termination of employment; or 2) his or her scheduled fixed payment date.

6. Existing Paragraph 12 is restated as follows:

13. Payment of B Accounts.

     Normal Time of Payment. The vested portion of the B Account shall become payable on the date such portion becomes vested in accordance with Paragraph 9 or 10, whichever is applicable, and shall be paid in a lump sum payment as soon as administratively practicable after such time.

     Age 65 Deferral Election. Provided the participant is employed by the Company, the participant may elect to defer payment of his or her B Account balance in a lump sum payment for a period of at least five (5) years from the normal time of payment. Such an election shall be made no later than twelve (12) months prior to the normal time of payment.

     Election Procedures. An election to defer pursuant to this Paragraph must be delivered to the Plan Administrator at such time and in such form and manner as is acceptable to the Plan Administrator. An election shall be irrevocable after the deadline for making such election.

     Notwithstanding any of the payment provisions noted in this Paragraph, a participant will receive payment of all vested monies the earlier of 1) 5 years following termination of employment; or 2) his or her scheduled fixed payment date.

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7. The first paragraph of existing Paragraph 14 is restated as follows:

     Payment Upon Death. In the event of the death of a participant, the entire balance credited to all Accounts of the participant at the time of the death of the participant shall be paid to the beneficiary in a single lump sum as soon as administratively practical after the death of the participant as determined by the Plan Administrator in its sole discretion.

8. The following is added as the second paragraph to existing Paragraph 16:

     The Plan Administrator may adopt policies and procedures necessary or advisable to implement the Treasury Department’s temporary regulations relating to the American Jobs Creation Act of 2004 (the “2004 Act”). The Executive Committee of A.G. Edwards, Inc. may approve any Plan amendments necessary or advisable to implement such temporary regulations of the 2004 Act.

9. Add Paragraph 19 as follows:

     Investment Committee. The Plan Administrator shall appoint an Investment Committee to serve at its pleasure. The members of the Investment Committee may be a corporation (including the Sponsor), one or more individuals or any combination of the above. The Plan Administrator may change such appointments from time to time provided that such changes are published to the extent of enabling interested parties to ascertain the person or persons responsible for operating the Plan.

     In the absence of such an appointment, the Compensation Committee of A.G. Edwards & Sons, Inc. shall serve as the Investment Committee.

     Any member serving on the Investment Committee may, but need not, be an employee, and may, but need not, be a participant. Any member shall serve, in the case of natural persons until his death, resignation or removal and in the case of a corporation until its liquidation, resignation or removal. The Compensation Committee of A.G. Edwards & Sons, Inc. in its sole discretion, may remove any member of the Investment Committee at any time. A member serving on the Investment Committee may resign by delivering a written resignation to the Compensation Committee of A.G. Edwards & Sons, Inc.

     All resolutions and other actions of the Investment Committee may be adopted and effected by a majority of a quorum of the Investment Committee at the time of such action. A quorum of the Investment Committee shall be comprised of no fewer than fifty percent (50%) of the members then serving. An

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action of the Investment Committee also shall be valid if concurred in by unanimous written consent in lieu of a meeting. A member may participant in a meeting by means of a conference telephone or similar communications equipment.

     The Investment Committee may appoint one or more of its members to carry out any particular duty or duties or to execute any and all documents. Any documents so executed shall have the same effect as if executed by all such persons. Such appointment shall be made by an instrument in writing that specifies which duties and powers are so allocated and to whom each such duty or power is so allocated.

     IN WITNESS WHEREOF, the undersigned as Secretary of A.G. Edwards, Inc. hereby certifies that this Second Amendment was duly adopted by A.G. Edwards, Inc.

By:	/s/ Douglas L. Kelly
Title:	Corporate Secretary

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EX-21

EXHIBIT 21

A.G. EDWARDS, INC.

REGISTRANT’S SUBSIDIARIES

     The following listing includes the registrant’s directly-owned subsidiaries and indirectly-owned subsidiaries (certain subsidiaries that are not significant are omitted from the listing), all of which are included in the consolidated financial statements:

	State of
	Incorporation/
Name of Company	Organization	Subsidiary of
A.G. Edwards & Sons, Inc.	Delaware	Registrant
A.G. Edwards Technology Group, Inc.	Missouri	A.G. Edwards & Sons, Inc.
A.G. Edwards Hedging Services, Inc.	Nevada	Registrant
A.G. Edwards Trust Company FSB	Federal Charter	Registrant
A.G.E. Properties, Inc.	Missouri	Registrant
AGE Investments, Inc.	Delaware	Registrant
Beaumont Insurance Company	Vermont	AGE Investments, Inc.
A.G. Edwards Capital, Inc.	Delaware	Registrant
AGE Capital Holding, Inc.	Delaware	Registrant
AGE International, Inc.	Delaware	Registrant
A.G. Edwards & Sons (UK) Limited	United Kingdom	AGE International, Inc.
Gallatin Asset Management, Inc.	Delaware	Registrant

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos. 333-127719; 333-127718; 333-126234; 333-98669, 333-87507, 33-61949, 33-52786, 33-36609, and 33-23837 of A.G. Edwards, Inc. on Form S-8 of our reports dated May 2, 2006, relating to the consolidated financial statements and financial statement schedule of A.G. Edwards, Inc. and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph related to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”) and management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of A.G. Edwards, Inc. for the year ended February 28, 2006.

St. Louis, Missouri
May 10, 2006

EX-31.I

CERTIFICATIONS

EXHIBIT 31(i)

I, Robert L. Bagby, certify that:

1.	I have reviewed this annual report on Form 10-K of A.G. Edwards, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2006

/s/ Robert L. Bagby 

Robert L. Bagby 

Chairman of the Board and 

Chief Executive Officer 

EX-31.II

CERTIFICATIONS

EXHIBIT 31(ii)

I, Douglas L. Kelly, certify that:

1.	I have reviewed this annual report on Form 10-K of A.G. Edwards, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted acounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2006

/s/ Douglas L. Kelly 

Douglas L. Kelly 

Chief Financial Officer 

EX-32.I

EXHIBIT 32(i)

CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

     In connection with the Annual Report of A.G. Edwards, Inc. (the “Registrant”) on Form 10-K for the period ended February 28, 2006, as filed with the Securities and Exchange Commission on May 5, 2006, hereof (the “Report”), I, Robert L. Bagby, Chairman of the Board and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	A.G. EDWARDS, INC.
May 5, 2006	By:	/s/ Robert L. Bagby
		Robert L. Bagby
		Chairman of the Board and
		Chief Executive Officer

____________________

*      A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.II

EXHIBIT 32(ii)

CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

     In connection with the Annual Report of A.G. Edwards, Inc. (the “Registrant”) on Form 10-K for the period ended February 28, 2006, as filed with the Securities and Exchange Commission on May 5, 2006, hereof (the “Report”), I, Douglas L. Kelly, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	A.G. EDWARDS, INC.
Date: May 5, 2006	By:	/s/ Douglas L. Kelly
		Douglas L. Kelly
		Chief Financial Officer

____________________

*      A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.