0000012659
2008-07-31
0000012659
2008-04-30
0000012659
2009-07-31
0000012659
2008-05-01
2008-07-31
0000012659
2009-04-30
0000012659
2009-08-31
0000012659
2009-05-01
2009-07-31
xbrli:pure
iso4217:USD
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false
--04-30
2009-07-31
10-Q
0000012659
335306120
Yes
Large Accelerated Filer
6539980861
H&R Block, Inc.
Yes
Yes
327141000
334533000
<div>
<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.4pt">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light">
<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Earnings
(Loss) Per Share and Stockholders’ Equity</span></b>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.4pt">
<a id="OLE_LINK1" name="OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Basic and
diluted loss per share is computed using the two-class method
per</span></a> <span style=
"mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
FASB Staff Position EITF 03-6-1, “</span></span><span style=
"mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">Determining
Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities”</span></span>
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
(FSP 03-6-1)</span></span><span style=
"mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">. See
note 13 for additional information. The two-class method is
an earnings allocation formula that determines net income per
share for each class of common stock and participating
security according to dividends declared and participation
rights in undistributed earnings. Per share amounts are
computed by dividing net income from continuing operations
attributable to common shareholders by the weighted average
shares outstanding during each period. The dilutive effect of
potential common shares is included in diluted earnings per
share except in those periods with a loss from continuing
operations. Diluted earnings per share excludes the impact of
shares of common stock issuable upon the lapse of certain
restrictions or the exercise of options to purchase 19.4
million shares and 25.7 million shares for the three months
ended July 31, 2009 and 2008, respectively, as the effect
would be antidilutive due to the net loss from continuing
operations during each period.</span></span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> The computations of basic and diluted loss per
share from continuing operations are as
follows:</span></span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.4pt right 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span></span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.4pt right 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 2">                                                                                                                                                  </span>
(in 000s, except per share amounts)</span></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: right 369.0pt 6.5in; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Three months ended July 31,<span style=
"mso-tab-count: 1">                                                                                               
   </span>2009<span style=
"mso-tab-count: 1">                               
   </span> 2008</span></span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 0in 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss from continuing operations attributable to
shareholders<span style="mso-tab-count: 1">          </span>
$<span style="mso-tab-count: 1">            </span>   
 (130,617)<span style=
"mso-tab-count: 1">              </span> $<span style=
"mso-tab-count: 1">         </span> (128,423)</span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 0in 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Income allocated to participating securities (nonvested
shares)<span style=
"mso-tab-count: 1">                     </span><u><span style="mso-tab-count: 1">          
          </span> (367</u>)<span style=
"mso-tab-count: 1">              </span> <u><span style=
"mso-tab-count: 1">                   </span>
(199</u>)</span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 0in 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss from continuing operations attributable to common
shareholders<span style="mso-tab-count: 1">  </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">         </span> (130,984</u>)<span style=
"mso-tab-count: 1">              </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">        </span>
(128,622</u>)</span></span>
</p>
<p class="MsoHeader" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: 27.0pt .75in 99.35pt 184.5pt decimal 3.25in left 247.5pt decimal 301.7pt left 4.25in decimal 369.0pt 382.3pt left 400.3pt decimal 459.35pt; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 0in 99.35pt 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Basic weighted average common shares<span style=
"mso-tab-count: 2">                                                                             </span>
 334,533<span style=
"mso-tab-count: 2">                            </span>
327,141</span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 0in 9.0pt 99.35pt 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Potential dilutive shares from stock options and nonvested
shares<span style=
"mso-tab-count: 2">                                       </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                                      </span>
-<span style="mso-spacerun: yes">   </span></span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 0in 9.0pt 99.35pt 4.25in decimal 369.0pt left 405.0pt decimal 6.5in left 477.0pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Convertible preferred stock<span style=
"mso-tab-count: 1">                                                                                      </span>
<u><span style="mso-tab-count: 1">              
         </span> - <span style=
"mso-spacerun: yes">   </span></u><span style=
"mso-tab-count: 1">               </span> <u><span style=
"mso-tab-count: 1">                      </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">   </span></span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 0in .75in 99.35pt 4.25in decimal 369.0pt left 405.0pt decimal 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Dilutive weighted average common shares<span style=
"mso-tab-count: 1">                                                         </span>
<u style="text-underline: double"><span style=
"mso-tab-count: 1">               </span>
334,533</u><span style=
"mso-tab-count: 1">               </span> <u style=
"text-underline: double"><span style=
"mso-tab-count: 1">            </span>
327,141</u></span></span>
</p>
<p class="MsoHeader" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: 27.0pt .75in 99.35pt 184.5pt decimal 3.25in left 247.5pt decimal 301.7pt left 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 0in .75in 99.35pt 184.5pt decimal 3.25in left 247.5pt decimal 301.7pt left 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Earnings (loss) per share from continuing
operations:</span></span>
</p>
<p class="MsoHeader" style=
"MARGIN-RIGHT: -4.5pt; tab-stops: 9.0pt .75in 99.35pt 4.25in right 369.0pt left 405.0pt right 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> Basic <span style=
"mso-tab-count: 3">                                                                                                                        </span>
$<span style="mso-tab-count: 1">              </span>
(0.39)<span style="mso-tab-count: 1">               </span>
$<span style="mso-tab-count: 1">              </span>
(0.39)</span></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 9.0pt .75in 99.35pt 4.25in right 369.0pt left 405.0pt right 6.5in">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> Diluted<span style=
"mso-tab-count: 4">                                                                                                                                       </span>
(0.39)<span style=
"mso-tab-count: 2">                                </span>
(0.39)</span></span>
</p>
<div style=
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<p class="MsoHeader" style=
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<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span></span>
</p>
</div>
<p class="MsoHeader" style=
"LINE-HEIGHT: 6pt; tab-stops: 9.0pt 3.5in decimal 310.5pt left 369.0pt decimal 427.5pt; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman,serif; mso-bidi-font-size: 10.0pt">
  </span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"mso-tab-count: 1">    </span></span> <span style=
"mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">The
weighted average shares outstanding <a id="OLE_LINK18" name=
"OLE_LINK18">for the three months ended</a> July 31, 2009
increased to 334.5 million from 327.1 million for the three
months ended July 31, 2008, primarily due to the issuance of
shares of our common stock in October 2008.</span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> During the three months ended July 31, 2009 and
2008, we issued 1.4 million and 2.3 million shares of common
stock, respectively, due to the exercise of stock options,
employee stock purchases and vesting of nonvested
shares.</span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> During the three months ended July 31, 2009, we
acquired 0.2 million shares of our common stock at an
aggregate cost of $3.5 million, and during the three months
ended July 31, 2008, we acquired 0.2 million shares at an
aggregate cost of $4.1 million. Shares acquired during these
periods represented shares swapped or surrendered to us in
connection with the vesting of nonvested shares and the
exercise of stock options.</span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> At July 31, 2009, we had accrued but unpaid
dividends totaling $50.5 million. This amount is included in
accounts payable, accrued expenses and other current
liabilities on the condensed consolidated balance
sheet.</span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt">
<span style="mso-bookmark: OLE_LINK1"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> During the three months ended July 31, 2009, we
granted 4.0 million stock options and 0.8 million nonvested
shares and units in accordance with our stock-based
compensation plans. The weighted average fair value of
options granted was $3.14 for management options and $2.70
for options granted to our seasonal associates. Stock-based
compensation expense of our continuing operations totaled
$7.3 million and $4.5 million for the three months ended July
31, 2009 and 2008, respectively. At July 31, 2009,
unrecognized compensation cost for options totaled $17.0
million, and for nonvested shares and units totaled $26.4
million.</span></span>
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4048000
1318000
-0.41
-0.40
-0.39
-0.39
-0.02
-0.01
351947000
396027000
543967000
330145000
705945000
648470000
625075000
643978000
-11639000
-2849000
836477000
824212000
128541000
129433000
5359722000
4545762000
2571080000
1828146000
664897000
245463000
1654663000
1006303000
-419434000
-648360000
<div>
<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light">
<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Commitments
and Contingencies</span></b>
</p>
<p class="MsoBodyText2">
<span style=
"FONT-WEIGHT: normal; FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-weight: bold">
Changes in deferred revenue balances related to our Peace of
Mind (POM) program, the current portion of which is included
in accounts payable, accrued expenses and other current
liabilities and the long-term portion of which is included in
other noncurrent liabilities in the condensed consolidated
balance sheets, are as follows:</span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt right 6.5in">
<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
<div style=
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<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Three months ended July 31,<span style=
"mso-tab-count: 1">                                                                                 </span>
2009<span style=
"mso-tab-count: 1">                                              </span>
2008</span>
</p>
</div>
<p class="MsoBodyText" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Balance, beginning of period<span style=
"mso-tab-count: 1">                                                          </span>
$<span style="mso-tab-count: 1">              </span>
146,807<span style=
"mso-tab-count: 1">                       </span>
$<span style="mso-tab-count: 1">              </span>
140,583</span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Amounts deferred for new guarantees issued<span style=
"mso-tab-count: 2">                                                      </span>
583<span style=
"mso-tab-count: 2">                                                </span>
513</span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Revenue recognized on previous deferrals<span style=
"mso-tab-count: 1">                                  </span>
<u><span style="mso-tab-count: 1">                 </span>
(27,913</u>)<span style=
"mso-tab-count: 1">                      </span>
<u><span style="mso-tab-count: 1">                 </span>
(27,241</u>)</span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Balance, end of period<span style=
"mso-tab-count: 2">                                                                      </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">         </span> 119,477</u><span style=
"mso-tab-count: 1">                       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">              </span> 113,855</u></span>
</p>
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<span style=
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  </span>
</p>
</div>
<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoBodyText" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-size: 9.0pt">
The following table summarizes certain of our other
contractual obligations and commitments:</span>
</p>
<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt">  </span>
</p>
<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
<div style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
As of <span style=
"mso-tab-count: 1">                                                                                                            </span>
July 31, 2009<span style=
"mso-tab-count: 1">                              </span>
April 30, 2009</span>
</p>
</div>
<p class="MsoBodyText" style=
"LINE-HEIGHT: 2pt; tab-stops: 81.35pt 99.35pt center 274.5pt left 4.0in center 355.5pt decimal 5.0in left 5.25in center 436.5pt decimal 6.25in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Franchise Equity Lines of Credit – undrawn
commitment<span style="mso-tab-count: 1">         </span>
$<span style="mso-tab-count: 1">                </span>
35,976<span style=
"mso-tab-count: 1">                       </span>
$<span style="mso-tab-count: 1">                </span>
38,055</span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 9.0pt 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Contingent business acquisition obligations<span style=
"mso-tab-count: 2">                                                   </span>24,504<span style="mso-tab-count: 1">                       </span>
<span style="mso-tab-count: 1">                  </span>
24,165</span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 9.0pt 81.35pt 99.35pt 3.5in decimal 4.5in left 5.25in decimal 6.25in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Media advertising purchase obligation<span style=
"mso-tab-count: 2">                                                          </span>
45,768<span style=
"mso-tab-count: 2">                                          </span>
45,768</span>
</p>
<div style=
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align="left">
<span style=
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  </span>
</p>
</div>
<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 13.5pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> We routinely enter into contracts that include
embedded indemnifications that have characteristics similar
to guarantees. Guarantees and indemnifications of the Company
and its subsidiaries include obligations to protect
counterparties from losses arising from the following: (1)
tax, legal and other risks related to the purchase or
disposition of businesses; (2) penalties and interest
assessed by federal and state taxing authorities in
connection with tax returns prepared for clients; (3)
indemnification of our directors and officers; and (4)
third-party claims relating to various arrangements in the
normal course of business. Typically, there is no stated
maximum payment related to these indemnifications, and the
terms of the indemnities may vary and in many cases are
limited only by the applicable statute of limitations. The
likelihood of any claims being asserted against us and the
ultimate liability related to any such claims, if any, is
difficult to predict. While we cannot provide assurance we
will ultimately prevail in the event any such claims are
asserted, we believe the fair value of guarantees and
indemnifications relating to our continuing operations is not
material as of July 31, 2009.</span>
</p>
<p class="MsoNormal" style=
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<b style="mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt">
<span style="FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">
Discontinued Operations</span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Sand Canyon
Corporation (SCC), formerly Option One Mortgage Corporation,
maintains recourse with respect to loans previously sold or
securitized under indemnification of loss provisions relating
to breach of representations and warranties made to purchasers
or insurers.</span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
At July 31, 2009 and April 30, 2009, our loan repurchase
liability totaled $202.4 million and $206.6 million,
respectively.</span> <span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">This
liability is included in accounts payable, accrued expenses
and other current liabilities on our consolidated balance
sheets.</span>
</p>
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0.14
0.15
0.01
0.01
800000000
800000000
444176510
444176510
4442000
4442000
-134372000
-124844000
360138000
386450000
483524000
489667000
8782000
6093000
854888000
712008000
0
7063000
259698000
101410000
<div>
<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Fair
Value</span></b>
</p>
<p class="MsoNormal" style=
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<a id="OLE_LINK11" name="OLE_LINK11"><span style=
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The following table presents for each hierarchy level the
financial assets that are measured at fair value on both a
recurring and non-recurring basis at July 31,
2009:</span></a>
</p>
<p class="MsoNormal" style=
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<span style=
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"mso-tab-count: 2">                                                               </span>
<span style=
"mso-tab-count: 1">                                                                                                                   </span>
<span style="mso-bidi-font-style: italic">(dollars in
000s)</span></span>
</p>
<div style=
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<span style="FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">
<span style=
"mso-tab-count: 1">                                                                                  </span>
Total<span style=
"mso-tab-count: 1">                  </span> Level
1<span style=
"mso-tab-count: 1">                      </span> Level
2<span style=
"mso-tab-count: 1">                          </span> Level
3</span>
</p>
</div>
<p class="MsoBodyText" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Recurring:</span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Available-for-sale
securities<span style="mso-tab-count: 1">            </span>
$<span style="mso-tab-count: 1">        </span>
42,430<span style="mso-tab-count: 1">           </span>
$<span style="mso-tab-count: 1">          </span>
-<span style="mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 1">               </span> $<span style=
"mso-tab-count: 1">   </span> 42,430<span style=
"mso-tab-count: 1">               </span> $<span style=
"mso-tab-count: 1">              </span> -<span style=
"mso-spacerun: yes">    </span></span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Non-recurring:</span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Impaired mortgage loans</span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">        </span> held for
investment<span style=
"mso-tab-count: 1">                       </span>
<u><span style="mso-tab-count: 1">        </span>
248,529<span style=
"mso-tab-count: 2">                         </span> -
<span style="mso-spacerun: yes">    </span><span style=
"mso-tab-count: 2">                             </span>
-<span style="mso-spacerun: yes">    </span>  <span style=
"mso-tab-count: 2">                        </span>248,529</u></span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 2">                                                                   </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 290,959<span style=
"mso-tab-count: 1">           </span> $<span style=
"mso-tab-count: 1">          </span> -<span style=
"mso-spacerun: yes">    </span> <span style="mso-tab-count: 1">
               </span> $<span style=
"mso-tab-count: 1">    </span> 42,430<span style=
"mso-tab-count: 1">               </span> $<span style=
"mso-tab-count: 1">      </span> 248,529</u></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; tab-stops: 30.65pt 153.0pt decimal 207.0pt left 3.25in decimal 279.0pt left 315.0pt decimal 5.0in left 5.5in decimal 6.25in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
<p class="MsoNormal" style=
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<span style="FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">As
a percentage of total assets<span style=
"mso-tab-count: 2">                          </span>
6.4%<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">  </span> %<span style=
"mso-tab-count: 2">                          </span>
0.9%<span style=
"mso-tab-count: 2">                              </span>
5.5%</span>
</p>
<div style=
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<span style=
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  </span>
</p>
</div>
<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
There were no significant changes to the unobservable inputs
used in determining the fair values of our level 2 and level
3 financial assets.</span>
</p><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><br style="PAGE-BREAK-BEFORE: always"
clear="all" /></span>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
The carrying amounts and estimated fair values of our
financial instruments at July 31, 2009 are as follows:</span>
</p>
<p class="MsoNormal" style="tab-stops: right 6.5in">
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 1">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
(in 000s)</span>
</p>
<div style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 2">                                                                                                                </span>
Carrying<span style=
"mso-tab-count: 1">                                           </span>
Estimated</span>
</p>
</div>
<div style=
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<span style=
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<span style=
"mso-tab-count: 2">                                                                                                                  </span>
Amount<span style=
"mso-tab-count: 1">                                          </span>
Fair Value<span style=
"mso-tab-count: 1">                              </span></span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 2pt; TEXT-ALIGN: justify; tab-stops: 30.65pt 99.0pt decimal 2.0in left 2.25in decimal 207.0pt left 225.0pt decimal 3.75in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 9.0pt 30.65pt 81.4pt 215.0pt decimal 290.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Mortgage loans
held for investment<span style=
"mso-tab-count: 1">                              </span>
$<span style="mso-tab-count: 1">               </span>
707,712<span style=
"mso-tab-count: 1">                              </span>
$<span style="mso-tab-count: 1">             </span>
549,497</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 9.0pt 30.65pt 81.4pt 215.0pt decimal 290.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">IRAs and other
time deposits<span style=
"mso-tab-count: 2">                                                             </span>479,758<span style="mso-tab-count: 2">                                              </span>
479,375</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 4.5pt 9.0pt 30.65pt 81.4pt 215.0pt decimal 290.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Long-term
debt<span style=
"mso-tab-count: 3">                                                                                  </span>
1,038,488<span style=
"mso-tab-count: 2">                                           </span>
1,064,855</span>
</p>
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
</div>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b>
</p>
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75000000
75000000
25000000
25000000
850230000
852018000
<div>
<p class="MsoNormal" style=
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<b><span style=
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<span style="mso-list: Ignore">5.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Goodwill
and Intangible Assets</span></b>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Changes in
the carrying amount of goodwill for the three months ended July
31, 2009 consist of the following:</span>
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<p class="MsoBodyTextIndent2" style=
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<span style=
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"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
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<span style=
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<span style=
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<span style=
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April 30, 2009<span style=
"mso-tab-count: 1">                </span>
Additions<span style="mso-tab-count: 1">            </span>
Impairment<span style=
"mso-tab-count: 1">                         </span>
Other<span style="mso-tab-count: 1">           </span> July
31, 2009</span>
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</div>
<p class="MsoFooter" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: 99.35pt 153.0pt decimal 3.0in left 3.25in decimal 297.0pt left 315.0pt decimal 5.25in left 5.5in decimal 459.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
"tab-stops: 1.25in decimal 2.0in left 166.5pt decimal 220.5pt left 243.0pt decimal 297.0pt left 4.5in decimal 5.25in left 405.0pt decimal 459.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Tax Services<span style=
"mso-tab-count: 1">                </span> $<span style=
"mso-tab-count: 1">      </span> 447,591<span style=
"mso-tab-count: 1">         </span> $<span style=
"mso-tab-count: 1">          </span> 1,004<span style=
"mso-tab-count: 1">         </span> $<span style=
"mso-tab-count: 1">              </span> -<span style=
"mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 1">           </span> $<span style=
"mso-tab-count: 1">          </span> 1,483<span style=
"mso-tab-count: 1">           </span> $<span style=
"mso-tab-count: 1">      </span> 450,078</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 1.25in decimal 2.0in left 166.5pt decimal 220.5pt left 243.0pt decimal 297.0pt left 4.5in decimal 5.25in left 405.0pt decimal 459.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Business Services<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">        </span>
402,639</u><span style="mso-tab-count: 1">         </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">         </span> <u><span style=
"mso-tab-count: 1">                 </span> -<span style=
"mso-spacerun: yes">    </span></u>  <span style=
"mso-tab-count: 1">           </span>  <u><span style=
"mso-tab-count: 1">             </span> (699</u>)<span style=
"mso-tab-count: 1">          </span> <u><span style=
"mso-tab-count: 1">        </span> 401,940</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 1.25in decimal 2.0in left 166.5pt decimal 220.5pt left 243.0pt decimal 297.0pt left 4.5in decimal 5.25in left 405.0pt decimal 459.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Total<span style=
"mso-tab-count: 1">                              </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 850,230</u><span style=
"mso-tab-count: 1">         </span> <a id="OLE_LINK19" name=
"OLE_LINK19"></a><a id="OLE_LINK4" name=
"OLE_LINK4"><span style="mso-bookmark: OLE_LINK19"><u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">          </span></u></span></a> <u style=
"text-underline: double">1,004</u><span style=
"mso-tab-count: 1">         </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">              </span> -<span style=
"mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">           </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">             </span> 784</u><span style=
"mso-tab-count: 1">           </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 852,018</u></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoBodyTextIndent2" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 2pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 369.0pt decimal 441.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 0in 0in 1.0pt 0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
</div>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; LINE-HEIGHT: 6pt; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> We test goodwill for impairment annually at the
beginning of our fourth quarter, or more frequently if events
occur which could, more likely than not, reduce the fair
value of a reporting unit’s net assets below its carrying
value.</span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> We considered the July 21, 2009 notice by M&P
of its intent to terminate the</span> <span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
administrative services agreement</span><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">with RSM
to represent a significant change in circumstances requiring
an interim evaluation of the fair value of our RSM reporting
unit. Goodwill of this reporting unit totaled $372.7 million
at July 31, 2009. The net carrying value of other intangible
assets of RSM totaled $96.0 million at July 31, 2009,
including $50.8 million for an indefinite-lived trade name
asset. We have concluded that, as of July 31, 2009, the fair
value of this reporting unit exceeds its carrying value and
also that the net carrying value of other intangible assets
is recoverable.</span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> Our conclusion is based on our current
assumptions, including, but not limited to, those listed
below.</span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: 13.5pt list .5in left 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Wingdings; mso-fareast-font-family: Wingdings; mso-bidi-font-family: Wingdings">
<span style="mso-list: Ignore">§<span style=
"FONT: 7pt Times New Roman">  </span></span></span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">We have
assumed that our noncompete rights are enforceable.</span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: 13.5pt list .5in left 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Wingdings; mso-fareast-font-family: Wingdings; mso-bidi-font-family: Wingdings">
<span style="mso-list: Ignore">§<span style=
"FONT: 7pt Times New Roman">  </span></span></span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">We have
assumed that, more likely than not, RSM and M&P will
continue to collaborate; or, in the event of a separation,
RSM will successfully establish an alliance with other attest
firms.</span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: 13.5pt list .5in left 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Wingdings; mso-fareast-font-family: Wingdings; mso-bidi-font-family: Wingdings">
<span style="mso-list: Ignore">§<span style=
"FONT: 7pt Times New Roman">  </span></span></span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">We have
assumed that ongoing negotiations between RSM and M&P
will not result in modifications of their relationship that
would be materially adverse to the financial interests of
RSM.</span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: 13.5pt list .5in left 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Wingdings; mso-fareast-font-family: Wingdings; mso-bidi-font-family: Wingdings">
<span style="mso-list: Ignore">§<span style=
"FONT: 7pt Times New Roman">  </span></span></span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">In the
event of a separation, we have made various assumptions
concerning client retention and post-separation operating
margins.</span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 0.5in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: 13.5pt list .5in left 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Wingdings; mso-fareast-font-family: Wingdings; mso-bidi-font-family: Wingdings">
<span style="mso-list: Ignore">§<span style=
"FONT: 7pt Times New Roman">  </span></span></span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">In the
event of a separation, we have assumed M&P would be able
to repay its indebtedness to RSM.</span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt 49.5pt 94.5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> It is difficult to predict the outcome of the
above matters, including the outcome of mitigating factors
that we are currently pursuing. However, it is possible that
changes in our assumptions, based on future events or
circumstances, could result in changes in our fair value
estimates and corresponding impairment charges.<span style=
"mso-spacerun: yes">  </span></span>
</p>
<p class="MsoBodyText" style=
"tab-stops: 13.5pt .75in 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 441.0pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> Intangible assets consist of the
following:</span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt right 6.5in">
<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 211.5pt 387.0pt; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in">
<span style=
"FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman,serif; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                             </span></span>
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2009<span style=
"mso-tab-count: 1">                                                    </span>
April 30, 2009</span>
</p>
</div>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 153.0pt 211.5pt 328.5pt 387.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 0in 0in 1.0pt 0in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                              </span>
Gross<span style=
"mso-tab-count: 2">                                                                  </span>
Gross<span style=
"mso-tab-count: 1">                    </span></span>
</p>
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 153.0pt 211.5pt 328.5pt 387.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 0in 0in 1.0pt 0in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                           </span>
Carrying<span style="mso-tab-count: 1">     </span>
Accumulated<span style=
"mso-tab-count: 1">                               </span>
Carrying<span style="mso-tab-count: 1">     </span>
Accumulated</span>
</p>
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 153.0pt 211.5pt 3.75in 328.5pt 387.0pt 445.5pt; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 0in 0in 1.0pt 0in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                            </span>
Amount<span style="mso-tab-count: 1">      </span>
Amortization<span style=
"mso-tab-count: 1">          </span> Net<span style=
"mso-tab-count: 1">               </span>
Amount<span style="mso-tab-count: 1">      </span>
Amortization<span style=
"mso-tab-count: 1">          </span> Net</span>
</p>
</div>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: .25in .75in 99.35pt 171.0pt decimal 225.0pt left 3.5in decimal 4.25in left 333.0pt decimal 387.0pt left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
"tab-stops: .25in .75in 99.35pt 171.0pt decimal 225.0pt left 3.5in decimal 4.25in left 333.0pt decimal 387.0pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Tax Services:</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Customer
relationships<span style=
"mso-tab-count: 2">           </span> $<span style=
"mso-tab-count: 1">   </span> 54,907<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">   </span> (26,938)<span style=
"mso-tab-count: 1">   </span> $<span style=
"mso-tab-count: 1">   </span> 27,969<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">   </span> 54,655<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">   </span> (25,267)<span style=
"mso-tab-count: 1">   </span> $<span style=
"mso-tab-count: 1">    </span> 29,388</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Noncompete
agreements<span style=
"mso-tab-count: 2">                </span> 23,271<span style=
"mso-tab-count: 2">           </span>  (21,272)<span style=
"mso-tab-count: 2">            </span> 1,999<span style=
"mso-tab-count: 2">            </span> 23,263<span style=
"mso-tab-count: 2">            </span> (20,941)<span style=
"mso-tab-count: 2">             </span> 2,322</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Reacquired franchise
rights <span style="mso-tab-count: 1">  </span>  <span style=
"mso-tab-count: 1">      </span>229,438<span style=
"mso-tab-count: 2">             </span>  (2,942)<span style=
"mso-tab-count: 2">       </span> 226,496<span style=
"mso-tab-count: 2">          </span> 229,438<span style=
"mso-tab-count: 2">             </span> (1,838)<span style=
"mso-tab-count: 2">         </span>  227,600</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Franchise
agreements<span style=
"mso-tab-count: 3">                     </span>
19,201<span style="mso-tab-count: 2">                
 </span> (853)<span style=
"mso-tab-count: 2">          </span> 18,348<span style=
"mso-tab-count: 2">            </span> 19,201<span style=
"mso-tab-count: 2">                </span> (533)<span style=
"mso-tab-count: 2">            </span> 18,668</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Purchased
technology<span style=
"mso-tab-count: 3">                      </span>
12,500<span style="mso-tab-count: 2">               </span>
(4,730)<span style="mso-tab-count: 2">            </span>
7,770<span style="mso-tab-count: 2">            </span>
12,500<span style="mso-tab-count: 2">              </span>
(4,240)<span style="mso-tab-count: 2">             </span>
 8,260</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Trade
name<span style=
"mso-tab-count: 3">                                          </span>
1,325<span style="mso-tab-count: 2">                 </span>
(250)<span style="mso-tab-count: 2">             </span>
1,075<span style="mso-tab-count: 2">               </span>
1,025<span style="mso-tab-count: 2">                 </span>
(217)<span style="mso-tab-count: 2">                 </span>
808</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .25in .75in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Business Services:<span style=
"mso-tab-count: 1">         </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Customer
relationships<span style=
"mso-tab-count: 3">                 </span>146,011<span style="mso-tab-count: 2">          </span>
(113,408)<span style="mso-tab-count: 2">       </span>  
32,603<span style="mso-tab-count: 2">          </span>
 146,040<span style="mso-tab-count: 2">          </span>
(111,017)<span style="mso-tab-count: 2">           </span>
35,023</span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Noncompete
agreements<span style=
"mso-tab-count: 2">                </span> 33,061<span style=
"mso-tab-count: 2">             </span> (20,468)<span style=
"mso-tab-count: 2">        </span>  12,593<span style=
"mso-tab-count: 2">            </span>  33,068<span style=
"mso-tab-count: 2">           </span>   (19,908)<span style=
"mso-tab-count: 2">           </span> 13,160</span>
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<p class="MsoNormal" style=
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<span style=
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<span style="mso-tab-count: 1">  </span> Trade name –
amortizing<span style=
"mso-tab-count: 2">                   </span>
2,600<span style="mso-tab-count: 2">             </span>
(2,600)<span style=
"mso-tab-count: 2">                 </span> -<span style=
"mso-spacerun: yes">    </span>  <span style=
"mso-tab-count: 2">              </span> 2,600<span style=
"mso-tab-count: 2">               </span> (2,600)
<span style="mso-tab-count: 2">                </span>
-<span style="mso-spacerun: yes">    </span></span>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Trade name –
non-amortizing<span style=
"mso-tab-count: 1">         </span><u>55,637</u><span style=
"mso-tab-count: 1">        </span> <u><span style=
"mso-tab-count: 1">   </span> (4,868</u>)<span style=
"mso-tab-count: 1">        </span> <u><span style=
"mso-tab-count: 1">   </span> 50,769</u><span style=
"mso-tab-count: 1">        </span> <u><span style=
"mso-tab-count: 1">   </span> 55,637</u><span style=
"mso-tab-count: 1">        </span> <u><span style=
"mso-tab-count: 1">   </span>    (4,868</u>)<span style=
"mso-tab-count: 1">        </span>  <u><span style=
"mso-tab-count: 1">  </span> 50,769</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .25in 99.35pt 1.75in decimal 175.5pt left 184.5pt decimal 3.25in left 243.0pt decimal 292.5pt left 301.5pt decimal 351.0pt left 5.0in decimal 409.5pt left 418.5pt decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 3">                                                       </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 577,951</u><span style=
"mso-tab-count: 1">   </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> (198,329</u>)<span style=
"mso-tab-count: 1">  </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 379,622</u><span style=
"mso-tab-count: 1">   </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 577,427</u><span style=
"mso-tab-count: 1">   </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> (191,429</u>)<span style=
"mso-tab-count: 1">  </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 385,998</u></span>
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  </span>
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<span style=
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</p>
<p class="MsoBodyTextIndent2" style=
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<span style=
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    </span> Amortization of intangible assets for the three
months ended July 31, 2009 and 2008 was $6.9 million and $5.6
million, respectively. Estimated amortization of intangible
assets for fiscal years 2010 through 2014 is $28.8 million,
$26.5 million, $23.5 million, $19.2 million and $15.8
million, respectively.</span>
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-128423000
-130617000
-212970000
-210873000
-4296000
-3017000
<div>
<p class="MsoNormal" style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Income
Taxes</span></b>
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<span style=
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We file a consolidated federal income tax return in the
United States and file tax returns in various state and
foreign jurisdictions. Consolidated tax returns for the years
1999 through 2007 are currently under examination by the
Internal Revenue Service (IRS). Tax years prior to 1999 are
closed by statute. Historically, tax returns in various
foreign and state jurisdictions are examined and settled upon
completion of the exam.</span>
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<span style=
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During the three months ended July 31, 2009, we accrued an
additional $1.2 million of interest and penalties related to
our uncertain tax positions. We had unrecognized tax benefits
of $126.0 million and $124.6 million at July 31, 2009 and
April 30, 2009, respectively. The unrecognized tax benefits
increased $1.4 million in the current year, due primarily to
positions related to prior years. We have classified the
liability for unrecognized tax benefits, including
corresponding accrued interest, as long-term at July 31,
2009, which is included in other noncurrent liabilities on
the condensed consolidated balance sheet. Amounts that we
expect to pay, or for which statutes expire, within the next
twelve months have been included in accounts payable, accrued
expenses and other current liabilities on the condensed
consolidated balance sheet.</span>
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Based upon the expiration of statutes of limitations,
payments of tax and other factors in several jurisdictions,
we believe it is reasonably possible that the total amount of
previously unrecognized tax benefits may decrease by
approximately $18 million within twelve months of July 31,
2009.</span>
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83111000
155804000
-84547000
-80256000
-8795000
-143199000
385998000
379622000
17847000
12287000
27258000
26168000
3953863000
3355048000
5359722000
4545762000
2398280000
1823126000
84073000
91691000
744899000
707712000
1032122000
1032395000
<div>
<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left .5in .75in 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 441.0pt">
<b><span style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Mortgage
Loans Held for Investment and Related Assets</span></b>
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<p class="MsoNormal" style=
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<span style=
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composition of our mortgage loan portfolio as of July 31, 2009
and April 30, 2009 is as follows:</span>
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<span style=
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</p>
<p class="MsoNormal" style="tab-stops: right 6.5in 505.0pt">
<span style=
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<span style=
"mso-tab-count: 1">                                                                                                                                                                                   </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
(dollars in 000s)</span>
</p>
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"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 10pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 30.65pt right 261.0pt 441.0pt; mso-line-height-rule: exactly; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 0in 0in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
<span style="mso-tab-count: 1">             </span>
<span style=
"mso-tab-count: 1">                                                                             </span>
July 31, 2009<span style=
"mso-tab-count: 1">                                                      </span>
April 30, 2009</span>
</p>
</div>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 10pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 30.65pt 81.4pt right 215.0pt 290.0pt 395.0pt 470.0pt; mso-line-height-rule: exactly; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 3">                                                                                </span>
Amount<span style="mso-tab-count: 1">              </span>
% of Total<span style=
"mso-tab-count: 1">                               </span>
Amount<span style="mso-tab-count: 1">              </span>
% of Total</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: 30.65pt 81.4pt center 3.75in 5.5in 445.5pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 30.65pt 81.4pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in right 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Adjustable-rate
loans<span style=
"mso-tab-count: 2">                             </span>
$<span style="mso-tab-count: 1">        </span>
501,112<span style=
"mso-tab-count: 2">                        </span>
63%<span style="mso-tab-count: 1">             </span>
$<span style="mso-tab-count: 1">               </span>
534,943<span style=
"mso-tab-count: 1">               </span>         65%</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 9.0pt 30.65pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in right 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Fixed-rate
loans<span style=
"mso-tab-count: 1">                                         </span>
<u><span style="mso-tab-count: 1">         </span>
292,014<span style=
"mso-tab-count: 2">                        </span>
37%</u><span style=
"mso-tab-count: 1">                     </span>
<u><span style="mso-tab-count: 1">         </span>
286,894<span style=
"mso-tab-count: 1">                       </span>
35%</u></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 9.0pt 30.65pt 81.4pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in right 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 5">                                                                                </span>
793,126<span style=
"mso-tab-count: 2">                      </span>
100%<span style="mso-tab-count: 1">                     </span>
<span style="mso-tab-count: 1">         </span>
821,837<span style=
"mso-tab-count: 1">                    </span> 100%</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 4.5pt 30.65pt 81.4pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in left 470.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Unamortized
deferred fees and costs<span style=
"mso-tab-count: 2">                 </span> 6,277<span style=
"mso-tab-count: 2">                                </span>
<span style=
"mso-tab-count: 2">                                    </span>
7,135</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 4.5pt 30.65pt 81.4pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in left 470.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Less:
Allowance for loan losses<span style=
"mso-tab-count: 1">             </span> <u><span style=
"mso-tab-count: 1">          </span> (91,691</u>)<span style=
"mso-tab-count: 3">                                                     </span>
<u><span style="mso-tab-count: 1">          </span>
(84,073</u>)</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; tab-stops: 30.65pt 81.4pt 160.0pt decimal 215.0pt left 235.0pt right 290.0pt left 340.0pt decimal 5.5in left 470.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 3">                                                                      </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 707,712</u><span style=
"mso-tab-count: 3">                                                      </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">       </span> 744,899</u></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 6pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt; mso-line-height-rule: exactly; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> Activity in the allowance for loan losses for the
three months ended July 31, 2009 and 2008 is as
follows:</span>
</p>
<p class="MsoNormal" style="tab-stops: right 6.5in 505.0pt">
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 1">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
(in 000s)</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 10pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 30.65pt right 285.0pt 430.0pt; mso-line-height-rule: exactly; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
Three months ended July 31, <span style=
"mso-tab-count: 1">                                                              </span>
2009<span style=
"mso-tab-count: 1">                                                      </span>
2008</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: 30.65pt 81.4pt center 3.75in 5.5in 445.5pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 4.5pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Balance,
beginning of the period<span style=
"mso-tab-count: 1">                                   </span>
$<span style="mso-tab-count: 1">               </span>
84,073<span style=
"mso-tab-count: 1">                                </span>
$<span style="mso-tab-count: 1">               </span>
45,401</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 9.0pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Provision<span style="mso-tab-count: 2">                                                                                                </span>
13,600<span style=
"mso-tab-count: 2">                                                   </span>
14,991</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 9.0pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Recoveries<span style="mso-tab-count: 2">                                                                                                     </span>
28<span style=
"mso-tab-count: 2">                                                         </span>
-<span style="mso-spacerun: yes">   </span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 9.0pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Charge-offs<span style="mso-tab-count: 1">                                                                         </span>
<u><span style="mso-tab-count: 1">                  </span>
(6,010</u>)<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">                </span>
(13,539</u>)</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 9.0pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Balance, end
of the period<span style=
"mso-tab-count: 1">                                               </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span>
91,691</u><span style="mso-tab-count: 1">                                </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span> 46,853</u></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 6pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; TEXT-ALIGN: justify; tab-stops: 9.0pt 2.0in decimal 3.0in left 3.25in right 279.0pt; mso-line-height-rule: exactly; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<u style="text-underline: #99CC00 thick"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style="TEXT-DECORATION: none">
  </span></span></u>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoBodyText" style=
"TEXT-INDENT: 15pt; tab-stops: .5in">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Our loan
loss reserve as a percent of mortgage loans was 11.56% at
July 31, 2009, compared to 10.23% at April 30, 2009.</span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 290.0pt 395.0pt 495.0pt 530.0pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Times">
<span style="mso-tab-count: 1">    </span> In cases where we
modify a loan and in so doing grant a concession to a
borrower experiencing financial difficulty, the modification
is considered a <a id="jump_exp_1" name=
"jump_exp_1"></a>troubled <a id="jump_exp_2" name=
"jump_exp_2"></a>debt restructuring (TDR). TDR loans totaled
$161.6 million and $160.7 million at July 31, 2009 and April
30, 2009, respectively.</span> <span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">The
principal balance of impaired loans as of July 31, 2009 and
April 30, 2009 is as follows:</span>
</p>
<p class="MsoNormal" style="tab-stops: right 6.5in">
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 1">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
(in 000s)</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 10pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 30.65pt right 285.0pt 430.0pt; mso-line-height-rule: exactly; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-style: italic">
<span style=
"mso-tab-count: 2">                                                                                                     </span>
July 31, 2009<span style=
"mso-tab-count: 1">                                      </span>
April 30, 2009</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; tab-stops: 4.5pt 2.0in decimal 3.0in left 3.25in right 279.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
<p class="MsoHeader" style=
"tab-stops: 4.5pt .25in 99.35pt 215.0pt right 290.0pt left 5.0in right 430.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> 60 - 89
days<span style=
"mso-tab-count: 2">                                                                      </span>
$<span style="mso-tab-count: 1">                 </span>
14,519<span style=
"mso-tab-count: 1">                              </span>
$<span style="mso-tab-count: 1">               </span>
21,415</span>
</p>
<p class="MsoHeader" style=
"tab-stops: 4.5pt .25in 99.35pt 215.0pt right 290.0pt left 5.0in right 430.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> 90+ days,
non-accrual<span style=
"mso-tab-count: 3">                                                                       </span>
148,603<span style=
"mso-tab-count: 2">                                              </span>
121,685</span>
</p>
<p class="MsoHeader" style=
"tab-stops: 4.5pt .25in 99.35pt 215.0pt right 290.0pt left 5.0in decimal 430.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> TDR loans,
accrual<span style=
"mso-tab-count: 3">                                                                               </span>
90,275<span style=
"mso-tab-count: 2">                                                </span>
60,044</span>
</p>
<p class="MsoHeader" style=
"tab-stops: 4.5pt 13.5pt 99.35pt 215.0pt right 290.0pt left 5.0in right 430.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> TDR loans,
non-accrual<span style=
"mso-tab-count: 2">                                               </span><u><span style="mso-tab-count: 1">                        </span>
71,295</u><span style=
"mso-tab-count: 1">                                       
      </span> <u>100,697</u></span>
</p>
<p class="MsoHeader" style=
"tab-stops: 4.5pt .25in 99.35pt 215.0pt right 290.0pt left 5.0in right 430.0pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 4">                                                                                               </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span>
324,692</u><span style=
"mso-tab-count: 1">                              </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">             </span> 303,841</u></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 6pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; TEXT-ALIGN: justify; tab-stops: 9.0pt 2.0in decimal 3.0in left 3.25in right 279.0pt; mso-line-height-rule: exactly; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<u style="text-underline: #99CC00 thick"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light"><span style="TEXT-DECORATION: none">
  </span></span></u>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-line-height-rule: exactly">
  
</p>
<p class="MsoBodyText" style="tab-stops: -.75in -.5in 13.5pt">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light"><span style="mso-tab-count: 1">
    </span></span></b> <span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Activity
related to our real estate owned is as follows:</span>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt right 6.5in">
<a id="OLE_LINK15" name="OLE_LINK15"><span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 6">                                                                                                                                                                                                </span></span></a>
<span style="mso-bookmark: OLE_LINK15"><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span></span>
</p>
<div style=
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Three months ended July 31, <span style=
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2009<span style=
"mso-tab-count: 1">                                                      </span>
2008</span></span>
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<span style="mso-bookmark: OLE_LINK15"><span style=
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</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 4.5pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK15"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Balance,
beginning of the period <span style=
"mso-tab-count: 1">                                  </span>
$<span style="mso-tab-count: 1">                </span>
 44,533<span style=
"mso-tab-count: 1">                                </span>
$<span style="mso-tab-count: 1">                     </span>
350</span></span>
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<p class="MsoNormal" style=
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3,797<span style=
"mso-tab-count: 2">                                                   </span>
53,469</span></span>
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<p class="MsoNormal" style=
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(4,348)<span style=
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-<span style="mso-spacerun: yes">    </span></span></span>
</p>
<p class="MsoNormal" style=
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<u><span style="mso-tab-count: 1">                  </span>
(1,241</u>)<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">                  </span>
(5,409</u>)</span></span>
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<p class="MsoNormal" style=
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<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span>
42,741</u><span style="mso-tab-count: 1">                                </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span>
48,410</u></span></span>
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-70581000
-216206000
16070000
15360000
-364923000
-454577000
-132719000
-133634000
-1355000
3289000
-211615000
-214162000
439226000
418856000
-1967000
-747000
314000
9537000
<div>
<p class="MsoNormal" style=
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<b><span style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Interest
Income and Expense</span></b>
</p>
<p class="MsoNormal" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">The
following table shows the components of interest income and
expense of our continuing operations:</span>
</p>
<p class="MsoNormal" style=
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<span style=
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</p>
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<span style="FONT-SIZE: 8pt; FONT-FAMILY: CenturyITC TT,serif">
<span style=
"mso-tab-count: 1">                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light">(in
000s)</span>
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<span style="FONT-FAMILY: Frutiger 45 Light">Three months
ended July 31,<span style=
"mso-tab-count: 1">                                                                                 </span>
2009<span style=
"mso-tab-count: 1">                                      </span>
2008<span style=
"mso-tab-count: 1">                </span></span>
</p>
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<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 4pt; tab-stops: 148.5pt decimal 2.75in left 229.5pt decimal 279.0pt; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 1.5in decimal 153.0pt left 171.0pt decimal 3.0in left 3.25in decimal 279.0pt; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light">Interest
income:</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Mortgage loans, net<span style=
"mso-tab-count: 1">                                                                       </span>
$<span style="mso-tab-count: 1">                  </span>
7,896<span style="mso-tab-count: 1">               </span>
$<span style="mso-tab-count: 1">                </span>
13,265<span style=
"mso-tab-count: 1">               </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Other<span style=
"mso-tab-count: 1">                                                                                                 </span>
<u><span style="mso-tab-count: 1">                     </span>
4,391</u><span style=
"mso-tab-count: 1">               </span>  <u><span style=
"mso-tab-count: 1">                    </span>
4,582</u><span style=
"mso-tab-count: 1">               </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 2">                                                                                                               </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">                </span>
12,287</u><span style="mso-tab-count: 1">               </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">                </span>
17,847</u><span style=
"mso-tab-count: 1">               </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light">Interest
expense:</span>
</p>
<p style=
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<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Borrowings<span style=
"mso-tab-count: 1">                                                                                      </span>
$<span style="mso-tab-count: 1">                </span>
18,957<span style="mso-tab-count: 1">               </span>
$<span style="mso-tab-count: 1">                </span>
18,172<span style=
"mso-tab-count: 1">               </span></span>
</p>
<p style=
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<a id="OLE_LINK9" name="OLE_LINK9"><span style=
"FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> Deposits<span style=
"mso-tab-count: 2">                                                                                                                </span>
2,049<span style=
"mso-tab-count: 1">               </span>  <span style=
"mso-tab-count: 1">                     </span>
4,043<span style=
"mso-tab-count: 1">               </span></span></a>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in left 6.5in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> FHLB advances<span style=
"mso-tab-count: 1">                                                                              </span>
<u><span style=
"mso-tab-count: 1">                        </span>
509</u><span style="mso-tab-count: 1">               </span>
<u><span style="mso-tab-count: 1">                     </span>
1,328</u><span style=
"mso-tab-count: 1">               </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 10pt; tab-stops: 9.0pt 3.5in decimal 4.5in left 5.0in decimal 6.0in; mso-line-height-rule: exactly">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">   </span> <span style=
"mso-tab-count: 1">                                                                                                           </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">                </span>
21,515</u><span style="mso-tab-count: 1">               </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">                </span>
23,543</u><span style=
"mso-tab-count: 1">               </span></span>
</p>
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448461000
424527000
13342000
15233000
31619000
19264000
-901000
4856000
-4116000
-3483000
-46790000
-50287000
-14648000
-8760000
15000000
0
28507000
6651000
-14387000
-25888000
368289000
359408000
512814000
379177000
<div>
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<b><span style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Regulatory
Requirements</span></b>
</p>
<p style="MARGIN: 0in 0in 0pt; TEXT-ALIGN: justify">
<a id="OLE_LINK54" name="OLE_LINK54"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Times New Roman">
H&R Block Bank (HRB Bank) files its regulatory Thrift
Financial Report (TFR) on a calendar quarter basis with the
Office of Thrift Supervision (OTS). The following table sets
forth HRB Bank’s regulatory capital requirements at June 30,
2009, as calculated in the most recently filed
TFR:</span></a>
</p>
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<span style="mso-bookmark: OLE_LINK54"><span style=
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<span style=
"mso-tab-count: 7">                                                                                                                                                                                   </span></span></span>
<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt; mso-bidi-font-style: italic">
(dollars in 000s)</span></span>
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<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light"><span style="mso-tab-count: 2">
                                                                                                                                               </span></span></span>
</p>
<p class="MsoBodyTextIndent" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: 0in; tab-stops: center 420.0pt">
<span style="mso-bookmark: OLE_LINK54"><span style=
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                                                                                                                            </span></span></span>
<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
To Be Well Capitalized</span></span>
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<p class="MsoBodyTextIndent" style=
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<span style="mso-bookmark: OLE_LINK54"><span style=
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<span style=
"mso-tab-count: 2">                                                                                                                   </span>
For Capital Adequacy<span style=
"mso-tab-count: 1">       </span> Under Prompt
Corrective<span style=
"mso-tab-count: 1">              </span></span></span>
</p>
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<span style="mso-bookmark: OLE_LINK54"><span style=
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<span style=
"mso-tab-count: 2">                                                                               </span>
Actual<span style=
"mso-tab-count: 1">                                   </span>
Purposes<span style=
"mso-tab-count: 1">                         </span> Action
Provisions<span style=
"mso-tab-count: 1">     </span></span></span>
</p>
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<p class="MsoBodyTextIndent" style=
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<span style="mso-bookmark: OLE_LINK54"><span style=
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<span style="mso-tab-count: 1">       </span> <span style=
"mso-tab-count: 2">                                                         </span>
Amount<span style="mso-tab-count: 1">              </span>
Ratio<span style="mso-tab-count: 1">              </span>
Amount<span style="mso-tab-count: 1">           </span>
Ratio<span style="mso-tab-count: 1">              </span>
Amount<span style="mso-tab-count: 1">           </span>
Ratio</span></span>
</p>
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<p class="MsoBodyTextIndent" style=
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<span style="mso-bookmark: OLE_LINK54"><span style=
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  </span></span>
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<p class="MsoNormal" style=
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<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Total
risk-based capital ratio <sup>(1)</sup> <span style=
"mso-tab-count: 1">    </span> <a id="OLE_LINK43" name=
"OLE_LINK43">$</a>142,490<span style=
"mso-tab-count: 1">           </span> 21.9%<span style=
"mso-tab-count: 1">          </span> $<span style=
"mso-tab-count: 1">   </span> 52,020<span style=
"mso-tab-count: 1">           </span> 8.0%<span style=
"mso-tab-count: 1">          </span> $<span style=
"mso-tab-count: 1">   </span> 65,025<span style=
"mso-tab-count: 1">         </span> 10.0%</span></span>
</p>
<p class="MsoNormal" style=
"MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; tab-stops: 138.0pt decimal 2.5in right 3.25in left 258.0pt decimal 300.0pt right 348.0pt left 372.0pt decimal 5.75in right 462.0pt">
<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Tier 1
risk-based capital ratio <sup>(2)<span style=
"mso-tab-count: 1">    </span></sup> $ 133,811<span style=
"mso-tab-count: 1">          </span> 20.6%<span style=
"mso-tab-count: 2">                    </span>
N/A<span style="mso-tab-count: 1">              </span>
N/A<span style="mso-tab-count: 1">          </span>
$<span style="mso-tab-count: 1">   </span> 39,015<span style=
"mso-tab-count: 1">           </span> 6.0%</span></span>
</p>
<p class="MsoNormal" style=
"MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; TEXT-ALIGN: justify; tab-stops: 138.0pt decimal 2.5in right 3.25in left 258.0pt decimal 300.0pt right 348.0pt left 372.0pt decimal 5.75in right 462.0pt">
<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Tier 1 capital
ratio (leverage) <sup>(3)</sup> <span style="mso-tab-count: 1">
   </span> $ 133,811<span style=
"mso-tab-count: 1">           </span> 13.6%<span style=
"mso-tab-count: 1">          </span> $ 118,381<span style=
"mso-tab-count: 1">         </span> 12.0%<span style=
"mso-tab-count: 1">          </span> $<span style=
"mso-tab-count: 1">   </span> 49,325<span style=
"mso-tab-count: 1">           </span> 5.0%</span></span>
</p>
<p class="MsoNormal" style=
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<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Tangible
equity ratio <sup>(4)</sup>  <span style=
"mso-tab-count: 1">                  </span> $
133,811<span style="mso-tab-count: 1">           </span>
13.6%<span style="mso-tab-count: 1">          </span>
$<span style="mso-tab-count: 1">   </span> 14,798<span style=
"mso-tab-count: 1">           </span> 1.5%<span style=
"mso-tab-count: 2">                       </span>
n/a<span style="mso-tab-count: 1">               </span>
n/a</span></span>
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  </span></span>
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<span style="mso-bookmark: OLE_LINK54"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span></span>
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align="left">
<a id="OLE_LINK13" name="OLE_LINK13"></a><a id="OLE_LINK6"
name="OLE_LINK6"><span style=
"mso-bookmark: OLE_LINK13"><sup><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; LETTER-SPACING: -0.3pt">(1)</span></sup></span></a>
<span style="mso-bookmark: OLE_LINK6"><span style=
"mso-bookmark: OLE_LINK13"><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; LETTER-SPACING: -0.3pt">
<span style="mso-tab-count: 1">  </span> Total risk-based
capital divided by risk-weighted assets.</span></span></span>
</p>
<p class="MsoBodyText" style=
"MARGIN-LEFT: 13.5pt; TEXT-INDENT: -13.5pt; TEXT-ALIGN: left; tab-stops: 13.5pt 40.5pt 49.5pt 94.5pt"
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<sup><span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; LETTER-SPACING: -0.3pt">
(2)<span style="mso-tab-count: 1">    </span></span></sup>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; LETTER-SPACING: -0.3pt">
Tier 1 (core) capital less deduction for low-level recourse
and residual interest divided by risk-weighted assets.</span>
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<p class="MsoBodyText" style=
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<sup><span style=
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(3)<span style="mso-tab-count: 1">    </span></span></sup>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; LETTER-SPACING: -0.3pt">
Tier 1 (core) capital divided by adjusted total
assets.</span>
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<p class="MsoBodyText" style=
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<sup><span style=
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(4)<span style="mso-tab-count: 1">    </span></span></sup>
<span style=
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Tangible capital divided by tangible assets.</span>
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  </span>
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  </span>
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<span style=
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    </span> As of July 31, 2009, HRB Bank’s leverage ratio
was 13.8%.</span>
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-40000000
0
51656000
46639000
2671437000
2437017000
271909000
275505000
240720000
247985000
<div>
<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.4pt">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light">
<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Condensed
Consolidating Financial Statements</span></b>
</p>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Block
Financial LLC (BFC) is an indirect, wholly-owned consolidated
subsidiary of the Company. BFC is the Issuer and the Company is
the Guarantor of the Senior Notes issued on January 11, 2008
and October 26, 2004, our unsecured committed lines of credit
(CLOCs) and other indebtedness issued from time to time. These
condensed consolidating financial statements have been prepared
using the equity method of accounting. Earnings of subsidiaries
are, therefore, reflected in the Company’s investment in
subsidiaries account. The elimination entries eliminate
investments in subsidiaries, related stockholders’ equity and
other intercompany balances and transactions.</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 50%; TEXT-ALIGN: justify; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<span style=
"FONT-SIZE: 10pt; LINE-HEIGHT: 50%; FONT-FAMILY: Times New Roman,serif">
  </span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: medium none; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt">
<p class="MsoBodyTextIndent2" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt right 6.5in; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 0in 0in">
<i><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Condensed
Consolidating Income Statements</span></i><span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 4">                                                                                                        </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
</div>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 166.5pt 3.25in 301.5pt 373.5pt 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style="FONT-FAMILY: Frutiger 45 Light">Three months
ended</span><span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 1">                     </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                    </span>
Other<span style=
"mso-tab-count: 2">                                              </span>
Consolidated</span>
</p>
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 166.5pt 3.25in 301.5pt 369.0pt 445.5pt left 472.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2009<span style=
"mso-tab-count: 1">                                   </span>
<span style="mso-tab-count: 1">   </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">           </span>
Subsidiaries<span style=
"mso-tab-count: 1">             </span> Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block<span style="mso-tab-count: 1">  </span></span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Total revenues<span style=
"mso-tab-count: 1">                                  </span>
<u>$<span style="mso-tab-count: 1">            </span>
-<span style="mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">      </span> 23,196</u><span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">      </span> 252,365</u><span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">             </span> (56</u>)<span style=
"mso-tab-count: 1">      </span> <u>$<span style=
"mso-tab-count: 1">      </span> 275,505</u></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 6pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Cost of revenues<span style=
"mso-tab-count: 2">                                              </span>
-<span style="mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 2">                </span> 45,560<span style=
"mso-tab-count: 2">                </span>
340,890<span style="mso-tab-count: 2">                         </span>
-<span style="mso-spacerun: yes">  </span> <span style=
"mso-tab-count: 2">                </span> 386,450</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Selling, general and administrative<span style=
"mso-tab-count: 1">   </span>  <u><span style=
"mso-tab-count: 1">       </span> -<span style=
"mso-spacerun: yes">    </span></u>  <span style=
"mso-tab-count: 1">              </span><u><span style=
"mso-tab-count: 1">     </span> 2,498</u><span style=
"mso-tab-count: 1">            </span><u><span style=
"mso-tab-count: 1">    </span> 100,775</u><span style=
"mso-tab-count: 1">      </span>          <u><span style=
"mso-tab-count: 1">       </span> (56</u>)<u><span style=
"mso-tab-count: 1">               </span> 103,217</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Total
expenses<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">               </span>
-<span style="mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 48,058</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 441,665</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">               </span>
(56</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">        </span>
489,667</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Operating income (loss)<span style=
"mso-tab-count: 2">                                 </span>
-<span style="mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 2">               </span>
(24,862)<span style="mso-tab-count: 2">             </span>
(189,300)<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">  </span> <span style=
"mso-tab-count: 2">               </span> (214,162)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other income (expense), net<span style=
"mso-tab-count: 1">         </span> <u><span style=
"mso-tab-count: 1">     </span> (210,873</u>)<span style=
"mso-tab-count: 1">      </span> <u><span style=
"mso-tab-count: 1">         </span> (1,233</u>)<span style=
"mso-tab-count: 1">      </span> <u><span style=
"mso-tab-count: 1">             </span> 4,522</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">      </span> 210,873</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">             </span> 3,289</u></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Income (loss) from continuing<span style=
"mso-spacerun: yes">  </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> operations before
taxes (benefit) <span style="mso-tab-count: 2">    </span>
(210,873)<span style="mso-tab-count: 2">             </span>
(26,095)<span style="mso-tab-count: 2">               </span>
(184,778)<span style="mso-tab-count: 2">            </span>
210,873<span style="mso-tab-count: 2">               </span>
(210,873)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Income taxes (benefit)<span style=
"mso-tab-count: 1">                    </span>
<u><span style="mso-tab-count: 1">       </span>
(80,256</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">       </span>
(10,692</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">         </span>
(69,564</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">        </span>
80,256</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">         </span>
(80,256</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net income (loss) from</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> continuing
operations<span style=
"mso-tab-count: 2">                       </span>
(130,617)<span style="mso-tab-count: 2">              </span>
(15,403)<span style="mso-tab-count: 2">             </span>
(115,214)<span style="mso-tab-count: 2">             </span>
130,617<span style="mso-tab-count: 2">               </span>
(130,617)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss from discontinued</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span>
operations<span style=
"mso-tab-count: 1">                                        </span>
<u><span style="mso-tab-count: 1">         </span>
(3,017</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">         </span>
(3,017</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">           </span> 3,017</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">           </span> (3,017</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net income (loss)<span style=
"mso-tab-count: 1">                             </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">  </span> (133,634)</u><span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">     </span> (18,420</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> (115,214</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 133,634</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> (133,634</u>)</span>
</p>
<p class="MsoBodyTextIndent" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: 0in; LINE-HEIGHT: 4pt; tab-stops: 0in 135.0pt center 315.0pt left 6.5in; mso-line-height-rule: exactly">
<a id="OLE_LINK24" name="OLE_LINK24"></a><a id="OLE_LINK7"
name="OLE_LINK7"><span style=
"mso-bookmark: OLE_LINK24"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">  </span></span></a>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 75.0pt 77.25pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style="FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
</div><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Arial Unicode MS; mso-bidi-font-family: Arial; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><br style="PAGE-BREAK-BEFORE: always"
clear="all" /></span>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: center 166.5pt 3.25in 301.5pt 373.5pt 445.5pt">
<span style="FONT-FAMILY: Frutiger 45 Light">Three months
ended</span><span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 1">                     </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                    </span>
Other<span style=
"mso-tab-count: 2">                                              </span>
Consolidated</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 166.5pt 3.25in 301.5pt 369.0pt 445.5pt left 472.5pt; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2008<span style=
"mso-tab-count: 2">                                      </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">           </span>
Subsidiaries<span style=
"mso-tab-count: 1">             </span> Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Total revenues<span style=
"mso-tab-count: 1">                                </span>
<u>$<span style="mso-tab-count: 1">              </span>
-<span style="mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">      </span> 20,775</u><span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">      </span> 252,572</u><span style=
"mso-tab-count: 1">       </span> <u>$<span style=
"mso-tab-count: 1">       </span> (1,438</u>)<span style=
"mso-tab-count: 1">      </span> <u>$<span style=
"mso-tab-count: 1">      </span> 271,909</u></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; LINE-HEIGHT: 6pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Cost of revenues<span style=
"mso-tab-count: 2">                                              </span>
-<span style="mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 2">                </span> 39,362<span style=
"mso-tab-count: 2">                </span>
320,772<span style="mso-tab-count: 2">                           </span>
4<span style="mso-tab-count: 2">                </span>
360,138</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Selling, general and administrative<span style=
"mso-tab-count: 1">   </span>  <u><span style=
"mso-tab-count: 1">       </span> -<span style=
"mso-spacerun: yes">    </span></u>  <span style=
"mso-tab-count: 1">               </span><u><span style=
"mso-tab-count: 1">  </span> 19,396</u><span style=
"mso-tab-count: 1">          </span> <u><span style=
"mso-tab-count: 1">       </span> 104,083</u><span style=
"mso-tab-count: 1">      </span> <u><span style=
"mso-tab-count: 1">             </span>  (93</u>)<span style=
"mso-tab-count: 1">        </span><u><span style=
"mso-tab-count: 1">       </span> 123,386</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Total
expenses<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">               </span>
-<span style="mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 58,758</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 424,855</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">               </span>
(89</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">        </span>
483,524</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Operating loss<span style=
"mso-tab-count: 2">                                                  </span>
-<span style="mso-spacerun: yes">    </span> <span style=
"mso-tab-count: 2">               </span>
(37,983)<span style="mso-tab-count: 2">             </span>
(172,283)<span style=
"mso-tab-count: 2">                </span>
(1,349)<span style="mso-tab-count: 2">              </span>
(211,615)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other income, net<span style=
"mso-tab-count: 1">                             </span>
<u><span style="mso-tab-count: 1">     </span>
(212,970</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">         </span>
(4,350</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">             </span>
2,995</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">      </span>
212,970</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">           </span>
(1,355</u>)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Loss from continuing</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 9.0pt 135.0pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> operations before
tax benefit <span style="mso-tab-count: 2">         </span>
(212,970)<span style="mso-tab-count: 2">              </span>
(42,333)<span style="mso-tab-count: 2">             </span>
(169,288)<span style="mso-tab-count: 2">             </span>
211,621<span style="mso-tab-count: 2">               </span>
(212,970)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Income tax benefit<span style=
"mso-tab-count: 1">                           </span>
<u><span style="mso-tab-count: 1">       </span>
(84,547</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">       </span>
(16,438</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">         </span>
(67,535</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">        </span>
83,973</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">         </span>
(84,547</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss from continuing</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span>
operations<span style=
"mso-tab-count: 2">                                           </span>
(128,423)<span style="mso-tab-count: 2">              </span>
(25,895)<span style="mso-tab-count: 2">             </span>
(101,753)<span style="mso-tab-count: 2">             </span>
127,648<span style="mso-tab-count: 2">               </span>
(128,423)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss from discontinued</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span>
operations<span style=
"mso-tab-count: 1">                                        </span>
<u><span style="mso-tab-count: 1">         </span>
(4,296</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">         </span>
(5,071</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">           </span> 5,071</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">           </span> (4,296</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net loss<span style=
"mso-tab-count: 1">                                              </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">  </span> (132,719</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">     </span> (30,966</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> (101,753</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 132,719</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> (132,719</u>)</span>
</p>
<p class="MsoBodyTextIndent" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: 0in; LINE-HEIGHT: 4pt; tab-stops: 0in 135.0pt center 315.0pt left 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; BACKGROUND: yellow; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt; mso-highlight: yellow">
  </span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoBodyTextIndent" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: 0in; BORDER-LEFT: medium none; TEXT-INDENT: 0in; LINE-HEIGHT: 10pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; TEXT-ALIGN: left; tab-stops: 0in 81.35pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt; mso-line-height-rule: exactly"
align="left">
<i><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light"><span style="mso-tab-count: 1">
                          </span></span></i>
</p>
</div>
<p class="MsoBodyTextIndent" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: 0in; tab-stops: 0in .5in 148.5pt center 315.0pt right 6.5in">
<i><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Condensed
Consolidating Balance Sheets<span style=
"mso-tab-count: 2">                                                                                   </span></span></i>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 166.5pt 3.25in 301.5pt 373.5pt 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                           </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                    </span>
Other<span style=
"mso-tab-count: 2">                                              </span>
Consolidated</span>
</p>
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 166.5pt 3.25in 301.5pt 369.0pt 445.5pt left 472.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2009<span style=
"mso-tab-count: 2">                                      </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">           </span>
Subsidiaries<span style=
"mso-tab-count: 1">             </span> Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Cash & cash equivalents<span style=
"mso-tab-count: 1">                </span> $<span style=
"mso-tab-count: 1">             </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">    </span> 122,895<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">      </span> 883,968<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">          </span> (560)<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">  </span> 1,006,303</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash & cash equivalents – restricted <span style=
"mso-tab-count: 1">           </span> -<span style=
"mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                    </span>
355<span style="mso-tab-count: 2">                   </span>
46,284<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                 </span> 46,639</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Receivables, net<span style=
"mso-tab-count: 2">                                           </span>
1,110<span style="mso-tab-count: 2">              </span>
109,803<span style="mso-tab-count: 2">                </span>
268,264<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 379,177</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Mortgage loans held for investment <span style=
"mso-tab-count: 1">            </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 707,712<span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 707,712</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Intangible assets and goodwill, net<span style=
"mso-tab-count: 2">               </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">              </span>1,231,640<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">             </span> 1,231,640</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 225.0pt 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Investments in subsidiaries<span style=
"mso-tab-count: 2">               </span>
3,055,015<span style=
"mso-tab-count: 3">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
185<span style="mso-tab-count: 2">         </span>
(3,055,015)<span style=
"mso-tab-count: 2">                       </span> 185</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other assets<span style=
"mso-tab-count: 1">                                      </span>
<u><span style="mso-tab-count: 1">                </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">      </span> 317,877</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 856,229</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">                </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">     </span> 1,174,106</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span><span style=
"mso-tab-count: 1">  </span> Total assets<span style=
"mso-tab-count: 1">                                   </span>
<u style="text-underline: double">$ 3,056,125</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ 1,258,642</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 3,286,570</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ (3,055,575</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 4,545,762</u></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt 225.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Customer deposits<span style=
"mso-tab-count: 1">                           </span>
$<span style="mso-tab-count: 1">             </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">    </span> 712,568<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">          </span> (560)<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">      </span> 712,008</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Long-term debt<span style=
"mso-tab-count: 2">                                                  </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 998,335<span style=
"mso-tab-count: 2">                  </span>
34,060<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">             </span> 1,032,395</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
FHLB borrowings<span style=
"mso-tab-count: 2">                                              </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 100,000<span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 100,000</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other liabilities<span style=
"mso-tab-count: 2">                                        </span>
 50,500<span style="mso-tab-count: 2">              </span>
124,914<span style="mso-tab-count: 2">             </span>
1,335,231<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">             </span> 1,510,645</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net intercompany advances<span style=
"mso-tab-count: 2">              </span>
1,814,911<span style="mso-tab-count: 2">             </span>
(811,975)<span style="mso-tab-count: 2">          </span>
(1,002,936)<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Stockholders’ equity<span style=
"mso-tab-count: 1">                        </span>
<u><span style="mso-tab-count: 1">   </span>
1,190,714</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">      </span>
134,800</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">     </span>
2,920,215</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">  </span>
(3,055,015</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">     </span>
1,190,714</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> Total liabilities
and<span style=
"mso-tab-count: 10">                                                                                                                                                                         </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 13.5pt 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">     </span> stockholders’
equity<span style=
"mso-tab-count: 1">                   </span> <u style=
"text-underline: double">$ 3,056,125</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ 1,258,642</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 3,286,570</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ (3,055,575</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 4,545,762</u></span>
</p>
<p class="MsoBodyTextIndent" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: 0in; LINE-HEIGHT: 4pt; tab-stops: .5in 135.0pt center 4.25in left 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 166.5pt 3.25in 301.5pt 373.5pt 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
  </span>
</p>
</div>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: center 166.5pt 3.25in 301.5pt 373.5pt 445.5pt">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                           </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                    </span>
Other<span style=
"mso-tab-count: 2">                                              </span>
Consolidated</span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 166.5pt 3.25in 301.5pt 369.0pt 445.5pt left 472.5pt; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
April 30, 2009<span style=
"mso-tab-count: 2">                                     </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">           </span>
Subsidiaries<span style=
"mso-tab-count: 1">             </span> Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block</span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash & cash equivalents<span style=
"mso-tab-count: 1">                </span> $<span style=
"mso-tab-count: 1">             </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">    </span> 241,350<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">  </span> 1,419,535<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">       </span> (6,222)<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">  </span> 1,654,663</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash & cash equivalents – restricted <span style=
"mso-tab-count: 1">           </span> -<span style=
"mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                 </span> 4,303<span style=
"mso-tab-count: 2">                  </span>
47,353<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                  </span> 51,656</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Receivables, net<span style=
"mso-tab-count: 2">                                                </span>
38<span style=
"mso-tab-count: 2">                </span> 114,442<span style="mso-tab-count: 2">                </span>398,334<span style="mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 512,814</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Mortgage loans held for investment<span style=
"mso-tab-count: 2">              </span> -<span style=
"mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">              </span> 744,899<span style=
"mso-tab-count: 2">                     </span> -<span style=
"mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                           </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                 </span> 744,899</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Intangible assets and goodwill, net<span style=
"mso-tab-count: 2">                </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">           </span> 1,236,228<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">              </span> 1,236,228</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Investments in subsidiaries<span style=
"mso-tab-count: 2">               </span>
3,289,435<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span>  <span style=
"mso-tab-count: 2">                      </span>
194<span style="mso-tab-count: 2">          </span>
(3,289,435)<span style="mso-tab-count: 2">                 
      </span> 194</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other assets<span style=
"mso-tab-count: 1">                                      </span>
<u><span style="mso-tab-count: 1">                </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">      </span> 308,481</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">        </span> 850,787</u><span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">                </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">       </span> <u><span style=
"mso-tab-count: 1">      </span> 1,159,268</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> Total
assets<span style=
"mso-tab-count: 1">                                   </span>
<u style="text-underline: double">$ 3,289,473</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ 1,413,475</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 3,952,431</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ (3,295,657</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 5,359,722</u></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 4pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt 225.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt 351.0pt decimal 5.5in left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 8">                                                                                                                                                 </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Customer deposits<span style=
"mso-tab-count: 1">                           </span>
$<span style="mso-tab-count: 1">             </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">    </span> 861,110<span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 1">       </span> $<span style=
"mso-tab-count: 1">       </span> (6,222)<span style=
"mso-tab-count: 1">      </span> $<span style=
"mso-tab-count: 1">      </span> 854,888</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Long-term debt<span style=
"mso-tab-count: 2">                                                  </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 998,245<span style=
"mso-tab-count: 2">                  </span>
33,877<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">             </span> 1,032,122</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
FHLB borrowings<span style=
"mso-tab-count: 2">                                              </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 100,000<span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 100,000</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Other liabilities<span style=
"mso-tab-count: 1">                                  </span>  <span style="mso-tab-count: 1">                </span>
2<span style="mso-tab-count: 2">              </span>
130,362<span style="mso-tab-count: 2">             </span>
1,836,477<span style=
"mso-tab-count: 2">                        </span>
12<span style="mso-tab-count: 1">       </span> <span style=
"mso-tab-count: 1">     </span> 1,966,853</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net intercompany advances<span style=
"mso-tab-count: 1">          </span> <span style=
"mso-tab-count: 1">   </span> 1,883,612<span style=
"mso-tab-count: 2">             </span> (827,453)<span style=
"mso-tab-count: 2">          </span> (1,056,147)<span style=
"mso-tab-count: 2">                      </span>
(12)<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Stockholders’ equity<span style=
"mso-tab-count: 1">                        </span>
<u><span style="mso-tab-count: 1">   </span>
1,405,859</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">      </span>
151,211</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">     </span>
3,138,224</u><span style="mso-tab-count: 1">       </span>
<u><span style="mso-tab-count: 1">  </span>
(3,289,435</u>)<span style="mso-tab-count: 1">      </span>
<u><span style="mso-tab-count: 1">     </span>
1,405,859</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span><span style=
"mso-tab-count: 1">  </span> Total liabilities
and<span style="mso-tab-count: 10">                                                                                                                                                                         </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 13.5pt .5in 139.5pt decimal 189.0pt left 207.0pt decimal 256.5pt left 274.5pt decimal 328.5pt left 346.5pt decimal 5.5in left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">     </span> stockholders’
equity<span style=
"mso-tab-count: 1">                   </span> <u style=
"text-underline: double">$ 3,289,473</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ 1,413,475</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 3,952,431</u><span style=
"mso-tab-count: 1">       </span> <u style=
"text-underline: double">$ (3,295,657</u>)<span style=
"mso-tab-count: 1">      </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 5,359,722</u></span>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-bottom-alt: solid windowtext .5pt">
<p class="MsoBodyTextIndent2" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: 0in; BORDER-LEFT: medium none; LINE-HEIGHT: 4pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 81.35pt 99.35pt 3.5in decimal 4.5in left 369.0pt decimal 441.0pt; mso-padding-alt: 0in 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
  </span>
</p>
</div>
<p class="MsoBodyTextIndent2" style=
"MARGIN-LEFT: 0in; LINE-HEIGHT: 6pt; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p><i><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><br style="PAGE-BREAK-BEFORE: always"
clear="all" /></span></i>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: medium none; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt">
<p class="MsoBodyTextIndent2" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN-LEFT: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt right 6.5in; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 0in 0in">
<i><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Condensed
Consolidating Statements of Cash Flows<span style=
"mso-tab-count: 1">                               </span></span></i>
<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 3">                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
</div>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 2.5in 247.5pt 310.5pt 5.25in 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style="FONT-FAMILY: Frutiger 45 Light">Three months
ended</span><span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 1">                           </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                  </span>
Other<span style=
"mso-tab-count: 2">                                          </span>
Consolidated</span>
</p>
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 2.5in 247.5pt 310.5pt 369.0pt 5.25in 445.5pt left 472.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2009<span style=
"mso-tab-count: 2">                                            </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">         </span>
Subsidiaries<span style="mso-tab-count: 1">         </span>
Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block<span style="mso-tab-count: 1">  </span></span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net cash used in operating activities:<span style=
"mso-tab-count: 1">  </span> <u>$<span style=
"mso-tab-count: 1">              </span> 868</u><span style=
"mso-tab-count: 1">     </span> <u>$<span style=
"mso-tab-count: 1">       </span> (4,881</u>)<span style=
"mso-tab-count: 1">    </span> <u>$<span style=
"mso-tab-count: 1">  </span> (450,564</u>)<span style=
"mso-tab-count: 1">    </span> <u>$<span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u>$<span style=
"mso-tab-count: 1">    </span> (454,577</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt 351.0pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash flows from investing:</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Mortgage loans
originated for</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> investment,
net<span style=
"mso-tab-count: 2">                                                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 19,264<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 19,264</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Purchase property
& equipment<span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span> (8,760)<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                 </span> (8,760)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Net intercompany
advances<span style=
"mso-tab-count: 2">                         </span>
45,536<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span> -
<span style="mso-spacerun: yes">   </span><span style=
"mso-tab-count: 2">               </span>
(45,536)<span style="mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Other,
net<span style=
"mso-tab-count: 1">                                               </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">           </span> 6,803</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">         </span> (1,947</u>)<span style=
"mso-tab-count: 1">    </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">             </span> 4,856</u></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Net cash provided by (used i</span><span style=
"FONT-FAMILY: Frutiger 45 Light">n)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">  </span> investing activities<span style=
"mso-tab-count: 1">                                </span> <u>
<span style="mso-tab-count: 1">          </span>
45,536</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">        </span>
26,067</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">       </span>
(10,707</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">         </span>
(45,536</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">          </span>
15,360</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash flows from financing:<span style=
"mso-tab-count: 8">                                                                                                                                </span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .25in .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Customer banking
deposits<span style=
"mso-tab-count: 2">                                  </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">           </span> (148,861)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                   </span>
5,662<span style="mso-tab-count: 2">             </span>
(143,199)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Dividends
paid<span style=
"mso-tab-count: 2">                                                </span>
(50,287)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span> (50,287)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<a id="OLE_LINK41" name="OLE_LINK41"></a><a id="OLE_LINK40"
name="OLE_LINK40"><span style=
"mso-bookmark: OLE_LINK41"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 1">  </span>
Acquisition of treasury shares<span style=
"mso-tab-count: 2">                        </span>
(3,483)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                 </span>
(3,483)</span></span></a>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Proceeds from
issuance of</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> common stock,
net<span style=
"mso-tab-count: 2">                                          </span>
6,651<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                   </span> 6,651</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Net intercompany
advances<span style=
"mso-tab-count: 2">                                 </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">              </span> 18,058<span style=
"mso-tab-count: 2">             </span> (63,594)<span style=
"mso-tab-count: 2">               </span> 45,536<span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Other,
net<span style=
"mso-tab-count: 1">                                               </span>
<u><span style="mso-tab-count: 1">                </span>
715</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">         </span>
(8,838</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">       </span>
(17,765</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">         </span> (25,888</u>)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Net cash provided by</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">  </span> financing activities<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">         </span>
(46,404</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">     </span>
(139,641</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">       </span>
(81,359</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">          </span>
51,198</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">       </span>
(216,206</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Effects of exchange rates on cash<span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">    </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">           </span> 7,063</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">             </span> 7,063</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net increase (decrease) in cash<span style=
"mso-tab-count: 2">                            </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">           </span> (118,455)<span style=
"mso-tab-count: 2">         </span> (535,567)<span style=
"mso-tab-count: 2">                 </span> 5,662<span style=
"mso-tab-count: 2">             </span> (648,360)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash – beginning of period<span style=
"mso-tab-count: 1">                 </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">      </span> 241,350</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">   </span> 1,419,535</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">           </span> (6,222</u>)<span style=
"mso-tab-count: 1">    </span> <u><span style=
"mso-tab-count: 1">     </span> 1,654,663</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash – end of period<span style=
"mso-tab-count: 1">                             </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 122,895</u><span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 883,968</u><span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">            </span> (560</u>)<span style=
"mso-tab-count: 1">    </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">  </span> 1,006,303</u></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 4pt; TEXT-ALIGN: justify; tab-stops: .5in 148.5pt decimal 207.0pt left 225.0pt decimal 3.75in left 4.0in decimal 333.0pt left 351.0pt decimal 5.5in left 5.75in decimal 6.5in; mso-line-height-rule: exactly">
<u style="text-underline: double"><span style=
"FONT-SIZE: 9pt; BACKGROUND: yellow; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt; mso-highlight: yellow">
<span style="TEXT-DECORATION: none">  </span></span></u>
</p>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: medium none; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; LINE-HEIGHT: 6pt; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 2.5in 247.5pt 310.5pt 373.5pt 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 0in 0in; mso-line-height-rule: exactly">
<span style=
"BACKGROUND: yellow; FONT-FAMILY: Frutiger 45 Light; mso-highlight: yellow">
  </span>
</p>
</div>
<div style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: windowtext 1pt solid; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; BORDER-LEFT: medium none; PADDING-TOP: 1pt; BORDER-BOTTOM: windowtext 1pt solid; mso-element: para-border-div; mso-border-top-alt: solid windowtext .5pt; mso-border-bottom-alt: solid windowtext .5pt">
<p style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; MARGIN: 0in 0in 0pt; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: center 2.5in 247.5pt 310.5pt 5.25in 445.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style="FONT-FAMILY: Frutiger 45 Light">Three months
ended</span><span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 1">                           </span>
H&R Block, Inc.<span style=
"mso-tab-count: 1">           </span> BFC<span style=
"mso-tab-count: 1">                  </span>
Other<span style=
"mso-tab-count: 2">                                          </span>
Consolidated</span>
</p>
<p class="MsoNormal" style=
"BORDER-RIGHT: medium none; PADDING-RIGHT: 0in; BORDER-TOP: medium none; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; BORDER-LEFT: medium none; PADDING-TOP: 0in; BORDER-BOTTOM: medium none; tab-stops: 135.0pt center 2.5in 247.5pt 310.5pt 369.0pt 5.25in 445.5pt left 472.5pt; mso-border-top-alt: solid windowtext .5pt; mso-padding-alt: 1.0pt 0in 1.0pt 0in; mso-border-bottom-alt: solid windowtext .5pt">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
July 31, 2008<span style=
"mso-tab-count: 2">                                            </span>
(Guarantor)<span style=
"mso-tab-count: 1">            </span> (Issuer)<span style=
"mso-tab-count: 1">         </span>
Subsidiaries<span style="mso-tab-count: 1">         </span>
Elims<span style=
"mso-tab-count: 1">                  </span> H&R
Block<span style="mso-tab-count: 1">  </span></span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; tab-stops: center 5.0in 6.0in; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style=
"mso-tab-count: 1">                                                                                                                                                               </span>
<b style="mso-bidi-font-weight: normal"><span style=
"mso-tab-count: 1">                               </span></b></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net cash provided by (used in)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> operating
activities:<span style=
"mso-tab-count: 1">                              </span>
<u>$<span style="mso-tab-count: 1">       </span>
(11,615</u>)<span style="mso-tab-count: 1">    </span>
<u>$<span style="mso-tab-count: 1">      </span>
58,425</u><span style="mso-tab-count: 1">     </span>
<u>$<span style="mso-tab-count: 1">  </span>
(411,733</u>)<span style="mso-tab-count: 1">    </span>
<u>$<span style="mso-tab-count: 1">               </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u>$<span style=
"mso-tab-count: 1">    </span> (364,923</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt 351.0pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash flows from investing:</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Mortgage loans
originated for</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> investment,
net<span style=
"mso-tab-count: 2">                                                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span>  31,619<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 31,619</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Purchase property
& equipment<span style=
"mso-tab-count: 2">                          </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                   </span>
(186)<span style="mso-tab-count: 2">            </span>
(14,462)<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span> (14,648)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Net intercompany
advances<span style=
"mso-tab-count: 2">                         </span>
29,630<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span>
(29,630)<span style="mso-tab-count: 2">                     </span>
-<span style="mso-spacerun: yes">    </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Other,
net<span style=
"mso-tab-count: 1">                                               </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">           </span> 1,365</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">         </span> (2,266</u>)<span style=
"mso-tab-count: 1">    </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">               </span> (901</u>)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Net cash provided by (used i</span><span style=
"FONT-FAMILY: Frutiger 45 Light">n)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">  </span> investing activities<span style=
"mso-tab-count: 1">                                </span> <u>
<span style="mso-tab-count: 1">          </span>
29,630</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">        </span>
32,798</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">       </span>
(16,728</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">         </span>
(29,630</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">          </span>
16,070</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash flows from financing:<span style=
"mso-tab-count: 8">                                                                                                                                </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .25in .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Repayments of FHLB
borrowings<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">             </span> (40,000)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span> (40,000)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .25in .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Proceeds
from</span> <span style="FONT-FAMILY: Frutiger 45 Light">FHLB
borrowings</span><span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt"><span style="mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> 15,000<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span> -
<span style="mso-spacerun: yes">   </span><span style=
"mso-tab-count: 2">                </span> 15,000</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .25in .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Customer banking
deposits<span style=
"mso-tab-count: 2">                                  </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">               </span> (8,964)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
169<span style="mso-tab-count: 2">                  </span>
 (8,795)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-spacerun: yes">  </span> Dividends
paid<span style=
"mso-tab-count: 2">                                                </span>
(46,790)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                </span> (46,790)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Acquisition of
treasury shares<span style=
"mso-tab-count: 2">                       </span>
(4,116)<span style=
"mso-tab-count: 2">                    </span> -<span style=
"mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                  </span> (4,116)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Proceeds from
issuance of</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">   </span> common stock, net
<span style=
"mso-tab-count: 2">                                       </span>
 28,507<span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                      </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                        </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                 </span> 28,507</span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Net intercompany
advances<span style=
"mso-tab-count: 2">                                 </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">             </span> (50,203)<span style=
"mso-tab-count: 2">             </span> 20,573<span style=
"mso-tab-count: 2">                </span> 29,630<span style=
"mso-tab-count: 2">                       </span>
-<span style="mso-spacerun: yes">    </span></span>
</p>
<p class="MsoNormal" style=
"tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="mso-tab-count: 1">  </span> Other,
net<span style=
"mso-tab-count: 1">                                               </span>
<u><span style="mso-tab-count: 1">             </span>
4,384</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">         </span>
(3,828</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">       </span>
(14,943</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">                  </span>
-<span style="mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">         </span> (14,387</u>)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 9.0pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Times New Roman; mso-bidi-font-family: Times New Roman; mso-bidi-font-size: 10.0pt">
Net cash provided by (used</span> <span style=
"FONT-FAMILY: Frutiger 45 Light">in)</span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; tab-stops: 4.5pt .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style="FONT-FAMILY: Frutiger 45 Light"><span style=
"mso-tab-count: 1">  </span> financing activities<span style=
"mso-tab-count: 1">                               </span>
<u><span style="mso-tab-count: 1">         </span>
(18,015</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">       </span>
(87,995</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">           </span>
5,630</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">          </span>
29,799</u><span style="mso-tab-count: 1">     </span>
<u><span style="mso-tab-count: 1">         </span>
(70,581</u>)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Net increase (decrease) in cash<span style=
"mso-tab-count: 2">                            </span>
-<span style="mso-spacerun: yes">   </span> <span style=
"mso-tab-count: 2">                 </span> 3,228<span style=
"mso-tab-count: 2">           </span> (422,831)<span style=
"mso-tab-count: 2">                     </span>
169<span style="mso-tab-count: 2">             </span>
(419,434)</span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash – beginning of period<span style=
"mso-tab-count: 1">                 </span> <u><span style=
"mso-tab-count: 1">                  </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">        </span> 34,611</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">      </span> 630,933</u><span style=
"mso-tab-count: 1">     </span> <u><span style=
"mso-tab-count: 1">               </span>
(647</u>)<span style="mso-tab-count: 1">    </span>
<u><span style="mso-tab-count: 1">        </span>
664,897</u></span>
</p>
<p class="MsoNormal" style=
"tab-stops: .5in 153.0pt decimal 207.0pt left 220.5pt decimal 3.75in left 283.5pt decimal 333.0pt left 346.5pt decimal 400.5pt left 5.75in decimal 6.5in">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
Cash – end of period<span style=
"mso-tab-count: 1">                             </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">               </span> -<span style=
"mso-spacerun: yes">   </span></u> <span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 37,839</u><span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">    </span> 208,102</u><span style=
"mso-tab-count: 1">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">            </span> (478</u>)<span style=
"mso-tab-count: 1">    </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">      </span> 245,463</u></span>
</p>
<p class="MsoNormal" style=
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<u style="text-underline: double"><span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
<span style="TEXT-DECORATION: none">  </span></span></u>
</p>
<div style=
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<p style=
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<span style="FONT-FAMILY: Frutiger 45 Light">  </span>
</p>
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<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<a id="OLE_LINK36" name="OLE_LINK36"><b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-fareast-font-family: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light">
<span style="mso-list: Ignore">11.<span style=
"FONT: 7pt Times New Roman">  </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Litigation
and Related Contingencies</span></b></a>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
We are party to investigations, legal claims and lawsuits
arising out of our business operations. We accrue our best
estimate of the probable loss upon resolution of such
matters. Amounts accrued, including obligations under
indemnifications, totaled $25.3 million and $27.9 million at
July 31, 2009 and April 30, 2009, respectively.</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<b style="mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<a id="OLE_LINK12" name="OLE_LINK12"></a><a id="OLE_LINK10"
name="OLE_LINK10"></a><a id="OLE_LINK61" name=
"OLE_LINK61"></a><a id="OLE_LINK55" name=
"OLE_LINK55"><span style=
"mso-bookmark: OLE_LINK61"><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">RAL
Litigation</span></span></span></span></a>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
We have been named as a defendant in numerous lawsuits
throughout the country regarding our refund anticipation loan
programs (collectively, “RAL Cases”). The RAL Cases have
involved a variety of legal theories asserted by plaintiffs.
These theories include allegations that, among other things:
disclosures in the RAL applications were inadequate,
misleading and untimely; the RAL interest rates were usurious
and unconscionable; we did not disclose that we would receive
part of the finance charges paid by the customer for such
loans; untrue, misleading or deceptive statements in
marketing RALs; breach of state laws on credit service
organizations; breach of contract, unjust enrichment, unfair
and deceptive acts or practices; violations of the federal
Racketeer Influenced and Corrupt Organizations Act;
violations of the federal Fair Debt Collection Practices Act
and unfair competition regarding debt collection activities;
and that we owe, and breached, a fiduciary duty to our
customers in connection with the RAL
program.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
The amounts claimed in the RAL Cases have been very
substantial in some instances, with one settlement resulting
in a pretax expense of $43.5 million in fiscal year 2003 (the
“Texas RAL Settlement”) and other settlements resulting in a
combined pretax expense in fiscal year 2006 of $70.2
million.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
<span style="mso-tab-count: 1">    </span> We have settled
all but one of the RAL Cases. The sole remaining RAL Case is
a putative class action entitled <i style=
"mso-bidi-font-style: normal">Sandra J. Basile, et al. v.
H&R Block, Inc., et al.</i>, April Term 1992 Civil Action
No. 3246 in the Court of Common Pleas, First Judicial
District Court of Pennsylvania, Philadelphia County,
instituted on April 23, 1993. In <i style=
"mso-bidi-font-style: normal">Basile</i>, the court
decertified the class in December 2003, and the Pennsylvania
appellate court subsequently reversed the trial court’s
decertification decision. In September 2006, the Pennsylvania
Supreme Court reversed the appellate court’s reversal of the
trial court’s decertification decision. In June 2007, the
appellate court affirmed its earlier decision to reverse the
trial court’s decertification decision. In June 2009, the
Pennsylvania Supreme Court again reversed the appellate
court’s reversal of the trial court’s decertification
decision and remanded the case to the appellate court for
additional review. We believe we have meritorious defenses to
this case and we intend to defend it vigorously. There can be
no assurances, however, as to the outcome of this case or its
impact on our financial statements.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Peace of
Mind Litigation</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
We are defendants in lawsuits regarding our Peace of Mind
program (collectively, the “POM Cases”), under which our
applicable tax return preparation subsidiary assumes
liability for additional tax assessments attributable to tax
return preparation error. The POM Cases are described
below.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><i style=
"mso-bidi-font-style: normal"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
Lorie J. Marshall, et al. v. H&R Block Tax Services,
Inc., et al.</span></i></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">,
Case No. 08-CV-591 in the U.S. District Court for the
Southern District of Illinois, is a class action case
originally filed in the Circuit Court of Madison County,
Illinois on January 18, 2002, in which class certification
was granted in August 2003. The plaintiffs allege that the
sale of POM guarantees constitutes (1) statutory fraud by
selling insurance without a license, (2) an unfair trade
practice, by omission and by “cramming” (i.e., charging
customers for the guarantee even though they did not request
it or want it), and (3) a breach of fiduciary duty. A class
was certified consisting of all persons residing in 13 states
who from January 1, 1997 to final judgment (1) were charged a
separate fee for POM by “H&R Block;” (2) were charged a
separate fee for POM by an “H&R Block” entity not
licensed to sell insurance; or (3) had an unsolicited charge
for POM posted to their bills by “H&R Block.” Persons who
received the POM guarantee through an H&R Block Premium
office were excluded from the plaintiff class. In August
2008, we removed the case from state court in Madison County,
Illinois to the U.S. District Court for the Southern District
of Illinois. In December 2008, the U.S. District Court
remanded the case back to state court. On April 3, 2009, the
United States Court of Appeals for the Seventh Circuit
reversed the decision to remand the case back to state court,
ruling that the case had been properly removed to federal
court. The plaintiffs filed a petition for rehearing of this
decision with the Seventh Circuit, which was denied in August
2009.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
There is one other putative class action pending against us
in Texas that involves the POM guarantee. This case is
pending before the same judge that presided over the Texas
RAL Settlement, involves the same plaintiffs’ attorneys that
are involved in the <i style=
"mso-bidi-font-style: normal">Marshall</i> litigation in
Illinois, and contains allegations similar to those in the
<i style="mso-bidi-font-style: normal">Marshall</i> case. No
class has been certified in this case.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
<span style="mso-tab-count: 1">    </span> We believe we have
meritorious defenses to the claims in the POM Cases, and we
intend to defend them vigorously. The amounts claimed in the
POM Cases are substantial, however, and there can be no
assurances as to the outcome of these pending actions
individually or in the aggregate.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light; mso-bidi-font-weight: bold">
Express IRA Litigation</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; TEXT-TRANSFORM: uppercase; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Frutiger 45 Light; mso-bidi-font-weight: bold">
O</span></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">n
March 15, 2006, the New York Attorney General filed a lawsuit
in the Supreme Court of the State of New York, County of New
York (Index No. 06/401110) entitled <i style=
"mso-bidi-font-style: normal">The People of New York v.
H&R Block, Inc. and H&R Block Financial Advisors,
Inc</i>. <i style="mso-bidi-font-style: normal">et al</i>.
The complaint alleges fraudulent business practices,
deceptive acts and practices, common law fraud and breach of
fiduciary duty with respect to the Express IRA product and
seeks equitable relief, disgorgement of profits, damages and
restitution, civil penalties and punitive damages. In July
2007, the Supreme Court of the State of New York issued a
ruling that dismissed all defendants other than H&R Block
Financial Advisors, Inc. (HRBFA) and the claims of common law
fraud. The intermediate appellate court reversed this ruling
in January 2009. We believe we have meritorious defenses to
the claims in this case and intend to defend this case
vigorously, but there are no assurances as to its
outcome.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
On January 2, 2008, the Mississippi Attorney General filed a
lawsuit in the Chancery Court of Hinds County, Mississippi
First Judicial District (Case No. G 2008 6 S 2) entitled
<i style="mso-bidi-font-style: normal">Jim Hood, Attorney for
the State of Mississippi v. H&R Block, Inc., et al.</i>
The complaint alleges fraudulent business practices,
deceptive acts and practices, common law fraud and breach of
fiduciary duty with respect to the Express IRA product and
seeks equitable relief, disgorgement of profits, damages and
restitution, civil penalties and punitive damages. The
defendants have filed a motion to dismiss. We believe we have
meritorious defenses to the claims in this case, and we
intend to defend this case vigorously, but there are no
assurances as to its outcome.</span></span></span>
</p>
<p class="Default" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
In addition to the New York and Mississippi Attorney General
actions, a number of civil actions were filed against HRBFA
and us concerning the Express IRA product, the first of which
was filed on March 15, 2006. Except for two cases pending in
state court, all of the civil actions have been consolidated
by the panel for Multi-District Litigation into a single
action styled <i style="mso-bidi-font-style: normal">In re
H&R Block, Inc. Express IRA Marketing Litigation</i>
(Case No. 06-1786-MD-RED) in the United States District Court
for the Western District of Missouri. The amounts claimed in
these cases are substantial.</span></span></span>
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT; mso-bidi-font-size: 12.0pt">
We believe we have meritorious defenses to the claims in
these cases and intend to defend these
case</span></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">s
vigorously, but there are no assurances as to their
outcome.</span></span></span>
</p>
<p class="Default" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
Although we sold HRBFA effective November 1, 2008, we remain
responsible for any liabilities relating to the Express IRA
litigation through an indemnification
agreement.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Securities
Litigation</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
On April 6, 2007, a putative class action styled <i style=
"mso-bidi-font-style: normal">In re H&R Block Securities
Litigation</i> (Case No. 06-0236-CV-W-ODS) was filed against
the Company and certain of its officers in the United States
District Court for the Western District of Missouri. The
complaint alleged, among other things, deceptive, material
and misleading financial statements and failure to prepare
financial statements in accordance with generally accepted
accounting principles. The complaint sought unspecified
damages and equitable relief. The court dismissed the
complaint in February 2008, and the plaintiffs appealed the
dismissal in March 2008. In addition, plaintiffs in a
shareholder derivative action that was consolidated into the
securities litigation filed a separate appeal in March 2008,
contending that the derivative action was improperly
consolidated. The derivative action is <i style=
"mso-bidi-font-style: normal">Iron Workers Local 16 Pension
Fund v. H&R Block, et al.</i>, in the United States
District Court for the Western District of Missouri, Case No.
06-cv-00466-ODS (instituted on June 8, 2006) and was brought
against certain of our directors and officers purportedly on
behalf of the Company. The derivative action alleged breach
of fiduciary duty, abuse of control, gross mismanagement,
waste, and unjust enrichment pertaining to (1) our
restatement of financial results in fiscal year 2006 due to
errors in determining our state effective income tax rate and
(2) certain of our products and business activities. We
believe we have meritorious defenses to the claims in these
cases and intend to defend this litigation vigorously. We
currently do not believe that we will incur a material loss
with respect to this litigation.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style="TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">RSM
McGladrey Litigation</span></span></span>
</p>
<p class="MsoNormal" style="TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><a id="OLE_LINK32" name=
"OLE_LINK32"></a><a id="OLE_LINK27" name=
"OLE_LINK27"><span style=
"mso-bookmark: OLE_LINK32"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">RSM
McGladrey Business Services, Inc. and certain of its
subsidiaries are parties to a class action filed on July 11,
2006 and entitled <i style="mso-bidi-font-style: normal">Do
Right’s Plant Growers, et al. v. RSM EquiCo, Inc., et al.</i>
Case No. 06 CC00137, in the California Superior Court, Orange
County. The complaint contains allegations relating to
business valuation services provided by RSM EquiCo, Inc.,
including allegations of fraud, negligent misrepresentation,
breach of contract, breach of implied covenant of good faith
and fair dealing, breach of fiduciary duty and unfair
competition and seeks unspecified damages, restitution and
equitable relief. On March 17, 2009, the court granted
plaintiffs’ motion for class certification on all claims. The
class consists of all RSM EquiCo</span></span></a>
<span style="mso-bookmark: OLE_LINK32"><span style=
"mso-bookmark: OLE_LINK27"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
U.S.</span></span></span> <span style=
"mso-bookmark: OLE_LINK32"><span style=
"mso-bookmark: OLE_LINK27"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
clients who signed platform agreements and for whom RSM
EquiCo did not ultimately market their business for sale. RSM
EquiCo filed a writ petition for interlocutory appeal of this
certification ruling, which was denied.<span style=
"mso-spacerun: yes">  </span> We intend to defend this case
vigorously. The amount claimed in this action is substantial
and could have a material adverse impact on our consolidated
results of operations. There can be no assurance regarding
the outcome of this
matter.</span></span></span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
<span style="mso-tab-count: 1">    </span> RSM McGladrey,
Inc. (RSM) has a relationship with
certain</span></span></span> <span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">public
accounting firms (collectively, “the Attest
Firms”)</span></span></span> <span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
pursuant to which (1) some RSM employees are also partners or
employees of the Attest Firms, (2) many clients of the Attest
Firms are also RSM clients, and (3) our RSM McGladrey brand
is closely linked to the Attest Firms. The Attest Firms are
parties to claims and lawsuits (collectively, “Attest Firm
Claims”) arising in the normal course of business. Judgments
or settlements arising from Attest Firm Claims exceeding the
Attest Firms’ insurance coverage could have a direct adverse
effect on Attest Firm operations and could impair RSM’s
ability to attract and retain clients and quality
professionals. For example, accounting and auditing firms
(including one of the Attest Firms) have become subject to
claims based on losses their clients suffered from
investments in investment funds managed by third-parties.
Although RSM may not have a direct liability for significant
Attest Firm Claims, such Attest Firm Claims could have a
material adverse effect on RSM’s operations and impair the
value of our investment in RSM. There is no assurance
regarding the outcome of the Attest Firm
Claims.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Litigation
and Claims Pertaining to Discontinued Mortgage
Operations</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
Although mortgage loan origination activities were terminated
and the loan servicing business was sold during fiscal year
2008, SCC remains subject to investigations, claims and
lawsuits pertaining to its loan origination and servicing
activities that occurred prior to such termination and sale.
These investigations, claims and lawsuits include actions by
state attorneys general, other state regulators,
municipalities, individual plaintiffs, and cases in which
plaintiffs seek to represent a class of others alleged to be
similarly situated. Among other things, these investigations,
claims and lawsuits allege discriminatory or unfair and
deceptive loan origination and servicing practices, public
nuisance, fraud, and violations of the Truth in Lending Act,
Equal Credit Opportunity Act and the Fair Housing Act. In the
current non-prime mortgage environment, the number of these
investigations, claims and lawsuits has increased over
historical experience and is likely to continue at increased
levels. The amounts claimed in these investigations, claims
and lawsuits are substantial in some instances, and the
ultimate resulting liability is difficult to predict. In the
event of unfavorable outcomes, the amounts SCC may be
required to pay in the discharge of liabilities or
settlements could be substantial and, because SCC’s operating
results are included in our consolidated financial
statements, could have a material adverse impact on our
consolidated results of operations.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
<span style="mso-tab-count: 1">    </span> On June 3, 2008,
the Massachusetts Attorney General filed a lawsuit in the
Superior Court of Suffolk County, Massachusetts (Case No.
08-2474-BLS) entitled <i style=
"mso-bidi-font-style: normal">Commonwealth of Massachusetts
v. H&R Block, Inc., et al.,</i> alleging unfair,
deceptive and discriminatory origination and servicing of
mortgage loans and seeking equitable relief, disgorgement of
profits, restitution and statutory penalties. In November
2008, the court granted a preliminary injunction limiting the
ability of the owner of SCC’s former loan servicing business
to initiate or advance foreclosure actions against certain
loans originated by SCC or its subsidiaries without (1)
advance notice to the Massachusetts Attorney General and (2)
if the Attorney General objects to foreclosure, approval by
the court. The preliminary injunction generally applies to
loans meeting all of the following four characteristics: (1)
adjustable rate mortgages with an introductory period of
three years or less; (2) the borrower has a debt-to-income
ratio generally exceeding 50 percent; (3) an introductory
interest rate at least 2 percent lower than the fully indexed
rate (unless the debt-to-income ratio is 55% or greater); and
(4) loan-to-value ratio of 97 percent or certain prepayment
penalties. We have appealed this preliminary injunction. We
believe the claims in this case are without merit, and we
intend to defend this case vigorously, but there are no
assurances as to its outcome.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
<span style="mso-tab-count: 1">    </span> SCC also remains
subject to potential claims for indemnification and loan
repurchase</span></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">s
pertaining to loans previously
sold</span></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">.
In the current non-prime mortgage environment, it is likely
that the frequency of repurchase and indemnification claims
may increase over historical experience and give rise to
additional litigation. In some instances, H&R Block, Inc.
was required to guarantee SCC’s obligations. The amounts
involved in these potential claims may be substantial, and
the ultimate resulting liability is difficult to predict.
Because SCC’s operating results are included in our
consolidated financial statements, the amounts SCC may be
required to pay in the discharge or settlement of these
claims in the event of unfavorable outcomes could have a
material adverse impact on our consolidated results of
operations.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; TEXT-ALIGN: justify; mso-layout-grid-align: none; mso-line-height-rule: exactly">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><b style=
"mso-bidi-font-weight: normal"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">  </span></b></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Other Claims
and Litigation</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 15.0pt 35.0pt right 145.0pt 250.0pt 355.0pt 465.0pt">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
We are from time to time party to investigations, claims and
lawsuits not discussed herein arising out of our business
operations. These investigations, claims and lawsuits include
actions by state attorneys general, other state regulators,
individual plaintiffs, and cases in which plaintiffs seek to
represent a class of others similarly situated. Some of these
investigations, claims and lawsuits pertain to RALs, the
electronic filing of customers’ income tax returns, the POM
guarantee program, wage and hour claims and investment
products. We believe we have meritorious defenses to each of
these investigations, claims and lawsuits, and we are
defending or intend to defend them vigorously. The amounts
claimed in these matters are substantial in some instances,
however the ultimate liability with respect to such matters
is difficult to predict. In the event of an unfavorable
outcome, the amounts we may be required to pay in the
discharge of liabilities or settlements could be
material.</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 15pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
In addition to the aforementioned types of matters, we are
party to claims and lawsuits that we consider to be ordinary,
routine litigation incidental to our business, including
claims and lawsuits (collectively, “Other Claims”) concerning
the preparation of customers’ income tax returns, the fees
charged customers for various products and services,
relationships with franchisees, intellectual property
disputes, employment matters and contract disputes. While we
cannot provide assurance that we will ultimately prevail in
each instance, we believe the amount, if any, we are required
to pay in the discharge of liabilities or settlements in
these Other Claims will not have a material adverse effect on
our consolidated</span></span></span> <span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">operating
results, financial position or cash
flows</span></span></span><span style=
"mso-bookmark: OLE_LINK10"><span style=
"mso-bookmark: OLE_LINK12"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">.</span></span></span>
</p>
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<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; mso-list: l0 level1 lfo1; tab-stops: list 0in left 81.35pt 99.35pt 4.5in decimal 382.3pt left 400.3pt decimal 459.35pt">
<b><span style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Accounting
Pronouncements</span></b>
</p>
<p class="MsoNormal" style="TEXT-ALIGN: justify">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Arial">
In June 2009, Statement of Financial Accounting Standards No.
167, “Amendments to FASB Interpretation No. 46(R)” (SFAS 167)
was issued. SFAS 167 changes how a reporting entity
determines when an entity that is insufficiently capitalized
or is not controlled through voting, or similar rights,
should be consolidated. The determination of whether a
reporting entity is required to consolidate another entity is
based on, among other things, the other entity’s purpose and
design and the reporting entity’s ability to direct the
activities of the other entity that most significantly impact
the other entity’s economic performance. SFAS 167 will
require a reporting entity to provide additional disclosures
about its involvement with variable interest entities and any
significant changes in risk exposure due to that involvement.
SFAS 167 will be effective for our fiscal year 2011. We are
currently evaluating the effect of this statement on our
consolidated financial statements.</span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Arial">
In June 2009, Statement of Financial Accounting Standards No.
166, “Accounting for Transfers of Financial Assets” (SFAS
166), was issued. SFAS 166 is a revision to FASB Statement
No. 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities,” and will require
more disclosure about transfers of financial assets,
including securitization transactions, and where entities
have continuing exposure to the risks related to transferred
financial assets. It eliminates the concept of a qualifying
special purpose entity, changes the requirements for
derecognizing financial assets. SFAS 166 will be effective at
the start of our fiscal year 2011. We are currently
evaluating the effect of this statement on its consolidated
financial statements.</span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Arial">
In May 2009, Statement of Financial Accounting Standards No.
165, “Subsequent Events” (SFAS 165) was issued.</span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">SFAS 165
establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available
to be issued. <a id="jump_exp_3" name="jump_exp_3"></a>SFAS
<a id="jump_exp_4" name="jump_exp_4"></a>165 is effective for
fiscal years and interim periods ending after June 15, 2009
and is applied prospectively. We adopted the new disclosure
requirements in the condensed consolidated financial
statements effective July 31, 2009. See note 1 for the
related disclosure.</span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify">
<span style=
"FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
In December 2007, Statement of Financial Accounting Standards
No. 141(R), “Business Combinations,” (SFAS 141R), and
Statement of Financial Accounting Standards No. 160,
“Non-Controlling Interests in Consolidated Financial
Statements – An Amendment of ARB No. 51” (SFAS 160) were
issued. These stan</span><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">dards</span>
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">require
an acquiring entity to recognize all the assets acquired and
liabilities assumed in a transaction, including
non-controlling interests, at the acquisition-date fair value
with limited exceptions</span><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">.
SFAS 141R will require acquisition-related expenses to be
expensed and will generally require contingent consideration
to be recorded as a liability at the time of acquisition.
Under SFAS 141R, subsequent changes to deferred tax valuation
allowances relating to acquired businesses and acquired
liabilities for uncertain tax positions will no longer be
applied to goodwill but will instead be typically recognized
as an adjustment to income tax expense. We adopted the
provisions of these standards as of May 1, 2009. The adoption
of SFAS 141R and SFAS 160 did not have a material impact on
our consolidated financial statements.</span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
In June 2008, FSP 03-6-1 was issued. FSP 03-6-1 addresses
whether instruments granted in share-based payment
transactions are participating securities prior to vesting
and, therefore, should be included in the process of
allocating earnings for purposes of computing earnings per
share</span><i><span style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: TimesNewRomanPSMT-Identity-H">
We adopted the provisions of FSP 03-6-1 as of May 1,
2009.</span> <span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
The adoption and retrospective application of the provisions
of FSP 03-6-1 did not change the current year or prior period
earnings per share amounts for the fiscal quarter. The
adoption of this standard will reduce earnings per share as
previously reported for fiscal year 2009 by $0.01. See
additional discussion in note 3.</span>
</p>
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<p class="MsoNormal" style=
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<b><span style=
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Recent
Events</span></b>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 81.4pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
RSM McGladrey, Inc. (RSM) and McGladrey & Pullen LLP
(M&P), an independent registered public accounting firm,
collaborate to provide accounting, tax and consulting
services to clients under an alternative practice structure.
<a id="OLE_LINK16" name="OLE_LINK16">RSM and M&P also
share in certain common overhead costs through an
administrative services agreement. These services are
provided by, and coordinated through, RSM, for which RSM
receives a management fee. On July 21, 2009, M&P provided
210 days notice of its intent to terminate the administrative
services agreement. The effect of the notice will be to
terminate the alternative practice structure on February 16,
2010, unless revoked or modified prior to that time. RSM and
M&P are engaged in arbitration to determine several of
their rights and responsibilities under their contractual
obligations to each other. An arbitration hearing is
scheduled for November 2009. RSM and M&P</a></span>
<span style="mso-bookmark: OLE_LINK16"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: Courier New">
are also engaged in negotiations to determine if there are
mutually agreeable changes to the current arrangements that
would allow our collaboration to continue.</span></span>
<span style="mso-bookmark: OLE_LINK16"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">
There are no assurances as to the outcome.</span></span>
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<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Segment
Information</span></b>
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<span style=
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of our continuing operations by reportable operating segment
are as follows:</span>
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<span style=
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"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
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(in 000s)</span>
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<span style=
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Three months ended July 31,<span style=
"mso-tab-count: 2">                                                                 </span>
2009<span style=
"mso-tab-count: 1">                                                           </span>
2008</span>
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<span style=
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  </span>
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<p class="MsoNormal" style=
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<span style=
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Revenues:<span style=
"mso-tab-count: 6">                                                                                                                                                        </span></span>
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<span style=
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<span style="mso-tab-count: 1">  </span> Tax
Services<span style=
"mso-tab-count: 3">                                                                          </span>
$<span style="mso-tab-count: 1">            </span>
87,963<span style=
"mso-tab-count: 1">                                          </span>
$<span style="mso-tab-count: 1">           </span>
81,700</span>
</p>
<p class="MsoNormal" style=
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<span style=
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<span style="mso-tab-count: 1">  </span> Business
Services<span style=
"mso-tab-count: 4">                                                                             </span>
177,618<span style=
"mso-tab-count: 2">                                                    
 </span> 174,651</span>
</p>
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<span style=
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<span style="mso-tab-count: 1">  </span>
Corporate<span style="mso-tab-count: 3">                                                                               </span>  <u><span style="mso-tab-count: 1">                </span>
9,924</u><span style=
"mso-tab-count: 1">                                          </span>
<u><span style="mso-tab-count: 1">             </span>
15,558</u></span>
</p>
<p class="MsoNormal" style=
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<span style=
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<span style=
"mso-tab-count: 4">                                                                                                   </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">          </span> 275,505</u><span style=
"mso-tab-count: 1">                                          </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">        </span> 271,909</u></span>
</p>
<p class="MsoNormal" style=
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<span style=
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Pretax income (loss):</span>
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<p class="MsoBodyText" style=
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<span style="FONT-SIZE: 9pt; FONT-FAMILY: CenturyITC TT,serif">
<span style="mso-tab-count: 1">  </span></span> <span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Tax
Services<span style=
"mso-tab-count: 3">                                                                          </span>
$<span style="mso-tab-count: 1">            </span>
 (171,974)<span style=
"mso-tab-count: 1">                                        </span>
$<span style="mso-tab-count: 1">          </span>
(163,657)</span>
</p>
<p class="MsoNormal" style=
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<span style=
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<span style="mso-tab-count: 1">  </span> Business
Services<span style=
"mso-tab-count: 3">                                                                </span>  <span style="mso-tab-count: 1">              
 </span> 1,321<span style=
"mso-tab-count: 2">                                                             </span>
(295)</span>
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<span style=
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<span style="mso-tab-count: 1">  </span>
Corporate <span style=
"mso-tab-count: 3">                                                                              </span>  <u><span style="mso-tab-count: 1">           </span>
 (40,220</u>)<span style=
"mso-tab-count: 1">                                        </span>  <u><span style="mso-tab-count: 1">             </span>
(49,018</u>)</span>
</p>
<p class="MsoNormal" style=
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<span style=
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<span style="mso-tab-count: 1">  </span> Loss from continuing
operations before tax benefit<span style=
"mso-tab-count: 2">     </span> <u style=
"text-underline: double">$<span style=
"mso-tab-count: 1">       </span> (210,873</u>)<span style=
"mso-tab-count: 1">                                        
  </span> <u style="text-underline: double">$      
(212,970</u>)</span>
</p>
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align="left">
<span style=
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  </span>
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<p class="MsoBodyTextIndent2" style=
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<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">  </span>
</p>
<p class="MsoNormal" style=
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<span style=
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Effective May 1, 2009, we realigned certain segments of our
business to reflect a new management reporting structure. The
operations of HRB Bank, which was previously reported as the
Consumer Financial Services segment, have now been
reclassified, with activities that support our retail tax
network included in the Tax Services segment, and the net
interest margin and gains and losses relating to our
portfolio of mortgage loans held for investment and related
assets included in corporate. Presentation of prior period
results reflects the new segment reporting
structure</span><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-family: CenturyITC TT">.</span>
</p>
<p class="MsoNormal" style=
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<span style=
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These segment changes also resulted in the shifting of assets
between segments.<span style="mso-spacerun: yes">  </span>
Identifiable assets by reportable segment at July 31, 2009
were as follows:</span>
</p>
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<span style=
"FONT-SIZE: 8pt; mso-bidi-font-size: 10.0pt"><span style=
"mso-tab-count: 6">                                                                                                                                                                                                </span></span>
<span style=
"FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-size: 10.0pt">
(in 000s)</span>
</p>
<div style=
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<span style="FONT-SIZE: 8pt; FONT-FAMILY: Frutiger 45 Light">
  </span>
</p>
</div>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 4.5pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Tax Services
<span style=
"mso-tab-count: 1">                                                                      </span>
$<span style="mso-tab-count: 1">         </span>
1,794,754<span style=
"mso-tab-count: 1">                                </span></span>
</p>
<p class="MsoNormal" style=
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<span style=
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Services<span style=
"mso-tab-count: 2">                                                                             </span>
829,772<span style=
"mso-tab-count: 1">                                </span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 10pt; TEXT-ALIGN: justify; tab-stops: 9.0pt 215.0pt decimal 285.0pt left 5.0in decimal 430.0pt; mso-line-height-rule: exactly">
<span style=
"FONT-SIZE: 9pt; FONT-FAMILY: Frutiger 45 Light">Corporate<span style="mso-tab-count: 1">                                                                            </span>
<u><span style="mso-tab-count: 1">            </span>
1,921,236</u><span style=
"mso-tab-count: 1">                                </span></span>
</p>
<p class="MsoNormal" style=
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"mso-tab-count: 1">   </span> <span style=
"mso-tab-count: 1">                                                                                           </span>
<u style="text-underline: double">$<span style=
"mso-tab-count: 1">         </span> 4,545,762</u><span style=
"mso-tab-count: 1">                                </span></span>
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<p class="MsoNormal" style=
"MARGIN-LEFT: 0in; TEXT-INDENT: -0.25in; TEXT-ALIGN: justify; tab-stops: list 0in left 81.4pt; mso-list: l0 level1 lfo1">
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: Frutiger 45 Light; mso-fareast-font-family: Frutiger 45 Light">
<span style="mso-list: Ignore">1.<span style=
"FONT: 7pt Times New Roman">    </span></span></span></b>
<b><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light">Summary of
Significant Accounting Policies</span></b>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; mso-line-height-rule: exactly; mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 8.5pt; FONT-FAMILY: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">
  </span>
</p>
<p class="MsoNormal" style="mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">
Basis of Presentation</span>
</p>
<p class="MsoNormal" style="TEXT-ALIGN: justify">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">The
condensed consolidated balance sheet as of July 31, 2009, the
condensed consolidated statements of operations and
comprehensive income (loss) for the three months ended July
31, 2009 and 2008, and the condensed consolidated statements
of cash flows for the three months ended July 31, 2009 and
2008 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
July 31, 2009 and for all periods presented have been made.
<a id="OLE_LINK65" name="OLE_LINK65"></a><a id="OLE_LINK64"
name="OLE_LINK64"></a></span>
</p>
<p class="MsoNormal" style=
"TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">“H&R
Block,” “the Company,” “we,” “our” and “us” are used
interchangeably to refer to H&R Block, Inc. or to H&R
Block, Inc. and its subsidiaries, as appropriate to the
context.</span></span></span>
</p>
<p style=
"MARGIN: 0in 0in 0pt; TEXT-INDENT: 13.5pt; TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><a id="OLE_LINK14" name=
"OLE_LINK14"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif; mso-bidi-font-size: 9.0pt">
Certain reclassifications have been made to prior year
amounts to conform to the current year presentation. In
addition, we realigned our segments as discussed in note 12,
and accordingly restated segment disclosures in prior
periods. These changes had no effect on our results of
operations or stockholders’ equity as previously
reported.</span></a></span></span>
</p>
<p class="MsoBodyText" style="tab-stops: 13.5pt 81.4pt">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif"><span style="mso-tab-count: 1">
    </span> Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles
have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the
financial <span style="LETTER-SPACING: -0.1pt">statements and
notes thereto included in our April 30, 2009 Annual Report to
Shareholders on Form 10-</span>K. All amounts presented
herein as of April 30, 2009 or for the year then ended, are
derived from our <span style="LETTER-SPACING: -0.1pt">April
30, 2009 Annual Report to Shareholders on Form
10-</span>K.</span></span></span>
</p>
<p class="MsoNormal" style="TEXT-ALIGN: justify">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">     We
have evaluated subsequent events through September 4, 2009,
the date of issuance of our condensed consolidated financial
statements.</span></span></span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; mso-line-height-rule: exactly; mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><span style=
"FONT-SIZE: 8.5pt; FONT-FAMILY: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">
  </span></span></span>
</p>
<p class="MsoNormal" style="mso-layout-grid-align: none">
<span style="mso-bookmark: OLE_LINK64"><span style=
"mso-bookmark: OLE_LINK65"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">
Management Estimates</span></span></span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">The
preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues
and expenses during the reporting periods. Significant
estimates, assumptions and judgments are applied in the
determination of our allowance for loan losses, potential
losses from loan repurchase and indemnity obligations
associated with our discontinued mortgage business,
contingent losses associated with pending litigation, fair
value of reporting units, reserves for uncertain tax
positions and related matters. We revise our estimates when
facts and circumstances dictate. However, future events and
their effects cannot be determined with absolute certainty.
As such, actual results could differ materially from those
estimates.</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; mso-line-height-rule: exactly; mso-layout-grid-align: none">
<span style=
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  </span>
</p>
<p class="MsoNormal" style="mso-layout-grid-align: none">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">
Seasonality of Business</span>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 13.5pt 81.4pt">
<span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Our
operating revenues are seasonal in nature with peak revenues
occurring in the months of January through April. Therefore,
results for interim periods are not indicative of results to
be expected for the full year.</span>
</p>
<p class="MsoNormal" style=
"LINE-HEIGHT: 6pt; mso-line-height-rule: exactly; mso-layout-grid-align: none">
<span style=
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  </span>
</p>
<p class="MsoNormal" style="mso-layout-grid-align: none">
<a id="OLE_LINK38" name="OLE_LINK38"></a><a id="OLE_LINK30"
name="OLE_LINK30"><span style=
"mso-bookmark: OLE_LINK38"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: Frutiger 45 Light; mso-bidi-font-family: TimesNewRomanPS-ItalicMT-Identi; mso-bidi-font-style: italic">Concentrations
of Risk</span></span></a>
</p>
<p class="MsoNormal" style=
"TEXT-ALIGN: justify; tab-stops: 13.5pt 81.4pt">
<span style="mso-bookmark: OLE_LINK30"><span style=
"mso-bookmark: OLE_LINK38"><span style=
"FONT-SIZE: 10pt; FONT-FAMILY: CenturyITC TT,serif">Our
mortgage loans held for investment include concentrations of
loans to borrowers in certain states, which may result in
increased exposure to loss as a result of changes in real
estate values and underlying economic or market conditions
related to a particular geographical location. Approximately
51% of our mortgage loan portfolio consists of loans to
borrowers located in the states of Florida, California and
New York.</span></span></span>
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