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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950137-00-005252.txt : 20001218
<SEC-HEADER>0000950137-00-005252.hdr.sgml : 20001218
ACCESSION NUMBER:		0000950137-00-005252
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20001031
FILED AS OF DATE:		20001215

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			H&R BLOCK INC
		CENTRAL INDEX KEY:			0000012659
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PERSONAL SERVICES [7200]
		IRS NUMBER:				440607856
		STATE OF INCORPORATION:			MO
		FISCAL YEAR END:			0430

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	001-06089
		FILM NUMBER:		790053

	BUSINESS ADDRESS:	
		STREET 1:		4400 MAIN ST
		CITY:			KANSAS CITY
		STATE:			MO
		ZIP:			64111
		BUSINESS PHONE:		8167536900

	MAIL ADDRESS:	
		STREET 1:		4410 MAIN STREET
		CITY:			KANSAS CITY
		STATE:			MO
		ZIP:			64111
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c59093e10-q.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>

<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-Q

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      FOR THE TRANSITION PERIOD FROM ______________ TO ______________


                          COMMISSION FILE NUMBER 1-6089

                                 H&R BLOCK, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              MISSOURI                                      44-0607856
  (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)

                                4400 MAIN STREET
                           KANSAS CITY, MISSOURI 64111
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (816) 753-6900
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


Yes   X     No
    -----      -----


The number of shares outstanding of the registrant's Common Stock, without par
value, at December 1, 2000 was 91,283,332 shares.


<PAGE>   2


                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
PART I   Financial Information

         Consolidated Balance Sheets
           October 31, 2000 and April 30, 2000 .............................  1

         Consolidated Statements of Operations
           Three Months Ended October 31, 2000 and 1999 ....................  2
           Six Months Ended October 31, 2000 and 1999 ......................  3

         Consolidated Statements of Cash Flows
           Six Months Ended October 31, 2000 and 1999 ......................  4

         Notes to Consolidated Financial Statements ........................  5

         Management's Discussion and Analysis of Financial
           Condition and Results of Operations.............................. 10

         Quantitative and Qualitative Disclosures about Market Risk......... 19

PART II  Other Information.................................................. 20

SIGNATURES.................................................................  23


<PAGE>   3


                                 H&R BLOCK, INC.
                           CONSOLIDATED BALANCE SHEETS
                   AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS

<TABLE>
<CAPTION>
                                                                                       OCTOBER 31,     APRIL 30,
                                                                                          2000           2000
                                                                                          ----           ----
                              ASSETS                                                   (UNAUDITED)     (AUDITED)
<S>                                                                                 <C>            <C>
CURRENT ASSETS
    Cash and cash equivalents                                                       $     247,679  $     379,901
    Marketable securities - available-for-sale                                             16,022         16,966
    Marketable securities - trading                                                        39,060         45,403
    Receivables from customers, brokers, dealers and clearing organ-
       izations, less allowance for doubtful accounts of $840 and $759                  2,640,656      2,857,379
    Receivables, less allowance for doubtful accounts of $46,075
       and $49,602                                                                        354,207        434,722
    Prepaid expenses and other current assets                                             136,553        129,172
                                                                                    -------------  -------------
       TOTAL CURRENT ASSETS                                                             3,434,177      3,863,543

INVESTMENTS AND OTHER ASSETS
    Investments in available-for-sale marketable securities                               224,554        176,395
    Excess of cost over fair value of net tangible assets acquired,
       net of amortization                                                              1,070,051      1,095,074
    Other                                                                                 331,311        303,672
                                                                                    -------------  -------------
                                                                                        1,625,916      1,575,141
PROPERTY AND EQUIPMENT, at cost less accumulated
    depreciation and amortization                                                         248,407        260,666
                                                                                    -------------  -------------
                                                                                    $   5,308,500  $   5,699,350
                                                                                    =============  =============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes payable                                                                   $     914,692  $     283,797
    Accounts payable to customers, brokers and dealers                                  2,291,963      2,570,200
    Accounts payable, accrued expenses and deposits                                       173,763        222,362
    Accrued salaries, wages and payroll taxes                                              76,261        173,333
    Accrued taxes on earnings                                                              37,112        202,779
    Current portion of long-term debt                                                      43,308         67,978
                                                                                    -------------  -------------
TOTAL CURRENT LIABILITIES                                                               3,537,099      3,520,449

LONG-TERM DEBT                                                                            840,073        872,396
OTHER NONCURRENT LIABILITIES                                                               96,800         87,916

STOCKHOLDERS' EQUITY
    Common stock, no par, stated value $.01 per share                                       1,089          1,089
    Additional paid-in capital                                                            420,003        420,594
    Retained earnings                                                                   1,122,159      1,277,324
    Accumulated other comprehensive income (loss)                                         (34,029)       (26,241)
                                                                                    -------------  -------------
                                                                                        1,509,222      1,672,766
    Less cost of 17,692,214 and 10,937,683 shares of common stock
       in treasury                                                                        674,694        454,177
                                                                                    -------------  -------------
                                                                                          834,528      1,218,589
                                                                                    -------------  -------------
                                                                                    $   5,308,500  $   5,699,350
                                                                                    =============  =============
</TABLE>


                 See Notes to Consolidated Financial Statements

                                       -1-


<PAGE>   4


                                 H&R BLOCK, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                          ------------------
                                                              OCTOBER 31,
                                                              -----------
                                                         2000          1999
                                                         ----          ----
<S>                                                    <C>          <C>
REVENUES
     Service revenues                                  $ 265,934    $ 152,699
     Product revenues                                     54,310       50,049
     Royalties                                             3,997        3,210
     Other                                                13,233        3,988
                                                       ---------    ---------
                                                         337,474      209,946
                                                       ---------    ---------
OPERATING EXPENSES
     Employee compensation and benefits                  172,900      118,306
     Occupancy and equipment                              56,234       47,560
     Interest                                             63,973       23,344
     Depreciation and amortization                        48,685       24,331
     Marketing and advertising                            14,728       14,635
     Supplies, freight and postage                        10,005        8,699
     Bad debt                                              8,733        5,933
     Other                                                51,123       41,932
                                                       ---------    ---------
                                                         426,381      284,740
                                                       ---------    ---------

Operating loss                                           (88,907)     (74,794)

OTHER INCOME
     Investment income, net                                2,536        2,402
     Other, net                                               15          235
                                                       ---------    ---------
                                                           2,551        2,637

Loss before income tax benefit                           (86,356)     (72,157)

Income tax benefit                                       (36,701)     (27,420)
                                                       ---------    ---------

Net loss                                               $ (49,655)   $ (44,737)
                                                       =========    =========


Weighted average number of common shares outstanding      91,403       97,814
                                                       =========    =========

Basic and diluted net loss per share                   $    (.54)   $    (.46)
                                                       =========    =========

Dividends per share                                    $     .30    $    .275
                                                       =========    =========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       -2-



<PAGE>   5


                                 H&R BLOCK, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED
                                                           ----------------
                                                              OCTOBER 31,
                                                              -----------
                                                          2000         1999
                                                          ----         ----
<S>                                                    <C>          <C>
REVENUES
     Service revenues                                  $ 506,098    $ 226,202
     Product revenues                                    108,069       94,241
     Royalties                                             5,158        4,140
     Other                                                22,259        6,923
                                                       ---------    ---------
                                                         641,584      331,506
                                                       ---------    ---------
OPERATING EXPENSES
     Employee compensation and benefits                  319,440      193,658
     Occupancy and equipment                             116,458       88,194
     Interest                                            127,171       34,818
     Depreciation and amortization                        96,142       42,731
     Marketing and advertising                            24,502       19,855
     Supplies, freight and postage                        17,584       12,891
     Bad debt                                             14,254       10,121
     Other                                               107,634       66,495
                                                       ---------    ---------
                                                         823,185      468,763
                                                       ---------    ---------

Operating loss                                          (181,601)    (137,257)

OTHER INCOME
     Investment income, net                                5,255        5,053
     Other, net                                               (3)         250
                                                       ---------    ---------
                                                           5,252        5,303

Loss before income tax benefit                          (176,349)    (131,954)

Income tax benefit                                       (74,948)     (50,143)
                                                       ---------    ---------

Net loss                                               $(101,401)   $ (81,811)
                                                       =========    =========


Weighted average number of common shares outstanding      92,332       97,764
                                                       =========    =========

Basic and diluted net loss per share                   $   (1.10)   $    (.84)
                                                       =========    =========

Dividends per share                                    $    .575    $    .525
                                                       =========    =========
</TABLE>


                 See Notes to Consolidated Financial Statements

                                       -3-


<PAGE>   6


                                 H&R BLOCK, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         UNAUDITED, AMOUNTS IN THOUSANDS

<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED
                                                                            ----------------
                                                                               OCTOBER 31,
                                                                               -----------
                                                                         2000              1999
                                                                         ----              ----
<S>                                                                 <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                        $   (101,401)   $    (81,811)
    Adjustments to reconcile net loss to net cash
          used in operating activities:
       Depreciation and amortization                                      96,142          42,731
       Provision for bad debt                                             14,254          10,121
       Accretion of acquisition liabilities                                5,604           3,633
       Changes in:
          Receivables from customers, brokers, dealers and
              clearing organizations                                     216,723            --
          Receivables                                                      9,904          14,032
          Marketable securities - trading                                  6,343            --
          Prepaid expenses and other current assets                       (8,181)        (69,082)
          Accounts payable to customers, brokers and dealers            (278,237)           --
          Accounts payable, accrued expenses and deposits                (48,599)        (47,986)
          Accrued salaries, wages and payroll taxes                      (97,072)       (136,882)
          Accrued taxes on earnings                                     (175,786)        (98,555)
          Other, net                                                      (1,169)         (7,040)
                                                                    ------------    ------------
    NET CASH USED IN OPERATING ACTIVITIES                               (361,475)       (370,839)
                                                                    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of available-for-sale securities                            (2,432)         (3,987)
    Maturities of available-for-sale securities                           10,090          25,112
    Loan to affiliate                                                       --           (62,627)
    Purchases of property and equipment, net                             (25,647)        (21,306)
    Payments made for business acquisitions, net of cash acquired        (10,659)        (81,550)
    Other, net                                                           (34,395)         (1,421)
                                                                    ------------    ------------
    NET CASH USED IN INVESTING ACTIVITIES                                (63,043)       (145,779)
                                                                    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayments of notes payable                                       (8,197,821)    (25,815,955)
    Proceeds from issuance of notes payable                            8,828,716      26,369,682
    Payments on acquisition debt                                         (63,993)         (3,000)
    Dividends paid                                                       (53,764)        (51,564)
    Payments to acquire treasury shares                                 (222,816)        (32,366)
    Proceeds from stock options exercised                                  1,708          24,325
    Other, net                                                               266             438
                                                                    ------------    ------------
    NET CASH PROVIDED BY FINANCING ACTIVITIES                            292,296         491,560
                                                                    ------------    ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                               (132,222)        (25,058)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                     379,901         193,240
                                                                    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                      $    247,679    $    168,182
                                                                    ============    ============

SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Income taxes paid                                               $     88,836    $     48,956
    Interest paid                                                        118,715          38,373

</TABLE>

                 See Notes to Consolidated Financial Statements

                                       -4-



<PAGE>   7


                                 H&R BLOCK, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               Unaudited, dollars in thousands, except share data

1.   The Consolidated Balance Sheet as of October 31, 2000, the Consolidated
     Statements of Operations for the three and six months ended October 31,
     2000 and 1999, and the Consolidated Statements of Cash Flows for the six
     months ended October 31, 2000 and 1999 have been prepared by the Company,
     without audit. In the opinion of management, all adjustments (which include
     only normal recurring adjustments) necessary to present fairly the
     financial position, results of operations and cash flows at October 31,
     2000 and for all periods presented have been made.

     Reclassifications have been made to prior periods to conform with the
     current year presentation.

     Certain information and footnote disclosures normally included in financial
     statements prepared in accordance with generally accepted accounting
     principles have been condensed or omitted. These consolidated financial
     statements should be read in conjunction with the financial statements and
     notes thereto included in the Company's April 30, 2000 Annual Report to
     Shareholders.

     Operating revenues are seasonal in nature with peak revenues occurring in
     the months of January through April. Thus, the six-month results are not
     indicative of results to be expected for the year.

2.   Receivables consist of the following:

     <TABLE>
     <CAPTION>
                                                  October 31,      April 30,
                                                  -----------      ---------
                                                      2000           2000
                                                      ----           ----
                                                  (Unaudited)      (Audited)
     <S>                                            <C>            <C>
     Mortgage loans held for sale                   $125,256       $163,033
     Business services accounts receivable           159,247        148,109
     Participation in refund anticipation loans       35,764         47,581
     Loans to franchisees                             31,659         24,888
     Other                                            48,356        100,713
                                                    --------       --------
                                                     400,282        484,324
     Allowance for doubtful accounts                  46,075         49,602
                                                    --------       --------
                                                    $354,207       $434,722
                                                    ========       ========
     </TABLE>

3.   The Company files its Federal and state income tax returns on a calendar
     year basis. The Consolidated Statements of Operations reflect the Company's
     current estimates of the effective tax rates expected to be applicable for
     the respective full fiscal years.

4.   Basic and diluted net loss per share is computed using the weighted average
     number of shares outstanding during each period. Diluted net loss per share
     excludes the impact of common stock options outstanding for 12,188,071
     shares and the conversion of 608 shares of preferred stock to common stock,
     as they are antidilutive. The weighted average shares outstanding for



                                      -5-
<PAGE>   8


     the six months ended October 31, 2000 decreased to 92,332,000 from
     97,764,000 last year, due to the purchase of treasury shares by the
     Company primarily during the first three months of fiscal 2001.

5.   During the six months ended October 31, 2000 and 1999, the Company issued
     59,669 and 617,028 shares, respectively, pursuant to provisions for
     exercise of stock options under its stock option plans. In addition, the
     Company issued 475,443 shares of its common stock for an U.S. tax
     operations' major franchise acquisition in the second quarter of fiscal
     2000. The issuance of common stock for the acquisition was treated as a
     noncash investing activity in the Consolidated Statement of Cash Flows for
     the six months ended October 31, 1999. During the six months ended October
     31, 2000, the Company acquired 6,814,200 shares of its common stock at an
     aggregate cost of $222,816. During the six months ended October 31, 1999,
     the Company acquired 721,800 shares of its common stock at an aggregate
     cost of $32,366.

6.   CompuServe Corporation (CompuServe), certain current and former officers
     and directors of CompuServe and the Company have been named as defendants
     in six lawsuits pending before the state and Federal courts in Columbus,
     Ohio. All suits allege similar violations of the Securities Act of 1933
     based on assertions of omissions and misstatements of fact in connection
     with CompuServe's public filings related to its initial public offering in
     April 1996. One state lawsuit brought by the Florida State Board of
     Administration also alleges certain oral omissions and misstatements in
     connection with such offering. Relief sought in the lawsuits is
     unspecified, but includes pleas for rescission and damages. One Federal
     lawsuit names the lead underwriters of CompuServe's initial public offering
     as additional defendants and as representatives of a defendant class
     consisting of all underwriters who participated in such offering. The
     Federal suits were consolidated, the defendants filed a motion to dismiss
     the consolidated suits, the district court stayed all proceedings pending
     the outcome of the state court suits, and the United States Court of
     Appeals for the Sixth Circuit affirmed such stay. The four state court
     lawsuits also allege violations of various state statutes and common law of
     negligent misrepresentation in addition to the 1933 Act claims. The state
     lawsuits were consolidated for discovery purposes and defendants filed a
     motion for summary judgment covering all four state lawsuits. In July 1998,
     the state court certified a plaintiff class of all persons and entities who
     purchased shares of common stock of CompuServe between April 18, 1996 and
     July 16, 1996 pursuant to the initial public offering or on the open
     market, and who were damaged thereby, excluding the named defendants and
     their affiliates. The named plaintiffs in three of the state court cases
     were designated class representatives.

     In July 2000, the class representatives and the defendants in the class
     action pending in state court, by their authorized counsel, entered into a
     Stipulation of Settlement, pursuant to which the defendants will pay a
     gross settlement amount of $9,500 in exchange for dismissal of the class
     action suit and a release of all claims. The court preliminarily approved
     the settlement in August 2000 and notices to the class were mailed and
     published. The fairness hearing relating to the settlement was held on
     November 30, 2000, but the court has not yet issued its ruling. Payment of
     plaintiffs' attorneys' fees and expenses are to be paid out of the gross
     settlement fund. The gross settlement fund will be paid in its entirety by
     the Company's



                                      -6-
<PAGE>   9


     insurance carrier. The Stipulation is not an admission of the validity of
     any claim or any fact alleged by the plaintiffs and defendants continue to
     deny any wrongdoing and any liability. The Stipulation states that the
     defendants consider it desirable to settle to avoid further expense,
     inconvenience, and delay, and put to rest all controversy concerning all
     claims.

     The Florida State Board of Administration has opted out of the settlement
     and that litigation continues separately from the state court class action.

     As a part of the sale of its interest in CompuServe, the Company agreed to
     indemnify WorldCom, Inc. and CompuServe against 80.1% of any losses and
     expenses incurred by them with respect to these lawsuits. In the opinion of
     management, the ultimate resolution of these suits through the agreed upon
     settlement or otherwise will not have a material adverse impact on the
     Company's consolidated financial position or results of operations.

7.   Summarized financial information for Block Financial Corporation, an
     indirect, wholly owned subsidiary of the Company, is presented below.

<TABLE>
<CAPTION>
                                                                                   October 31,        April 30,
                                                                                   -----------        ---------
                                                                                      2000              2000
                                                                                      ----              ----
                                                                                   (Unaudited)        (Audited)
<S>                                                                                <C>              <C>
     Condensed balance sheets:
         Cash and cash equivalents                                                 $  179,972       $  256,823
         Finance receivables, net                                                   2,796,172        3,054,792
         Other assets                                                               1,371,893        1,247,710
                                                                                   ----------       ----------
              Total assets                                                         $4,348,037       $4,559,325
                                                                                   ==========       ==========

         Notes payable                                                             $  914,692       $  283,797
         Long-term debt                                                               745,925          745,600
         Other liabilities                                                          2,467,389        3,304,740
         Stockholder's equity                                                         220,031          225,188
                                                                                   ----------       ----------
              Total liabilities and stockholder's equity                           $4,348,037       $4,559,325
                                                                                   ==========       ==========
</TABLE>


<TABLE>
<CAPTION>
                                                      Three months ended                 Six months ended
                                                      ------------------                 ----------------
                                                          October 31,                       October 31,
                                                          -----------                       -----------
                                                     2000            1999             2000              1999
                                                     ----            ----             ----              ----
<S>                                                <C>          <C>                <C>              <C>
     Condensed statements of operations:
         Revenues                                  $218,964     $   93,106         $  431,291       $  173,824
         Earnings before income taxes                 3,708         13,549              9,762           25,290
         Net earnings (loss)                         (2,244)        12,945             (3,208)          15,136
</TABLE>

8.   The Company sells short FNMA mortgage-backed securities to certain
     broker-dealer counterparties. The position on certain or all of the fixed
     rate mortgages is closed, on standard Public Securities Association (PSA)
     settlement dates, when the Company enters into a forward commitment to sell
     those mortgages or decides to securitize the mortgages. The Company in the
     past had applied hedge accounting treatment to the shorting of FNMA
     mortgage-backed securities; however, these instruments no longer qualify
     for hedge accounting treatment because the Company does not hold the
     mortgage loans on its balance



                                      -7-
<PAGE>   10


     sheet (the asset that was being hedged). These instruments are now carried
     at fair market value and changes in the fair market value are recorded in
     revenues on the income statement instead of being deferred. There are no
     FNMA securities instruments open at October 31, 2000. The contract value
     and market value of the forward commitment at October 31, 2000 were
     $126,000 and $126,082, respectively.

9.   The Company's comprehensive income is comprised of net earnings (loss),
     foreign currency translation adjustments and the change in the net
     unrealized gain or loss on marketable securities. The components of
     comprehensive income (loss) during the three and six months ended October
     31, 2000 and 1999 were:

<TABLE>
<CAPTION>
                                       Three months ended      Six months ended
                                       ------------------      ---------------
                                           October 31,           October 31,
                                           -----------           -----------
                                       2000        1999        2000         1999
                                       ----        ----        ----         ----
<S>                                 <C>         <C>         <C>          <C>
Net loss                            $(49,655)   $(44,737)   $(101,401)   $(81,811)
Change in net unrealized
   gain (loss) on mkt. securities     (5,670)      4,680       (1,613)      5,257
Change in foreign currency
   translation adjustments            (5,017)      3,122       (6,175)      1,830
                                    --------    --------    ---------    --------
Comprehensive income (loss)         $(60,342)   $(36,935)   $(109,189)   $(74,724)
                                    ========    ========    =========    ========
</TABLE>

10.  In September 2000, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards No. 140, "Accounting for
     Transfers and Servicing of Financial Assets and Extinguishments of
     Liabilities" (SFAS 140). SFAS 140 is effective for transfers and servicing
     of financial assets and extinguishments of liabilities occurring after
     March 31, 2001 and is effective for recognition and reclassification of
     collateral and for disclosures relating to securitization transactions and
     collateral for fiscal years ending after December 15, 2000. SFAS 140 is a
     replacement of Statement of Financial Accounting Standards No. 125,
     "Accounting for Transfers and Servicing of Financial Assets and
     Extinguishments of Liabilities" (SFAS 125). SFAS 140 revises the standards
     for accounting for securitizations and other transfers of financial assets
     and collateral and requires certain new disclosures, but carries over most
     of SFAS 125's provisions without reconsideration. The Company has not
     concluded its analysis to determine the effect of SFAS 140 on the
     consolidated financial statements.



                                      -8-
<PAGE>   11


11.  Information concerning the Company's operations by reportable operating
     segments for the three and six months ended October 31, 2000 and 1999 is as
     follows:

<TABLE>
<CAPTION>
                                       Three months ended         Six months ended
                                       ------------------         ----------------
                                           October 31,               October 31,
                                           -----------               -----------
                                        2000         1999         2000         1999
                                        ----         ----         ----         ----
<S>                                  <C>          <C>          <C>          <C>
Revenues:
    U.S. tax operations              $  26,403    $  19,723    $  37,753    $  32,798
    International tax operations        14,899       14,713       19,798       18,781
    Financial services                 216,263       91,503      427,530      170,957
    Business services                   78,267       83,180      154,364      107,359
    Unallocated corporate                1,642          827        2,139        1,611
                                     ---------    ---------    ---------    ---------
                                     $ 337,474    $ 209,946    $ 641,584    $ 331,506
                                     =========    =========    =========    =========

 Earnings (loss) from:
    U.S. tax operations              $ (87,203)   $ (83,663)   $(175,073)   $(154,733)
    International tax operations          (467)      (1,644)      (6,390)      (8,165)
    Financial services                  32,426       20,931       67,366       39,757
    Business services                     (781)      (1,152)      (3,794)      (1,340)
    Unallocated corporate               (6,727)      (3,428)     (11,340)      (6,777)
    Interest exp. acquisition debt     (24,484)      (8,027)     (51,772)     (12,465)
                                     ---------    ---------    ---------    ---------
                                       (87,236)     (76,983)    (181,003)    (143,723)
    Investment income, net               2,536        2,402        5,255        5,053
    Intercompany interest               (1,656)       2,424         (601)       6,716
                                     ---------    ---------    ---------    ---------
Loss before income tax benefit       $ (86,356)   $ (72,157)   $(176,349)   $(131,954)
                                     =========    =========    =========    =========
</TABLE>

Intercompany interest represents net interest expense charged to financial
related businesses for corporate cash that was borrowed to fund their operating
activities and, in fiscal 2001, it also includes net unallocated interest
expense attributable to commitment fees on the unused portion of the Company's
$1.89 billion credit facility.



                                       -9-
<PAGE>   12



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


THE INFORMATION CONTAINED IN THIS FORM 10-Q AND THE EXHIBITS HERETO MAY CONTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. SUCH
STATEMENTS ARE BASED UPON CURRENT INFORMATION, EXPECTATIONS, ESTIMATES AND
PROJECTIONS REGARDING THE COMPANY, THE INDUSTRIES AND MARKETS IN WHICH THE
COMPANY OPERATES, AND MANAGEMENT'S ASSUMPTIONS AND BELIEFS RELATING THERETO.
WORDS SUCH AS "WILL," "PLAN," "EXPECT," "REMAIN," "INTEND," "ANTICIPATE,"
"ESTIMATE," "APPROXIMATE," AND VARIATIONS THEREOF AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS SPEAK
ONLY AS OF THE DATE ON WHICH THEY ARE MADE, ARE NOT GUARANTEES OF FUTURE
PERFORMANCE, AND INVOLVE CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE
DIFFICULT TO PREDICT. THEREFORE, ACTUAL OUTCOMES AND RESULTS COULD MATERIALLY
DIFFER FROM WHAT IS EXPRESSED, IMPLIED OR FORECAST IN SUCH FORWARD-LOOKING
STATEMENTS. SUCH DIFFERENCES COULD BE CAUSED BY A NUMBER OF FACTORS INCLUDING,
BUT NOT LIMITED TO, THE UNCERTAINTY OF LAWS, LEGISLATION, REGULATIONS,
SUPERVISION AND LICENSING BY FEDERAL, STATE AND LOCAL AUTHORITIES AND THEIR
IMPACT ON ANY PROPOSED OR POSSIBLE TRANSACTION AND THE LINES OF BUSINESS IN
WHICH THE COMPANY'S SUBSIDIARIES ARE INVOLVED; UNFORESEEN COMPLIANCE COSTS;
CHANGES IN ECONOMIC, POLITICAL OR REGULATORY ENVIRONMENTS; CHANGES IN
COMPETITION AND THE EFFECTS OF SUCH CHANGES; THE INABILITY TO IMPLEMENT THE
COMPANY'S STRATEGIES; CHANGES IN MANAGEMENT AND MANAGEMENT STRATEGIES; THE
COMPANY'S INABILITY TO SUCCESSFULLY DESIGN, CREATE, MODIFY AND OPERATE ITS
COMPUTER SYSTEMS AND NETWORKS; LITIGATION INVOLVING THE COMPANY; THE UNCERTAINTY
OF THE IMPACT OF SHARE REPURCHASES ON EARNINGS PER SHARE; AND RISKS DESCRIBED
FROM TIME TO TIME IN REPORTS AND REGISTRATION STATEMENTS FILED BY THE COMPANY
AND ITS SUBSIDIARIES WITH THE SECURITIES AND EXCHANGE COMMISSION. READERS SHOULD
TAKE THESE FACTORS INTO ACCOUNT IN EVALUATING ANY SUCH FORWARD-LOOKING
STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY OR REVISE
ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.


FINANCIAL CONDITION

These comments should be read in conjunction with the Consolidated Balance
Sheets and Consolidated Statements of Cash Flows found on pages 1 and 4,
respectively.

Working capital decreased to a negative $102.9 million at October 31, 2000 from
$343.1 million at April 30, 2000. The working capital ratio at October 31, 2000
is .97 to 1, compared to 1.10 to 1 at April 30, 2000. The decrease in working
capital and the working capital ratio is primarily due to the increase in
short-term borrowings due to the seasonal nature of the Company's U.S. tax
operations segment, payments on Business services acquisitions, the share
repurchase program, interest, tax and dividend payments. Tax return preparation
occurs almost entirely in the fourth quarter and has the effect of increasing
certain assets and liabilities during the fourth quarter, including cash and
cash equivalents, receivables, accrued salaries, wages and payroll taxes and
accrued taxes on earnings.


                                      -10-
<PAGE>   13


In the U.S., the Company incurs short-term borrowings throughout the year
primarily to fund receivables associated with its mortgage loans held for sale
and Business services and seasonal working capital needs. These short-term
borrowings in the U.S. are supported by a $1.89 billion back-up credit facility
through October 2000. On October 30, 2000, the credit facility was renewed at
$1.86 billion through October 2001.

The Company annually obtains a seasonal line of credit to support a short-term
borrowing facility in Canada. The credit limit of this line fluctuates in
accordance with the seasonal need for short-term borrowings outstanding during
the year.

In April 2000, the Company entered into third party off-balance sheet financing
arrangements and whole-loan sale arrangements for Option One Mortgage
Corporation (Option One). This financing, which is not guaranteed by H&R Block,
freed up excess cash and short-term borrowing capacity ($408.4 million at
October 31, 2000), improved liquidity and flexibility, and reduced balance sheet
risk, while providing stability in dealing with the secondary market for
mortgage loans. Management anticipates that the negative fiscal year earnings
per share impact of the off-balance sheet financing will be more than offset by
the increases in earnings per share resulting from share repurchases made during
the first six months of this year.

At October 31, 2000, short-term borrowings increased to $914.7 million from
$283.8 million at April 30, 2000. The Company's capital expenditures, dividend
payments, share repurchase program, Business services acquisition payments and
normal operating activities during the first six months were funded through
both internally-generated funds and short-term borrowings.

For the six months ended October 31, 2000 and 1999, interest expense was $127.2
million and $34.8 million, respectively. The increase in interest expense is due
to the first-time inclusion of operating interest expense to external parties at
OLDE Financial Corporation (OLDE) of $66.4 million and acquisition interest
expense of $37.3 million related to the OLDE acquisition in December 1999.

In March 2000, the Company's Board of Directors approved a plan to repurchase up
to 12 million shares of its common stock. At October 31, 2000, 7.2 million
shares had been repurchased under this plan. The Company plans to continue to
purchase its shares on the open market in accordance with this authorization,
subject to various factors including the price of the stock, availability of
excess cash, the ability to maintain liquidity and financial flexibility,
securities laws restrictions and other investment opportunities available.
However, the Company does not anticipate being as aggressive in its share
repurchase program for the reminder of the fiscal year.




                                      -11-
<PAGE>   14


RESULTS OF OPERATIONS

Interest income and interest expense related to certain mortgage loans in
fiscal year 2001 were previously reported in the Company's press release dated
November 28, 2000 on a gross basis in Service revenues and Interest expense,
respectively. The Company is now reporting in Service revenues on the
Consolidated Statements of Operations the interest income from such mortgages
net of the related interest expense of $41.6 million for the six months ended
October 31, 2000 in accordance with Statement of Financial Acoounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This revision has no impact on the net loss
previously reported.

FISCAL 2001 COMPARED TO FISCAL 2000

The analysis that follows should be read in conjunction with the tables below
and the Consolidated Statements of Operations found on pages 2 and 3.

                 THREE MONTHS ENDED OCTOBER 31, 2000 COMPARED TO
                       THREE MONTHS ENDED OCTOBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              Revenues                Earnings (loss)
                                       ----------------------    -----------------------
                                          2000         1999         2000         1999
                                          ----         ----         ----         ----
<S>                                    <C>          <C>          <C>          <C>
U.S. tax operations                    $  26,403    $  19,723    $ (87,203)   $ (83,663)

International tax operations              14,899       14,713         (467)      (1,644)

Financial services                       216,263       91,503       32,426       20,931

Business services                         78,267       83,180         (781)      (1,152)

Unallocated corporate                      1,642          827       (6,727)      (3,428)

Interest expense on acquisition debt        --           --        (24,484)      (8,027)
                                       ---------    ---------    ---------    ---------

                                       $ 337,474    $ 209,946      (87,236)     (76,983)
                                       =========    =========
Investment income, net                                               2,536        2,402

Intercompany interest                                               (1,656)       2,424
                                                                 ---------    ---------

                                                                   (86,356)     (72,157)

Income tax benefit                                                 (36,701)     (27,420)
                                                                 ---------    ---------

Net loss                                                         $ (49,655)   $ (44,737)
                                                                 =========    =========
</TABLE>


Consolidated revenues for the three months ended October 31, 2000 increased
60.7% to $337.5 million from $209.9 million reported last year. The increase is
primarily due to revenues from Financial services of $216.3 million, a 136.3%
increase over the prior year, due to the first time inclusion of OLDE.

The consolidated pretax loss for the second quarter of fiscal 2001 increased to
$86.4 million from $72.2 million in the second quarter of last year. The
increase is attributable to the interest expense on the OLDE acquisition debt
and increased losses from U.S. tax operations and Unallocated corporate, which
was offset by improved results from Financial services.

The Company's performance as measured by earnings before interest (including
interest expense on acquisition debt, investment income and interest allocated
to operating business units), taxes, depreciation and amortization (EBITDA)
improved 68.5% to a negative $14.1 million compared to a negative $44.6 million
in the prior year's second quarter.



                                      -12-
<PAGE>   15


The net loss was $49.7 million, or $.54 per share, compared to $44.7 million, or
$.46 per share, for the same period last year. The per share loss this year was
increased by approximately $.06 per share due to the Company's share repurchase
program that resulted in lower investment income and fewer shares outstanding
for the quarter. The effective income tax rate increased from 38.0% last year to
42.5% this year as a result of the non-deductible intangible amortization
resulting from the OLDE acquisition, and helped reduce this quarter's net loss.

An analysis of operations by reportable operating segments follows.

U.S. TAX OPERATIONS

Revenues increased 33.9% to $26.4 million from $19.7 million last year,
resulting primarily from higher revenues from the Company's Peace of Mind
program.

The pretax loss increased 4.2% to $87.2 million from $83.7 million in the second
quarter of last year due primarily to normal operating increases in
depreciation, amortization and rent expenses, as well as costs associated with
the development of new online services for the upcoming tax season. The higher
depreciation and rent expense is a result of office expansion efforts in the
prior year. Also contributing to the increase in amortization expense are
franchise acquisitions that occurred in the prior year. Due to the nature of
this segment's business, second quarter operating results are not indicative of
expected results for the entire fiscal year.

INTERNATIONAL TAX OPERATIONS

Revenues increased 1.3% to $14.9 million compared to $14.7 million in the prior
year's second quarter. The increase is attributable to Canadian operations. The
increase in Canadian revenues is due to higher discounted return fees, which is
the result of a 69.2% increase in the number of discounted returns prepared over
the same period last year. The increase was partially offset by lower revenues
in the United Kingdom.

The pretax loss decreased 71.6% to $467 thousand from $1.6 million last year.
The decrease is primarily due to improved performance in Canada. This improved
performance is a result of lower employee compensation and marketing and
advertising expenses. Australian operations also contributed positive results
over the prior year. Due to the nature of this segment's business, second
quarter operating results are not indicative of expected results for the entire
fiscal year.

FINANCIAL SERVICES

Revenues increased 136.3% to $216.3 million from $91.5 million in the same
period last year. The increase is primarily attributable to OLDE, which was
acquired December 1, 1999. OLDE is the parent company of H&R Block Financial
Advisors, Inc. (formally OLDE Discount Corporation) which contributed revenues
of $128.9 million for the quarter. For the three months ended October 31, 2000,
H&R Block Financial Advisors' average commission per trade was $70.52 with daily
average trades of 9,788. Option One, which includes H&R Block Mortgage
Corporation, also contributed $81.0 million in revenues an increase of 5.5% over
the same period last year. The increase in revenues is primarily due to Option
One's servicing portfolio of $16.6 billion and 162,200 loans compared to last
year's October 31 portfolio of $8.8 billion and 87,900 loans. Option One
originated and sold or securitized $1.5 billion during the second quarter of




                                      -13-
<PAGE>   16


fiscal 2001, compared to $1.5 billion originated and $1.6 billion sold in the
second quarter last year.

Financial services pretax earnings of $32.4 million improved 54.9% this year
compared with earnings of $20.9 million during the second quarter of fiscal
2000. The increase is mainly due to OLDE contributing earnings of $12.4
million, which includes goodwill amortization of $11.3 million. Additionally,
Option One contributed $21.2 million in pretax earnings compared to $19.9
million in the prior year, which includes goodwill amortization of $3.4
million in both years. The increases at OLDE and Option One were somewhat
offset by costs associated with the winding down of certain mortgage
activities.

BUSINESS SERVICES

Business services revenues of $78.3 million decreased 5.9% from $83.2 million in
the prior year. As of October 31, 2000, the operations of all but two of the
original seven regional accounting firms acquired have been merged into RSM
McGladrey, the national accounting firm that was acquired on August 2, 1999.
Prior to the mergers, for the regional accounting firms, the Company was
required to consolidate revenues and expenses from the non-attest business that
the Company owned and the attest business of five firms located in Kansas City,
Chicago, Indianapolis, Baltimore and Philadelphia that the Company did not own,
but for whom it performed management services. Revenues are no longer
consolidated as a result of the change in organizational structure. The revenue
decline is attributable in part to the change in consolidation, as well as, to
lower technology consulting fees associated with Y2K engagements last year. RSM
McGladrey and McGladrey and Pullen, LLP have a number of common clients and
their combined revenues, including those of the regional accounting firms not
merged and the attest firms for whom they provide management services, for the
three months ended October 31, 2000 increased 12.1% over the same period in the
prior year.

The pretax loss was $781 thousand compared to $1.2 million in the prior year,
which includes goodwill amortization of $7.8 million and $5.2 million,
respectively. The improved results are due to better staff utilization during
the quarter. The change in organizational structure described above does not
impact the pretax earnings or losses of the segment. Due to the nature of this
segment's business, revenues are seasonal, while expenses are relatively fixed
throughout the year. Results for the second quarter are not indicative of the
expected results for the entire fiscal year.

UNALLOCATED CORPORATE

The Unallocated corporate pretax loss for the second quarter increased 96.2% to
$6.7 million from $3.4 million in the comparable period last year. The increase
is primarily a result of interest expense related to borrowings for funding of
operations.

Interest expense on acquisition debt increased $16.5 million to $24.5 million
from $8.0 million in the three months ended October 31, 1999. The increase is
attributable to the acquisition of OLDE in December 1999 which is somewhat
offset by lower interest expense related to the acquisition of the non-attest
assets of McGladrey & Pullen, LLP due to payment of a portion of the acquisition
debt in August 2000.



                                      -14-
<PAGE>   17


        THREE MONTHS ENDED OCTOBER 31, 2000 (SECOND QUARTER) COMPARED TO
                THREE MONTHS ENDED JULY 31, 2000 (FIRST QUARTER)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              Revenues               Earnings (loss)
                                       ----------------------    -----------------------
                                        2nd Qtr      1st Qtr      2nd Qtr       1st Qtr
                                        -------      -------      -------       -------
<S>                                    <C>          <C>          <C>          <C>
U.S. tax operations                    $  26,403    $  11,350    $ (87,203)   $ (87,870)

International tax operations              14,899        4,899         (467)      (5,923)

Financial services                       216,263      211,267       32,426       34,940

Business services                         78,267       76,097         (781)      (3,013)

Unallocated corporate                      1,642          497       (6,727)      (4,613)

Interest expense on acquisition debt        --           --        (24,484)     (27,288)
                                       ---------    ---------    ---------    ---------

                                       $ 337,474    $ 304,110      (87,236)     (93,767)
                                       =========    =========

Investment income, net                                               2,536        2,719

Intercompany interest                                               (1,656)       1,055
                                                                 ---------    ---------

                                                                   (86,356)     (89,993)

Income tax benefit                                                 (36,701)     (38,247)
                                                                 ---------    ---------

Net loss                                                         $ (49,655)   $ (51,746)
                                                                 =========    =========
</TABLE>


Consolidated revenues for the three months ended October 31, 2000 increased
11.0% to $337.5 million from $304.1 million reported in the first quarter of
fiscal 2001. Revenues increased for all segments, however, the increase is
primarily due to U.S. tax operations and International tax operations.

The consolidated pretax loss for the second quarter of fiscal 2001 decreased to
$86.4 million from $90.0 million in the first quarter of this year. The
decreased loss is primarily attributable to improved performance from
International tax operations.

The net loss was $49.7 million, or $.54 per share, compared to $51.7 million, or
$.55 per share, for the first quarter.

An analysis of operations by reportable operating segments follows.

U.S. TAX OPERATIONS

Revenues increased 132.6% to $26.4 million from $11.4 million in the first
quarter. The pretax loss decreased 0.8% to $87.2 million from $87.9 million in
the three months ended July 31, 2000. The improved performance in revenues is a
result of higher revenues from tuition tax school fees, which are seasonal, and
the Peace of Mind program, contributing $5.6 million and $5.4 million,
respectively. The decreased loss is primarily due to the increase in revenues
from



                                      -15-
<PAGE>   18



the Peace of Mind program, which was partially offset by increased costs
associated with the development of new online services for the upcoming tax
season.

INTERNATIONAL TAX OPERATIONS

Revenues increased 204.1% to $14.9 million compared to first quarter revenues of
$4.9 million. The increase is entirely due to the onset of the tax season in
Australia, which contributed $11.8 million in revenues. The increase was
partially offset by a decline in tax preparation and discounted return fees in
Canada due to a decrease in the number of returns prepared and lower revenues
from the United Kingdom.

The pretax loss declined 92.1% to $467 thousand from $5.9 million in the first
quarter. The improved results are attributable to the Australian tax-filing
season, which contributed earnings of $4.9 million compared to a pretax loss of
$1.4 million in the quarter ended July 31, 2000. The improved results were
reduced by increased losses in Canada and the United Kingdom.

FINANCIAL SERVICES

Revenues increased 2.4% to $216.3 million from $211.3 million in the prior
quarter. The increase is primarily due to higher servicing income that is
attributable to a larger servicing portfolio.

Pretax earnings decreased 7.2% to $32.4 million from $34.9 million in the three
months ended July 31, 2000. The decrease is due to lower daily trading volumes.
Customer daily average trades decreased 4.6% from 10,262 to 9,788. In addition,
Option One added to the decline due to higher compensation and benefits and bad
debt expense. However, the Company's retail mortgage operations did show
improvement from the first quarter by reducing its losses by $5.6 million.

BUSINESS SERVICES

Revenues increased 2.9% to $78.3 million from $76.1 million in the three months
ended July 31, 2000 due primarily to acquisitions. The pretax loss decreased
74.1% to $781 thousand from $3.0 million in the first quarter due to the
increase in revenues from acquisitions.

UNALLOCATED CORPORATE

The Unallocated corporate pretax loss for the second quarter increased 45.8% to
$6.7 million. The increase is primarily due to interest expense related to
borrowings for funding of operations.

Interest expense on acquisition debt decreased from $27.3 million to $24.5
million in the current quarter. The decrease is attributable to payment of a
portion of the long-term debt related to the acquisition of the non-attest
assets of McGladrey & Pullen LLP in August 2000 and, with cash generated from
OLDE, the Company's payment of a portion of the short-term debt related to the
OLDE acquisition.




                                      -16-
<PAGE>   19



                  SIX MONTHS ENDED OCTOBER 31, 2000 COMPARED TO
                        SIX MONTHS ENDED OCTOBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                               Revenues               Earnings (loss)
                                       -----------------------   -----------------------
                                          2000         1999         2000         1999
                                          ----         ----         ----         ----
<S>                                    <C>          <C>          <C>          <C>
U.S. tax operations                    $  37,753    $  32,798    $(175,073)   $(154,733)

International tax operations              19,798       18,781       (6,390)      (8,165)

Financial services                       427,530      170,957       67,366       39,757

Business services                        154,364      107,359       (3,794)      (1,340)

Unallocated corporate                      2,139        1,611      (11,340)      (6,777)

Interest expense on acquisition debt        --           --        (51,772)     (12,465)
                                       ---------    ---------    ---------    ---------

                                       $ 641,584    $ 331,506     (181,003)    (143,723)
                                       =========    =========
Investment income, net                                               5,255        5,053

Intercompany interest                                                 (601)       6,716
                                                                 ---------    ---------

                                                                  (176,349)    (131,954)

Income tax benefit                                                 (74,948)     (50,143)
                                                                 ---------    ---------

Net loss                                                         $(101,401)   $ (81,811)
                                                                 =========    =========
</TABLE>


Consolidated revenues for the six months ended October 31, 2000 increased 93.5%
to $641.6 million from $331.5 million reported last year. The increase is due
almost entirely to the first time inclusion of OLDE, acquired December 1, 1999.

The consolidated pretax loss for the first six months of fiscal 2001 increased
to $176.3 million from $132.0 million last year. The higher loss is largely
attributable to interest expense on the OLDE acquisition debt of $37.3 million
and increased losses from U.S. tax operations.

The net loss was $101.4 million, or $1.10 per share, compared to $81.8 million,
or $.84 per share, for the same period last year. The per share loss this year
was increased by approximately $.10 per share due to the Company's share
repurchase program that resulted in lower investment income and fewer shares
outstanding for the six months ended October 31, 2000. The effective income tax
rate increased from 38.0% last year to 42.5% this year as a result of the
non-deductible intangible amortization resulting from the OLDE acquisition, and
helped reduce the loss for the six-month period.

An analysis of operations by reportable operating segments follows.



                                      -17-
<PAGE>   20


U.S. TAX OPERATIONS

Revenues increased 15.1% to $37.8 million from $32.8 million last year,
resulting primarily from higher revenues from the Company's Peace of Mind
program.

The pretax loss increased 13.1% to $175.1 million from $154.7 million in the
comparable period last year due to normal operational increases in depreciation,
amortization, compensation and rent expenses. The higher depreciation and rent
expense is a result of our office expansion efforts in the prior year. Also
contributing to the increase in amortization expense are franchise acquisitions
that occurred in the prior year. Due to the nature of this segment's business,
the six-month operating results are not indicative of expected results for the
entire fiscal year.

INTERNATIONAL TAX OPERATIONS

Revenues increased 5.4% to $19.8 million compared to $18.8 million the prior
year. The increase is primarily attributable to Canadian operations. The
increase in Canadian revenues is due to higher discounted return fees, which is
the result of a 25.4% increase in the number of discounted returns prepared over
the same period last year. Also contributing to the increase in revenues were
higher tax preparation fees in Australia and the United Kingdom.

The pretax loss decreased 21.7% to $6.4 million compared to $8.2 million last
year. The decrease is due to improved results in Canada resulting from lower
employee costs, consulting and marketing and advertising expenses. Australia and
the United Kingdom also contributed to the improvement. Due to the nature of
this segment's business, the six-month operating results are not indicative of
expected results for the entire fiscal year.

FINANCIAL SERVICES

Revenues increased 150.1% to $427.5 million from $171.0 million in the same
period last year. The increase is essentially attributable to OLDE, which
contributed revenues of $257.2 million for the six months ended October 31,
2000. For the first six months of fiscal 2001, OLDE's average commission per
trade was $66.86 with daily average trades of 10,023. Option One, which includes
H&R Block Mortgage, contributed $10.6 million of the increase. The higher
revenues are driven by the growth in the Company's servicing portfolio. Option
One's servicing portfolio at October 31, 2000 was $16.6 billion compared to $8.8
billion last October. Option One and H&R Block Mortgage originated and sold or
securitized $2.9 billion in loans during the first six months of fiscal 2001,
compared to $2.8 billion in the same period last year. These increases were
slightly offset by lower revenues at the Company's other mortgage operations.

Pretax earnings increased 69.4% to $67.4 million from $39.8 million in the
prior year. The increase is primarily due to OLDE contributing earnings of
$26.3 million, which includes $22.9 million in goodwill amortization. This
increase was partially offset by costs associated with the winding down of
certain mortgage activities.

BUSINESS SERVICES

Business services revenues increased 43.8% to $154.4 million compared to $107.4
million for the six months ended October 31, 1999. The pretax loss increased
183.1% to $3.8 million from $1.3 million for the same period last year, which
includes goodwill amortization of $14.8 million and $7.0 million, respectively.
The increase in revenues and pretax loss are primarily due to the



                                      -18-
<PAGE>   21


inclusion of RSM McGladrey for six months in fiscal 2001 compared to three
months in fiscal 2000.

As of October 31, 2000, the operations of all but two of the original seven
regional accounting firms acquired have been merged into RSM McGladrey, the
national accounting firm that was acquired on August 2, 1999. Prior to the
mergers, for the regional accounting firms, the Company was required to
consolidate revenues and expenses from the non-attest business that the Company
owned and the attest business of five firms located in Kansas City, Chicago,
Indianapolis, Baltimore and Philadelphia that the Company did not own, but for
whom it performed management services. Revenues are no longer consolidated as a
result of the change in organizational structure. The revenue decline is
attributable in part to the change in consolidation, as well as, to lower
technology consulting fees associated with Y2K engagements last year. RSM
McGladrey and McGladrey and Pullen, LLP have a number of common clients and
their combined revenues, including those of the regional accounting firms not
merged and the attest firms for whom they provide management services, for the
six months ended October 31, 2000 increased 71.2% over the same period in the
prior year. The change in organizational structure described above does not
impact the pretax earnings or losses of the segment. Due to the nature of this
segment's business, revenues are seasonal, while expenses are relatively fixed
throughout the year. Results for the six months are not indicative of the
expected results for the entire fiscal year.

UNALLOCATED CORPORATE

The Unallocated corporate pretax loss for the six months increased 67.3% to
$11.3 million from $6.8 million in the comparable period last year. The increase
is a result of interest expense related to borrowings for funding of operations.

Interest expense on acquisition debt increased to $51.8 million from $12.5
million in the six months ended October 31, 1999. The increase is primarily
attributable to the acquisition OLDE in December 1999, and to a lesser extent,
the acquisition of the non-attest assets of McGladrey & Pullen, LLP in August
1999.

                    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

There have been no material changes in market risk from those reported at April
30, 2000.



                                      -19-
<PAGE>   22



PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

CompuServe Corporation (CompuServe), certain current and former officers and
directors of CompuServe and the Company have been named as defendants in six
lawsuits pending before the state and Federal courts in Columbus, Ohio. All
suits allege similar violations of the Securities Act of 1933 based on
assertions of omissions and misstatements of fact in connection with
CompuServe's public filings related to its initial public offering in April
1996. One state lawsuit brought by the Florida State Board of Administration
also alleges certain oral omissions and misstatements in connection with such
offering. Relief sought in the lawsuits is unspecified, but includes pleas for
rescission and damages. One Federal lawsuit names the lead underwriters of
CompuServe's initial public offering as additional defendants and as
representatives of a defendant class consisting of all underwriters who
participated in such offering. The Federal suits were consolidated, the
defendants filed a motion to dismiss the consolidated suits, the district court
stayed all proceedings pending the outcome of the state court suits, and the
United States Court of Appeals for the Sixth Circuit affirmed such stay. The
four state court lawsuits also allege violations of various state statutes and
common law of negligent misrepresentation in addition to the 1933 Act claims.
The state lawsuits were consolidated for discovery purposes and defendants filed
a motion for summary judgment covering all four state lawsuits. In July 1998,
the state court certified a plaintiff class of all persons and entities who
purchased shares of common stock of CompuServe between April 18, 1996 and July
16, 1996 pursuant to the initial public offering or on the open market, and who
were damaged thereby, excluding the named defendants and their affiliates. The
named plaintiffs in three of the state court cases were designated class
representatives.

In July 2000, the class representatives and the defendants in the class action
pending in state court, by their authorized counsel, entered into a Stipulation
of Settlement, pursuant to which the defendants will pay a gross settlement
amount of $9.5 million in exchange for dismissal of the class action suit and a
release of all claims. The court preliminarily approved the settlement in August
2000 and notices to the class were mailed and published. The fairness hearing
relating to the settlement was held on November 30, 2000, but the court has not
yet issued its ruling. Payment of plaintiffs' attorneys' fees and expenses are
to be paid out of the gross settlement fund. The gross settlement fund will be
paid in its entirety by the Company's insurance carrier. The Stipulation is not
an admission of the validity of any claim or any fact alleged by the plaintiffs
and defendants continue to deny any wrongdoing and any liability. The
Stipulation states that the defendants consider it desirable to settle to avoid
further expense, inconvenience, and delay, and put to rest all controversy
concerning all claims.

The Florida State Board of Administration has opted out of the settlement and
that litigation continues separately from the state court class action.

As a part of the sale of its interest in CompuServe, the Company agreed to
indemnify WorldCom, Inc. and CompuServe against 80.1% of any losses and expenses
incurred by them with respect to these lawsuits. In the opinion of management,
the ultimate resolution of these suits through the agreed upon settlement or
otherwise will not have a material adverse impact on the Company's consolidated
financial position or results of operations. The lawsuits discussed



                                      -20-
<PAGE>   23


herein were previously reported in Forms 10-K and 10-Q filed by the Company,
including the Form 10-Q for the quarterly period ended July 31, 2000.

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

The annual meeting of shareholders of the registrant was held on September 13,
2000. At such meeting, four Class II directors were elected to serve three-year
terms, one Class I director was elected to serve a two-year term, and one Class
III director was elected to serve a one-year term. In addition, the resolutions
set forth below were submitted to a vote of shareholders. With respect to the
election of directors and the adoption of each resolution, the number of votes
cast for, against or withheld, and the number of abstentions were as follows:

         Election of Class II Directors:
         ------------------------------

                Nominee                      Votes FOR           Votes WITHHELD
                -------                      ---------           --------------

         G. Kenneth Baum                    79,118,627             1,021,492
         Mark A. Ernst                      79,193,284               946,835
         Henry F. Frigon                    79,171,416               968,703
         Roger W. Hale                      79,212,834               927,285

         Election of Class I Director:
         ----------------------------

               Nominee                       Votes FOR           Votes WITHHELD
               -------                       ---------           --------------

         Thomas M. Bloch                    79,162,877               977,242

         Election of Class III Director:
         ------------------------------

               Nominee                       Votes FOR           Votes WITHHELD
               -------                       ---------           --------------

         Rayford Wilkins, Jr.               79,018,502             1,121,617

         Approval of the H&R Block, Inc. 2000 Employee Stock Purchase Plan:
         -----------------------------------------------------------------

         The following resolution was adopted by a vote of 77,020,390 shares in
         favor of such resolution, 2,523,509 shares against such resolution, and
         596,018 shares abstaining. The resolution states:

                  "RESOLVED, That the H&R Block, Inc. 2000 Employee Stock
                  Purchase Plan, included as Appendix B to the proxy statement
                  relating to this meeting, is hereby adopted and approved."



                                      -21-
<PAGE>   24


         Approval of the H&R Block, Inc. Short-Term Incentive Plan, as amended:
         ----------------------------------------------------------------------

         The following resolution was adopted by a vote of 76,435,653 shares in
         favor of such resolution, 2,955,058 shares against such resolution, and
         749,407 shares abstaining. The resolution states:

                  "RESOLVED, That the H&R Block Short-Term Incentive Plan, as
                  amended, included in Appendix C to the proxy statement
                  relating to this meeting, is hereby adopted and approved."

         Appointment of Auditors
         -----------------------

         The following resolution was adopted by a vote of 79,545,640 shares in
         favor of such resolution, 191,849 shares against such resolution and
         402,630 shares abstaining:

                  "RESOLVED, That the appointment of PricewaterhouseCoopers LLP
                  as the independent auditors for H&R Block, Inc., and its
                  subsidiaries for the year ending April 30, 2001 is hereby
                  ratified, approved and confirmed."

At the close of business on July 10, 2000, the record date for the annual
meeting of shareholders, there were 92,297,566 shares of Common Stock of the
registrant outstanding and entitled to vote at the meeting. There were
80,140,119 shares represented at the annual meeting of shareholders held on
September 13, 2000.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

a)       Exhibits

         10.1     The H&R Block Short-Term Incentive Plan, as amended September
                  13, 2000.

         10.2     Amendment No. 7 to the H&R Block Deferred Compensation Plan
                  for Directors.

         10.3     Amendment No. 5 to the H&R Block Deferred Compensation Plan
                  for Executives, as Amended and Restated.

         10.4     H&R Block, Inc. Executive Survivor Plan (As Amended and
                  Restated).

         27       Financial Data Schedule

b)       Reports on Form 8-K

The registrant did not file any reports on Form 8-K during the second quarter of
fiscal 2001.



                                      -22-
<PAGE>   25



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                                   H&R BLOCK, INC.
                                          -----------------------------------
                                                    (Registrant)



DATE    12/15/00                       BY       /s/ Frank J. Cotroneo
     ----------------------               -----------------------------------
                                                   Frank J. Cotroneo
                                              Senior Vice President and
                                                Chief Financial Officer



DATE    12/15/00                       BY       /s/ Cheryl L. Givens
     ----------------------               -----------------------------------
                                                  Cheryl L. Givens
                                       Vice President and Corporate Controller




                                      -23-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>c59093ex10-1.txt
<DESCRIPTION>THE H&R BLOCK SHORT-TERM INCENTIVE PLAN
<TEXT>

<PAGE>   1


                                                                   EXHIBIT 10.1

                       H&R BLOCK SHORT-TERM INCENTIVE PLAN
                                  (AS AMENDED)

                                    ARTICLE I

                                     GENERAL



Section 1.1 Purpose.

     The purpose of the H&R Block Short-Term Incentive Plan (the "Plan") is to
attract and retain highly qualified individuals as executive officers; to obtain
from each the best possible performance in order to achieve particular business
objectives established for H&R Block, Inc. (the "Company") and its subsidiaries;
and to include in their compensation package a bonus component intended to
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), which compensation would be
deductible by the Company under the Code.

Section 1.2 Administration.

     The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee") consisting of at least two
members, each of which shall be an "outside director" within the meaning of
Section 162(m) of the Code. The Committee shall adopt such rules and guidelines
as it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of the Company, to execute and deliver documents on behalf of the Committee. The
determination of the majority shall be final and binding in all matters relating
to the Plan. The Committee shall have authority to determine the terms and
conditions of the Awards granted to eligible persons specified in Section 1.3
below.

Section 1.3 Eligibility.

     Awards may be granted only to employees of the Company or any of its
subsidiaries who are at the level of Assistant Vice President or at a more
senior level and who are selected for participation in the Plan by the
Committee. A qualifying employee so selected shall be a "Participant" in the
Plan.

                                   ARTICLE II

                                     AWARDS

Section 2.1 Awards.

     The Committee may grant annual performance-based awards ("Awards") to
Participants with respect to each fiscal year of the Company, or a portion
thereof (each such fiscal year or a portion thereof to constitute a "Performance
Period"), subject to the terms and conditions of the Plan. Awards shall be in
the form of cash compensation. Within 90 days after the beginning of a
Performance Period, the Committee shall establish (a) performance goals and
objectives ("Performance Targets") for the Company and the subsidiaries and
divisions thereof for such


<PAGE>   2


Performance Period, (b) target awards ("Target Awards") for each Participant,
which shall be a specified dollar amount, and (c) schedules or other objective
methods for determining the applicable performance percentage ("Performance
Percentage") to be multiplied by each portion of the Target Award to which a
Performance Target relates in arriving at the actual Award payout amount
pursuant to Section 2.4 ("Performance Schedules"). The Committee shall specify
the Performance Targets applicable to each Participant for each Performance
Period and shall further specify the portion of the Target Award to which each
Performance Target shall apply. In no event shall a Performance Schedule include
a Performance Percentage in excess of 200%.

Section 2.2 Performance Targets.

     Performance Targets established by the Committee each year shall be based
of one or more of the following business criteria: (a) earnings, (b) revenues,
(c) sales of products, services or accounts, (d) numbers of income tax returns
prepared, (e) margins, (f) earnings per share, (g) return on equity, (h) return
on capital, and (i) total shareholder return. For any Performance Period,
Performance Targets may be measured on an absolute basis or relative to internal
goals, or relative to levels attained in fiscal years prior to the Performance
Period.

Section 2.3 Employment Requirement.

     To be eligible to receive payment of an Award, the Participant must have
remained in the continuous employ of the Company or its subsidiaries through the
end of the applicable Performance Period, provided that, in the event that the
Participant's employment terminates during the Performance Period due to death,
disability or retirement, the Committee may, at its sole discretion, authorize
the Company or the applicable subsidiary to pay in full or on a prorated basis
an Award determined in accordance with Sections 2.4 and 2.5. For purposes of
this Section 2.3, (a) "disability" shall be as defined in the employment
practices or policies of the applicable subsidiary of the Company in effect at
the time of termination of employment, and (b) "retirement" shall mean
termination of employment with all subsidiaries of the Company by the
Participant after either attainment of age 65 or attainment of age 55 and the
completion of at least ten (10) years of employment with the Company or its
subsidiaries.

Section 2.4 Determination of Awards.

     In the manner required by Section 162(m) of the Code, the Committee shall,
promptly after the date on which the necessary financial or other information
for a particular Performance Period becomes available, certify the extent to
which Performance Targets have been achieved. Using the Performance Schedules,
the Committee shall determine the Performance Percentage applicable to each
Performance Target and multiply the portion of the Target Award to which the
Performance Target relates by such Performance Percentage in order to arrive at
the actual Award payout for such portion.

     At the time that Target Awards are determined, the Committee may specify
that the Performance Percentage attributable to any one or more portions of a
Participant's Target Award may not exceed the Performance Percentage
attributable to any other portion of the Participant's Target Award. In the
event such specification is made, actual Award payouts shall be determined
accordingly.



                                       2
<PAGE>   3



Section 2.5 Limitations on Awards.

     The aggregate amount of all Awards under the Plan to any Participant for
any Performance Period shall not exceed $1,000,000.

Section 2.6 Payment of Awards.

     Payment of Awards shall be made by the Company or the applicable employer
subsidiary as soon as administratively practical following the certification by
the Committee of the extent to which the applicable Performance Targets have
been achieved and the determination of the actual Awards in accordance with
Sections 2.4 and 2.5. All Awards under the Plan are subject to withholding,
where applicable, for federal, state and local taxes.

Section 2.7 Adjustment of Awards.

     In the event of the occurrence during the Performance Period of any
recapitalization, reorganization, merger, acquisition, divestiture,
consolidation, spin-off, split-off, combination, liquidation, dissolution, sale
of assets, other similar corporate transaction or event, any changes in
applicable tax laws or accounting principles, or any unusual, extraordinary or
nonrecurring events involving the Company which distorts the performance
criteria applicable to any Performance Target, the Committee shall adjust the
calculation of the performance criteria, and the applicable Performance Targets
as is necessary to prevent reduction or enlargement of Participants' Awards
under the Plan for such Performance Period attributable to such transaction or
event. Such adjustments shall be conclusive and binding for all purposes.

                                   ARTICLE III

                                  MISCELLANEOUS

Section 3.1  No Rights to Awards or Continued Employment.

     No employee of the Company or any of its subsidiaries shall have any claim
or right to receive Awards under the Plan. Neither the Plan nor any action taken
under the Plan shall be construed as giving any employee any right to be
retained by the Company or any subsidiary of the Company.

Section 3.2 No Limits on Other Awards and Plans.

     Nothing contained in this Plan shall prohibit the Company or any of its
subsidiaries from establishing other special awards or incentive compensation
plans providing for the payment of incentive compensation to employees of the
Company and its subsidiaries, including any Participants.

Section 3.3 Restriction on Transfer.

     The rights of a Participant with respect to Awards under the Plan shall not
be transferable by the Participant otherwise than by will or the laws of descent
and distribution.



                                       3
<PAGE>   4


Section 3.4 Source of Payments.

     The Company and its subsidiaries shall not have any obligation to establish
any separate fund or trust or other segregation of assets to provide for
payments under the Plan. To the extent any person acquires any rights to receive
payments hereunder from the Company or any of its subsidiaries, such rights
shall be no greater than those of an unsecured creditor.

Section 3.5  Effective Date; Term; Amendment.

     The Plan is effective as of June 19, 1996, subject to approval by the
Company's shareholders at the Company's 1996 annual meeting of shareholders, and
shall remain in effect until such time as it shall be terminated by the Board of
Directors of the Company. If approval of the Plan meeting the requirements of
Section 162(m) of the Code is not obtained at the 1996 annual meeting of
shareholders of the Company, then the Plan shall not be effective and any Award
made on or after June 19, 1996, shall be void ab initio. The Board of Directors
may at any time and from time to time alter, amend, suspend or terminate the
Plan in whole or in part.

Section 3.6 Prohibited or Unenforceable Provisions.

     Any provision of the Plan that is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the Plan.

Section 3.7 Section 162(m) Provisions.

     Any Awards under the Plan shall be subject to the applicable restrictions
imposed by Code Section 162(m) and the Treasury Regulations promulgated
thereunder, notwithstanding any other provisions of the Plan to the contrary.

Section 3.8 Governing Law.

     The Plan and all rights and Awards hereunder shall be construed in
accordance with and governed by the laws of the State of Missouri.



                                       4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>c59093ex10-2.txt
<DESCRIPTION>AMEND. #7 TO THE DEFERRED COMPENSATION PLAN
<TEXT>

<PAGE>   1


                                                                   EXHIBIT 10.2

                                AMENDMENT NO. 7
                                     TO THE
               H&R BLOCK DEFERRED COMPENSATION PLAN FOR DIRECTORS


     H&R BLOCK, INC. (the "Company") adopted the H&R Block Deferred Compensation
Plan for Directors (the "Plan") effective as of August 1, 1987. The Company
amended said Plan by Amendment No. 1 effective May 1, 1995; by Amendment No. 2
effective December 11, 1996; by Amendment No. 3 effective May 1, 1997; by
Amendment No. 4 effective January 1, 1998; by Amendment No. 5 effective in part
on March 1, 1998 and in part on April 1, 1998; and by Amendment No. 6 effective
December 8, 1999. The Company continues to retain the right to amend the Plan
pursuant to action by the Company's Board of Directors. The Company hereby
exercises that right. This Amendment No. 7 is effective as of January 1, 2001.

                                    AMENDMENT

     1. Section 2.1.15 of the Plan, as previously amended, is further amended
by: (a) inserting the punctuation and words ", each of which is an Affiliate"
immediately after the words "of the Company" and immediately before the
punctuation ":"; (b) deleting the words "H&R Block Tax Services, Inc." and
replacing them with the words "H&R Block Services, Inc."; and (c) deleting the
words "Option One Mortgage Corporation" and replacing them with the words "HRB
Business Services, Inc.".

     2. Section 4.2 of the Plan, as previously amended, is further amended by
(a) inserting the words "on a daily basis" immediately after the words "posted
to the Account" and immediately before the words "in accordance with" in the
first sentence of the first paragraph thereof; and (b) deleting the fifth
sentence of said section and replacing it with the following new sentence:

        "Participants may elect to reallocate all or any portion of their
        Account balances, including their entire balance in a Fixed 120 Account,
        among the available investment options, including those funds selected
        by the Company for the variable rate investment option, provided said
        reallocations are in at least one percent (1%) increments."

     3. Section 4.2.2 of the Plan, as previously amended, is further amended by
deleting the third and fourth sentences of said section and replacing them with
the following new sentence:

        "Participants may elect to have their Accounts treated as if they were
        invested in one or more of the funds selected, provided the election is
        in at least one percent (1%) increments of the Account."


     4. Section 6.4.2 of the Plan is deleted and replaced with the following new
Section 6.4.2:




                                       1
<PAGE>   2


            "6.4.2. Death Prior to Benefit Commencement. In the event a
        Participant dies prior to the time benefits commence, the Company shall
        pay a pre-retirement death benefit to the Participant's Beneficiary in
        the form of a lump sum payment, semimonthly payments over a five-year
        period, or semimonthly payments over a ten-year period, as selected by
        the Participant on a form and in a manner prescribed by the Committee. A
        Participant may change such election once each Plan Year. If the form of
        payment selected by the Participant is a lump sum, the amount of the
        pre-retirement death benefit shall be equal to the Participant's Account
        as of the date of the Participant's death. If the form of payment
        selected by the Participant is semimonthly payments over a five or
        ten-year period, the amount of the pre-retirement death benefit shall be
        equal to the Participant's Account as of the date of the Participant's
        death, annuitized over a five-year or ten-year period, respectively, at
        an interest rate equal to the rate of one-year United States Treasury
        notes in effect as of September 30 of the Plan Year immediately prior to
        the Plan Year in which payment of the pre-retirement death benefit
        commences, as published by Salomon Brothers, Inc., or any successor
        thereto, or as determined by the Chief Financial Officer of the Company.
        If a Participant fails to select the form of the pre-retirement death
        benefit, the pre-retirement death benefit shall be paid in the form of
        semimonthly payments over a ten-year period."

     5. Section 6.4.4 of the Plan is amended by adding the following new
sentence after the third sentence of said section:

        "In the event a Participant is married at the time he or she designates
        a beneficiary other than his or her spouse, such designation will not be
        valid unless the Participant's spouse consents in writing to such
        designation."

     6. Except as modified in this Amendment No. 7, the Plan, as previously
amended, shall remain in full force and effect, including the Company's right to
amend or terminate the Plan as set forth in Article 9 of the Plan.

                                       H&R BLOCK, INC.


                                       By:
                                           -----------------------------------

                                       Name:
                                             ---------------------------------

                                       Title:
                                             ---------------------------------


                                       2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>c59093ex10-3.txt
<DESCRIPTION>AMEND. #5 TO THE DEFERRED COMPENSATION PLAN
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.3
                                 AMENDMENT NO. 5
                                     TO THE
                      H&R BLOCK DEFERRED COMPENSATION PLAN
                     FOR EXECUTIVES, AS AMENDED AND RESTATED

     H&R Block, Inc. (the "Company") adopted the H&R Block Deferred Compensation
Plan for Executives, as Amended and Restated (the "Plan"), effective as of
January 1, 1999. The Company amended said Plan by Amendment No. 1 effective as
of January 1, 1999, by Amendment No. 2 effective as of January 1, 2000, by
Amendment No. 3 effective as of September 8, 1999, and by Amendment No. 4
effective as of December 31, 1999. The Company continues to retain the right to
amend the Plan pursuant to action by the Company's Board of Directors. The
Company hereby exercises that right. This Amendment No. 5 is effective as of
January 1, 2001.

                                    AMENDMENT

     1.   Section 2.1.7 of the Plan, as previously amended, is further amended
by: (a) deleting clause (a) in the second sentence thereof, and replacing it
with the following new clause (a):

     "(a) not greater than fifty percent (50%) for Permissible Deferrals of
     persons eligible to participate in the Plan prior to January 1, 2000 and
     are Participants as of January 1, 2001, and who continuously remain
     eligible to make Permissible Deferrals in Plan Years commencing on or after
     January 1, 2000, or";

and (b) deleting clause (A) in the third sentence thereof, and replacing it with
the following new clause (A):

     "(A) not greater than fifty percent (50%), expressed in five percent (5%)
     increments, for Permissible Deferrals of persons eligible to participate in
     the Plan prior to January 1, 2000 and are Participants as of January 1,
     2001, and who continuously remain eligible to make Permissible Deferrals in
     Plan Years commencing on or after January 1, 2000, or".

     2.   Section 2.1.22 of the Plan is amended by deleting the words "long term
group" and replacing them with the words "group long-term".

     3.   Section 2.1.31 of the Plan is amended by deleting the words "then
existing H&R Block Employee Profit Sharing Retirement" and replacing them with
the word "Qualified".

     4.   Section 2.1.37 of the Plan is amended by deleting the words "H&R Block
Tax Services, Inc." and replacing them with the words "H&R Block Services, Inc."

     5.   Section 2.1.38 of the Plan is amended by deleting the fourth paragraph
thereof.


<PAGE>   2

     6.   The following new Section 2.1.40a is added after Section 2.1.40 of the
Plan:

          "2.1.40a `Qualified Plan' means the H&R Block Profit Sharing
     Retirement Plan or any successor plan that is intended to satisfy the
     requirements of section 401 of the Code."

     7.   Section 3.1.1 of the Plan is amended by deleting clause (ii) and
replacing it with the following new clause (ii):

     "(ii) who was eligible to participate in the DCP as a `Group A Participant'
     as of December 31, 1998, as such term was defined in the DCP as of such
     date, and was a participant in the DCP or Plan on or before January 1,
     2001."

     8.   Section 4.1.2 of the Plan, as previously amended, is further amended
by: (a) inserting the words and punctuation "and is a Participant as of January
1, 2001" immediately after the words and punctuation "who was eligible to
participate in the Plan prior to January 1, 2000" and immediately before the
punctuation and words ", the Company shall post" in the second sentence of the
first paragraph thereof; and (b) inserting the words and punctuation "and for
Participants who first became eligible to participate in the Plan prior to
January 1, 2000 but did not become Participants until after January 1, 2001"
immediately after the words and punctuation "commencing on January 1, 2000 or
thereafter" and immediately before the punctuation and words ", no Matching
Contributions" in the third sentence of the first paragraph thereof.

     9.   Section 4.1.3 of the Plan is amended by deleting the first paragraph
in its entirety and replacing it with the following new paragraph:

     "The Company shall also post once each Plan Year to the Account of each
     Participant who is also a participant in the Qualified Plan the difference,
     if any, between (a) the amount for that Plan Year which would have been
     contributed on behalf of the Participant to the Qualified Plan as an
     employer discretionary profit sharing contribution if the Participant had
     not made a Permissible Deferral election under the Plan; and (b) the actual
     amount for that Plan Year that was contributed on behalf of the Participant
     to the Qualified Plan as an employer discretionary profit sharing
     contribution."

     10.  Section 4.2 of the Plan is amended by: (a) adding the words "on a
daily basis" immediately after the words "posted to the Account" and immediately
before the words "in accordance with" in the first sentence of the first
paragraph thereof; and (b) deleting the words "at least ten percent (10%)" and
replacing them with the words "whole number" in the fourth sentence of the first
paragraph thereof.

     11.  Section 4.2.2 of the Plan is amended by deleting the words "at least
ten percent (10%)" and replacing them with the words "whole number" in the last
sentence thereof.

     12.  Section 6.1 of the Plan is deleted in its entirety and replaced with
the following new Section 6.1:

          "Section 6.1 Payments After Termination of Employment. Generally,
     payments of benefits to a Participant shall be made by the Company only
     upon termination, voluntary or involuntary, of the Participant's employment
     with all Affiliates, except where, (i) the provisions of Section 6.1.1 or
     Section 6.1.2, below,


                                       2
<PAGE>   3

     apply, (ii) a Participant is disabled, (iii) the provisions of Section
     6.2.2 apply, or (iv) the provisions of Section 6.7 apply.

          6.1.1 Immediate Lump-Sum Payment. Prior to termination, voluntary or
     involuntary, of a Participant's employment with all Affiliates, the
     Participant may elect, on a form provided by the Committee and delivered by
     the Participant to the Company, to receive an immediate lump-sum payment of
     all or a portion of the one hundred percent (100%) vested balance of said
     Participant's Account valued as of the day immediately prior to the day
     such election is approved, reduced by a penalty equal to ten percent (10%)
     of the elected payment amount, which penalty shall be forfeited to the
     Company. If a Participant elects to receive a payment under this Section
     6.1.1, the Participant's deferrals of Base Salary and Bonus will cease
     immediately and the Participant may not defer Base Salary or Bonus under
     the Plan until the beginning of the second Plan Year following the Plan
     Year in which such election was made. Any payment elected under this
     Section 6.1.1 will be made to the Participant in cash as soon as
     administratively practicable.

          6.1.2 Future Payments. A Participant as of January 1, 2001 may elect
     during the Enrollment Period for the 2001 Plan Year, and an individual who
     becomes a Participant as of any date after January 1, 2001 may elect during
     the Enrollment Period immediately prior to such individual's first day of
     participation in the Plan, to receive payment on one or more selected
     future dates of all or a portion (stated in whole number percentages) of
     the one hundred percent (100%) vested balance of such Participant's Account
     attributable to deferrals and Matching Contributions made after January 1,
     2001. A Participant may make an election under this Section 6.1.2 only on a
     form provided by the Committee and delivered by the Participant to the
     Company. Any such future payment(s) may begin no earlier than during the
     fourth Plan Year after the Plan Year during which the election was made,
     and only one such payment may be made in any Plan Year. A Participant may
     cancel or extend a scheduled payment elected under this Section 6.1.2
     provided that such cancellation or extension is made on a form provided by
     the Committee and delivered by the Participant to the Company and is made
     no later than the end of the second Plan Year prior to the Plan Year during
     which such payment is scheduled to be made. The actual distribution amount
     of any payment under this Section 6.1.2 shall be determined as of the first
     day of the month preceding or coincident with the applicable payment date
     and shall be paid to the Participant in cash as soon as administratively
     practicable after such determination. The actual distribution amount of a
     payment elected under this Section 6.1.2 may be less than the amount
     elected. An election under this Section 6.1.2 shall only be honored by the
     Committee while the Participant is an active employee of the Company or its
     Affiliates."


                                       3
<PAGE>   4

     13.  Section 6.6.1 of the Plan is amended by: (a) deleting the comma
immediately before clause (b) in the last sentence thereof; (b) adding the word
"or" immediately before clause (b) in the last sentence thereof; and (c)
deleting the punctuation and words ", or (c) fifteen (15) years from the date
benefits commenced or would have commenced to the Participant" in the last
sentence thereof.

     14.  Section 6.6.2 of the Plan is amended by: (a) deleting the second and
third sentences thereof and replacing them with the following new sentences:

     "As elected by the Participant on a form and in a manner prescribed by the
     Committee, the pre-retirement death benefit may be in the form of a lump
     sum payment, semimonthly payments for a five-year period, or semimonthly
     payments for a ten-year period. If the Participant selects a lump sum
     payment, the amount of such pre-retirement death benefit will be the
     greater of (a) the Participant's Account as of the date of the
     Participant's death or (b) twenty-five percent (25%) of the total deferrals
     and Company Contributions made as of the date of the Participant's death.
     If the Participant selects semimonthly payments for a five or ten-year
     period, the amount of such pre-retirement death benefit will be the greater
     of:

               (y) the Participant's Account as of the date of the Participant's
          death annuitized over a five or ten-year period, as the case may be,
          at an interest rate equal to the rate of one-year United States
          Treasury notes in effect as of September 30 of the Plan Year
          immediately prior to the Plan Year in which payment of the
          pre-retirement death benefit commences, as published by Salomon
          Brothers, Inc., or any successor thereto, or as determined by the
          Chief Financial Officer of the Company; or

               (z) An annual benefit of twenty-five percent (25%) of the total
          deferrals and Company Contributions made as of the date of the
          Participant's death.

     A Participant may change an election under this Section 6.6.2 once per Plan
     Year on a form acceptable to the Committee and shall only be effective upon
     delivery to the Company. If the Participant fails to select the form of the
     pre-retirement death benefit, the pre-retirement death benefit will be paid
     in the form of semimonthly payments over a ten-year period.";

and (b) deleting the reference to "Section 6.6.2(a)" and replacing it with a
reference to "Section 6.6.2(y)" in the fifth sentence thereof.

     15.  Section 6.6.4 of the Plan is amended by adding the following new
sentence after the third sentence thereof:

     "In the event a Participant is married at the time he or she designates a
     beneficiary other than his or her spouse, such designation will not be
     valid unless the Participant's spouse consents in writing to such
     designation."

     16.  Section 11.2 of the Plan is amended by deleting the words "then
current H&R Block Profit Sharing Retirement" and replacing them with the word
"Qualified".


                                       4
<PAGE>   5


     17.  Except as modified in this Amendment No. 5, the Plan shall remain in
full force and effect, including the Company's right to amend or terminate the
Plan as set forth in Article 9 of the Plan.


                                               H&R BLOCK, INC.


                                               By:
                                                   -----------------------------

                                               Its:
                                                   -----------------------------






                                       5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>c59093ex10-4.txt
<DESCRIPTION>EXECUTIVE SURVIVOR PLAN (AS AMENDED AND RESTATED)
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.4









                                 H&R BLOCK, INC.

                             EXECUTIVE SURVIVOR PLAN


















                      AMENDED AND RESTATED JANUARY 1, 2001


<PAGE>   2
                                 H&R BLOCK, INC.
                             EXECUTIVE SURVIVOR PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
ARTICLE 1  DEFINITIONS .........................................................................................  1

ARTICLE 2  POLICY RIGHTS AND OBLIGATIONS .......................................................................  4

         Section 2.1       Purchase of Policies.................................................................  4
         Section 2.2       Ownership of Policies ...............................................................  4
         Section 2.3       Payment of Premiums .................................................................  4
         Section 2.4       Designation of Policy Beneficiary ...................................................  4
         Section 2.5       Assignment by Participant ...........................................................  5
         Section 2.6       Company's Rights in Policies ........................................................  5
         Section 2.7       Limitations on Company's Rights in Policy ...........................................  5
         Section 2.8       Collection of Death Proceeds ........................................................  5
         Section 2.9       Termination of Participant's Participation in the Plan During the
                           Participant's Lifetime ..............................................................  6
         Section 2.10      Insurer not a Party .................................................................  7

ARTICLE 3  ADMINISTRATION AND CLAIMS PROCEDURE .................................................................  7

         Section 3.1       Designation of Fiduciary and Administration .........................................  7
         Section 3.2       Claim ...............................................................................  7
         Section 3.3       Claim Decision ......................................................................  8
         Section 3.4       Request for Review ..................................................................  8
         Section 3.5       Review of Decision ................................................................... 8

ARTICLE 4  MISCELLANEOUS .......................................................................................  8

         Section 4.1       Amendment or Termination ............................................................  8
         Section 4.2       Binding Effect ....................................................................... 8
         Section 4.3       Notice................................................................................ 9
         Section 4.4       Governing Law......................................................................... 9
         Section 4.5       No Contract of Employment ............................................................ 9
         Section 4.6       Gender, Singular and Plural .......................................................... 9
         Section 4.7       Captions ............................................................................. 9
</TABLE>




                                       i
<PAGE>   3


<TABLE>
<S>                                                                                                             <C>
         Section 4.8       Validity ............................................................................. 9
         Section 4.9       Withholding .......................................................................... 9

APPENDIX A  IRREVOCABLE ASSIGNMENT OF BENEFITS UNDER THE H&R BLOCK, INC. EXECUTIVE SURVIVOR PLAN .............. A-1
</TABLE>
















                                       ii
<PAGE>   4

                                 H&R BLOCK, INC.
                             EXECUTIVE SURVIVOR PLAN


     The H&R Block, Inc. Executive Survivor Plan as amended and restated herein
is made and entered into as of this ___ day of _____________, 2000, by the
Company.

     WHEREAS, effective June 1, 1990, the Company adopted the H&R Block, Inc.
Executive Survivor Plan;

     WHEREAS, effective January 1, 2000, the Company adopted an amendment to the
Plan; and

     WHEREAS, the Company wishes to amend and restate the Plan, pursuant to the
rights retained by it in Section 9.2 of the Plan to amend the Plan by written
instrument signed by the Company.

     NOW, THEREFORE, in consideration of the premises, the Company hereby amends
and restates the Plan to read as follows:

                                    ARTICLE 1

                                   DEFINITIONS

     Except as may otherwise be provided in the Policies, the following terms
shall have the meaning hereinafter indicated whenever used in this Plan with
initial capital letters:

     AFFILIATE. "Affiliate" means any of the following entities: HRB Management,
Inc.; H&R Block Services, Inc.; H&R Block Enterprises, Inc.; H&R Block Eastern
Enterprises, Inc.; H&R Block Texas Enterprises, L.P.; H&R Block Canada, Inc.;
H&R Block Limited; Block Financial Corporation; H&R Block Financial Advisors,
Inc.; Option One Mortgage Corporation; H&R Block Mortgage Corporation, a
Massachusetts corporation; H&R Block Mortgage Corporation, an Ontario
corporation, or their respective successors in interest; and such other entities
as may be designated by the Company from time to time.

     COMPANY. "Company" means H&R Block, Inc., or any successor in interest.

     COMPANY'S CASH VALUE INTEREST. "Company's Cash Value Interest" means, with
respect to each Policy, as of the date of determination, the amount of the
premiums on such Policy paid by the Company or the Designated Subsidiary for the
Participant's Basic Survivor Benefit under this Plan, less any outstanding
indebtedness incurred by the Company or the Designated Subsidiary and secured by
such Policy, including any unpaid interest on such indebtedness.

     CASH SURRENDER VALUE. "Cash Surrender Value," with respect to each Policy,
shall have the meaning stated in the Policy.



                                       1
<PAGE>   5
     DESIGNATED SUBSIDIARY. "Designated Subsidiary" means a direct or indirect
majority-owned subsidiary of the Company designated by the Compensation
Committee of the Board of Directors of the Company to designate the Insurer,
purchase Policies, own Policies, pay premiums, furnish income statements to
Participants, recover the Company's Cash Value Interest in a Policy, perform
other obligations of the Company under the Plan or exercise the rights of the
Company under the Plan. Until otherwise designated by the Compensation Committee
of the Board of Directors of the Company, the Designated Subsidiary shall be HRB
Management, Inc.

     ENTRY DATE. "Entry Date," with respect to a Participant, means the January
1, or such other date as approved by the Compensation Committee of the Board of
Directors of the Company, coincident with or immediately following the date an
individual satisfies the definition of a Participant.

     INSURER. "Insurer" means Nationwide Life Insurance Company and/or one or
more insurance companies as may be designated by the Company or the Designated
Subsidiary from time to time.

     PARTICIPANT. "Participant" means an individual employed by an Affiliate who
(a) is (i) a Vice President or more senior officer of the Company or the
Affiliate; or (ii) was employed by a Tax Subsidiary as a Regional Director,
Regional Franchise Director or Assistant Regional Director as of October 26,
1999, for so long as he or she continues in such position or in a more senior
level position; or (iii) is employed by a Tax Subsidiary as a Regional Director
or Regional Franchise Director after October 26, 1999, for so long as he or she
continues in such position or in a more senior level position; or (iv) was
eligible to participate in the Plan during the 1999 Plan Year, for so long as he
or she would continue to be eligible under the eligibility requirements
applicable to the 1999 Plan Year; or (v) has been selected by the Compensation
Committee of the Company's Board of Directors as eligible to participate in the
Plan, and (b) has elected to participate in the Plan.

                  PARTICIPANT'S CURRENT ANNUAL COMPENSATION. For a Participant
who derives a majority of his or her compensation from salary and other forms of
compensation other than commissions, "Participant's Current Annual Compensation"
means the total annual base salary payable to the Participant at the salary rate
in effect on the first day of the Plan Year with respect to which the
Participant's Current Annual Compensation is being calculated, including the
amount of any salary reduction contributions to any 401(k) Plan sponsored by the
applicable Affiliate or in which the applicable Affiliate participates, the H&R
Block Deferred Compensation Plan for Executives, as Amended and Restated, and/or
any Internal Revenue Code Section 125 Plan sponsored by the applicable Affiliate
or in which the applicable Affiliate participates. For a Participant who derives
a majority of his or her compensation from commissions, "Participant's Current
Annual Compensation" means the average of the commissions earned by such
Participant during each of the two calendar years immediately preceding the Plan
Year with respect to which the Participant's Current Annual Compensation is
being calculated, including the amount of any salary reduction contributions to
any 401(k) Plan sponsored by the applicable Affiliate or in which the applicable
Affiliate participates, the H&R Block Deferred Compensation Plan for Executives,
as Amended and Restated, and/or



                                       2
<PAGE>   6

any Internal Revenue Code Section 125 Plan sponsored by the applicable Affiliate
or in which the applicable Affiliate participates.

     PARTICIPANT'S BASIC SURVIVOR BENEFIT. "Participant's Basic Survivor
Benefit" means three times the Participant's Current Annual Compensation.

     PARTICIPANT'S SUPPLEMENTAL SURVIVOR BENEFIT. "Participant's Supplemental
Survivor Benefit," if elected by the Participant on a form provided by the
Company, means that multiple (one or two) of the Participant's Current Annual
Compensation, selected by the Participant on the form provided by the Company,
but in no event may the Participant elect to receive a Supplemental Survivor
Benefit of less than $50,000.

     PLAN. "Plan" means the H&R Block, Inc. Executive Survivor Plan.

     PLAN BENEFICIARY DESIGNATION. "Plan Beneficiary Designation" means a
written agreement in a form approved by the Company and executed by a
Participant pursuant to which the Participant designates the beneficiary or
beneficiaries to receive the amounts to which the Participant is entitled upon
the Participant's death, as provided in the Plan.

     PLAN YEAR. "Plan Year" means a calendar year.

     POLICIES/POLICY. "Policies" means the polices of life insurance on the
Participants' lives acquired from the Insurer to provide the life insurance
benefits under the Plan. "Policy" means one of the Policies.

     POLICY ANNIVERSARY DATE. "Policy Anniversary Date," with respect to each
Policy, shall have the meaning stated in such Policy.

     PREMIUM. "Premium," with respect to a Policy, shall have the meaning stated
in the Policy.

     RETIREMENT/RETIRED. "Retirement" means the termination of the Participant's
employment with the Company or an Affiliate in the case where (a) the
Participant has completed a minimum of 10 years of service as a full-time
employee with the Company or an Affiliate and has attained age 55; or (b) the
Participant has attained age 65. A Participant is "Retired" following his or her
Retirement.

     SEPARATE ACCOUNT. "Separate Account," with respect to each Policy, shall
have the meaning stated in the Policy.

     TAX SUBSIDIARY. "Tax Subsidiary" means H&R Block Enterprises, Inc., H&R
Block Eastern Enterprises, Inc., or H&R Block Texas Enterprises, L.P.

     TOTAL DISABILITY/TOTALLY DISABLED. "Total Disability" and "Totally
Disabled" shall be defined for purposes of this Plan as defined under the group
long-term disability plan then in existence for the Affiliate that is then (or
most recently was) the employer of the Participant.



                                       3
<PAGE>   7
                                    ARTICLE 2

                          POLICY RIGHTS AND OBLIGATIONS

     2.1  PURCHASE OF POLICIES. The Company or the Designated Subsidiary shall
purchase the Policies from the Insurer. The Company shall take all necessary
action to cause the Insurer to issue the Policies or which may be necessary to
cause the Policies to conform to the provisions of the Plan. Each Participant
shall take any action required to cause the Insurer to issue the Policy insuring
his or her life or to cause such Policy to conform to the provisions of the
Plan. The Policies will be subject to the terms and conditions of the Plan and
of the beneficiary designations of the Policies filed with the Insurer.

     2.2  OWNERSHIP OF POLICIES. The Company or the Designated Subsidiary shall
be the sole and absolute owner of the Policies, and may exercise all ownership
rights granted to the owner thereof by the terms of the Policies, including, but
not limited to, the right to elect and to change the Death Benefit Option, the
Face Amount of Insurance, and the allocation of the Separate Account among the
various investment options from time to time available under the Policy, except
as may otherwise be provided in this Plan.

     2.3  PAYMENT OF PREMIUMS.

          2.3.1. PAYMENT OF PREMIUM FOR BASIC SURVIVOR BENEFIT.
Contemporaneously with the purchase of a Policy, and in each subsequent Plan
Year until the first to occur of termination of participation in the Plan by the
Participant insured by such Policy or such Participant's Retirement, the Company
or the Designated Subsidiary shall pay an amount equal to the Premium with
respect to such Policy to the Insurer. The Company or, if applicable, the
Designated Subsidiary shall have no obligation to make any additional premium
payments on such Policy but may, in its sole discretion, make additional premium
payments on such Policy. The Company or the Designated Subsidiary shall annually
furnish the Participant a statement of the amount of income reportable by the
Participant for federal and state income tax purposes, as a result of the
insurance protection provided the Participant's beneficiary under the Plan.

          2.3.2 PAYMENT OF PREMIUM FOR SUPPLEMENTAL SURVIVOR BENEFIT. In each
Plan Year for which a Participant elects a Participant's Supplemental Survivor
Benefit, the Company or the Designated Subsidiary shall pay an amount equal to
the premium required for the Participant's Supplemental Survivor Benefit to the
Insurer. The Participant shall reimburse the Company or the Designated
Subsidiary for such premium payment through after-tax payroll deductions made by
the applicable Affiliate ratably over the Plan Year and forwarded by such
Affiliate to the Company or the Designated Subsidiary.

     2.4  DESIGNATION OF POLICY BENEFICIARY. Each Participant shall execute a
Plan Beneficiary Designation. In the event a Participant is married at the time
he or she designates a beneficiary other than his or her spouse, such
designation will not be valid unless the Participant's spouse consents in
writing to such designation on a form approved by the Company. The Participant
or the Participant's assignee may thereafter at any time and from time to time
execute a new Plan Beneficiary Designation, which shall supersede any and all



                                       4
<PAGE>   8


prior Plan Beneficiary Designations, with respect to such Participant, upon the
Company's receipt of the new Plan Beneficiary Designation. The Company or the
Designated Subsidiary shall execute and deliver to the Insurer the forms
necessary to designate the beneficiary or beneficiaries listed on the
Participant's Plan Beneficiary Designation and itself as beneficiaries of the
Policy on the Participant's life in the amounts to which they are entitled under
this Plan upon the Participant's death. Except upon receipt of a new Plan
Beneficiary Designation, while the Plan is in effect with respect to a
Participant, neither the Company nor the Designated Subsidiary shall terminate,
alter or amend the beneficiary designation filed with the Insurer with respect
to the amount to which the Participant's beneficiary or beneficiaries are
entitled upon the Participant's death without the express written consent of the
Participant or the Participant's assignee.

     2.5  ASSIGNMENT BY PARTICIPANT. Each Participant shall have the right to
absolutely and irrevocably assign by gift all of his or her right, title and
interest in and to the Plan and to the Policy insuring his or her life to an
assignee. This right shall be exercisable by the execution and delivery to the
Company of a written assignment, in substantially the form of Exhibit A. Upon
receipt of such written assignment executed by the Participant and duly accepted
by the assignee thereof, the Company shall consent thereto in writing, and shall
thereafter treat the Participant's assignee as the sole owner of all of the
Participant's right, title and interest in and to the Plan and in and to the
Policy insuring the Participant's life. Thereafter, the Participant shall have
no right, title or interest in and to the Plan or the Policy insuring his or her
life, all such rights being vested in and exercisable only by such assignee.

     2.6  COMPANY'S RIGHTS IN POLICIES.

          2.6.1 COMPANY'S RIGHT UPON MERGER OR ACQUISITION. In the event the
Company or the Designated Subsidiary is involved in a merger or acquisition, the
Company or Designated Subsidiary may assign or transfer any one or more of the
Policies to a successor entity under a merger or acquisition without the consent
of any Participant or any Participant's assignee.

          2.6.2 ALLOCATION OF SEPARATE ACCOUNT. In addition to the other rights
of the Company or the Designated Subsidiary in the Policies, the Company or the
Designated Subsidiary shall have the sole authority to direct the manner in
which the Separate Account of each Policy shall be allocated among the various
investment options from time to time available under the Policy and to change
such allocation from time to time, as provided for in the Policy.

     2.7  LIMITATIONS ON COMPANY'S RIGHTS IN POLICY. Except as otherwise
provided in Section 2.6.1 above, while the Plan is in force with respect to a
Participant, neither the Company nor the Designated Subsidiary shall sell,
assign, transfer, surrender or cancel the Policy insuring the life of such
Participant without, in any such case, the express written consent of such
Participant or the Participant's assignee.

     2.8  COLLECTION OF DEATH PROCEEDS.

          2.8.1 COLLECTION OF DEATH PROCEEDS. Upon the death of a Participant,



                                       5
<PAGE>   9

the Company and, if applicable, the Designated Subsidiary shall cooperate with
the beneficiary or beneficiaries designated by the Participant or the
Participant's assignee to take whatever action is necessary to collect the death
benefit provided under the Policy insuring the life of the Participant; when
such benefit has been collected and paid as provided herein, the Participant's
participation in this Plan shall terminate.

          2.8.2 RIGHTS OF PARTIES TO DEATH PROCEEDS. Upon the death of a
Participant while the Plan is in effect with respect to such Participant, an
amount of the death benefit provided under the Policy insuring such
Participant's life equal to the Company's Cash Value Interest in such Policy
shall be paid directly to the Company or, if applicable, the Designated
Subsidiary. The lesser of (a) the sum of the Participant's Basic Survivor
Benefit and, if any, the Participant's Supplemental Survivor Benefit, or (b) the
balance of the insurance death benefits provided under the Policy remaining
after payment to the Company or the Designated Subsidiary of the Company's Cash
Value Interest shall be paid directly to the beneficiary or beneficiaries
designated by the Company or the Designated Subsidiary at the direction of
Participant or the Participant's assignee in the manner and in the amount or
amounts provided in the beneficiary designation provision of the Policy. The
balance of the insurance death benefits provided under the Policy, if any, shall
be paid to the Company or, if applicable, to the Designated Subsidiary.

          2.8.3 GENERAL INSTRUCTIONS REGARDING PAYMENT OF DEATH BENEFIT. In no
event shall the amount payable to the Company or the Designated Subsidiary with
respect to a Policy while the Plan is in effect with respect to such Policy
exceed the insurance death benefits of such Policy payable at the death of the
Participant who is insured by such Policy. No amount shall be paid from the
death benefit of a Policy insuring the life of a Participant to the beneficiary
or beneficiaries designated by the Participant or the Participant's assignee
until the full amount due the Company or the Designated Subsidiary with respect
to such Policy has been paid.

          2.8.4 REFUND OF PREMIUMS. Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no death benefit is
payable under a Policy upon the death of the Participant insured by such Policy
and in lieu thereof the Insurer refunds all or any part of the premiums paid for
the Policy, the Company or the Designated Subsidiary and the beneficiary or
beneficiaries designated by the Participant or the Participant's assignee shall
have the unqualified right to share such premiums in the same proportions as the
contributions of the Company or, if applicable, the Designated Subsidiary and
the Participant toward such premiums.

     2.9  TERMINATION OF PARTICIPANT'S PARTICIPATION IN PLAN DURING THE
PARTICIPANT'S LIFETIME.

          2.9.1 AUTOMATIC TERMINATION EVENTS. A Participant's participation in
the Plan shall terminate with respect to any Participant during the
Participant's lifetime, without notice, upon the occurrence of any of the
following events: (a) total cessation of the Company's business not resulting
from merger or consolidation; (b) bankruptcy, receivership or dissolution of the
Company; (c) termination of Participant's employment by an Affiliate (other than
by reason of the Participant's death, the Participant's Total Disability,
acceptance



                                       6
<PAGE>   10

of employment by another Affiliate, or the Participant's Retirement prior to the
seventh anniversary of his or her Entry Date); (d) in the case of a Participant
who has Retired prior to the seventh anniversary of the Participant's Entry
Date, the seventh anniversary of the Participant's Entry Date, (e) a change in
the Participant's employment by an Affiliate such that he or she is no longer a
Participant, as defined in Article 1 of the Plan, or (f) in the case of a
Participant who is Totally Disabled, (i) cessation of his or her Total
Disability, unless he or she resumes his or her employment with an Affiliate, or
(ii) his or her attainment of age 65.

          2.9.2 DISPOSITION OF POLICY UPON TERMINATION OF PARTICIPANT'S
PARTICIPATION IN THE PLAN. If the Plan terminates with respect to any
Participant during the Participant's lifetime as provided above, then following
such termination, the Company or, if applicable, the Designated Subsidiary shall
recover the Company's Cash Value Interest in the Policy by exercising such of
the powers retained by the Company or Designated Subsidiary as owner of the
Policy, including but not limited to the power to borrow or withdraw the Cash
Surrender Value of the Policy, as the Company or Designated Subsidiary, in its
sole discretion, deems appropriate. After the Company or Designated Subsidiary
has recovered the Company's Cash Value Interest, the Company or Designated
Subsidiary shall execute the forms required by the Insurer to transfer the
Policy to the Participant or the Participant's assignee.

     2.10 INSURER NOT A PARTY. The Insurer shall be fully discharged from
its obligations under each Policy by payment of the Policy death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall the Insurer be considered a party to
the Plan, or any modification or amendment of the Plan. No provision of the
Plan, nor of any modification or amendment of the Plan, shall in any way be
construed as enlarging, changing, varying or in any other way affecting the
obligations of the Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by the beneficiary
designation executed by the Company or the Designated Subsidiary and filed with
the Insurer in connection with the Plan.

                                    ARTICLE 3

                       ADMINISTRATION AND CLAIMS PROCEDURE

     3.1  DESIGNATION OF FIDUCIARY AND ADMINISTRATION. The Company is hereby
designated as the named fiduciary under this Plan. The Company shall have
authority to control and manage the operation and administration of this Plan,
and it shall be responsible for establishing and carrying out a funding policy
and method consistent with the objectives of this Plan. The Company has the
power and discretion to construe the provisions of the Plan and to determine all
questions concerning eligibility, participation and benefits. Any such decision
made by the Company will be binding on all individuals, Participants, and
beneficiaries, and is intended to be subject to the most deferential standard of
judicial review. The decision of the Company upon all matters within the scope
of its authority will be final and binding

     3.2  CLAIM. A person who believes that he or she is being denied a benefit
to which he or she is entitled under this Plan (hereinafter referred to as a
"Claimant") may file a



                                       7
<PAGE>   11

written request for such benefit with the Company, setting forth his or her
claim. The request must be addressed to the President of the Company at its then
principal place of business.

     3.3  CLAIM DECISION. Upon receipt of a claim, the Company shall advise the
Claimant that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Company may, however, extend
the reply period for an additional ninety (90) days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Plan on which such denial is
based; (c) a description of any additional material or information necessary for
the Claimant to perfect his or her claim and an explanation why such material or
such information is necessary; (d) appropriate information as to the steps to be
taken if the Claimant wishes to submit the claim for review; and (e) the time
limits for requesting a review under paragraph 3.3 and for review under
paragraph 3.4 hereof.

     3.4  REQUEST FOR REVIEW. Within sixty (60) days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the President of the Company review the determination of the
Company. Such request must be addressed to the President of the Company, at its
then principal place of business. The Claimant or his or her duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Company. If the Claimant
does not request a review of the Company's determination by the President of the
Company within such sixty (60) day period, he or she shall be barred and
estopped from challenging the Company's determination.

     3.5  REVIEW OF DECISION. Within sixty (60) days after the President's
receipt of a request for review, he or she, or his or her designee, will review
the Company's determination. After considering all materials presented by the
Claimant, the President, or his or her designee, will render a written opinion,
written in a manner calculated to be understood by the Claimant, setting forth
the specific reasons for the decision and containing specific references to the
pertinent provisions of this Plan on which the decision is based. If special
circumstances require that the sixty (60) day time period be extended, the
President will so notify the Claimant and will render the decision as soon as
possible, but no later than one hundred twenty (120) days after receipt of the
request for review.

                                    ARTICLE 4

                                  MISCELLANEOUS

     4.1  AMENDMENT OR TERMINATION. This Plan may be amended or terminated by
the Company at any time, by a written instrument signed by the Company.

     4.2  BINDING EFFECT. The Plan shall be binding upon and inure to the
benefit of the Company and its successors and assigns, and the Participants,
their successors, assigns, heirs, executors, administrators and beneficiaries.



                                       8
<PAGE>   12

     4.3  NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of the Plan shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand is
mailed to the Company or a Participant, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known address as
shown on the records of the Company. The date of such mailing shall be deemed
the date of notice, consent or demand.

     4.4  GOVERNING LAW. This Plan, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Missouri.

     4.5  NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed
to be a contract of employment, nor as conferring upon any Participant the right
to continue in the employ of any Affiliate in any capacity.

     4.6  GENDER, SINGULAR AND PLURAL. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.

     4.7  CAPTIONS. The captions of the articles, sections, and paragraphs of
this Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.

     4.8  VALIDITY. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.

     4.9  WITHHOLDING. The applicable Affiliate shall withhold from each
Participant's compensation any state, local or federal income or employment
taxes required to be withheld as a result of the benefit provided the
Participant under this Plan at such time and in such manner it deems
appropriate.

     IN WITNESS WHEREOF, H&R Block, Inc. has executed the Plan, in duplicate, as
of the day and year first above written.


                                        H&R BLOCK, INC.

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------






                                       9
<PAGE>   13

                                    EXHIBIT A

                            IRREVOCABLE ASSIGNMENT OF
                                 BENEFITS UNDER
                                 H&R BLOCK, INC.
                            EXECUTIVE SURVIVIOR PLAN

             THIS ASSIGNMENT, dated this       day of                .
                                         ------       ---------------

             WITNESSETH THAT:

             WHEREAS, the undersigned (the "Assignor") is a Participant
participating in the H&R Block, Inc. Executive Survivor Plan (the "Plan"),
effective June 1, 1990, as amended and restated effective January 1, 2001,
sponsored by H&R Block, Inc. (the "Company"), which Plan confers upon the
undersigned certain rights and benefits with regard to one or more policies of
insurance insuring the Assignor's life; and

             WHEREAS, pursuant to the provisions of said Plan, the Assignor
retained the right, exercisable by the execution and delivery to the Company of
a written form of assignment, to absolutely and irrevocably assign all of the
Assignor's right, title and interest in and to said Plan to an assignee; and

             WHEREAS, the Assignor desires to exercise said right;

             NOW, THEREFORE, the Assignor, without consideration, and intending
to make a gift, hereby absolutely and irrevocably assigns, gives, grants and
transfers to ______________, (the "Assignee") all of the Assignor's right, title
and interest in and to the Plan and said policies of insurance, intending that,
from and after this date, the Plan be solely between the Company and the
Assignee and that hereafter the Assignor shall neither have nor retain any
right, title or interest therein.


                                             --------------------------------
                                             Assignor







                                      A-1
<PAGE>   14
                            ACCEPTANCE OF ASSIGNMENT

             The Assignee hereby accepts the above assignment of all right,
title and interest of the Assignor therein in and to the Plan, and hereby agrees
to be bound by all of the terms and conditions of said Plan, as if the original
Participant thereunder.


                                            -------------------------------
                                            Assignee

Dated:
       ------------------


                              CONSENT TO ASSIGNMENT

             The Company hereby consents to the foregoing assignment of all of
the right, title and interest of the Assignor in and to the Plan, to the
Assignee designated therein. The Company hereby agrees that, from and after the
date hereof, the Company shall look solely to such Assignee for the performance
of all obligations under said Plan which were heretofore the responsibility of
the Assignor, shall allow all rights and benefits provided therein to the
Assignor to be exercised only by said Assignee, and shall hereafter treat said
Assignee in all respects as if the original Participant thereunder.


                                        H&R BLOCK, INC.

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

Dated:
        ------------------






                                      A-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>6
<FILENAME>c59093ex27.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          APR-30-2001
<PERIOD-END>                               OCT-31-2000
<CASH>                                         247,679
<SECURITIES>                                    55,082
<RECEIVABLES>                                3,041,778
<ALLOWANCES>                                    46,915
<INVENTORY>                                          0
<CURRENT-ASSETS>                             3,434,177
<PP&E>                                         248,407<F1>
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                               5,308,500
<CURRENT-LIABILITIES>                        3,537,099
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         1,089
<OTHER-SE>                                     833,439
<TOTAL-LIABILITY-AND-EQUITY>                 5,308,500
<SALES>                                              0
<TOTAL-REVENUES>                               641,584
<CGS>                                                0
<TOTAL-COSTS>                                  823,185
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                              (176,349)
<INCOME-TAX>                                  (74,948)
<INCOME-CONTINUING>                          (101,401)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 (101,401)
<EPS-BASIC>                                     (1.10)
<EPS-DILUTED>                                   (1.10)
<FN>
<F1>PP&E BALANCE IS NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION.
</FN>


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
