SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10‐K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended February 28, 2001
Commission file number 1‐8527
**A.G. EDWARDS, INC.**
State of Incorporation: **DELAWARE** I.R.S. Employer Identification No.: **43‐1288229
One North Jefferson Avenue

St. Louis, Missouri 63103**
Registrant's telephone number, including area code: (314) 955‐3000

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

                    Title of each class
Name of each exchange on which registered
COMMON STOCK, $1 PAR VALUE
NEW YORK STOCK EXCHANGE  
RIGHTS TO PURCHASE COMMON STOCK
NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE

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

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

The aggregate market value of voting stock held by non‐affiliates was approximately $3.3 billion at May 1, 2001. 

At May 1, 2001, there were 79,869,916 shares of A.G. Edwards, Inc. Common Stock, $1 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the A.G. Edwards, Inc. Annual Report Fiscal Year 2001 (the "2001 Annual Report to Stockholders") are incorporated by reference into Parts I, II and IV hereof. Portions of the Company's Proxy Statement filed with the SEC inconnection with the Company's Annual Meeting of Stockholders to be held June 21, 2001 (the "Company's 2001 Proxy Statement") are incorporated by reference into Part III hereof. Other documents incorporated by reference in this report are listedin the Exhibit Index beginning on page 19 of this Form 10-K.

PART I

ITEM 1.BUSINESS. 

(a) General Development of Business

A.G. Edwards, Inc., a Delaware corporation, is a holding company incorporated in 1983 whose principal subsidiary, A.G. Edwards & Sons, Inc. (Edwards), is successor to a partnership founded in 1887. A.G. Edwards, Inc. and its directlyowned and indirectly owned subsidiaries (collectively referred to as the "Company") provide securities and commodities brokerage, asset management, insurance, trust, investment banking and other related financial services to individual, corporate,governmental and institutional clients. At February 28, 2001, the Company had more than 695 offices in 49 states, the District of Columbia, and London, England, and more than 17,000 full-time employees, including more than 7,000 financial consultants. 

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

AGE Commodity Clearing Corp. (Clearing), a commodity clearing subsidiary, is registered with the CFTC as a FCM and operates exclusively as a commodity clearing company for Edwards. Clearing is a member of all major U.S. commodities exchanges and theNational Futures Association (NFA). The A.G. Edwards trust companies (collectively referred to as the Trust Companies), including a federally chartered savings bank, provide investment advisory, portfolio management and trust services. A.G. Edwards & Sons (U.K.) Limited is a securities broker-dealer located in London, England. A.G. Edwards Capital, Inc. serves as general partner to four private equity partnerships formed to invest in portfolios of venture capital and buy-out funds anddirect investments. 

(b) Financial Information About Industry Segments

Information regarding industry segments is set forth in Note 1 (Summary of Significant Accounting Policies) of the Notes to Consolidated Financial Statements under the caption "Basis of Financial Information" appearing on page 33 of the 2001Annual Report to Stockholders. Such information is hereby incorporated by reference.

""(c) Narrative Description of Business

Commissions, principal transactions, investment banking, and asset management and service fees were the principal sources of consolidated revenue for the last three fiscal years. The total amount of revenue contributed by these services, including theamount of total revenue by class of products or services that accounted for 10% or more of consolidated revenues, are set forth on page 28 of the 2001 Annual Report to Stockholders under the caption "Consolidated Five-Year Financial Summary." Suchinformation is hereby incorporated by reference.

COMMISSIONS

Commission revenue represents the most significant source of revenue for the Company, accounting for more than 46% of total revenue during the last five years. The following briefly describes the Company's sources of commission revenue. 

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

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

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

Commodities and Financial Futures. Edwards acts as broker in the purchase and sale of commodity futures contracts, financial futures contracts and options on commodity and financial futures contracts. These contracts coveragricultural products, precious metals, currency, interest rate and stock index futures. Substantially all of Edwards' clients' futures transactions are executed and cleared through Clearing. Nearly all transactions in futures contracts are executed witha relatively low margin deposit, usually 3% to 17% of the total contract amount. Consequently, the risk to the client and resulting credit risk assumed by Edwards is substantial, generally greater than on securities transactions. To limit its exposure,Edwards requires its clients to meet minimum net worth requirements and other established credit standards, in addition to the margin deposits. Regulations of some commodity exchanges limit the allowable upward or downward price fluctuations for eachcommodity on a given day. These restrictions on price fluctuations may preclude purchases or sales necessary to limit losses or realize gains. 

As a member of the clearing associations of the principal commodity exchanges, Clearing has potentially significant financial exposure in the event other members default on their obligations to the clearing houses of such exchanges. 

Insurance. As agent for several unaffiliated life insurance companies, Edwards distributes life insurance and tax‐deferred annuities. Edwards also provides financial planning services to assist individuals in structuring financial portfolios toachieve their financial goals. In addition, A.G. Edwards Life Insurance Company is licensed to issue life insurance policies under the laws of Missouri, but has not issued any to date. 

PRINCIPAL TRANSACTIONS 

Client transactions in the equity and fixed income over‐the‐counter markets may be effected by Edwards acting as principal as well as agent. Principal transactions, including market making, require maintaining inventories of securities tosatisfy customer order flow. These securities are valued in the Company's consolidated financial statements at fair value and unrealized gains or losses are included in the results of operations. Securities fluctuations may be sudden and sharp as a resultof changes in market conditions. To the extent Edwards can correctly anticipate such changes, risks may be reduced by varying inventory levels or by use of hedging strategies. 

INVESTMENT BANKING

Edwards is an underwriter of corporate and municipal securities, certificates of deposit, as well as corporate and municipal unit investment trusts and closed-end mutual funds. Edwards' municipal underwriting activities include areas of specializationin primary and secondary schools, sports and entertainment, municipal finance, housing, higher education, health care, and public utilities. Corporate finance activities are focused on seven major sectors: utilities, technology, healthcare, real estate,financial services, consumer and energy. As an underwriter, usually in conjunction with other broker-dealers and financial institutions, Edwards purchases securities for resale to its clients. Edwards acts as a consultant to corporations and municipalentities in planning their capital needs and determining the most advantageous means for raising capital. It also advises clients in merger and acquisition activities and acts as agent in private placements. 

Underwriting involves risk. As an underwriter, Edwards may incur losses if it is unable to resell the securities it is committed to purchase or if it is forced to liquidate all or a part of its commitment at less than the purchase price. Under federaland state securities laws, an underwriter is exposed to substantial potential liability for material misstatements or omissions of fact in the prospectus used to describe the securities being offered. Generally, issuers agree to indemnify underwritersagainst such liabilities, but otherwise, underwriters are not specifically insured. In addition, the commitment of capital to underwriting may reduce Edwards' regulatory net capital position and, consequently, its underwriting participation may be limitedby the requirement that it must at all times be in compliance with the net capital rules administered by the Securities and Exchange Commission (SEC). 

Although it is generally more profitable to manage or co‐manage an underwriting, as opposed to being a participant, managers generally commit to underwriting a greater portion of the offering than the other members of the underwriting group andconsequently, managers assume a greater risk. 

ASSET MANAGEMENT AND SERVICE FEES

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

Edwards, through the Trust Companies, provides its clients with personal, ERISA and custodial trust services.

Clients desiring professional money management are offered three types of account portfolio services. Edwards, acting as investment manager, offers portfolio management strategies based on the client's investment objectives. Edwards' investmentconsulting service offers the Private Advisor Service, which provides clients with third-party investment management, performance measurement, management search and related consulting services. The Pathways(SM) Spectrum, Fund Navigator and Fund Advisor investment advisory programs are personalized, fee-based asset allocation programs that utilize load and no-load mutual fund investments. Clients select from established asset allocation models, orcustomize their own, based on their investment objectives, risk tolerance and time horizon. In addition, under the Client Choice program, clients can execute transactions and receive ongoing personalized advice from their financial consultant for anannual fee based on the value of their assets held at Edwards. 

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

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

MARGIN FINANCING 

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

A substantial portion of the Company's assets and obligations result from transactions with clients who have provided financial instruments as collateral. The Company manages its risk associated with these transactions through position and creditlimits, and the continuous monitoring of collateral. Additional information regarding risks associated with client transactions is set forth in Note 10 (Financial Instruments) of the Notes to Consolidated Financial Statements under the caption"Off-Balance Sheet Risk and Concentration of Credit Risk" appearing on page 38 of the 2001 Annual Report to Stockholders. Such information is hereby incorporated by reference.

A client, borrowing in a margin account, is charged an interest rate based on the broker call loan rate plus up to an additional 2 1/2%, depending on the amount of the client's borrowings during each interest period. Interest earned on thesebalances represents an important source of revenue for Edwards. 

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

PRIVATE CLIENT SERVICES

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

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

INVESTMENT ACTIVITIES

The Company's investment activities include, among other things, making investments in equity and equity-related securities in connection with private investment transactions, either for the accounts of private investment funds in which the Companyparticipates or, to a lesser extent, for its own account. These activities include venture capital investments and investments in portfolio and operating companies. The fair value of these investments is subject to a high degree of volatility and mayinclude significant risks of loss while attempting to obtain higher returns than those available from publicly traded securities.. 

RESEARCH

Edwards provides both technical market and fundamental analysis of numerous industries and individual securities for use by its financial consultants and clients. In addition, review and analysis of general economic conditions, along with assetallocation recommendations, are also available. These services are provided by Edwards' research analysts, economists and market strategists. Revenues from research activities are derived principally through resulting transactions on an agency orprincipal basis. 

COMPETITION 

All aspects of the Company's business are highly competitive. Edwards competes with numerous broker-dealers, including on-line services, some of whom possess greater financial resources than the Company. Edwards competes for clients on the basis ofprice, quality of service, financial resources and reputation. There is constant competition to attract and retain personnel within the securities industry. 

The 1999 Gramm-Leach-Bliley Act, which repealed United States 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 baseserviced by the Company. Thus, competition for the investment dollar and for clients has increased from other sources, such as commercial banks, savings institutions, mutual fund management companies, investment advisory companies as well as from othercompanies offering insurance, real estate, private equity investments, and other investment services both in the United States and globally. In addition, the financial services industry has experienced consolidation and convergence in recent years, asfinancial 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 continueand 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. 

REGULATION 

Edwards, as a broker‐dealer and FCM, is subject to various federal and state laws which specifically regulate its activities as a broker‐dealer in securities and commodities, as an investment advisor and as an insurance agent. Clearing, asa FCM, is regulated as a broker in commodities. Edwards and Clearing are also subject to various regulatory requirements imposed by the securities and commodities exchanges and the NASD. The primary purpose of these requirements is to enhance theprotection of customer assets. Under certain circumstances, these rules may limit the ability of the Company to make withdrawals of capital from Edwards and Clearing. These laws and regulatory requirements generally subject Edwards and Clearing tostandards of solvency with respect to capital requirements, financial reporting requirements, approval of qualifications of personnel engaged in various aspects of its business, record keeping and business practices, the handling of their clients' fundsresulting from securities and commodities transactions and the extension of credit to clients on margin transactions. Infractions of these rules and regulations may include suspension of individual employees or their supervisors, termination of employees,limitations on certain aspects of Edwards' and Clearing's regulated businesses, as well as censures and fines, or proceedings of a civil or criminal nature which could result in a temporary or permanent suspension of a part or all of Edwards' andClearing's activities. Information regarding regulatory minimum net capital is set forth in Note 5 of the Notes to Consolidated Financial Statements under the caption "Net Capital Requirements" appearing on page 36 of the 2001 Annual Report toStockholders. Such information is hereby incorporated by reference.

A.G. Edwards & Sons (U.K.) Limited is registered under the laws of the United Kingdom and is regulated as a securities broker-dealer by the Securities and Futures Authority. A.G. Edwards Trust Company FSB, a federal savings bank, isregulated by the Office of Thrift Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC) and by the SEC as an investment advisor. A.G. Edwards Trust Company (Missouri) is regulated by the State of Missouri Division of Finance. A.G. EdwardsLife Insurance Company is regulated by the insurance laws of the State of Missouri. A.G. Edwards Capital, Inc. is registered with the SEC as an investment advisor. 

ITEM 2. PROPERTIES. 

The Company's headquarters are located at One North Jefferson Avenue, St. Louis, Missouri. It consists of several buildings owned by the Company which contain approximately 1,700,000 square feet of general office space, as well asunderground and surface parking and a five-story parking garage. The buildings are located on approximately 18 acres of land owned by the Company. In addition, the Company owns four additional office buildings in the St. Louis area, which are usedfor information technology facilities, contingency planning facilities and a trust company office. The Company is currently expanding its headquarters with the construction of an additional office building, a learning center and a parking garage. TheCompany owns an additional 22 acres of land adjacent to its headquarters and is using this property principally for this expansion as well as additional employee parking areas. 

The Company's branch offices occupy leased premises throughout the United States, as well as an office in London, England. Aggregate annual rental for branch office premises for the year ended February 28, 2001, was $62,883,000. 

ITEM 3. LEGAL PROCEEDINGS. 

(a) Litigation
The Company is a defendant in lawsuits and arbitrations, 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.

""(b) Proceedings Terminated during the Fourth Quarter of the Fiscal Year 
""Covered by This Report. 

Not applicable.

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

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended February 28, 2001. 

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the executive officers of the Company as of May 1, 2001. Executive officers are appointed by the Board of Directors to hold office until their successors are appointed and qualified.