SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

OR

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

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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

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

Aggregate market value of the voting stock held by non-affiliates of the registrant as of December 6, 2002: $1,548,017,907

Number of common shares outstanding (December 6, 2002): 48,756,470

Raymond James Financial, Inc. ("RJF") is a Florida-based holding company whose subsidiaries are engaged in the financial services business. Its principal subsidiaries include Raymond James & Associates, Inc. ("RJA"), Raymond James Financial Services, Inc. ("RJFS"), Raymond James Ltd. ("RJ Ltd."), Eagle Asset Management, Inc. ("Eagle"), Heritage Asset Management, Inc. ("Heritage") and Raymond James Bank, FSB ("RJBank"). All of these subsidiaries are wholly-owned by RJF. RJF and its subsidiaries are hereinafter collectively referred to as the "Company".

RJF's principal subsidiary, RJA, was organized in Florida in 1962 and is the largest full service brokerage and investment firm headquartered in the state of Florida and one of the largest retail firms in North America. RJA is a self-clearing broker-dealer engaged in most aspects of securities distribution, trading, investment banking and asset management. RJA also offers financial planning services for individuals and provides clearing services for RJFS, other affiliated entities and several unaffiliated broker-dealers. RJA is a member of the New York Stock Exchange ("NYSE"), American Stock Exchange, and most regional exchanges. It is also a member of the National Association of Securities Dealers ("NASD") and Securities Investors Protection Corporation ("SIPC"). On May 28, 1999 the Company purchased Roney & Co. ("Roney"), a broker-dealer headquartered in Detroit, Michigan, which was merged into RJA as of September 25, 1999.

RJFS was formed in January 1999, when the Company merged its two independent contractor broker-dealer subsidiaries, Investment Management & Research, Inc. ("IM&R") and Robert Thomas Securities, Inc. ("RTS"). Financial Advisors affiliated with RJFS may offer to their clients all products and services offered by RJA to its retail clients. RJFS also has four institutional sales offices in Europe. RJFS is a member of the NASD and SIPC, but not of any exchange, as it clears all of its business on a fully-disclosed basis through RJA.

On January 1, 2001, the Company purchased Goepel McDermid Inc., a Canadian broker-dealer, which changed its name to Raymond James Ltd. It engages in both retail and institutional distribution and investment banking. RJ Ltd. is a member of the Toronto Stock Exchange and the Investment Dealers Association of Canada, and its U.S. broker-dealer subsidiary is a member of the NASD.

Eagle was formed in 1984 as a registered investment advisor to serve as the discretionary manager for individual equity portfolios.

Heritage was organized in 1985 to act as the manager of the Company's internally sponsored Heritage Family of Mutual Funds.

RJBank was formed in 1994 in conjunction with a purchase from the Resolution Trust Corporation. Its primary purpose is to provide traditional banking products and services to the clients of the Company's broker-dealer subsidiaries and to the general public.

The Company's business has five segments: retail; capital markets; asset management; RJBank; and several operations combined in the "other" segment. Financial information concerning RJF for each of the fiscal years ended September 27, 2002, September 28, 2001 and September 29, 2000 is included in the consolidated financial statements and notes thereto. Such information is hereby incorporated by reference.

The majority of U.S. Financial Advisors are also licensed to sell insurance and annuity products through the Company's general insurance agency, Planning Corporation of America ("PCA"). PCA is a wholly-owned subsidiary of RJA, a general insurance agency and represents a number of insurance companies. Through the Financial Advisors of the Company's broker-dealer subsidiaries, PCA provides product and marketing support for a broad range of insurance products, principally fixed and variable annuities, numerous forms of life insurance, disability insurance and long-term care coverage.

The retail Financial Advisors offer a number of professionally managed, load mutual funds as well as a selection of no-load funds. RJA maintains dealer-sales agreements with most major distributors of mutual fund shares sold through broker-dealers, including funds managed by Heritage Asset Management, an affiliated company. Commissions on such sales generally range from 1% to 5% of the dollar value of the transaction. Alternative sales compensation structures typically include front-end charges, "back-end" or contingent deferred sales charges, and an annual charge in the form of a fund expense. No single client accounts for a material percentage of this segment's total business.

* Fixed Income products include municipal, corporate, government agency and mortgage-backed bonds, preferred stock, CD's, and unit investment trusts.

RJA employs 932 Financial Advisors who offer a broad range of financial alternatives and services, generally applying disciplines rooted in financial planning while providing personalized service to clients.

With 75 retail branches and 17 satellites concentrated in the South, Midwest and Mid-Atlantic, RJA's Financial Advisors, who are all employees, work in a traditional branch setting supported by local management and administrative staffs. The average branch system (including satellites) supports about 12 Financial Advisors, with the number of Financial Advisors per office ranging from one to 35.

RJFS supports its 3,827 independent contractor Financial Advisors in providing products and services to their retail clients in 1,579 offices and 541 satellite offices in all 50 states.

The Company operates with several domestic sales divisions. The 3,122 producing independent contractor Financial Advisors provide investment and financial planning services, offering individual securities and investment advice primarily to individual investors. The Financial Institutions Division offers securities to customers of financial institutions such as banks, thrifts and credit unions and has 705 Financial Advisors in 261 locations. The Investment Advisors Division supports 17 independent Registered Investment Advisory firms with a comprehensive clearing and custodial platform. These Investment Advisors do not hold a securities license, charge for their services strictly on a fee basis and manage assets on a discretionary basis under their SEC registration.

The number of Financial Advisors in RJFS offices ranges from 1 to 23. These independent contractors must conduct all securities business through RJFS. As independent contractors they are permitted to conduct other businesses such as non-variable insurance products, independent registered advisory services, accounting and tax services among others. These activities are required to be disclosed to RJFS. Independent contractors are responsible for all of their direct costs and are paid a larger percentage of commissions and fees to compensate them for their added expenses.

RJ Ltd. has 21 retail branches and 237 Financial Advisors, all located in Canada. RJ Ltd. provides a broad range of financial products and services to clients, primarily in accordance with an established commission schedule. RJ Ltd. also offers asset-based fee alternatives to its traditional commission structure. RJ Ltd. is a self-clearing broker-dealer with its own operations and information processing personnel and is in the process of launching an independent contractor operation in Canada.

The Company owns 60% of a joint venture known as Raymond James Investment Services Limited. This entity is in the early stages of developing an independent contractor network in the United Kingdom.

RJA's operations personnel are responsible for the execution of orders, processing of securities transactions, custody of client securities, receipt, identification and delivery of funds and securities, compliance with certain regulatory and legal requirements, internal financial accounting and controls and general office administration for most of the Company's securities brokerage operations. At September 27, 2002, RJA employed 616 persons in its operations areas. Operations personnel provide services primarily to the Company's retail, capital markets and asset management business.

The Company's operations are supported by, and are dependent upon an extensive system of electronic data processing. The Company's computer systems are largely developed and maintained by its internal staff of 634 associates, most of whom are located in St. Petersburg.

Clients' transactions in securities are effected on either a cash or margin basis. In margin transactions, the client pays a portion of the purchase price, and RJA makes a loan to the client for the balance, collateralized by the securities purchased or by other securities owned by the client. Interest is charged to clients on the amount borrowed to finance margin transactions. The financing of margin purchases is an important source of revenue to RJA, since the interest rate paid by the client on funds loaned by RJA exceeds RJA's cost of short-term funds. The interest rate charged to a client on a margin loan depends on the average loan balance in the client's account and ranges from prime plus 1% to prime minus .75%.

Typically, broker-dealers utilize bank borrowings and equity capital as the primary sources of funds to finance clients' margin account borrowings. The Company's primary source of funds to finance clients' margin account balances has been cash balances in clients' accounts (Client Interest Program) which are funds awaiting investment. In addition, pursuant to written agreements with clients, broker-dealers are permitted by Securities and Exchange Commission ("SEC") and NYSE rules to lend client securities in margin accounts to other financial institutions. SEC regulations, however, restrict the use of clients' funds derived from pledging and lending clients' securities, as well as funds awaiting investment, to the financing of margin account balances, and to the extent not so used, such funds are required to be deposited in a special account for the benefit of clients. The regulations also require broker-dealers, within designated periods of time, to obtain possession or cont rol of, and to segregate, clients' fully paid and excess margin securities.

     Capital Markets activities include both equity and fixed income products and services. No single client accounts for a material percentage of this segment's total business. This segment consists of the departments described below:

     The Company's institutional clients are serviced by the RJA and RJ Ltd. Institutional Equity and RJA Fixed Income Departments and by the European offices of RJFS. In providing securities brokerage services to its institutional clients, the Company discounts its commissions on equity transactions based on trade size and the amount of business conducted annually with each institution.

     The 104 domestic and overseas professionals in RJA's Institutional Equity Sales and Sales Trading Departments maintain relationships with over 1,400 institutional clients, principally in North America and Europe. In addition to the Company's headquarters in St. Petersburg, FL, institutional equity offices are located in New York, Chicago, Los Angeles, London and Geneva. In addition, there are RJFS offices in Brussels, Dusseldorf, Luxembourg and Paris. There is also a UK broker-dealer in London, Raymond James Financial International Ltd.

RJA distributes to its institutional clients both taxable and tax-exempt fixed income products, primarily municipal, corporate, government agency and mortgage-backed bonds, through 85 institutional salespeople. RJA carries inventory positions of taxable and tax exempt securities in both the primary and secondary markets. In addition to St. Petersburg, the Fixed Income Department maintains institutional sales and trading offices in New York, Chicago and eight other cities around the country. To assist institutional clients, the Fixed Income Research Group provides strategy portfolio analysis and corporate bond research.

     Raymond James Ltd. has 22 equity sales and trading professionals servicing predominantly Canadian institutional investors from offices in Montreal, Toronto and Vancouver.

The 47 domestic senior analysts in RJA's research department publish research on nearly 500 predominantly U.S. companies, primarily focused on companies in specific industries including Technology, Telecommunications, Consumer, Financial Services, Healthcare, Real Estate, Energy and Industrial Growth. Proprietary industry studies and company-specific research reports are provided to both institutional and retail clients. This department has distinguished itself through its record of extremely successful comparative results as reported each quarter in the Wall Street Journal. RJ Ltd. has an additional 18 analysts who publish research on approximately 190 Canadian companies in the Biotechnology, Energy, Consumer, Industrial Growth, Financial Services, Paper and Forest Products, Real Estate and Technology sectors.

Recent statutory and regulatory developments could have a material impact on the way in which research activities are conducted at broker-dealers. (See "Regulation").

Trading equity securities in the over-the-counter ("OTC") market involves the purchase of securities from, and the sale of securities to, clients of the Company or other dealers who may be purchasing or selling securities for their own account or acting as agent for their clients. Profits and losses are derived from the spreads between bid and asked prices, as well as market trends for the individual securities during the holding period. RJA makes markets in approximately 250 common stocks in the OTC market. Similar to the equity research department, this operation serves to support the Company's institutional and retail sales efforts and is not evaluated on its independent profitability.

The 59 professionals of RJA's Investment Banking Group, located primarily in St. Petersburg with additional offices in Atlanta, Nashville, Chicago, Princeton, Dallas, Houston and Detroit, are involved in a variety of activities including public and private equity financing for corporate clients, and merger and acquisition advisory services. RJ Ltd.'s Investment Banking Group consists of 19 professionals located in Calgary, Toronto and Vancouver providing equity financing and financial advisory services to corporate clients. The Company's investment banking activities are focused in the same industries as those followed by the Equity Research department.

The Syndicate Department coordinates the marketing, distribution, pricing and stabilization of RJA's lead- and co-managed equity underwritings. In addition to RJA's managed and co-managed offerings, this department coordinates the firm's syndicate and selling group activities in transactions managed by other investment banking firms.

The Company trades both taxable and tax-exempt fixed income products. The 22 taxable and 19 tax exempt RJA fixed income traders purchase and sell corporate, municipal, government, government agency, mortgage-backed bonds, asset backed securities, preferred stock and CD's from/to clients of the Company or other dealers who may be purchasing or selling securities for their own account or acting as an agent for their clients. The Company enters into future commitments such as forward contracts and "to be announced" securities (e.g. securities having a stated coupon and original term to maturity, although the issuer and/or the specific pool of mortgage loans is not known at the time of the transaction). The majority of the Company's trading inventory is made up of fixed income bonds. Another subsidiary of the Company participates in the interest rate swaps market as a principal, both for economically hedging RJA fixed income inventory and in transactions with customers.

Fixed income investment banking includes mortgage backed securities, public finance and structured finance activities. The 26 professionals in the RJA Public Finance division operate out of 9 offices (3 located in Florida, one each in Birmingham, AL, New York, Pittsburgh, Chicago, Dallas and San Antonio), acting as Financial Advisor or underwriter to various municipal agencies or political subdivisions, housing developers and non-profit health care institutions. In addition, the structured finance group works with a variety of issuers in the sale of asset backed securities.

In addition, RJA acts as an underwriter or selling group member for corporate bonds, mortgage-backed securities, agency bonds, preferred stock and unit investment trusts. When underwriting new issue securities, RJA agrees to purchase the issue through a negotiated sale or submits a competitive bid.

Raymond James Tax Credit Funds, Inc., acts as general partner in 22 partnerships that have invested in real estate properties that qualify for low income housing tax credits. Other subsidiaries of the Company continue to act as general partner in a variety of limited partnerships syndicated several years ago.

The Company's asset management segment includes proprietary asset management operations, internally sponsored mutual funds, outside money management alternatives, and other asset-based fee programs. No single account or client accounts for a material percentage of this segment's total business.

Eagle is a registered investment advisor with approximately $5.2 billion under management at September 27, 2002 including approximately $700 million managed for the Heritage Family of Mutual Funds. In addition to individuals, Eagle's clients include pension and profit sharing plans, retirement funds, foundations, endowments, variable annuity and mutual fund portfolios. Accounts are managed on a discretionary basis in accordance with the investment objective(s) specified by the client. Eagle manages approximately $2.6 billion for institutional clients, including funds managed for Heritage and $2.6 billion for retail accounts.

Eagle's investment management fee generally ranges from 0.20% to 1.0% of asset balances per year depending upon the size and investment objective of the account.

At September 27, 2002, Eagle had 15 investment objectives managed by 13 investment managers.

Heritage serves as investment advisor to the Heritage Family of Mutual Funds. Heritage also serves as transfer agent for all of the funds and as fund accountant for all Heritage funds except the International Equity Fund. Portfolio management for the Aggressive Growth Fund, Growth Equity Fund, Technology Fund and the Mid Cap Stock Fund are subcontracted to Eagle Asset Management, Inc. Portfolio management for the Small Cap Stock Fund is subcontracted to both Eagle and the Company's Awad Asset Management subsidiary. Unaffiliated advisors are employed for the Municipal Money Market Fund, Capital Appreciation Trust, High Yield Bond Fund, Growth and Income Fund, Value Equity Fund , and the International Equity Fund .

Heritage also serves as an advisor to RJBank to make recommendations and monitor the Bank's investment portfolio of mortgage-backed securities.

Assets under management at September 27, 2002 were as follows (in 000's):

Awad is a registered investment advisor which primarily manages small cap equity portfolios. Fees generally range from 0.50% to 1.0% of asset balances annually. At September 27, 2002, Awad had approximately $675 million under management including $75 million managed for the Heritage Small Cap Stock Fund.

RJA's Asset Management Services ("AMS") Department manages programs which offer investment advisory services to clients, as well as certain non-advisory programs which offer fee-based alternatives to traditional commission charges for transactions. The primary advisory service offered by AMS is the Investment Advisory Services ("IAS") program. IAS maintains an approved list of investment managers (of which all but one are unaffiliated with the Company), establishes custodial facilities, monitors performance of client accounts, provides clients with accounting and other administrative services, and assists investment managers with certain trading management activities. IAS earns fees generally ranging from 0.50% to 1.00% of asset balances per annum, a portion of which is paid to the investment managers who direct the investment of the clients' accounts. At September 27, 2002, this program had approximately $2.9 billion in assets under management through agreements with 33 independent investment advisors and Awad.

Passport and similar programs, known as Freedom, Ambassador, MIP and PPA, offer a fee alternative that allows clients to pay a quarterly fee (and in some cases a low transaction charge) in lieu of commissions. Fees are based on the individual account size and are also dependent on the type of securities in the accounts. For these accounts, clients receive quarterly performance reporting and other services. As of September 27, 2002, these programs had approximately $6.4 billion in assets serviced by Financial Advisors.

In addition to the foregoing programs, AMS also offers fee based programs to clients who have contracted for portfolio management services from outside money managers that are not a part of the IAS program.

RJFS offers a program similar to Passport called IMPAC. As of September 27, 2002 IMPAC had $2.5 billion in assets serviced by RJFS Financial Advisors.

Raymond James Trust Company
Raymond James Trust Company West

Raymond James Trust Company was chartered and opened for business in 1992. This wholly-owned subsidiary of RJF was formed primarily to provide personal trust services to existing clients of the broker-dealer subsidiaries. Portfolio management of trust assets is often subcontracted to the asset management operations of the Company. In October 1993, the Company acquired a second trust company, Sound Trust Company, in Tacoma, Washington. The name of Sound Trust Company was changed to Raymond James Trust Company West effective October 1, 2000. This subsidiary provides personal trust services primarily to broker-dealer clients outside the State of Florida. These two subsidiaries had a combined total of approximately $692 million in client assets at September 27, 2002, including $12 million in the donor-advised Raymond James Charitable Endowment Fund.

Raymond James Bank, FSB ("RJBank") received its federal savings bank charter in 1994. RJBank provides residential, consumer and commercial loans as well as FDIC-insured deposit accounts to clients of the Company's broker-dealer subsidiaries and to the general public.

Access to RJBank's products and services is available nationwide through the offices of its affiliated broker-dealer firms as well as through convenient telephonic and electronic banking services. As of September 27, 2002, RJBank had total assets in excess of $920 million with 86% of the bank's deposits representing cash balances swept from wrap fee ERISA and IRA accounts managed by Eagle and RJA - Asset Management Services. Other than the foregoing, no single client accounts for a material percentage of the segment's total business.

In addition to the retail, capital markets, asset management and RJBank businesses, the Company operates securities lending activity and is a partner in several international joint ventures in emerging market countries. The Company has approximately $4.5 million invested in consolidated joint ventures in India, Argentina and Turkey. These operations are grouped in the "other" segment.

This activity involves the borrowing and lending of securities from and to other broker-dealers and other financial institutions, generally as an intermediary. The borrower of the securities puts up a cash deposit, commonly 102% of the market value of the securities. This deposit, which is adjusted daily to reflect changes in current market value. The profits of this operation are the net interest spread generated.

Raymond James International Holdings, Inc. ("RJIH") is a Delaware corporation formed in 1994 to own some of the Company's foreign operations. RJIH currently has ownership in consolidated joint ventures in Argentina, India and Turkey. These joint ventures operate in securities brokerage, investment banking and asset management. In addition, the Company owns a broker-dealer registered in the British Virgin Islands which is a correspondent firm to RJA.

The Company is engaged in an intensely competitive business. The Company' competes with many larger, better capitalized providers of financial services, including other securities firms, some of which are affiliated with major financial services companies, insurance companies, banking institutions and other organizations. The Company also competes with a number of firms offering on-line financial services and discount brokerage services, usually with lower levels of service, to individual clients. The Company' competes principally on the basis of service, product selection, location and reputation in local markets.

In the financial services industry, there is significant competition for qualified employees. The Company faces competition for qualified employees from major financial services companies, including other brokerage firms, insurance companies, banking institutions, on-line financial service providers, discount brokerage firms, asset management firms, and private equity funds. The Company's ability to compete effectively in its businesses is substantially dependent on its continuing ability to attract, retain, and motivate qualified employees, including successful Financial Advisors, investment bankers, trading professionals and other revenue-producing or experienced personnel.

The following discussion sets forth some of the material elements of the regulatory framework applicable to the financial services industry and provides some specific information relevant to the Company. The regulatory framework is intended primarily for the protection of customers and the securities markets, depositors and the Federal Deposit Insurance Fund and not for the protection of creditors or shareholders. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on our business.

The financial services industry in the United States of America is subject to extensive regulation under federal and state laws. The SEC is the federal agency charged with administration of the federal securities laws. Financial services firms are also subject to regulation by state securities commissions in those states in which they conduct business. RJA and RJFS are currently registered in all 50 states. In addition, financial services firms are subject to regulation by various foreign governments, securities exchanges, central banks and regulatory bodies, particularly in those countries where they have established offices.

Much of the regulation of broker-dealers, however, has been delegated to self-regulatory organizations ("SRO's), principally the NASD, the NYSE and other securities exchanges. These SRO's adopt and amend rules (which are subject to approval by the SEC) for governing the industry and conduct periodic examinations of member broker-dealers.

The financial services industry in Canada is subject to comprehensive regulation under both federal and provincial laws. Securities commissions have been established in 13 provinces and territorial jurisdictions and are charged with the administration of securities laws. RJ Ltd. is currently registered in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Quebec. Securities dealers in Canada are also subject to regulation by SRO's which are responsible for the enforcement of conformity with securities legislation for their members and have been granted the powers to prescribe their own rules of conduct and financial requirements of members. RJ Ltd. is regulated by the Securities Commissions in the jurisdictions of registration as well as by the SRO's, Investment Dealers Association ("IDA") and Market Regulation Services Inc.

Broker-dealers are subject to regulations that cover all aspects of the securities business, including:

One of the primary purposes of these regulations is to enhance the protection of customer assets. Under certain circumstances, these rules may limit the ability of the Company to make capital withdrawals from its broker-dealer subsidiaries.

The SEC, SRO's and state securities commissions may conduct administrative proceedings that can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. Such administrative proceedings, whether or not resulting in adverse findings, can require substantial expenditures and can have an adverse impact on the reputation of a broker-dealer.

The Company's clearing broker-dealer subsidiary, RJA, is required by federal law to belong to the SIPC. When the SIPC fund falls below a certain amount, members are required to pay annual assessments of up to 1% of adjusted gross revenues. As a result of adequate fund levels, each of the Company's two domestic broker-dealer subsidiaries was required to pay the minimum annual assessment of $150 in fiscal 2002. The SIPC fund provides protection for securities held in customer accounts up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances. RJA carries an excess policy that provides additional protection for securities of up to $99,500,000 per customer, including another $900,000 for cash awaiting investment. This limit per client does not protect against market fluctuations.

See Note 13 of the Notes to Consolidated Financial Statements for further information on SEC and regulations pertaining to broker-dealer regulatory minimum net capital requirements.

The Company's investment advisory operations, including the Company-sponsored mutual funds, are also subject to extensive regulation. The Company's U.S. asset managers are registered as investment advisors with the SEC and are also required to make notice filings in certain states. Virtually all aspects of the asset management business are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to benefit the asset management clients and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict an investment advisor from conducting its asset management business in the event that it fails to comply with such laws and regulations. Possible sanctions that may be imposed for a failure include the suspension of individual employees, limitations on the asset managers engaging in the asset management business for specified periods of time, the revocation of registrations, and other censures and fines. A regulatory proceeding, regardless of whether it results in a sanction, can require substantial expenditures and can have an adverse effect on the reputation of an asset manager.

RJBank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on RJBank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, RJBank must meet specific capital guidelines that involve quantitative measures of RJBank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. RJBank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require RJBank to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets (as defined in the regulati ons). See Note 7 to the Consolidated Financial Statements for further information and capital analysis.

The Company's two trust entities are subject to regulation by the states in which they are chartered. These regulations focus on, among other things, the soundness of internal controls in place at the trust companies.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act represents a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity or debt securities registered under the Securities Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new requirements for audit committees, including independence, expertise, and responsibilities; (ii) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) new standards for auditors and regulation of audits; (iv) increased disclosure and reporting obligations for the reporting company and their directors and executive officers; and (v) new and increased civil and criminal penalties for violations of the securities laws. Many of the provisions became effe ctive immediately while other provisions become effective over a period of 30 to 270 days and are subject to rulemaking by the SEC. Although there will be modest additional expenses incurred in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such compliance will have a material impact on our results of operations or financial condition.

As a result of widespread publicity regarding alleged conflicts of interest and lack of objectivity in the activities of research departments of broker-dealer firms, major changes have been mandated by the NYSE and NASD in the rules regarding compensation of analysts, content of research reports and relationships of the research department to other activities such as corporate finance and investment banking. Under the Sarbanes-Oxley Act of 2002, the SEC is required to undertake a further evaluation of this area and may propose additional changes that could substantially affect the conduct and activities of research departments. The Company believes that it is in compliance with all existing rules. However, the application of these rules and further changes that may be imposed by regulators could adversely affect the effectiveness and value of research activities at broker-dealers.

The Company owns a 610,000 square foot headquarters complex in St. Petersburg, FL (three mid-rise office buildings, a bank and trust headquarters building, and two five deck parking garages). The complex covers approximately fifty-five acres, and the Company has the ability to build up to another 753,000 square feet on this site. The Company has begun the construction of a fourth mid-rise office building, which is expected to be ready for occupancy in December 2003. The Company also leases 80,000 square feet in a nearby office building, and an additional 30,000 square feet in another nearby facility. The employees in these leased facilities will move to the fourth building upon its completion and the leases terminate at that time. In addition, the Company owns a 45,000 square foot, eight story building in Detroit, Michigan and leases 20,000 square feet in a building adjacent to that building. With the exception of a Company-owned RJA branch office buildin g in Crystal River, FL, RJA branches are leased with various expiration dates through 2008. RJ Ltd. leases premises for main offices in Vancouver, Calgary, and Toronto and for branch offices throughout Canada. These leases have various expiration dates through 2013. RJ Ltd. does not own any land or buildings. The RJFS Investment Management division headquarters office in Atlanta and Raymond James Trust Company West facility in Tacoma are also under lease. See Note 10 to Consolidated Financial Statements for further information regarding the Company's leases.

Leases for branch offices of RJFS and the Independent Financial Services Business of RJ Ltd. are the responsibility of the respective independent contractor registered representatives.

The Company is a defendant or co-defendant in various lawsuits and arbitrations incidental to its securities business. Like others in the retail securities industry, during the past two years the Company has experienced a significant increase in the number of claims seeking recovery due to portfolio losses experienced in the past thirty months.

In September 2001, RJA was sued in the U.S. District Court for the Southern District of Florida by the Seminole Tribe of Florida for millions of dollars in losses experienced in their securities accounts during a period of dramatic market declines. In June 2002, the Court ruled that the dispute should be resolved by arbitration in accordance with the terms of the Raymond James customer agreement, and the appeal of the Tribe from that ruling was dismissed by the U.S. Court of Appeals for the 11th Circuit in October 2002. The Seminole Tribe has not filed an arbitration claim to date, although it is anticipated that they will pursue this claim in arbitration or in further court proceedings.

In September, 2002 RJFS was sued in the U.S. District Court in Rhode Island by a company which claimed that $12.5 million entrusted by it to an account in that office had been misappropriated by the account holder and an RJFS Financial Advisor. The plaintiff had no account with RJFS, and in its complaint acknowledges that it consented to moving the funds from the account. RJFS has moved to dismiss the complaint and is vigorously contesting the claim. The Securities and Exchange Commission has filed suit in the U.S. District Court in Rhode Island against the principals of this account and the former RJFS Financial Advisor, and is conducting an investigation into the activities of RJFS in connection with the account.

The Company is contesting the allegations in these and other cases and believes that there are meritorious defenses in each of these lawsuits. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. In the opinion of the Company's management, based in part on outside legal counsel, and after consideration of amounts provided for in the accompanying consolidated financial statements with respect to these matters, ultimate resolution of these matters will not have a material adverse impact on the Company's financial position or results of operations with the exception of the matter noted below which is in its initial stages.

     None.

The Company's common stock is traded on the NYSE under the symbol "RJF". The following table sets forth for the periods indicated the high and low trades for the common stock.

Since 1985 when the Company initiated payment of a cash dividend, there have been 19 increases in the cash dividend rate, including seven in the form of stock splits and stock dividends. Quarterly dividends are disclosed in Item 8.

The payment of dividends on the Company's common stock is subject to the availability of funds from the Company's subsidiaries, including the broker-dealer subsidiaries which may be subject to restrictions under the net capital rules of the SEC, NYSE and the IDA and RJBank which may be subject to restrictions by federal banking agencies. Such restrictions have never become applicable with respect to the Company's dividend payments. (See Notes 7 and 13 of the Notes to Consolidated Financial Statements.)

At December 6, 2002 there were approximately 12,000 holders of the Company's common stock.

Business Environment

The U.S. economy remained generally sluggish throughout fiscal 2002. The equity market was already well into a slower period following declines in the technology and "dot com" equities when the events of September 11, 2001 shook the country's and the world's sense of well-being. These events, followed by the announcements by the likes of Enron and Worldcom, eroded investor confidence, particularly that of individual investors. Further discoveries of less than desirable accounting treatments and unethical management, ongoing investigations, continued market uncertainty and loan defaults have continued to plague the marketplace and resulted in not only a volatile and declining equity market but also in weaker credit markets. The U.S. Federal Reserve lowered the overnight interest rate three times during the fiscal year (following eight rate reductions in the first three quarters of calendar 2001), in an attempt to stimulate some economic recovery. While this may have helped the housing market and, combined with auto manufacturer incentives, spurred auto sales, it had not stimulated a resurgence of the equity markets by fiscal year end. This is evidenced by the fact the Dow Jones Industrial Average had its worst September performance in 65 years and its worst quarterly showing since 1987.

Results of Operations

Although 2002 revenues were the third highest in the Company's history, they also marked the second consecutive year of decline as poor equity markets continued. Revenues of $1,515,923,000 were down 9% from the prior year, with the decline in interest revenue accounting for more than all of this difference. Net income declined 18%, but only 10% when the prior year is adjusted to remove the positive $8.7 million impact of the reversal of the excess reserve for the Corporex litigation. Fiscal 2001's revenues were down 2% from fiscal 2000 and net income declined 23% (36% excluding the effects of the Corporex litigation reserve). The correlation of the decrease in revenues with the decrease in earnings in the current year reflects a combination of variable expenses and the Company's adjustments to the poor market environment through improved cost control efforts.

The Capital Markets segment turned in a strong performance in 2002 despite the generally poor equity market conditions. Institutional commissions increased 14% in fiscal 2002 over 2001, following an increase of 30% in fiscal 2001 over 2000. Two-thirds of these increases were related to the sales of fixed income products. In addition to the increased institutional sales, investment banking results improved in 2002 over the level of the prior two years. This improvement was due to an increased number of public offerings, particularly during the spring of 2002, and increases in private placement fees in 2002. The number of U.S. lead-managed and co-managed underwritings, the vast majority of which were equity-related offerings, and the dollar volume of these transactions were as follows: 2002 - 50 new issues for $6.9 billion; 2001 - 25 new issues for $3.7 billion; and 2000 - 23 new issues for $3.6 billion. Merger and acquisition fees include $7.5 million from RJ Ltd. in fiscal 2002 and $ 6.5 million in fiscal 2001, accounting for most of the increase over fiscal 2000. The third significant component of this segment's revenues is trading profits, which remained strong. Throughout this period, trading results in fixed income products represented the largest component of this line item.

The Asset Management segment revenues, consisting predominantly of investment advisory fees, have been negatively impacted by the decline in equity markets since the majority of managed assets are equities. The Company's primary investment advisor, Eagle Asset Management, has had strong investment performance, with most of the retail objectives outperforming their benchmark averages during the last three years and institutional results currently ranking in the top decile of equivalent managers. The Company's mutual fund management company, Heritage Asset Management, has four funds that have received a four or five star overall Morningstar rating. Unfortunately, the declining equity market has outweighed the relatively strong performance and positive sales results. Investment advisory fees were flat between fiscal 2001 and fiscal 2000 after several years of benefiting from overall asset appreciation.

Interest income represents over 95% of RJBank's revenue. Interest rates have declined from the high point during the three year period in the quarter ended December 2000, when RJBank was earning an average rate of 7.3%, to average rates ranging from 3.8% to 3.3 % during fiscal 2002. Average assets, consisting mainly of mortgage backed securities, purchased whole loan pools, and mortgage, consumer and commercial loans, have increased from $674 million in fiscal 2000 to $806 million in fiscal 2001 and to $877 million in fiscal 2002. As RJBank maintains a substantially duration-matched balance sheet, interest rates on the expense side have also declined, from an average rate of 5.7% in December 2000 - yielding a 1.6% spread - to average rates ranging from 2.6% to 1.6% during fiscal 2002. Spreads went as low as 1.2% during periods of rapidly declining interest rates but have recovered and were an average of 1.5% for fiscal 2002, a spread consistent with the previous two years.

The "Other" segment consists of the securities lending business, the Company's joint ventures in emerging markets and certain items not attributable to an existing or specific segment of business operations, such as the Corporex litigation. The Company does predominantly "matched book" Stock Loan/Stock Borrow business. Interest revenues and related expense in this business are down both due to lower rates and lower balances, the latter due to the weak equity markets.

RJ Ltd., which the Company purchased in January of 2001, accounts for expenses of $84 million in fiscal 2002 and $65 million in fiscal 2001.

Commission expense generally fluctuates in proportion to commission income. The increase in non-commission compensation expense between fiscal 2001 and 2002 is almost entirely attributable to including a full twelve months of RJ Ltd. vs. nine months in fiscal 2001 coupled with increased incentive compensation earned by capital markets professionals, both in the equity and fixed income departments. These increases were somewhat offset by cost control efforts in the RJA operations departments where headcount has declined from its high of 1,725 in March 2001 to 1,612 in September 2002, and in retail where branch support personnel count was reduced in branches that have been unable to maintain historic production levels.

The increase in non-commission compensation expense between fiscal 2000 and 2001 was a combination of the purchase of RJ Ltd., adding $16 million, and increases in RJA as capital markets, retail and operations reached their peak in the number of personnel during 2001 before beginning to scale back due to market conditions. Beginning in fiscal 2003 the Company will expense stock options in accordance with SFAS 123 "Accounting for Stock-based Compensation", which is expected to negatively impact earnings. The Financial Accounting Standards Board has a proposal outstanding which will provide additional transition alternatives to companies adopting SFAS 123. The Company has evaluated the alternatives proposed and if the proposal is enacted in its current form, the Company will elect the alternative to apply the fair value method to all awards granted after the beginning of fiscal 2003 and to the unvested portion of all outstanding previous awards. Had this policy been in effect in fiscal 2 002 the impact would have resulted in a reduction of net income of approximately $4 million.

Throughout this period there continued to be significant efforts to improve and support our information processing and to further automate processes. The effect of these efforts is reflected in the increased communications and information processing expenses. In addition, communications and information processing expense includes write-downs of our investment in CSS (our software joint venture in Colorado) as we converted to the equity method of accounting this year due to the increase in the Company's ownership percentage. These efforts affect all segments of the Company's business, but retail in particular, as it has the largest transaction volume and is therefore allocated the largest percentage of processing expenses.

Due to the current market conditions there has been a renewed emphasis on cost control, particularly with respect to travel costs, advertising and other business development expenses.

Year to year comparisons of "other" expense are distorted by the large addition to reserves for the Corporex judgment in fiscal 2000, of which $16 million was subsequently reversed in fiscal 2001 when the case was settled. Fiscal 2002 "other" expense is up $18 million, excluding the prior year reversal, substantially all related to additional legal costs and reserves related to the retail segment, including the adverse resolution of certain recruiting claims. The number and magnitude of client claims has increased dramatically in the current negative equity market environment, including three significant matters described in Part 1 under Legal Matters.

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (see Summary of Significant Accounting Policies in the consolidated financial statements). The Company believes that of its significant accounting policies, those described below involve a high degree of judgment and complexity. These critical accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the consolidated financial statements. Therefore, understanding these policies is important in understanding the reported results of operations and the financial position of the Company.

Substantially all financial instruments are reflected in the consolidated financial statements at fair value or amounts that approximate fair value, these include: cash, cash equivalents, and securities purchased under agreements to resell; deposits with clearing organizations; securities owned; and securities sold but not yet purchased. Unrealized gains and losses related to these financial instruments are reflected in net earnings or other comprehensive income in accordance with FASB 115, depending on the underlying purpose of the instrument. Where available, the Company uses prices from independent sources such as listed market prices, or broker or dealer price quotations. Fair values for certain derivative contracts are derived from pricing models that consider current market and contractual prices for the underlying financial instruments or commodities, as well as time value and yield curve or volatility factors underlying the positions. In addition, even where the value of a secur ity is derived from an independent market price or broker or dealer quote, certain assumptions may be required to determine the fair value. For instance, the Company generally assumes that the size of positions in securities that the Company holds would not be large enough to affect the quoted price of the securities if the Company were to sell them, and that any such sale would happen in an orderly manner. However, these assumptions may be incorrect and the actual value realized upon disposition could be different from the current carrying value.

Intangible assets consist predominantly of goodwill related to the acquisitions of Roney & Co. and Goepel McDermid, Inc. (now called RJ Ltd). This goodwill, totaling $63 million, was allocated to the reporting units within the retail and capital markets segments pursuant to SFAS No. 142. Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," indefinite-life intangible assets and goodwill are not amortized.

The Company reviews its goodwill in order to determine whether its value is impaired on at least an annual basis. Goodwill is impaired when the carrying amount of the reporting unit exceeds the implied fair value of the reporting unit. In estimating the fair value of the reporting unit, the Company uses valuation techniques based on multiples of revenues, earnings, book value and discounted cash flows similar to models employed in analyzing the purchase price of an acquisition target. If the value of the goodwill is impaired, the difference between the value of the goodwill reflected on the financial statements and its current fair value is recognized as an expense in the period in which the impairment occurs. See further discussion in "Effects of recently issued accounting standards".

The Company records reserves related to legal proceedings in "other payables". The determination of these reserve amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client's account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee of the Company; previous results in similar cases; and legal precedents and case law. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions of management in determining the estimates of reserves may be incorrect and the actual disposition of a legal proceeding could be greater or less than the reserve amount.

The Company also records reserves or allowances for doubtful accounts related to client and Financial Advisor receivables. Client loans are collateralized by securities, real estate or other property. Reserves at RJBank are established and reviewed in accordance with banking regulations. Client loans at the broker-dealers are collateralized by securities; however, if there is a decline in the value of the collateral and the Company cannot obtain more collateral or collect on the loan, a reserve is established. The Company also makes loans or pays advances to Financial Advisors. Reserves are established on these receivables if the Financial Advisor is no longer associated with the Company and the receivable has not been promptly repaid or if it is determined that it is probable the amount will not be collected.

Net cash provided by operating activities during fiscal 2002 was approximately $54 million. Cash was provided by decreased stock borrow balances exceeding decreased stock loan balances, decreased balances in the client margin accounts, and increased client interest balances, and the fluctuations in various other asset and liability accounts net of increased segregated cash and cash equivalents.

Investing activities required $12 million during fiscal 2002. The additions to fixed assets consumed $26 million; $5.6 million for the construction of the parking garage, $2 million to date toward the construction of Tower IV and the remainder for the purchase of computers, office furniture and equipment. Net purchases, sales and maturations of investments provided $14 million during the year.

Financing activities used $28 million, the result of the payment of cash dividends net of the exercise of stock options and employee stock purchases, and the net repayment on borrowings.

The Company has loans payable consisting primarily of a $37.1 million mortgage on its headquarters office complex, $60 million in Federal Home Loan Bank advances at RJBank and a $50 million three year term loan at RJF. On October 21, 2002 the term loan was renewed for another three years and increased to $60 million. On December 13, 2002, the Company refinanced the mortgage through a twenty year, $75 mortgage to be taken down in two draws; the initial $48 million drawn on December 13, 2002 and the remaining $27 million upon the completion of the fourth headquarters building, projected to be January 2004. In addition, RJF has a $100 million line of credit and RJ Ltd. has a CDN $40 million line of credit. RJA has uncommitted bank lines of credit aggregating $380 million with commercial banks.

The Company has committed a total of $31 million, ranging in amount from $500,000 to $1,500,000, to thirty-two different independent venture capital or private equity partnerships. As of September 27, 2002, $20 million has been invested by the Company.

Management has been authorized by the Board of Directors to repurchase its common stock at their discretion for general corporate purposes. There is no formal stock repurchase plan at this time. As of September 27, 2002, the Board has authorized the repurchase of 2,000,000 shares.

The Company's broker-dealer subsidiaries are subject to requirements of the SEC and the Investment Dealers Association of Canada ("IDA") relating to liquidity and capital standards. The domestic broker-dealer subsidiaries of the Company are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. RJA, a member firm of the New York Stock Exchange, Inc. ("NYSE"), is also subject to the rules of the NYSE, whose requirements are substantially the same. Rule 15c3-1 requires that aggregate indebtedness, as defined, not exceed fifteen times net capital, as defined. Rule 15c3-1 also provides for an "alternative net capital requirement", which RJA has elected. It requires that minimum net capital, as defined, be equal to the greater of $250,000 or two percent of Aggregate Debit Items arising from client transactions. The NYSE may require a member firm to reduce its business if its net capital is less than four perc ent of Aggregate Debit items and may prohibit a member firm from expanding its business and declaring cash dividends if its net capital is less than five percent of Aggregate Debit items.

RJ Ltd. is subject to the Minimum Capital Rule (By-Law No. 17 of the IDA) and the Early Warning System (By-Law No. 30 of the IDA). The Minimum Capital Rule requires that every member shall have and maintain at all times Risk Adjusted Capital greater than zero calculated in accordance with Form 1 (Joint Regulatory Financial Questionnaire and Report) and with such requirements as the Board of Directors of the IDA may from time to time prescribe. Insufficient Risk Adjusted Capital my result in suspension from membership in the stock exchanges or the IDA. (See Note 13 to Consolidated Financial Statements).

The Early Warning System is designed to provide advance warning that a member firm is encountering financial difficulties. This system imposes certain sanctions on members who are designated in Early Warning level 1 or level 2 according to its capital profitability and liquidity position from time to time and frequency of designation or at the discretion of the IDA. Restrictions on business activities and capital transactions, early filing requirements, and mandated corrective measures are sanctions that may be imposed as part of the Early Warning System. RJ Ltd. was not in Early Warning level 1 or level 2 during fiscal 2002 or 2001.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and that certain intangible assets acquired in a business combination shall be recognized as assets apart from goodwill. SFAS 142 requires goodwill to be tested for impairment at least annually, as well as under certain circumstances, and written down when impaired, rather than being amortized as previous standards required. Furthermore, SFAS 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. SFAS 142 is effectiv e for fiscal years beginning after December 15, 2001; however the Company elected to early-adopt the standard as of the beginning of fiscal 2002. As a result, the Company ceased all goodwill amortization and therefore did not recognize $4.7 million of goodwill amortization expense that would have been recognized ratably during 2002 under the previous accounting standard.

The following table presents the impact of SFAS 142 on net income and net income per share had the standard been in effect for the fiscal years ended September 28, 2001 and September 29, 2000 (in 000's, except per share data):

In accordance with the requirements of SFAS 142 the Company completed its transitional impairment testing and determined that there is no indication of impairment as of the date of adoption. The Company will be required to perform goodwill impairment tests on at least an annual basis. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

As of September 27, 2002 and September 28, 2001, total purchased intangible assets, other than goodwill, consisted only of a noncompete agreement with an original gross carrying amount of $3 million arising from the acquisition of RJ Ltd.. The noncompete agreement is included in other assets and is being amortized over a two-year period and will be fully amortized at the end of the first quarter of fiscal 2003, resulting in an expense of $375,000 per quarter until that time.

Risks are an inherent part of the Company's business and activities. Management of these risks is critical to the Company's fiscal soundness and profitability. Risk management at the Company is a multi-faceted process that requires communication, judgment and knowledge of financial products and markets. The Company's senior management takes an active role in the risk management process and requires specific administrative and business functions to assist in the identification, assessment, monitoring and control of various risks. The principal risks involved in the Company's business activities are market, credit, operational, regulatory and legal.

The potential for changes in the value of financial instruments owned by the Company is referred to as "market risk". Market risk is inherent to both derivative and non-derivative financial instruments and, accordingly, the scope of the Company's market risk management procedures extends beyond derivatives to include financial instruments deemed sensitive to market risk.

The tables above primarily represent trading inventories associated with the Company's customer facilitation, market-making activities and RJBank investments, and include net long and short fair values, which is consistent with the way risk exposure is managed. See Notes 2 and 3 of the Notes to Consolidated Financial Statements for the related gross long and short fair values of financial instruments owned and investments.

The Company trades tax exempt and taxable debt obligations including: U.S. Treasury bills, notes, and bonds; U.S. Government agency and municipal notes and bonds; bank certificates of deposit; mortgage backed securities; and corporate obligations. The Company is also an active market-maker in over-the-counter equity securities. In connection with these activities, the Company maintains inventories in order to ensure availability and to facilitate customer transactions. The Company also invests for its own proprietary equity investment account and takes interest rate swap and Eurodollar futures positions.

Changes in value of the Company's trading and investment inventories may result from fluctuations in interest rates, credit ratings, equity prices and the correlation among these factors, along with the level of volatility.

The Company manages its trading inventories by product type and has established trading divisions that have responsibility for each product type. The trading inventories are managed with a view toward facilitating client transactions, considering the risk and profitability of each inventory.

The Company's primary method of controlling risk in its trading and investment inventories is through the use of limits. As of September 27, 2002, the absolute fixed income inventory limits were $1,307,000,000 and absolute equity limits were $65,300,000.  The average absolute fixed income inventory balance was $443,957,000 and the average absolute equity inventory balance was $15,834,000 during the year ended September 27, 2002. Position limits in trading inventory accounts are established and monitored on a daily basis. Consolidated position and exposure reports are prepared and distributed to senior management. Limit violations are carefully monitored. Management monitors inventory levels and results of the trading groups, as well as inventory aging, pricing, concentration and securities ratings. Mark to Market prices are obtained from an external vendor and are compared to internal valuations. Summarized results are reviewed and a valuation adjustment is determined by management to record the instrument at estimated fair value.

The Company is exposed to interest rate risk as a result of maintaining inventories of interest-rate-sensitive financial instruments and from changes in the interest rates on its interest-earning assets (including client loans, stock borrow activities, investments, and inventories) and its funding sources (including client cash balances, stock lending activities, and bank borrowings), which finance these assets. The collateral underlying client (margin) loans, interest rate swaps and stock borrow/loan activities at the broker-dealer is repriced daily, thus there are no unrecorded gains or losses in value. Interest rates on client balances and stock borrow and lending activities produce a positive spread to the Company, with the rates generally fluctuating in parallel. However, in times of rapid changes in interest rates the spreads may be impacted.

The Company manages its inventory exposure to interest rate risk by setting and monitoring limits and, where feasible, economically hedging with offsetting positions in securities with similar interest rate risk characteristics. While a significant portion of the Company's securities inventories have contractual maturities in excess of five years, these inventories, on average, turn over several times per year.

The Company utilizes interest rate swap contracts to economically hedge a significant portion of its debt inventory. These interest rate swap contracts and debt inventory are recorded at fair value with the changes in fair value recognized in earnings. In addition, interest rate swap contracts are used at RJBank to hedge against the effect of fluctuating interest rates on the variable cash flow paid on the deposit base which serves as the funding source for loans. RJBank assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. RJBank maintains risk management control systems to monitor interest rate cash flow risk attributable to both RJBank's outstanding debt obligations as well as RJBank's offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on RJBank's future cash flows. RJBank accounts for its swap activity as cash flow hedges under SFAS 133 and monitors this activity by reviewing effectiveness of the hedges in accordance with criteria of SFAS 133. The effective portion of the gain or loss is accumulated in other comprehensive income and the gain or loss on the ineffective portion is recognized in earnings immediately.

The Company also conducts an interest rate swap business with its institutional clients and takes trading positions to facilitate this business. The interest rate swap activities, aside from the RJBank activity, have limits which are established and monitored through daily reports to the accounting department and weekly reports circulated to senior management of RJA and RJF. These reports reflect total market exposure of all open positions and the market value of outstanding positions with respect to each counter-party. See Note 8 to the consolidated financial statements for further discussion.

For interest rate swap contracts the Company uses notional (contract) amounts, daily mark to markets, as well as limited value-at-risk analysis and stress testing to measure and assess risks associated with this derivative and related cash activity. Notional amounts are not included on the Company's consolidated statement of financial condition as these contract amounts are not actually paid or received. Notional amounts allow the Company to calculate the cash flows to be exchanged and are not necessarily indicative of overall market risk. The value-at-risk approach is used to derive a quantitative measure specifically for market risks under normal market conditions. For a given portfolio, value-at-risk measures the possible future loss (in terms of market value) which, under normal market conditions, will not be exceeded within a defined probability in a certain period. Stress testing supplements other analyses of market risk as it helps to determine the possible effects of potential ly extreme market movements on the market value of the Company's assets.

The Company is exposed to equity price risk as a consequence of making markets in equity securities. The Company's activities as a dealer are client-driven, with the objective of meeting clients' needs while earning a trading profit to compensate for the risk associated with carrying inventory. The Company attempts to reduce the risk of loss inherent in its inventory of equity securities by monitoring those security positions constantly throughout each day and establishing position limits. The Company's equity securities inventories are repriced on a regular basis and there are no unrecorded gains or losses.

The Company is engaged in various trading and brokerage activities whose counterparties primarily include broker-dealers, banks and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the credit worthiness of the counterparty and/or the issuer of the instrument. The Company manages this risk by imposing and monitoring individual and aggregate position limits for each counterparty, monitoring trading counterparties, conducting regular credit reviews of financial counterparties, reviewing security concentrations, holding and marking to market collateral on certain transactions and conducting business through clearing organizations, which guarantee performance.

The Company's client activities involve the execution, settlement, and financing of various transactions on behalf of its clients. Client activities are transacted on either a cash or margin basis. Credit exposure associated with the Company's retail client business consists primarily of customer margin accounts, which are monitored daily and are collateralized. When clients execute a purchase on margin the Company is at some risk that the client will renege on the trade. If this occurs the Company may have to liquidate the position at a loss. However, for over three quarters of the retail purchase transactions clients have cash in the account before the trade is executed. The Company monitors exposure to industry sectors and individual securities and performs analysis on a regular basis in connection with its margin lending activities. The Company adjusts its margin requirements if it believes its risk exposure is not appropriate based on market conditions.

In addition, RJBank offers a variety of loan products including mortgage, commercial real estate, and consumer loans which are collateralized and corporate loans for which the borrower is carefully evaluated and monitored. RJBank's policy is to require customers to provide collateral prior to the disbursement of approved loans. The amount of collateral obtained, if it is deemed necessary by RJBank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, real estate, and income-producing commercial properties. By using derivative financial instruments to hedge exposures to changes in interest rates, RJBank exposes itself to credit risk. RJBank minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties whose credit rating is investment grade.

The Company is subject to concentration risk if it holds large positions, extends large loans to, or has large commitments with a single counterparty, borrower, or group of similar counterparties or borrowers (e.g. in the same industry). Securities purchased under agreement to resell represent approximately 35% of the Company's total assets at September 27, 2002 and consist entirely of securities issued by the U.S. government. Receivables from and payables to clients and stock borrow and lending activities are conducted with a large number of clients and counterparties and potential concentration is carefully monitored. Inventory and investment positions taken and commitments made, including underwritings, may involve exposure to individual issuers and businesses. The Company seeks to limit this risk through careful review of the underlying business and the use of limits established by senior management, taking into consideration factors including the financial strength of the company, the size of the position or commitment, the expected duration of the position or commitment and other positions or commitments outstanding.

The Company is the lessor in two leveraged commercial aircraft transactions with two major domestic airlines (Continental and Delta). The Company's ability to realize its expected return is dependent upon the airlines' ability to fulfill its lease obligations. In the unlikely event that the airlines default on their lease commitments and the Company is unable to re-lease or sell the plane with adequate terms the Company would suffer a loss of some or all of its investment. As of September 27, 2002, it is management's opinion that the value of this investment is not impaired.

Operational risk generally refers to the risk of loss resulting from the Company's operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in the Company's technology or financial operating systems and inadequacies or breaches in the company's control processes. The Company operates different businesses in diverse markets and is reliant on the ability of its employees and systems to process a large number of transactions. These risks are less direct than credit and market risk, but managing them is critical, particularly in a rapidly changing environment with increasing transaction volumes. In the event of a breakdown or improper operation of systems or improper action by employees, the Company could suffer financial loss, regulatory sanctions and damage to its reputation. Business continuity plans exist for critical systems, and redundancies are built into the systems as deemed appropriate. In order to mitigate an d control operational risk, the Company has developed and continues to enhance specific policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization and within such departments as Accounting, Operations, Information Technology, Legal, Compliance and Internal Audit. These control mechanisms attempt to ensure that operational policies and procedures are being followed and that the Company's various businesses are operating within established corporate policies and limits.

A Compliance and Standards Committee comprised of senior executives meets monthly to consider policy issues. The Committee reviews material customer complaints and litigation, as well as issues in operating departments, for the purpose of identifying issues that present risk exposure to customers or to the Company. The Committee adopts policies to deal with these issues, which are then disseminated throughout the Company.

The Company has established a Quality of Markets Committee that meets regularly to review execution of customer orders by the OTC, Option and Listed trading departments. This Committee is comprised of representatives from the Retail firms, Correspondent services, Compliance and Legal and is under the direction of a senior officer of RJF. This Committee reviews reports from OTC, Option and Listed trading departments and recommends action for improvement when necessary.

Legal risk includes the risk of large numbers of retail customer claims, a potentially sizable adverse legal judgement and of non-compliance with applicable legal and regulatory requirements. The Company is generally subject to extensive regulation in the different jurisdictions in which it conducts business. The Company has designated an Anti-money Laundering Compliance Officer who has instituted procedures to assure compliance with regulations adopted under the U.S.A. Patriot Act. The Company has comprehensive procedures addressing issues such as regulatory capital requirements, sales and trading practices, use of and safekeeping of customer funds, credit granting, collection activities, money-laundering and record keeping. The Company acts as an underwriter or selling group member in both equity and fixed income product offerings. Particularly when acting as lead or co-lead manager, the Company has legal exposure. To manage this exposure, a committee of senior executives review s proposed underwriting commitments to assess the quality of the offering and the adequacy of due diligence investigation.

The compliance departments are responsible for monitoring compliance with regulatory requirements at the respective branch offices of each broker-dealer. In addition, there are compliance officers concentrating on fixed income, equity capital markets and asset management who focus on the regulations specific to those businesses.

The Company has experienced an increase in the number of retail claims as a result of the downturn in the equity markets. While these claims may not individually be for large amounts and may not be the result of any wrongdoing, the Company does, at a minimum, incur costs associated with investigating and possibly defending against such claims. See further discussion on the Company's reserve policy under "Critical Accounting Policies"; see also "Legal Proceedings".

The Company's assets are primarily liquid in nature and are not significantly affected by inflation. Management believes that the replacement cost of property and equipment would not materially affect operating results. However, the rate of inflation affects the Company's expenses, including employee compensation and benefits, communications and occupancy, which may not be readily recoverable through charges for services provided by the Company.

From time to time, the Company may publish "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, or make oral statements that constitute forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products, anticipated market performance, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. These risks and uncertainties, many of which are beyond the Company's control, incl ude, but are not limited to: (i) transaction volume in the securities markets; (ii) the volatility of the securities markets; (iii) fluctuations in interest rates; (iv) changes in regulatory requirements which could affect the cost of doing business or the profitability of certain segments of the Company's business; (v) fluctuations in currency rates; (vi) general economic conditions, both domestic and international; (vii) changes in the rate of inflation and related impact on securities markets; (viii) competition from existing financial institutions and other new participants in the securities markets; (ix) legal developments affecting the litigation experience of the Company or the securities industry generally; (x) changes in federal and state tax laws which could affect the popularity of products sold by the Company; (xi) natural disasters; (xii) political and military events which would affect the United States of America or world markets, which could disrupt the Company's communications and securities processing capabilities or o ther operations; and (xiii) changes in investor confidence which could adversely affect the sale of the Company's products and services. The Company does not undertake any obligation to publicly update or revise any forward-looking statements.

1. Financial statements, schedules and exhibits filed under this item are