Exhibit
10.5  KBW,
Inc. Annual Incentive Plan  Section 1.               Purposes.  The purposes of the KBW, Inc. Annual
Incentive Plan (the Plan) are to attract, retain and motivate selected
employees of KBW, Inc. (KBW) and its subsidiaries and affiliates
(together with KBW, and their and its successors, the Firm) in order
to promote the Firms long-term growth and profitability. Section 2.               Administration. (a)           Role of Chief Executive Officer.  Subject to Section 2(b) and applicable law
and regulation, the Plan shall be administered by the Chief Executive Officer
of KBW (such Chief Executive Officer (or, if applicable, its permitted delegate
pursuant to the next following sentence), the Plan Administrator).  Subject to applicable law and regulation, the
Plan Administrator may delegate to any person or group of persons any of its
responsibilities and authority hereunder. (b)           Role of Compensation Committee.  Notwithstanding Section 2(a), the
Compensation Committee (the Committee) of the Board of Directors of KBW
(the Board) shall make all determinations regarding the compensation
of the Chief Executive Officer of KBW hereunder and shall make recommendations
to the Plan Administrator with regard to the compensation of other executive
officers of KBW under the Plan.  For
purposes of the Plan, the term Plan Administrator shall be deemed to refer to
the Committee to the extent the context or facts and circumstances relate to
the compensation of the Chief Executive Officer of KBW. (c)           Administrative Authority.  The Plan Administrator shall have the sole
discretion to (i) construe, interpret and implement the Plan, (ii) prescribe,
amend and rescind rules and regulations relating to the Plan, including rules
and regulations governing its own operations, and (iii) make all
determinations necessary or advisable in administering the Plan.  The determination of the Plan Administrator
on all matters relating to the Plan or any amounts payable thereunder shall be
final, binding and conclusive. Section 3.               Plan
Year.  The Plan shall operate for
successive fiscal years of KBW (each, a Plan Year).  The first Plan Year shall be the 2006 fiscal
year. Section 4.               Participation.  Participants in the Plan shall generally
include the Firms senior executives and other professional employees (the Participants).  the Plan Administrator shall have the authority
at any time during the Plan Year to add Participants to or to remove
Participants from the Plan for that Plan Year. 
Designation as a Participant with respect to any Plan Year does not
create a right to payment of a bonus hereunder for such Plan Year or to
participation in a subsequent Plan Year. Section 5.               Determination
of Bonus Amounts. (a)           Establishment of Bonus Pool.  For each Plan Year, a bonus pool (the Bonus
Pool) shall be established by the Plan Administrator, in consultation with
the Committee, in the following manner: 
The size of the Bonus Pool will be based upon a percentage of KBWs
revenue for the Plan Year (the Plan Year Percentage).  The Chief Executive Officer of KBW will
establish the Plan Year Percentageduring the
first quarter of


each
Plan Year,based upon KBWs estimated annual
budget for the Plan Year.  During the
course of the Plan Year, the Chief Executive Officer of KBW may adjust the Plan
Year Percentage upward or downward based upon actual performance of KBW as
compared to the estimated annual budget. 
At the end of the Plan Year, the Chief Executive Officer of KBW will
establish the aggregate amount of the Bonus Pool subject to approval by the
Committee, based upon the Plan Year Percentage (as adjusted pursuant to this
Section 5(a)). (b)           Allocation of Bonus Pool.  Except as provided below, the Plan
Administrator shall in its sole discretion determine the allocation of the Bonus
Pool for each Plan Year among the Participants, which allocation may be made at
any time prior to payment of bonuses for such Plan Year pursuant to Section
6.  Such determination may take into
account any factors deemed appropriate by the Plan Administrator, including,
without limitation, assessments of individual performance, subsidiary,
department or division performance and overall performance of KBW, in addition
to input of the Firms management and of the Committee (which shall make
recommendations to the Plan Administrator regarding compensation of KBWs
executive officers).  Notwithstanding the
foregoing, the Committee shall determine the portion of the Bonus Pool to be
allocated to the Chief Executive Officer of KBW, and the Plan Administrators
authority to allocate the Bonus Pool pursuant to this Section 5(b) shall apply
to the remainder of the Bonus Pool. 
There is no requirement that the entire Bonus Pool for any Plan Year be
allocated to Participants. (c)           Termination During Plan Year.  If a Participants employment with the Firm
terminates for any reason before the end of a Plan Year, unless otherwise
determined by the Plan Administrator, such Participant shall not participate in
the allocation of the Bonus Pool under the Plan. Section 6.               Payment
of Bonus Amount; Voluntary Deferral. 
Each Participants bonus shall be payable by KBW (or the subsidiary of
KBW that employs the Participant)in cash and/or
(subject to the approval of the Committee) an equity-based award of equivalent
value (as determined by the Committee), with the cash portion paid at such time
as bonuses are generally paid by KBW (or the employing subsidiary) for the
relevant Plan Year, but in no event shall such payment be made later than March
15 of the calendar year immediately following the applicable Plan Year.  The cash portion shall be payable to a
Participant in U.S. dollars or, if the Participant is located outside the
United States, in U.S. dollars or local currency (as determined by the Plan
Administrator) based upon such conversion rates as the Plan Administrator
determines appropriate.  Subject to
applicable law and to approval by the Plan Administrator and to any requirements
imposed by the Plan Administrator in connection with such approval, each
Participant may be entitled to defer receipt, under the terms and conditions of
any applicable deferred compensation plan of the Firm, of part or all of any
payments otherwise due under this Plan. 
Any equity-based award shall be granted pursuant to the terms of KBWs
equity incentive plan as in effect from time to time and shall be subject to
such terms and conditions (including vesting requirements and restrictive
covenants) as the Committee may determine. Section 7.               General
Provisions. (a)           Amendment; Termination.  The Board reserves the right at any time and
from time to time to modify, alter, amend, suspend, discontinue or terminate
the Plan, including  2


in
a manner that adversely affects the rights of Participants. (b)           Nonassignability; Designation of
Beneficiaries.  No rights of any
Participant (or of any beneficiary pursuant to this Section 7(b)) under the
Plan may be sold, exchanged, transferred, assigned, pledged, hypothecated or
otherwise disposed of (including through the use of any cash-settled
instrument) other than by will or by the laws of descent and distribution.  Any assignment in violation of the provisions
of this Section 7(b) shall be void. (c)           Plan Creates No Employment Rights
or Entitlement.  Nothing in the Plan
shall confer upon any Participant the right to continue in the employ of the
Firm for the Plan Year or thereafter or affect any right which the Firm may
have to terminate such employment.  Each
Participant recognizes and agrees that prior to being selected by the Plan
Administrator to participate in the Plan, such Participant has no rights
hereunder.  Accordingly, in consideration
of a Participants selection to participate in the Plan, each Participant
expressly waives any right to contest the amount of any bonus payable hereunder,
the terms of the Plan, the amount of the Bonus Pool, any determination, action
or omission hereunder by the Plan Administrator, KBW, or the Board or any
committee thereof, or any amendment to the Plan. (d)           Arbitration.  Any dispute, controversy or claim between the
Firm and any Participant arising out of or relating to or concerning the
provisions of the Plan shall be finally settled by arbitration in New York City
before, and in accordance with the rules then obtaining of, the New York Stock
Exchange, Inc. (the NYSE) or, if the NYSE declines to arbitrate the
matter, the American Arbitration Association (the AAA) in accordance
with the commercial arbitration rules of the AAA.  Prior to arbitration, all claims maintained
by any Participant must first be submitted to the Plan Administrator in
accordance with claim procedures determined by the Plan Administrator in its
sole discretion.  Each Participant hereby
agrees, as a condition to such Participants participation in the Plan, to keep
confidential the existence of, and any information concerning, a dispute
described in this Section 7(d), except that a Participant may disclose
information concerning such dispute to the arbitrator or court that is
considering such dispute or to such Participants legal counsel (provided that
such counsel agrees not to disclose any such information other than as
necessary to the prosecution or defense of the dispute). (e)           Governing Law.  ALL RIGHTS AND OBLIGATIONS UNDER THE PLAN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. (f)            Tax Withholding.  In connection with any payments to a
Participant or other event under the Plan that gives rise to a U.S. federal (or
similar tax in the applicable non-U.S. jurisdiction) or other governmental tax
withholding obligation relating to the amounts paid or payable under the Plan
(including, without limitation, FICA tax or social security (or similar)
contributions), (i) the Firm may deduct or withhold (or cause to be deducted or
withheld) from any payment or distribution to such Participant whether or not
pursuant to the Plan or (ii) the Plan Administrator shall be entitled to
require that such Participant remit cash (through payroll deduction or otherwise),
in each case in an amount sufficient in the opinion of the Firm to satisfy such
withholding obligation.  3


(g)           Right of Offset.  The Firm shall have the right to offset,
against the obligation to pay amounts to any Participant under the Plan, any
outstanding amounts (including, without limitation, travel and entertainment expense,
or advance account balances, loans, tax withholding amounts paid by the Firm or
amounts repayable to the Firm pursuant to tax equalization, housing, automobile
or other employee programs) such Participant then owes to the Firm. (h)           Non-Pensionable.  Amounts payable under the Plan shall not be
treated as pensionable earnings for purposes of any pension plan maintained by
the Firm, unless explicitly provided otherwise in such plan. (i)            Severability.  If any of the provisions of this Plan is
finally held to be invalid, illegal or unenforceable (whether in whole or in
part), such provision shall be deemed modified to the extent, but only to the
extent, of such invalidity, illegality or unenforceability and the remaining
provisions shall not be affected thereby. (j)            No Third Party Beneficiaries.  The Plan shall not confer on any person other
than the Firm and any Participant any rights or remedies hereunder. (k)           Successors and Assigns.  The terms of this Plan shall be binding upon
and inure to the benefit of KBW and its successors and assigns. (l)            Plan Headings.  The headings in this Plan are for the purpose
of convenience only and are not intended to define or limit the construction of
the provisions hereof. (m)          Construction.  In the construction of this Plan, the
singular shall include the plural, and vice versa, in all cases where such
meanings would be appropriate.  4


IN
WITNESS WHEREOF, and as evidence of the adoption of this Plan effective as of October 30,
2006, by KBW, it has caused the same to be signed by its duly authorized officer
this 30th day of October, 2006. KBW, INC.By:
  /s/ Mitchell B. KleinmanName: Mitchell B. KleinmanTitle:   General Counsel  5