FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended: April 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________ to ________ Commission File Number: 1-6089 H&R BLOCK, INC. (Exact name of registrant as specified in its charter) Missouri 44-0607856 (State or other jurisdiction of (I.R.S. Employer Identifi- incorporation or organization) cation Number) 4410 Main Street, Kansas City, Missouri 64111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (816) 753-6900 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, without par value New York Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non- affiliates of the registrant, computed by reference to the price at which the stock was sold on June 1, 1994, was $4,252,270,128. Number of shares of registrant's Common Stock, without par value, outstanding on June 1, 1994: 106,546,354. DOCUMENTS INCORPORATED BY REFERENCE Certain specified portions of the registrant's annual report to security holders for the fiscal year ended April 30, 1994, are incorporated herein by reference in response to Part I, Item 1, and Part II, Items 5 through 8, inclusive, and certain specified portions of the registrant's definitive proxy statement to be filed within 120 days after April 30, 1994, are incorporated herein by reference in response to Part III, Items 10 through 13, inclusive. PART I ITEM 1. BUSINESS. GENERAL DEVELOPMENT OF BUSINESS H&R Block, Inc. is a diversified services corporation that was organized in 1955 under the laws of the State of Missouri (the "Company"). It is the parent corporation in a two-tier holding company structure as a result of a corporate restructuring effected in March 1993. The second-tier holding company is H&R Block Group, Inc., a Delaware corporation and the direct owner of all of the shares of the Company's primary operating subsidiary corporations. Such primary operating subsidiaries consist of H&R Block Tax Services, Inc., CompuServe Incorporated and Block Financial Corporation. Developments within each of these segments of the Company during fiscal year 1994 are described in the section below entitled "Description of Business." During the year ended April 30, 1994, the Company was not involved in any bankruptcy, receivership or similar proceedings or any material reclassifications, mergers or consolidations and, except for the disposition of all of the stock of Interim Services Inc., the Company did not acquire or dispose of any material amount of assets otherwise than in the ordinary course of business. In November 1993, the Company acquired MECA Software, Inc. ("MECA"), a Delaware corporation involved in developing, publishing and marketing personal productivity software products designed to assist individuals in managing personal finances and in preparing their income tax returns, for $45,384,000 in cash. On November 15, 1993, the Company, through Block Acquisition Corporation ("BAC"), an indirect wholly-owned subsidiary of the Company, completed a $6.625 per share cash tender offer for all of the outstanding shares of common stock, par value $.01 per share, of MECA. The tender offer commenced on October 18, 1993, pursuant to the terms of an Agreement and Plan of Merger dated as of October 12, 1993 (the "Merger Agreement"). A total of 4,469,391 shares of MECA stock, representing approximately 96% of MECA's outstanding shares, were properly tendered by MECA shareholders pursuant to the tender offer, and were purchased by BAC. The remaining MECA shares were acquired by the Company on November 24, 1993, when, pursuant to the terms of the Merger Agreement, BAC was merged into MECA. In connection with the MECA transaction, the Company also acquired all rights to certain software code and editorial content marketed by MECA and thereby eliminated a significant portion of MECA's royalty obligations. MECA is a wholly-owned subsidiary of H&R Block Group, Inc. Among the products marketed by MECA are TaxCut (trademark), a top-rated personal income tax return preparation software developed by Legal Knowledge Systems, Inc., a subsidiary of MECA, and Managing Your Money (trademark), computer software designed to assist individuals in managing personal finances. TaxCut is expected to provide the Company with products designed to address the market for taxpayers who prepare their own tax returns, while Managing Your Money is expected to complement the financial services offered by Block Financial Corporation and the on-line information services offered by CompuServe Incorporated. On January 27, 1994, the Company (through its wholly-owned subsidiary, H&R Block Group, Inc.) sold its 100% interest in its indirect wholly-owned subsidiary, Interim Services Inc., through an initial public offering of 10,000,000 shares of common stock, par value $.01 per share, at an initial public offering price of $20.00 per share. The initial public offering was conducted in accordance with the terms of underwriting agreements among the Company, H&R Block Group, Inc., Interim Services Inc. and the underwriters. The closing of the transactions among the parties to the underwriting agreements occurred on February 3, 1994. The initial public offering price was negotiated among the Company and representatives of the underwriters. Among the factors considered in determining the initial public offering price, in addition to prevailing market conditions, were Interim's historical performance, estimates of the business potential and earnings prospects of Interim, an assessment of Interim's management and the consideration of the above factors in relation to market valuation of companies in related businesses. The Company received cash proceeds from the sale of Interim stock of $188,500,000 (which represents the initial public offering price of $200,000,000, less an underwriting discount of $11,500,000), as well as $30,000,000 from the retirement of a term loan to Interim, for net proceeds from the transaction of $218,500,000. The Company recorded a net gain on the sale of stock of $27,265,000. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The information required by Item 101(b) of Regulation S-K relating to financial information about industry segments is contained in the Notes to the Consolidated Financial Statements in the Company's annual report to security holders for the fiscal year ended April 30, 1994, and is hereby incorporated by reference. NUMBER OF EMPLOYEES The Company, including its subsidiaries, has approximately 3,400 regular full-time employees. The highest number of persons employed by the Company during the fiscal year ended April 30, 1994, including seasonal employees, was approximately 82,800. DESCRIPTION OF BUSINESS H&R BLOCK TAX SERVICES, INC. ("TAX SERVICES") GENERALLY. The income tax return preparation and related services segment continues to be the Company's largest business segment. Such services are provided to the public through a system of offices operated by Tax Services or by others to whom Tax Services has granted franchises. References in this Section to "Tax Services" include H&R Block Tax Services, Inc., and its subsidiaries involved in the income tax return preparation business, and references in this Section to "H&R Block" include both Tax Services and its franchisees. Tax Services provides income tax return preparation services and electronic filing services worldwide and refund discounting services in Canada. In addition, H&R Block's Executive Tax Service provides income tax return preparation services generally to taxpayers with more complicated returns. H&R Block served 18,107,000 taxpayers worldwide during fiscal year 1994, a decrease from the 18,182,800 taxpayers served in fiscal year 1993. "Taxpayers served" includes taxpayers for whom H&R Block prepared income tax returns as well as taxpayers for whom Block provided only electronic filing services. H&R Block also markets its knowledge of how to prepare income tax returns through its income tax training schools. These schools teach taxpayers how to prepare their own income tax returns, as well as provide Tax Services with a source of trained income tax return preparers. During the 1994 fiscal year, 133,458 students enrolled in H&R Block's basic and advanced income tax courses, compared to 133,268 students during fiscal year 1993. TAX RETURN PREPARATION. During the 1994 income tax filing season (January 3 through April 30), H&R Block offices prepared approximately 15,181,000 individual United States and Canadian income tax returns. About 13,037,000 of these returns were United States returns, constituting 12.2% of an Internal Revenue Service estimate of total U.S. individual income tax returns filed during that time period. Tax Services prepared approximately 2,144,000 Canadian returns filed with Revenue Canada during the 1994 income tax filing season, a decrease from the 2,225,000 Canadian returns prepared in the previous year. H&R Block also prepares U.S. income tax returns in other countries and Australian tax returns in Australia. The returns prepared at offices in countries outside of the United States and Canada constituted 2.5% of the total returns prepared by H&R Block in the last fiscal year. The following table shows the approximate number of income tax returns prepared at H&R Block offices in the United States and Canada during the last five tax filing seasons: Tax Season Ended April 30 (in thousands) 1990 1991 1992 1993 1994 Returns prepared (U.S. and Canada) 13,318 14,589 15,179 15,189 15,181 During the tax season, most H&R Block offices are open from 9:00 a.m. to 9:00 p.m. weekdays and from 9:00 a.m. to 5:00 p.m. Saturdays and Sundays. Office hours are often extended during peak periods. Most tax preparation business is transacted on a cash basis. The procedures of Tax Services have been developed so that a customer's tax return is prepared in his or her presence, in most instances in less than one hour, on the basis of information furnished by the customer. In all Company-owned offices and most franchised offices, tax returns are prepared with the assistance of a computer. After the customer's return has been initially prepared, he or she is advised of the amount of his or her tax due or refund. The return, however, is retained and reviewed for theoretical accuracy. After completion of this review and after copies of the return have been made, the return is presented to the customer for signature and filing. These post-preparation procedures must be modified somewhat for customers who desire to have their returns electronically filed (see "Electronic Filing," below). If an H&R Block preparer makes an error in the preparation of a customer's tax return that results in the assessment of any interest or penalties on addi- tional taxes due, while H&R Block does not assume the liability for the additional taxes, it guarantees payment of the interest and penalties. EXECUTIVE TAX SERVICE. In addition to its regular offices, H&R Block offers tax return preparation services at Executive Tax Service offices in the United States and Canada. Appealing to taxpayers with more complicated returns, Executive Tax Service stresses the convenience of appointments, year-round tax service from the same preparer and private office interviews. The number of Executive Tax Service offices increased from 458 in fiscal year 1993 to 515 in 1994. In fiscal 1994, the number of Executive Tax Service clients increased to 513,726, compared to 432,497 in 1993 and 329,349 in 1992. Tax Services plans to continue to expand the Executive Tax Service segment of its tax return preparation business. ELECTRONIC FILING. Tax Services and its participating franchisees offer to taxpayers a service consisting of the electronic filing of individual income tax returns. Electronic filing reduces the amount of time required for a taxpayer to receive a federal tax refund and provides assurance to the client that the return, as filed with the Internal Revenue Service, is mathematically accurate. If the customer desires, he or she may have his or her refund deposited by the Treasury Department directly into his or her account at a financial institution designated by the customer. Tax Services and its franchisees filed approximately 7,559,000 tax returns electronically in 1994, compared to 7,302,000 in fiscal 1993 and 6,778,000 in fiscal 1992. In some areas of the United States in 1994, Tax Services offered the electronic filing service at no charge to those clients for whom H&R Block prepared the tax return. For U.S. returns, H&R Block offers a refund anticipation loan service in conjunction with its electronic filing service. In cooperation with selected national banking institutions, electronic filing customers who meet certain eligibility criteria are offered the opportunity to apply for loans from the banks in amounts based upon the customers' anticipated federal income tax refunds. Under this program, income tax return information is simultaneously transmitted by H&R Block to the Internal Revenue Service and the lending bank. Within a few days after the date of filing, a check in the amount of the loan, less a transaction fee (retained by the bank), is received by the refund anticipation loan customer. The Internal Revenue Service then deposits the participating customer's actual federal income tax refund into a designated account at the bank in order for the loan to be repaid. H&R Block's tax return preparation fee and electronic filing fee may be withheld from the loan proceeds and paid by the bank to Tax Services or the franchisee involved. Approximately 5,554,000 refund anticipation loans were processed in 1994 by H&R Block, compared to 5,662,000 in 1993. In 1994, H&R Block offered a service to transmit state income tax returns to state tax authorities in 18 states and plans to continue to expand this program as more states make this filing alternative available to their taxpayers. H&R Block also offered the electronic filing of U.S. income tax returns at offices located in Europe and the electronic filing of Australian and Canadian income tax returns at its offices in Australia and Canada, respectively. CASH BACK. In Canada, the Company and its franchisees offer a refund discount ("Cash Back") program to their customers. The procedures which H&R Block must follow in conducting the program are specified by Canadian law. In accordance with current Canadian regulations, if a customer's tax return indicates that such customer is entitled to a tax refund, a check is issued by H&R Block to the customer for an amount which is equal to the sum of (1) 85% of that portion of the anticipated refund which is less than or equal to $300 and (2) 95% of that portion of the refund in excess of $300. The customer assigns to H&R Block the full amount of the tax refund to be issued by Revenue Canada. The refund check is then sent by Revenue Canada directly to H&R Block and deposited by H&R Block in its bank account. In accordance with the law, the discount is deemed to include both the tax return preparation fee and the fee for tax refund discounting. This program is financed by short-term borrowing. The number of returns discounted under the Cash Back program decreased from 871,592 in fiscal year 1993 to 663,951 in fiscal year 1994. A decrease in 1994 was anticipated by the Company due to changes in procedures for the distribution of welfare payments in Canada. OWNED AND FRANCHISED OFFICES. Most H&R Block offices are similar in appearance and usually contain the same type of furniture and equipment, in accordance with the specifications of Tax Services. Free-standing offices are generally located in business and shopping centers of large metropolitan areas and in the central business areas of smaller communities. All offices are open during the tax season. During the balance of the year only a limited number of offices are open, but through telephone listings, H&R Block personnel are available to provide service to customers throughout the entire year. In fiscal year 1994, H&R Block also operated 895 offices in department stores, including 731 offices in Sears, Roebuck & Co. stores operated as "Sears Income Tax Service by H&R Block." During the 1994 tax season, the Sears facilities constituted approximately 7.6% of the tax office locations of H&R Block. In 1994, the Sears locations were operated under a license agreement that expires on December 31, 1994. A new license agreement is currently being negotiated and the Company has every reason to believe that Tax Services' contractual relationship with Sears will continue. Tax Services believes its relations with Sears to be excellent and that both parties to the license arrangement view the operations thereunder to date as satisfactory. On April 15, 1994, there were 9,577 H&R Block offices in operation principally in all 50 states, the District of Columbia, Canada, Australia and Europe, compared to 9,511 offices in opera- tion on April 15, 1993. Of the 9,577 offices, 4,537 were owned and operated by Tax Services and 5,040 were owned and operated by independent franchisees. Of such franchised offices, 3,460 were owned and operated by "satellite" franchisees of Tax Services (described below), 907 were owned and operated by "major" fran- chisees (described below) and 673 were owned and operated by satellite franchisees of major franchisees. From time to time, the Company has acquired the operations of existing franchisees and Tax Services will continue to do so if future conditions warrant such acquisitions and satisfactory terms can be negotiated. Two types of franchises have principally been granted by the tax services segment of the Company. "Major" franchisees entered into agreements with the Company (primarily in the Company's early years) covering larger cities and counties and providing for the payment of franchise royalties based upon a percentage of gross revenues of their offices. Under the agreements, the Company granted to each franchisee the right to the use of the name "H&R Block" and provided a Policy and Procedure Manual and other supervisory services. Tax Services offers to sell furniture, signs, advertising materials, office equipment and supplies to major franchisees. Each major franchisee selects and trains the employees for his or her office or offices. Since March 1993, HRB Royalty, Inc., a Delaware corporation and a wholly-owned subsidiary of Tax Services, has served as the franchisor under the major franchise agreements. In smaller localities, Tax Services grants what it terms "satellite" franchises. A satellite franchisee receives from Tax Services signs, designated equipment, specialized forms, local advertising, initial training, and supervisory services and, consequently, pays the Company a higher percentage of his or her gross tax return preparation and related service revenues as a franchise royalty than do major franchisees. Substantially all of the satellite franchises of Tax Services are located in cities with populations of 15,000 or less. Some major franchisees also grant satellite franchises in their respective areas. It has always been the policy of the Company to grant tax return preparation franchises to qualified persons without an initial franchise fee; however, the policy of Tax Services is to require a deposit to secure compliance with franchise contracts. The deposit fund as of April 30, 1994, amounted to $2,378,000. SEASONALITY OF BUSINESS. Since most of the customers of Tax Services file their tax returns during the period from January through April of each year, substantially all of Tax Services' revenues from income tax return preparation, related services and franchise royalties are received during this period. As a result, Tax Services operates at a loss through the first nine months of its fiscal year. Historically, such losses primarily reflect payroll of year-round personnel, training of income tax preparers, rental and furnishing of tax offices, and other costs and expenses relating to preparation for the following tax season. SERVICE MARKS AND TRADEMARKS. HRB Royalty, Inc., a Delaware corporation and a wholly-owned subsidiary of Tax Services, owns the following service marks registered on the principal register of the United States Patent Office: H&R Block in Two Distinct Designs The Income Tax People H&R Block Income Tax and Design Income Tax Saver Executive (when used in connection with the preparation of income tax returns for others) Rapid Refund H&R Block and Design Tax Services has a license to use the trade names and service marks of HRB Royalty, Inc., in the conduct of the business of Tax Services. In addition, HRB Royalty, Inc., owns the following unregistered service marks and trademarks: America's Largest Tax Service Nation's Largest Tax Service COMPETITIVE CONDITIONS. The tax return preparation and electronic filing business is highly competitive. Tax Services considers its primary source of tax return preparation competition to be the individual who prepares his own tax return. In addition, there are substantial numbers of tax return prepara- tion firms. Many of these firms and many firms not otherwise in the tax return preparation business are involved in providing electronic filing and refund anticipation loan services to the public. Commercial tax return preparers and electronic filers are highly competitive with regard to price, service and reputation for quality. Tax Services believes that in terms of the number of offices and tax returns prepared it is the largest tax return preparation firm in the United States. Tax Services also believes that in terms of the number of offices and tax returns electronically filed in fiscal year 1994, it is the largest provider of electronic filing services in the United States. COMPUSERVE INCORPORATED ("COMPUSERVE") GENERALLY. CompuServe, the Company's information services and computer communications subsidiary based in Columbus, Ohio, operates through three divisions - Information Services, Network Services and Support Services. CompuServe became a wholly-owned subsidiary of the Company in May 1980 and is presently a wholly- owned subsidiary of H&R Block Group, Inc. From its origins as a computer time-sharing firm, CompuServe has become a leading provider of computer-based information and communications services to businesses and individual owners of personal computers. CompuServe's highly sophisticated and efficient telecommunications network links CompuServe subscribers and system users to each other, to CompuServe's central computer facilities or to other computer centers and data bases distributed across the country and around the world. As of April 30, 1994, CompuServe's telecommunications network extended to 349 metropolitan local access points in the United States, covering all major metropolitan areas and many rural locations. Through the use of supplementary and other networks, CompuServe provides network coverage in the United States and in approximately 100 foreign countries which have public networks. CompuServe has also established local dial access points in more than 140 cities in ten countries. CompuServe's largest division is its Information Services Division. The CompuServe Information Service, the online service for personal computer owners, provides subscribers with access to data stored on mainframes and networked personal computers. CompuServe is one of the leading providers of information services to national and international markets. The total number of subscribers to CompuServe Information Services increased to more than 1.8 million personal computer owners worldwide at the end of fiscal year 1994, compared to approximately 1.3 million at the end of the previous year. Membership in 1994 grew by more than 100% in Europe to 100,000 subscribers, helped in part by a new office in Paris. Among the services accessible through CompuServe's information system are online shopping services, stock market brokerage services and airline reservation services. Customers can also play computer games, conduct research, send and receive messages and exchange helpful tips about computer use through special interest bulletin boards called "Forums" simply by connecting their personal computers to an ordinary telephone line. Through its Information Services Division, CompuServe has also developed a wide range of business services that enable companies to link their employees with the information needed to conduct business. The services include electronic mail, internal corporate information systems for diverse applications, and a host of business-related databases. Electronic mail and other communications systems provided by CompuServe allow business users flexible, two-way access to information in operating areas such as sales, marketing, investment research and information management. Through the use of these systems, suppliers and customers are able to access information easily and securely through personal computers and computer terminals. CompuServe's Network Services Division provides value-added packet data network, frame relay and local area network services to corporations and many other diverse organizations. The network offers these organizations an exceptionally fast and reliable data communications system which can be customized to meet their particular requirements. The number of clients of the Network Services Division totalled 586 at the end of fiscal year 1994, an increase from the 484 clients at the end of fiscal year 1993. One of the many applications for which the CompuServe network is utilized by its customers relates to point-of-sale transactions. CompuServe is a leading provider of value-added telecommunications services for point-of-sale authorization of credit card purchases. Using the CompuServe network, a merchant can pass a customer's card through a computer terminal and determine almost instantly whether the card is valid. In addition to providing technical support to all other divisions of CompuServe, the Support Services Division of CompuServe again in fiscal year 1994 lent its expertise to the income tax return preparation and related services segment of the Company in the nationwide operation of H&R Block Tax Services, Inc.'s electronic filing program. The system developed and implemented by the Support Services Division ensured fast, accurate, high-volume transmission and processing of tax return refund claims. The Support Services Division also developed the income tax return preparation software used in H&R Block offices nationwide during fiscal year 1994. Fiscal year 1994 saw the introduction of CompuServe CD, the multimedia companion to the CompuServe Information Service that combines CD-ROM based information, applications, sound, graphics and video with CompuServe's online services. Subsequent to the end of fiscal year 1994, CompuServe disposed of CompuServe Data Technologies, a division that marketed database management software, and Collier-Jackson, Inc., a subsidiary of CompuServe that marketed newspaper management and financial software. SERVICE MARKS, TRADEMARKS, PATENTS OR COPYRIGHTS. CompuServe owns the following service marks registered on the principal register of the United States Patent Office: CompuServe EasyPlex The Electronic Mall B+ Protocol Forum CB Simulator In addition, CompuServe owns the following trademarks registered on the principal register of the United States Patent Office: CompuServe Information Manager InfoPlex B Protocol WINCIM FRAME-Net CompuServe also owns or claims numerous unregistered service marks or trademarks. CompuServe presently holds no patents on its software programs. CompuServe is licensed by others to use various software programs and offers such programs to customers on a surcharge basis. COMPETITIVE CONDITIONS. The online information and remote computer services businesses are highly competitive and consist of a large number of companies. The Company believes that, in terms of subscriber base, CompuServe is the largest provider of worldwide online information services. The remote computer services industry is highly fragmented and no single supplier can be considered to occupy a dominant position in the industry. CompuServe's Network Division continues to compete successfully with competitors who have larger sales and technical organizations than CompuServe. BLOCK FINANCIAL CORPORATION ("BFC") GENERALLY. Block Financial Corporation, a Delaware corporation and a subsidiary of H&R Block Group, Inc., was incorporated in May 1992 and such corporation, or a subsidiary thereof, is involved in investing in refund anticipation loans, offering H&R Block and CompuServe bank cards, leasing computer equipment to franchisees of H&R Block Tax Services, Inc. (or one of its subsidiaries), extending equity lines of credit to such franchisees, providing business insurance services to H&R Block Tax Services, Inc., its franchisees and other subsidiaries of the Company, and, through a captive insurance subsidiary, reinsuring certain Company risks and providing insurance coverages for third-party businesses. BFC is a party to an agreement with Mellon Bank (DE) National Association ("Mellon") under which BFC purchases interests in a trust to which certain refund anticipation loans made by Mellon in the United States are sold. Mellon is one of the national banking institutions through which such loans are made to H&R Block electronic filing customers, as described in the section entitled "H&R Block Tax Services, Inc.," under "Electronic Filing." During fiscal year 1994, Mellon offered refund anticipation loans to customers of Tax Services and its franchisees in an area that included approximately one-half of the total of company-owned and satellite franchised offices in the United States. BFC purchased an interest of just under 50% in all refund anticipation loans made by Mellon during fiscal year 1994 at those tax offices in the Mellon territory. BFC's purchases were financed through short-term borrowing. BFC bears all of the risks associated with its interests in the refund anticipation loans. Through Columbus Bank and Trust Company, Columbus, Georgia, BFC had issued in excess of 45,000 credit cards by the end of fiscal year 1994. The "H&R Block ValueCard" is designed for customers of H&R Block Tax Services, Inc., and the CompuServe Visa Card is designed for customers of CompuServe Incorporated. The cards currently feature a low annual fee, a market-based annual percentage rate of interest equivalent to the prime rate, plus 9.9%, and rebates for the services offered by Tax Services or CompuServe, as the case may be. BFC plans to introduce a value-added on-line transaction review service for customers with a CompuServe Visa Card. In a program designed to help franchise owners automate their income tax return preparation operations in an economical manner, Franchise Partner, Inc., a subsidiary of BFC, offers direct finance capital leases to franchisees of either H&R Block Tax Services, Inc., or one of its subsidiary corporations in order to finance computer equipment. The leases offered are for terms of 24 or 36 months. Franchise Partner, Inc., also offers to such franchisees equity lines of credit which must be used for purposes related to the operation of the franchise. A franchise equity line of credit is secured by the franchise itself. The program is designed to provide franchise owners with lines of credit with reasonable interest rates in order to better enable the franchisees to refinance existing business debt, expand or renovate offices or meet off-season cash flow needs. The minimum line of credit amount is generally $10,000 and the standard term for an equity line of credit is five years (with provisions for automatic extensions of such term). In most states during fiscal year 1994, draws against a line of credit were charged a variable monthly interest rate of the prime interest rate, plus one percent. At the end of fiscal year 1994, the operations of the personal finance software (Managing Your Money (copyright)) portion of MECA Software, Inc., were combined with BFC. BFC intends to expand the market for such software beyond the consumer market to an integrated system designed to tie financial service companies to their customers. COMPETITIVE CONDITIONS. The credit card, computer equipment leasing, lending and insurance businesses are highly competitive and consist of a large number of companies. No single supplier can be considered to occupy a dominant position in any of these businesses. ITEM 2. PROPERTIES. The executive offices of both the Company and H&R Block Tax Services, Inc., are located at 4410 Main Street, Kansas City, Missouri, in a three-story building owned by Tax Services which was constructed in 1963 and expanded in 1965, 1973 and 1981. Tax Services has acquired property adjacent to such building and an additional expansion is in the planning stages. Most other offices of Tax Services (except those in department stores) are operated in premises held under short-term leases providing fixed monthly rentals, usually with renewal options. CompuServe's executive offices are located in an office complex in Columbus, Ohio, owned by CompuServe. CompuServe also owns and occupies two other buildings in the Columbus area and has broken ground on new facilities in the Columbus area (presently planned for occupancy in the third quarter of fiscal year 1996). In addition, CompuServe leases office space in three other buildings in the Columbus area and in a number of other locations in the United States and Europe. CompuServe owns SC30M computer systems purchased from Systems Concepts, Inc., and has assembled several SC-30 and SC-40 processors on-site via an agreement with such firm. CompuServe also owns central processors manufactured by Digital Equipment Corporation and located in its two computer centers. Due to the varying demands of different computer programs on the capabilities of the com- puter hardware, it is not possible to define a single measurement of the hardware capacity. The executive offices of Block Financial Corporation are located in leased offices at 4435 Main Street, Kansas City, Missouri. ITEM 3. LEGAL PROCEEDINGS. There are no material legal proceedings pending by or against the Company or any of its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended April 30, 1994. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of the Company, each of whom has been elected to serve at the discretion of the Board of Directors of the Company, are: Name and age Office(s) - - - - ---------------------- ------------------------------ Henry W. Bloch (71) Chairman of the Board since August 1989; Chief Executive Officer from 1974 through July 1992; President from 1962 through July 1989; Member of the Board of Directors since 1955. Thomas M. Bloch (40) President since August 1989; Chief Executive Officer since August 1992; Chief Operating Officer from August 1989 through July 1992; Executive Vice President from August 1988 through July 1989; Member of the Board of Directors since 1983. William F. Evans (46) Senior Vice President, Corporate Operations, since August 1992. See Note 1. William P. Anderson (45) Vice President, Corporate Development, since December 1991; Chief Financial Officer since August 1992. See Note 2. Robert L. Arnold (51) Vice President since February 1986; Director of Internal Audit since 1978. Ozzie Wenich (51) Vice President, Corporate Con- troller and Treasurer since March 1994; Vice President and Corporate Controller from Sep- tember 1985 until March 1994. Note 1: Mr. Evans was Executive Vice President and Chief Financial Officer of Dun & Bradstreet Software Services, Inc., Atlanta, Georgia, from 1990 through July 1992; and Executive Vice President and Chief Financial Officer of Management Science America, Inc., Atlanta, Georgia, from 1988 until 1990. Note 2: Mr. Anderson was a partner in KPMG Peat Marwick, accounting firm, from 1984 until December 1991, in Atlanta, Georgia, serving in various capacities, including responsibility for the firm's national corporate finance consulting practice. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The information called for by this item is contained in the Company's annual report to security holders for the fiscal year ended April 30, 1994, under the heading "Common Stock Data," and is hereby incorporated by reference. The Company's Common Stock is traded principally on the New York Stock Exchange. The Company's Common Stock is also traded on the Pacific Stock Exchange. On June 10, 1994, there were 35,485 stockholders of the Company. ITEM 6. SELECTED FINANCIAL DATA. The information called for by this item is contained in the Company's annual report to security holders for the fiscal year ended April 30, 1994, under the heading "Selected Financial Data," and is hereby incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information called for by this item is contained in the Company's annual report to security holders for the fiscal year ended April 30, 1994, under the headings "Management's Discussion and Analysis of Results of Operations" and "Management's Discussion and Analysis of Liquidity and Capital Resources," and is hereby incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information called for by this item and listed at Item 14(a)1 is contained in the Company's annual report to security holders for the fiscal year ended April 30, 1994, and is hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There has been no change in the registrant's accountants during the two most recent fiscal years or any subsequent interim time period. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information called for by this item is contained in the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after April 30, 1994, in the section titled "Election of Directors" and in Item 4a of Part I of this report, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information called for by this item is contained in the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after April 30, 1994, in the section titled "Compensation of Executive Officers," and is incorporated herein by reference, except that information contained in such section under the subtitles "Performance Graphs" and "Compensation Committee Report" is not incorporated herein by reference and is not to be deemed "filed" as part of this filing. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by this item is contained in the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after April 30, 1994, in the section titled "Election of Directors" and in the section titled "Information Regarding Security Holders," and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by this item is contained in the Company's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after April 30, 1994, in the section titled "Election of Directors," and in the section titled "Compensation of Executive Officers," and is incorporated herein by reference, except that information contained in the section titled "Compensation of Executive Officers" under the subtitles "Performance Graphs" and "Compensation Committee Report" is not incorporated herein by reference and is not deemed "filed" as part of this filing. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS The following consolidated financial statements of H&R Block, Inc., and Subsidiaries are incorporated by reference to the Company's annual report to security holders for the year ended April 30, 1994: Page Consolidated Statements of Earnings 19 Consolidated Balance Sheets 20 Consolidated Statements of Cash Flows 21 Notes to Consolidated Financial Statements 22 Quarterly Financial Data 27 Independent Auditors' Report 29 2. FINANCIAL STATEMENT SCHEDULES Independent Auditors' Report Schedule I - Marketable Securities - Other Security Investments Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other Than Related Parties Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Schedules not filed herewith are either not applicable, the information is not material or the information is set forth in the financial statements or notes thereto. 3. EXHIBITS 3(a) Restated Articles of Incorporation of H&R Block, Inc., as amended, filed as Exhibit 4(a) to the Com- pany's quarterly report on Form 10- Q for the quarter ended October 31, 1991, are incorporated herein by reference. 3(b) Bylaws of H&R Block, Inc., as amended, filed as Exhibit 4 to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 1989, are incorporated by reference. 4(a) Conformed copy of Rights Agreement dated as of July 14, 1988 between H&R Block, Inc., and Centerre Trust Company of St. Louis, filed on August 9, 1993 as Exhibit 4(c) to the Company's Registration Statement on Form S-8 (File No. 33- 67170), is incorporated herein by reference. 4(b) Form of Certificate of Designation, Preferences and Rights of Participating Preferred Stock of H&R Block, Inc., filed on August 9, 1989 as Exhibit 4(d) to the Company's Registration Statement on Form S-8 (File No. 33-30453), is incorporated by reference. 4(c) Copy of Amendment to Rights Agreement dated as of May 9, 1990 between H&R Block, Inc., and Boatmen's Trust Company, filed as Exhibit 4(c) to the Company's annual report on Form 10-K for the fiscal year ended April 30, 1990, is incorporated herein by reference. 4(d) Copy of Second Amendment to Rights Agreement dated September 11, 1991 between H&R Block, Inc., and Boatmen's Trust Company, filed as Exhibit 4(b) to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 1991, is incorporated herein by reference. 10(a) The Company's 1984 Long-Term Executive Compensation Plan, as amended (terminated as of September 8, 1993, except with respect to awards then outstanding thereunder), filed as Exhibit 28(a) to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 1991, is incorporated herein by reference. 10(b) The Company's 1993 Long-Term Executive Compensation Plan, filed as Exhibit 10 to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 1993, is incorporated herein by reference. 10(c) The H&R Block Long-Term Performance Program, as amended. 10(d) The H&R Block Deferred Compensation Plan for Directors, as amended. 10(e) The H&R Block Deferred Compensation Plan for Executives, as amended. 10(f) The H&R Block Supplemental Deferred Compensation Plan for Executives. 10(g) The Amended and Restated H&R Block, Inc. Retirement Plan for Non- Employee Directors, filed as Exhibit 10(e) to the Company's annual report on Form 10-K for the fiscal year ended April 30, 1989, is incorporated herein by reference. 10(h) The Company's 1989 Stock Option Plan for Outside Directors, as amended, filed as Exhibit 28(b) to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 1991, is incorporated herein by reference. 11 Statement re Computation of Per Share Earnings. 13 Those portions of the annual report to security holders for the fiscal year ended April 30, 1994 which are expressly incorporated by reference in this filing are filed as Exhibit 13 hereto. 21 Subsidiaries of the Company. 23 The consent of Deloitte & Touche, Certified Public Accountants, is located immediately after the signature pages contained in this filing. (b) Reports on Form 8-K. The Company did not file any current reports on Form 8-K during the fourth quarter of the year ended April 30, 1994. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there- unto duly authorized. H&R BLOCK, INC. June 22, 1994 By/s/ Thomas M. Bloch --------------------------- Thomas M. Bloch, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title - - - - ----------------------- ----------------------- /s/ Thomas M. Bloch President, Chief - - - - ----------------------- Executive Officer and Thomas M. Bloch Director (principal executive officer) /s/ G. Kenneth Baum Director - - - - ----------------------- G. Kenneth Baum /s/ Henry W. Bloch Director - - - - ----------------------- Henry W. Bloch /s/ Robert E. Davis Director - - - - ----------------------- Robert E. Davis /s/ Donna R. Ecton Director - - - - ----------------------- Donna R. Ecton /s/ Henry F. Frigon Director - - - - ----------------------- Henry F. Frigon /s/ Roger W. Hale Director - - - - ----------------------- Roger W. Hale (Signed as to each on June 22, 1994) Signature Title - - - - -------------------------- ------------------------- /s/ Marvin L. Rich Director - - - - -------------------------- Marvin L. Rich /s/ Frank L. Salizzoni Director - - - - -------------------------- Frank L. Salizzoni /s/ Morton I. Sosland Director - - - - -------------------------- Morton I. Sosland /s/ William P. Anderson Vice President, Corporate - - - - -------------------------- Development and Chief William P. Anderson Financial Officer (principal financial officer) /s/ Ozzie Wenich Vice President, Corporate - - - - -------------------------- Controller and Treasurer Ozzie Wenich (principal accounting officer) (Signed as to each on June 22, 1994) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 4 to Registration Statement No. 33-185 of H&R Block, Inc. and subsidiaries (relating to shares of Common Stock issued under the 1984 Long-Term Executive Compensation Plan) on Form S-8 and Registration Statement No. 33-33889 of H&R Block, Inc. and subsidiaries (relating to shares of Common Stock issuable under the 1989 Stock Option Plan for Outside Directors) on Form S-8 of our reports dated June 21, 1994, appearing in and incorporated by reference in this Annual Report on Form 10-K of H&R Block, Inc. and subsidiaries for the year ended April 30, 1994. /s/Deloitte & Touche Kansas City, Missouri July 28, 1994 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders H&R Block, Inc. Kansas City, Missouri We have audited the consolidated financial statements of H&R Block, Inc. and subsidiaries as of April 30, 1994 and 1993 and for each of the three years in the period ended April 30, 1994, and have issued our report thereon dated June 21, 1994; such consolidated financial statements and report are included in your 1994 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedules of H&R Block, Inc. and subsidiaries, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Deloitte & Touche Kansas City, Missouri June 21, 1994 H&R BLOCK, INC. AND SUBSIDIARIES Schedule I - MARKETABLE SECURITIES - OTHER SECURITY INVESTMENTS APRIL 30, 1994 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS: MUNICIPAL BONDS: Richfield, Minnesota Independent School District General Obligation Series 1993 B Floating Rate, Tax Exempt Adjustable Rate Bonds. Rate resets monthly on the first. 2,000,000 $2,000,000 $2,000,000 $2,000,000 Richfield, Minnesota Independent School District General Obligation School Building Series 1993 B Floating Rate, Tax Exempt Adjustable Rate Bonds. Rate resets monthly on the first. 2,260,000 2,260,000 2,260,000 2,260,000 Richfield, Minnesota Independent School District General Obligation School Building Series 1993 B Floating Rate, Tax Exempt Adjustable Rate Bonds. Rate resets monthly on the first. 1,315,000 1,315,000 1,315,000 1,315,000 Puerto Rico Commonwealth, Tax Exempt Adjustable Rate Bond. Rate resets every 28 days. 1,700,000 1,700,000 1,700,000 1,700,000 McLean County, North Dakota Solid Waste Disposal Revenues National Rural Utility COOP, Tax Exempt Adjustable Rate Bonds. Rate resets every 32 days. 3,200,000 3,200,000 3,200,000 3,200,000 Washington State Public Power Supply System #2, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 1,580,000 1,580,000 1,580,000 1,580,000 Philadelphia Hospital Pennsylvania, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 2,450,000 2,450,000 2,450,000 2,450,000 Illinois Housing Development Authority, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 5,000,000 5,000,000 5,000,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Massachusetts Health and Education Facility Authority for Boston University, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 6,250,000 6,249,312 6,250,000 6,250,000 Georgia State General Obligation Series A - Private Placement, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 3,140,000 3,140,000 3,140,000 3,140,000 Georgia State General Obligation Series A - Private Placement, Tax Exempt Adjustable Rate Bonds. Rate resets every 30 days. 4,300,000 4,300,000 4,300,000 4,300,000 California State Housing University Revenues, Tax Exempt Adjustable Rate Bonds. Rate resets every 30 days. 7,600,000 7,600,000 7,600,000 7,600,000 Fairfax County, Virginia Industrial Development Authority Revenues, Tax Exempt Adjustable Rate Bonds. Rate resets every 29 days. 9,000,000 9,000,000 9,000,000 9,000,000 San Francisco, California City and County Sewer Revenue Float, Tax Exempt Adjustable Rate Bonds. Rate resets every 28 days. 2,800,000 2,800,000 2,800,000 2,800,000 Los Angeles, California Waste Water System Revenues 1992 B, Tax Exempt Adjustable Rate Bonds. Rate resets every 34 days. 4,000,000 4,000,000 4,000,000 4,000,000 Pre-Refunded Pooled Private Placement, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 5,000,000 5,000,000 5,000,000 First California Pre-Refunded, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 5,000,000 5,000,000 5,000,000 5,000,000 First California Pre-Refunded, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 1,100,000 1,100,000 1,100,000 1,100,000 Pre-Refunded Pooled Private Placement, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 3,500,000 3,500,000 3,500,000 3,500,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): New York City Municipal Water Financial Authority Water and Sewer Systems Revenues, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 2,000,000 2,000,000 2,000,000 2,000,000 Missouri State Environment Transportation and Energy Revenue (Union Electric Company), Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 4,999,850 5,000,000 5,000,000 City of Chelsea, Massachusetts Lease Revenues Series A, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 5,000,000 5,000,000 5,000,000 Underwood, North Dakota Pollution Control Revenues (COOP Power Association Project) Series A, Tax Exempt Adjustable Rate Bonds. Rate resets every 34 days. 5,000,000 5,000,000 5,000,000 5,000,000 Los Angeles, California Waste and Water System Revenues Series 1992 B, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 4,000,000 4,000,000 4,000,000 4,000,000 Washington State Housing Financial Single Family Mortgage Revenues Refunding, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 2,100,000 2,100,000 2,100,000 2,100,000 Missouri State Environmental Transportation and Energy Revenues (Union Electric), Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 2,900,000 2,900,000 2,900,000 2,900,000 City of Chelsea, Massachusetts Lease Revenues Series A, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 2,000,000 2,000,000 2,000,000 2,000,000 Montana State Health Facility Authority, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 3,650,000 3,650,000 3,650,000 3,650,000 New York, New York City Municipal Water Financial Authority Water and Sewer Revenue Fiscal 1989 B, Tax Exempt Adjustable Rate Bonds. Rate resets every 36 days. 5,000,000 5,000,000 5,000,000 5,000,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): California State Department of Water Resource, Tax Exempt Adjustable Rate Bonds. Rate resets every 39 days. 8,700,000 8,700,000 8,700,000 8,700,000 Vermont Student Assistance Corporation Series E, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 2,300,000 2,300,000 2,300,000 2,300,000 Student Loan Acquisition Authority of Arizona Series 1994 A-2 "AGES", Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 5,000,000 5,000,000 5,000,000 City of Wamego, Kansas (Western Resources Project) Pollution Control Revenues, Tax Exempt Adjustable Rate Bonds. Rate resets every 16 days. 5,000,000 4,999,450 4,999,450 4,999,450 Massachusetts Bay Transportation Authority General Transportation System Series A, Tax Exempt Adjustable Rate Bonds. Rate resets every 137 days. 1,500,000 1,501,080 1,501,080 1,500,432 New York State Dormitory Authority Revenues for Cornell University, Tax Exempt Adjustable Rate Bonds. Rate resets every 35 days. 5,000,000 5,000,000 5,000,000 5,000,000 New York State Urban Development 1994-7, Tax Exempt Adjustable Rate Bonds. Rate resets every 128 days. 5,000,000 5,000,000 5,000,000 5,000,000 State of Washington General Obligation 1994-15, Tax Exempt Adjustable Rate Bonds. Rate resets every 118 days. 3,400,000 3,400,000 3,400,000 3,400,000 Oklahoma City, Oklahoma Municipal Improvement Authority Water System Revenue Bonds Series 1985 A, Tax Exempt Municipal Bonds. 7.75% Mature May 1, 1994. 500,000 500,000 500,000 500,000 Missouri State Health and Education Facility for John Knox Village. Letter of Credit at Security Pacific. 7.375% Mandatory tender May 1, 1994 at par. 1,000,000 996,250 1,000,250 1,000,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Michigan State Hospital Finance Authority Revenue Bonds for Henry Ford Hospital, Series 1984-A. 10.50% Callable May 1, 1994 at 102. 660,000 754,941 673,477 660,000 Missouri State Health and Educational Facilities Authority for John Knox Village Revenue Bond. 7.375% Mandatory put May 1, 1994 at par. 745,000 773,362 745,186 745,000 Tonawanda Town, New York Bond Anticipation Notes. 2.75% Mature May 12, 1994. 2,250,000 2,249,887 2,249,181 2,250,000 Missouri State Health and Education Facility Authority Revenue Series B, St. Louis University. 6.20% Matures June 1, 1994. 455,000 455,000 456,411 455,000 State of Texas Veterans Land Housing Division 1983 Authority, General Obligation Bond, Series A. 9.00% Callable June 1, 1994. 1,000,000 1,102,520 1,025,000 1,043,600 Minneapolis, Minnesota Water and Sewer Revenues Series 1992, Tax Exempt Municipal Notes. 4.75% Callable June 1, 1994 at par. 2,500,000 2,507,525 2,510,623 2,502,508 Fraser, Colorado Industrial Development Revenue Refunding Series 1993 (Safeway, Inc. Project), Tax Exempt Adjustable Put Bonds. 2.75% Mandatory put June 1, 1994. 2,100,000 2,100,000 2,100,000 2,100,000 Tremonton City, Utah Industrial Development Revenue Refunding Series 1993 (Safeway, Inc. Project), Tax Exempt Adjustable Put Bonds. 2.75% Mandatory put June 1, 1994. 1,300,000 1,300,000 1,300,000 1,300,000 South Essex, Massachusetts Sewer District Temporary Notes General Obligation, Tax Exempt Municipal Notes. 2.75% Mature June 17, 1994. 5,000,000 4,994,300 4,992,495 4,997,557 California Statewide Community Development Authority Revenues Pool Series A, Tax Exempt Municipal Notes. 3.25% Mature June 30, 1994. 5,000,000 5,008,600 5,001,400 5,003,440 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Philadelphia, Pennsylvania School District Tax and Revenue Anticipation Notes, Tax Exempt Municipal Notes. 3.625% Mature June 30, 1994. 5,000,000 5,013,650 5,003,250 5,006,825 Philadelphia, Pennsylvania School District Tax and Revenue Anticipation Notes, Tax Exempt Municipal Notes. 3.625% Mature June 30, 1994. 2,500,000 2,506,225 2,501,625 2,503,113 California School Cash Reserve Program Authority Series A, Tax Exempt Municipal Notes. 3.40% Mature July 5, 1994. 5,000,000 5,007,250 5,002,000 5,004,833 Lake County School District #116, Illinois Tax Anticipation Warrants (Round Lake), Tax Exempt Municipal Notes. 4.00% Mature July 19, 1994. 750,000 753,127 753,128 752,085 California State Revenue Anticipation Warrants Series B, Tax Exempt Municipal Notes. 3.50% Mature July 26, 1994. 3,000,000 3,008,700 3,003,000 3,005,220 California State Revenue Anticipation Warrants Series B, Tax Exempt Municipal Notes. 3.50% Mature July 26, 1994. 2,500,000 2,507,250 2,502,500 2,504,350 Will County School District #161 (Summit Hill) Illinois Tax Anticipation Warrants, Tax Exempt Municipal Notes. 3.49% Mature August 1, 1994. 500,000 500,540 500,540 500,324 Denver, Colorado City and County Airport Revenue Bonds. 8.375% Callable August 1, 1994 at par. 1,000,000 1,130,490 1,007,030 1,030,495 Texas State General Obligation Bond. 6.50% Matures August 1, 1994. 1,945,000 1,942,569 1,961,532 1,944,878 Illinois Housing Development Authority Residential Revenue - Third Party Citibank, Tax Exempt Adjustable Put Bond. 2.70% Optional put August 1, 1994. 5,000,000 5,001,200 5,002,400 5,000,600 Illinois Housing Development Authority Series C, Tax Exempt Adjustable Put Bond. 2.70% Mandatory put August 1, 1994. 3,520,000 3,517,466 3,521,690 3,518,733 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Elizabeth, New Jersey Bond Anticipation Notes, Tax Exempt Municipal Notes. 3.60% Mature August 3, 1994. 5,000,000 5,003,700 4,997,225 5,002,775 New Mexico Mortgage Finance Authority Single Family Mortgage 1988 Series A (Federal Insurance of Guaranty Asset Loans), Tax Exempt Adjustable Put Bond. 3.125% Optional put September 1, 1994. 2,360,000 2,360,000 2,384,822 2,360,000 Passaic, New Jersey Tax Anticipation Notes, Tax Exempt Municipal Notes. 3.75% Mature September 22, 1994. 3,000,000 3,006,570 2,998,764 3,004,380 Massachusetts Bay Transportation Authority General Obligation Notes Series B, Tax Exempt Municipal Notes. 3.25% Mature September 30, 1994. 4,600,000 4,612,052 4,602,668 4,607,533 Jersey City, New Jersey Bond Anticipation Notes, Tax Exempt Municipal Notes. 3.50% Mature September 30, 1994. 5,000,000 5,012,750 4,992,095 5,009,107 Kansas City, Missouri Industrial Development Authority Hospital Revenue Bond 1984 Series A (St. Luke's Hospital) (Insured by Industrial Indemnity Company). 9.40% Matures October 1, 1994. 250,000 249,375 256,938 249,974 Little Blue Valley, Missouri Sewer District Sewer System Refunding Revenue Bond. 7.80% Matures October 1, 1994. 500,000 498,750 510,310 499,940 Florida State Municipal Power, Tax Exempt Municipal Bond. 9.00% Callable October 1, 1994. 1,000,000 1,128,770 1,046,030 1,010,318 Jacksonville, Florida St. John's River Power #1 Electric Authority Revenue Bond, Series 2. 9.00% Matures October 1, 1994. 1,000,000 1,108,360 1,025,180 1,008,711 City of Dallas, Texas Water Works and Sewer System Revenue Bond. 9.00% Matures October 1, 1994. 1,550,000 1,714,161 1,589,432 1,563,239 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Michigan State Building Authority Revenue Detroit Regional Prison Series I. 7.00% Matures October 1, 1994. 1,000,000 1,019,500 1,017,840 1,001,741 Nevada Housing Division Single Family Mortgage Senior Revenues Series B, Tax Exempt Adjustable Put Bond. 3.25% Optional put October 1, 1994 at par. 1,315,000 1,314,671 1,330,938 1,314,726 Montana Board of Housing Single Family Mortgage Revenues Series C, Tax Exempt Adjustable Put Bond. 3.25% Optional put October 1, 1994 at par. 1,795,000 1,794,551 1,794,551 1,794,626 Toledo, Ohio Bond Anticipation Notes, Tax Exempt Municipal Notes. 3.70% Mature October 13, 1994. 2,360,000 2,362,313 2,357,279 2,361,982 Kane County, Illinois School District #300 Tax Anticipation Warrants (Dundee/Carpenterville), Tax Exempt Municipal Notes. 3.98% Mature October 19, 1994. 2,500,000 2,505,550 2,505,550 2,504,625 Orange Township, New Jersey Tax Anticipation Notes, Tax Exempt Municipal Notes. 3.75% Mature October 28, 1994. 5,000,000 5,002,750 5,002,750 5,002,750 Chicago O'Hare International Airport Revenue Bond Series B. 10.375% Callable January 1, 1995 at 103. 500,000 587,210 534,735 513,562 Chicago, Illinois Park District Capital Improvement Unlimited Tax General Obligation Bond. 9.70% Matures January 1, 1995. 550,000 618,992 569,630 559,199 Florida State Jacksonville Transportation Authority General Obligation Bond. 9.00% Matures January 1, 1995. 1,000,000 1,092,440 1,032,060 1,012,750 Dallas County, Texas General Obligation Bond. 8.75% Matures January 10, 1994. 630,000 689,233 650,752 636,219 ------------ ------------ ------------ 239,057,242 238,257,797 238,091,600 ------------ ------------ ------------ Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): REDEEMABLE PREFERRED STOCK: Muniyield Quality Fund Series A, Tax Exempt Money Market Preferred Stock 99 4,950,000 4,950,000 4,950,000 Ford Holdings, Inc. Series A, Money Market Preferred Stock 16 1,600,000 1,600,000 1,600,000 Nuveen California Municipal Opportunity Fund Series W, Tax Exempt Money Market Preferred Stock 200 5,000,000 5,000,000 5,000,000 Voyager Minnesota Municipal Income Fund II Series A, Tax Exempt Money Market Preferred Stock 71 3,550,000 3,550,000 3,550,000 Paine Webber Premium Insured Municipal Income Fund C, Tax Exempt Money Market Preferred Stock 60 3,000,000 3,000,000 3,000,000 Asea Brown Boveri Limited Special Finance Series A, Money Market Preferred Stock 2 2,000,000 2,000,000 2,000,000 Pacificorp Series A-1, Money Market Preferred Stock 26 2,600,000 2,600,000 2,600,000 Van Kampen Investment Grade Florida, Tax Exempt Money Market Preferred Stock 86 4,300,000 4,300,000 4,300,000 Seligman Select Municipal Fund Series B, Tax Exempt Money Market Preferred Stock 50 5,000,000 5,000,000 5,000,000 Van Kampen Merritt Trust Investment Grade Florida, Tax Exempt Money Market Stock 83 4,150,000 4,150,000 4,150,000 Muniyield Insured Fund Series D, Tax Exempt Money Market Preferred Stock 160 8,000,000 8,000,000 8,000,000 Nuveen Premium Income Municipal Fund Series A, Tax Exempt Money Market Preferred Stock 70 7,000,000 7,000,000 7,000,000 Muniyield Quality I Series C, Tax Exempt Money Market Preferred Stock 100 5,000,000 5,000,000 5,000,000 Voyager Minnesota Municipal Income Fund, Tax Exempt Money Market Preferred Stock 120 6,000,000 6,000,000 6,000,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): REDEEMABLE PREFERRED STOCK (continued): Muniyield Quality Fund Series C, Tax Exempt Money Market Preferred Stock 160 8,000,000 8,000,000 8,000,000 Van Kampen Merritt Ohio Quality Municipal Trust, Tax Exempt Money Market Preferred Stock 20 1,000,000 1,000,000 1,000,000 Van Kampen Opportunity Trust Series B, Tax Exempt Money Market Preferred Stock 117 5,850,000 5,850,000 5,850,000 Van Kampen Opportunity Trust Series B, Tax Exempt Money Market Preferred Stock 100 5,000,000 5,000,000 5,000,000 Voyager Minnesota Municipal Income Fund, Tax Exempt Money Market Preferred Stock 80 4,000,000 4,000,000 4,000,000 Voyager Minnesota Municipal Income Fund II Series B, Tax Exempt Money Market Preferred Stock 100 5,000,000 5,000,000 5,000,000 Fiat Corporation Series B, Money Market Preferred Stock 5 5,000,000 5,000,000 5,000,000 Duke Power Company Series A, Money Market Preferred Stock 14 1,400,000 1,400,000 1,400,000 Virginia Electric and Power Company, Money Market Preferred Stock 13 1,300,000 1,300,000 1,300,000 Nuveen Performance Series W, Tax Exempt Money Market Preferred Stock 200 5,012,300 5,017,500 5,012,300 Nuveen Performance Series W, Tax Exempt Money Market Preferred Stock 160 4,014,000 4,014,000 4,014,000 ACM Municipal Income Fund Series A, Tax Exempt Money Market Preferred Stock 50 2,504,961 2,504,961 2,504,961 Nuveen New York Select Quality Series W, Tax Exempt Money Market Preferred Stock 120 3,006,371 3,006,371 3,006,371 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): REDEEMABLE PREFERRED STOCK (continued): Van Kampen Merritt Municipal Trust A, Tax Exempt Money Market Preferred Stock 100 5,025,500 5,025,500 5,025,500 ------------ ------------ ------------ 118,263,132 118,268,332 118,263,132 ------------ ------------ ------------ OTHER: Rite Aid Corporation, Commercial Paper 1,300,000 1,296,663 1,296,663 1,296,663 Philadelphia, Pennsylvania Gas Works Revenue Notes Series A, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Emery County, Utah Pollution Control Revenues (Pacificorp Project) Series 1991, Tax Exempt Commercial Paper 4,200,000 4,200,000 4,200,000 4,200,000 Municipal Electric Authority Georgia Money Market Municipal Project 1 Series A, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Sacramento Municipal Utility District Series H, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Maryland Health and Higher Education Pooled Loan on Progress Revenue Notes (John Hopkins Hospital) Series C, Tax Exempt Commercial 5,000,000 5,000,000 5,000,000 5,000,000 Brazos River Harbor Navigation District of Brazoria County, Texas Variable Rate Pollution Control Revenues (The Dow Chemical Company) Series 1988, Tax Exempt Commercial Paper 2,500,000 2,500,000 2,500,000 2,500,000 Venengo Industrial Development Authority Resource Recovery Revenues Series 1993 (Scrubgrass Project), Tax Exempt Commercial Paper 2,400,000 2,400,000 2,400,000 2,400,000 Wake County, North Carolina Industrial Facility and Pollution Control for Carolina Power and Light Project 1990 B, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): OTHER (continued): Hoosier City of Sullivan, Indiana National Rural Utilities Co-op Financial Corporation (Hoosier Energy Rural Electric Co-op), Tax Exempt Commercial Paper 3,200,000 3,200,000 3,200,000 3,200,000 Anne Arundel County, Maryland Economic Development Revenues (Baltimore Gas and Electric) Series 1988, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Sweetwater County, Wyoming Environmental Improvement Revenue Bonds (Pacific Corporation Project) Series 1990 A, Tax Exempt Commercial Paper 2,200,000 2,200,000 2,200,000 2,200,000 Salt Lake City, Utah Flexible Rate Revenue Bonds Series 1990, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Oklahoma Industries Authority Flexible Rate Hospital Revenues (Baptist Medical Center of Oklahoma) Series 1990 B, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 City and County of Denver, Colorado Airport Systems Revenue Bonds Series 1990 D, Tax Exempt Commercial Paper 5,000,000 5,000,000 5,000,000 5,000,000 Sarasota County Public Hospital District Sarasota Memorial Hospital Series B, Tax Exempt Commercial Paper 5,450,000 5,450,000 5,450,000 5,450,000 City of Petersburg, Indiana Pollution Control Revenues Series 1991 (Indianapolis Power and Light Project), Tax Exempt Commercial Paper 4,700,000 4,700,000 4,700,000 4,700,000 City of Maysville, Kentucky Solid Waste Disposal Revenues Series 1992, Tax Exempt Commercial Paper 1,035,000 1,035,000 1,035,000 1,035,000 Markborough Properties, Inc., Commercial Paper 3,616,500 3,613,679 3,613,643 3,613,679 Honda Canada, Inc., Commercial Paper 2,531,550 2,527,626 2,527,575 2,527,626 Ford Credit Canada, Limited, Commercial Paper 2,531,550 2,524,006 2,523,854 2,524,006 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ CURRENT ASSETS (continued): OTHER (continued): Ford Credit Canada, Limited, Commercial Paper 2,169,900 2,161,394 2,159,796 2,161,394 Confederation Life Insurance Company, Commercial Paper 2,531,550 2,518,234 2,517,977 2,518,234 Confederation Life Insurance Company, Commercial Paper 2,531,550 2,515,829 2,515,551 2,515,829 Confederation Life Insurance Company, Commercial Paper 2,531,550 2,512,614 2,512,135 2,512,614 Confederation Life Insurance Company, Commercial Paper 2,531,550 2,509,855 2,516,910 2,509,855 Confederation Life Insurance Company, Commercial Paper 2,531,550 2,506,412 2,506,209 2,506,412 General Motors Acceptance Corporation Canada, Commercial Paper 10,849,500 10,686,106 10,685,571 10,686,106 Chrysler Credit Canada, Commercial Paper 10,849,500 10,631,100 10,631,425 10,631,100 ------------ ------------ ------------ 116,688,518 116,692,309 116,688,518 ------------ ------------ ------------ TOTAL CURRENT ASSETS $474,008,892 $473,218,438 $473,043,250 ============ ============ ============ NON-CURRENT ASSETS: MUNICIPAL BONDS: San Antonio, Texas Sewer Bonds. 8.75% Mature May 1, 2005. Callable May 1, 1995. 500,000 $538,475 $532,270 $505,742 Arlington, Texas General Obligation Permanent Improvement Refunding Bonds. 9.25% Mature May 1, 2005. Callable May 1, 1995 at par. 500,000 551,005 524,605 507,613 Missouri State Health and Education Facility Authority Revenue Bond, Series A, St. Louis University. 6.40% Matures June 1, 1995. 500,000 500,000 513,390 500,000 Ocean County, New Jersey Unlimited Tax General Obligation Bond. 9.60% Matures June 1, 1995. Noncallable. 740,000 841,965 784,245 761,040 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): University of Arizona Revenue Bonds, Series A. 9.00% Mature June 1, 1995. 930,000 1,026,952 979,718 950,006 Reading, Pennsylvania General Obligation Bond, Series A. 9.125% Matures June 15, 2015. Prerefunded June 15, 1995 at par. 1,000,000 1,129,120 1,054,740 1,024,691 Indianapolis, Indiana Airport Authority Revenue Bond. 7.00% Matures July 1, 1995. 425,000 429,645 438,141 425,000 Florida State Turnpike Authority Revenue Bond. 7.25% Matures July 1, 1995. Noncallable. 1,000,000 1,028,540 1,036,310 1,006,243 South Carolina State Public Service Authority Electric Expansion Revenue Refunding Bonds, Series 1985 A. 8.60% Mature July 1, 1997. Callable July 1, 1995. 1,000,000 1,094,560 1,078,290 1,041,302 Kansas City, Missouri Metropolitan Community Colleges Building Corporation Leasehold, Real Estate and Improvement General Obligation Bonds. FGIC Insured. 9.375% Mature July 1, 2005. Callable July 1, 1995 at 101. 2,000,000 2,306,040 2,138,400 2,060,346 Intermountain Power Agency, Utah Power Supply Revenue Crossover Bond, Series H. 9.00% Matures July 1, 2019. Callable July 1, 1995 at 101.50. 1,500,000 1,648,605 1,603,515 1,533,023 Texas General Obligation College Student Loan Bond. 6.60% Matures August 1, 1995. Noncallable. 1,500,000 1,496,250 1,554,990 1,499,219 Indiana Municipal Bank Bond, Series B. 9.125% Matures February 1, 2005. Callable August 1, 1995. 1,000,000 1,104,740 1,086,390 1,018,831 Mesquite, Texas Independent School District Unlimited Tax Bond. 10.25% Matures August 15, 1995. 300,000 347,433 322,557 310,780 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): City of Plano, Texas General Obligation Bonds, Series 1988 A (FGIC Insured). 10.00% Mature September 1, 1995. 650,000 756,041 698,691 670,417 Hillsborough County, Florida School District Bond, Series A. 8.875% Matures September 1, 2002. Callable September 1, 1995 at 102. 500,000 550,925 540,220 509,817 Harris County, Texas Flood Control District Bond. 8.70% Matures October 1, 1995. 1,000,000 1,174,970 1,070,170 1,028,149 Harris County, Texas Road Improvement General Tax Obligation Bond. 9.30% Matures October 1, 2001. Callable October 1, 1995 at par. 750,000 836,453 803,302 767,209 Salt Lake County, Utah Water Conservancy District Revenue Bond, Series A. 9.25% Matures October 1, 2002. Callable October 1, 1995 at 101. 1,000,000 1,123,020 1,079,820 1,082,285 Columbia, Missouri Water and Electric Revenue Bond. 9.00% Matures October 1, 2005. Callable October 1, 1995 at 102 and October 1, 1997 at par. 2,000,000 2,242,600 2,171,680 2,128,166 Ohio State Public Facilities Commission Higher Education Facilities Revenue Bond. 8.10% Matures November 1, 1995. Noncallable. 1,500,000 1,617,690 1,584,930 1,528,171 Dallas-Fort Worth, Texas Airport Bond. 9.125% Matures November 1, 2015. Callable November 1, 1995 at par. 1,000,000 1,097,820 1,093,090 1,020,371 Kansas City, Missouri Municipal Assistance Corporate Revenue Bond. 7.00% Matures December 1, 1995. 200,000 200,000 208,352 200,000 Cincinnati, Hamilton County, Ohio Urban Redevelopment Improvement Unlimited Tax Registered Bond. 6.875% Matures December 1, 1995. Noncallable. 500,000 506,960 522,520 501,740 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Wheaton, Illinois Revenue Bond, Franciscan Health Care, Inc. MBIA Insured. 8.50% Matures December 1, 1997. Callable December 1, 1995 at par. 745,000 818,017 801,285 778,761 Philadelphia, Pennsylvania Water and Sewer Revenue Bond, 11th Series, Subseries A. 9.10% Matures December 1, 2002. Callable December 1, 1995 at 102 and December 1, 1997 at par. 1,000,000 1,137,040 1,092,390 1,033,640 Fort Worth, Texas Water and Sewer Revenue Bond. 9.00% Matures March 1, 1996. Noncallable. 600,000 673,170 647,850 620,317 El Paso, Texas Water and Sewer Revenue Bond. 10.00% Matures March 1, 1996. Noncallable. 1,200,000 1,408,104 1,316,424 1,257,880 Plano, Texas Unlimited Tax General Obligation Bond. 8.00% Matures March 1, 1996. 1,000,000 1,061,110 1,031,330 1,018,417 University of Arizona Revenue Bonds, Series A. 9.00% Mature June 1, 1996. 1,020,000 1,145,939 1,117,084 1,061,980 Salt Lake County, Utah General Obligation Bond. 8.50% Matures June 15, 1996. Noncallable. 700,000 768,971 760,452 723,450 Washington State Public Power Supply System Nuclear Project #3 Revenue Refunding Bond, Series B. 6.70% Matures July 1, 1996. 1,000,000 995,000 1,043,900 1,000,000 Orlando and Orange County, Florida Expressway Authority Revenue Bond. 6.30% Matures July 1, 1996. Noncallable. 1,350,000 1,319,153 1,405,743 1,339,447 Tarrant County, Texas General Obligation Limited Tax Bond. 9.25% Matures July 15, 1996. Noncallable. 1,000,000 1,119,760 1,105,460 1,042,587 Milwaukee County, Wisconsin General Obligation Refunding Bond. 8.10% Matures September 1, 1996. 500,000 531,420 517,165 505,237 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Washington State General Obligation Various Purpose Bond. 10.00% Matures October 1, 1996. Noncallable. 1,000,000 1,174,980 1,128,500 1,064,233 Milwaukee, Wisconsin Unlimited Tax General Obligation Bond. 7.20% Matures October 1, 1997. Callable October 1, 1996 at par. 550,000 561,501 579,557 554,169 Oregon State General Obligation Bond. 5.00% Matures October 15, 1996. Noncallable. 1,000,000 903,410 1,023,900 963,932 Kansas City, Missouri Municipal Assistance Corporate Leasehold Revenue Capital Improvement Bond, Series 1990 A. AMBAC Insured. Matures October 15, 1996. No periodic interest. 1,900,000 1,280,676 1,693,489 1,653,107 Ohio State Public Facilities Commission Higher Education Facilities Revenue Bond. 8.10% Matures November 1, 1996. Noncallable. 700,000 751,562 760,116 719,336 Cincinnati, Hamilton County, Ohio Urban Redevelopment Improvement Unlimited Tax Registered Bond. 6.875% Matures December 1, 1996. Noncallable. 500,000 506,380 532,840 502,248 Kansas City, Missouri Water Revenue Bond. 9.25% Matures December 1, 1996. 690,000 792,534 774,049 728,763 Houston, Texas Water and Sewer System Revenue Exchange Bond. 7.75% Matures December 1, 1996. Noncallable. 1,000,000 1,053,220 1,082,850 1,020,368 Monmouth County, New Jersey General Improvement Utility Bond. 9.25% Matures December 1, 1996. Noncallable. 920,000 1,050,014 1,033,510 969,759 Birmingham, Jefferson, Alabama Civic Center Special Tax Revenue Bond, Series 1989 B. 6.80% Matures January 1, 1997. Noncallable. 1,000,000 1,005,250 1,052,320 1,002,049 Allegheny, Pennsylvania General Obligation Bond. 7.30% Matures February 15, 1997. Noncallable. 1,000,000 1,038,400 1,073,470 1,015,406 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Massachusetts State Water Resource Authority Revenue Bond. 6.90% Matures April 1, 1997. 1,015,000 1,015,000 1,076,671 1,015,000 Albuquerque, New Mexico Airport Revenue Bonds. 8.875% Mature July 1, 2007. Callable April 1, 1997 at 101 and April 1, 1999 at par. 1,455,000 1,604,850 1,644,019 1,547,095 Kansas City, Missouri Municipal Assistance Corporate Leasehold Revenue Capital Improvement Bond, Series 1990 A. AMBAC Insured. Matures April 15, 1997. No periodic interest. 1,000,000 648,620 866,700 844,075 Phoenix, Arizona Civic Improvement Bond. 7.75% Matures July 1, 2002. Callable July 1, 1997 at 102 and July 1, 2000 at par. 1,815,000 1,929,327 2,037,791 1,894,654 Olathe, Kansas Hospital Revenue Bond, Olathe Hospital Foundation, Inc. Project. 6.90% Matures September 1, 1997. 350,000 356,111 379,809 352,716 Greater Orlando, Florida Airport Facility Revenue Bond. 7.30% Matures October 1, 1997. Noncallable. 1,000,000 1,023,140 1,090,160 1,010,426 Reedy Creek, Florida Utility Revenue Bond. MBIA Insured. 8.60% Matures October 1, 1999. Callable October 1, 1997 at 102. 2,000,000 2,227,540 2,276,400 2,145,001 Kansas City, Missouri Municipal Assistance Corporate Revenue Bond, Series 1987. 7.40% Matures December 1, 1997. 250,000 250,000 273,160 250,000 Kansas City, Missouri Water Revenue Bond, Series B. 9.25% Matures December 1, 1997. Noncallable. 420,000 483,466 485,558 449,344 Dade County, Florida Utility Public Improvement General Obligation Bond. FGIC Insured. 12.00% Matures October 1, 1998. Noncallable. 2,000,000 2,654,320 2,577,620 2,385,322 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Kansas City, Missouri Municipal Assistance Corporate Leasehold Revenue Capital Improvement Bond, Series 1990 A. AMBAC Insured. Matures October 15, 1998. No periodic interest. 1,000,000 586,100 800,520 774,044 Kenosha, Wisconsin General Obligation Promissory Notes, Series 1991 A. 6.60% Mature December 1, 2000. Callable December 1, 1998 at par. 1,000,000 997,500 1,053,940 998,519 Kane, Cook and Dupage Counties, Illinois School District #46 Bond, Elgin, Illinois. 8.00% Matures January 1, 1999. Noncallable. 1,450,000 1,575,048 1,626,538 1,525,298 Frenship, Texas Independent School District Bond. 9.00% Matures February 15, 2005. Callable February 15, 2000 at par. 1,000,000 1,152,060 1,192,290 1,099,232 Pinckney, Michigan Community Schools, Livingston and Washtenaw Counties School Building and Site Unlimited Tax Registered Bond. 8.375% Matures May 1, 2000. Noncallable. 500,000 563,130 583,795 542,087 Maryland Student Loan Series 1993, Tax Exempt Municipal Bond, Held by Block Financial Corporation-Companion Insurance, Limited. 4.00% Matures July 15, 2000. 1,000,000 995,770 949,160 996,100 Essex County, New Jersey Series A, Tax Exempt Municipal Bond, Held by Block Financial Corporation-Companion Insurance, Limited. 4.60% Matures October 1, 2000. 1,000,000 1,021,490 968,090 1,019,747 Oregon Student Higher Education, Tax Exempt Municipal Bond, Held by Block Financial Corporation-Companion Insurance, Limited. 5.70% Matures October 15, 2000. 1,000,000 1,096,260 1,038,220 1,089,048 Ohio Water Development Authority, Tax Exempt Municipal Bond, Held By Block Financial Corporation-Companion Insurance, Limited. 5.40% Matures December 1, 2000. 1,000,000 1,067,870 1,015,440 1,062,350 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Jefferson County, Colorado School District Number R-001 Refunding Series 1993 A. 4.20% Matures December 15, 2000. 2,300,000 2,278,932 2,180,975 2,280,419 Mecklenberg County, North Carolina, Tax Exempt Municipal Bond, Held by Block Financial Corporation-Companion Insurance, Limited. 3.75% Matures April 1, 2001. 1,000,000 975,210 926,470 976,969 St. Charles County, Missouri Industrial Development Authority Industrial Revenue Refunding Bond, Series 1991. Wentzville Project Guaranteed General Motors. 6.625% Matures April 1, 2001. Noncallable. 2,000,000 2,000,000 2,070,020 2,000,000 Pinckney, Michigan Community Schools, Livingston and Washtenaw Counties School Building and Site Unlimited Tax Registered Bond. 8.3% Matures May 1, 2001. Noncallable. 500,000 561,510 590,355 543,057 California State Public Works Board Lease Revenues Series 1993 D Department of Correction California State Prison. 4.60% Matures June 1, 2001. 1,000,000 996,790 951,080 997,002 Port of Seattle, Washington Refunding Revenue Series C, Tax Exempt Municipal Bond. 4.30% Matures July 1, 2001. 1,430,000 1,357,799 1,327,712 1,358,629 Chelan County, Washington Public Utility District #1, Chelan Hydro Consolidated System Revenue Bond, Series 1991-A. 7.00% Matures July 1, 2025. Callable July 1, 2001 at par. 1,000,000 1,000,000 1,084,910 1,000,000 Jacksonville Electric, Florida, Tax Exempt Municipal Bond, Held By Block Financial Corporation-Companion Insurance, Limited. 5.00% Matures October 1, 2001. 1,000,000 1,041,830 997,790 1,038,452 Utah Associated Municipal Power System Refunding Revenues Craig Mona-Transmission Project. 4.55% Matures December 1, 2001. 695,000 683,366 646,684 684,085 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Los Angeles County, California Public Works Lease Revenue Facilities. 4.50% Mature December 1, 2001. 2,200,000 2,167,154 2,095,280 2,168,865 Concord, New Hampshire Refunding. 4.30% Matures January 15, 2002. 1,120,000 1,112,530 1,048,421 1,112,766 California State Public Works Board Lease Revenue Series 1993 Department of Corrections - Madera State Prison. 4.70% Matures June 1, 2002. 2,100,000 2,085,531 1,983,513 2,086,104 Orange County, California Transmission Authority Revenue Series 1993-C. 5.125% Matures July 1, 2002. 1,680,000 1,671,029 1,663,855 1,671,963 Georgia State Refunding Series 1993 E Unlimited Tax. 4.50% Matures July 1, 2002. 1,000,000 992,720 955,730 993,410 Denver, Colorado City and County School District Number 1 Refunding Series 1994 A. 4.50% Matures December 1, 2002. 1,100,000 1,100,000 1,029,028 1,100,000 Concord, New Hampshire Refunding. 4.40% Matures January 15, 2003. 1,110,000 1,101,864 1,031,390 1,102,092 California State Public Works Board Lease Refunding Revenue Series 1993 A Variable University California. 5.00% Matures June 1, 2003. 1,000,000 996,100 941,350 996,367 Nevada State Refunding Series 1993 B Limited Tax. 4.375% Matures August 1, 2003. 1,535,000 1,508,506 1,396,343 1,509,427 Arlington, Texas Refunding. 5.00% Matures August 15, 2003. 1,000,000 992,140 981,710 992,730 University Delaware Housing and Dining System Revenue. 5.00% Matures November 1, 2003. 1,000,000 993,600 968,390 994,068 Pennsylvania State Higher Education Facilities Authority Revenue Philadelphia. 4.70% Matures December 1, 2003. 915,000 907,808 848,708 908,050 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): MUNICIPAL BONDS (continued): Washington Sanitary District Refunding Water Supply Unlimited Tax. 4.40% Matures June 1, 2004. 1,500,000 1,483,890 1,364,775 1,484,280 ------------ ------------ ------------ $ 94,501,331 $ 94,014,390 $ 92,154,040 ============ ============ ============ PREFERRED STOCKS: Texas Utilities Electric Company Cumulative Preferred Stock Series B 5,200 516,100 384,800 516,100 First Chicago Corporation Adjustable Dividend Preferred Stock Series B 15,600 994,500 1,409,850 994,500 ------------ ------------ ------------ $ 1,510,600 $ 1,794,650 $ 1,510,600 ============ ============ ============ COMMON STOCKS: Commerce Bancshares Common Stock 110,000 1,660,000 3,572,868 1,660,000 First America Bank Common Stock 80,800 1,671,934 3,050,200 1,671,934 First Virginia Banks, Inc. Common Stock 45,287 667,292 1,669,958 667,292 Liberty National Bancorp, Inc. Common Stock 57,350 655,182 1,648,813 655,182 Marshall & Ilsley Corporation Common Stock 176,700 1,667,122 3,666,525 1,667,122 Amoco Corporation Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,700 90,840 95,413 90,840 Dupont Common Stock, Held By Block Financial Corporation-Companion Insurance, Limited 1,600 89,096 91,400 89,096 Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): COMMON STOCKS (continued): E-Systems, Incorporated Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 2,000 86,870 80,250 86,870 Sprint Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 2,500 88,588 91,875 88,588 McGraw Hill Corporation Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,400 91,084 91,175 91,084 Sears Roebuck Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,900 89,968 89,300 89,968 Sundstrand Corporation Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,800 87,354 85,500 87,354 Tenneco Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,600 87,890 82,000 87,890 Universal Foods Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 2,700 87,912 87,750 87,912 Williams Companies Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 4,000 93,240 103,000 93,240 Mills Corporation Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 4,000 89,740 84,500 89,740 John Deere Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,000 77,435 76,625 77,435 Xerox Corporation Common Stock, Held by Block Financial Corporation-Companion Insurance, Limited 1,000 97,560 98,875 97,560 ------------ ------------ ------------ $ 7,479,107 $ 14,766,027 $ 7,479,107 ============ ============ ============ Number of shares or Value based units/ on current principal market Amount at amount of quotations which shown bonds and Cost of at balance in balance Name of issuer and title of issue notes Issue sheet date sheet - - - - ------------------------------------------------------ ------------ ------------ ------------ ------------ NON-CURRENT ASSETS (continued): OTHER (continued): Putnam Option Income Trust 36,706 505,795 311,634 505,795 Patriot Premium Dividend Fund 400,000 4,055,000 3,600,000 4,055,000 ------------ ------------ ------------ 4,560,795 3,911,634 4,560,795 ------------ ------------ ------------ TOTAL NON-CURRENT ASSETS: $108,051,833 $114,486,701 $105,704,542 ============ ============ ============ H&R BLOCK, INC. AND SUBSIDIARIES SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES YEARS ENDED APRIL 30, 1994, 1993 AND 1992 Balance Deductions at end of period Balance at ----------------------- --------------------- beginning of Amounts Amounts Not Name of debtor period Additions collected written off Current Current - - - - ------------------------- -------- -------- -------- ----------- -------- -------- Year ended April 30, 1994 Donald W. Ayers<F1> - $100,200 - - $100,200 - Clifford A. Davis<F2> - 305,989 - - 305,989 - Kristine K. Rodgers<F3> - 274,030 - - 274,030 - -------- -------- -------- -------- -------- -------- - $680,219 - - $680,219 - ======== ======== ======== ======== ======== ======== Year ended April 30, 1993 William P. Anderson $450,000 - $450,000 - - - ======== ======== ======== ======== ======== ======== Year ended April 30, 1992 William P. Anderson - $450,000 - - $450,000 - ======== ======== ======== ======== ======== ======== <FN> <F1>The Promissory Note of Mr. Ayers is dated January 12, 1994, and is payable ten days after demand, which demand shall not be made earlier than (a) July 12, 1994, (b) the date of the closing on the sale of his home, or (c) the date of the termination of his employment. The Note bears no interest if paid when due and 10% interest per annum thereafter. It is secured by benefit payments to be made to Mr. Ayers under the Company's deferred compensation plan. <F2>The Promissory Note of Mr. Davis and his wife is dated February 15, 1994, is payable 30 days after demand, bears no interest if paid when due and bears 10% interest per annum thereafter. The Note is secured by a mortgage on certain residential property purchased by the makers of the Note. <F3>The Promissory Note of Ms. Rodgers and her husband is dated February 26, 1994, is payable 30 days after demand, bears no interest if paid when due and bears 10% interest per annum thereafter. The Note is secured by a mortgage on certain residential property purchased by the makers of the Note. </FN> H&R BLOCK, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED APRIL 30, 1994, 1993 AND 1992 Additions ------------------------- Charged Balance to Costs Charged Balance Beginning and to at End Description of Period Expenses Other Deductions of Period - - - - ------------------------- --------- ---------- ------- ---------- --------- Allowance for Doubtful Accounts-deducted from accounts receivable in the balance sheet 1994 $12,000,000 $24,977,000 $ - $24,233,000 $12,744,000 =========== =========== ======== =========== =========== 1993 $ 7,292,000 $13,962,000 $ - $ 9,254,000 $12,000,000 =========== =========== ======== =========== =========== 1992 $ 9,416,000 $12,776,000 $ - $14,900,000 $ 7,292,000 =========== =========== ======== =========== =========== H&R BLOCK, INC. AND SUBSIDIARIES SCHEDULE IX - SHORT-TERM BORROWINGS YEARS ENDED APRIL 30, 1994, 1993, AND 1992 Weighted Maximum Weighted average amount Average amount average Category of Balance at interest outstanding outstanding interest rate borrowing end of period rate during period during period during period - - - - ----------- ------------- -------- ------------- -------------- ------------- 1994 Banks $ - - $825,467,000 $244,620,000 3.3% 1993 Banks $ 37,167,000 4.3% $794,003,000 $261,922,000 4.4% 1992 Banks $101,332,000 7.2% $309,358,000 $146,960,000 7.3% <FN> The average borrowings were determined based on the amounts outstanding each day. The weighted average interest rate during the period was computed by dividing actual interest expense in each year by average short-term borrowings in each year. Short-term borrowings outstanding for all years presented were incurred by the Company's Canadian subsidiary to fund the refund purchase program during the tax season of each fiscal year (the period) and were payable in Canadian dollars. Borrowings for 1994 and 1993 also include the borrowings of Block Financial Corporation. Through the purchases of interests in a trust to which certain Refund Anticipation Loans (RALs) made by Mellon Bank (DE) National Association are sold, Block Financial Corporation purchases an interest of just under 50% in RALs subject to its agreement with Mellon. </FN>