|A.G. Edwards, Inc.
|------------------

|Annual Report
      Fiscal Year 2001 Table of Contents | Page |                                                    |    | Page
|------------------------------------------------------ | ---- | -------------------------------------------------- | -- | ----
|Mapping
      Your Journey                             | 1    | Notes
      to Consolidated Financial Statements   | 33
|Letter
      to ShareholdersBenjamin F. Edwards III   | 2    | Note  1                                            | 33
|Financial
      Highlights                             | 4    | Note  2                                            | 34
|Company
      Description                              | 5    | Note  3                                            | 34
|Letter
      to ShareholdersRobert L. Bagby           | 6    | Note  4                                            | 36
|Quarterly
      Financial Information                  | 8    | Note  5                                            | 36
|Client
      Profiles                                  | 9    | Note  6                                            | 36
|Steve
      and Barbara Denker                         | 10   | Note  7                                            | 37
|Jane
      Chiotti                                     | 12   | Note  8                                            | 37
|Buck
      and Mary Sharp                              | 14   | Note 
      9                                      | 38
|Joe
      Davis                                        | 16   | Note
      10                                      | 38
|Milestones                                             | 19   | Note
      11                                      | 39
|Benjamin
      F. Edwards III Milestone                | 21   | Independent
      Auditors Report                 | 39
|Managements
      Financial Discussion                | 23   | Corporate
      Organization                       | 40
|Consolidated
      Five-Year Financial Summary         | 28   | Board
      of Directors A.G. Edwards, Inc.        | 40
|Consolidated
      Financial Statements                | 29   | Board
      of Directors A.G. Edwards & Sons, Inc. | 41
|Consolidated
      Balance Sheets                      | 29   | Boards
      of Directors                          | 42
|Consolidated
      Statements of Earnings              | 30   | Regional
      Officers                            | 43
|Consolidated
      Statements of Stockholders Equity  | 31   | Branch
      Office Management                     | 44
|Consolidated
      Statements of Cash Flows            | 32   | Branch
      Office Management (cont.)             | 45
|                                                       |      | Branch
      Office Management (cont.)             | 46
|                                                       |      | Branch
      Office Management (cont.)             | 47
|                                                       |      | Branch
      Office Management (cont.)             | 48
|                                                       |      | Shareholder
      Information                      | 49

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|Mapping Your Journey  Successful
      investing is more than short-term gains. Its about long-term solutions.
      Thats how weve approached our business for 114 years. 
      Instead of being preoccupied with minute-to-minute swings of the market,
      our financial consultants focus on getting to know their clients, whether
      those clients are at the beginning of their financial journey or approaching
      their destination. They ask lots of questions and listen to what
      their clients are saying. They explain things in a way their clients
      understand. They provide a range of choices and have the freedom to recommend
      what makes the most sense for their clients. They act as a sounding board,
      sometimes advising specific actions. At other times, they recommend their
      clients stay the course. 
      Our clients trust their financial consultants to guide them on the road
      to their financial goals and dreams, whether its achieving a comfortable
      retirement, providing a college education or passing on wealth or a family
      business. A relationship built on trust is earned by acting with integrityputting
      clients interests first. It must be this way. Not only is it the right
      thing to do, but our clients financial well-being is on the line.
      Our clients want more than information. They want solutions and solid investment
      advice. Using all the resources available to themobjectivity, experience
      and the specialized knowledge of our headquarters personnelour financial
      consultants develop comprehensive financial plans based on an understanding
      of what is important to their clients. Our financial consultants have state-of-the-art
      technology that lets them share information easily and quickly. Technology
      is a collaborative tool that our financial consultants use to enhancenot
      replacethe relationships they have with their clients.
      They also help their clients stay on course when they may be tempted to
      turn back or change their route. However, unforeseen changes may require
      adjustments to their financial plans. Because our financial consultants
      know whats going on in their clients lives, they are ready for
      any detours and are flexible enough to offer new strategies to meet their
      clients changing needs. 
      Building wealth is a process, not a transaction. Through customized financial
      planning and ongoing advice, our financial consultants help clients get
      where theyre going and preserve their wealth for future generations.
      The journey to financial success begins with a destination. Its our job
      to earn our clients trust so we can help them get there.

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      Page 1 | A.G. Edwards, Inc.
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|Benjamin F. Edwards IIITo
      Our Shareholders After a long bull market
      and years of record net earnings, fiscal 2001 brought us one of those healthy
      corrections that makes you sick. Our economy looks sound, and I would look
      for an improvement in the market before long.
      We ended our fiscal year with 696 locations, adding West Linn, Ore.; Panama
      City Beach, Fla.; Mount Pleasant, Iowa; Aiken, S.C.; Bernardsville, N.J.;
      and Huntsville, Ala. in our final quarter. With both revenues and net earnings
      down, we are in a cost-cutting mode. We are experiencing a record number
      of trainees, which I think bodes well for the future. I believe the firm
      is in good shape as it faces the toughest conditions since the 80s.
      This is my last letter to shareholders as I stepped completely out of management
      March 1, 2001. I couldnt have scripted a better career than I have
      been blessed to enjoy, and I shall miss deeply the daily contact with our
      many wonderful people. I plan to visit branches until I run out of energy
      or get too fat. Ill enjoy visiting with our folks, and Ill bring
      my branch feedback to the right people in our headquarters.
      As I reflect on my 45 years with Edwards, the last 36 as CEO, I am impressed
      less with our growth than I am with the character and integrity of the many
      people who have become Edwards. I think the Board of Directors chose well
      in selecting Bob Bagby as CEO and Tad Edwards as president to lead us on
      to greater heights.
      I have always wanted us to be the firm our clients can trust, and we have
      been working toward this by having a single corporate mission: to help our
      clients achieve their financial goals. This allows us to serve our clients
      rather than to use them to achieve our corporate objectives. I think we
      have proved over the past 36 years that this can work, even in a very competitive
      environment, and it surely is more fun.Although market conditions are humbling to all of us, God has surely blessed
      us over the years and allowed us to touch lives for the better, making more
      comfortable retirements possible and helping parents and grandparents send
      children to college. Im sure the firm will continue to seek first
      what is right and never compromise our ethics.
      Thank you, faithful shareholders, for your loyalty, and thank you, fellow
      Edwards employees, for your friendship and steadfast work. May we always
      put our clients interests first, and may we always enjoy our work
      together. I pray for Gods continued blessing.
      Sincerely,Benjamin F. Edwards III
      Benjamin F. Edwards IIIChairman Emeritus
      April 2, 2001
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      Pages 2-3 | A.G. Edwards, Inc.
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|Financial
      Highlights(For fiscal year ended February 28 or 29)
      (In thousands, except per share data and other data)
|------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                              
|Operating Results                                                                                                             
|Net Revenues                                                                                                                  
|Net Earnings                                                                                                                  
|Net Earnings                                                                                                                  
|as
      a Percent
         of Net Revenues                                                                                   
|Return on
         Average Equity                                                                                             
|Per Share Data                                                                                                                
|Earnings                                                                                                                      
|Diluted                                                                                                                       
|Basic                                                                                                                         
|Cash Dividends                                                                                                                
|Book Value                                                                                                                    
|Financial Condition                                                                                                           
|Stockholders Equity                                                                                                          
|Total Assets                                                                                                                  
|Other Data                                                                                                                    
|Full-Time Employees                                                                                                           
|Financial Consultants                                                                                                         
|Locations                                                                                                                     
|                                                                                                                              
|Per share data
      have been restated for stock splits and stock dividends.                                                 

|Net Revenues | Net Earnings | Diluted Earnings per Share
|------------ | ------------ | --------------------------

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|A.G. Edwards, Inc. is
      a holding company whose subsidiaries provide securities and commodities
      brokerage, investment banking, trust, asset management, and insurance services.
      Its principal subsidiary, A.G. Edwards & Sons, Inc., is a St. Louis-based
      financial services company with 696 locations in 49 states, the District
      of Columbia and an affiliated office in London, England. A.G. Edwards &
      Sons, Inc. provides a full range of financial products and services to individual
      and institutional investors. The firm also offers investment banking services
      to corporate, governmental and municipal clients through 11 regional offices
      and its St. Louis headquarters.
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|Robert L. BagbyTo
      Fellow Shareholders, Clients and Associates: Im sure wed
      all agree that fiscal 2001 was a challenging one for our industry and A.G.
      Edwards. Volumes on the various exchanges grew, but market volatility made
      the year difficult for both our clients and financial consultants. Nearly
      all the major indexes fell, while the Nasdaq, which is heavily weighted
      in technology stocks, was down significantly. A.G. Edwards total revenues
      grew slightly to just over $2.8 billion, while net earnings slipped to $287
      million or $3.43 per share on a diluted basis.
      A.G. Edwards continued investment in technology and investment banking
      affected this years net earnings, but we believe these investments
      enhance our ability to serve both our individual, institutional and corporate
      clients. T + 1 (settlement of security transactions on the business day
      following trade date) and upcoming regulatory requirements will demand additional
      investments in technology. 
      This year our asset management and fee-based programs showed respectable
      growth, with revenues increasing 20 percent. We also expanded our talent
      pool of research, investment banking and sales trading professionals. We
      expect these areas to provide growth opportunities for us moving forward.
      This past year we broke ground on a one-million-square-foot addition to
      our headquarters complex. When completed in fiscal 2004, an 800,000-square-foot
      office building will house the majority of our Information Technology and
      Operations Divisions and a 200,000-square-foot learning center will provide
      a state-of-the-art training facility that will support our training initiatives,
      including A.G. Edwards University.
      Our new A.G. Edwards University provides three levels of continuing education
      courses for our financial consultants, financial associates and headquarters
      personnel to ensure our clients are served by the best-trained professionals
      in the industry. The curriculum emphasizes financial planning, enhancing
      our employees ability to develop effective financial plans for our
      clients based on each clients individual needs and circumstances.
      We are currently rolling out A.G. Edwards University in our existing training
      facilities and online through our ClientOne workstations. We believe this
      investment in training adds value for our clients and complements our full-service
      approach to meeting their needs. 
      Fiscal 2002 looks like it will be another challenging year for Edwards as
      well as the securities industry. Market volatility will continue to cause
      investors concern, and our financial consultants must guide our clients
      to think long term when developing their financial plans. However, with
      challenge comes opportunity.
      This year Edwards plans to expand our number of financial consultants to
      serve our ever-growing client base. Well increase our presence in
      the United States by adding branches where we can identify and recruit individuals
      who can support our client-first philosophy. While other firms have chosen
      to deny investors with less than $100,000 in assets access to a specific
      financial consultant, Edwards continues to serve each client individually,
      regardless of their financial resources.
      In addition to beginning our new fiscal year, March 2001 marked an important
      change for A.G. Edwards as a corporation. Ben Edwards, our long-time chairman,
      president and chief executive officer, decided to retire. For the past 36
      years, Ben has provided strong leadership to the organization by upholding
      two basic principles: putting the client first and living the Golden Rule.These two principles form the
      foundation of A.G. Edwards business philosophy and will guide us as
      we face the future without Bens daily involvement.
      Ben will now serve Edwards as chairman emeritus, visiting branches across
      the country during the next two years. Although Ben will be missed, he leaves
      Edwards with a strong management team that is well-prepared to meet the
      challenges in our future. All 18,000 employees wish Ben much happiness and
      good health as he retires from A.G. Edwards.The Board of Directors selected Benjamin F. Tad Edwards IV to
      serve as president of A.G. Edwards, while continuing to serve as vice chairman
      and leading our Sales and Marketing Division. Ron Kessler was named vice
      chairman and continues to head our Operations Division. I was honored to
      be selected chairman and chief executive officer.Also retiring at the end of the fiscal year was Robert Proost, our chief
      financial officer and the director of the Administration Division. I have
      asked Doug Kelly, our division director of Law and Compliance, to assume
      these additional responsibilities.Rob Pietroburgo, former Great Lakes regional officer, has succeeded me as
      director of our Branch Division. 
      I have served Edwards for 25 years, and I look forward to building on our
      companys strong foundation. My thanks to our Board of Directors, shareholders
      and employees for their confidence as we move ahead.Robert L. Bagby
      Robert L. BagbyChairman and CEO
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|                             | Dividends 
      Declared 
      per Share | Stock Price 
        Trading Range 
      High  Low | Net 
      Revenues 
       (in millions) | Earnings 
      Before Tax 
      (in millions) | Net
      Earnings 
      (in millions) | Earnings 
      per Share
|---------------------------- | ------------------------------------------ | ---------------------------------------------------- | ----------------------------------------- | ----------------------------------------------- | --------------------------------------- | -------------------------
|Diluted                      | Basic                                     
|                            
|Fiscal 2001
      by Quarter
|First                        | $0.16                                      | 40.81
       31.50                                  | $786.6                                    | $170.7                                          | $107.3                                  | $1.24                    
|Second                       | $0.16                                      | 57.00
       34.88                                  | $680.1                                    | $122.7                                          | $77.0                                   | $0.93                    
|Third                        | $0.16                                      | 57.94
       42.18                                  | $634.0                                    | $89.9                                           | $57.2                                   | $0.69                    
|Fourth                       | $0.16                                      | 52.19
       37.42                                  | $640.5                                    | $71.8                                           | $45.9                                   | $0.57                    
|                            
|Fiscal 2000
      by Quarter
|First                        | $0.15                                      | 38.19
       30.88                                  | $648.7                                    | $136.9                                          | $84.5                                   | $0.88                    
|Second                       | $0.15                                      | 33.56
       24.63                                  | $630.4                                    | $132.8                                          | $82.3                                   | $0.86                    
|Third                        | $0.15                                      | 34.00
       24.25                                  | $708.1                                    | $184.1                                          | $115.3                                  | $1.23                    
|Fourth                       | $0.16                                      | 34.19
       26.75                                  | $809.1                                    | $169.3                                          | $100.8                                  | $1.11                    
|                            

|                       
|-----------------------
|Stock Split History    
|                       
|                       
|Dividend Growth History
|                       
|                       
|Stock Price History    
|                       

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|Its often easier to get
      where youre going when you have a map. The same is true for reaching
      your financial goals. Every one of our clients  regardless of where
      they are on their journey  benefits from the trusted advice and guidance
      of their A.G. Edwards financial consultant. Our clients deserve nothing
      less.
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|Steve and Barbara Denker  Steve and Barbara
      Denker enjoy tinkering
      with their 97 Mustang.Barbara RandolphBarbara
      Randolph, 
      Associate 
      Vice President-
      Investments, 
      Hartford, Connecticut | At least Steve
      and Barbara dont have to worry about retirement.
      After working 23 years for the same company, Steve was laid off. He was
      out of work more than three years. He finally got back on his feet when
      he was hired as a project manager for Thomcast Communications. Things were
      looking up, and he and Barbara decided to plan a cruise. But then everything
      was put on hold when Barbara was diagnosed with a brain tumor. Fortunately,
      the tumor was benign. However, the surgery did create some physical problems
      for Barbara, and she had to quit her job and go on long-term disability.
      They are a really great couple, and their strong relationship helped them
      through these difficult times. Throughout these misfortunes, they continued
      to prepare for retirement. We periodically reviewed their portfolio to make
      sure they remained on track financially. As they neared retirement age,
      we began reallocating some of their assets into fixed-income and growth-and-income
      products. With the help of the retirement planning team at the firms
      headquarters, we also had prepared a Financial Horizons plan that took a
      comprehensive look at their entire financial situation. The plan included
      a net worth analysis, which showed that they faced a significant estate
      tax bill when passing on their wealth. A trust with a life insurance component
      was created to preserve the estate for their children. We have continued
      to review the plan periodically. Now, not only is their retirement secure,
      but Steve can retire early. Today they have the luxury of going on cruises
      at least twice a year. Steve just bought a Mustang that he drag races on
      Wednesday nights. Life is unpredictableyou cant plan for everything.
      But planning can help smooth lifes bumps and bruises. Just ask Steve
      and Barbara.
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|Jane Chiotti and granddaughter Kara  Jane Chiotti loves
      spending time with Kara, 
      one of her two granddaughters.Annette TylkaAnnette
      Tylka, 
      Supervisor,
      Trust Administration, 
      A.G. Edwards 
      Trust Company, 
      St. Louis, Missouri | My husband,
      Tony, always handled the finances.
      Fortunately, he worked with A.G. Edwards to set up our trusts that would
      take care of me after he was gone. When Tony died, I began working with
      Annette at the A.G. Edwards Trust Company. She was a godsend. Needless to
      say, I had a lot of things on my mind, and finances were the last thing
      I wanted to think about. Believe me, Im very grateful that I have
      it as nice as I do because I have known a few ladies whove had some
      difficulties when their husbands passed away. Annette has helped tremendously
      in making everything go smoothly. Shes taken the time to educate me
      about my trust accounts and answer my questions. This has helped me make
      informed decisions when she calls with recommendations about how something
      with one of the trusts should be handled. I dont really want to manage
      the trusts by myselfI dont have that kind of knowledge. Actually,
      Id rather spend time with my children and grandchildren, and I know
      thats what Tony wanted. Thanks to Annette and good planning by Tony,
      I can do that. And now Im going to Ireland this summer with my daughters.
      Thats always been a dream. Now I get to live it. Jane Chiotti,
      Florissant, Missouri
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      Pages 12-13 | A.G. Edwards, Inc.
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|Keegan and Buck Sharp  Keegan Sharp helped
        save for college by working in the 
        family pharmacy with her dad Buck.
      Michael JenningsMichael
        Jennings, 
        Branch Manager, 
        Vice President-Investments,
        La Jolla, California | When our kids
      were born, we began saving for their college.
      But when our daughter, Keegan, turned 12, we realized we werent saving
      enough. We needed a plan. Mike suggested an education cost analysis to determine
      how much we needed to put away to reach our goal. The analysis showed that
      we were going to fall short unless we began saving more and investing more
      aggressively. Mike sat down with us and asked a lot of questions and discussed
      different strategies to achieve our goals. As it turned out, we decided
      we would be more aggressive in our investing approach. Mike also suggested
      we save taxes by opening college savings accounts in our childrens
      names. Keegan and our son, David, helped out by saving what they earned
      working at our pharmacy. Every six months we sat down together to review
      our portfolio, and when Keegan got closer to going to college, Mike recommended
      we take a more conservative approach. We didnt want to risk losing
      what we had earned just as she was going to need the money for school. That
      turned out to be a wise move. Sure, some luck was on our side. But we also
      give Mike a lot of the credit. He came up with a long-term plan to help
      us reach our goal and helped us stick to it. Keegan is planning to attend
      California Polytechnic Institute in the fall, and David wants to go to the
      University of California-Davis. Planning really does work. Buck and Mary
      Sharp, Lompoc, California
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|Bo, Joe and Joe Bob Davis  Their financial
        plan helped Bo, Joe and Joe Bob Davis 
      protect the family convenience-store business.Gerald GalbraithGerald
        Galbraith, 
        Branch Manager, 
        Vice President-
        Investments, 
        Abilene, Texas | Joe didnt
      plan to get into the convenience-store business.
      He was in construction and was going to build a convenience store and lease
      it to a local chain. That didnt work out, so Joe decided he would
      build and operate the store himself. He called it Skinnys, a nickname
      for his father-in-law. That was 1974. Today Joe and his sons own and operate
      more than 90 convenience stores in west and central Texas with 450 employees.
      We were there early on, and as the business grew, so did the complexity
      of their financial needs. Just as Joes sons joined him in his business,
      my son, Greg, became a financial consultant in the A.G. Edwards Dallas office,
      and we began working as a team for the Davises. Most of their estate was
      tied up in their business, and they needed to plan for the future. We started
      by asking lots of questions. We listened. We understood their concerns.
      With the help of a comprehensive Business Needs Analysis, we identified
      a number of issues concerning the future not only of Skinnys, but
      the Davises personal assets as well. We implemented an asset allocation
      strategy and hired independent money managers to help manage corporate,
      personal and private foundation funds. One of the most important recommendations
      was establishing a succession plan so Joe could retire comfortably and leave
      the business to his sons. Insurance to protect the business in the event
      of a loss of key employees was also put into effect. Finally, we devised
      a strategy to prevent taxes from wiping out nearly a third of their estate.
      Theyve worked hard to get what they haveit is our job to help
      them keep it.
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|The Years
      MilestonesChange in Leadership After 45 years with the firm, Benjamin F. Edwards
      III announced he was stepping down as chairman, chief executive officer
      and president of the company founded by his great-grandfather. On March
      1, 2001, he became chairman emeritus. After having served as director of
      the Branch Division since 1995, Robert L. Bagby was appointed chairman and
      chief executive officer by the Board of Directors. The board also named
      Benjamin F. Tad Edwards IV president of the firm in addition
      to his responsibilities as vice chairman and director of the Sales and Marketing
      Division. In addition, Ronald J. Kessler, director of the Operations Division,
      was appointed vice chairman. During Ben Edwards tenure as chairman,
      he presided over the firms tremendous growth and reinforced the firms
      client-first philosophy.Branch Growth A volatile year for the financial markets contributed
      to decreased net earnings in the fiscal year ended February 28, 2001. Meanwhile,
      the firm continued to reach out to more investors by adding 24 branch offices,
      bringing the total to 696 offices, maintaining A.G. Edwards ranking
      as one of the largest retail branch networks in the country. Fee Revenue Fee-based revenue continued to grow, increasing to 24
      percent of net revenues in fiscal 2001, up from 19 percent in fiscal 2000.
      Fee revenues include Client Choice, a fee-based pricing program introduced
      last year that has proven popular with clients. By consolidating accounts
      in Client Choice, investors pay one fee but receive the same services, recommendations
      and advice as they would under a standard commission arrangement. Features
      of Client Choice include virtually unlimited trades, cost-lot reporting,
      no-fee IRAs, a Visa® Gold debit card with travel awards and a free OnTrack
      Financial Analysis with annual reviews and updates.Managed Assets Average client assets administered under the companys
      management programs and third-party management increased to $17.9 billion
      in fiscal 2001 from $13.9 billion the previous fiscal year. These services
      include A.G. Edwards Asset Management; A.G. Edwards Trust Companies; Private
      Advisor Service; and Pathways, Spectrum, Fund Navigator and Fund Advisor
      mutual fund advisory services. ClientOne The firm continued to invest heavily in technology to deliver
      convenience and value to clients and greater efficiencies to its business.
      The rollout of state-of-the-art ClientOne computer workstations was completed
      in all of the firms branch offices nationwide and enthusiastically
      received by the firms financial consultants. These new workstations
      provide financial consultants high-speed access to the Internet and enhanced
      financial planning tools that include OnTrack personal financial analyses.
      The OnTrack analyses let financial consultants provide their clients in-depth
      financial plans to assist them in setting financial goals using personal
      net worth statements, retirement planning analyses, education cost analyses
      and estate tax projections. Internet Services Preparations continued for a major upgrade of AGe-connect,
      the firms online client-account-access service. The redesigned AGe-connect
      sitewhich began rolling out in April this yearharnesses the
      collaborative potential of the Internet to reinforce the relationship between
      financial consultants and their clients. AGe-connect offers free real-time
      quotes, charts and news, an expanded array of research reports, an interactive
      feature that provides intraday portfolio valuation, a stock watchlist, technical
      analysis tools, and account-data downloads into personal financial management
      software. All of the features will be available through financial consultants
      personalized Web pages for clients, enabling financial consultants to customize
      content for their clients based on each clients particular investing
      profile and interests. To keep pace with changing technology and the growing
      needs of clients, the firm will continue to monitor the sites effectiveness
      and offer further improvements and innovations in the future. A.G. Edwards University In an effort to maintain its goal of having
      the best-trained financial consultants in the industry, the firm created
      A.G. Edwards University to deliver the broadest training curriculum possible
      to its financial consultants, headquarters personnel and branch office employees.
      A.G. Edwards offers its courses online via the new ClientOne workstation
      and through the firms internal television network. 
      Once fully implemented, A.G. Edwards University will offer one of the most
      comprehensive training curriculums in the industry. It has been designed
      to address the growing complexity and breadth of our clients financial
      needs and will include professional designations and internal certification
      programs for our financial consultants. Headquarters Expansion To accommodate expansion of the firms
      training capabilities and company growth, ground was broken on an 800,000-square-foot
      office building and adjoining 200,000-square-foot learning center, which
      will contain more than 50 training rooms, a 600-seat auditorium and a studio
      for the firms internal satellite television network. Mortgage Services The firm announced a strategic alliance with Nexstar
      Financial Corporation to be effective in the first quarter of fiscal 2002.
      Under the multiyear agreement, clients will be able to access home-financing
      solutions powered by Nexstars fully integrated, state-of-the-art phone-and
      Web-based technology via AGe-connect. In addition to applying for a mortgage,
      clients will be able to take advantage of additional mortgage services tailored
      to meet their individual needs, including prepurchase approvals, loan decisions
      within minutes of application, online loan status, automated pricing, online
      rate locks, online closing costs summary and online loan-servicing account
      capability. All mortgages originating under the program will be made by
      Nexstar, a licensed mortgage lender.Record Institutional Sales Trading As a result of increases in orders
      from institutional accounts, trading volume increased dramatically at the
      firms New York City-based Institutional Sales Trading operation to
      1.5 billion shares in the past year from 1 billion shares in 2000, a 50
      percent increase. National Recognition Stock research and the firms employee-friendly
      work environment again received national recognition. Twelve A.G. Edwards
      research analysts earned Best on the Street status for their
      stock-picking skill and/or earnings-estimate accuracy in a survey developed
      by First Call Investment Research and published in The Wall Street Journal.
      Five of this years 12 qualifying analysts have appeared at least twice
      in the eight-year-old surveyformerly known as the All-Star Analysts
      Survey. Since the surveys inception, 36 A.G. Edwards analysts
      have earned Best on the Street status at least once during their
      careers, with 13 of them appearing two or more times.
      For the fourth consecutive year, A.G. Edwards was named one of the 100
      Best Companies to Work for in America by FORTUNE magazine.
      The firm is one of only five companies nationwide to appear on all six versions
      of the list originally published as a book by best-selling authors Robert
      Levering and Milton Moskowitz.
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      Pages 18-20 | A.G. Edwards, Inc.
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|Ben EdwardsA
      Legacy of Leadership When Ben Edwards took over leadership of A.G. Edwards
      36 years ago, the firm was a partnership employing 300 financial consultants
      in 44 branches and earning a profit of $757,000. To finance expansion of
      the branch system, Ben advocated the firm raise capital by becoming a publicly
      traded company. In November 1971, a total of 445,000 shares were offered
      for sale at $12 a share, boosting the firms net worth to $14.7 million
      from $6.9 million before the sale. Today the firms net worth is more
      than $1.6 billion, giving the firm stability and a strong foundation for
      further growth.
      A.G. Edwards now has more than 7,000 financial consultants in 696 branches
      in 49 states, the District of Columbia and London. Profits have grown as
      wellto $287 million in fiscal 2001. 
      But Ben never measured the firms success solely by its balance sheet.
      In place of growth goals, budgets and sales quotas, Ben substituted his
      fervent belief in the Golden Ruletreating others as you would like
      to be treated. Its a personal value that Ben made the cornerstone
      of the firms business philosophy.
      As a result, A.G. Edwards financial consultants primary focus is putting
      their clients interests above all else. They do it by offering full-service
      advice and financial planning to clients with any level of assets, from
      a few thousand dollars to several million. They do it by having the freedom
      to recommend products and services that are best for their clients. They
      do it by taking time to answer clients questions, explain things and
      listen. They do it by earning clients trust. Its a philosophy
      that has benefited clients, employees and shareholders. Ben Edwards
      But Ben didnt just talk about treating others as you would like to
      be treated. He lived it.
      He lived it by giving back to the communitywhether it was teaching
      Sunday school or supporting a program at a local elementary school where
      employees could take time off work to mentor the schools students
      in reading. He also donated his time and financial resources to numerous
      civic endeavors, including leadership roles in public education and the
      United Way. 
      His genuine interest in people is why he invited new employees into his
      office on their first day to personally welcome them to the firm. Its
      why he stood for hours shaking hands with 5,000 employees at the headquarters
      holiday luncheon each year. Its the reason why he answered his own
      phone, hosted monthly internal broadcasts with employees and took time to
      eat lunch with financial consultant trainees. Its also why he has
      visited more than 100 branch offices annually and continues to do so even
      though he has stepped down from managing the firms day-to-day operations.
      His approach has earned the respect and admiration of employees and also
      has won national recognition. On nearly a dozen occasions, Ben was named
      one of the top CEOs in the securities industry. He truly believes work should
      be fun and even wrote it into the A.G. Edwards mission statement. As a result,
      A.G. Edwards is one of only five companies nationwide to have been named
      in all six editions of the annual listing of the 100 Best Companies
      to Work for in America.
      Ben has always said that A.G. Edwards is in the business of touching
      lives. If clients financial consultants do their jobs well, children
      will go to college, people will retire more comfortably and families will
      be able to pass on more of their wealth to future generations. 
      It is Bens sincere belief that the firm will continue to live this
      mission in the years to come. In fact, Ben hopes he wont be missed.
      He believes that if he has done his job well, the firms client-first
      mission will live on not only in practice, but in the hearts of everyone
      at the firm. Continuing this mission, Ben says, would be the best tribute
      he could ever receive. Mission accomplished.
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|Managements Financial
      Discussion(Year references are to fiscal years ended February 28 (29) unless otherwise
      specified.)General Business Environment
      A.G. Edwards, Inc. is a 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 and insurance services to its clients through
      one of the industrys largest retail branch distribution systems. A
      St. Louis-based financial services firm, the Company has more than 695 locations
      and 17,000 employees in 49 states, the District of Columbia and London,
      England. The Companys primary business is providing a full range of
      financial products and services, including investment banking, to its individual,
      institutional, corporate, governmental and municipal clients. Many factors
      affect the Companys revenues and profitability, including changes
      in economic conditions, the level and volatility of interest rates, inflation,
      political events, investor sentiment and competition from other financial
      institutions. Because these factors are unpredictable and beyond the Companys
      control, earnings may fluctuate significantly from year to year.
      In addition to competition from firms traditionally engaged in the financial
      services business, there has been increased competition in recent years
      from other sources, such as commercial banks, insurance companies, online
      service providers, mutual fund sponsors and other companies offering financial
      services both in the United States and globally. The financial services
      industry also has experienced consolidation and convergence in recent years,
      as financial institutions involved in a broad range of financial services
      industries have merged and different types of financial companies have begun
      offering a broader array of securities and other investment products. These
      trends are expected to continue and could result in the Companys competitors
      gaining greater capital and other resources, such as a broader range of
      products and services and geographic diversity. The 1999 Gramm-Leach-Bliley
      Act, which repealed U.S. laws that separated commercial banking, investment
      banking and insurance activities, has increased the number of companies
      competing for a similar client base, including the client base serviced
      by the Company.
      The year began with the Federal Reserve (the Fed) increasing the federal
      funds interest rate twice before the end of May, from 5.75 percent to 6.5
      percent, for a total of six increases in the preceding twelve months. The
      Fed acted out of concern that the economy was overheating and
      to guard against future inflation risk. However, by the end
      of the year, the Fed had decreased the federal funds rate to 5.5 percent
      due to a slowing economy.
      The Dow Jones Industrial Average (the Dow) began the year at 10,128 and
      ended at 10,495 for an increase of 3.6 percent. However, during the year
      the Dow closed as low as 9,796 and as high as 11,311, a range from low to
      high of more than 15 percent. Although the Dow has historically been the
      primary stock market indicator followed by investors, it was the rise and
      fall of the New Economy stocks, as measured by the Nasdaq Composite Index
      (the Nasdaq), that gained the most attention from investors during 2001.
      After ending 2000 with a gain of 105 percent and finishing the year at its
      all-time high, the Nasdaq continued to climb to a new peak of 5,049 during
      the first few days of 2001. However, the Nasdaq plummeted throughout the
      remainder of 2001 to its lowest point of 2,152, down 54 percent from the
      previous year end.
      Many factors contributed to the market volatility, including initial lofty
      valuations of high-tech companies followed by rapid declines in prices,
      uncertainty over the direction of interest rates, inflation concerns and
      the slowing economy. All of these factors led to investor anxiety resulting
      in decreased trading activity in the latter half of the year.Results of Operations
      The Company experienced a decline in net revenues, net earnings and earnings
      per share from the previous year, departing from the five-year trend of
      year-over-year increases in each category. Net revenues declined 2 percent
      ($55 million) in 2001 after rising 25 percent ($561 million) in 2000. Net
      earnings in 2001 decreased 25 percent to $287 million from $383 million
      in the previous year. Net earnings in 2000 were up 31 percent from $292
      million in 1999. Diluted earnings per share for the Company were $3.43 in
      2001, versus $4.08 and $3.00 in 2000 and 1999, respectively. The Companys
      net profit margin was 10.5 percent in 2001, compared to 13.7 percent in
      2000 and 13.1 percent in 1999. The results for 2000 include a $75 million
      pre-tax gain from an investment in a privately held investment management
      company, which increased net earnings by $35 million or $0.37 per diluted
      share. Excluding this gain from net revenues for the prior year, net revenues
      increased 1 percent in 2001, while net earnings and earnings per share declined
      17.3 percent and 7.5 percent, respectively.
      The number of the Companys financial consultants reached 7,073 at
      year end, an increase of 4 percent from the prior year end. The number of
      total locations at the end of 2001 was 696, up from 672 at year-end 2000.
      The Company intends to continue expanding its distribution system as opportunities
      occur.
      The following table and discussion summarize the changes in the major categories
      of revenues and expenses for the past two years (dollars in thousands):
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|Increase (Decrease)                      | 2001
      vs. 2000 | 2000
      vs. 1999
|---------------------------------------- | ------------------- | -------------------
|                                        
|Revenues                                
|Commissions                              | $(97,877)           | (7)%               
|Principal transactions                   | 8,057               | 3                  
|Investment banking                       | (52,422)            | (23)               
|Asset management and
      service fees  | 108,467             | 20                 
|Interest                                 | 111,811             | 45                 
|Other                                    | (57,895)            | (65)               
|                                        
|Total
      Revenues                     | 20,141              | 1                  
|Interest expense                         | 75,124              | 329                
|                                        
|Net
      Revenues                       | (54,983)            | (2)                
|                                        
|                                        
|Non-Interest
      Expenses             
|Compensation and benefits                | (400)               |                   
|Communication and technology             | 83,272              | 52                 
|Occupancy and equipment                  | 21,297              | 20                 
|Marketing and business
      development | 9,023               | 21                 
|Floor brokerage and clearance            | 1,290               | 6                  
|                                        
|Other                                    | (1,504)             | (2)                
|Total
      Non-Interest                 |                     |                    
|Expenses                                 | $112,978            | 5%                 
|                                        

|Commissions
      Commissions declined 7 percent, from $1.4 billion in 2000 to $1.3 billion
      in 2001, primarily due to equity-related commissions decreasing 10 percent
      ($98 million) resulting from a 9 percent decline in trading volumes in commission-based
      accounts. As commissions are transaction-based revenues, they are influenced
      by the number and size of client transactions and product mix and may vary
      considerably from year to year. Revenue from mutual fund sales decreased
      6 percent ($20 million) in 2001 due to clients choosing lower-commission
      pricing alternatives and a decline in trading volumes in commission-based
      accounts. As an offset, insurance commissions increased 12 percent ($20
      million) primarily due to increased sales of variable annuities. Although
      commissions declined in 2001, they remained the most significant source
      of revenue for the Company, accounting for more than 47 percent of total
      revenue in each of the last three years.
      An increasing number of clients are choosing fee-based alternatives instead
      of the traditional commission-based trading account. In 2001, the Company
      launched Client Choice, a new fee-based pricing alternative available to
      individual investors. As a result, future revenues within the commissions
      and asset management and service fees categories will likely be affected
      by the number of clients choosing fee-based pricing alternatives.
      The 21 percent ($246 million) increase in total commissions in 2000 over
      1999 reflected increased retail investor activity due to higher stock prices
      and trading volumes as well as strong cash flows into mutual funds and variable
      annuities.Principal Transactions
      The Company maintains inventories of debt and equity securities to satisfy
      client demand and, therefore, effects certain transactions with its clients
      by acting as principal. Realized and unrealized gains and losses result
      from the sale and holding of securities positions for resale to clients
      and are included in principal transactions revenue.
      Principal transactions revenue increased 3 percent ($8 million) in 2001
      primarily as a result of a 27 percent ($24 million) rise in revenue from
      sales of equity products. The Company acted as a market maker in a greater
      number of actively traded, larger-capitalized securities than in the prior
      year. Revenue from debt products decreased 8 percent ($16 million) due to
      falling yields for much of this year, compared to rising yields in the prior
      year, resulting in decreased client demand for fixed income products. In
      addition, many bond investors were hesitant to enter the markets due to
      uncertainty caused by federal and state budget surpluses, the U.S. Treasury
      Departments debt buyback program and the Feds stance on interest
      rates.
      Revenues from principal transactions increased 41 percent ($82 million)
      in 2000 compared to 1999 due to increased client demand for debt securities
      as a result of rising yields. Municipal bonds were particularly attractive
      last year as yields reached levels not seen in several years. Revenues from
      equity products rose 49 percent ($30 million) in 2000 reflecting the strong
      Nasdaq equity market.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.
      In 2001, investment banking revenues decreased 23 percent ($52 million).
      Underwriting fees and selling concessions decreased 24 percent ($46 million),
      primarily resulting from a 22 percent ($29 million) decrease in revenue
      from corporate equity issues in 2001. IPO activity declined this year due
      to the volatility in the equity markets, particularly as markets declined
      in the latter part of the year. Distribution of equity-based unit trusts
      slowed in 2001 reflecting decreased client demand for these specialized
      products following the decline in the Nasdaq. Revenue from underwriting
      debt products decreased 30 percent ($16 million) primarily due to a decline
      in sales of certificates of deposit as a result of falling yields. In addition,
      sales of municipal debt fell as strong economic growth and higher tax revenues
      decreased the borrowing needs of state and local governments. Management
      fees, including fees from mergers and acquisitions, decreased 19 percent
      ($7 million) due to participation as manager or co-manager in fewer offerings
      by the Company this year following the decline in IPO activity.
      In 2000, investment banking revenue increased 3 percent ($7 million) due
      primarily to strong sales of equity-based unit trusts following the dramatic
      rise in the Nasdaq. Fiscal 2000 also was positively impacted by sales of
      certificates of deposit as a result of rising yields.Asset Management and Service Fees
      Asset management and service fees consist primarily of revenues earned from
      providing support and services in connection with client assets under third-party
      management, including mutual funds and annuities, and the Companys
      trust services. These revenues include fees based on the amount of client
      assets under management and transaction-related service fees, as well as
      fees related to the administration of custodial and other specialty accounts.
      Asset management and service fees rose 20 percent ($108 million) in 2001.
      Fees from third-party mutual funds and annuities were 12 percent ($37 million)
      higher than in 2000, reflecting strong cash flows into funds and annuities.
      Fees resulting from the administration of client assets under third-party
      management and from the Companys management services improved 41 percent
      ($62 million) in 2001. The average number of fee-based accounts increased
      59 percent, while the average total assets in these programs grew from $14.5
      billion in 2000 to $20.4 billion in 2001, an increase of 41 percent.
      The 2000 increase in asset management and service fees of 28 percent ($118
      million) over 1999 was primarily due to a 21 percent ($55 million) jump
      in service fees from third-party mutual funds and annuities. Fees from the
      administration of client assets under third-party management and from the
      Companys management services in 2000 rose 37 percent ($41 million)
      as a result of the growth in the number of client accounts and higher market
      valuations of existing assets.Interest Revenue
      The Company earns interest revenue principally from financing its clients
      margin accounts, debt securities carried in inventory for resale and short-term
      investments. Interest revenue rose 45 percent ($112 million) in 2001, primarily
      because of a 47 percent ($107 million) increase in interest earned on margin
      accounts resulting from a 29 percent rise in average margin balances. In
      addition, the average interest rate charged on margin balances was higher
      in 2001 than in 2000. Interest revenue from securities owned increased 25
      percent ($5 million) as a result of higher average debt inventory levels.
      The increase in interest revenue of 23 percent ($47 million) in 2000 versus
      1999 was principally due to a 32 percent ($54 million) increase in interest
      earned on margin accounts as a result of a 34 percent rise in average customer
      margin balances. Interest revenue from short-term investments decreased
      77 percent ($9 million) as a result of a decrease in average short-term
      investments as funds were utilized to finance the rise in margin balances.Other Revenues
      Other revenues decreased 65 percent ($58 million) primarily due to the prior
      year including a gain of $75 million from the sale of one-half of the Companys
      investment in a privately held investment management company and the related
      increase in the carrying value of the remaining investment to its fair value.
      This investment had been carried on the equity method of accounting, which
      was discontinued due to the reduction of the Companys ownership and
      the terms surrounding the remaining investment.Interest Expense
      Interest expense increased 329 percent ($75 million) in 2001 due to an increase
      in short-term borrowings, which include short-term bank loans and securities
      lending arrangements, combined with higher average interest rates on borrowings.
      Proceeds from the additional borrowings were primarily used to finance the
      increase in average customer margin balances, and, to a lesser extent, capital
      expenditures and stock repurchases. Interest expense increased 305 percent
      ($17 million) in 2000 versus 1999 also due to an increase in short-term
      borrowings primarily used to finance increased customer margin balances.Non-Interest Expense
      Compensation and benefits was unchanged in 2001 and rose 23 percent ($335
      million) in 2000. A significant portion of this expense is variable in nature
      and directly relates to commissionable sales and to the Companys profitability.
      The year-to-year comparisons generally reflect the changes in revenue and
      profitability in both 2001 and 2000. General and administrative salary expense
      increased 29 percent ($89 million) in 2001 and 23 percent ($57 million)
      in 2000 because of general salary increases and a 16 percent growth in the
      number of support employees in both years. Incentive-related compensation
      fell 19 percent ($67 million) in 2001 as a result of lower earnings. Incentive-related
      compensation rose 25 percent ($70 million) in 2000 due to higher earnings.
      In 2001, communication and technology expense increased 52 percent ($83
      million). The majority of this increase was related to the development,
      deployment and ongoing maintenance and support of a new workstation introduced
      to all financial consultants during the year. The remaining increase was
      primarily due to branch and headquarters expansion and technology-related
      upgrades. Communication and technology expense increased 29 percent ($36
      million) in 2000 primarily due to increased business volume and branch and
      headquarters expansion.
      All remaining expenses increased a combined 12 percent ($30 million) in
      2001 primarily due to a 20 percent ($21 million) increase in occupancy and
      equipment expense related to branch relocations and branch and headquarters
      expansion. In addition, marketing and business development expense increased
      21 percent ($9 million) which includes the Companys first national
      sales conference at its St. Louis headquarters. In 2000, all remaining expenses
      increased 18 percent ($38 million) due to general business expansion.Income Taxes
      For information regarding the provision for income taxes and information
      regarding the difference between effective tax rates and statutory rates,
      see Note 6 (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
      because of the timing of certain transactions. Customer receivables decreased
      in 2001 reflecting the volatility experienced in the equity markets this
      year and clients decreasing use of margin borrowings.
      The principal sources for financing the Companys business are stockholders
      equity, cash generated from operations, short-term bank loans and securities
      lending activities. The Company has no long-term debt. Average short-term
      bank loans of $406 million and $218 million, and average securities lending
      arrangements of $1.1 billion and $200 million in 2001 and 2000, respectively,
      were primarily used to finance customer receivables. The Company is constructing
      an additional office building, a learning center and a parking garage at
      its headquarters campus with an estimated total cost of approximately $215
      million through its projected completion in 2004. The Company expended $40
      million in connection with these projects through February 28, 2001.
      The Company completed a stock repurchase program under which it was authorized
      to repurchase 33 million shares during a 5 1/2 year period beginning in
      May 1996. The Company purchased 10.6 million and 11 million shares at aggregate
      costs of $447 million and $336 million in 2001 and 2000, respectively. These
      shares were used in part to offset the issuance of stock under the employee
      stock plans. In February 2001, the Board of Directors authorized the repurchase
      of up to 10 million shares during the period ending December 31, 2002. At
      February 28, 2001, no shares had been repurchased under this program.
      Management believes the Company has adequate sources of credit available,
      if needed, to finance customer-trading volumes, branch expansion, stock
      repurchases, dividend payments and major capital expenditures.
      The Companys principal subsidiary, A.G. Edwards & Sons, Inc.,
      is required by the Securities and Exchange Commission (SEC) to maintain
      specified amounts of liquid net capital to meet its obligations to clientssee
      Note 5 (Net Capital Requirements) of the Notes to Consolidated Financial
      Statements.Risk ManagementGeneral
      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 most significant risks to
      the Company are credit risk and market risk.Credit Risk
      Credit risk is discussed in Note 10 (Financial InstrumentsOff-Balance
      Sheet Risk and Concentration of Credit Risk) of the Notes to Consolidated
      Financial Statements.Market Risk
      Market risk is the risk of loss to the Company resulting from changes in
      interest rates, equity prices or both. The Company is exposed to market
      risk to the extent it maintains positions in fixed income and equity securities.
      The Company primarily manages its risk through the establishment of trading
      policies and guidelines and through the implementation of control and review
      procedures. The Companys management philosophy provides for communication
      among all responsible parties throughout the trading day.
      The Companys policy is to purchase inventory to provide investment
      products for its clients. Consequently, the Company purchases only inventory
      that it believes it can readily sell to its clients, thus reducing the Companys
      exposure to liquidity risk but not market fluctuations. In addition, the
      Executive Committee of A.G. Edwards & Sons, Inc. establishes maximum
      inventory guidelines for fixed income and equity securities, subject to
      certain limited exceptions.
      Capital management and control are accomplished through review (by product
      managers and members of management outside of the trading areas) of various
      reports, including reports that show current inventory profit and loss,
      inventory positions exceeding set limits, and aged positions. Additionally,
      real-time capital management data is 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, 2001, and February 29, 2000, 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.
      For the purposes of the SECs disclosure requirements, the Company
      has elected to use a sensitivity approach to express the potential decrease
      in the fair value of the Companys interest-rate-sensitive financial
      instruments. The Company calculated the potential loss in fair value of
      its debt inventory by calculating the change in offering price of each inventory
      item resulting from a 10 percent increase in either the Treasury yield curve
      for taxable products or the Municipal Market Data Corporations AAA
      rated yield curve for tax-exempt products. Using this method, if such a
      10 percent increase were to occur, the Company calculated a potential loss
      in fair value of its debt inventory of $10.3 million at February 28, 2001,
      and $8.7 million at February 29, 2000.Forward-Looking Statements
      The Managements Financial Discussion contains forward-looking statements
      within the meaning of federal securities laws. Actual results are subject
      to risks and uncertainties, including both those specific to the Company
      and those specific to the industry, which could cause results to differ
      materially from those contemplated. The risks and uncertainties include,
      but are not limited to, general economic conditions, actions of clients,
      actions of competitors, regulatory actions, changes in legislation and technology
      changes. Undue reliance should not be placed on the forward-looking statements,
      which speak only as of the date of this Annual Report. The Company does
      not undertake any obligation to publicly update any forward-looking statements.
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      Pages 23-27 | A.G. Edwards, Inc.
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|Consolidated
      Five-Year Financial Summary                                         
|---------------------------------------------------------------------------------------
|Year Ended                                                                             
|(In thousands, 
       except per share amounts)                                       
|                                                                                       
|Revenues                                                                               
|Commissions:                                                                           
|Listed
      securities                                                                
|Options                                                                                
|Over-the-counter
      securities                                                      
|Mutual
      funds                                                                     
|Commodities                                                                            
|Insurance                                                                              
|                                                                                       
|Total                                                                                  
|                                                                                       
|Principal transactions:                                                                
|Equities                                                                               
|Debt
      securities                                                                  
|                                                                                       
|Total                                                                                  
|                                                                                       
|Investment banking:                                                                    
|Underwriting
      fees 
              and selling concessions                         
|Management
      fees                                                                  
|                                                                                       
|Total                                                                                  
|                                                                                       
|Asset management 
          and service fees                                           
|                                                                                       
|Interest:                                                                              
|Margin
      account balances                                                          
|Securities
      owned and deposits                                                    
|                                                                                       
|Total                                                                                  
|                                                                                       
|Other                                                                                  
|                                                                                       
|Total
      Revenues                                                                   
|                                                                                       
|Interest expense                                                                       
|                                                                                       
|Net
      Revenues                                                                     
|                                                                                       
|Non-Interest Expenses                                                                  
|Compensation and benefits                                                              
|Communication and technology                                                           
|Occupancy and equipment                                                                
|Marketing and 
          business development                                          
|Floor brokerage and
      clearance                                                    
|Other                                                                                  
|                                                                                       
|Total
      Non-Interest Expenses                                                      
|                                                                                       
|Earnings Before Income
      Taxes                                                     
|                                                                                       
|Income Taxes                                                                           
|                                                                                       
|Net Earnings                                                                           
|                                                                                       
|Per Share Data:                                                                        
|Diluted
      Earnings                                                                 
|Basic
      Earnings                                                                   
|Cash
      Dividends                                                                   
|Book
      Value                                                                       
|Other Data:                                                                            
|Total
      Assets                                                                     
|Stockholders
      Equity                                                             
|Cash
      Dividends                                                                   
|Pre-tax
      Return 
              on Average Equity                                  
|Return
      on Average Equity                                                         
|Net
      Earnings as a 
              Percent of Net Revenues                         
|Average
      Common and 
              Common Equivalent                              
|Shares
      Outstanding 
                  (Diluted)                                  
|Average
      Common Shares 
              Outstanding (Basic)                         
|                                                                                       
|Share
      and per share data have been restated for stock splits and stock dividends.

|Back
      to Table of Contents | End of
      Page 28 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Consolidated Balance Sheets                            | February 28, | February 29,
|------------------------------------------------------ | ------------ | ------------
|(Dollars in thousands, except
      per share amounts) | 2001         | 2000        
|                                                      
|Assets                                                 |              |             
|                                                      
|Cash and cash equivalents                              | $116,004     | $154,487    
|Cash and government securities,
      segregated       |              |             
|under
      federal and other regulations              | 78,455       | 86,851      
|Securities purchased under
      agreements to resell  | 17,352       | 10,674      
|Securities borrowed                                    | 127,328      | 278,199     
|Receivables:                                           |              |             
|Customers                                              | 3,285,220    | 3,777,352   
|Brokers,
      dealers and clearing organizations      | 30,314       | 22,529      
|Fees,
      dividends and interest                     | 70,934       | 62,989      
|Securities inventory, at fair
      value:             |              |             
|State
      and municipal                              | 188,559      | 240,154     
|Government
      and agencies                          | 41,024       | 57,943      
|Corporate                                              | 63,733       | 110,311     
|Investments                                            | 218,003      | 116,307     
|Property and equipment, at cost,                       |              |             
|net
      of accumulated depreciation                  |              |             
|and
      amortization of $362,615 and $337,602        | 508,970      | 312,942     
|Deferred income taxes                                  | 71,017       | 75,361      
|Other assets                                           | 43,071       | 41,488      
|                                                      
|                                                       | $4,859,984   | $5,347,587  
|                                                      
|                                                       |              |             
|                                                      
|Liabilities and Stockholders
      Equity             |              |             
|                                                      
|Short-term bank loans                                  | $319,800     | $638,000    
|Checks payable                                         | 252,588      | 283,602     
|Securities loaned                                      | 780,666      | 637,684     
|Payables:                                              |              |             
|Customers                                              | 899,091      | 946,373     
|Brokers,
      dealers and clearing organizations      | 123,084      | 203,129     
|Securities sold but not                                |              |             
|yet
      purchased, at fair value                     | 31,194       | 24,920      
|Employee compensation and related
      taxes          | 673,756      | 740,188     
|Income taxes                                           | 58,871       | 73,557      
|Other liabilities                                      | 94,620       | 83,012      
|                                                      
|Total
      Liabilities                                | 3,233,640    | 3,630,465   
|                                                      
|Stockholders Equity:                                  |              |             
|Preferred
      stock, $25 par value:                  |              |             
|Authorized,
      4,000,000 shares, none issued        |              |             
|Common stock, $1 par value:                            |              |             
|Authorized,
      550,000,000 shares                   |              |             
|Issued,
      96,463,114 shares                        | 96,463       | 96,463      
|Additional paid-in capital                             | 280,094      | 253,917     
|Retained earnings                                      | 1,875,379    | 1,645,332   
|                                                      
|                                                       | 2,251,936    | 1,995,712   
|Less: Treasury stock, at cost                          |              |             
|(16,325,828
      and 9,254,005 shares)                | 625,592      | 278,590     
|                                                      
|Total Stockholders Equity                             | 1,626,344    | 1,717,122   
|                                                      
|                                                       | $4,859,984   | $5,347,587  
|                                                      
|See Notes to Consolidated
      Financial Statements.  |              |             

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      to Table of Contents | End of
      Page 29 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Consolidated Statements
      of EarningsYear Ended            | February
      28, | February
      29, | February
      28,
|-------------------------------------------------------------- | ------------------ | ------------------ | ------------------
|(Dollars in thousands,
      
       except per share amounts) | 2001               | 2000               | 1999              
|                                                              
|Revenues                                                       |                    |                    |                   
|Commissions                                                    | $1,328,549         | $1,426,426         | $1,179,937        
|Principal transactions                                         | 292,275            | 284,218            | 202,022           
|Investment banking                                             | 173,297            | 225,719            | 219,001           
|Asset management and
      service fees                        | 652,998            | 544,531            | 426,967           
|Interest                                                       | 360,399            | 248,588            | 201,512           
|Other                                                          | 31,630             | 89,525             | 11,360            
|                                                              
|Total
      Revenues                                           | 2,839,148          | 2,819,007          | 2,240,799         
|Interest expense                                               | 97,942             | 22,818             | 5,628             
|                                                              
|Net
      Revenues                                             | 2,741,206          | 2,796,189          | 2,235,171         
|                                                              
|Non-Interest Expenses                                          |                    |                    |                   
|Compensation and benefits                                      | 1,766,311          | 1,766,711          | 1,431,697         
|Communication and technology                                   | 242,530            | 159,258            | 123,126           
|Occupancy and equipment                                        | 126,594            | 105,297            | 100,972           
|Marketing and business
      development                       | 51,767             | 42,744             | 34,617            
|Floor brokerage and
      clearance                            | 22,957             | 21,667             | 20,933            
|Other                                                          | 75,893             | 77,397             | 53,039            
|                                                              
|Total
      Non-Interest Expenses                              | 2,286,052          | 2,173,074          | 1,764,384         
|                                                              
|Earnings Before Income
      Taxes                             | 455,154            | 623,115            | 470,787           
|Income Taxes                                                   | 167,677            | 240,194            | 178,670           
|                                                              
|Net Earnings                                                   | $287,477           | $382,921           | $292,117          
|                                                              
|Earnings Per Share:                                            |                    |                    |                   
|Diluted                                                        | $3.43              | $4.08              | $3.00             
|                                                              
|Basic                                                          | $3.50              | $4.16              | $3.07             
|                                                              
|See Notes
      to Consolidated Financial Statements.         

|Back
      to Table of Contents | End of
      Page 30 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Consolidated
      Statements of Stockholders Equity(Three Years Ended February 28, 2001)
|------------------------------------------------------------------------------------------
|(Dollars
      in thousands, 
       except per share amounts)                            
|                                                                                          
|Balances, March
      1, 1998                                                             
|Net
      earnings                                                                        
|Dividends
      declared
            $0.57 per share                                     
|Treasury
      stock acquired                                                             
|Stock
      issued:                                                                       
|Employee
      stock 
               purchase/option plans                                
|Restricted
      stock                                                                    
|                                                                                          
|Balances, February
      28, 1999                                                         
|Net
      earnings                                                                        
|Dividends
      declared
           $0.61 per share                                      
|Treasury
      stock acquired                                                             
|Stock
      issued:                                                                       
|Employee
      stock 
               purchase/option plans                                
|Restricted
      stock                                                                    
|                                                                                          
|Balances, February
      29, 2000                                                         
|Net
      earnings                                                                        
|Dividends
      declared
            $0.64 per share                                     
|Treasury
      stock acquired                                                             
|Stock
      issued:                                                                       
|Employee
      stock 
               purchase/option plans                                
|Restricted
      stock                                                                    
|                                                                                          
|Balances, February
      28, 2001                                                         
|                                                                                          
|See Notes to
      Consolidated Financial Statements.                                     

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      to Table of Contents | End of
      Page 31 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Consolidated
      Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                        
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Year Ended                                                                                                                                                                                                                                                                                                                                                                                                                         
|(In thousands)                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash Flows From Operating
      Activities:                                                                                                                                                                                                                                                                                                                                                                                        
|Net earnings                                                                                                                                                                                                                                                                                                                                                                                                                       
|Noncash
      and non-operating items 
          included in earnings:                                                                                                                                                                                                                                                                                                                                                             
|Depreciation
      and amortization                                                                                                                                                                                                                                                                                                                                                                                                
|Expense
      of restricted stock awards                                                                                                                                                                                                                                                                                                                                                                                           
|Deferred
      income taxes                                                                                                                                                                                                                                                                                                                                                                                                        
|Gain
      on investments, net                                                                                                                                                                                                                                                                                                                                                                                                     
|Decrease
      (increase) in operating assets:                                                                                                                                                                                                                                                                                                                                                                                     
|Segregated
      cash and government securities                                                                                                                                                                                                                                                                                                                                                                                    
|Securities
      borrowed                                                                                                                                                                                                                                                                                                                                                                                                          
|Receivable
      from customers                                                                                                                                                                                                                                                                                                                                                                                                    
|Receivable
      from brokers, dealers and 
              clearing organizations                                                                                                                                                                                                                                                                                                                                                   
|Fees,
      dividends and interest receivable                                                                                                                                                                                                                                                                                                                                                                                      
|Securities
      inventory                                                                                                                                                                                                                                                                                                                                                                                                         
|Other
      assets                                                                                                                                                                                                                                                                                                                                                                                                                 
|(Decrease)
      increase in operating liabilities:                                                                                                                                                                                                                                                                                                                                                                                
|Checks
      payable                                                                                                                                                                                                                                                                                                                                                                                                               
|Securities
      loaned                                                                                                                                                                                                                                                                                                                                                                                                            
|Payable
      to customers                                                                                                                                                                                                                                                                                                                                                                                                         
|Payable
      to brokers, 
               dealers and clearing organizations                                                                                                                                                                                                                                                                                                                                                       
|Securities
      sold but not yet purchased                                                                                                                                                                                                                                                                                                                                                                                        
|Employee
      compensation and related taxes                                                                                                                                                                                                                                                                                                                                                                                      
|Income
      taxes                                                                                                                                                                                                                                                                                                                                                                                                                 
|Other
      liabilities                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net cash
      from operating activities                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash Flows From Investing
      Activities:                                                                                                                                                                                                                                                                                                                                                                                        
|Securities
      purchased under agreements to resell                                                                                                                                                                                                                                                                                                                                                                              
|Purchase
      of property and equipment                                                                                                                                                                                                                                                                                                                                                                                           
|Investments                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net cash
      from investing activities                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash Flows From Financing
      Activities:                                                                                                                                                                                                                                                                                                                                                                                        
|Short-term
      bank loans                                                                                                                                                                                                                                                                                                                                                                                                        
|Securities
      loaned                                                                                                                                                                                                                                                                                                                                                                                                            
|Employee
      stock transactions                                                                                                                                                                                                                                                                                                                                                                                                  
|Purchase
      of treasury stock                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash dividends
      paid                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net cash
      from financing activities                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net (Decrease) Increase
      in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                         
|Cash and Cash Equivalents,
      at Beginning of Year                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash and Cash Equivalents,
      at End of Year                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Interest payments totaled $98,444 in 2001, $21,593 in 2000, and $5,585 in
      1999.
      Income taxes paid totaled $165,304 in 2001, $167,340 in 2000, and $168,748
      in 1999.
      Supplemental disclosures of noncash financing activities: Restricted stock
      awards, net of forfeitures, totaled $32,813 in 2001, $34,611 in 2000, and
      $28,602 in 1999.
      See Notes to Consolidated Financial Statements.

|Back
      to Table of Contents | End of
      Page 32 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Notes to Consolidated Financial
      Statements(Three years ended February 28, 2001)
      (Dollars in thousands, except per share amounts)1. Summary of Significant Accounting Policies
      Basis of Financial Information
      The consolidated financial statements include the accounts of A.G. Edwards,
      Inc. and its wholly owned subsidiaries (collectively referred to as the
      Company) and are prepared in conformity with accounting principles
      generally accepted in the United States of America. 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. Actual results could differ from these estimates.
      All material intercompany balances and transactions have been eliminated
      in consolidation. Prior years financial information has been reclassified
      to conform with the current-year presentation.
      The Company operates and is 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, insurance, trust, investment
      banking, and other related services. These services are provided by more
      than 7,000 financial consultants in more than 695 locations of the Companys
      principal 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.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.
      Securities inventory, securities sold but not yet purchased, securities
      segregated under federal and other regulations, and investments 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. Among the factors considered by management in determining the
      fair value of investments, for which a quoted market or dealer price is
      not available, 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. Unrealized gains and losses are reflected
      in revenue.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.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.Property and Equipment
      Depreciation of buildings is provided using both straight-line and accelerated
      methods over estimated useful lives of 15 to 45 years. Leasehold improvements
      are amortized over the lesser of the life of the lease or estimated useful
      life of the improvement. Depreciation of equipment is provided over estimated
      useful lives of three to 10 years using both straight-line and accelerated
      methods. Software is depreciated over its useful life, generally not exceeding
      three years. The Company periodically evaluates the carrying value of its
      property and equipment to determine if an impairment exists.Income Taxes
      Income tax expense is provided for using the asset and liability method,
      under which deferred tax assets and liabilities are determined based upon
      the temporary differences between the financial statement and income tax
      bases of assets and liabilities, using current tax rates. The Company files
      a consolidated federal income tax return.Comprehensive Earnings
      Comprehensive earnings for each of the three years in the period ended February
      28, 2001, was equal to the Companys net earnings.Recent Accounting Pronouncements
      On March 1, 2001, the Company adopted the Statement of Financial Accounting
      Standards (SFAS) No. 133, Accounting for Derivative Instruments
      and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 138.
      The statements establish accounting and reporting standards for derivative
      instruments and hedging activities. The adoption of these statements did
      not have a material impact on the Companys consolidated financial
      statements.
      In September 2000, the Financial Accounting Standards Board issued SFAS
      No. 140, Accounting for Transfers and Servicing of Financial Assets
      and Extinguishments of Liabilities. This standard replaced SFAS No.
      125 of the same name. SFAS No. 140 provides accounting and reporting standards
      for transfers and servicing of financial assets and extinguishments of liabilities.
      The Company adopted SFAS No. 140 in the fourth quarter of fiscal 2001 for
      disclosures relating to securitization transactions and collateral and plans
      to adopt the remaining provisions of SFAS No. 140 in the first quarter of
      fiscal 2002 for transfers and servicing of financial assets and extinguishments
      of liabilities. The Company has not yet determined the impact that the adoption
      of the remainder of this statement will have on its consolidated financial
      statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Back
      to Table of Contents | End of
      Note 1 (Pages 33-34) | A.G. Edwards, Inc.
|------------------------------- | --------------------------------- | ------------------

|2. 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 $1.1 billion
      in 2001, $200 million in 2000 and zero in 1999, at effective interest rates
      of 6.5 percent in 2001 and 5.6 percent in 2000. Bank loans are short-term
      borrowings that are payable on demand and may be unsecured or collateralized
      by customer-owned securities held in margin accounts. The average of such
      bank loans was $406 million in 2001, $218 million in 2000 and $35 million
      in 1999, at effective interest rates of 6.5 percent, 5.5 percent and 5.8
      percent, respectively. Firm investments in the amount of $34,854 were utilized
      to secure certain bank borrowings at February 28, 2001, and the banks do
      not have the ability to sell or repledge such investments. Substantially
      all other bank borrowings were secured by customer-owned securities.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Back
      to Table of Contents | End of
      Note 2 (Page 34) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|3. 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:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             
|-----------------------------
|                             
|                             
|Pro forma net earnings       
|Pro forma earnings per share:
|Diluted                      
|Basic                        
|                             

|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 Companys stock purchase plan are exercisable October 1,
      2001, at 85 percent of market price based on dates specified in the plan.
      Employees purchased 1,870,983 shares at $32.33 per share in 2001, 1,871,284
      shares at $21.89 per share in 2000 and 1,872,249 shares at $25.29 per share
      in 1999. Treasury shares were utilized for all of the shares purchased.
      The fair value of the options granted under this plan was estimated using
      the following assumptions for 2001, 2000 and 1999, respectively: dividend
      yield of 1.44 percent, 2.01 percent and 1.51 percent; an expected life of
      one year; expected volatility of 46 percent, 36 percent and 43 percent;
      and risk-free interest rates of 6.21 percent, 5.42 percent and 4.55 percent.
      The fair value of the options granted in 2001, 2000 and 1999 was $14.08,
      $5.99 and $7.52 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, 2001, 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, 2001, were awarded 967,561
      shares with a market value of $34,977. At February 29, 2000, and February
      28, 1999, the awards were 916,010 and 882,623 shares, respectively, with
      corresponding market values of $36,018 and $28,685. Treasury shares were
      utilized for these awards.
      Nonqualified stock options are granted to purchase common stock at 100 percent
      of market value at date of grant. Such options are exercisable beginning
      three years from date of award and expire eight years from date of award,
      or earlier upon termination of employment. The fair value of each option
      grant was estimated at the date of grant using the following assumptions
      for 2001, 2000 and 1999, respectively: dividend yield of 1.44 percent, 2.01
      percent and 1.51 percent; expected lives of 6 years; expected volatility
      of 46 percent, 36 percent and 43 percent; risk-free interest rates of 4.86
      percent, 6.62 percent and 5.49 percent; and a forfeiture rate of 8 percent,
      7 percent and 6 percent. The fair value of options granted under this plan
      in 2001, 2000 and 1999 was $16.04, $14.99 and $13.92, respectively.
      A summary of the status of the Companys stock options at February
      28 (29) and changes during the years ended on those dates follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                      
|------------------------------------------------------------------------------------------------------
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Outstanding, 
          beginning of year                                                             
|Granted                                                                                               
|Exercised                                                                                             
|Forfeited                                                                                             
|                                                                                                      
|Outstanding, 
          end of year                                                                   
|                                                                                                      
|Treasury shares 
          utilized for exercises                                                     
|                                                                                                      
|The following table summarizes information about outstanding stock options
      at February 28, 2001:

|                                     
|-------------------------------------
|                                     
|                                     
|Range of
      
      Exercise Prices
|                                     
|$11$15                              
|$16$20                              
|$21$25                              
|$31$35                              
|$36$40                              
|$41$45                              
|                                     
|                                     
|                                     

|Back
      to Table of Contents | End of
      Note 3 (Pages 34-35) | A.G. Edwards, Inc.
|------------------------------- | --------------------------------- | ------------------

|4. Employee Profit Sharing
      Plan
      The Company has a defined contribution plan [401(k)] covering substantially
      all employees, whereby the Company is obligated to match, in specified amounts
      as defined therein, portions of contributions made by eligible employees.
      Additional contributions may be made at the discretion of the Company and
      are based on the Companys pre-tax earnings. The Company expensed $86,873
      in 2001, $104,787 in 2000 and $85,308 in 1999 in connection with the 401(k).
      The Company has an unfunded, nonqualified deferred compensation plan that
      provides benefits to participants whose contributions from the Company in
      the 401(k) are subject to Internal Revenue Service limitations. Participants
      may choose to base their return on the broker call rate or on the performance
      of one or more of a combination of mutual funds, as designated by the Company.
      Participants have no ownership in the mutual funds. Included in investments
      is $52,115 in mutual funds that were purchased by the Company to hedge its
      liability to the participants that chose to base the performance of their
      return on the mutual fund option. At February 28, 2001, and February 29,
      2000, employee compensation and related taxes on the balance sheet included
      $175,595 and $151,298, respectively, related to this plan.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Back
      to Table of Contents | End of
      Note 4 (Page 36) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|5. Net Capital Requirements
      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 from the SEC and
      other regulatory organizations for substantial withdrawals of capital or
      loans to affiliates. At February 28, 2001, the subsidiarys net capital
      of $780,612 was 24 percent of aggregate debit items and $715,818 in excess
      of the minimum required.
      Certain other subsidiaries are also subject to minimum capital requirements
      that may restrict the payment of cash dividends and advances to A.G. Edwards,
      Inc. The only restriction with regard to the payment of cash dividends by
      A.G. Edwards, Inc. is its ability to obtain cash dividends and advances
      from its subsidiaries, if needed.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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      to Table of Contents | End of
      Note 5 (Page 36) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|                                                                 
|-----------------------------------------------------------------
|6. Income Taxes
      The provisions for income taxes consist of:
|                                                                 
|                                                                 
|Current:                                                         
|Federal                                                          
|State
      and local                                            
|                                                                 
|                                                                 
|Deferred                                                         
|                                                                 
|                                                                 
|                                                                 

|Deferred income taxes reflect temporary differences in the bases of the
      Companys assets and liabilities for income tax purposes and for financial
      reporting purposes, using current tax rates. These temporary differences
      result in taxable or deductible amounts in future years. Significant components
      of deferred tax assets and liabilities at February 28, 2001, and February
      29, 2000, are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            
|----------------------------
|                            
|                            
|Deferred Tax Assets:        
|Employee
      benefits     
|Other                       
|                            
|                            
|                            
|                            
|Deferred Tax Liabilities:   
|Receivables                 
|Investments                 
|Property
      and equipment
|Other                       
|                            
|                            
|                            
|Net Deferred Tax Assets     
|                            

|The Company expects to fully realize these deferred tax assets given its
      historical level of earnings and related taxes paid; accordingly, no valuation
      allowance has been established. The Companys effective tax rate was
      37 percent in 2001, 39 percent in 2000 and 38 percent in 1999, which differed
      from the federal statutory rate of 35 percent. State and local taxes, net
      of federal benefit, increased the effective rate by 3 percent in 2001, and
      4 percent in 2000 and 1999. No other single item had a material impact on
      the difference in the rates.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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      to Table of Contents | End of
      Note 6 (Page 36) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|                                            
|--------------------------------------------
|7. Investments
      Investments consist of:
|                                            
|                                            
|Private equity                              
|Mutual funds                                
|U.S. government                             
|Other                                       
|                                            
|Total Investments                           
|                                            

|The Company primarily invests
      in U.S. government securities through its trust company subsidiaries. The
      Companys mutual fund investments are primarily to hedge certain liabilities
      under its deferred compensation plan, and, to a lesser extent, as an approved
      investment by one of the trust companies. Private equity consists primarily
      of investments in a privately held investment management company and in
      a Company-sponsored private equity fund.
      In 2000, the Company recognized a gain of $75,200, which is included in
      other revenue, from the sale of one-half of the Companys investment
      in a privately held investment management company and the related increase
      in the carrying value of the remaining investment to its fair value. This
      investment had been carried on the equity method of accounting, which was
      discontinued due to the reduction of the Companys ownership and the
      terms surrounding the remaining investment.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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      to Table of Contents | End of
      Note 7 (Page 37) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------
|8. Stockholders
      EquityEarnings Per Share
      The following table presents the computations of basic and diluted earnings
      per share:
|                                                                                                                                                  
|                                                                                                                                                  
|Net earnings available to common
      stockholders                                                                                               
|                                                                                                                                                  
|Shares (in thousands):                                                                                                                            
|Weighted
      average shares outstanding                                                                                                         
|                                                                                                                                                  
|Effect
      of dilutive common shares:                                                                                                           
|Restricted
      shares                                                                                                                           
|Stock
      purchase plan                                                                                                                         
|Stock
      option plan                                                                                                                           
|                                                                                                                                                  
|Dilutive
      common shares                                                                                                                      
|                                                                                                                                                  
|Total weighted average diluted
      shares                                                                                                       
|                                                                                                                                                  
|Earnings per share:                                                                                                                               
|Diluted                                                                                                                                           
|Basic                                                                                                                                             
|                                                                                                                                                  

|Stock Repurchase Program
      The Companys May 1996 stock repurchase program, which authorized the
      Company to purchase up to 33 million of its outstanding shares, ended in
      2001 as the share repurchase limit was attained. The Company purchased 10,640,750
      shares with an aggregate cost of $446,726 in 2001, 11,032,500 shares at
      a cost of $336,028 in 2000 and 4,871,500 shares at a cost of $180,175 in
      1999.
      In February 2001, the Board of Directors authorized the repurchase of up
      to 10 million of the Companys outstanding shares during a 23 month
      period. Repurchased shares are added to treasury stock to be used for employee
      stock plans and to partially offset the past, and future, effect of these
      plans. At February 28, 2001, the Company had not repurchased shares under
      this authorization.Stockholders Rights Plan
      The Companys Stockholders Rights Plan, as amended, provides
      for the distribution of one Common Stock Purchase Right for each outstanding
      share of the Companys common stock. The rights cannot be exercised
      or traded apart from the common stock until, without the prior consent of
      the Company, a third party acquires no less than 20 percent of the Companys
      outstanding common stock or commences a tender or exchange offer that would
      result in the third party acquiring no less than 20 percent of the outstanding
      common stock. The Board of Directors may decrease the 20 percent thresholds
      to 10 percent of the outstanding stock. Each right, upon becoming exercisable,
      entitles the registered holder to purchase one share of common stock for
      $150 from the Company. If a person actually acquires no less than 20 percent,
      or 10 percent if appropriate, of the Companys common stock without
      the Board of Directors consent, then each right will entitle the holder,
      other than the acquiring third party, to purchase for $150 the number of
      shares of the Companys common stock (or in the event of a merger or
      other business combination, the number of shares of the acquirers
      stock) that has a market value of $300. The rights, which are redeemable
      by the Company at a price of $0.01 each prior to the persons acquiring
      no less than 20 percent, or 10 percent if appropriate, of the Companys
      common stock, are subject to adjustment to prevent dilution and expire June
      22, 2005.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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      to Table of Contents | End of
      Note 8 (Page 37) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|9. 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, 2001, are as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   
|-----------------------------------
|Year ending February 28
      (29),
|                                   
|2002                               
|2003                               
|2004                               
|2005                               
|2006                               
|Later years                        
|                                   
|                                   
|                                   

|Rental expense under all operating leases and service agreements was $94,455
      in 2001, $61,827 in 2000 and $52,657 in 1999.
      The Company has commitments of $70 million for 2002 and $65 million for
      2003 for the construction of an additional office building, a learning center
      and a parking garage at its headquarters campus.
      In the normal course of business, the Company enters into when-issued and
      underwriting commitments and delayed delivery transactions. Settlement of
      these transactions at February 28, 2001, would not have had a material effect
      on the consolidated financial statements.
      At February 28, 2001, and February 29, 2000, the Company had $123,849 and
      $144,662, respectively, of outstanding letters of credit, principally to
      satisfy margin deposit requirements with a clearing corporation. Of these
      amounts, $10,000 was collateralized by customer-owned securities held in
      margin accounts.
      The Company is a defendant in a number of lawsuits, in some of which plaintiffs
      claim substantial amounts, relating primarily to its securities and commodities
      business. While results of litigation cannot be predicted with certainty,
      management, after consultation with counsel, believes that resolution of
      all such litigation will have no material adverse effect on the consolidated
      financial statements of the Company.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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      to Table of Contents | End of
      Note 9 (Page 38) | A.G. Edwards, Inc.
|------------------------------- | ----------------------------- | ------------------

|10. Financial InstrumentsOff-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 sheet.
      Customer financing and securities settlement activities generally require
      the Company to pledge customer securities as collateral in support of various
      financing sources. Additionally, customer securities may be pledged as collateral
      to satisfy margin deposits at various clearing organizations. To the extent
      these counterparties are unable to fulfill their contracted obligation to
      return securities pledged, the Company is exposed to the risk of obtaining
      securities at prevailing market prices to meet its customer obligations.
      Securities sold but not yet purchased represent obligations of the Company
      to deliver specified securities at contracted prices. Settlement of such
      obligations may be at amounts greater than those recorded in the consolidated
      balance sheet.
      A substantial portion of the Companys assets and obligations result
      from transactions with customers and other counterparties who have provided
      financial instruments as collateral. Volatile trading markets could impair
      the value of such collateral and affect customers and other counterparties
      ability to satisfy their obligations to the Company.
      The Company manages its risks associated with the aforementioned transactions
      through position and credit limits and the continuous monitoring of collateral.
      Additional collateral is required 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, 2001, the fair value of securities received as collateral where the
      Company is permitted to sell or repledge the securities was $4,474,000 and
      the fair value of the collateral that had been sold or repledged was $1,288,000.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 Considerations
      Substantially all of the Companys financial instruments are carried
      at fair value or amounts that approximate fair value. Customer receivables,
      primarily consisting of floating rate loans collateralized by margin securities,
      are charged interest at rates similar to other such loans made throughout
      the industry. The Companys remaining financial instruments are generally
      short-term in nature and liquidate at their carrying values.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Back
      to Table of Contents | End of
      Note 10 (Pages 38-39) | A.G. Edwards, Inc.
|------------------------------- | ---------------------------------- | ------------------

|11. Enterprise-Wide
      Disclosure
      The Company provides investment services to its clients through its financial
      consultants in more than 695 branch offices. 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 total revenues by type of
      service for the years ended February 28 (29):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         
|-------------------------
|                         
|                         
|Transaction services     
|Asset management services
|Interest                 
|Other                    
|                         
|                         
|                         

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      Note 11 (Page 39) | A.G. Edwards, Inc.
|------------------------------- | ------------------------------ | ------------------

|Independent
      Auditors Report                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Deloitte&Touche                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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, 2001
      and February 29, 2000, and the related consolidated statements of earnings,
      stockholders equity and cash flows for each of the three years in
      the period ended February 28, 2001. 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, 2001 and February 29, 2000, and the results
      of their operations and their cash flows for each of the three years in
      the period ended February 28, 2001, in conformity with accounting principles
      generally accepted in the United States of America.Deloitte&Touche LLP
      April 18, 2001
      St. Louis, Missouri

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      to Table of Contents | End of
      Page 39 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Board
      of Directors 
      A.G. Edwards, Inc.                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Robert L. Bagby                                                                                                                                                  
|Robert
      L. Bagby
      1
      Chairman of the Board, 
      Chief Executive Officer                                                                        
|Charmaine S. Chapman                                                                                                                                             
|Charmaine
      S. Chapman
      2,3,4
      President, 
      Chief Executive Officer, 
      United Way of 
      Greater St. Louis, 
      St. Louis, Missouri
|Ronald J. Kessler                                                                                                                                                
|Ronald
      J. Kessler
      1
      Vice Chairman of the Board                                                                                                 

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      to Table of Contents | End of
      Page 40 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Board
      of Directors 
      A.G. Edwards & Sons, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Member
      of 
      A.G. Edwards 
      & Sons, Inc.:
      5 Executive Committee
      6 Finance Committee
      7 Compensation
        Committee
      Robert L. Bagby 5,6,7
      Chairman of the Board, 
      Chief Executive Officer, 
      26 years with A.G. Edwards
      Mary V. Atkin 5,6,7
      Executive Vice President, 
      Director of Information Technology, 
      23 years with A.G. Edwards
      Bill Branson Jr.
      Senior Vice President, 
      Northeast Regional Officer, 
      7 years with A.G. Edwards
      Donnis L. Casey 5,7
      Executive Vice President, 
      Director of Staff, 
      34 years with A.G. Edwards
      Paul B. Coffee
      Senior Vice President, 
      Western Regional Officer, 
      26 years with A.G. Edwards
      Terry J. Dessent
      Senior Vice President, 
      Securities Research, 
      23 years with A.G. Edwards
      David J. Diffenauer
      Senior Vice President, 
      Customer Accounting,
      30 years with A.G. Edwards
      Benjamin 
      F. Edwards IV 5,6,7
      Vice Chairman of the Board, 
      President, 
      Director of Sales & Marketing,
      23 years with A.G. Edwards
      Charles T. Forrest
      Senior Vice President, 
      Public Finance, 
      13 years with A.G. Edwards
      S. Rawls Fortenberry
      Senior Vice President, 
      Florida Regional Officer, 
      32 years with A.G. Edwards
      Charles J. Galli 5
      Senior Vice President, 
      Home Regional Officer, 
      22 years with A.G. Edwards

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      Page 41 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Boards
      of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A.G.
      EdwardsTechnology Group, Inc.Robert L. Bagby
      Chairman of the Board 
      and
      Chief Executive Officer
      Mary V. Atkin
      President
      Donnis L. Casey
      Benjamin F. Edwards IV
      Charles J. Galli
      Alfred E. Goldman
      Richard F. Grabish
      Douglas L. Kelly
      Ronald J. Kessler
      Paul F. Pautler
      Robert A. PietroburgoA.G. Edwards 
      Trust CompanyRichard F. Grabish
      Chairman of the Board and 
      Chief Executive Officer
      Thomas ODonnell
      President
      Terry J. Dessent
      Benjamin F. Edwards IV
      Charles J. Galli
      Douglas L. Kelly
      Michael Scafati
      Charles V. ZurfluhA.G. Edwards 
      Trust Company FSBRichard F. Grabish
      Chairman of the Board and 
      Chief Executive Officer
      Thomas ODonnell
      President
      Terry J. Dessent
      Benjamin F. Edwards IV
      Charles J. Galli
      Douglas L. Kelly
      Michael Scafati 
      Charles V. Zurfluh

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      Page 42 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Regional
      Officers
      Number of branch offices as of March 31, 2001.
|----------------------------------------------------------------------------
|Western                                                                     
|Paul B. Coffee
      Paul B. Coffee                                         
|Pacific Coast                                                               
|John F. Lee
      John F. Lee                                               
|Southwest                                                                   
|David C. Sprowl
      David C. Sprowl                                       
|Southern                                                                    
|Marlow N. Morgan
      Marlow N. Morgan                                     
|Central                                                                     
|Donald N. Robinson
        Donald N. Robinson                               
|Mid-Central                                                                 
|John H. Henning
      John H. Henning                                       

|Home                                               
|---------------------------------------------------
|Charles J. Galli
      Charles J. Galli            
|Great Lakes                                        
|Louis A. Ginocchio Jr.
      Louis A. Ginocchio Jr.
|Florida                                            
|S. Rawls Fortenberry
      S. Rawls Fortenberry    
|Mid-Atlantic and Southeast                         
|Earl D. Laing
      Earl D. Laing                  
|Northeast                                          
|Bill Branson Jr.
      Bill Branson Jr.            
|Eastern                                            
|Peter M. Miller
        Peter M. Miller            

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|------------------------------- | -------------------- | ------------------

|Branch
      Office Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Alabama
      Anniston
      John M. Monroe
      Birmingham
      David H. Gilchrist
      Dothan
      Earl D. Laing*
      Fairhope
      Thomas S. Lott Sr.
      Florence
      Thomas T. Ross
      Gadsden
      Troy D. Wagnon
      Gulf Shores
      Barbara S. Boutwell
      Huntsville
      Benny N. Little
      Inverness Center
      Benson R. McLendon Jr.
      Mobile
      Jere W. Marques
      Montgomery
      A. Reid Smith III
      Prattville
      Rondy K. Smith
      Selma
      Thomas R. Boyd
      Troy
      Robert K.T. Cole Jr.
      Arizona
      Carefree
      P. Josh Slocum
      Chandler-Tempe
      Robert L. McDonnell
      East Tucson
      Kenneth C. Jacowsky
      Flagstaff
      Clifford E. Alexander
      Green Valley
      Nolan D. Myers
      Mesa
      William R. Berg
      Oro Valley
      Ben Palazzo
      Phoenix
      Daniel L. Christy III
      Pinnacle Peak
      Robert E. Rittel
      Prescott
      Gerry M. Thornbro

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|------------------------------- | -------------------- | ------------------

|Branch Office
      Management(cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Florida
      Belleair Bluffs
      Robert N. Chiavacci
      Boca Raton
      James D. Edge
      Bonita Springs
      Richard L. Bucher
      Boynton Beach
      Jeffrey L. Hill
      Bradenton
      Gary M. Knuckles
      Cape Coral
      Patrick S. Zych
      Citrus Hills
      Harry B. Sampson
      Clearwater
      Robert W. Hicks
      Clermont
      Frederick S. Lipp
      Coral Gables
      Alfredo Oliva
      Daytona Beach
      Ray Stephens
      Destin
      Jerry R. Ogle
      Englewood
      Burton E. Mason
      Eustis
      Tracy M. Belton
      Fort Lauderdale
      Mark D. Hawkins
      Fort Myers
      James A. Nolte
      Fort Pierce
      Francis E. Campbell
      Fort Walton Beach
      Edmond Waters
      Gainesville
      John H. Decker Jr.
      Holiday
      Francis J. Velten
      Indialantic
      Gerald B. Goodchild
      Jacksonville
      Ray Stephens
      Juno Beach
      James A. Collins
      Kissimmee
      Robert Gillespie
      Lake Mary
      John R. Snively
      Lake Worth
      Robert A. Lepa

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      Page 45 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Branch Office
      Management(cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Iowa (cont.)
      Marshalltown
      Jay P. Merryman
      Mason City
      Robert M. Zishka
      Mount Pleasant
      Patrick J. McCabe
      Sioux City
      Michael J. Woods
      Storm Lake
      Alan E. Bowles
      Waterloo
      Richard D. Pilipchuk
      Kansas
      Abilene
      Patricia M. 
      OMalley-Knox
      Garden City
      Sean P. Thayer
      Randall A. Fisher
      Hutchinson
      Roger D. Gatton
      Independence
      Robert J. Miller
      Lawrence
      Jerald L. Samp
      Liberal
      Thomas C. Mein
      Manhattan
      Jayson C. Kaus
      Overland Park
      Gene M. Diederich
      Steven B. Vecchio
      Pittsburg
      Jason E. McElwee
      Salina
      Kenneth M. Wedel
      Wichita
      Roger A. Buller
      Kentucky
      Ashland
      James E. Schroth
      Bowling Green
      Marc W. Evans
      Lexington
      Byron L. Holley
      Louisville
      John J. Wingfield
      Owensboro
      Larry H. Beisel Jr.
      Paducah
      John A. Williams

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      Page 46 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Branch Office
      Management(cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|New Hampshire
      Claremont
      Gisela M. Polleys
      Concord
      William D. Chapin
      Hanover
      E. Clinton Swift
      Keene
      Terry D. Schnare
      Laconia
      Richard V. Breton
      Nashua
      Richard T. Iannacone
      New London
      Philip D. Estabrook III
      North Conway
      Henry N. Forrest
      Portsmouth
      Rohe V. Pennington III
      New Jersey
      Bernardsville
      Peter L. Roselle
      Cape May
      Henry S. Brzyski
      Cherry Hill
      Walter J. Schwenk
      East Brunswick
      Michael J. Doherty
      Green Village
      Brian J. McCafferty
      Hillsborough
      Patricia L. Halpern
      Morristown
      Joseph J. Bancheri
      Northfield
      Donald N. Levy
      Gene N. Schraeder Jr.
      Oradell
      Joseph Buono
      Grace M. Galvin
      Princeton
      Constantine Giviskos
      Rockaway
      Fred K. Ecke Jr.
      Short Hills
      Frank M. Taylor
      Spring Lake
      James J. Coughlin
      Voorhees
      Charles J. McAfee
      Watchung
      Walter W. Roth

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      Page 47 | A.G. Edwards, Inc.
|------------------------------- | -------------------- | ------------------

|Branch Office
      Management(cont.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|South Carolina
      (cont.)
      Pawleys Island
      Michael J. Hirsch
      Perrin Q. Dargan
      Seneca
      Jesse E. Wright III
      Spartanburg
      William T. Brown
      Sumter
      Charles Alessandro
      Sun City
      John C. Levy
      South Dakota
      Aberdeen
      Richard W. Niebuhr
      Craig D. Golz
      Huron
      Daniel L. Reinders
      Mitchell
      Dennis M. Martin
      Rapid City
      Patrick D. Malone
      Emiel E. Belzer
      Sioux Falls
      Joseph C. Wood
      Watertown
      Thomas C. Beadnell
      Tennessee
      Chattanooga
      Joseph E. Petty
      Johnson City
      Gregory G. Schuette
      Knoxville
      William K. West III
      Memphis
      Charles H. Long Jr.
      Morristown
      John E. Martin
      Nashville
      Richard J. Eskind
      Texas
      Abilene
      Gerald A. Galbraith
      Addison
      John O. Norwood
      Amarillo
      Jesse C. Miller
      Arlington
      Jack R. Alexander Jr.
      Austin
      Hollis L. Jefferies Jr.

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      Page 48 | A.G. Edwards, Inc.
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|Shareholder
      InformationAnnual Meeting
      The 2001 Annual Meeting of Stockholders will be held at the Companys
      headquarters, One North Jefferson, St. Louis, Missouri, on Thursday, June
      21, 2001, 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 2 and October
      1, 2001, and January 2 and April 1, 2002.Form 10-K
      The Form 10-K annual report filed with the Securities and Exchange Commission,
      which provides further details on A.G. Edwards business, is available
      at no charge from:
      Secretary, A.G. Edwards, Inc.
      One North Jefferson
      St. Louis, Missouri 63103Stock 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, 2001,
      was 25,000.Registrar/Transfer Agent
      The Bank of New York
      Shareholder Relations Department11E
      P.O. Box 11258
      Church Street Station
      New York, New York 10286-1258
      (800) 524-4458Account Protection Package
      The securities held by A.G. Edwards & Sons, Inc. for client accounts
      are protected up to $500,000, including up to $100,000 for cash claims,
      by the Securities Investor Protection Corporation (SIPC). In addition to
      the SIPC coverage, securities and cash held in client accounts are provided
      additional protection to the full value of the account (as determined by
      SIPC) by a commercial insurance company.Exchange Memberships
      A.G. Edwards companies are members of all major domestic stock and commodity
      exchanges, including the American, Boston, Chicago, New York, Pacific and
      Philadelphia stock exchanges; the Chicago Board Options Exchange; the Chicago
      Board of Trade; the Chicago Mercantile Exchange; the New York Board of Trade;
      the New York Mercantile Exchange; and other commodity exchanges. A.G. Edwards
      companies are also members of the National Futures Association and the National
      Association of Securities Dealers, Inc.
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|Back
      to Table of Contents | End of
      Page 49 | A.G. Edwards, Inc.A.G. Edwards, Inc.
      One North Jefferson
      St. Louis, Missouri 63103
      (314) 955-3000
      www.agedwards.com
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