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Annual Report Fiscal Year 2002 Table of Contents	Page		Page
Company Description		Notes to Consolidated Financial Statements	23
Financial Highlights	1	Note 1	23
Letter to Shareholders	2	Note 2	25
Client Profiles	4	Note 3	26
The Lieberts	4	Note 4	26
The Nelsons	5	Note 5	26
MoSys	7	Note 6	28
Larry Richardson	9	Note 7	28
Quarterly Financial Information	10	Note 8	28
Management’s Financial Discussion	11	Note 9	29
Consolidated Five-Year Summary	18	Note 10	29
Consolidated Financial Statements	19	Note 11	30
Consolidated Balance Sheets	19	Note 12	30
Consolidated Statements of Earnings	20	Note 13	31
Consolidated Statements of Stockholders’ Equity	21	Independent Auditors’ Report	32
Consolidated Statements of Cash Flows	22	Corporate Organization	33
		Board of Directors A.G. Edwards, Inc.	33
		Board of Directors A.G. Edwards & Sons, Inc.	34
		Boards of Directors	35
		Branch Office Management AL to DC	36
		Branch Office Management DC to IA	37
		Branch Office Management IA to NE	38
		Branch Office Management NV to SC	39
		Branch Office Management SC to WY & UK	40
		Shareholder Information	41
		Address Information

Company Description
A.G. Edwards, Inc. is a holding company whose subsidiaries provide securities and commodities brokerage, investment banking, trust, asset management, retirement planning, and insurance products and services. Its principal subsidiary, A.G. Edwards & Sons, Inc. is a St. Louis-based financial services company with more than 700 locations in 49 states; the District of Columbia; and an affiliated office in London, England. A.G. Edwards & Sons, Inc. provides a full range of financial products and services to individual and institutional investors. The firm also offers investment banking services to corporate, governmental and municipal clients through 12 regional offices and its St. Louis headquarters.

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Financial Highlights
(For fiscal year ended February 28 or 29)

(In thousands, except per share data and other data)

		2002		2001		2000		1999		1998
Operating Results
Net Revenues	$	2,338,413	$	2,741,206	$	2,796,189	$	2,235,171	$	2,002,697
Net Earnings	$	71,501	$	287,477	$	382,921	$	292,117	$	269,297
Net Earnings as a Percent of
Net Revenues		3.1%		10.5%		13.7%		13.1%		13.4%
Return on Average Equity		4.4%		17.2%		22.9%		18.9%		19.8%




Per Share Data
Earnings
Diluted	$	0.88	$	3.43	$	4.08	$	3.00	$	2.75
Basic	$	0.89	$	3.50	$	4.16	$	3.07	$	2.81
Cash Dividends	$	0.64	$	0.64	$	0.61	$	0.57	$	0.51
Book Value	$	20.42	$	20.29	$	19.69	$	17.16	$	15.21




Financial Condition
Stockholders’ Equity	$	1,647,796	$	1,626,344	$	1,717,122	$	1,627,737	$	1,463,121
Total Assets	$	4,187,170	$	4,859,984	$	5,347,587	$	3,803,132	$	4,193,328




Other Data
Full-Time Employees		16,791		17,086		15,451		13,953		12,967
Financial Consultants		7,384		7,073		6,823		6,528		6,289

Locations		705		696		672		639		594

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To Fellow Shareholders, Clients and Associates:

Looking back on the challenges of the past year, I realize it is times like these that test our character as a nation, as an industry and as a company.

Although we were all deeply affected by the terrible devastation of September 11, I am thankful that none of our employees were lost or injured in the attacks. I am also proud of the way our employees, especially those in New York, responded to the crisis, working tirelessly to ensure that our company and our industry would be ready to serve investors when the markets reopened. By working together, we demonstrated to the world the strength of our resolve and the resilience of our free market system.

In the months before September 11, we, along with the rest of our industry, were dealing with a slowdown in our revenues following one of this country’s longest economic expansions. The tragic events of September 11 only exacerbated these already challenging market conditions.

Despite the difficulties, we at A.G. Edwards chose to look at fiscal 2002 as a time of opportunity in many ways. Our ongoing commitment to support our financial consultants and their one-on-one client relationships enabled us to recruit many high-caliber financial consultants this year. We strengthened our national sales network by adding more than 300 financial consultants and nine new offices. While others in our industry reduced their ranks of financial consultants and assigned clients with smaller assets to service centers, we remained committed to providing personalized service to all of our clients regardless of the size of their accounts.

To ensure our financial consultants and support staff are equipped to provide our clients with the best service possible, we continued to invest in training. A.G. Edwards University, our online training program introduced in December 2000, greatly enhanced our training efforts this year, with our employees taking more than 16,000 online courses and more than 700 of our financial consultants earning one or more professional accreditations.

We achieved record-breaking revenues in investment banking this year thanks to the combined efforts of Investment Banking, Syndicate, and Institutional Sales and Trading. Our investment banking revenues for the year grew to $256 million from $173 million last year, despite the difficult market conditions. We are proud of this accomplishment and the people who contributed to these results. We remain committed to building our investment banking business.

This year we continued to grow our fee-based business, adding new services that give our financial consultants options to help their clients meet their investment objectives. Each year more of our clients choose to invest through fee-based accounts and services. We are committed to providing our clients the same level of excellent service and advice whether they choose to pay by the transaction or use one of our fee-based pricing options.

During the year we also made some important financial decisions to ensure that Edwards remains profitable, strong and independent. As firm revenues slowed and expenses increased, we took a number of steps – some of them difficult – to reduce long-term corporate expenses and better position us for a strong future. The initial costs of taking these steps were included in a fourth-quarter charge of $107 million ($67 million after taxes). As a result, A.G. Edwards’ net earnings for the fiscal year declined to $72 million, or $0.88 diluted earnings per share, on revenues of $2.3 billion. We will maintain our cost-containment efforts while being careful not to diminish our ability to serve our clients.

Some of the specific steps we took this year to reduce expenses included a workforce reduction and the consolidation of several real estate holdings in St. Louis as we near the completion of the new addition to our headquarters complex. We also repositioned and, in some cases, eliminated technology projects as we undertook a new technology initiative that will redesign our operations platform enabling us to dramatically streamline our current operations and prepare us for tightened trade settlement requirements. Establishing an efficient, flexible technology infrastructure will help position Edwards for a strong, competitive future.

I would like to take this opportunity to thank the A.G. Edwards Board of Directors for their ongoing support and their commitment to keeping the best interests of Edwards, our clients and our shareholders foremost in mind when making decisions.

Unfortunately, we lost board member Charmaine Chapman, who died last July after a long fight with cancer. We remember Charmaine not only for her four years of service to A.G. Edwards, but also for her more than 30 years of leadership with the United Way. She is missed.

We elected Peter Madoff to our board. Peter is senior managing director of Bernard L. Madoff Investment Securities LLC, an international market maker headquartered in New York. He brings many years of valuable securities experience to the board.

As I look ahead, I realize that fiscal 2003 will most likely be another challenging year for our industry and our firm. However, economic conditions do seem to be improving, and I continue to be impressed by our employees’ consistent dedication to doing whatever it takes to keep A.G. Edwards strong.

To be successful in the future, we must stay focused on reducing costs and growing our revenues through financial consultant training and recruitment, opening new branches, and increasing average production per financial consultant. Each one of us must remain committed to doing our personal best and holding ourselves individually accountable for our performance.

Most importantly, we must continue to strive to make Edwards the best brokerage firm in the industry, with the best-trained employees, the best array of financial products and the best client-centered service. This is how we pass the ultimate test with our clients — by delivering the best value for what we charge. That’s how our clients know it’s worth it.

Thank you for your continued loyalty and support.

Sincerely,

Robert L. Bagby
Chairman and CEO
April 5, 2002
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As the stock market in the 1990s soared and the availability of financial information proliferated, some investors questioned the need for a relationship with a financial consultant. Many opted for the market’s short-term action, hoping for quick trading gains, rather than taking a long-term approach to their future. But market volatility once again demonstrated the complexities of investing, underscoring the importance of planning and reminding investors of the value of a relationship with a financial consultant who offers professional financial advice and service. At A.G. Edwards we never lost sight of that. We remain committed to building and nurturing personal relationships with each of our clients regardless of account size or market conditions. We believe it’s worth it – now more than ever.

By looking beyond daily market fluctuations, a financial consultant offers experience, perspective and the ability to assess each situation objectively, with each client’s individual goals in mind. After all, planning for the future goes beyond stock quotes and trade executions. It involves collaboration, understanding and trust. Our financial consultants earn that trust from their clients daily by being there in good times and bad, asking the right questions, listening to their clients’ answers, explaining things, and presenting sound advice and solutions to situations ranging from the basic to the complex.

It is for these reasons we will continue to provide all clients the service and attention of an A.G. Edwards financial consultant, whether they’re a seasoned investor or just starting out. It’s worth it for our clients because they can talk face to face with a highly trained professional who knows about their lives and is personally committed to their long-term financial success. It’s worth it because their financial consultants have access to the specialized knowledge and resources of our headquarters personnel as they develop comprehensive financial plans tailored to a client’s specific needs. But most importantly, it’s worth it because they can develop meaningful long-term relationships with their financial consultant built on a foundation of trust.

Jack Liebert understands the value of hard work, having co-founded his own company more than 37 years ago. With A.G. Edwards’ help, the company was taken public and later merged with a global corporation. “My wife Evelyn and I knew at that point we could provide nicely for our children, our grandchildren and even our great-grandchildren,” Jack says. “We worked hard to get where we are, and we wanted to make sure our family was taken care of.” He also wanted to be actively involved with his three children and their efforts to finance and develop luxury golf resort community projects. “We are a very close-knit family,” Jack says, “so it just seemed natural for us to go into business together.”

But along with the family business came additional financial responsibilities and complexities, which created a need for a more detailed financial plan that included not only Jack and Evelyn, but their three children as well. Jack said he had stayed in touch with A.G. Edwards after his company’s initial public offering, “so we knew someone there could help us.” They found that someone in financial consultant Michael McCain.

“We clicked right away,” Jack says. “Evelyn and I could tell Mike was smart and sincere, and he immediately understood the importance of getting our children involved in our planning process. As a result, he helps all of our kids with their financial plans.” Mike also works closely with Jack’s attorney and accountant to develop a detailed estate plan, so, as Jack puts it, “our kids don’t get stuck with a lot of problems along with their inheritance.”

“The Lieberts do almost everything together, so their finances are quite interconnected,” Mike says. “It’s important to first look at the family as a whole and then assess how each individual’s needs and circumstances factor into the equation.”

After selling the company he co-founded in Columbus, Ohio, Jack Liebert (left) and his wife, Evelyn, moved to Naples, Florida, and turned to Michael McCain, senior vice president-investments at A.G. Edwards, to help them address their current business needs and pass along their assets smoothly to their children and grandchildren.

When addressing the Lieberts’ unique situation, Mike says he takes advantage of the resources available at A.G. Edwards’ headquarters. “It’s a good feeling to know I have folks in St. Louis to consult with and help me develop solutions that really fit my clients’ circumstances, no matter how complex their financial issues are.”

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When Dr. Martine Nelson first met Vicky Campbell, it wasn’t to discuss finances. Martine, a pediatrician, first met Vicky, her A.G. Edwards financial consultant, when Vicky’s daughter was sick and Martine had just opened her practice. Over time all three of Vicky’s children became patients, and the two women became better acquainted. “I knew what Vicky did for a living,” Martine explains, “but that was never a topic we discussed unless I had a question. I liked that.”

Over time Martine and her husband, Glenn, also a doctor, realized they needed help developing a financial plan. “At the time, Glenn and I didn’t have a lot of money to invest,” Martine says. “But our children were getting older, and both of us realized we needed a plan for our future – and theirs.”

As she and Glenn considered their options, both felt it was important to work with someone who not only knew what they were doing, but also was easy to talk to. “When it came to talking about money, both Glenn and I felt kind of like one of our patients – somewhat apprehensive but wanting help,” Martine says. “So we wanted to work with someone who could put us at ease just as we do with our patients. Vicky immediately came to mind.”

Dr. Martine Nelson takes time to get to know the young patients who come to her pediatric office in Naperville, Illinois, so they feel comfortable with her. It’s that same approach to client care that Martine and her husband, Glenn, appreciate when working with Vicky Campbell, senior vice president-investments at A.G. Edwards.

The Nelsons sat down with Vicky and talked at length about their situation and their goals. “She really listened to us and asked a lot of questions about what we wanted to do,” Martine recalls. “During those first few meetings, the size of our portfolio wasn’t an issue. We told her how much money we had, but she focused more on our plans for the future – the kids’ college educations, our medical practices and, of course, our retirement.”

Understanding a client’s specific needs is critical to gaining – and maintaining – a client’s trust for the long term. “She took the time to really get to know both Glenn and me and how we wanted to approach investing,” Martine says. As Vicky learned more, it became apparent the couple needed to first address other financial obligations, such as establishing their medical practices and repaying their college and medical school loans, before committing to a regular investing plan.

“Vicky never pushed us to do things we couldn’t do,” Martine says. “She got us started by consolidating all of our investments and getting us going with a simple buy-and-hold investing plan. Then, once we were in a position to do more, she worked with us to accelerate our savings efforts by investing more regularly.” For instance, Vicky arranged for Martine and Glenn to make monthly contributions to a 529 college savings plan for their two sons.


Vicky Campbell knows there’s more to a client relationship than the contents of a portfolio.		Patients rely on Dr. Glenn Nelson for medical advice. He and his wife, Martine, rely on A.G. Edwards’ Vicky Campbell for financial advice.

Martine later asked Vicky to develop a retirement program for the employees in her medical practice. “I figured I already was entrusting her with my family’s financial future, so I could also trust her to do the same for my employees,” Martine recalls. “I want to take good care of them. After all, they work hard for my patients and me.”

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Knowledge and commitment are qualities that Monolithic System Technology CEO Fu-Chieh Hsu admires most in business colleagues. And he saw those qualities in John Moriarty, managing director-Investment Banking at A.G. Edwards. “I first heard about A.G. Edwards from one of my board members who had worked with the firm and couldn’t say enough good things about them,” Fu-Chieh says.

Fu-Chieh met John when the Monolithic System Technology (also known as MoSys) board of directors was considering an initial public offering to help the technology company continue to grow while also rewarding its loyal employees. Founded by Fu-Chieh in 1992, the company has grown to a $22 million revenue concern that designs the underlying memory technology to support consumer products and business devices, ranging from video games to digital cameras.

“When I first met John, it was obvious he had done his homework,” Fu-Chieh says. “He knew a lot about our company, our industry and the competitive environment. But he also asked questions and listened to what we had to say. He really seemed to grasp the qualities that set us apart from other technology firms. That’s the type of initiative and understanding we wanted and, as it turned out, we needed.”

When looking to take his company public, Monolithic System Technology CEO Fu-Chieh Hsu (left) wanted to work with an investment firm that showed a commitment to his company’s unique vision for success. He chose A.G. Edwards and John Moriarty, managing director-Investment Banking at A.G. Edwards, to make that vision a reality.

As plans to take the company public neared fruition, the bottom dropped out of the Nasdaq market and technology stocks in general. But as other investment firms were advising their corporate clients to delay their initial public offerings, John was not deterred. “This company had a great story – breakthrough technology, a strong business model and a proven revenue stream,” John says. “As I saw it, it was our job to help them get that story out to prospective investors.” In the end, the initial public offering enjoyed broad participation from individual and institutional investors alike. “A.G. Edwards never lost sight of our goals,” Fu-Chieh says. “That commitment meant a lot.” It’s a commitment that continued after MoSys’ initial public offering. “They always look at our situation carefully and help us find ways to maintain investors’ confidence,” Fu-Chieh says.

One instance took place roughly three months after MoSys’ initial public offering. “When the tragic events in September occurred, it seemed like every stock in the market fell, and we were no exception,” Fu-Chieh recalls. “We looked to John for guidance, and he immediately gave us ideas and developed an action plan,” which called for MoSys executives to meet with major shareholders.

Later, a longtime corporate partner who had financed MoSys as a start-up company indicated its intention to sell its position in the stock to secure profits. “Long-term start-up investors sometimes need liquidity,” John explains. “As a result, this type of situation can have a significant impact on a company’s stock if it’s not handled right.” Which is why A.G. Edwards’ Investment Banking, Institutional Sales and Nasdaq Trading personnel worked with MoSys to attract new investors and complete the transaction in an orderly and efficient manner. In both instances, John says communication was the key. “As a newly public company,” John explains, “it’s crucial for MoSys to keep telling its story about the company’s unique business model and how it is well-positioned for long-term growth.”

These efforts reaffirmed Fu-Chieh’s decision to work with John and A.G. Edwards. “They were there for us when we needed them most. So I felt it was worth it for us to expand our relationship with A.G. Edwards by asking them to handle our stock-option exercises as well as my own personal account. They did such a wonderful job, it just made sense.”
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Municipal clients – whether a state agency, a city or a school district – also want to work with someone who can bring the resources and expertise to offer innovative solutions for complex financing needs. As managing director-Investment Banking for A.G. Edwards, Larry J. Richardson works closely with his municipal clients to help them finance a variety of community-improvement projects. “Public entities want to work with a firm that understands their financing requirements and also respects their need to make their bonds available to a wide range of investors so their constituents can take part in helping their community,” Larry explains. “For example, we provided the city of Chicago a detailed plan of how A.G. Edwards would sell its Midway and O’Hare airport-improvement bonds to individuals and institutions in Illinois and across the country. We’ve also worked with the city on a number of other occasions with this approach in mind.” Larry says he enjoys how the relationships with his municipal clients also benefit other A.G. Edwards clients. “Not only do we help these municipalities finance projects to better their communities,” he says, “we also provide our other clients with access to investments that can fit nicely in their personal financial plans.”

Listening. Understanding. Explaining. Planning. Caring. These are the qualities that make a relationship with an A.G. Edwards financial consultant worth it. For Jack, it’s worth it because his legacy is in the hands of someone he trusts who has the sophisticated resources needed to help that legacy live on with the generations who follow him. For Martine, it’s worth it because she works with someone who cares more about her and her family than the size of her portfolio. For Monolithic Systems and our other corporate and municipal clients, it’s worth it because they have a firm committed to helping them address their financing needs in a way that’s as individual as each client.

Relationships matter. Our clients and their needs matter. That’s why we believe every client deserves a personal financial consultant who shows them each and every day why it’s worth it to bring their dreams to us.

Serving municipal clients for more than 12 years, Larry J. Richardson, managing director-Investment Banking at A.G. Edwards, works to satisfy the financing needs of municipalities and public agencies while also creating investment opportunities for A.G. Edwards’ other clients.

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Quarterly Financial Information
(Unaudited)

	Dividends	Stock Price	Net		Earnings (Loss	)	Net		Earnings (Loss			)
	Declared	Trading Range	Revenues		Before Tax		Earnings (Loss	)	per Share
	per Share	High – Low	(in millions	)	(in millions	)	(in millions	)	Diluted		Basic

Fiscal 2002 by Quarter
First	$0.16	44.75 – 31.80	$605.7		$70.9		$45.3		$0.56		$0.57
Second	$0.16	48.29 – 40.00	$596.8		$62.1		$41.0		$0.50		$0.51
Third	$0.16	44.75 – 29.76	$555.9		$24.4		$22.2		$0.28		$0.28
Fourth	$0.16	46.70 – 38.85	$580.0		$(65.3	)	$(37.0	)	$(0.46	)	$(0.46	)




Fiscal 2001 by Quarter
First	$0.16	40.81 – 31.50	$786.6		$170.7		$107.3		$1.24		$1.26
Second	$0.16	57.00 – 34.88	$680.1		$122.7		$77.0		$0.93		$0.95
Third	$0.16	57.94 – 42.18	$634.0		$89.9		$57.2		$0.69		$0.71
Fourth	$0.16	52.19 – 37.42	$640.5		$71.8		$45.9		$0.57		$0.58

Investment Performance Overview

Stock Split History As a result of stock splits and stock dividends, an investment of 100 shares of A.G. Edwards stock at the time of the firm’s initial public offering in calendar 1971 has grown to 3,627 shares today. Given the initial offering price of $12 per share, the value of a $1,200 investment would have increased 12,247 percent, or 17.2 percent compounded annually, to $148,163 as of February 28, 2002.


Dividend Growth History A steadily increasing dividend has reflected A.G. Edwards’ continued revenue and earnings growth. During the past 10-year period, the dividend has grown from $0.29 per share to $0.64 per share, an average 14 percent increase per year. Since the firm went public, dividend payments have totaled more than $588 million. (Per share data have been restated for stock splits and stock dividends.)


Stock Price History A.G. Edwards stock, which trades on the New York Stock Exchange (symbol AGE), closed at 40.85 on February 28, 2002. This represents a 203 percent increase from the 13.47 closing price on February 28, 1993. (Per share data have been restated for stock splits and stock dividends.)
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Management’s Financial Discussion
(Year references are to fiscal years ended February 28 (29) unless otherwise specified.)

Introduction
A.G. Edwards, Inc. is a financial services holding company whose primary subsidiary is the national brokerage firm of A.G. Edwards & Sons, Inc. Through this and its other operating subsidiaries (collectively, the “Company”), A.G. Edwards, Inc. provides securities and commodities brokerage, investment banking, trust, asset management, retirement planning, and insurance products and services to its clients through one of the industry’s largest retail branch distribution systems. The Company is a St. Louis-based financial services firm with more than 700 locations and more than 16,700 employees in 49 states; the District of Columbia; and London, England. The Company’s primary business is to provide a full range of financial products and services, including investment banking, to its individual, institutional, corporate, governmental and municipal clients.

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

In addition to competition from firms traditionally engaged in the financial services business, there has been increased competition in recent years from other sources, such as commercial banks, insurance companies, online service providers, mutual fund sponsors and other companies offering financial services both in the United States and globally, creating increased competition for a similar client base, including the client base served by the Company. The financial services industry continues to experience consolidation and convergence as financial institutions offering a range of financial services have begun offering a broader array of securities and other investment products. These trends are expected to continue and could result in the Company’s competitors acquiring greater capital and other resources as well as a broader range of products and services and geographic diversity.

The first half of 2002 produced challenging market and economic conditions. The U.S. economy began the year in a weakened condition with higher energy prices, lower consumer confidence and reduced spending in the business sector contributing to the slowdown. In an effort to boost the economy, Congress began distributing tax rebate checks in July as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001, and the Federal Reserve Board, via five rate decreases in the first six months of the fiscal year, reduced the target rate from 5.5 percent to 3.5 percent. During this six-month period, the Dow Jones Industrial Average decreased 5 percent and the Nasdaq Composite Index decreased 16 percent. Despite concerns about the economy, activity on the major exchanges was high as overall trading volumes on the New York Stock Exchange and Nasdaq increased 14 percent and 15 percent, respectively.

The terrorist attacks of September 11th further weakened the economy as consumers and businesses reduced spending and travel. The attacks led to the closing of the financial markets for several days in September, and upon their reopening, the popular averages dropped dramatically in heavy trading volume with the Dow decreasing 14 percent from September 10th to September 21st. The Federal Reserve Board moved aggressively with three reductions to the target rate in a seven-week period and followed with a fourth in December, decreasing the Fed funds target rate to 1.75 percent. In addition, the Treasury Department announced that it would no longer issue 30-year Treasury bonds, leading to reduced long-term interest rates. By December the U.S. economy began to show signs of stabilization as layoffs began to ease and consumer confidence began to improve.

In 2002, the Federal Reserve Board decreased the target rate nine times from 5.5 percent to 1.75 percent as the U.S. economy showed continued signs of weakness and recession. The Dow Jones Industrial Average began the year at 10,495 and ended the year at 10,106, an overall decrease of 4 percent. This small decrease masks the record 685-point single day decline following the September 11th attacks. The Nasdaq Composite Index began the period at 2,152 and ended at 1,731, a decrease of 20 percent. Despite uncertainties about the economy, markets and the war on terrorism, activity on the major exchanges during the year was high as overall trading volumes on the New York Stock Exchange increased 15 percent and the Nasdaq increased slightly (1 percent) over last year.

Results of Operations
The Company experienced a decline in net revenues, net earnings and earnings per share for each of the last two fiscal years. Net revenues declined 15 percent ($403 million) in 2002 after decreasing 2 percent ($55 million) in 2001. Net earnings decreased 75 percent ($216 million) in 2002 and 25 percent ($95 million) in 2001 to $72 million and $287 million, respectively. Diluted earnings per share for the Company were $0.88 in 2002 versus $3.43 in 2001 and $4.08 in 2000. The Company’s profit margin fell to 3.1 percent in 2002, compared with 10.5 percent and 13.7 percent in 2001 and 2000, respectively. The results for 2002 include charges of $127 million, which decreased net earnings $80 million or $0.98 per diluted share. Of the $127 million, $20 million in reserves for a margin account occurred in the third quarter and $107 million in restructuring and other charges occurred in the fourth quarter. The results for 2000 include a $75 million gain from an investment in a privately held investment management company, which increased net earnings by $35 million or $0.37 per diluted share.

The number of Company financial consultants reached 7,384 at year-end, an increase of 4 percent from the prior year-end. The total number of locations at the end of 2002 was 705, up from 696 at year-end 2001. The Company intends to continue to expand its branch distribution system as opportunities occur.

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)	2002 vs. 2001			2001 vs. 2000

Revenues
Commissions	$(378,524	)	(28	)%	$(97,877	)	(7	)%
Asset management
and service fees	6,105		1		108,467		20
Principal transactions	27,409		9		8,057		3
Investment banking	83,132		48		(52,422	)	(23	)
Interest	(188,431	)	(52	)	111,811		45
Other	(25,038	)	(79	)	(57,895	)	(65	)

Total Revenues	(475,347	)	(17	)	20,141		1
Interest expense	(72,554	)	(74	)	75,124		329

Net Revenues	(402,793	)	(15	)	(54,983	)	(2	)




Non-Interest Expenses
Compensation and
benefits	(208,591	)	(12	)	(400	)	-
Communication and
technology	52,823		22		83,272		52
Occupancy and
equipment	6,646		5		21,297		20
Marketing and business
development	(10,155	)	(20	)	9,023		21
Floor brokerage and
clearance	(1,045	)	(5	)	1,290		6
Other	38,163		50		(1,504	)	(2	)
Restructuring	82,462		n/a		-		n/a

Total Non-Interest
Expenses	$(39,697	)	(2	)%	$112,978		5	%

Commissions
Commission revenues arise from activities in transaction-based accounts in listed and over-the-counter securities, mutual funds, futures, options, and insurance products. Commission revenues declined $379 million or 28 percent, from $1.3 billion in 2001 to $950 million in 2002. This decrease resulted from reduced retail investor participation in the equity markets, reflecting the difficult market conditions of the past year as evidenced by decreases in commissions from listed transactions of $106 million (20 percent), over-the-counter transactions of $185 million (62 percent) and mutual fund transactions of $79 million (27 percent). Many of the Company’s clients opted out of the equities markets in favor of fixed income products or money market funds, reflecting uncertainty in the face of the economic conditions of the past year and continued market volatility. Trades in clients’ commission-based accounts decreased 19 percent. Average client assets in money market funds increased 17 percent ($4 billion) over last year. As commissions are transaction-based revenues, they are influenced by the number and size of client transactions and product mix and may vary considerably from year to year.

Although commission revenues declined significantly in 2002, they remain an important source of revenue for the Company, accounting for more than 40 percent of total revenues for the last three years. However, the number of investors choosing fee-based alternatives over the traditional commission-based trading account continued to increase this year. As a result, the number of clients choosing fee-based pricing alternatives will likely affect future revenues within the commissions and asset management and service fees categories.

The 7 percent decline in commission revenues in 2001 was primarily due to a 10 percent ($98 million) decrease in equity-related commissions resulting from a 9 percent decline in trading volumes in transaction-based accounts.

Asset Management and Service Fees
Asset management and service fees consist primarily of revenues earned from providing support and services in connection with client assets under third-party management, including mutual funds, annuities, the Company’s trust services and Client Choice — a fee-based pricing alternative available to individual investors instead of the traditional transaction-based account. These revenues include fees based on the amount of client assets under management and transaction-related service fees as well as fees related to the administration of custodial and other specialty accounts.

Asset management and service fees rose $6 million (1 percent). Fees generated from the administration of client assets under third-party management and from the Company’s management services improved $6 million (3 percent) as a result of a 20 percent increase in the number of clients choosing fee-based pricing alternatives. Fees from third-party mutual funds and annuities were $13 million (5 percent) lower than in 2001 as investors retreated from these equity-based products. Distribution fees received from money market funds increased $18 million (18 percent) as many investors have opted out of the equity markets in favor of money market funds. If interest rates remain low, the Company expects money fund distribution fees to be significantly lower next year as several money funds offered by the Company are expected to reach expense caps resulting from the low yields these funds are currently offering to investors. Service fees, which are largely transaction-based, decreased $4 million (5 percent) following the decrease in client transactions.

In 2001, many investors were moving into mutual funds, annuities and fee-based pricing alternatives, and accordingly, asset management and service fees rose 20 percent ($108 million), reflecting a 12 percent ($37 million) increase in fees received from third-party mutual funds and annuities along with a 41 percent ($62 million) improvement in fees resulting from client assets under third-party management and from the Company’s management services.

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 result from the sale and holding of securities positions for resale to clients and are included in principal transactions revenue.

Principal transactions revenue increased 9 percent ($27 million) primarily resulting from a $68 million (38 percent) increase in revenue from the sale of fixed income products, reflecting client desire for more conservative investments given the volatility of the equity markets. Investor actions overrode the typical reaction to avoid fixed income products in a decreasing interest rate environment. This shift was demonstrated as these revenues from the sale of equities dropped $41 million (36 percent).

Revenues from principal transactions increased 3 percent ($8 million) in 2001 primarily resulting from a 27 percent ($24 million) rise in revenue from the sale of equity products offset by an 8 percent ($16 million) decline in sales from fixed income products. The Company increased its market making activities in equity products as falling yields resulted in decreased investor demand for fixed income products.

Investment Banking
The Company derives investment banking revenues from underwriting public offerings of securities for corporate and governmental entities for sale to its clients. The Company also provides advisory services to corporate and governmental entities.

Revenues from investment banking activities increased $83 million (48 percent), reflecting the popularity of trust preferred securities along with investor desire for fixed income products despite the declining interest rate environment that prompted issuers to refund existing debt or issue new debt at a reduced rate. Underwriting fees and selling concessions for sales of corporate debt, municipal debt and government debt rose $55 million (147 percent), while revenues from the sale of corporate equity transactions fell $13 million (12 percent). Management fees increased $41 million (144 percent) as the Company participated as a manager or co-manager in a larger number of offerings this year over last. The Company also experienced an increase in merger and acquisition activities and consulting arrangements.

In 2001, investment banking revenues decreased 23 percent ($52 million) as a result of decreased IPO activity in the volatile equity markets, declining yields on debt products, and decreased borrowing needs of state and local governments.

Interest Revenue
The Company earns interest revenue principally from financing client margin accounts, debt securities carried in inventory for resale and short-term investments. Interest revenue dropped $188 million (52 percent) in 2002, primarily because of a $182 million (55 percent) decrease in interest earned on margin account balances. The total average margin account balance decreased 32 percent from 2001, while the average interest rate charged on these balances decreased 38 percent.

The increase in interest revenue in 2001 of 45 percent ($112 million) was primarily the result of a 29 percent rise in average margin balances along with a higher average interest rate charged on these balances.

Other Revenues
Other revenues declined $25 million (79 percent) in 2002, primarily because of a decrease in private equity investment valuations of $7 million versus an increase of $13 million in 2001.

Other revenues decreased 65 percent ($58 million) in 2001 primarily due to a $75 million gain in the prior year from the sale of one-half of the Company’s investment in a privately held investment management company and the related increase in the carrying value of the remaining investment to its fair value.

Interest Expense
Interest expense decreased $73 million (74 percent) in 2002 due to a decrease in short-term borrowings, which include short-term bank loans and securities lending arrangements, combined with lower average interest rates on borrowings. This decrease is primarily the result of lower financing needs due to decreased levels of customer margin balances. Interest expense increased $75 million (329 percent) in 2001, due to an increase in short-term borrowings used to finance increased average client margin balances and, to a lesser extent, capital expenditures and stock repurchases in a higher interest rate environment.

Non-Interest Expenses
Compensation and benefits decreased $209 million (12 percent) in 2002 and remained unchanged in 2001 from 2000. A significant portion of this expense is variable in nature and relates to commissionable sales and to the Company’s profitability. The year-to-year comparisons generally reflect the changes in revenue and profitability in both 2002 and 2001. Commission expense decreased $130 million (14 percent) in 2002 and was down $28 million (3 percent) in 2001 as a result of decreased commissionable sales in both years. General and administrative salaries and benefits increased $29 million (5 percent) in 2002 and $94 million (19 percent) in 2001 due to general salary and employment increases. Included in general and administrative salaries and benefits are increases in medical benefits of $12 million (21 percent) and $7 million (13 percent) in 2002 and 2001, respectively, as the cost of medical insurance continues to increase. Incentive compensation decreased $109 million (38 percent) in 2002 and $67 million (19 percent) in 2001, reflecting decreased profitability in both years. In 2002, fourth-quarter restructuring and other charges of $107 million and a third-quarter charge of $20 million related to reserves for a margin account were excluded from the calculation of incentive-related compensation.

In 2002, communication and technology expense increased $53 million (22 percent) primarily due to the implementation of new technology initiatives and increased expenses related to the new financial consultant workstation, which experienced its first full year of implementation. Communication and technology expense in 2001 increased $83 million (52 percent) mainly due to the development, deployment, and ongoing maintenance and support of the new financial consultant workstation.

Other expenses in 2002 increased $38 million (50 percent). This increase is primarily due to the establishment of a $26 million reserve against a $37 million partly secured margin loan. Among other factors, this estimated reserve was based upon the number of shares, trading volume and price volatility of the underlying collateral securing the loan. Due to the facts and circumstances surrounding the margin loan and underlying collateral, management’s estimate regarding collectibility may be susceptible to significant fluctuations in the near term. In addition, 2002 was impacted by $17 million in reserves established in connection with client litigation.

All remaining expenses decreased a combined $5 million (2 percent) in 2002 primarily as a result of a decrease in marketing and business development of $10 million (20 percent) as a result of costs in 2001 related to the Company’s first national sales conference at its St. Louis headquarters. This was partially offset by a $7 million (5 percent) increase in occupancy and equipment expenses related to branch expansion and relocation. In 2001, all remaining expenses increased a combined 19 percent ($32 million) primarily due to increased occupancy and equipment costs related to branch and headquarters expansion and costs associated with the national sales conference.

Restructuring Charge
As a result of a number of actions taken to reduce costs, streamline its headquarters operations and better position the Company for improved profitability, a charge of $82 million ($52 million after-tax) was recorded in 2002. The charge included the following components:

Approximately $46 million was due to the write-off of capitalized software related to the discontinuance or realignment of certain technology initiatives after a review of technology priorities as the Company redesigns its technology infrastructure.
Approximately $19 million resulted from severance costs associated with job reductions of approximately 460 non-branch personnel achieved through a combination of voluntary and involuntary separations. This workforce reduction is estimated to decrease annual compensation and benefits expense by $28 million.
Approximately $17 million relates to the planned sale or sublease of certain real estate holdings and leases as the Company consolidates its St. Louis non-branch workforce to its main headquarters campus. The Company expects to complete this consolidation in the next fiscal year.

Income Taxes
The Company’s effective income tax rate for the fiscal year is 22 percent compared to 37 percent last year. This decrease is primarily attributable to research and development tax credits and a favorable reduction in state taxes due to corporate structure changes and the recent resolution of other matters. For additional information regarding the provision for income taxes and information regarding the difference between effective tax rates and statutory rates, see Note 8 (Income Taxes) of the Notes to Consolidated Financial Statements.

Liquidity and Capital Resources
The Company’s assets fluctuate in the normal course of business, primarily due to the timing of certain transactions. Customer receivables decreased in 2002 as the Company’s clients reduced their use of margin borrowings in reaction to the economic, market and other events of the past year. Short-term bank loans and securities lending arrangements decreased due to a reduced need to finance client margin balances.

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 $283 million and $406 million, and average securities lending arrangements of $371 million and $1.1 billion in 2002 and 2001, respectively, were primarily used to finance customer receivables.

In 2002, the Company completed construction of a parking garage at a cost of $24 million. The Company is expanding its headquarters with an additional office building and learning center. The total cost of this project is estimated to be $185 million. Total expenditures for this project through February 28, 2002, were $97 million.

Under the Company’s stock repurchase program, which began in February 2001, the Company is authorized to purchase up to 10 million shares of the Company’s common stock through December 31, 2002. The Company purchased 2.2 million shares at an aggregate cost of $85 million in 2002. No shares were purchased under this authorization in 2001. The Company completed its prior stock repurchase program with the purchase of 10.6 million shares in 2001 at an aggregate cost of $447 million. The Company was authorized to repurchase up to 33 million shares under the prior program.

The Company has commitments of $95 million to various private equity partnerships, of which $65 million remain unfunded at February 28, 2002.

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 has access to approximately $1.6 billion in uncommitted lines of credit as well as the ability to increase its securities lending activities.

The Company’s principal subsidiary, A.G. Edwards & Sons, Inc., is required by the Securities and Exchange Commission to maintain specified amounts of liquid net capital to meet its obligations to clients — see Note 7 (Net Capital Requirements) of the Notes to Consolidated Financial Statements.

Critical Accounting Estimates
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 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.

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, terms and liquidity of the investment, developments since the acquisition 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 yield that are publicly traded, and other factors generally pertinent to the valuation of investments.

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 unsecured 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.

The Company is a defendant in several lawsuits and arbitrations, which arose from its business activities. Some of these lawsuits and arbitrations claim substantial amounts, including punitive damage claims. Management has determined that it is likely that ultimate resolution in favor of the claimant will result in losses to the Company on certain of these claims. The Company has, after consultation with outside counsel and consideration of facts currently known by management, recorded estimated losses to the extent they believe certain claims are probable of loss and the amount of the loss can be reasonably estimated. Factors considered by management in estimating the Company’s liability are the loss and damages sought by the claimant/plaintiff, the merits of the claim, the total cost of defending the litigation and the likelihood of a successful defense against the claim, and the potential for fines and penalties from regulatory agencies. Results of litigation and arbitration are inherently uncertain, and management’s assessment of risk associated therewith is subject to change as the proceedings evolve.

Risk Management
General
The business activities of the Company expose it to a variety of risks. Management of these risks is necessary for the long-term profitability of the Company. The Company manages these risks through the establishment of numerous policies, procedures and controls. The Company does not rely on off-balance sheet arrangements or transactions with unconsolidated, special purpose or limited purpose entities to manage its risks. The most significant risks to the Company are operational, legal, credit and market risk.

Operational Risk
Operational risk refers generally to the risk of loss resulting from the Company’s operations including, but not limited to, 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 and systems to process high numbers of transactions. In the event of a breakdown or improper operation of systems or improper action 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 policies and procedures that are designed to identify and manage operational risk at appropriate levels. 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. The Company also uses periodic self-assessments and Internal Audit examinations as a further review of operational risk.

Legal Risk
Legal risk includes the risk of non-compliance with applicable legal and regulatory requirements and the risk that a counterparty’s performance obligations will be unenforceable. The Company is generally subject to extensive regulation in the different jurisdictions in which it conducts its business. The Company has established procedures based on legal and regulatory requirements that are designed to ensure compliance with all applicable statutory and regulatory requirements. The Company has also established procedures that are designed to ensure that senior management’s policies relating to conduct, ethics and business practices are followed. In connection with its businesses, the Company has various procedures addressing issues, such as regulatory capital requirements, sales and trading practices, new products, use and safekeeping of customer funds and securities, credit granting, collection activities, money laundering, privacy and record keeping.

Credit Risk
Credit risk is discussed in Note 12 (Financial Instruments — Off-Balance Sheet Risk and Concentration of Credit Risk) of the Notes to Consolidated Financial Statements.

Market Risk
Market risk is the risk of loss to the Company resulting from changes in interest rates, equity prices or both. The Company is exposed to market risk to the extent it maintains positions in fixed income and equity securities. The Company primarily manages its risk through the establishment of trading policies and guidelines and through the implementation of control and review procedures. The Company’s management philosophy provides for communication among all responsible parties throughout the trading day.

The Company’s policy is to purchase inventory to provide investment products for its clients. Consequently, 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. In addition, the Executive Committee of A.G. Edwards & Sons, Inc. establishes maximum inventory guidelines for fixed income and equity securities subject to certain limited exceptions.

Capital management and control are accomplished through review (by product managers and members of management outside of the trading areas) of various reports, including reports that show current inventory profit and loss, inventory positions exceeding set limits, and aged positions. Additionally, real-time capital management data are available for intraday assessments.

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. These transactions are not material to the Company’s financial condition or results of operations.

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. At February 28, 2002 and 2001, the potential daily loss in the fair value of equity securities was not material.

Interest Rate Risk. Interest rate risk refers to the risk of changes in the level or volatility of interest rates, the speed of payments on mortgage-backed securities, the shape of the yield curve and 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 has elected to use a sensitivity approach to express the potential decrease in the fair value of the Company’s interest-rate-sensitive financial instruments. The Company calculated the potential loss in fair value of its debt inventory by calculating the change in 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 were to occur, the Company calculated a potential loss in fair value of its debt inventory of $13 million at February 28, 2002, and $10.3 million at February 28, 2001.

Forward-Looking Statements
The Management’s Financial Discussion contains 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, the actions of competitors, regulatory actions, changes in legislation, risk management, technology changes, implementation and effects of expense reduction strategies, workforce reductions, disposition of real estate holdings and estimates of capital expenditures. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Annual Report. The Company does not undertake any obligation to publicly update any forward-looking statements.

Back to Table of Contents End of Page 17

Consolidated Five-Year Summary

Year Ended	February 28,		February 28,		February 29,		February 28,		February 28,
(In thousands, except per share amounts)	2002		2001		2000		1999		1998

Revenues
Commissions:
Listed securities	$403,921		$482,136		$537,005		$505,226		$462,276
Options	28,453		55,883		62,708		49,830		44,188
Over-the-counter securities	111,065		295,921		331,992		199,472		190,092
Mutual funds	214,339		293,307		312,833		281,782		255,005
Commodities	17,966		16,540		17,305		15,518		16,315
Insurance	174,281		184,762		164,583		128,109		117,528

Total	950,025		1,328,549		1,426,426		1,179,937		1,085,404

Asset management and service fees	659,103		652,998		544,531		426,967		329,695

Principal transactions:
Equities	73,553		114,363		90,202		60,538		61,184
Debt securities	246,131		177,912		194,016		141,484		146,768

Total	319,684		292,275		284,218		202,022		207,952

Investment banking:
Underwriting fees and selling concessions	186,839		144,725		190,236		163,419		152,029
Management fees	69,590		28,572		35,483		55,582		38,889

Total	256,429		173,297		225,719		219,001		190,918

Interest:
Margin account balances	150,365		331,980		225,319		170,982		149,738
Securities owned and deposits	21,603		28,419		23,269		30,530		31,132

Total	171,968		360,399		248,588		201,512		180,870

Other	6,592		31,630		89,525		11,360		9,294

Total Revenues	2,363,801		2,839,148		2,819,007		2,240,799		2,004,133

Interest expense	25,388		97,942		22,818		5,628		1,436

Net Revenues	2,338,413		2,741,206		2,796,189		2,235,171		2,002,697

Non-Interest Expenses
Compensation and benefits	1,557,720		1,766,311		1,766,711		1,431,697		1,276,931
Communication and technology	295,353		242,530		159,258		123,126		113,556
Occupancy and equipment	133,240		126,594		105,297		100,972		82,605
Marketing and business development	41,612		51,767		42,744		34,617		29,790
Floor brokerage and clearance	21,912		22,957		21,667		20,933		19,825
Other	114,056		75,893		77,397		53,039		42,193
Restructuring	82,462		-		-		-		-

Total Non-Interest Expenses	2,246,355		2,286,052		2,173,074		1,764,384		1,564,900

Earnings Before Income Taxes	92,058		455,154		623,115		470,787		437,797

Income Taxes	20,557		167,677		240,194		178,670		168,500

Net Earnings	$71,501		$287,477		$382,921		$292,117		$269,297



Per Share Data:
Diluted Earnings	$0.88		$3.43		$4.08		$3.00		$2.75
Basic Earnings	$0.89		$3.50		$4.16		$3.07		$2.81
Cash Dividends	$0.64		$0.64		$0.61		$0.57		$0.51
Book Value	$20.42		$20.29		$19.69		$17.16		$15.21
Other Data:
Total Assets	$4,187,170		$4,859,984		$5,347,587		$3,803,132		$4,193,328
Stockholders’ Equity	$1,647,796		$1,626,344		$1,717,122		$1,627,737		$1,463,121
Cash Dividends	$51,043		$51,962		$55,483		$54,002		$48,740
Pre-tax Return on Average Equity	5.6	%	27.2	%	37.3	%	30.5	%	32.1	%
Return on Average Equity	4.4	%	17.2	%	22.9	%	18.9	%	19.8	%
Net Earnings as a Percent of Net Revenues	3.1	%	10.5	%	13.7	%	13.1	%	13.4	%
Average Common and Common Equivalent
Shares Outstanding (Diluted)	81,282		83,925		93,814		97,322		98,051
Average Common Shares Outstanding (Basic)	80,013		82,096		92,140		95,252		95,950

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Consolidated Balance Sheets

	February 28,	February 28,
(Dollars in thousands, except per share amounts)	2002	2001

Assets
Cash and cash equivalents	$100,425	$116,004
Cash and government securities, segregated
under federal and other regulations	92,921	78,455
Securities purchased under agreements to resell	44,823	17,352
Securities borrowed	68,264	127,328
Receivables:
Customers, less allowance for doubtful
accounts of $38,214 and $10,697	2,460,753	3,285,220
Brokers, dealers and clearing organizations	44,615	30,314
Fees, dividends and interest	76,004	70,934
Securities inventory, at fair value:
State and municipal	254,582	188,559
Government and agencies	38,252	41,024
Corporate	84,674	63,733
Investments	217,954	218,003
Property and equipment, at cost, net of accumulated
depreciation and amortization of $470,805 and $362,615	531,283	508,970
Deferred income taxes	93,460	71,017
Other assets	79,160	43,071

	$4,187,170	$4,859,984



Liabilities and Stockholders’ Equity
Short-term bank loans	$107,300	$319,800
Checks payable	239,607	252,558
Securities loaned	274,535	780,666
Securities sold under agreements to repurchase	45,861	-
Payables:
Customers	982,371	899,091
Brokers, dealers and clearing organizations	141,511	123,084
Securities sold but not yet purchased, at fair value	30,200	31,194
Employee compensation and related taxes	392,187	498,161
Deferred compensation	184,999	175,595
Income taxes	12,878	58,871
Other liabilities	127,925	94,620

Total Liabilities	2,539,374	3,233,640

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	286,480	280,094
Retained earnings	1,892,189	1,875,379

	2,275,132	2,251,936
Less: Treasury stock, at cost (15,767,984 and 16,325,828 shares)	627,336	625,592

Total Stockholders’ Equity	1,647,796	1,626,344

	$4,187,170	$4,859,984

See Notes to Consolidated Financial Statements.
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Consolidated Statements Of Earnings

Year Ended	February 28,	February 28,	February 29,
(Dollars in thousands, except per share amounts)	2002	2001	2000

Revenues
Commissions	$950,025	$1,328,549	$1,426,426
Asset management and service fees	659,103	652,998	544,531
Principal transactions	319,684	292,275	284,218
Investment banking	256,429	173,297	225,719
Interest	171,968	360,399	248,588
Other	6,592	31,630	89,525

Total Revenues	2,363,801	2,839,148	2,819,007
Interest expense	25,388	97,942	22,818

Net Revenues	2,338,413	2,741,206	2,796,189

Non-Interest Expenses
Compensation and benefits	1,557,720	1,766,311	1,766,711
Communication and technology	295,353	242,530	159,258
Occupancy and equipment	133,240	126,594	105,297
Marketing and business development	41,612	51,767	42,744
Floor brokerage and clearance	21,912	22,957	21,667
Other	114,056	75,893	77,397
Restructuring	82,462	-	-

Total Non-Interest Expenses	2,246,355	2,286,052	2,173,074

Earnings Before Income Taxes	92,058	455,154	623,115
Income Taxes	20,557	167,677	240,194

Net Earnings	$71,501	$287,477	$382,921



Earnings Per Share:
Diluted	$0.88	$3.43	$4.08



Basic	$0.89	$3.50	$4.16

See Notes to Consolidated Financial Statements.
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Consolidated Statements Of Stockholders’ Equity
(Three Years Ended February 28, 2002)

		Additional					Total
	Common	Paid-in	Retained		Treasury		Stockholders’
(Dollars in thousands, except per share amounts)	Stock	Capital	Earnings		Stock		Equity

Balances, March 1, 1999	$96,463	$239,998	$1,348,094		$ (56,818	)	$1,627,737
Net earnings			382,921				382,921
Dividends declared – $0.61 per share			(55,483	)			(55,483	)
Treasury stock acquired					(336,028	)	(336,028	)
Stock issued:
Employee stock purchase/option plans		7,694	(39,532	)	89,453		57,615
Restricted stock		6,225	9,332		24,803		40,360

Balances, February 29, 2000	96,463	253,917	1,645,332		(278,590	)	1,717,122
Net earnings			287,477				287,477
Dividends declared – $0.64 per share			(51,962	)			(51,962	)
Treasury stock acquired					(446,726	)	(446,726	)
Stock issued:
Employee stock purchase/option plans		17,687	(5,464	)	72,501		84,724
Restricted stock		8,490	(4	)	27,223		35,709

Balances, February 28, 2001	96,463	280,094	1,875,379		(625,592	)	1,626,344
Net earnings			71,501				71,501
Dividends declared – $0.64 per share			(51,043	)			(51,043	)
Treasury stock acquired					(85,137	)	(85,137	)
Stock issued:
Employee stock purchase/option plans		908	(3,648	)	66,520		63,780
Restricted stock		5,478			16,873		22,351

Balances, February 28, 2002	$96,463	$286,480	$1,892,189		$(627,336	)	$1,647,796

See Notes to Consolidated Financial Statements.
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Consolidated Statements Of Cash Flows

Year Ended	February 28,		February 28,		February 29,
(In thousands)	2002		2001		2000

Cash Flows From Operating Activities:
Net earnings	$71,501		$ 287,477		$ 382,921
Noncash and nonoperating items included in earnings:
Depreciation and amortization	123,125		100,348		63,380
Expense of restricted stock awards	22,568		32,581		34,244
Deferred income taxes	(22,443	)	4,344		12,951
Loss (gain) on investments, net	5,625		(11,751	)	(75,236	)
Allowance for doubtful accounts	27,056		6,341		507
Restructuring charge	52,395		-		-
(Increase) decrease in operating assets:
Segregated cash and government securities	(14,466	)	8,396		(28,892	)
Securities purchased under agreements to resell	(27,471	)	(6,678	)	4,164
Securities borrowed	59,064		150,871		(34,692	)
Receivable from customers	797,411		485,791		(1,151,543	)
Receivable from brokers, dealers and clearing organizations	(14,301	)	(7,785	)	5,326
Fees, dividends and interest receivable	(5,070	)	(7,945	)	(10,912	)
Securities inventory	(84,192	)	115,092		(141,313	)
Trading investments, net	47,655		(87,809	)	29,390
Other assets	(36,805	)	(2,158	)	(24,083	)
Increase (decrease) in operating liabilities:
Checks payable	(12,951	)	(31,044	)	57,086
Securities sold under agreements to repurchase	45,861
Securities loaned	(98,699	)	(170,381	)	106,213
Payable to customers	83,280		(47,282	)	(2,703	)
Payable to brokers, dealers and clearing organizations	18,427		(80,045	)	134,710
Securities sold but not yet purchased	(994	)	6,274		(20,739	)
Employee compensation and related taxes	(105,974	)	(90,729	)	126,938
Deferred compensation	9,404		24,297		35,177
Income taxes	(40,858	)	(992	)	60,164
Other liabilities	26,842		12,752		29,547

Net cash from operating activities	925,990		689,965		(407,395	)


Cash Flows From Investing Activities:
Purchase of property and equipment	(190,808	)	(295,801	)	(130,912	)
Purchase of other investments	(72,926	)	(25,353	)	(20,272	)
Proceeds from sale or maturity of other investments	19,695		23,217		12,953

Net cash from investing activities	(244,039	)	(297,937	)	(138,231	)


Cash Flows From Financing Activities:
Short-term bank loans	(212,500	)	(318,200	)	638,000
Securities loaned	(407,432	)	313,363		301,929
Employee stock transactions	58,428		74,158		52,479
Purchase of treasury stock	(85,137	)	(446,726	)	(336,028	)
Cash dividends paid	(50,889	)	(53,106	)	(55,766	)

Net cash from financing activities	(697,530	)	(430,511	)	600,614


Net (Decrease) Increase in Cash and Cash Equivalents	(15,579	)	(38,483	)	54,988
Cash and Cash Equivalents, at Beginning of Year	116,004		154,487		99,499

Cash and Cash Equivalents, at End of Year	$ 100,425		$ 116,004		$ 154,487



Interest payments totaled $29,125 in 2002, $97,017 in 2001 and $21,495 in 2000. Income taxes paid totaled $85,947 in 2002, $165,304 in 2001 and $167,340 in 2000. Supplemental disclosures of noncash financing activities: Restricted stock awards, net of forfeitures, totaled $22,422 in 2002, $32,813 in 2001 and $34,611 in 2000. See Notes to Consolidated Financial Statements.

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Notes To Consolidated Financial Statements
(Three years ended February 28, 2002)
(Dollars in thousands, except 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 offers a wide range of services designed to meet clients’ individual investment needs, including securities and commodities brokerage, asset management, retirement planning, insurance, trust, investment banking and other related services. These services are provided by approximately 7,400 financial consultants in more than 700 locations of the Company’s principal operating subsidiary, A.G. Edwards & Sons, Inc. 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 49 states; the District of Columbia; and London, England.

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. Where appropriate, prior years’ financial information has been reclassified to conform to the current-year presentation.

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, the allowance for doubtful accounts, and the accrual for litigation, income tax and other reserves. 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.

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.

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 unsecured 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. Unrealized gains and losses are reflected in revenue.

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 may be susceptible to significant fluctuations in the near term.

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 45 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.

Stock-Based Compensation
The Company applies the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion No. 25), and related interpretations to account for its employee stock plans. Based on the provisions of the plans, no compensation expense has been recognized for options issued under these plans. Restricted stock awards are expensed in the year granted, which is the defined service period.

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. The Company files a consolidated federal income tax return.

Comprehensive Earnings
Comprehensive earnings for each of the three years in the period ended February 28, 2002, was equal to the Company’s net earnings.

Recent Accounting Pronouncements
On March 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and SFAS No. 138. The statements establish accounting and reporting standards for derivative instruments and hedging activities. The Company does not act as dealer, trader or end-user of complex derivatives such as swaps, collars and caps; however, the Company will occasionally hedge a portion of its debt inventory through the use of financial futures contracts. These transactions and the adoption of these statements did not have a material impact on the Company’s consolidated financial statements.

In September 2000, the FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This standard replaced SFAS No. 125 of the same name. SFAS No. 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. The Company adopted SFAS No. 140 in the fourth quarter of fiscal 2001 for disclosures relating to securitization transactions and collateral. The remaining provisions of SFAS No. 140 were adopted in the first quarter of fiscal 2002 for transfers and servicing of financial assets and extinguishments of liabilities and did not have a material impact on the Company’s consolidated financial statements.

In July 2001, the FASB released SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method. The adoption of SFAS No. 141 did not have a material impact on the Company’s consolidated financial statements. Under SFAS No. 142, intangible assets with indefinite lives and goodwill will no longer be amortized. Instead, these assets are required to be tested at least annually for impairment. The adoption of SFAS No. 142 will not have a material impact on the Company’s consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” This statement is effective for the Company’s consolidated financial statements beginning in fiscal year 2003. The adoption of this statement will not have a material impact on the Company’s consolidated financial statements.
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2. Restructuring and Other Charges
As a result of a number of actions taken to reduce costs, streamline its headquarters operations and better position the Company for improved profitability, a restructuring charge of $82,462 was recorded in 2002. The Company also recorded other charges of $44,500.

Restructuring Charge
The restructuring charge consists of technology asset write-offs of $46,332, severance costs of $18,605 and real estate consolidations of $17,525. Technology asset write-offs resulted from the discontinuance of certain technology projects resulting from a review by management of the Company’s technology priorities and redesign of its technology infrastructure. Workforce reductions of approximately 460 non-branch personnel were implemented through a combination of voluntary and involuntary separations. Real estate consolidation costs included the estimated loss on the planned sale or sublease of certain properties in the St. Louis area as the Company consolidates its headquarters staff to its main campus. The Company expects to complete the consolidation in the next fiscal year. No cash payments have been made as of February 28, 2002.

Other Charges
The Company incurred other charges of $44,500, which included reserves of $25,800 for a $37,660 partly secured margin loan. Among other factors, this estimated reserve was based upon the number of shares, trading volume and price volatility of the underlying collateral securing the loan. Due to the facts and circumstances surrounding the margin loan and underlying collateral, the Company’s estimate regarding collectibility may be susceptible to significant fluctuations in the near term. In addition, reserves of $16,900 were established in connection with customer litigation.
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3. Property and Equipment
At February 28, 2002 and 2001, property and equipment consists of:

	2002		2001

Land	$19,925		$17,979
Building and leasehold
improvements	244,789		230,057
Equipment and computer
hardware	458,226		441,111
Software and software
applications	141,700		143,991
Construction in progress	137,448		38,447

Total property and
equipment	1,002,088		871,585
Less: Accumulated depreciation
and amortization	(470,805	)	(362,615	)

Total property and
equipment, net	$531,283		$508,970

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4. 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 $371,000 in 2002, $1,100,000 in 2001 and $200,000 in 2000, at average effective interest rates of 3.2 percent in 2002, 6.5 percent in 2001 and 5.6 percent in 2000. 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 $283,000 in 2002, $406,000 in 2001 and $218,000 in 2000, at effective interest rates of 3.3 percent, 6.5 percent and 5.5 percent, respectively. Company-owned investments of $33,376 in 2002 and $34,854 in 2001 were utilized to secure certain bank borrowings. Banks do not have the ability to sell or repledge such investments. Substantially all other bank borrowings were secured by customer-owned securities.
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5. Employee Stock Plans
The Company applies the provisions of APB Opinion No. 25 to account for its employee stock plans. If compensation expense for the Company’s stock option and stock purchase plans were determined based on the estimated fair value of the options granted, consistent with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net earnings and earnings per share would have been as follows:

	2002	2001	2000

Pro forma net earnings	$63,000	$270,000	$372,000
Pro forma
earnings per share:
Diluted	$0.78	$3.22	$3.97
Basic	$0.79	$3.29	$4.04

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

Employee Stock Purchase Plan
Options to purchase 1,875,000 shares of common stock granted to employees under the Employee Stock Purchase Plan are exercisable October 1, 2002, at 85 percent of market price based on dates specified in the plan. Employees purchased 1,708,788 shares at $29.58 per share in 2002, 1,870,983 shares at $32.33 per share in 2001 and 1,871,284 shares at $21.89 per share in 2000. Treasury shares were utilized for all of the shares issued. The fair value of the options granted under this plan was estimated using the following assumptions for 2002, 2001 and 2000, respectively: dividend yield of 1.56 percent, 1.44 percent and 2.01 percent; an expected life of one year; expected volatility of 39 percent, 46 percent and 36 percent; and risk-free interest rates of 2.47 percent, 6.21 percent and 5.42 percent. The fair value of the options granted in 2002, 2001 and 2000 was $8.03, $14.08 and $5.99 per option, respectively.

Restricted Stock and Stock Options
Under the Company’s Incentive Stock Plan, three types of benefits may be awarded to officers and key employees: restricted stock, stock options and stock appreciation rights. Such awards are subject to forfeiture upon termination of employment during a restricted period, generally three years from the award date. Through February 28, 2002, no stock appreciation rights had been granted.

Restricted stock awards are made, and shares issued, without cash payment by the employee. Eligible employees at February 28, 2002, were awarded 564,550 shares with a market value of $24,614. At February 28, 2001 and 2000, the awards were 967,561 and 916,010 shares, respectively, with corresponding market values of $34,977 and $36,018. Treasury shares were utilized for these awards.

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 award and expire eight years from date of award 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 2002, 2001 and 2000, respectively: dividend yield of 1.56 percent, 1.44 percent and 2.01 percent; expected lives of six years; expected volatility of 38 percent, 35 percent and 32 percent; risk-free interest rates of 4.6 percent, 4.86 percent and 6.62 percent; and a forfeiture rate of 8 percent, 8 percent and 7 percent. The fair value of options granted under this plan in 2002, 2001 and 2000 was $16.37, $13.27 and $13.96, respectively.

A summary of the status of the Company’s stock options as of February 28 (29), 2002, 2001 and 2000, and changes during the years ended on those dates is presented as follows:

			2002			2001			2000

			Weighted			Weighted			Weighted
			Average			Average			Average
	Shares		Exercise	Shares		Exercise	Shares		Exercise
	(000	)	Price	(000	)	Price	(000	)	Price

Outstanding, beginning of year	4,803		$30.74	4,840		$27.52	4,597		$22.91
Granted	446		$43.60	901		$36.15	1,006		$39.32
Exercised	(474	)	$13.77	(828	)	$16.95	(723	)	$14.41
Forfeited	(45	)	$37.12	(110	)	$37.12	(40	)	$32.03

Outstanding, end of year	4,730		$29.49	4,803		$30.74	4,840		$27.52



Treasury shares utilized for exercises	474			828			723

The following table summarizes information about outstanding stock options at February 28, 2002:

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

$11-$15	256	1	$14.50	256	$14.50
$16-$20	387	2	$16.59	387	$16.59
$21-$25	381	3	$21.21	381	$21.21
$26-$35	899	5	$32.50	899	$32.50
$36-$40	1,829	6.49	$37.78	-	-
$41-$45	978	5.82	$43.31	533	$43.06

	4,730			2,456

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6. Employee Profit Sharing Plan
The Company has a defined contribution plan [401(k)] covering substantially all employees, whereby the Company is obligated to match, in specified amounts as defined therein, portions of contributions made by 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 $62,650 in 2002, $86,873 in 2001 and $104,787 in 2000 in connection with the 401(k).

The Company has an unfunded, nonqualified deferred compensation plan that provides benefits to participants whose contributions from the Company in the 401(k) are subject to Internal Revenue Service limitations. Participants may choose to base their return on the broker call rate or on the performance of one or more of a combination of mutual funds as designated by the Company. Participants have no ownership in the mutual funds. Included in investments are $70,259 in 2002 and $52,115 in 2001 in mutual funds that were purchased by the Company to hedge its liability to the participants that chose to base the performance of their return on the mutual fund option. The Company expensed $25,226 in 2002, $41,895 in 2001 and $43,933 in 2000 in connection with this plan.
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7. Net Capital Requirements
As a registered broker-dealer, A.G. Edwards & Sons, Inc. is subject to net capital rules administered by the Securities and Exchange Commission (SEC) and the New York Stock Exchange. 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 A.G. Edwards & Sons, Inc. to notify and sometimes obtain approval of the SEC and other regulatory organizations for substantial withdrawals of capital or loans to affiliates. At February 28, 2002, the subsidiary’s net capital of $616,892 was 25 percent of aggregate debit items and $566,624 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 A.G. Edwards, Inc. The only restriction with regard to the payment of cash dividends by A.G. Edwards, Inc. is its ability to obtain cash dividends and advances from its subsidiaries, if needed.

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8. Income Taxes
The provisions for income taxes consist of:

	2002		2001	2000

Current:
Federal	$53,282		$144,996	$188,529
State and local	(10,282	)	18,337	38,714

	43,000		163,333	227,243
Deferred	(22,443	)	4,344	12,951

	$20,557		$167,677	$240,194

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.

Significant components of deferred tax assets and liabilities at February 28, 2002 and 2001, are as follows:

	2002	2001

Deferred Tax Assets:
Employee benefits	$121,718	$138,341
Other	19,316	11,252

	141,034	149,593

Deferred Tax Liabilities:
Receivables	16,471	33,386
Investments	18,571	21,042
Property and equipment	11,070	22,252
Other	1,462	1,896

	47,574	78,576


Net Deferred Tax Assets	$93,460	$71,017

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. The Company’s effective tax rate was 22.3 percent in 2002, 36.9 percent in 2001 and 38.5 percent in 2000, which differed from the federal statutory rate of 35 percent.

A reconciliation of the effective tax rate and the federal statutory rate for 2002, 2001 and 2000 is as follows:

	2002		2001		2000

Federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes,
net of Federal tax benefit	(6.1	)	2.7		3.9
Research and development
credits	(4.3	)	-		-
Municipal bond interest	(3.3	)	(0.9	)	(0.5	)
Meal and entertainment
expenses	1.3		0.3		0.2
Other	(0.3	)	(0.2	)	(0.1	)

	22.3	%	36.9	%	38.5	%

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9. Investments
Investments consist of:

	2002	2001

Private equity	$110,493	$107,202
Mutual funds	88,939	75,724
U.S. government	10,080	25,830
Other	8,442	9,247

Total Investments	$217,954	$218,003

Private equity primarily consists of investments in a privately held investment management company and in Company-sponsored private equity funds. The Company has commitments of $95,483 to various private equity partnerships, of which $64,733 remain unfunded at February 28, 2002. The Company’s mutual fund investments are utilized primarily to hedge certain liabilities under its deferred compensation plan and also include a qualified investment 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 the Company’s broker-dealer subsidiary.

In 2000, the Company recognized a gain of $75,200, which is included in other revenue, from the sale of one-half of the Company’s investment in a privately held investment management company and the related increase in the carrying value of the remaining investment to its fair value. This investment had been carried on the equity method of accounting, which was discontinued due to the reduction of the Company’s ownership and the terms surrounding the remaining investment.
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10. Stockholders’ Equity
Earnings Per Share
The following table presents the computations of basic and diluted earnings per share:

	2002	2001	2000

Net earnings available to
common stockholders	$71,501	$287,477	$382,921



Shares (in thousands):
Weighted average
shares outstanding	80,013	82,096	92,140

Effect of dilutive
common shares:
Restricted shares	217	375	551
Stock purchase plan	276	508	357
Stock option plan	776	946	766

Dilutive common shares	1,269	1,829	1,674

Total weighted average
diluted shares	81,282	83,925	93,814



Earnings per share:
Diluted	$0.88	$3.43	$4.08
Basic	$0.89	$3.50	$4.16

Stock Repurchase Program
In February 2001, the Board of Directors authorized the repurchase of up to 10 million of the Company’s outstanding shares during a 23-month period. Repurchased shares are added to treasury stock to be used for employee stock plans and to partially offset the past and future effect of these plans. The Company purchased 2,164,900 shares with an aggregate cost of $85,137 in 2002 under this program; no shares were repurchased under this program in 2001.

The Company’s May 1996 stock repurchase program, which authorized the Company to purchase up to 33 million of its outstanding shares, ended in 2001 as the 33 million share limit was attained. The Company purchased 10,640,750 shares with an aggregate cost of $446,726 in 2001 and 11,032,500 shares at a cost of $336,028 in 2000 under this program.

Stockholders’ Rights Plan
The Company’s Stockholders’ Rights Plan, as amended, provides for the distribution of one Common Stock Purchase Right for each outstanding share of the Company’s common stock. The rights cannot be exercised or traded apart from the common stock until, without the prior consent of the Company, a third party acquires no less than 20 percent of the Company’s outstanding common stock or commences a tender or exchange offer that would result in the third party acquiring no less than 20 percent of the outstanding common stock. The Board of Directors may decrease the 20 percent thresholds to 10 percent of the outstanding stock. Each right, upon becoming exercisable, entitles the registered holder to purchase one share of common stock for $150 from the Company. If a person actually acquires no less than 20 percent, or 10 percent if appropriate, of the Company’s common stock without the Board of Directors’ consent, then each right will entitle the holder, other than the acquiring third party, to purchase for $150 the number of shares of the Company’s common stock (or in the event of a merger or other business combination, the number of shares of the acquirer’s stock) that has a market value of $300. The rights, which are redeemable by the Company at a price of $0.01 each prior to the person’s acquiring no less than 20 percent, or 10 percent if appropriate, of the Company’s common stock are subject to adjustment to prevent dilution and expire June 25, 2005.
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11. 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, 2002, are as follows:

Year ending February 28 (29),

2003	$105,600
2004	89,500
2005	67,300
2006	56,700
2007	47,500
Later years	114,000

	$480,600

Rental expense under all operating leases and service agreements was $115,816 in 2002, $94,455 in 2001 and $61,827 in 2000.

The Company has remaining commitments of $88,000 through 2004 for the construction of an additional office building and a learning center at its headquarters campus.

In the normal course of business, the Company enters into when-issued and underwriting commitments and delayed delivery transactions. Settlement of these transactions at February 28, 2002, would not have had a material effect on the consolidated financial statements.

At February 28, 2002, the Company had $70,106 of outstanding letters of credit, principally to satisfy margin deposit requirements with a clearing corporation. At February 28, 2001, the Company had $123,849 outstanding letters of credit, of which $10,000 was collateralized by customer-owned securities held in margin accounts.

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 plaintiff will result in losses to the Company on certain of these claims. Factors considered by management in estimating the Company’s liability are the loss and damages sought by the plaintiff, the merits of the claim, the total cost of defending the litigation and the likelihood of a successful defense against the claim, 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. While results of litigation cannot be predicted with certainty, management, after consultation with counsel, believes that resolution of all such litigation is not expected to have a material adverse effect on the consolidated balance sheets, statements of earnings or statements of cash flows of the Company.

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12. 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. Additionally, 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.

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 customers’ and other counterparties’ ability 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 deliver to counterparties to cover short positions. At February 28, 2002, the fair value of securities received as collateral where the Company is permitted to sell or repledge the securities was $3,367,130, and the fair value of the collateral that had been sold or repledged was $487,323.

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 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.

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13. 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 and London, England. 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, 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.

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

	2002	2001	2000

Transaction services	$1,548,824	$1,827,049	$1,971,589
Asset management
services	579,588	569,373	470,125
Interest	146,580	262,457	225,770
Other	63,421	82,327	128,705

	$2,338,413	$2,741,206	$2,796,189

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Independent Auditors’ Report

To the Board of Directors and Stockholders of A.G. Edwards, Inc.:

We have audited the accompanying consolidated balance sheets of A.G. Edwards, Inc. and subsidiaries (the “Company”) as of February 28, 2002 and 2001, and the related consolidated statements of earnings, stockholders’ equity and cash flows for each of the three years in the period ended February 28, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 at February 28, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 2002, in conformity with accounting principles generally accepted in the United States of America.

April 18, 2002
St. Louis, Missouri

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Board of Directors
A.G. Edwards, Inc.

		Member of A.G. Edwards, Inc.: 1 Executive Committee 2 Audit Committee 3 Compensation Committee 4 Nominating Committee
Robert L. Bagby ¹ Chairman of the Board, Chief Executive Officer	Dr. E. Eugene Carter ^2,3,4 Trustee, Charlotte R. Boschan Trust, Cambridge, Massachusetts

Benjamin F. Edwards IV ¹ Vice Chairman of the Board, President	Samuel C. Hutchinson Jr. ^2,3,4 President, Interface Construction Corp., Berkeley, Missouri

Ronald J. Kessler ¹ Vice Chairman of the Board	Peter B. Madoff ^2,3,4 Senior Managing Director, Bernard L. Madoff Investment Securities LLC, New York, New York	Mark S. Wrighton ^2,3,4 Chancellor, Washington University, St. Louis, Missouri

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Board of Directors A.G. Edwards & Sons, Inc.
Member of A.G. Edwards & Sons, Inc.: 5 Executive Committee 6 Finance Committee 7 Compensation Committee Robert L. Bagby ^5,6,7 Chairman of the Board, Chief Executive Officer, 27 years with A.G. Edwards Mary V. Atkin ^5,6,7 Executive Vice President, President, A.G. Edwards Technology Group, Inc., 24 years with A.G. Edwards Bill Branson Jr. Senior Vice President, Northeast Regional Officer, 8 years with A.G. Edwards Donnis L. Casey^5,7 Executive Vice President, Director of Staff, 35 years with A.G. Edwards Paul B. Coffee Senior Vice President, Western Regional Officer, 27 years with A.G. Edwards Terry J. Dessent Senior Vice President, Securities Research, 24 years with A.G. Edwards David J. Diffenauer Senior Vice President, Customer Accounting, 31 years with A.G. Edwards Benjamin F. Edwards IV^5,6,7 Vice Chairman of the Board, President, Director of Sales & Marketing, 24 years with A.G. Edwards Charles T. Forrest Senior Vice President, Fixed Income, 14 years with A.G. Edwards Charles J. Galli ⁵ Senior Vice President, Home Regional Officer, 23 years with A.G. Edwards Louis A. Ginocchio Jr. Senior Vice President, Great Lakes Regional Officer, 12 years with A.G. Edwards	Alfred E. Goldman ⁵ Corporate Vice President, Market Analysis, 42 years with A.G. Edwards Richard F. Grabish⁵ Senior Vice President, Assistant Director of Sales & Marketing, 21 years with A.G. Edwards Douglas L. Kelly^5,6,7 Executive Vice President, Secretary, Treasurer, Chief Financial Officer, Director of Law & Compliance, Director of Administration, 8 years with A.G. Edwards Ronald J. Kessler^5,6,7 Vice Chairman of the Board, Executive Vice President, Director of Operations, 34 years with A.G. Edwards Earl D. Laing Senior Vice President, Mid-Atlantic and Southeast Regional Officer, 36 years with A.G. Edwards Oliver M. Langenberg⁶ Senior Vice President, Institutional Sales and Research, 41 years with A.G. Edwards John F. Lee Senior Vice President, Pacific Coast Regional Officer, 15 years with A.G. Edwards James Michaels Senior Vice President, New York Operations, 29 years with A.G. Edwards Peter M. Miller Senior Vice President, Eastern Regional Officer, 13 years with A.G. Edwards Marlow N. Morgan Senior Vice President, Southern Regional Officer, 30 years with A.G. Edwards Thomas N. O’Donnell Senior Vice President, President, A.G. Edwards Trust Company, 7 years with A.G. Edwards	Paul F. Pautler^5,7 Executive Vice President, Director of Investment Banking, 4 years with A.G. Edwards Robert A. Pietroburgo ^5,6,7 Executive Vice President, Director of Branches, 15 years with A.G. Edwards Joseph G. Porter Senior Vice President, Assistant Director of Administration, 19 years with A.G. Edwards Howard R. Posner Senior Vice President, Corporate Syndicate-Equity, 20 years with A.G. Edwards John D. Quinn Senior Vice President, Securities Accounting, 33 years with A.G. Edwards Donald N. Robinson Senior Vice President, Central Regional Officer, 28 years with A.G. Edwards Michael Scafati Senior Vice President, Managed Products, 30 years with A.G. Edwards Daniel J. Schaub Senior Vice President, NASDAQ/OTC Trading, 21 years with A.G. Edwards David C. Sprowl Senior Vice President, Southwest Regional Officer, 28 years with A.G. Edwards Brian C. Underwood Senior Vice President, Compliance, 18 years with A.G. Edwards William J. Winter Sr. Senior Vice President, Assistant Treasurer, 35 years with A.G. Edwards Charles V. Zurfluh Senior Vice President, Branch Operations, 38 years with A.G. Edwards

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Boards of Directors
A.G. Edwards Technology Group, Inc. Robert L. Bagby Chairman of the Board and Chief Executive Officer Mary V. Atkin President Donnis L. Casey Benjamin F. Edwards IV Charles J. Galli Alfred E. Goldman Richard F. Grabish Douglas L. Kelly Ronald J. Kessler Paul F. Pautler Robert A. Pietroburgo A.G. Edwards Trust Company FSB Richard F. Grabish Chairman of the Board and Chief Executive Officer Thomas N. O’Donnell President Terry J. Dessent Benjamin F. Edwards IV Charles J. Galli Douglas L. Kelly Michael Scafati Charles V. Zurfluh AGE Commodity Clearing Corp. Ronald J. Kessler Chairman of the Board, Chief Executive Officer and President Douglas L. Kelly Thomas A. Petros Jr.	Edwards Development Corp. Douglas L. Kelly Chairman of the Board and President Donnis L. Casey Benjamin F. Edwards IV Ronald J. Kessler Eugene J. King, Jr. A.G. Edwards Life Insurance Company Douglas L. Kelly Chairman of the Board Michael Scafati President Robert L. Bagby Benjamin F. Edwards IV Charles T. Forrest Alfred E. Goldman Richard F. Grabish Ronald J. Kessler Thomas H. Martin Jr. Joseph G. Porter A.G.E. Properties, Inc. Robert L. Bagby Chairman of the Board Douglas L. Kelly President Donnis L. Casey Ronald J. Kessler	GULL-AGE Capital Group, Inc. Douglas L. Kelly Chairman of the Board and President AGE Investments, Inc. Douglas L. Kelly Director A.G. Edwards Capital, Inc. Paul F. Pautler Chairman of the Board, Chief Executive Officer and President Robert L. Bagby Benjamin F. Edwards IV Douglas L. Kelly Ronald J. Kessler Michael Scafati A.G. Edwards & Sons (U.K.) Limited Benjamin F. Edwards IV Chairman of the Board Douglas L. Kelly Robert A. Pietroburgo CPI Qualified Plan Consultants, Inc. Ronald J. Kessler Chairman of the Board and Chief Executive Officer Robert J. Dema President Sheryl K. Cheely Richard F. Grabish Douglas L. Kelly

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Branch Office Management
Alabama Anniston John M. Monroe Birmingham David H. Gilchrist Dothan Earl D. Laing* Fairhope Thomas S. Lott Sr. Florence Thomas T. Ross Gadsden Troy D. Wagnon Gulf Shores Thomas S. Lott Sr. Huntsville Benny N. Little Inverness Center Benson R. McLendon Jr. Mobile Jere W. Marques Montgomery Jeffrey S. Sprague Prattville Rondy K. Smith Selma Thomas R. Boyd Troy Robert K.T. Cole Jr. Arizona Carefree P. Josh Slocum Chandler-Tempe Theresa C. Clemmons East Tucson Kenneth C. Jacowsky Flagstaff Clifford E. Alexander Green Valley William H. Olsen Mesa William R. Berg Oro Valley Ben Palazzo Phoenix Daniel L. Christy III Pinnacle Peak Robert E. Rittel Prescott Gerry M. Thornbro	Prescott Valley Karen E. Baxter Scottsdale John S. Abbs Paul C. Ruble Jr. Sierra Vista Paula G. Beardsworth Surprise Michael J. Audisio Tucson Irving Mindes Arkansas Bella Vista John E. McLelland Berryville Allen Rogers Blytheville Shirley C. Magee Conway Curtis R. Williams El Dorado Andy E. Allen Fayetteville Brian L. Keck Fort Smith Elton E. Rambin Harrison Ronald C. Richardson Holiday Island Park Paul K. Engskov Hot Springs Joseph K. Patrico Hot Springs Village Brenda E. Riley Jonesboro R. Arnold Cooper Little Rock Robert W. Tucker Vallie B. Carney Mountain Home David W. Floyd Pine Bluff Walter K. Cash Rogers Steven R. Burkhead Russellville Danny C. Stobaugh Springdale Russell D. Beck	California Arroyo Grande Nathan F. Alvarado Bakersfield David D. Westerfeld Carlsbad Gary P. Endres Chico William D. Carson Jr. Del Mar Thomas S. Green El Dorado Hills Scott M. Nelson Escondido Jeffrey S. McCoy J. Webb Cate Eureka Laura K. Hussey Fairfield Glenn E. Holbert Fallbrook Robert W. Kuech Fort Jones Terence L. Ross Fresno Donald A. Vincenti Gilroy Richard Silverstein Grass Valley D. Robert Frew Hemet Michael E. Hornkohl Laguna Beach Kenneth E. Hansen Laguna Hills Mark J. Robles La Jolla Michael W. Jennings Lake San Marcos Kenneth R. Klauber Lincoln Hills James C. Lee Lodi Paolo F. Marchetti Long Beach Rahamin Suares Curtis L. Cribbs Modesto Randall K. Anderson Monterey Anthony S. Piazza	Napa Gregory R. van Kesteren Newport Beach Timothy C. Metcalf Northridge George W. Ott III Oakland Jon P. McGeath Orange Randall J. Beckman Oroville Kevin D. Zeitler James H. Moll Oxnard Anthony A. Russo Palm Desert William C. Lacy Palm Springs Mark F. Blalock Palo Alto Christopher W. Inglis Paradise John W. Nelson Pasadena David P. Luna Pismo Beach Juliet C. Franzen Pleasanton John P. Rohan Porterville Brett A. Schroeder Rancho Bernardo Robert R. Gonzales Redding Brian D. Gruber Redlands Robert R. Heinze Riverside Mary Carruthers Roseville Thomas P. Bjork Sacramento John F. Lee* Steven J. Hudgins San Diego Timothy P. Cronin San Francisco Paul A. Kromhout San Jose W. James O’Donoghue	San Juan Capistrano Robert W. Burns San Luis Obispo Glenn P. Johnson San Rafael Tomm E. Hudson Santa Barbara Americo J. Salvetti Santa Maria John E. Puscheck Santa Monica Francis V. Bennett Santa Rosa Samuel D. Slayden Silicon Valley Kenneth W. Green Stockton Larry D. Watts Temecula Steven W. Fillingim Torrance William E. Smith Truckee Kenneth S. Roberts Visalia John C. Merritt James E. Wohlford Walnut Creek Richard D. Russell Jr. Westlake Village Frank D. Covely Colorado Boulder Dennis H. Kaboth Cherry Creek James B. Haass Colorado Springs Gary A. Backstrom Richard A. Murphy Denver Michael A. Pappas James A. Wiltshire Durango Scott L. Woods Estes Park Debra A. Grill Evergreen Robert C. Thompson Fort Collins John R. Bennett Grand Junction Linda S. Arledge	Greeley Rick L. Runyan Greenwood Village Paul B. Coffee* Mark P. Fellows Interlocken Thomas E. Mahoney Lakewood James M. Wilday Longmont Ronald R. Billings Loveland Charles A. Bouchard Pueblo Gary A. Backstrom Connecticut Danbury Arnold H. Rozany Darien Martin P. McLaughlin Jr. Essex Edward J. Brennan Calvin C. Coburn Farmington Peter M. Miller* Bruce C. Stenquist Glastonbury John J. McDermott III Greenwich Lawrence A. Baker Hamden Richard Pignone Kimberly S. Hurd Hartford Patrick J. Sheehan Mystic Frederick C. Leonard New London Edwin Rachleff Southport John J. Kubica Jr. Wilton Paul A. Steffany Delaware Newark Frank A. Alteri District of Columbia Washington, D.C. William C. Mitchell

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Branch Office Management (continued)
Washington, D.C. -Downtown Bradford R. Coyle Loren D. Evans Florida Belleair Bluffs Larry Rudolph Boca Raton James D. Edge Bonita Springs Mark S. Preston Boynton Beach Jeffrey L. Hill Bradenton Gary M. Knuckles Cape Coral Patrick S. Zych Citrus Hills Michael T. Fels Clearwater Robert W. Hicks Clermont Frederick S. Lipp Coral Gables Alfredo Oliva Silvano R. Vizoso Jr. Daytona Beach John D. Carl Destin Edmond Waters Englewood Burton E. Mason Eustis Tracy M. Belton Fort Lauderdale Mark D. Hawkins Fort Myers James A. Nolte Fort Pierce Francis E. Campbell Fort Walton Beach Daniel R. Cauley Gainesville John H. Decker Jr. Holiday Kevin M. Crain Indialantic Gerald B. Goodchild Jacksonville Robert M. Ivey Kissimmee Robert Gillespie Lake Mary John R. Snively	Lake Worth Robert A. Lepa Marco Island Terrence J. McCreanor Melbourne Thomas W. Sinclair Merritt Island Robert W. Sullivan Naples Robert E. Price Ocala Richard A. Knight Orlando Robert S. Fox Ormond Beach Raymond C. Stephens Palm Beach Gardens James A. Collins Palm Coast Gary J. Smith Panama City August F. Yanke Panama City Beach Michael A. Protz Pensacola Eugene R. Borcz Port Charlotte Robert F. Fresard Port Richey Ronald J. May Punta Gorda Joshua M. Howell St. Armands Key William G. McDaniel St. Petersburg David A. Ossenmacher Sarasota Paul D. Buskey Sebring John R. Clark Seminole Larry P. Rudolph Spring Hill Charles R. Morgan Stuart Robert J. Sander Sun City Center Richard W. Sheffield Tallahassee John B. Mackie Tampa Robert B. Moler Jr. Titusville David D. David	Venice-North Bruce W. Haltinner Venice-South John W. Holic Vero Beach John D. Orcutt Jr. Viera Thomas R. Bedor The Villages Gregory E. Sutfin West Palm Beach Alex M. Bigelow* Larry E. Bernstein Winter Haven Ronald W. Snyder Zephyrhills Nancy L. Duffield-Cook Georgia Albany Frank P. O’Lear Jr. Athens Paul A. Bingham Jr. Atlanta Frederick J. Barton Augusta W. Neal Hines Canton Judy T. Ross Columbus Jon V. Davidson Jr. Dalton Gary B. Oliver Gainesville A. Frank Wiegand Jr. Griffin Michael S. Cain Johns Creek Roland H. deLiniere Macon John A. Wood Marietta Parks H. Brown Jr. Milledgeville William G. Neely III Rome Cecil B. Wright III Roswell James M. Broadway Sandy Springs Tiberio P. DeJulio	Savannah Thomas J. Hussey Thomasville William J. McCollum Tifton Yancey F. Carter III Hawaii Honolulu Tobias M. Martyn Idaho Boise Jerry L. Beto Coeur d’Alene Paul C. Barone Idaho Falls Fred T. Finlayson Ketchum James R. Everitt Pocatello Mark N. Buckalew Twin Falls Frederick C. Nelson Illinois Alton Neil R. Harrison Aurora Kevin A. Skogsberg Barrington Steven P. Fromm Belleville Rodney D. Vaught Robert D. Maurer Bloomington Charles A. Norman Burr Ridge Michael S. Ludlow Carbondale Barbara J. Blacklock Champaign Phillip B. Blankenburg Charleston Dan R. Cunningham Chicago Loop James H. Cox III Chicago-Michigan Avenue Pamela M. Olah Chicago- Union Station James A. Talley Michael J. Krause	Danville Keith R. Souza Decatur Jay A. Cunningham Edwardsville Richard R. Sims Effingham Kent C. Schmidt Elgin Robert L. Schrieber Galesburg Sid V. Carlson Geneseo Brian J. Gernant Jacksonville Michael H. Lansden Jerseyville Anita M. Rose Joliet Warren C. DeNardo Lake Forest Robert W. Skipton Lincoln Philip M. Dehner Lisle Michael J. Lantz Macomb Joseph A. Bartlow Morris Edward L. Capko Mount Vernon Victoria L. Kirk Naperville Vicky S. Campbell Oakbrook Robert D. Gagnon Palos Heights David C. Heide Peoria Thomas R. Henrichs Peru David A. Claggett Quincy Richard V. Marcolla Rockford Martin L. Smith Roselle David W. Hanson St. Charles Craig S. Morgan Skokie Louis J. Welborne Springfield Craig R. Schermerhorn Anthony M. Guzzardo	Waterloo Gary W. Hency Woodstock Dennis L. Anderson Virgil R. Smith Indiana Auburn Juliann McWilliams Bloomington Daniel F. Davila Carmel Theodore J. Sturges Chesterton Mark S. Lazart Columbus Jeremy S. Donaldson Evansville Stephen H. Merrick Fishers James P. Roederer Fort Wayne Richard L. Miller Greenwood Anthony C. La Rosa Indianapolis Dean J. Abplanalp Kokomo Michael V. Ricci Merrillville H. Dean Davis Muncie Katherine M. Onieal New Albany Timothy W. Newman Richmond Donald E. Bates Jr. South Bend Edward L. Patzer Terre Haute Rodney R. Heefner Iowa Burlington Linda M. Kelly Cedar Rapids Julianne E. Smith Davenport Stanley M. Reeg Des Moines Douglas A. West Dubuque Dennis J. Houlihan

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Branch Office Management (continued)
Iowa City Darrel G. Courtney Keokuk Heather J. Barnett Marshalltown Jay P. Merryman Mason City Robert M. Zishka Mount Pleasant Patrick J. McCabe Sioux City Michael J. Woods Storm Lake Alan E. Bowles Waterloo Richard D. Pilipchuk Kansas Abilene Patricia M. O’Malley-Knox Garden City Sean P. Thayer Randall A. Fisher Hutchinson Roger D. Gatton Independence Robert J. Miller Lawrence Jerald L. Samp Liberal Thomas C. Mein Manhattan Jayson C. Kaus Overland Park Gene M. Diederich* Steven B. Vecchio Martin C. Bicknell Pittsburg Jason E. McElwee Salina Kenneth M. Wedel Wichita Roger A. Buller Kentucky Ashland James E. Schroth Bowling Green Marc W. Evans Lexington Byron L. Holley	Louisville John J. Wingfield Owensboro Larry H. Beisel Jr. Paducah John A. Williams Louisiana Alexandria Lucien A. Branch Jr. Bart B. Schmolke Baton Rouge Gerald T. Goss Robert G. Hazel Franklinton Thomas M. Lewis Hammond Herbert J. Payne Frank J. VanMullem Jennings Keith J. Broussard Lafayette Thomas W. Grote Lake Charles Glenn R. Granger Reed Mendelson Mandeville Allen J. Catalanotto Monroe Marlow N. Morgan* Mary Ann Frost Natchitoches William H. Cross New Orleans Douglas A. Potter Opelousas Gregory M. Bordelon Ruston Bobby J. Conville Jr. Shreveport Clyde B. French Maine Auburn Christopher C. Coburn Bangor Harry W. Moses Jeffrey H. Jackson Camden Glenn E. Buckingham Portland R. Bartlett Osgood III Waterville David F. Radsky	Maryland Annapolis Kevin D. Brady Baltimore Richard K. Sutor Bel Air Herbert F. Otto Columbia Glenn A. Drake Easton R. Barry Drew Hunt Valley Stephen G. Mitchell Salisbury Brian C. Timken Massachusetts Boston Gerald J. Buckley Boston-Back Bay Albert A. Fagan III Chelmsford Daniel S. Hanley East Harwich Jon O. Laurell Fall River Richard B. Wolfson Falmouth Francis X. Keohane Greenfield James D. Talbert Hingham John M. Koulopoulos Hyannis David J. Mason New Bedford Joseph Barry Jr. Newton Lower Falls Eric H. Burt Northampton Robert R. Wolanske Peabody E. Alan Freeman Daniel R. Santanello Pittsfield Thomas W. Neely Plymouth Fred J. Gennelly Springfield John J. Sullivan Jr. Worcester Sarah G. Berry	Michigan Ann Arbor Michael J. Fulkerson Battle Creek Charles J. Carroll Bay City Harold M. Miller Bloomfield Hills Sarah K. Rosner Cascade Stephen D. Bowman Clinton Township Donald J. Van De Steene Dearborn John P. Mathey Farmington Hills Stephen M. Sherline Flint Edwin E. Luke Grand Rapids James E. Marosi James E. Preston Gross Pointe Woods Craig J. Kohler Holland David J. Young Jackson James S. Grace Kalamazoo Jerry J. Cross Midland Doak R. Stolz Richard L. Smith Okemos James L. Carter Owosso Paul A. Schluckebier Port Huron Thomas K. Andison St. Joseph Craig A. Herrington Traverse City Glenn C. Hirt Troy F. Daniel Mirabella Minnesota Eden Prairie Rick K. Kendall Edina Robert S. Hansen	Fergus Falls Roger B. Johnson Minneapolis Charles M. Maguire Mississippi Clarksdale Hiram L. Dilworth Columbus Dan L. Holley Gulfport J. Doug Medley Hattiesburg Duane L. Raanes Jackson Hance W. McKenzie Jr. Meridian William S. Hudson Pascagoula Michael F. Odom Starkville Robert M. Crosland Missouri Blue Springs Charles S. Cooper Gerald F. Kurth Branson Mitchell L. Walker Cameron William L. Nash Cape Girardeau Marsha M. Limbaugh Clayton Blake R. Dunlop Columbia James G. Church Robert P. Stansberry Festus John D. McAtee Sr. Florissant Larry D. Richardson Frontenac Charles J. Galli* Gerald H. Cooper Hannibal Kenneth W. Greger Jackson Timothy W. Gutwein Jefferson City Jon R. Gilstrap Joplin Bryan D. Vowels	Kansas City Plaza Brian T. Wall Kirksville Jeffrey Dudgeon Lebanon Gregory V. Sullivan Liberty James J. Ballinger Louisiana Clyde E. Penrod Moberly Jerry C. Jeffrey O’Fallon William H. Dillingham III Osage Beach James M. Herfurth Rolla Mark T. Riefer St. Charles Steve A. Mahler St. Joseph David M. Pickett St. Louis-Downtown Edward J. Costigan Jr. Sikeston Elmer E. Grant Springfield David L. Burnette Sunset Hills Patrick J. Howley Town & Country James K. McAtee Washington Charles J. Trankler Montana Missoula Roger T. Roy Nebraska Beatrice Thomas L. Shutts Grand Island Dan A. Govier John C. Stinson Lincoln Loy U. Olson North Platte Kevin P. Kennedy Jr. Omaha Randall C. Peck

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Branch Office Management (continued)
Nevada Incline Village Frederick C. Findeisen Las Vegas Fred T. Snyder Reno John C. Meadows Stateline Henry R. Serrano Jr. Summerlin Daniel R. Jackson New Hampshire Claremont Gisela M. Polleys Concord William D. Chapin Hanover E. Clinton Swift Keene Terry D. Schnare Laconia Richard V. Breton Nashua Richard T. Iannacone New London Philip D. Estabrook III North Conway Henry N. Forrest Portsmouth Rohe V. Pennington III New Jersey Bernardsville Peter L. Roselle Cape May Henry S. Brzyski Cherry Hill Walter J. Schwenk East Brunswick Michael J. Doherty Green Village Brian J. McCafferty Hillsborough Patricia L. Halpern Morristown Joseph J. Bancheri Northfield Donald N. Levy Gene N. Schraeder Jr. Oradell Joseph Buono Grace M. Galvin Princeton Constantine Giviskos	Rockaway Fred K. Ecke Jr. Short Hills Frank M. Taylor Spring Lake James J. Coughlin Voorhees Charles J. McAfee Warren Walter W. Roth New Mexico Albuquerque David M. Adams Carlsbad Constance J. Schoeld Las Cruces Bruce A. Reed Roswell Brian D. Stokes Santa Fe Robert E. Bennett New York Albany Terry L. Jandreau Binghamton Carol A. Eurillo Buffalo Karl I. Riner Cooperstown Carolyn L. Anderson Corning David W. Davies Garden City Michael J. DiSilvio Glen Cove Kevin W. Pettersen Hudson Valley Jeffrey T. Zelin Huntington Alan M. Borko Ithaca Catherine L. Mawicke Lake Placid Charles G. Cowan New York City-Midtown J. William Forrester Olean Lynn R. Johnson Oneonta Frank G. Burden	Port Jefferson Jeffrey D. Thiele Rochester Joseph E. Klarberg Smithtown Kevin A. Healy Southampton Michael W. Kreimer Syracuse Randall J. Powers Bill Branson Jr.* Utica Eugene L. D’Amico Sr. White Plains Neal J. Baumann North Carolina Asheboro Joseph G. Thomas Asheville Robert R. Douglas Asheville-South William M. Pomeroy Ballantyne Walter C. Martin Burlington James D. Mackintosh III Shannon S. Mackintosh Charlotte David S. Younts Harry B. Smith III Fayetteville S. Lynn Legatski Greensboro Steven B. Holbrook Greenville Herbert L. Ormond III Hendersonville Scott E. Price Hickory Clifford J. Watts Highlands Steven R. Perry High Point Peter B. Wint Lake Norman Kevin D. Phillips Morehead City Phillip B. Nelson Pinehurst Walter L. McGowan	Raleigh Alexander Mihajlov Rocky Mount Barden Winstead Jr. John W. Lewis Shallotte Carolyn B. Felton Southport Albert Elrod Tryon Robert M. Tobey Wilmington Michael A. Faulkenbury North Dakota Bismarck Irvin A. Smith III Fargo Charles E. Hanish Grand Forks Keith A. Bjerk Jamestown Rick E. Bosche Ohio Akron Samuel D. Baio Ashtabula Daniel M. Huffman Blue Ash Sue Bowman Cambridge Tommy D. Davey Chardon Terry R. Campbell Chillicothe Tom D. Hamsher Cincinnati Louis A. Ginocchio Jr.* Arthur L. Fischer Cleveland John N. Janoch Columbus Brent A. Markley Dayton Roger B. Chudde Findlay Edward F. Abbey Jr. Lancaster James R. Lewis Lima Phillip L. Trueblood	Mansfield N. Thomas Steury Medina Joseph A. Hanna Mentor Nicholas C. Tibaldi William A. Rigo Toledo Gerald L. Sliemers Westlake Kurt A. Faulhaber Worthington Martin E. VandenBroek Zanesville Jay J. Gruenebaum Oklahoma Bartlesville George L. Sneed El Reno Thomas H. Avant Enid Alan G. Stong Grove David L. East Lawton Charles E. Young John B. Wolverton Oklahoma City Barry D. Gangwer Ponca City Patrick J. Mulligan Stillwater Eric W. Hodson Tulsa George E. Ferguson Oregon Bend Michael A. Groat Corvallis Andrew E. Jones Eugene Gary L. Feldman Medford David R. McDermott Portland Burton L. Beahm Portland/Downtown James L. McCulley Roseburg Melvin G. Duncan Salem Michael J. Kitzmiller	West Linn Janet M. Hudson Pennsylvania Abington George A. Porreca Jr. Beaver Gerald E. Gebbia Bethlehem Scott A. Brantingson Cranberry Nancy J. Lynches Greensburg Robert A. Moffet Jr. Harrisburg Richard J. Beatty Meadville Robert C. Asmus Media Timothy E. Griffith Peters Township James L. Lockerman Pittsburgh John T. Barbour David W. Spatig Scranton Keith R. Kleinman Sharon Ronald J. Koshar South Hills Rande T. Casaday Stephen P. Patrick Rhode Island Charlestown Dennis P. McGuire Newport James L. Carroll Providence Robert L. Capone South Carolina Aiken William G. Paschal Beaufort William R. Hatcher Bluffton Fred Barton Sr. Charleston William C. Tumlin Columbia Albert L. Stallings Jr. Florence Frank J. Brand II

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Branch Office Management (continued)
Greenville D. Michael Plemmons Hilton Head Island Todd H. Crutchley Inman Janice C. Farrell Laurens Mark A. Kelly Myrtle Beach Ruell L. Hicks Jr. Pawleys Island Michael J. Hirsch Perrin Q. Dargan Seneca Jesse E. Wright III Spartanburg William T. Brown Sumter Charles Alessandro South Dakota Aberdeen Richard W. Niebuhr Craig D. Golz Huron Daniel L. Reinders Mitchell Dennis M. Martin Rapid City Patrick D. Malone Emiel E. Belzer Sioux Falls Joseph C. Wood Watertown Thomas C. Beadnell Tennessee Chattanooga Joseph E. Petty Johnson City Gregory G. Schuette Knoxville William K. West III Memphis Charles H. Long Jr. Morristown John E. Martin Nashville Richard J. Eskind Texas Abilene Gerald A. Galbraith Addison John O. Norwood	Amarillo Jesse C. Miller Arlington Jack R. Alexander Jr. Austin Hollis L. Jefferies Jr. Beaumont Michael W. Morgan Brownsville Randy D. Edington Bryan Robert L. Allen Champion Brett A. Tynes Clear Lake Rolfe R. Young Conroe Donald W. Kainer Corpus Christi Matt P. Paul Dallas Lois M. Powell Denton R. Kyle Ratcliff DFW-Mid Cities Stephen T. Campbell El Paso Kent D. Mitchell Fort Worth Terry C. Hayes Galveston Marshall D. Stein Georgetown Michael D. Cooke Greenville Allison D. Tarplay Harlingen Sam T. Hahs Houston Robert L. Rogers Downtown Houston Philip D. Gundy Katy Arthur E. Harding Kerrville Franklin C. White Kingwood Mark A. Owens Lake Jackson Gary L. Foose Jr. Laredo Oscar O. Lopez Las Colinas Thomas E. Frye	Lewisville Dan H. Barlow Longview Dave L. Spurrier Lubbock Bill D. Lane Lufkin John P. Friesen Marble Falls Charles L. Bowen McAllen Gregory A. Douglas McKinney Ricky L. Brewer Memorial City Richard W. Ashcroft Midland Bhupendra K. Agrawal Nacogdoches John D. Montfort Odessa Charles R. Eubanks Palestine Charles M. Bennett Pampa Richard P. Russell Paris Robert M. Smith Park Cities-Dallas Edward H. Ladd III M. Earl Hudman Plano Jimmy J. Beale Rockwall James E. Koestner San Angelo J. Greg Gray San Antonio Dennis N. Kamphoefner San Antonio- Stone Oak Jonathan F. Thrall Sherman David C. Sprowl* Gail W. Utter Sugarland Douglas O. Elliott Temple John R. Holmes Texarkana Scott DuBois Judy Carmeli Tyler Brent S. Lemons	Victoria William L. Holter Waco Keith A. Ferguson West Austin Thomas T. Langmead Wichita Falls Ralph Grantom The Woodlands William D. Stigall Utah Draper Michael C. Forbes Logan Nolan P. Gunnell Salt Lake City L. Rand Jolley Vermont Barre William M. Hedberg Brattleboro Frances K. Stotz Burlington Paul M. Andrew Jr. Manchester Katherine W. Traver St. Johnsbury Judith A. Kendall Virginia Alexandria Frank E. Key Jr. Charlottesville James B. Neligan Danville† Larry B. Swaney Gloucester Aubrey J. Ellis Harrisonburg Daniel E. Grandstaff Leesburg Katherine M. Owens Norfolk Robert J. Ballard Richmond Lee P. Dudley W. Taliaferro Thompson III Roanoke Richard W. Wertz Robert H. Kulp Tazewell Jeffrey D. Murray	Washington Bellingham Scott A. Hume Chehalis Judith G. Archibald Colville Susan M. Poe Edmonds Douglas M. Reilly Kirkland Steven L. Tracy Mount Vernon Arthur E. Larvie Seattle Kim R. Salzwedel Spokane Chadwick C. Gladhart Donald L. Cutler Tacoma Albert Sullivan Vancouver Dean G. Alsup West Virginia Bluefield Alfred E. Garrett Charleston Michael N. Barnett Huntington Garry L. McClure Morgantown Kevin K. Wilson Wisconsin Appleton Graham A. Werner Beaver Dam Calvin L. Hemling Mark Killingsworth Brookfield Robert M. Derks Burlington Michael P. Sonnichsen Eau Claire Michael D. Markin Elkhorn Tyson J. Ray Fond du Lac Jay H. Weiland Franklin Ellen M. Duhamel	Green Bay Richard G. Kellogg Janesville Michelangelo J. Lamendola La Crosse Edward S. Neuman Madison A. Paul Olsen Mequon Richard L. Davis Milwaukee Thomas J. Caufield Oconomowoc Steven M. Cremer Oshkosh Ronald L. Gray Sturgeon Bay David L. Harris Wausau Edward C. Fox III Wyoming Cheyenne David E. Foreman Jackson Hole Kelly D. Lockhart Regional Officer †Branch opened after February 28, 2002 London, England* A.G. Edwards & Sons (U.K.) Limited Angus L. Carlill

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Shareholder Information

Annual Meeting
The 2002 Annual Meeting of Stockholders will be held at the Company’s headquarters, One North Jefferson, St. Louis, Missouri, on Thursday, June 20, 2002, at 10 a.m. The Notice of Annual Meeting, Proxy Statement and Proxy Voting Card are mailed in May to each stockholder. 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 Dates
The next four anticipated dividend payment dates are July 1 and October 1, 2002, and January 2 and April 1, 2003.

Form 10-K
The Form 10-K annual report filed with the Securities and Exchange Commission, which provides further details on A.G. Edwards’ business, is available at no charge from:

Secretary, A.G. Edwards, Inc.
One North Jefferson
St. Louis, Missouri 63103

Stock Exchange Listing
A.G. Edwards, Inc. stock is traded on the New York Stock Exchange under the symbol AGE. The approximate number of stockholders on February 28, 2002, was 25,400.

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

Account Protection Package
The securities held by A.G. Edwards & Sons, Inc. for client accounts are protected up to $500,000, including up to $100,000 for cash claims, by the Securities Investor Protection Corporation (SIPC). In addition to the SIPC coverage, securities and cash held in client accounts are provided additional protection to the full value of the account (as determined by SIPC) by a commercial insurance company.

Exchange Memberships
A.G. Edwards companies are members of all major domestic stock and commodity exchanges, including the American, Boston, Chicago, New York, Pacific and Philadelphia stock exchanges; the Chicago Board Options Exchange; the Chicago Board of Trade; the Chicago Mercantile Exchange; the New York Board of Trade; the New York Mercantile Exchange; and other commodity exchanges. A.G. Edwards companies are also members of the National Futures Association and the National Association of Securities Dealers, Inc.

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A.G. Edwards, Inc.
One North Jefferson
St. Louis, Missouri 63103
(314) 955-3000
www.agedwards.com