UNITED STATES SECURITIES
  AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K ANNUAL REPORT PURSUANT
  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended February 28, 2003  Commission file number
  1-8527




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

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


|TITLE OF
      EACH CLASS             | NAME OF
      EACH EXCHANGE
      ON WHICH REGISTERED
|------------------------------------- | -----------------------------------------------------
|                                     
|Common
      Stock, $1 par value      | New
      York Stock Exchange                        
|Rights
      to purchase common stock | New
      York Stock Exchange                        

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

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

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

Indicate
  by check mark whether the registrant is an accelerated filer (as defined in
  Rule 12b-2 of the Act).Yes
  |X|   No |_|.

The
  aggregate market value of the voting and non-voting common equity held by non-affiliates
  computed by reference to the price at which the common equity was last sold,
  or the average bid and asked price of such common equity price of such common
  equity, as of August 31, 2002, was $3.0 billion.

At May 1, 2003, there were
  80,164,462 shares of A.G. Edwards, Inc. common stock, $1 par value, outstanding.

DOCUMENTS
  INCORPORATED BY REFERENCE

Portions
  of the A.G. Edwards, Inc. Proxy Statement filed with the SEC in connection with
  the Companys Annual Meeting of Stockholders to be held June 19, 2003,
  (the Companys 2003 Proxy Statement) are incorporated by reference
  into Part III hereof. Other documents incorporated by reference in this report
  are listed in the Exhibit Index of this Form 10-K.

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A.G.
  EDWARDS, INC.

TABLE
  OF CONTENTS

|               |                                                                                  | Page
|-------------- | -------------------------------------------------------------------------------- | ----
|               |                                                                                  |     
|Part
      I   |                                                                                  |     
|               |                                                                                  |     
|Item
      1   | Business                                                                         | 3   
|Item
      2   | Properties                                                                       | 7   
|Item
      3   | Legal
      Proceedings                                                          | 7   
|Item
      4   | Submission
      of Matters to a Vote of Security Holders                        | 8   
|               |                                                                                  |     
|Part
      II  |                                                                                  |     
|               |                                                                                  |     
|Item
      5   | Market
      for Registrants Common Equity and Related Stockholder Matters      | 10  
|Item
      6   | Selected
      Financial Data                                                    | 11  
|Item
      7   | Managements
      Discussion and Analysis of Financial Condition and            |     
|               | Results
      of Operations                                                      | 12  
|Item
      7A  | Quantitative
      and Qualitative Disclosures About Market Risk                 | 20  
|Item
      8   | Financial
      Statements and Supplementary Data                                | 21  
|Item
      9   | Changes
      in and Disagreements With Accountants on Accounting and            |     
|               | Financial
      Disclosure                                                       | 39  
|               |                                                                                  |     
|Part
      III |                                                                                  |     
|               |                                                                                  |     
|Item
      10  | Directors
      and Executive Officers of the Registrant                         | 39  
|Item
      11  | Executive
      Compensation                                                     | 39  
|Item
      12  | Security
      Ownership of Certain Beneficial Owners and Management and Related |     
|               | Stockholder
      Matters                                                        | 39  
|Item
      13  | Certain
      Relationships and Related Transactions                             | 39  
|Item
      14  | Controls
      and Procedures                                                    | 39  
|               |                                                                                  |     
|Part
      IV  |                                                                                  |     
|               |                                                                                  |     
|Item
      15  | Exhibits,
      Financial Statement Schedules and Reports on Form 8-K            | 41  

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PART
  I

ITEM 1.     BUSINESS.

(a)     General Development
  of Business

A.G.
  Edwards, Inc., a Delaware corporation, is a holding company incorporated in
  1983 whose principal subsidiary, A.G. Edwards & Sons, Inc. (Edwards), is
  successor to a partnership founded in 1887. A.G. Edwards, Inc. and its directly-owned
  and indirectly-owned subsidiaries (collectively referred to as the Company)
  provide securities and commodities brokerage, investment banking, trust, asset
  management, retirement planning and insurance products and other related financial
  services to individual, corporate, governmental and institutional clients. At
  February 28, 2003, the Company had more than 700 locations in 49 states, the
  District of Columbia, and London, England, and more than 16,100 full-time employees,
  including approximately 7,200 financial consultants providing services for approximately
  3,600,000 clients.

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

AGE
  Commodity Clearing Corp. (Clearing), a commodity clearing subsidiary, is registered
  with the CFTC as a FCM and operates exclusively as a commodity clearing company
  for Edwards. Clearing is a member of all major U.S. commodities exchanges and
  the National Futures Association (NFA). A.G. Edwards Trust Company FSB (Trust
  Company) is a federally chartered savings bank that provides investment advisory,
  portfolio management and trust services. A.G. Edwards & Sons (U.K.) Limited
  is a securities broker-dealer located in London, England. A.G. Edwards Capital,
  Inc. serves as general partner to four private equity partnerships formed to
  invest in portfolios of venture capital and buy-out funds and direct investments.
  A.G. Edwards Technology Group, Inc. provides information technology services
  to the Company. Beaumont Insurance Company is a Vermont captive insurance company
  that centralizes risk management and provides access to reinsurance markets.

(b)     Financial Information
  About Industry Segments

The
  Company operates and is managed as a single business segment providing investment
  services to its clients. These services are provided using the same sales and
  distribution personnel, support services and facilities, and all are provided
  to meet the needs of its clients. The Company does not identify or manage assets,
  revenues or expenses resulting from any service, or class of services, as a
  separate business segment.

(c)     Narrative Description
  of Business

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

Commissions

Commission
  revenue represents the most significant source of revenue for the Company, accounting
  for more than 40% of total revenue during the last five years. The following
  briefly describes the Companys sources of commission revenue.

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

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Options.Edwards acts as broker in the purchase and sale of option
  contracts to buy or sell securities, primarily common stocks and stock indexes.
  Edwards holds memberships for trading on the principal option exchanges.

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

Commodities
  and Financial Futures.Edwards acts as broker in the
  purchase and sale of commodity futures contracts, financial futures contracts
  and options on commodity and financial futures contracts. These contracts cover
  agricultural products, precious metals, currency, interest rate and stock index
  futures. Substantially all of Edwards clients futures transactions
  are executed and cleared through Clearing.

Insurance.As agent for several unaffiliated life insurance companies,
  Edwards distributes life insurance and tax-deferred annuities. Edwards also
  provides financial planning services to assist individuals in structuring financial
  portfolios to achieve their financial goals.

Asset Management and
  Service Fees

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

Edwards,
  through the Trust Company, provides its clients with personal trust, employee
  benefit trust and custodial trust services.

Clients
  desiring professional money management are offered various types of account
  portfolio services. Edwards, acting as investment manager, offers portfolio
  management strategies based on the clients investment objectives. Edwards
  investment consulting service offers the Private Advisor Service and Select
  Advisor, which provide clients third-party investment management, performance
  measurement, management search and related consulting services. The PathwaysSM,
  Spectrum, Cyclical Asset Allocation Portfolio, Professional Fund Advisor and
  Mutual Fund Marketplace (formerly known as Fund Advisor) investment advisory
  programs are personalized, fee-based asset allocation programs that utilize
  load and no-load mutual fund investments. Clients select from established asset
  allocation models, or customize their own, based on their investment objectives,
  risk tolerance and time horizon. In addition, under the Client Choice program,
  clients can execute transactions and receive ongoing personalized advice from
  their financial consultant for an annual fee based on the value of their assets
  held at Edwards.

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

Edwards
  provides custodial services to its clients for the various types of self-directed
  individual retirement accounts as provided under the Internal Revenue Code.

Principal Transactions

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

Investment Banking

Edwards
  is an underwriter for public offerings of corporate and municipal securities
  as well as corporate and municipal unit investment trusts and closed-end investment
  companies. Edwards public finance activities include

4

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

Margin Financing

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

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

Private Client Services

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

CPI
  Qualified Plan Consultants, Inc., a wholly-owned subsidiary of the Company,
  provides third-party administration services for employee benefit plans to closely-held
  businesses and corporations.

Investment Activities

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

Research

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

Competition

All
  aspects of the Companys business are highly competitive. Edwards competes
  with numerous broker-dealers, including on-line services, some of which possess
  greater financial resources than the Company. Edwards

5

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competes for clients on
  the basis of price, quality of service, financial resources and reputation.
  There is constant competition to attract and retain personnel within the securities
  industry.

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, 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
  or have acquired securities firms to reach different markets. These trends may
  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.

Regulation

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

As
  a registered broker-dealer, Edwards 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 Edwards 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, 2003, the subsidiarys
  net capital of $606 million was 30 percent of aggregate debit items and $566
  million 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 through dividends and advances from its subsidiaries
  or borrowings, if needed.

A.G.
  Edwards & Sons (U.K.) Limited is registered under the laws of the United
  Kingdom and is regulated as a securities broker-dealer by the Financial Services
  Authority. The Trust Company, a federal savings bank, is regulated by the Office
  of Thrift Supervision, the Federal Deposit Insurance Corporation and by the
  SEC as an investment advisor. A.G. Edwards Capital, Inc. is registered with
  the SEC as an investment advisor. Beaumont Insurance Company is regulated by
  the Vermont Department of Banking, Insurance, Securities and Health Care Administration.

(d)     Financial information
  about geographic areas

Revenues from the Companys
  non-U.S. operations are currently not material.

(e)     Available Information

A.G.
  Edwards, Inc. files annual, quarterly and current reports, proxy statements
  and other information with the Securities and Exchange Commission (SEC).

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The
  public may read and copy A.G. Edwards, Inc.s annual report on Form 10-K,
  quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments
  to these reports filed with the SEC at the SECs Public Reference Room
  at 450 Fifth Street, NW., Washington, DC 20549. The public may obtain information
  on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
  This information may also be obtained from the SECs web site at http://www.sec.gov.

A.G.
  Edwards, Inc. makes available at http://www.agedwards.com, free of charge,
  its most recent annual report on Form 10-K, its quarterly reports on Form 10-Q
  for the current fiscal year, current reports on Form 8-K and amendments to these
  reports, its most recent proxy statement and its most recent summary annual
  report to shareholders. In some cases these documents may not be available on
  the Companys web site as soon as they are available on the SECs
  web site.

ITEM 2. PROPERTIES.

The
  Companys headquarters are located at One North Jefferson Avenue, St. Louis,
  Missouri, 63103. It consists of several buildings owned by the Company, which
  contain approximately 1,700,000 square feet of general office space as well
  as underground and surface parking and two parking garages. In addition, the
  Company owns two additional office buildings in the St. Louis area, which are
  used for information technology and contingency planning facilities. The Company
  is currently expanding its headquarters with an additional office building and
  learning center of approximately 1,100,000 square feet. The Companys branch
  offices, with a few exceptions, occupy leased premises throughout the United
  States as well as an office in London, England.

ITEM 3. LEGAL PROCEEDINGS.

(a)     Litigation

The
  Company is a defendant in a number of lawsuits, in some of which plaintiffs
  claim substantial amounts, relating primarily to its securities and commodities
  business. Management has determined that it is likely that ultimate resolution
  in favor of the plaintiffs will result in losses to the Company on certain of
  these claims. Factors considered by management in estimating the Companys
  liability are the loss and damages sought by the plaintiffs, the merits of the
  claims, the total cost of defending the litigation, the likelihood of a successful
  defense against the claims, and the potential for fines and penalties from regulatory
  agencies. Management, based on its understanding of the facts, reasonably estimates
  a range of loss and accrues what it considers appropriate to reserve against
  probable loss for certain claims. 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.

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

Not applicable.

7

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

There
  were no matters submitted to a vote of security holders during the fourth quarter
  of the fiscal year ended February 28, 2003.

Executive Officers
  of the Company

The
  following table sets forth the executive officers of the Company as of May 1,
  2003. Executive officers are appointed by the Board of Directors to hold office
  until their successors are appointed and qualified.

|Name               |  | Age |  | Office
      and Title                                   |  | Year
      FirstAppointed ExecutiveOfficer of theCompany
|------------------ |  | --- |  | -------------------------------------------------------- |  | --------------------------------------------------------
|                   |  |     |  |                                                          |  |                                                         
|Robert L. Bagby    |  | 59  |  | Chairman
      of the Board and Chief Executive Officer  |  | 1991                                                    
|                   |  |     |  | of the
      Company and Edwards since 2001. Vice        |  |                                                         
|                   |  |     |  | Chairman
      of the Board, Executive Vice President    |  |                                                         
|                   |  |     |  | and Director
      of the Branch Division of Edwards     |  |                                                         
|                   |  |     |  | prior to
      March 2001. Employee of Edwards for 28    |  |                                                         
|                   |  |     |  | years.
      Director of Edwards since 1979.             |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Ronald J. Kessler  |  | 55  |  | Vice Chairman
      of the Board of the Company and      |  | 1996                                                    
|                   |  |     |  | Edwards
      since 2001. Executive Vice President of    |  |                                                         
|                   |  |     |  | Edwards.
      Director of the Operations Division since |  |                                                         
|                   |  |     |  | 1998. Assistant
      Director of Operations prior to    |  |                                                         
|                   |  |     |  | 1998. Employee
      of Edwards for 35 years. Director   |  |                                                         
|                   |  |     |  | of Edwards
      since 1989.                             |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Mary V. Atkin      |  | 48  |  | Executive
      Vice President of Edwards. President of  |  | 1999                                                    
|                   |  |     |  | A.G. Edwards
      Technology Group, Inc. since 2001.    |  |                                                         
|                   |  |     |  | Director
      of the Information Technology Division of |  |                                                         
|                   |  |     |  | Edwards
      from 1999 to 2001. Manager of Corporate    |  |                                                         
|                   |  |     |  | Communications
      of Edwards prior to 1999.           |  |                                                         
|                   |  |     |  | Employee
      of Edwards for 25 years. Director of      |  |                                                         
|                   |  |     |  | Edwards
      since 1993.                                |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Donnis L. Casey    |  | 55  |  | Executive
      Vice President of Edwards. Director of   |  | 1996                                                    
|                   |  |     |  | the Staff
      Division of Edwards since 1996.          |  |                                                         
|                   |  |     |  | Employee
      of Edwards for 36 years. Director of      |  |                                                         
|                   |  |     |  | Edwards
      since 1993.                                |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Charles J. Galli   |  | 62  |  | Senior
      Vice President of Edwards. Regional         |  | 2001                                                    
|                   |  |     |  | Manager
      since 1988. Employee of Edwards for 24     |  |                                                         
|                   |  |     |  | years.
      Director of Edwards since 1990.             |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Alfred E. Goldman  |  | 69  |  | Corporate
      Vice President, Director of Market       |  | 1991                                                    
|                   |  |     |  | Analysis
      of Edwards. Employee of Edwards for 43    |  |                                                         
|                   |  |     |  | years.
      Director of Edwards since 1967.             |  |                                                         
|                   |  |     |  |                                                          |  |                                                         
|Richard F. Grabish |  | 54  |  | Chairman
      and Chief Executive Officer of A.G.       |  | 2001                                                    
|                   |  |     |  | Edwards
      Trust Company since 2001. President of     |  |                                                         
|                   |  |     |  | A.G. Edwards
      Trust Company from 1987 to 2001.      |  |                                                         
|                   |  |     |  | Senior
      Vice President of Edwards. Assistant        |  |                                                         
|                   |  |     |  | Director
      of Sales and Marketing Division of        |  |                                                         
|                   |  |     |  | Edwards.
      Employee of Edwards for 22 years.         |  |                                                         
|                   |  |     |  | Director
      of Edwards since 1988.                    |  |                                                         

8

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|Name                      |  | Age |  | Office
      and Title                                    |  | Year
      FirstAppointed
      ExecutiveOfficer of theCompany
|------------------------- |  | --- |  | --------------------------------------------------------- |  | --------------------------------------------------------------
|                          |  |     |  |                                                           |  |                                                               
|Douglas L. Kelly          |  | 54  |  | Vice President,
      Secretary and, since 2001, Chief    |  | 1994                                                          
|                          |  |     |  | Financial
      Officer and Treasurer of the Company.     |  |                                                               
|                          |  |     |  | Executive
      Vice President, Secretary, Director of    |  |                                                               
|                          |  |     |  | Law and
      Compliance, Chief Financial Officer,        |  |                                                               
|                          |  |     |  | Treasurer
      and Director of Administration of         |  |                                                               
|                          |  |     |  | Edwards.
      Employee of Edwards for 9 years.           |  |                                                               
|                          |  |     |  | Director
      of Edwards since 1994.                     |  |                                                               
|                          |  |     |  |                                                           |  |                                                               
|Thomas H. Martin
      Jr |  | 43  |  | Assistant
      Treasurer of the Company since 1999.      |  | 1999                                                          
|                          |  |     |  | Vice President
      of Edwards. Controller of the        |  |                                                               
|                          |  |     |  | Company
      and Edwards since 1999. Accounting          |  |                                                               
|                          |  |     |  | Manager
      prior to 1999. Employee of Edwards for      |  |                                                               
|                          |  |     |  | 22 years.                                                 |  |                                                               
|                          |  |     |  |                                                           |  |                                                               
|Peter M. Miller           |  | 45  |  | Executive
      Vice President of Edwards. Director of    |  | 2002                                                          
|                          |  |     |  | Sales and
      Marketing of Edwards since July, 2002.    |  |                                                               
|                          |  |     |  | Regional
      Manager from 1995 to 2002. Employee        |  |                                                               
|                          |  |     |  | of Edwards
      for 14 years. Director of Edwards        |  |                                                               
|                          |  |     |  | since 1997.                                               |  |                                                               
|                          |  |     |  |                                                           |  |                                                               
|Paul F. Pautler           |  | 57  |  | Executive
      Vice President of Edwards. Director of    |  | 2000                                                          
|                          |  |     |  | Investment
      Banking of Edwards since 2000. Director  |  |                                                               
|                          |  |     |  | of Corporate
      Finance of Edwards from 1999 to 2001.  |  |                                                               
|                          |  |     |  | Managing
      Director of Mergers and Acquisitions from  |  |                                                               
|                          |  |     |  | 1997 to
      1999. Employee of Edwards for 5 years.      |  |                                                               
|                          |  |     |  | Director
      of Edwards since 2000.                     |  |                                                               
|                          |  |     |  |                                                           |  |                                                               
|Robert A. Pietroburgo     |  | 46  |  | Executive
      Vice President and Director of the Branch |  | 2001                                                          
|                          |  |     |  | Division
      of Edwards since 2001. Regional Manager    |  |                                                               
|                          |  |     |  | of Edwards
      from 2000 to 2001. Branch Manager of     |  |                                                               
|                          |  |     |  | Edwards
      prior to 2000. Employee of Edwards for      |  |                                                               
|                          |  |     |  | 16 years.
      Director of Edwards since 2001.           |  |                                                               
|                          |  |     |  |                                                           |  |                                                               
|Joseph G. Porter          |  | 42  |  | Assistant
      Treasurer of the Company since 1999.      |  | 1999                                                          
|                          |  |     |  | Senior
      Vice President and Assistant Director of     |  |                                                               
|                          |  |     |  | Administration
      of Edwards since 2000. Principal     |  |                                                               
|                          |  |     |  | Accounting
      Officer of the Company and Edwards       |  |                                                               
|                          |  |     |  | since 1999.
      Accounting Manager prior to 1999.       |  |                                                               
|                          |  |     |  | Employee
      of Edwards for 20 years. Director of       |  |                                                               
|                          |  |     |  | Edwards
      since 2001.                                 |  |                                                               

9

---



PART
  II

|ITEM 5. | MARKET FOR THE
      REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERMATTERS.
|------- | -------------------------------------------------------------------------------

Quarterly
  Financial Information(Unaudited)

|                             | DividendsDeclaredper Share |       | Stock
      PriceTrading RangeHigh  Low |  | NetRevenues(in millions) |        | Earnings(Loss)Before
      Tax(in millions) |       | NetEarnings(Loss)(in millions) |  | Earnings
      (Loss)per Share
|---------------------------- | -------------------------- | ----- | ---------------------------------------- |  | ------------------------ | ------ | ------------------------------------------- | ----- | ------------------------------ |  | ------------------------------
|                            
|Diluted                      |                            | Basic
|                             |                            |       |                                          |  |                          |        |                                             |       |                                |  |                               
|Fiscal
      2003 by Quarter |                            |       |                                          |  |                          |        |                                             |       |                                |  |                               
|First                        |                            | $     | 0.16                                     |  |                          | $47.75 |  $                                         | 38.85 |                                |  | $                             
|Second                       |                            | $     | 0.16                                     |  |                          | $39.75 |  $                                         | 28.80 |                                |  | $                             
|Third                        |                            | $     | 0.16                                     |  |                          | $38.20 |  $                                         | 26.50 |                                |  | $                             
|Fourth                       |                            | $     | 0.16                                     |  |                          | $37.04 |  $                                         | 25.50 |                                |  | $                             
|                             |                            |       |                                          |  |                          |        |                                             |       |                                |  |                               
|Fiscal
      2002 by Quarter |                            |       |                                          |  |                          |        |                                             |       |                                |  |                               
|First                        |                            | $     | 0.16                                     |  |                          | $44.75 |  $                                         | 31.80 |                                |  | $                             
|Second                       |                            | $     | 0.16                                     |  |                          | $48.29 |  $                                         | 40.00 |                                |  | $                             
|Third                        |                            | $     | 0.16                                     |  |                          | $44.75 |  $                                         | 29.76 |                                |  | $                             
|Fourth                       |                            | $     | 0.16                                     |  |                          | $46.70 |  $                                         | 38.85 |                                |  | $                             

Annual Meeting

The
  2003 Annual Meeting of Stockholders will be held at the Companys headquarters,
  One North Jefferson, St. Louis, Missouri, on Thursday, June 19, 2003, 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, 2003, and January 2 and April
  1, 2004.

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, 2003, was 24,200.
  The approximate number of equity security holders of record includes customers
  who hold the Companys stock in their accounts on the books of Edwards.

Registrar/Transfer
  AgentThe Bank of New YorkShareholder Relations
  Department  11E
  P.O. Box 11258 
  Church Street Station 
  New York, New York 10286-1258 
  (800) 524-4458

10

---



ITEM 6.      SELECTED
  FINANCIAL DATA.

Consolidated
  Five-Year Summary

|Year
      Ended                                | February
      28,2003                           |           | February
      28,2002 |   | February
      28,2001 |   | February
      29,2000 |           | February
      28,1999 |  
|----------------------------------------------- | ------------------------------------------------ | --------- | ---------------------- | - | ---------------------- | - | ---------------------- | --------- | ---------------------- | -
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|                                                | (In
        thousands, except per share amounts)
|Revenues                                        |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Commissions:                                    |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Listed
      securities                         | $                                                | 387,483   |                        | $ | 403,921                |   | $                      | 482,136   |                        | $
|Options                                         |                                                  | 23,485    |                        |   | 28,453                 |   |                        | 55,883    |                        |  
|Over-the-counter
      securities               |                                                  | 70,864    |                        |   | 111,065                |   |                        | 295,921   |                        |  
|Mutual
      funds                              |                                                  | 201,567   |                        |   | 214,339                |   |                        | 293,307   |                        |  
|Commodities                                     |                                                  | 26,371    |                        |   | 17,966                 |   |                        | 16,540    |                        |  
|Insurance                                       |                                                  | 185,249   |                        |   | 174,281                |   |                        | 184,762   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total                                           |                                                  | 895,019   |                        |   | 950,025                |   |                        | 1,328,549 |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Asset
      management and service fees         |                                                  | 625,626   |                        |   | 659,282                |   |                        | 652,998   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Principal
      transactions:                   |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Equities                                        |                                                  | 58,436    |                        |   | 73,553                 |   |                        | 114,363   |                        |  
|Debt
      securities                           |                                                  | 252,688   |                        |   | 246,131                |   |                        | 177,912   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total                                           |                                                  | 311,124   |                        |   | 319,684                |   |                        | 292,275   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Investment
      banking:                       |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Underwriting
      fees and selling concessions |                                                  | 184,220   |                        |   | 186,839                |   |                        | 144,725   |                        |  
|Management
      fees                           |                                                  | 66,960    |                        |   | 69,590                 |   |                        | 28,572    |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total                                           |                                                  | 251,180   |                        |   | 256,429                |   |                        | 173,297   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Interest:                                       |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Margin
      account balances                   |                                                  | 86,189    |                        |   | 150,365                |   |                        | 331,980   |                        |  
|Securities
      owned and deposits             |                                                  | 19,838    |                        |   | 21,603                 |   |                        | 28,419    |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total                                           |                                                  | 106,027   |                        |   | 171,968                |   |                        | 360,399   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Other                                           |                                                  | 10,239    |                        |   | 6,592                  |   |                        | 31,630    |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total
      Revenues                            |                                                  | 2,199,215 |                        |   | 2,363,980              |   |                        | 2,839,148 |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Interest
      expense                          |                                                  | 5,214     |                        |   | 25,567                 |   |                        | 97,942    |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Net
      Revenues                              |                                                  | 2,194,001 |                        |   | 2,338,413              |   |                        | 2,741,206 |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Non-Interest
      Expenses                     |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Compensation
      and benefits                 |                                                  | 1,453,671 |                        |   | 1,557,720              |   |                        | 1,766,311 |                        |  
|Communication
      and technology              |                                                  | 282,603   |                        |   | 295,353                |   |                        | 242,530   |                        |  
|Occupancy
      and equipment                   |                                                  | 134,149   |                        |   | 133,240                |   |                        | 126,594   |                        |  
|Marketing
      and business development        |                                                  | 40,177    |                        |   | 41,612                 |   |                        | 51,767    |                        |  
|Floor
      brokerage and clearance             |                                                  | 22,464    |                        |   | 21,912                 |   |                        | 22,957    |                        |  
|Other                                           |                                                  | 89,503    |                        |   | 114,056                |   |                        | 75,893    |                        |  
|Restructuring                                   |                                                  |          |                        |   | 82,462                 |   |                        |          |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total
      Non-Interest Expenses               |                                                  | 2,022,567 |                        |   | 2,246,355              |   |                        | 2,286,052 |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Earnings
      Before Income Taxes              |                                                  | 171,434   |                        |   | 92,058                 |   |                        | 455,154   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Income
      Taxes                              |                                                  | 52,606    |                        |   | 20,557                 |   |                        | 167,677   |                        |  
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Net
      Earnings                              | $                                                | 118,828   |                        | $ | 71,501                 |   | $                      | 287,477   |                        | $
|                                                |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Per
      Share Data:                           |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Diluted
      Earnings                          | $                                                | 1.46      |                        | $ | 0.88                   |   | $                      | 3.43      |                        | $
|Basic
      Earnings                            | $                                                | 1.48      |                        | $ | 0.89                   |   | $                      | 3.50      |                        | $
|Cash
      Dividends                            | $                                                | 0.64      |                        | $ | 0.64                   |   | $                      | 0.64      |                        | $
|Book
      Value                                | $                                                | 20.92     |                        | $ | 20.42                  |   | $                      | 20.29     |                        | $
|Other
      Data:                               |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Total
      Assets                              | $                                                | 3,980,094 |                        | $ | 4,187,170              |   | $                      | 4,859,984 |                        | $
|Stockholders
      Equity                      | $                                                | 1,688,537 |                        | $ | 1,647,796              |   | $                      | 1,626,344 |                        | $
|Cash
      Dividends                            | $                                                | 51,034    |                        | $ | 51,043                 |   | $                      | 51,962    |                        | $
|Pre-tax
      Return on Average Equity          |                                                  | 10.3      | %                      |   | 5.6                    | % |                        | 27.2      | %                      |  
|Return
      on Average Equity                  |                                                  | 7.1       | %                      |   | 4.4                    | % |                        | 17.2      | %                      |  
|Net
      Earnings as a Percent of Net Revenues |                                                  | 5.4       | %                      |   | 3.1                    | % |                        | 10.5      | %                      |  
|Average
      Common and Common Equivalent      |                                                  |           |                        |   |                        |   |                        |           |                        |  
|Shares
      Outstanding (Diluted)              |                                                  | 81,177    |                        |   | 81,282                 |   |                        | 83,925    |                        |  
|Average
      Common Shares Outstanding (Basic) |                                                  | 80,133    |                        |   | 80,013                 |   |                        | 82,096    |                        |  

11

---



|ITEM 7. | MANAGEMENTS
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
      OF OPERATIONS.
|------- | -------------------------------------------------------------------------------------------------

(Year
  references are to fiscal years ended February 28 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 16,100 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.

The
  number of Company financial consultants at year-end was 7,222, a decrease of
  2 percent from the prior year-end. The total number of locations at the end
  of 2003 was 709, up from 705 at year-end 2002.

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.

Fiscal
  2003 produced another challenging year of market and economic conditions that
  dampened business and consumer confidence. The threat of more terrorist attacks,
  additional corporate and accounting scandals, and the debate and buildup for
  war with Iraq increased investor concerns and added to the uncertainty in the
  markets. In November 2002, the Federal Reserve Board reduced its target rate
  to 1.25 percent from 1.75 percent in an attempt to support economic growth.

The
  Dow Jones Industrial Average began the 2003 fiscal year at 10,106 and ended
  the year at 7,891, a decrease of 22 percent, while the Nasdaq Composite Index
  decreased from 1,731 to 1,338, a decrease of 23 percent. Investors steered away
  from equity-based securities and moved toward Treasury and municipal securities
  as a safe haven. Activity on the major exchanges was mixed as the overall trading
  volumes on the New York Stock Exchange increased 17 percent and the Nasdaq decreased
  7 percent from the prior 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, on-line service providers, mutual
  fund sponsors and other companies offering financial services both in the United
  States and globally, 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
  or have acquired securities firms to reach different markets. These trends may
  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.

Interest Rates

As
  discussed further below, the Company is subject to changes in net revenues,
  net earnings and earnings per share based on changes in interest rates. Net
  interest revenue and asset management and service fees are impacted by changes
  in interest rates and will likely decrease should interest rates decrease. Asset
  management and service fees are reduced as a result of certain third-party money
  funds offered by the Company reaching expense caps that are triggered by low
  money fund yields. Net interest revenue and asset management and service fees
  declined a combined $79 million (10 percent) in 2003 primarily due to decreases
  in interest rates. These revenues may decline further, year over year, reflecting
  the decrease in the federal funds target rate in November, and these revenues
  will likely continue to be limited until interest rates increase significantly.

12

---



Results of Operations

The
  Company experienced in 2003 a decrease in net revenues and an increase in net
  earnings and earnings per share versus the previous fiscal year. This compares
  with a decrease in each category in 2002 compared with 2001. Net revenues declined
  6 percent to $2.2 billion in 2003 after decreasing 15 percent to $2.3 billion
  in 2002. Net earnings increased 66 percent ($47 million) to $119 million in
  2003 and decreased 75 percent ($216 million) to $72 million in 2002. Diluted
  earnings per share for the Company were $1.46 in 2003 versus $0.88 in 2002 and
  $3.43 in 2001. The Companys profit margin was 5.4 percent in 2003 versus
  3.1 percent and 10.5 percent in 2002 and 2001, respectively. The results for
  2002 include restructuring and other charges of $107 million, which decreased
  net earnings $70 million.

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)                | 2003
      vs 2002 |          |   | 2002
      vs 2001 |     
|---------------------------------------- | ------------------ | -------- | - | ------------------ | ----
|                                         |                    |          |   |                    |     
|Revenues                                 |                    |          |   |                    |     
|Commissions                              | $                  | (55,006  | ) |                    | (6  
|Asset management
      and service fees  |                    | (33,656  | ) |                    | (5  
|Principal
      transactions             |                    | (8,560   | ) |                    | (3  
|Investment
      banking                 |                    | (5,249   | ) |                    | (2  
|Interest                                 |                    | (65,941  | ) |                    | (38 
|Other                                    |                    | 3,647    |   |                    | 55  
|                                         |                    |          |   |                    |     
|Total Revenues                           |                    | (164,765 | ) |                    | (7  
|Interest
      expense                   |                    | (20,353  | ) |                    | (80 
|                                         |                    |          |   |                    |     
|Net Revenues                             |                    | (144,412 | ) |                    | (6  
|                                         |                    |          |   |                    |     
|Non-Interest
      Expenses              |                    |          |   |                    |     
|Compensation
      and benefits          |                    | (104,049 | ) |                    | (7  
|Communication
      and technology       |                    | (12,750  | ) |                    | (4  
|Occupancy
      and equipment            |                    | 909      |   |                    | 1   
|Marketing
      and business development |                    | (1,435   | ) |                    | (3  
|Floor brokerage
      and clearance      |                    | 552      |   |                    | 3   
|Other                                    |                    | (24,553  | ) |                    | (22 
|Restructuring                            |                    | (82,462  | ) |                    | (100
|                                         |                    |          |   |                    |     
|Total Non-Interest
      Expenses        | $                  | (223,788 | ) |                    | (10 
|                                         |                    |          |   |                    |     

Commissions

Commission
  revenues arise from activities in transaction-based accounts in listed and over-the-counter
  securities, mutual funds, futures, options, and insurance products. As commissions
  are transaction-based revenues, they are influenced by the number, size and
  market value of client transactions and product mix. Commission revenues declined
  $55 million (6 percent), from $950 million in 2002 to $895 million in 2003.
  This decrease resulted to a significant degree from reduced investor participation
  in the equity markets given the ongoing difficult market conditions. In addition,
  the Companys clients continued to shift their assets to fee-based accounts
  and fixed-income securities. Commissions from over-the-counter transactions
  decreased $40 million (36 percent), listed transactions decreased $21 million
  (5 percent) and mutual funds decreased $13 million (6 percent).

The
  $379 million (28 percent) drop in commission revenues in 2002 was primarily
  reflective of reduced retail investor activity in the equity markets due to
  difficult market conditions, uncertain economic environment and the September
  11 terrorist attacks.

Asset Management and
  Service Fees

Asset
  management and service fees include fees based on the value of client assets
  under management and transaction-related service fees as well as fees related
  to the administration of custodial and other specialty accounts. These revenues
  consist primarily of revenues earned from providing support and services in
  connection with client

13

---



assets under third-party
  management, including mutual funds and annuities, as well as the Companys
  trust services and in connection with Client Choice  a fee-based pricing
  alternative available to individual investors instead of the traditional transaction-based
  account.

In
  2003, asset management and service fees decreased $34 million (5 percent) as
  a result of a decrease of $35 million (30 percent) in distribution fees received
  from third-party investment managers in connection with certain third-party
  money market funds offered by the Company. These money market funds stipulate
  that fund expenses cannot exceed 25 percent of annual investment income. As
  interest rates have fallen in the past two years, the funds have reached these
  expense limitations resulting in severe reductions in the distribution fees
  received by the Company. Client money market fund balances remained virtually
  unchanged in 2003 from 2002. The downward trend in distribution fees is likely
  to continue following the Federal Reserves interest rate reduction in
  November 2002. Fees from third-party mutual funds were $9 million (4 percent)
  lower than in 2002 reflecting lower asset values and a retreat from these equity-based
  products, while service fees were $11 million (14 percent) higher spread across
  several categories.

Asset
  management and service fees increased $6 million (1 percent) in 2002 due to
  increased fees generated from assets under third-party investment advisory services
  and from the Companys management services. In addition, there was an increase
  in distribution fees received from money market funds resulting from an increase
  in investors choosing money markets in the uncertain market conditions of the
  time. These were offset by a decrease in fees from third-party mutual funds
  and annuities reflecting lower asset values and a retreat from equity-based
  products.

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 decreased $9 million (3 percent) in 2003 from 2002. Revenue
  from the sale of equity securities and corporate debt decreased $15 million
  (21 percent) and $11 million (13 percent), respectively, while revenues from
  the sale of municipal and government securities increased $10 million (9 percent)
  and $7 million (15 percent). Corporate accounting scandals, market volatility
  related to concerns about the economy and the possibility of war with Iraq led
  investors to the higher after-tax yields of municipals and increased safety
  of Treasury products.

In
  2002, principal transactions revenue increased $27 million (9 percent) resulting
  primarily from a $68 million (38 percent) increase in revenue from the sale
  of fixed-income products that was partially offset by a $41 million (36 percent)
  decrease in revenue from the sale of equity securities as clients moved to more
  conservative investments given the volatility of the equity markets.

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 decreased $5 million (2 percent) in 2003.
  Underwriting fees and selling concessions from corporate products decreased
  $10 million (7 percent), reflecting investors desire for higher yields
  and greater safety. Underwriting fees and selling concessions from municipal
  and government products increased a combined $8 million (28 percent) as clients
  sought the relative safety of these products.

In
  2002, investor demand for fixed-income products and the popularity of trust
  preferred securities led to an increase of $83 million (48 percent) in revenues
  from investment banking activities. Underwriting fees and selling concessions
  from sales of corporate debt, municipal debt and government debt rose $55 million
  (147 percent), while revenues from the sale of corporate equity products fell
  $13 million (12 percent). Management fees increased $41 million (144 percent)
  as the Company participated as manager or co-manager in a larger number of offerings
  over the prior year.

14

---



Net Interest Revenue

Interest
  revenue net of interest expense decreased $46 million (31 percent) for the year
  and decreased $116 million (44 percent) in fiscal 2002. The decreases were due
  to declines in average client margin balances and in the average interest rates.

Non-Interest Expenses

Compensation
  and benefits decreased $104 million (7 percent) in 2003 and decreased $209 million
  (12 percent) in 2002. A significant portion of this expense is variable in nature
  and relates to commissionable sales (sales upon which payments are made to financial
  consultants) and to the Companys profitability. The year-to-year comparisons
  generally reflect the changes in commissionable sales and profitability in both
  2003 and 2002. In 2002, restructuring and other charges of $127 million were
  excluded from the calculation of incentive-related compensation. Commission
  expense decreased $37 million (5 percent) in 2003 and $130 million (14 percent)
  in 2002 as a result of decreased commissionable sales in both years. General
  and administrative salaries and benefits decreased $47 million (8 percent) in
  2003 primarily as a result of workforce reductions implemented at the end of
  2002. Included in the $47 million decrease, the cost of medical benefits declined
  $11 million (16 percent) primarily as a result of changes in plan design. General
  and administrative salaries and benefits increased $29 million (5 percent) in
  2002 due to general salary and employment increases and a $12 million (21 percent)
  increase in medical benefits resulting from the increasing cost of medical insurance.
  Incentive compensation decreased $23 million (13 percent) in 2003 and $109 million
  (38 percent) in 2002, reflecting decreased profitability in both years. The
  impact in 2003 was reduced by the implementation of three performance-based
  compensation structures, one for research analysts, one for investment bankers
  and one for institutional sales traders.

Communication
  and technology expenses decreased $13 million (4 percent) in 2003. Decreases
  in expenses of $31 million principally related to financial consultants
  workstations, repairs and maintenance, and professional services from outside
  contractors were partially offset by an increase of $18 million due to the amortization
  of several technology initiatives that were placed in service during 2002. In
  2002, communication and technology expenses increased $53 million (22 percent)
  primarily due to the use of new technology initiatives and increased expenses
  related to the new financial consultant workstation, which experienced first
  full year of use.

Other
  expenses decreased $25 million (22 percent) in 2003 from 2002. In 2002, the
  Company reserved $26 million against a $37 million margin loan. In 2003, the
  Company expensed an additional $7 million for this loan, increasing the reserve
  to $33 million. The collateral underlying the secured portion of the loan was
  liquidated throughout 2003 and the Company realized proceeds in the amount of
  the unreserved balance. Both years were negatively impacted by reserves established
  in connection with client litigation.

All
  remaining operational expenses combined were relatively unchanged in 2003 from
  2002. In 2002, these expenses decreased a combined $5 million (2 percent) as
  a result of decreased marketing and business development expenses of $10 million
  (20 percent) from the costs in 2001, which included expenses related to a national
  sales conference at its St. Louis headquarters. The decrease was partially offset
  by a $7 million (5 percent) increase in occupancy and equipment expenses primarily
  related to branch expansion and relocation.

Restructuring Charge

As
  a result of a number of actions taken to reduce costs, streamline headquarters
  operations and better position the Company for improved profitability, a restructuring
  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 redesigned 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.
- Approximately $17 million
    related to the planned sale or sublease of certain real estate holdings and
    leases as the Company consolidated its St. Louis non-branch workforce to its
    main headquarters campus.

15

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Of
  these amounts, $7 million related to severance costs and $9 million related
  to real estate transactions remained unpaid at February 28, 2003. The remaining
  severance costs were paid in fiscal 2004.

Income Taxes

The
  Companys effective tax rate was 31 percent for the current year compared
  to 22 percent in the prior year. The current year rate was affected by an $8.9
  million tax benefit resulting from the settlement of a state tax matter covering
  a number of tax years as well as the recognition of a federal tax item based
  on guidance published by the Internal Revenue Service during the year. The prior
  year tax rate was affected by a favorable reduction in state taxes due to corporate
  structure changes and the resolution of other matters during the year. For additional
  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
  2003 as the Companys clients continued to reduce their use of margin borrowings
  in reaction to the economic, market, geopolitical and other events of the past
  two years. Short-term bank loans decreased due to the 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 $163 million and $283 million and average securities lending arrangements
  of $186 million and $371 million in 2003 and 2002, respectively, were primarily
  used to finance customer receivables.

The
  Company is expanding its headquarters with an additional office building and
  learning center. The total construction cost of this project is estimated to
  be $185 million. Total expenditures for this project through February 28, 2003,
  were $162 million. This project is expected to be complete in 2004.

The
  Company is engaged in a project that, when fully implemented, will update the
  Companys technology infrastructure, streamline its back-office processing
  and strengthen its data capabilities. As part of this project, the Company will
  migrate its back-office systems to an application service provider, which will
  provide the software and computer operations that support the Companys
  securities processing functions. The Company has internally designated up to
  $183 million, including internal development costs, related to this project.
  Total costs for this project through February 28, 2003, were $26 million. The
  project is expected to be completed in mid-fiscal year 2006.

In
  November 2002, the Board of Directors authorized the repurchase of up to 10
  million shares of the Companys outstanding common stock during the period
  January 1, 2003 through December 31, 2004. The Company purchased 3.1 million
  shares at an aggregate cost of $115 million in 2003, and 2.2 million shares
  at an aggregate cost of $85 million in 2002 under this authorization and other
  previously authorized plans.

The
  Company has commitments of $124 million to various private equity partnerships,
  of which $58 million remained unfunded at February 28, 2003.

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 $1.5 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
  standards 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

16

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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 cost, terms and
  liquidity of the investment, the sale price of recently issued securities, the
  financial condition and operating results of the issuer, earnings trends and
  consistency of operating cash flows, the long-term business potential of the
  issuer, the quoted market price of securities with similar quality and yields
  that are publicly traded, 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 a number of 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 claimants 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 claimants, the merits of the claims,
  the total cost of defending the litigation and the likelihood of a successful
  defense against the claims, 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.

Accruals
  for tax contingencies require management to make estimates and judgments with
  respect to the ultimate outcome of a tax audit. Actual results could vary from
  these estimates. The Company operates within multiple taxing jurisdictions and
  is subject to audit in these jurisdictions. These audits can involve complex
  issues, which may require an extended period of time to resolve. In managements
  opinion, adequate provisions for income taxes have been made for all years.

Recent Accounting Pronouncements

In
  July 2001, the Financial Accounting Standards Board (FASB) released Statement
  of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
  Assets. 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 Company adopted the provisions
  of SFAS No. 142 in the first quarter of fiscal year 2003. The adoption of this
  standard did 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. The
  Company adopted provisions of SFAS No. 144 in the first quarter of fiscal-year
  2003. The adoption of this standard did not have a material impact on the Companys
  consolidated financial statements.

In
  June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
  with Exit or Disposal Activities. This standard requires companies to
  recognize costs associated with exit or disposal activities when they are incurred
  rather than at the date of a commitment to an exit or disposal plan. SFAS No.
  146 will replace the existing guidance provided by Emerging Issues Task Force
  Issue No. 94-3, Liability Recognition for Certain Employee Termination
  Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
  in a

17

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Restructuring). The
  provisions of this standard are to be applied prospectively to exit or disposal
  activities initiated after December 31, 2002. The adoption of this standard
  did not have a material impact on the Companys consolidated financial
  statements.

In
  November 2002, the FASB issued Interpretation No. 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others (FIN 45). FIN 45 requires the recognition
  of a liability for the fair value of an obligation undertaken in issuing a guarantee
  and also requires certain disclosures of such guarantees. The disclosure requirements
  became effective in 2003. The recognition requirements became effective for
  the Company on January 1, 2003. The adoption of FIN 45 did not have a material
  impact on the Companys consolidated financial statements.

In
  January 2003, the FASB issued Interpretation No. 46, Consolidation of
  Variable Interest Entities (FIN 46), an interpretation of
  Accounting Research Bulletin No. 51, Consolidated Financial Statements,
  which requires the consolidation by a business enterprise of variable interest
  entities if the business enterprise is the primary beneficiary. FIN 46 is effective
  January 31, 2003, for the Company with respect to interests in variable interest
  entities obtained after that date and August 31, 2003, with respect to interests
  in variable interest entities existing prior to that date. Although the Company
  has not completed its analysis of FIN 46, the Company currently does not believe
  it will be required to consolidate any material variable interest entities.

In
  December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
  Compensation-Transition and Disclosure, an amendment of SFAS No. 123,
  Accounting for Stock-Based Compensation. SFAS No. 148 permits three
  alternative methods of transition for a voluntary change to the fair-value based
  method of accounting for employee stock-based compensation. SFAS No. 148 continues
  to permit prospective applications for companies that adopt prior to the beginning
  of fiscal-year 2004. SFAS No. 148 also allows for a modified prospective application,
  which requires the fair value of all unvested awards to be amortized over the
  remaining service period, as well as restatement of prior years expense.
  The transition guidance and annual disclosure provisions of SFAS No. 148 were
  effective for fiscal years ending after December 15, 2002, with earlier application
  permitted in certain circumstances. The transitional guidance of SFAS No. 148
  did not have an impact on the Companys financial position, results of
  operations, earnings per share or cash flows as the Company applies the provisions
  of Accounting Principles Board Opinion No. 25 Accounting for Stock Issued
  to Employees. However, the disclosure provisions of SFAS No. 148 will
  require the Company to include the disclosure requirements of SFAS No. 123,
  effective for the Companys quarter ending May 31, 2003.

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 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

18

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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 further reviews
  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 also has 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 business, 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,
  granting credit, 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 and has an indirect effect on the Companys credit
  risk as it relates to the value of customer collateral. 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, 2003 and 2002, 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

19

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of its debt inventory by
  calculating the change in the offering price of each inventory item resulting
  from a 10 percent increase in either the Treasury yield curve for taxable products
  or the Municipal Market Data Corporations AAA rated yield curve for tax-exempt
  products. Using this method, if such a 10 percent increase were to occur, the
  Company calculated a potential loss in fair value of its debt inventory of $12
  million at February 28, 2003, and $13 million at February 28, 2002.

Forward-Looking Statements

The
  Managements Discussion and Analysis of Financial Condition and Results
  of Operations and other sections of this Form 10-K 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, changes in technology or operations,
  the effect, cost or timing of technology project, the effect or success of outsourced
  operations, estimates of capital expenditures, the affect of interest rate changes
  on future distribution fees, and implementation and effects of expense reduction
  strategies, workforce reductions, and disposition of real estate holdings. Undue
  reliance should not be placed on the forward-looking statements, which speak
  only as of the date of this Form 10-K. The Company does not undertake any obligation
  to publicly update any forward-looking statements.

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

The
  information required by this item is contained in Managements Discussion
  and Analysis of Financial Condition and Results of Operations under the
  caption Risk Management  Market Risk of this Form 10-K.

20

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ITEM 8.      FINANCIAL
  STATEMENTS AND SUPPLEMENTARY DATA.

A.G.
  Edwards, Inc.
  Consolidated Balance Sheets

|                                                                                     | February
      28,2003                                       |           | February
      28,2002
|------------------------------------------------------------------------------------ | ------------------------------------------------------------ | --------- | ----------------------
|                                                                                     |                                                              |           |                       
|                                                                                     | (Dollars
      in thousands,
      except per share amounts)
|Assets                                                                               |                                                              |           |                       
|Cash and
      cash equivalents                                                      | $                                                            | 97,552    |                       
|Cash and
      government securities, segregated under federal and other regulations |                                                              | 103,714   |                       
|Securities
      purchased under agreements to resell                                |                                                              | 220,000   |                       
|Securities
      borrowed                                                            |                                                              | 77,130    |                       
|Receivables:                                                                         |                                                              |           |                       
|Customers,
      less allowance for doubtful accounts of $44,508 and $38,214         |                                                              | 2,038,807 |                       
|Brokers,
      dealers and clearing organizations                                    |                                                              | 22,469    |                       
|Fees,
      dividends and interest                                                   |                                                              | 60,051    |                       
|Securities
      inventory, at fair value:                                           |                                                              |           |                       
|State
      and municipal                                                            |                                                              | 316,172   |                       
|Government
      and agencies                                                        |                                                              | 50,134    |                       
|Corporate                                                                            |                                                              | 75,599    |                       
|Investments                                                                          |                                                              | 237,183   |                       
|Property
      and equipment, at cost, net of accumulated depreciation and           |                                                              |           |                       
|amortization
      of $579,225 and $470,805                                          |                                                              | 526,387   |                       
|Deferred
      income taxes, net                                                     |                                                              | 93,775    |                       
|Other assets                                                                         |                                                              | 61,121    |                       
|                                                                                     |                                                              |           |                       
|                                                                                     | $                                                            | 3,980,094 |                       
|                                                                                     |                                                              |           |                       
|Liabilities
      and Stockholders Equity                                           |                                                              |           |                       
|Short-term
      bank loans                                                          | $                                                            | 40,000    |                       
|Checks
      payable                                                                 |                                                              | 236,525   |                       
|Securities
      loaned                                                              |                                                              | 227,356   |                       
|Securities
      sold under agreements to repurchase                                 |                                                              |          |                       
|Payables:                                                                            |                                                              |           |                       
|Customers                                                                            |                                                              | 960,679   |                       
|Brokers,
      dealers and clearing organizations                                    |                                                              | 134,911   |                       
|Securities
      sold but not yet purchased, at fair value                           |                                                              | 35,440    |                       
|Employee
      compensation and related taxes                                        |                                                              | 346,292   |                       
|Deferred
      compensation                                                          |                                                              | 170,690   |                       
|Income
      taxes                                                                   |                                                              | 15,222    |                       
|Other liabilities                                                                    |                                                              | 124,442   |                       
|                                                                                     |                                                              |           |                       
|Total
      Liabilities                                                              |                                                              | 2,291,557 |                       
|                                                                                     |                                                              |           |                       
|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    |                       
|Additional
      paid-in capital                                                     |                                                              | 289,028   |                       
|Retained
      earnings                                                              |                                                              | 1,943,325 |                       
|                                                                                     |                                                              |           |                       
|                                                                                     |                                                              | 2,328,816 |                       
|Less: Treasury
      stock, at cost (15,737,245 and 15,767,984 shares)               |                                                              | 640,279   |                       
|                                                                                     |                                                              |           |                       
|Total
      Stockholders Equity                                                     |                                                              | 1,688,537 |                       
|                                                                                     |                                                              |           |                       
|                                                                                     | $                                                            | 3,980,094 |                       
|                                                                                     |                                                              |           |                       

See Notes
  to Consolidated Financial Statements.

21

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

|Year
      Ended                         | February
      28,2003                                 |         | February
      28,2002 |   | February
      28,2001
|---------------------------------------- | ------------------------------------------------------ | ------- | ---------------------- | - | ----------------------
|                                         |                                                        |         |                        |   |                       
|                                         | (Dollars
      in thousands, except per share amounts)
|Revenues                                 |                                                        |         |                        |   |                       
|Commissions                              | $                                                      | 895,019 |                        | $ | 950,025               
|Asset
      management and service fees  |                                                        | 625,626 |                        |   | 659,282               
|Principal
      transactions             |                                                        | 311,124 |                        |   | 319,684               
|Investment
      banking                 |                                                        | 251,180 |                        |   | 256,429               
|Interest                                 |                                                        | 106,027 |                        |   | 171,968               
|Other                                    |                                                        | 10,239  |                        |   | 6,592                 
|                                         |                                                        |         |                        |   |                       
|Total
      Revenues                     | 2,199,215                                              |         | 2,363,980              |   |                       
|Interest
      expense                   |                                                        | 5,214   |                        |   | 25,567                
|                                         |                                                        |         |                        |   |                       
|Net
      Revenues                       | 2,194,001                                              |         | 2,338,413              |   |                       
|                                         |                                                        |         |                        |   |                       
|                                         |                                                        |         |                        |   |                       
|Non-Interest
      Expenses              |                                                        |         |                        |   |                       
|Compensation
      and benefits          | 1,453,671                                              |         | 1,557,720              |   |                       
|Communication
      and technology       |                                                        | 282,603 |                        |   | 295,353               
|Occupancy
      and equipment            |                                                        | 134,149 |                        |   | 133,240               
|Marketing
      and business development |                                                        | 40,177  |                        |   | 41,612                
|Floor
      brokerage and clearance      |                                                        | 22,464  |                        |   | 21,912                
|Other                                    |                                                        | 89,503  |                        |   | 114,056               
|Restructuring                            |                                                        |        |                        |   | 82,462                
|                                         |                                                        |         |                        |   |                       
|Total
      Non-Interest Expenses        | 2,022,567                                              |         | 2,246,355              |   |                       
|                                         |                                                        |         |                        |   |                       
|Earnings
      Before Income Taxes       |                                                        | 171,434 |                        |   | 92,058                
|Income
      Taxes                       |                                                        | 52,606  |                        |   | 20,557                
|                                         |                                                        |         |                        |   |                       
|Net
      Earnings                       | $                                                      | 118,828 |                        | $ | 71,501                
|                                         |                                                        |         |                        |   |                       
|                                         |                                                        |         |                        |   |                       
|Earnings
      Per Share:                |                                                        |         |                        |   |                       
|Diluted                                  | $                                                      | 1.46    |                        | $ | 0.88                  
|                                         |                                                        |         |                        |   |                       
|Basic                                    | $                                                      | 1.48    |                        | $ | 0.89                  
|                                         |                                                        |         |                        |   |                       

See Notes
  to Consolidated Financial Statements.

22

---



A.G.
  Edwards, Inc.Consolidated
  Statements of Stockholders Equity

(Three Years Ended
  February 28, 2003)

|                                     | CommonStock                                            |        | Additional
      Paid-In
      Capital |   | RetainedEarnings |  | TreasuryStock |           | TotalStockholdersEquity |  
|------------------------------------ | ------------------------------------------------------ | ------ | -------------------------------------- | - | ---------------- |  | ------------- | --------- | ------------------------ | -
|                                     |                                                        |        |                                        |   |                  |  |               |           |                          |  
|                                     | (Dollars
      in thousands, except per share amounts)
|Balances,
      March 1, 2000        | $                                                      | 96,463 |                                        | $ | 253,917          |  | $             | 1,645,332 |                          | $
|Net
      earnings                   |                                                        |        |                                        |   |                  |  |               | 287,477   |                          |  
|Dividends
      declared  $0.64 per |                                                        |        |                                        |   |                  |  |               |           |                          |  
|share                                |                                                        |        |                                        |   |                  |  |               | (51,962   | )                        |  
|Treasury
      stock acquired        |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Stock
      issued:                  |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Employee
      stock purchase/option |                                                        |        |                                        |   |                  |  |               |           |                          |  
|plans                                |                                                        |        |                                        |   | 17,687           |  |               | (5,464    | )                        |  
|Restricted
      stock               |                                                        |        |                                        |   | 8,490            |  |               | (4        | )                        |  
|                                     |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Balances,
      February 28, 2001    |                                                        | 96,463 |                                        |   | 280,094          |  |               | 1,875,379 |                          |  
|Net
      earnings                   |                                                        |        |                                        |   |                  |  |               | 71,501    |                          |  
|Dividends
      declared  $0.64 per |                                                        |        |                                        |   |                  |  |               |           |                          |  
|share                                |                                                        |        |                                        |   |                  |  |               | (51,043   | )                        |  
|Treasury
      stock acquired        |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Stock
      issued:                  |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Employee
      stock purchase/option |                                                        |        |                                        |   |                  |  |               |           |                          |  
|plans                                |                                                        |        |                                        |   | 908              |  |               | (3,648    | )                        |  
|Restricted
      stock               |                                                        |        |                                        |   | 5,478            |  |               |           |                          |  
|                                     |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Balances,
      February 28, 2002    |                                                        | 96,463 |                                        |   | 286,480          |  |               | 1,892,189 |                          |  
|Net
      earnings                   |                                                        |        |                                        |   |                  |  |               | 118,828   |                          |  
|Dividends
      declared  $0.64 per |                                                        |        |                                        |   |                  |  |               |           |                          |  
|share                                |                                                        |        |                                        |   |                  |  |               | (51,034   | )                        |  
|Treasury
      stock acquired        |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Stock
      issued:                  |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Employee
      stock purchase/option |                                                        |        |                                        |   |                  |  |               |           |                          |  
|plans                                |                                                        |        |                                        |   | 1,432            |  |               | (10,320   | )                        |  
|Restricted
      stock               |                                                        |        |                                        |   | 1,116            |  |               | (6,338    | )                        |  
|                                     |                                                        |        |                                        |   |                  |  |               |           |                          |  
|Balances,
      February 28, 2003    | $                                                      | 96,463 |                                        | $ | 289,028          |  | $             | 1,943,325 |                          | $
|                                     |                                                        |        |                                        |   |                  |  |               |           |                          |  

See Notes
  to Consolidated Financial Statements.

23

---



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

|Year
      Ended                                                  | February
      28,2003 |          | February
      28,2002 |   | February
      28,2001 |  
|----------------------------------------------------------------- | ---------------------- | -------- | ---------------------- | - | ---------------------- | -
|                                                                  |                        |          |                        |   |                        |  
|                                                                  | (In
      thousands)  
|Cash
      Flows From Operating Activities:                       |                        |          |                        |   |                        |  
|Net earnings                                                      | $                      | 118,828  |                        | $ | 71,501                 |  
|Noncash
      and nonoperating items included in earnings:        |                        |          |                        |   |                        |  
|Depreciation
      and amortization                               |                        | 131,903  |                        |   | 123,125                |  
|Expense
      of restricted stock awards                          |                        | 19,415   |                        |   | 22,568                 |  
|Deferred
      income taxes                                       |                        | (315     | )                      |   | (22,443                | )
|Loss
      (gain) on investments, net                             |                        | 9,193    |                        |   | 5,625                  |  
|Allowance
      for doubtful accounts                             |                        | 9,009    |                        |   | 27,056                 |  
|Restructuring
      charge                                        |                        |         |                        |   | 52,395                 |  
|(Increase)
      decrease in operating assets:                    |                        |          |                        |   |                        |  
|Cash
      and government securities, segregated                  |                        | (10,793  | )                      |   | (14,466                | )
|Securities
      purchased under agreements to resell             |                        | (175,177 | )                      |   | (27,471                | )
|Securities
      borrowed                                         |                        | (8,866   | )                      |   | 59,064                 |  
|Receivable
      from customers                                   |                        | 412,937  |                        |   | 797,411                |  
|Receivable
      from brokers, dealers and clearing organizations |                        | 22,146   |                        |   | (14,301                | )
|Fees,
      dividends and interest receivable                     |                        | 15,953   |                        |   | (5,070                 | )
|Securities
      inventory                                        |                        | (64,397  | )                      |   | (84,192                | )
|Trading
      investments, net                                    |                        | (20,739  | )                      |   | 47,655                 |  
|Other
      assets                                                |                        | 18,093   |                        |   | (36,805                | )
|Increase
      (decrease) in operating liabilities:               |                        |          |                        |   |                        |  
|Checks
      payable                                              |                        | (3,082   | )                      |   | (12,951                | )
|Securities
      sold under agreements to repurchase              |                        | (45,861  | )                      |   | 45,861                 |  
|Securities
      loaned                                           |                        | (4,549   | )                      |   | (98,699                | )
|Payable
      to customers                                        |                        | (21,692  | )                      |   | 83,280                 |  
|Payable
      to brokers, dealers and clearing organizations      |                        | (6,600   | )                      |   | 18,427                 |  
|Securities
      sold but not yet purchased                       |                        | 5,240    |                        |   | (994                   | )
|Employee
      compensation and related taxes                     |                        | (45,895  | )                      |   | (105,974               | )
|Deferred
      compensation                                       |                        | (14,309  | )                      |   | 9,404                  |  
|Income
      taxes                                                |                        | 9,409    |                        |   | (40,858                | )
|Other
      liabilities                                           |                        | (3,483   | )                      |   | 26,842                 |  
|                                                                  |                        |          |                        |   |                        |  
|Net cash
      from operating activities                          |                        | 346,368  |                        |   | 925,990                |  
|                                                                  |                        |          |                        |   |                        |  
|Cash
      Flows From Investing Activities:                       |                        |          |                        |   |                        |  
|Purchase
      of property and equipment, net                     |                        | (127,007 | )                      |   | (190,808               | )
|Purchase
      of other investments                               |                        | (18,116  | )                      |   | (72,926                | )
|Proceeds
      from sale or maturity of other investments         |                        | 10,433   |                        |   | 19,695                 |  
|                                                                  |                        |          |                        |   |                        |  
|Net cash
      from investing activities                          |                        | (134,690 | )                      |   | (244,039               | )
|                                                                  |                        |          |                        |   |                        |  
|Cash
      Flows From Financing Activities:                       |                        |          |                        |   |                        |  
|Short-term
      bank loans                                       |                        | (67,300  | )                      |   | (212,500               | )
|Securities
      loaned                                           |                        | (42,630  | )                      |   | (407,432               | )
|Employee
      stock transactions                                 |                        | 60,967   |                        |   | 58,428                 |  
|Purchase
      of treasury stock                                  |                        | (114,500 | )                      |   | (85,137                | )
|Cash dividends
      paid                                         |                        | (51,088  | )                      |   | (50,889                | )
|                                                                  |                        |          |                        |   |                        |  
|Net cash
      from financing activities                          |                        | (214,551 | )                      |   | (697,530               | )
|                                                                  |                        |          |                        |   |                        |  
|Net Decrease
      in Cash and Cash Equivalents                   |                        | (2,873   | )                      |   | (15,579                | )
|Cash and
      Cash Equivalents, at Beginning of Year             |                        | 100,425  |                        |   | 116,004                |  
|                                                                  |                        |          |                        |   |                        |  
|Cash and
      Cash Equivalents, at End of Year                   | $                      | 97,552   |                        | $ | 100,425                |  
|                                                                  |                        |          |                        |   |                        |  

Interest
  payments, net of amounts capitalized of $2,565, $2,044 and $1,055, totaled $5,494
  in 2003, $29,304 in 2002 and $98,444 in 2001.

Income
  taxes paid totaled $43,223 in 2003, $85,947 in 2002 and $165,304 in 2001.

Supplemental
  disclosures of noncash financing activities: Restricted stock awards granted,
  totaled $21,738 in 2003, $24,614 in 2002 and $34,977 in 2001.

See Notes
  to Consolidated Financial Statements.

24

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements
  (Three years ended February 28, 2003)
  (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 7,200 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 accruals for litigation and income
  taxes. Actual results could differ from these estimates.

Cash and Cash Equivalents

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

Securities Transactions

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

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.

25

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

1.       Summary
  of Significant Accounting Policies (Continued)

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

26

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003) 
  (Dollars in thousands, except per share amounts)

1.      Summary
  of Significant Accounting Policies (Continued)

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. Valuation allowances are established when
  necessary to reduce deferred tax assets to the amounts expected to be realized.
  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, 2003,
  was equal to the Companys net earnings.

Recent Accounting Pronouncements

In
  July 2001, the Financial Accounting Standards Board (FASB) released Statement
  of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
  Assets. 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 Company adopted the provisions
  of SFAS No. 142 in the first quarter of fiscal-year 2003. The adoption of this
  standard did 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. The
  Company adopted provisions of SFAS No. 144 in the first quarter of fiscal-year
  2003. The adoption of this standard did not have a material impact on the Companys
  consolidated financial statements.

In
  June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
  with Exit or Disposal Activities. This standard requires companies to
  recognize costs associated with exit or disposal activities when they are incurred
  rather than at the date of a commitment to an exit or disposal plan. SFAS No.
  146 will replace the existing guidance provided by Emerging Issues Task Force
  Issue No. 94-3, Liability Recognition for Certain Employee Termination
  Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
  in a Restructuring). The provisions of this standard are to be applied
  prospectively to exit or disposal activities initiated after December 31, 2002.
  The adoption of this standard did not have a material impact on the Companys
  consolidated financial statements.

In
  November 2002, the FASB issued FASB Interpretation No. (FIN) 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others (FIN 45).

27

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003) 
  (Dollars in thousands, except per share amounts)

1. Summary
  of Significant Accounting Policies (Continued)

FIN 45 requires the recognition
  of a liability for the fair value of an obligation undertaken in issuing a guarantee
  and also requires certain disclosures of such guarantees. The disclosure requirements
  became effective in 2003. The recognition requirements became effective for
  the Company on January 1, 2003. The adoption of FIN 45 did not have a material
  impact on the Companys consolidated financial statements.

In
  January 2003, the FASB issued Interpretation No. 46, Consolidation of
  Variable Interest Entities (FIN 46), an interpretation of
  Accounting Research Bulletin No. 51, Consolidated Financial Statements,
  which requires the consolidation by a business enterprise of variable interest
  entities if the business enterprise is the primary beneficiary. FIN 46 is effective
  January 31, 2003, for the Company with respect to interests in variable interest
  entities obtained after that date and August 31, 2003, with respect to interests
  in variable interest entities existing prior to that date. Although the Company
  has not completed its analysis of FIN 46, the Company currently does not believe
  it will be required to consolidate any material variable interest entities.

In
  December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
  Compensation  Transition and Disclosure, an amendment of SFAS No.
  123, Accounting for Stock-Based Compensation. SFAS No. 148 permits
  three alternative methods of transition for a voluntary change to the fair-value
  based method of accounting for employee stock-based compensation. SFAS No. 148
  continues to permit prospective applications for companies that adopt prior
  to the beginning of fiscal-year 2004. SFAS No. 148 also allows for a modified
  prospective application, which requires the fair value of all unvested awards
  to be amortized over the remaining service period, as well as restatement of
  prior years expense. The transition guidance and annual disclosure provisions
  of SFAS No. 148 were effective for fiscal years ending after December 15, 2002,
  with earlier application permitted in certain circumstances. The transitional
  guidance of SFAS No. 148 did not have an impact on the Companys financial
  position, results of operations, earnings per share or cash flows as the Company
  applies the provisions of Accounting Principles Board Opinion No. 25 Accounting
  for Stock Issued to Employees. However, the disclosure provisions of SFAS
  No. 148 will require the Company to include the disclosure requirements of SFAS
  No. 123, effective for the Companys quarter ending May 31, 2003.

2.      Restructuring
  and Other Charges

As
  a result of a number of actions taken to reduce costs, streamline 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
  following table reflects changes in the restructuring reserves included in employee
  compensation and related taxes and other liabilities at February 28, 2003 and
  2002:

|                                  | InitialBalance |        | Utilized
      inFiscal-Year
      
      2002 |   | BalanceFebruary 28,2002 |   | Utilized
      inFiscal-Year
      
      2003 |        | Adjustmentsin 2003 toInitialEstimates |   | BalanceFebruary 28,2003
|--------------------------------- | -------------- | ------ | ---------------------------------------------- | - | ----------------------- | - | ---------------------------------------------- | ------ | ------------------------------------- | - | -----------------------
|                                  |                |        |                                                |   |                         |   |                                                |        |                                       |   |                        
|Technology
      asset write-offs | $              | 46,332 |                                                | $ | (45,932                 | ) | $                                              | 400    |                                       | $ | (264                   
|Severance
      costs             |                | 18,605 |                                                |   |                        |   |                                                | 18,605 |                                       |   | (10,987                
|Real estate
      consolidations  |                | 17,525 |                                                |   | (7,938                  | ) |                                                | 9,587  |                                       |   | (1,767                 
|                                  |                |        |                                                |   |                         |   |                                                |        |                                       |   |                        
|                                  | $              | 82,462 |                                                | $ | (53,870                 | ) | $                                              | 28,592 |                                       | $ | (13,018                
|                                  |                |        |                                                |   |                         |   |                                                |        |                                       |   |                        

The
  remaining severance costs liability was paid in fiscal 2004. The real estate
  consolidations liability will be paid out over the remaining lives of the related
  leases.

28

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003) 
  (Dollars in thousands, except per share amounts)

2.      Restructuring
  and Other Charges (Continued) Other Charges

The
  other charges of $44,500 incurred by the Company in 2002 included reserves of
  $16,900 for customer litigation and $25,800 for a $37,660 partly secured margin
  loan. In 2003, the Company expensed an additional $7,000 for this loan, increasing
  the reserve to $32,800. The collateral underlying the secured portion of the
  loan was liquidated throughout the year and the Company realized proceeds in
  the amount of the unreserved balance.

3. Property
  and Equipment

At
  February 28, 2003 and 2002, property and equipment consists of:

|                                                      | 2003 |           | 2002 |  
|----------------------------------------------------- | ---- | --------- | ---- | -
|                                                      |      |           |      |  
|Land                                                  | $    | 20,523    |      | $
|Building
      and leasehold improvements             |      | 276,973   |      |  
|Equipment
      and computer hardware                 |      | 494,391   |      |  
|Software
      and software applications              |      | 152,837   |      |  
|Construction
      in progress                        |      | 160,888   |      |  
|                                                      |      |           |      |  
|Total property
      and equipment                    |      | 1,105,612 |      |  
|Less: Accumulated
      depreciation and amortization |      | (579,225  | )    |  
|                                                      |      |           |      |  
|Total property
      and equipment, net               | $    | 526,387   |      | $
|                                                      |      |           |      |  

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 $186,000 in 2003, $371,000 in 2002 and $1,100,000
  in 2001, at average effective interest rates of 2.0 percent in 2003, 3.2 percent
  in 2002 and 6.5 percent in 2001. Customer securities were utilized in these
  arrangements. Bank loans are short-term borrowings that are payable on demand
  and may be unsecured or collateralized by customer-owned securities held in
  margin accounts. The average of such bank loans was $163,000 in 2003, $283,000
  in 2002 and $406,000 in 2001, at average effective interest rates of 2.1 percent,
  3.3 percent and 6.5 percent, respectively. Company-owned investments of $38,952
  in 2003, $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 throughout each year were secured by
  customer-owned securities. At February 28, 2003 and 2002, there were outstanding
  short-term bank loans of $40,000 and $107,300, respectively.

29

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A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

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:

|                                                       | 2003 |         | 2002 |   | 2001   |  
|------------------------------------------------------ | ---- | ------- | ---- | - | ------ | -
|                                                       |      |         |      |   |        |  
|Net income,
      as reported                          | $    | 118,828 |      | $ | 71,501 |  
|Deduct:
      Total stock-based employee compensation  |      |         |      |   |        |  
|expense
      determined under fair value based method |      |         |      |   |        |  
|for
      all awards net of changes in incentive       |      |         |      |   |        |  
|compensation
      and related tax effects             |      | (9,129  | )    |   | (8,449 | )
|                                                       |      |         |      |   |        |  
|Pro forma
      net earnings                           | $    | 109,699 |      | $ | 63,052 |  
|                                                       |      |         |      |   |        |  
|Earnings
      per share:                              |      |         |      |   |        |  
|Diluted                                                | $    | 1.46    |      | $ | 0.88   |  
|                                                       |      |         |      |   |        |  
|Basic                                                  | $    | 1.48    |      | $ | 0.89   |  
|                                                       |      |         |      |   |        |  
|Pro forma
      earnings per share:                    |      |         |      |   |        |  
|Diluted                                                | $    | 1.35    |      | $ | 0.78   |  
|                                                       |      |         |      |   |        |  
|Basic                                                  | $    | 1.37    |      | $ | 0.79   |  
|                                                       |      |         |      |   |        |  

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, 2003, at 85 percent
  of market price based on dates specified in the plan. Employees purchased 1,850,030
  shares at $27.13 per share in 2003, 1,708,788 shares at $29.58 per share in
  2002, and 1,870,983 shares at $32.33 per share in 2001. 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 2003, 2002
  and 2001, respectively: dividend yield of 1.79 percent, 1.56 percent and 1.44
  percent; an expected life of one year; expected volatility of 36 percent, 39
  percent and 46 percent; and risk-free interest rates of 1.43 percent, 2.47 percent
  and 6.21 percent. The fair value of the options granted in 2003, 2002 and 2001
  was $4.41, $8.03 and $14.08 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, 2003, 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, 2003, were awarded 844,188 shares with a
  market value of $21,738. At February 28, 2002 and 2001, the awards were 564,550
  and 967,561 shares, respectively, with corresponding market values of $24,614
  and $34,977. 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 for awards granted prior
  to 2003 and 10 years for awards granted in 2003 or earlier upon termination
  of employment. The fair value of each option grant was estimated at the date
  of grant using the following assumptions

30

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A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued) 
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

5. Employee
  Stock Plans (Continued)

for 2003, 2002 and 2001,
  respectively: dividend yield of 1.79 percent, 1.56 percent and 1.44 percent;
  expected lives of seven years for 2003 and six years for 2002 and 2001; expected
  volatility of 34 percent, 38 percent and 35 percent; risk-free interest rates
  of 3.37 percent, 4.6 percent and 4.86 percent; and a forfeiture rate of 9 percent,
  8 percent and 8 percent. The fair value of options granted under this plan in
  2003, 2002 and 2001 was $8.66, $16.37 and $13.27, respectively.

A
  summary of the status of the Companys stock options as of February 28,
  2003, 2002 and 2001, and changes during the years ended on those dates is presented
  as follows:

|                                     | Shares(000) |   | 2003WeightedAverageExercisePrice |       | Shares(000) |       | 2002WeightedAverageExercisePrice |   | Shares(000) |  | 2001WeightedAverageExercisePrice
|------------------------------------ | ----------- | - | -------------------------------- | ----- | ----------- | ----- | -------------------------------- | - | ----------- |  | --------------------------------
|                                     |             |   |                                  |       |             |       |                                  |   |             |  |                                 
|Outstanding,
      beginning of year | 4,730       |   | $                                | 29.49 |             | 4,803 |                                  | $ | 30.74       |  | 4,840                           
|Granted                              | 756         |   | $                                | 25.75 |             | 446   |                                  | $ | 43.60       |  | 901                             
|Exercised                            | (519        | ) | $                                | 21.36 |             | (474  | )                                | $ | 13.77       |  | (828                            
|Forfeited                            | (56         | ) | $                                | 38.98 |             | (45   | )                                | $ | 37.12       |  | (110                            
|                                     |             |   |                                  |       |             |       |                                  |   |             |  |                                 
|Outstanding,
      end of year       | 4,911       |   | $                                | 33.61 |             | 4,730 |                                  | $ | 29.49       |  | 4,803                           
|                                     |             |   |                                  |       |             |       |                                  |   |             |  |                                 
|Treasury
      shares utilized for   |             |   |                                  |       |             |       |                                  |   |             |  |                                 
|exercises                            | 519         |   |                                  |       |             | 474   |                                  |   |             |  | 828                             
|                                     |             |   |                                  |       |             |       |                                  |   |             |  |                                 

The
  following table summarizes information about outstanding stock options at February
  28, 2003:

|Range
      ofExercisePrices |   | Options
      Outstanding                       |    | Options
      Exercisable   
|---------------------------- | - | ----------------------------------------------- | -- | ----------------------------
|                             |  
|NumberOutstanding(000)       |   | WeightedAverageRemainingContractualLife (years) |    | WeightedAverageExercisePrice
|                             |   |                                                 |    |                             
|                             | $ | 16                                              | $ | 20                          
|                             | $ | 21                                              | $ | 25                          
|                             | $ | 26                                              | $ | 30                          
|                             | $ | 31                                              | $ | 35                          
|                             | $ | 36                                              | $ | 40                          
|                             | $ | 41                                              | $ | 45                          
|                             |   |                                                 |    |                             
|                             |   |                                                 |    |                             
|                             |   |                                                 |    |                             

6. Employee
  Profit Sharing Plan

The
  Company has a defined contribution plan [401(k)] covering substantially all
  employees, whereby the Company is obligated to make contributions, in specified
  amounts as defined therein, based on the compensation of eligible employees.
  Prior to 2003, the Company was obligated to match, in specified amounts, 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 $60,658 in 2003, $62,650 in 2002 and
  $86,873 in 2001, 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. The Company expensed $13,883
  in 2003, $25,226 in 2002 and $41,895 in 2001, in connection with this plan.
  Participants may choose to base their return on the performance of one or more
  of a combination of mutual funds

31

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003) 
  (Dollars in thousands, except per share amounts)

6.       Employee
  Profit Sharing Plan (Continued)

as designated by the Company
  or, in limited cases, the broker call rate. Participants have no ownership in
  the mutual funds. Included in investments are $90,998 in 2003 and $70,259 in
  2002 in mutual funds that were purchased by the Company to hedge its liability
  to the participants that choose to base the performance of their return on the
  mutual fund option, with the exception of those who choose to base the performance
  of the return on money market mutual funds.

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, 2003, the subsidiarys net capital
  of $606,277 was 30 percent of aggregate debit items and $565,635 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. These
  subsidiaries have consistently operated in excess of their capital adequacy
  requirements. The only restriction with regard to the payment of cash dividends
  by A.G. Edwards, Inc. is its ability to obtain cash through dividends and advances
  from its subsidiaries, if needed.

8. Income
  Taxes

The
  provisions for income taxes (net of the resolution of tax matters) consist of:

|                      | 2003 |        | 2002 |   | 2001   
|--------------------- | ---- | ------ | ---- | - | -------
|                      |      |        |      |   |        
|Current:              |      |        |      |   |        
|Federal               | $    | 54,747 |      | $ | 53,282 
|State
      and local |      | (1,826 | )    |   | (10,282
|                      |      |        |      |   |        
|                      |      | 52,921 |      |   | 43,000 
|Deferred              |      | (315   | )    |   | (22,443
|                      |      |        |      |   |        
|                      | $    | 52,606 |      | $ | 20,557 
|                      |      |        |      |   |        

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.

32

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A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

8. Income
  Taxes (Continued)

Significant
  components of deferred tax assets and liabilities at February 28, 2003 and 2002,
  are as follows:

|                                | 2003 |         | 2002
|------------------------------- | ---- | ------- | ----
|                                |      |         |     
|Deferred
      Tax Assets:      |      |         |     
|Employee
      benefits         | $    | 124,471 |     
|Other                           |      | 14,216  |     
|                                |      |         |     
|                                |      | 138,687 |     
|                                |      |         |     
|Deferred
      Tax Liabilities: |      |         |     
|Receivables                     |      | 20,682  |     
|Investments                     |      | 14,186  |     
|Property
      and equipment    |      | 5,257   |     
|Other                           |      | 4,787   |     
|                                |      |         |     
|                                |      | 44,912  |     
|                                |      |         |     
|Net Deferred
      Tax Assets   | $    | 93,775  |     
|                                |      |         |     

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

A reconciliation of the
  effective tax rate and the federal statutory rate for 2003, 2002 and 2001 is
  as follows:

|                                                               | 2003 |   | 2002 |   | 2001 |  
|-------------------------------------------------------------- | ---- | - | ---- | - | ---- | -
|                                                               |      |   |      |   |      |  
|Federal
      statutory rate                                   | 35.0 | % | 35.0 | % | 35.0 | %
|State and
      local income taxes, net of Federal tax benefit | 2.0  |   | 2.0  |   | 2.7  |  
|Resolution
      of Federal and state tax matters              | (5.2 | ) | (8.1 | ) |     |  
|Research
      and development credits                         |     |   | (4.3 | ) |     |  
|Municipal
      bond interest                                  | (1.6 | ) | (3.3 | ) | (0.9 | )
|Meal and
      entertainment expenses                          | 0.9  |   | 1.3  |   | 0.3  |  
|Other                                                          | (0.4 | ) | (0.3 | ) | (0.2 | )
|                                                               |      |   |      |   |      |  
|                                                               | 30.7 | % | 22.3 | % | 36.9 | %
|                                                               |      |   |      |   |      |  

9. Investments

Investments
  consist of:

|                                 | 2003 |         | 2002
|-------------------------------- | ---- | ------- | ----
|                                 |      |         |     
|Private
      equity             | $    | 101,485 |     
|Mutual
      funds               |      | 113,794 |     
|U.S. government
      securities |      | 13,509  |     
|Other                            |      | 8,395   |     
|                                 |      |         |     
|Total Investments                | $    | 237,183 |     
|                                 |      |         |     

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 $124,000 to various private equity partnerships, of which $58,250 remain
  unfunded at February 28, 2003. 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.

33

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A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

10.      Stockholders
  Equity

Earnings Per Share

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

|                                                    | 2003 |         | 2002 |   | 2001  
|--------------------------------------------------- | ---- | ------- | ---- | - | ------
|                                                    |      |         |      |   |       
|Net earnings
      available to common stockholders | $    | 118,828 |      | $ | 71,501
|                                                    |      |         |      |   |       
|Shares
      (in thousands):                        |      |         |      |   |       
|Weighted
      average shares outstanding           |      | 80,133  |      |   | 80,013
|                                                    |      |         |      |   |       
|Effect
      of dilutive common shares:             |      |         |      |   |       
|Restricted
      shares                             |      | 327     |      |   | 217   
|Stock
      purchase plan                           |      | 355     |      |   | 276   
|Stock
      option plan                             |      | 362     |      |   | 776   
|                                                    |      |         |      |   |       
|Dilutive
      common shares                        |      | 1,044   |      |   | 1,269 
|                                                    |      |         |      |   |       
|Total weighted
      average diluted shares         |      | 81,177  |      |   | 81,282
|                                                    |      |         |      |   |       
|Earnings
      per share:                           |      |         |      |   |       
|Diluted                                             | $    | 1.46    |      | $ | 0.88  
|                                                    |      |         |      |   |       
|Basic                                               | $    | 1.48    |      | $ | 0.89  
|                                                    |      |         |      |   |       

At
  year-end 2003, 2002 and 2001, there were 966,570, 532,786 and 0 options, respectively,
  that were considered antidilutive and thus were not included in the above calculations.

Stock Repurchase Program

In
  November 2002, the Board of Directors authorized the repurchase of up to 10,000,000
  shares of the Companys outstanding common stock during the period January
  31, 2003 through December 31, 2004. The Company purchased 3,145,319 shares at
  an aggregate cost of $114,500 in 2003, 2,164,900 shares at an aggregate cost
  of $85,137 in 2002 and 10,640,750 shares at an aggregate cost of $446,726 in
  2001, under this authorization and other previously authorized plans.

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 applicable,
  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 applicable, of the Companys
  common stock are subject to adjustment to prevent dilution and expire June 25,
  2005.

34

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A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

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, 2003, are as follows:

|Year
      ending February 28 (29), |   |        
|----------------------------------- | - | -------
|                                    |   |        
|2004                                | $ | 102,200
|2005                                |   | 81,400 
|2006                                |   | 73,100 
|2007                                |   | 60,500 
|2008                                |   | 50,100 
|Later years                         |   | 102,300
|                                    |  
|                                    | $ | 469,600
|                                    |  

Rental
  expense under all operating leases and service agreements was $133,871 in 2003,
  $115,816 in 2002 and $94,455 in 2001.

The
  Company has remaining commitments of $23,200 through 2004 for the construction
  of an additional office building and a learning center at its headquarters campus.

The
  Company is engaged in a project that, when fully implemented, will update the
  Companys technology infrastructure, streamline its back-office processing
  and strengthen its data capabilities. As part of this project, the Company will
  migrate its back-office systems to an application service provider, which will
  provide the software and computer operations that support the Companys
  securities processing functions. The Company has internally designated up to
  $183 million, including internal development costs, related to this project.

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, 2003, would not have had a material effect on the consolidated
  financial statements.

The
  Company had outstanding letters of credit of $60,931 at February 28, 2003, and
  $70,106 at February 28, 2002, principally to satisfy margin deposit requirements
  with the Options Clearing Corporation.

The
  Company is a defendant in a number of lawsuits and arbitrations that 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 claimants 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 claimants, the merits of the claims, the total cost of defending
  the litigation and the likelihood of a successful defense against the claims,
  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. 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.

The
  Company also provides guarantees to securities clearing houses and exchanges
  under their standard membership agreements, which require members to guarantee
  the performance of other members. Under these agreements, if a member becomes
  unable to satisfy its obligations to the clearing houses and exchanges, all
  other members would be required to meet any shortfall. The Companys liability
  under these agreements is not quantifiable and may

35

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

11.      Commitments
  and Contingent Liabilities (Continued)

exceed the cash and securities
  it has posted as collateral. However, the potential requirement for the Company
  to make payments under these agreements is remote. Accordingly, no liability
  has been recognized for these transactions.

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. In addition, customer securities may be pledged as collateral to satisfy
  margin deposits at various clearing organizations. To the extent these counterparties
  are unable to fulfill their contracted obligation to return securities pledged,
  the Company is exposed to the risk of obtaining securities at prevailing market
  prices to meet its customer obligations.

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

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

The
  Company manages its risks associated with the aforementioned transactions through
  position and credit limits and the continuous monitoring of collateral. Additionally,
  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, 2003, the fair value
  of securities received as collateral where the Company is permitted to sell
  or repledge the securities was $2,818,675, and the fair value of the collateral
  that had been sold or repledged was $304,367.

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

36

---



A.G.
  Edwards, Inc.

Notes
  to Consolidated Financial Statements (Continued)
  (Three years ended February 28, 2003)
  (Dollars in thousands, except per share amounts)

12.     
  Financial Instruments (Continued)

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.

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:

|                                | 2003 |           | 2002 |   | 2001     
|------------------------------- | ---- | --------- | ---- | - | ---------
|                                |      |           |      |   |          
|Transaction
      services      | $    | 1,479,388 |      | $ | 1,548,824
|Asset management
      services |      | 535,132   |      |   | 579,588  
|Interest                        |      | 100,813   |      |   | 146,580  
|Other                           |      | 78,668    |      |   | 63,421   
|                                |      |           |      |   |          
|                                | $    | 2,194,001 |      | $ | 2,338,413
|                                |      |           |      |   |          

* * * * *
  *

37

---



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, 2003 and 2002,
  and the related consolidated statements of earnings, stockholders equity
  and cash flows for each of the three years in the period ended February 28,
  2003. 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, 2003 and 2002, and the results of their operations and their cash flows
  for each of the three years in the period ended February 28, 2003, in conformity
  with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

St. Louis, Missouri 
  April 25, 2003

38

---



|ITEM 9. | CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL
      DISCLOSURE.
|------- | ------------------------------------------------------------------------------------------------

None.

PART
  III

ITEM 10.    
  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The
  information required by this item is included under the caption Election
  of Directors  Nominees for Directors in the Companys 2003
  Proxy Statement and under the caption Section 16(a) Beneficial Ownership
  Reporting Compliance of the Companys Proxy Statement, such information
  is hereby incorporated by reference, and in Part I of this Form 10-K under the
  caption Executive Officers of the Company.

ITEM 11.    
  EXECUTIVE COMPENSATION.

The
  information required by this item is included under the captions Director
  Compensation and Executive Compensation in the Companys
  2003 Proxy Statement. Such information is hereby incorporated by reference.

|ITEM 12. | SECURITY OWNERSHIP
        OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND
        RELATED STOCKHOLDER MATTERS.
|-------- | --------------------------------------------------------------------------------------------------------------

The
  information required by this item is contained in the Companys 2003 Proxy
  Statement under the caption Ownership of the Companys Common Stock.
  Such information is hereby incorporated by reference.

The
  following table summarizes information about the equity compensation plans at
  February 28, 2003:

|                                                | (a)                                                                                            |           | (b)                                                                      |  | (c)                                                                                                                                         
|----------------------------------------------- | ---------------------------------------------------------------------------------------------- | --------- | ------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Plan
      category                             | Number
      of securities tobe issued upon exerciseof outstanding options,warrants and rights |           | Weighted-averageexercise price ofoutstanding options,warrants and rights |  | Number
      of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in column (a))
|                                                |                                                                                                |           |                                                                          |  |                                                                                                                                             
|Equity
      compensation plans approved by     |                                                                                                |           |                                                                          |  |                                                                                                                                             
|security
      holders                          |                                                                                                | 4,911,000 |                                                                          |  |                                                                                                                                             
|Equity
      compensation plans not approved by |                                                                                                |           |                                                                          |  |                                                                                                                                             
|security
      holders                          |                                                                                                | None      |                                                                          |  |                                                                                                                                             
|                                                |                                                                                                |           |                                                                          |  |                                                                                                                                             
|Total                                           |                                                                                                | 4,911,000 |                                                                          |  |                                                                                                                                             
|                                                |                                                                                                |           |                                                                          |  |                                                                                                                                             

|    
|----
|(*) 
|(**)

ITEM 13.     CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS.

The
  information required by this item is contained in the Companys 2003 Proxy
  Statement under the caption Certain Transactions. Such information
  is hereby incorporated by reference.

ITEM 14.     CONTROLS
  AND PROCEDURES.

Within
  the 90 days prior to the date of this Annual Report on Form 10-K, the Company
  evaluated the effectiveness of the design and operation of its disclosure
  controls and procedures (Disclosure Controls), and its internal
  controls and procedures for financial reporting (Internal Controls). This
  evaluation (the Controls Evaluation) was performed under the supervision and
  with the participation of management, including the Chief Executive Officer
  (CEO) and Chief Financial Officer (CFO).

Disclosure
  Controls are procedures designed to ensure that information required to be disclosed
  in the Companys reports filed under the Exchange Act, such as this Annual
  Report, is recorded, processed, summarized

39

---



and reported within the
  time periods specified in the U.S. Securities and Exchange Commissions
  (the SEC) rules and forms. Disclosure Controls are also designed to ensure that
  such information is accumulated and communicated to management, including the
  CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
  Internal Controls are procedures designed to provide reasonable assurance that
  (1) transactions are properly authorized; (2) assets are safeguarded against
  unauthorized or improper use; and (3) transactions are properly recorded and
  reported, all to permit the preparation of financial statements in conformity
  with generally accepted accounting principles.

The
  Companys management, including the CEO and CFO, does not expect that the
  Disclosure Controls or other Internal Controls will prevent all error and all
  fraud. A control system, no matter how well designed and operated, can provide
  only reasonable, not absolute, assurance that the control systems objectives
  will be met. Further, the design of a control system must reflect the fact that
  there are resource constraints, and the benefits of controls must be considered
  relative to their costs. Because of the inherent limitations in all control
  systems, no evaluation of controls can provide absolute assurance that all control
  issues and instances of fraud, if any, within the Company have been detected.
  These inherent limitations include the realities that judgments in decision-making
  can be faulty, and that breakdowns can occur because of simple error or mistake.
  Controls can also be circumvented by the individual acts of some persons, by
  collusion of two or more people, or by management override of the controls.
  The design of any system of controls is based in part upon certain assumptions
  about the likelihood of future events, and there can be no assurance that any
  design will succeed in achieving its stated goals under all potential future
  conditions. Over time, controls may become inadequate because of changes in
  conditions or deterioration in the degree of compliance with its policies or
  procedures. Because of the inherent limitations in a cost-effective control
  system, misstatements due to error or fraud may occur and not be detected.

The
  evaluation of the Companys Disclosure Controls and Internal Controls included
  a review of the controls objectives and design, the Companys implementation
  of the controls and the effect of the controls on the information generated
  for use in this Annual Report. In the course of the Controls Evaluation, management
  sought to identify data errors, controls problems or acts of fraud and confirm
  that appropriate corrective actions, including process improvements, were being
  undertaken. This type of evaluation is performed on a quarterly basis so that
  the conclusions of management, including the CEO and CFO, concerning controls
  effectiveness can be reported in the Companys Quarterly Reports on Form
  10-Q and Annual Report on Form 10-K. The Companys Internal Controls are
  also evaluated on an ongoing basis by the Internal Audit Department and by other
  personnel, as well as by the independent auditors who evaluate them in connection
  with determining their auditing procedures related to their report on the annual
  financial statements and not to provide assurance on Internal Controls. The
  overall goals of these various evaluation activities are to monitor Disclosure
  Controls and Internal Controls, and to modify them as necessary. The Company
  intends to maintain the Disclosure Controls and the Internal Controls as dynamic
  systems that change as conditions warrant.

From
  the date of the Controls Evaluation to the date of this Annual Report, there
  have been no significant changes in Internal Controls or in other factors that
  could significantly affect Internal Controls, including any corrective actions
  with regard to significant deficiencies and material weaknesses.

Based
  upon the Controls Evaluation, the CEO and CFO have concluded that, subject to
  the limitations noted above, the Disclosure Controls are effective to ensure
  that material information relating to A.G. Edwards, Inc. and its consolidated
  subsidiaries is made known to management, including the CEO and CFO, particularly
  during the period when the periodic reports are being prepared, and that the
  Internal Controls are effective to provide reasonable assurance that the financial
  statements are fairly presented in conformity with generally accepted accounting
  principles.

40

---



PART
  IV

ITEM 15.     EXHIBITS,
  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

|    |    | Index                                                 | Page
      Number
|--- | -- | ----------------------------------------------------- | -----------------
|    |    |                                                       |                  
|    |    |                                                       |                  
|(a) | 1. | Financial
      Statements                            |                  
|    |    | Consolidated
      balance sheets                     | 21               
|    |    | Consolidated
      statements of earnings             | 22               
|    |    | Consolidated
      statements of stockholders equity | 23               
|    |    | Consolidated
      statements of cash flows           | 24               
|    |    | Notes to
      consolidated financial statements      | 2537            
|    |    | Independent
      Auditors Report                    | 38               
|    | 2. | Financial
      Statement Schedules                   |                  
|    |    | Independent
      Auditors Report                    | 47               
|    |    | Schedule
      II  Valuation and Qualifying Accounts | 48               

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

|                                                                                                                                                                                                             | 3.                                                                                                                                                                                                                                                                                                                          | Exhibits*
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Some
      of the following exhibits were previously filed as exhibits to other reports
      or registration statements filed by the Registrant and are incorporated
      by reference as indicated below.
|3(i)                                                                                                                                                                                                         | Certificate
      of Incorporation filed as Exhibit 3(i) to the Registrants Form 10-K
      for the fiscal year ended February 28, 1993, as amended by the Certificate
      of Amendment of Certificate of Incorporation filed as Exhibit 3(i)(a) to
      the Registrants Form 10-Q for the quarter ended May 31, 1998.
|3(ii)                                                                                                                                                                                                        | By-laws
      filed as Exhibit 3(ii) to the Registrants Form 10-K for the fiscal
      year ended February 28, 1994.                                                                                                                                                                                                      
|4(i)                                                                                                                                                                                                         | Reference
      is made to Articles IV, V, X, XII, XIII and XV of the Certificate of Incorporation
      filed as Exhibit 3(i) to this Form 10-K.                                                                                                                                                                          
|4(ii)                                                                                                                                                                                                        | Reference
      is made to Article II, Article III Sections 1 and 15, Article IV Sections
      1 and 3, Article VI and Article VII Sections 1-3 of the By-laws filed as
      Exhibit 3(ii) to this Form 10-K.                                                                                                            
|4(iii)                                                                                                                                                                                                       | Rights
      Agreement dated as of December 30, 1988, between A.G. Edwards, Inc. and
      Boatmens Trust Company as Rights Agent filed as Exhibit 4 to the Registrants
      Form 8-K Report dated December 30, 1988.                                                                                                   
|4(iv)                                                                                                                                                                                                        | Amendment
      No. 1 to the Rights Agreement dated December 30, 1988, between A.G. Edwards,
      Inc. and Boatmens Trust Company as Rights Agent, dated May 24, 1991,
      filed as Exhibit 4(iv) to Registrants Form 10-K for the fiscal year
      ended February 29, 1992.                                         
|4(v)                                                                                                                                                                                                         | Amendment
      No. 2 to the Rights Agreement dated December 30, 1988, between A.G. Edwards,
      Inc. and Boatmens Trust Company as Rights Agent, dated June 22, 1995,
      filed with the Registrants Form 8-A/A (Amendment No. 1) on July 12,
      1995.                                                           
|4(vi)                                                                                                                                                                                                        | Amendment
      No. 3 to the Rights Agreement dated December 30, 1988, between A.G. Edwards,
      Inc. and Boatmens Trust Company as Rights Agent, dated July 11, 1997,
      filed as Exhibit 4(vi) to Registrants Form 10-K for the fiscal year
      ended February 28, 1998.                                        
|4(vii)                                                                                                                                                                                                       | Amendment
      No. 4 dated December 15, 2000, to the Rights Agreement dated December 30,
      1988, filed as Exhibit 4(vii) to Registrants Form 8-A/A (Amendment
      No. 2) on December 19, 2000.                                                                                                                     
|                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                            

41

---





|10     | A.G. Edwards, Inc.
      1988 Incentive Stock Plan (as amended and restated) filed as Exhibit 10
      to Registrants Form 10-Q for the fiscal quarter ended May 31, 2002.                                   
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11     | Computation of per
      share earnings is set forth in Note 10 (Stockholders Equity) of the
      Notes to Consolidated Financial Statements under the caption Earnings
      Per Share in this Form 10-K.
|21     | Registrants
      Subsidiaries.                                                                                                                                                                              
|23     | Independent Auditors
      Consent.                                                                                                                                                                          
|24     | Power of Attorney.                                                                                                                                                                                            
|99(i)  | Principal Executive
      Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002.                                               
|99(ii) | Principal Financial
      Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002.                                               
|      
|*      | Numbers correspond to
      document numbers in Exhibit Table of Item 601 of Regulation S-K.                                                                                                                  
|(b)    | Reports on Form 8-K                                                                                                                                                                                           

No reports on Form 8-K were
  filed during the fourth quarter of the year ended February 28, 2003.

42

---



SIGNATURES

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

|                           |    | A.G. EDWARDS,
      INC.                                                                 
|-------------------------- | -- | -----------------------------------------------------------------------------------------
|                           |    |                                                                                          
|                           |    | (Registrant)                                                                             
|                           |    |                                                                                          
|                           |    |                                                                                          
|Date: April
      28, 2003 | By | /s/ Robert
        L. Bagby                                                              
|                           |    |                                                                                          
|                           |    | Robert
        L. BagbyChairman of the
        Board and 
        Chief Executive Officer

43

---



CERTIFICATION

I, Robert L. Bagby, certify
  that:

| | 1. | I
      have reviewed this annual report on Form 10-K of A.G. Edwards, Inc.;                                                                                                                                                                                                                                                                                                                                
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Based
      on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this annual
      report;                                                      
| | 3. | Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects
      the financial condition, results of operations and cash flows of the registrant
      as of, and for, the periods presented in this annual report;                                                                               
| | 4. | The
      registrants other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                                                                     
| |    | (a)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (b)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (c)                                                                                                                                                                                                                                                                                                                                                                                                         
| | 5. | The
      registrants other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrants auditors and the audit
      committee of registrants board of directors (or persons performing
      the equivalent function):                                                                                                                                       
| |    | (a)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (b)                                                                                                                                                                                                                                                                                                                                                                                                         
| | 6. | The
      registrants other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls subsequent
      to the date of our most recent evaluation, including any corrective actions
      with regard to significant deficiencies and material weaknesses.

Date: April 28, 2003

| | /s/ Robert
      L. Bagby                                                          
| | -----------------------------------------------------------------------------------
| |                                                                                    
| | Robert L.
      BagbyChairman of the
      Board and 
      Chief Executive Officer

44

---



CERTIFICATION

I, Douglas L. Kelly, certify
  that:

| | 1. | I
      have reviewed this annual report on Form 10-K of A.G. Edwards, Inc.;                                                                                                                                                                                                                                                                                                                                
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Based
      on my knowledge, this annual report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this annual
      report;                                                      
| | 3. | Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects
      the financial condition, results of operations and cash flows of the registrant
      as of, and for, the periods presented in this annual report;                                                                               
| | 4. | The
      registrants other certifying officer and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                                                                     
| |    | (a)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (b)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (c)                                                                                                                                                                                                                                                                                                                                                                                                         
| | 5. | The
      registrants other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrants auditors and the audit
      committee of registrants board of directors (or persons performing
      the equivalent function):                                                                                                                                       
| |    | (a)                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | (b)                                                                                                                                                                                                                                                                                                                                                                                                         
| | 6. | The
      registrants other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls subsequent
      to the date of our most recent evaluation, including any corrective actions
      with regard to significant deficiencies and material weaknesses.

Date: April 28, 2003

| | /s/ Douglas
      L. Kelly                          
| | ----------------------------------------------------
| |                                                     
| | Douglas
      L. Kelly
      Chief Financial Officer

45

---



POWER
  OF ATTORNEY

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

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

|/s/
      Robert L. Bagby          |  | Chairman
      of the Board, Chief Executive  |  | April
      30, 2003
|---------------------------------- |  | --------------------------------------------- |  | --------------------
|                                   |  | Officer
      and Director                    |  |                     
|Robert
      L. Bagby              |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Benjamin F. Edwards IV   |  | Vice
      Chairman of the Board and Director |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Benjamin
      F. Edwards IV       |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Ronald J. Kessler        |  | Vice
      Chairman of the Board and Director |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Ronald
      J. Kessler            |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Dr. E. Eugene Carter     |  | Director                                      |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Dr.
      E. Eugene Carter         |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Samuel C. Hutchinson Jr. |  | Director                                      |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Samuel
      C. Hutchinson Jr.     |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Peter B. Madoff          |  | Director                                      |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Peter
      B. Madoff              |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Mark S. Wrighton         |  | Director                                      |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Mark
      S. Wrighton             |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Douglas L. Kelly         |  | Treasurer,
      Chief Financial Officer and  |  | April
      30, 2003
|                                   |  | Secretary                                     |  |                     
|Douglas
      L. Kelly             |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Thomas H. Martin Jr.     |  | Controller                                    |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Thomas
      H. Martin Jr.         |  |                                               |  |                     
|                                   |  |                                               |  |                     
|/s/
      Joseph G. Porter         |  | Principal
      Accounting Officer            |  | April
      30, 2003
|                                   |  |                                               |  |                     
|Joseph
      G. Porter             |  |                                               |  |                     

46

---



INDEPENDENT
  AUDITORS REPORT

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

We
  have audited the consolidated financial statements of A.G. Edwards, Inc. and
  subsidiaries (the Company) as of February 28, 2003 and 2002, and
  for each of the three years in the period ended February 28, 2003, and have
  issued our report thereon dated April 25, 2003; such consolidated financial
  statements and report are included elsewhere in this Form 10-K. Our audits also
  included the consolidated financial statement schedule of A.G. Edwards, Inc.,
  and subsidiaries, listed in Item 15. This consolidated financial statement schedule
  is the responsibility of the Companys management. Our responsibility is
  to express an opinion based on our audits. In our opinion, such consolidated
  financial statement schedule, when considered in relation to the basic consolidated
  financial statements taken as a whole, presents fairly in all material respects
  the information set forth therein.

/s/ Deloitte & Touche LLP

St. Louis, Missouri 
  April 25, 2003

47

---



SCHEDULE
  II  VALUATION AND QUALIFYING ACCOUNTS

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

|Description                           | Balance
      atBeginningof Period |        | AdditionsCharged
      toCosts andExpenses |   | Deductions |  | Balanceat Endof Period
|------------------------------------- | ---------------------------------- | ------ | ------------------------------------------ | - | ---------- |  | ----------------------
|                                      |                                    |        |                                            |   |            |  |                       
|Year ended
      February 28, 2003    |                                    |        |                                            |   |            |  |                       
|Deducted
      from asset account:    |                                    |        |                                            |   |            |  |                       
|Allowance
      for doubtful accounts | $                                  | 38,214 |                                            | $ | 9,661      |  | $                     
|                                      |                                    |        |                                            |   |            |  |                       
|Year ended
      February 28, 2002    |                                    |        |                                            |   |            |  |                       
|Deducted
      from asset account:    |                                    |        |                                            |   |            |  |                       
|Allowance
      for doubtful accounts | $                                  | 10,697 |                                            | $ | 27,542     |  | $                     
|                                      |                                    |        |                                            |   |            |  |                       
|Year ended
      February 28, 2001    |                                    |        |                                            |   |            |  |                       
|Deducted
      from asset account:    |                                    |        |                                            |   |            |  |                       
|Allowance
      for doubtful accounts | $                                  | 5,043  |                                            | $ | 5,697      |  | $                     

48

---

EXHIBIT
    INDEX


|Exhibit | Description                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------------------
|        |                                                                                                                 
|        |                                                                                                                 
|21      | Registrants
      Subsidiaries                                                                                 
|        |                                                                                                                 
|23      | Independent
      Auditors Consent                                                                             
|        |                                                                                                                 
|24      | Power of
      Attorney (included on signature page)                                                            
|        |                                                                                                                 
|99(i)   | Principal
      Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to
|        | Section
      906 of the Sarbanes-Oxley Act of 2002                                                             
|        |                                                                                                                 
|99(ii)  | Principal Financial
      Officer CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to       
|        | Section
      906 of the Sarbanes-Oxley Act of 2002                                                             

49

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