SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 11-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

H&R Block Retirement Savings Plan

 

 

The H&R Block Retirement Savings Plan
Index

		Page
Report of Independent Registered Public Accounting Firm			1
Financial Statements:
Statements of Net Assets Available for Benefits, December 31, 2005 and 2004			2
Statement of Changes in Net Assets Available for Benefits, For the Year Ended December 31, 2005			3
Notes to Financial Statements			4 - 8
Schedule: *
Schedule H, Line 4i — Schedule of Assets (Held at End of Year) December 31, 2005			9 - 10
Signature			11
Exhibits
Consent of Independent Registered Public Accounting Firm (Exhibit 23.1)			12
Consent of KPMG LLP

Report of Independent Registered Public Accounting Firm

To the Participants and Administrator of
the H&R Block Retirement Savings Plan:

We have audited the accompanying statements of net assets available for benefits of the H&R Block Retirement Savings Plan (the “Plan”) as of December 31, 2005 and 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2005 and 2004, and the changes in net assets available for benefits for the year ended December 31, 2005 in conformity with U.S. generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule H, line 4i- schedule of assets (held at end of year) as of December 31, 2005 is presented for purposes of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ KPMG LLP

Kansas City, Missouri
June 28, 2006

The H&R Block Retirement Savings Plan

		December 31,
		2005				2004
Assets
Investments, at fair value:
H&R Block, Inc. common stock fund		$	16,042,004			$	13,391,454
Mutual funds			467,654,872				381,505,908
Common collective trust			46,532,871				40,794,958
Self-directed brokerage accounts			11,733,198				8,634,357
Participant loans			13,332,032				10,932,760
Total investments			555,294,977				455,259,437
Receivables:
Employer contributions			5,753,941				4,726,486
Participant contributions			2,986,802				2,324,970
Dividends			232,777				233,847
Other			18,393				10,382
Total receivables			8,991,913				7,295,685
Total assets			564,286,890				462,555,122
Net assets available for benefits		$	564,286,890			$	462,555,122

See accompanying notes to financial statements

The H&R Block Retirement Savings Plan

		Year Ended
		December 31, 2005
Additions:
Investment income:
Dividends and interest		$	22,769,058
Net appreciation in fair value of investments			16,704,814
Other			189,583
			39,663,455
Contributions:
Employer			36,335,045
Participant			63,641,420
			99,976,465
Total additions			139,639,920
Deductions:
Distributions to participants			37,812,735
Administrative expenses			95,417
Total deductions			37,908,152
Net increase			101,731,768
Net assets available for benefits
Beginning of year			462,555,122
End of year		$	564,286,890

See accompanying notes to financial statements.

The H&R Block Retirement Savings Plan

1.		Description of the Plan
		General
		The H&R Block Retirement Savings Plan (the “Plan”) is a defined contribution plan sponsored by HRB Management, Inc. (the “Company”) for its employees and the employees of certain of its affiliates. The Plan became effective on January 1, 1985 and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
		The Plan provides for selection of an administrative committee, a plan administrator and a trustee by the Board of Directors of the Company. The administrative committee is responsible for the general administration of the Plan and the interpretation of its provisions. The plan administrator is responsible for the reporting and disclosure requirements under ERISA. BNY Western Trust Company is the Plan’s trustee.
		The following description provides only general information. Participants should refer to the Plan document for a more complete description of the Plan.
		Investment Option Change
		Effective March 1, 2005, the UAM ICM Small Company Fund and Columbia Small Capitalization Growth Fund were replaced with the Harbor Small Cap Value Fund. Participant balances remaining in the UAM ICM Small Company Fund and the Columbia Small Capitalization Growth Fund existing on March 1, 2005 were transferred into the Harbor Small Cap Value Fund.
		Eligibility
		The timing of an employee’s eligibility for participation in the Plan depends on whether the employee is classified as a nonseasonal employee or seasonal employee. With respect to participant contributions and employer matching contributions: (a) nonseasonal employees are automatically enrolled in the Plan beginning the first day of the month following or coinciding with the date they complete 90 “Days of Service,” as such term is defined in the Plan, and (b) seasonal employees are automatically enrolled in the Plan beginning with the first participation date (January 1 or July 1) following or coinciding with the date they complete a “Year of Service,” as such term is defined in the Plan. With respect to employer profit sharing contributions, both nonseasonal and seasonal employees are eligible to participate beginning the first day of the Plan year that immediately precedes or is coincident with the date the employee completes a “Year of Service.”
		Contributions
		Participants may make pre-tax contributions from two to fifty percent of their compensation, subject to Internal Revenue Code limitations. The Company may make discretionary matching contributions of up to one hundred percent of a participant’s contributions, not to exceed five percent of the participant’s compensation. All participant and matching contributions are invested at the participant’s direction. The

The H&R Block Retirement Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004

		Company may also elect to make discretionary profit sharing contributions, which would be allocated among participant accounts based on the participant’s eligible compensation. For the year ended December 31, 2005, the Company contributed $36,335,045 for the matching contribution. No discretionary profit sharing contributions were made during the year ended December 31, 2005.
		Vesting
		Participant and employer contributions, and earnings thereon, are fully vested and nonforfeitable at all times.
		Earnings
		Earnings are allocated each day to participant accounts based upon the participant’s balance in each investment option as a percentage of the Plan’s balance in the respective investment option.
		Loans
		Participant loans must be at least $1,000 and are limited to the lesser of $50,000 less the highest outstanding loan balance in the previous 12 months or fifty percent of the participant’s vested account balance. Interest is prime plus one percent. Loans are payable over one to five years except for loans for the purchase of a residence, which may be longer.
		Distributions
		Generally, distributions may not be made to a participant, or in the case of death, a participant’s beneficiary, until administratively feasible following the earliest of the participant’s death, disability, or severance from employment. Distributions are in the form of a lump sum cash payment.
		Termination
		Although the Company has not expressed any intent to do so, it has the right to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in the Plan and under ERISA.
2.		Significant Accounting Policies
		Basis of Accounting
		The financial statements of the Plan have been prepared on the accrual basis of accounting.
		Investment Valuation and Income Recognition
		H&R Block, Inc. Common Stock is stated at fair value as determined by the market closing price on the last business day of the plan year. Mutual funds, including those in self-directed brokerage accounts, are stated at fair value as determined by quoted market prices. The common collective trust is stated at estimated fair value, which has been determined based on the unit value of the fund. The unit value is determined by the

The H&R Block Retirement Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004

		fund’s sponsor by dividing the fund’s net assets at fair value by its units outstanding at the valuation date. Participant loans are valued at cost, which approximates fair value.
		The Plan presents in the statement of changes in net assets available for benefits the net appreciation (depreciation) in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date.
		Expenses
		All administrative expenses incurred by the Plan are paid by the Plan, except to the extent paid by the Company. To the extent forfeitures are not used to pay administrative expenses of the Plan, such expenses are covered using participant account balances.
		Payment of Benefits
		Distributions to participants are recorded when they have been paid.
		Use of Estimates
		The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net assets available for benefits during the reporting period. Actual results could differ from those estimates.
3.		Investments
		The Plan’s investments (including investments bought, sold, and held during the year) appreciated (depreciated) in fair value as follows:

		For the Year Ended
		December 31,
		2005
H&R Block, Inc. common stock fund		$	(276,830	)
Self-directed brokerage accounts			1,098,169
Mutual funds			15,883,475
		$	16,704,814

The H&R Block, Inc. Common stock fund uses “unit” accounting. As a unitized stock fund, the Common stock Fund holds primarily H&R Block, Inc. common stock and a small percentage of cash and short-term investments, while participants hold units of the fund.

The H&R Block Retirement Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004

Individual investments that represent five percent or more of the fair value of the Plan’s net assets are as follows:

		December 31,
		2005				2004
Growth Fund of America Class R5		$	34,956,728			$	24,540,716
SEI Stable Asset Fund			46,532,871				40,794,958
Dodge & Cox Stock Fund			79,173,022				65,966,876
Vanguard Institutional Index Fund			58,111,292				53,774,543
Vanguard Wellington Fund			155,559,065				129,987,366
Lord Abbett Mid-Cap Value A Fund			28,557,775				*
EuroPacific Growth Fund			33,909,375				*

4.		Income Tax Status of the Plan
		The Plan received its latest determination letter dated November 11, 2003 in which the Internal Revenue Service stated the Plan is in compliance with the applicable requirements of the internal revenue code. The plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
5.		Related Party Transactions
		As of December 31, 2005 and 2004, the Plan’s investment portfolio includes an investment in the Common Stock of H&R Block, Inc., a party-in-interest to the Plan.
		The Plan’s recordkeeper, RSM McGladrey (“RSM”), is an affiliate of the Company and was paid $60,615 for administrative fees and reimbursements during the year ended December 31, 2005.
		The Plan’s custodian, H&R Block Financial Advisors, Inc., is an affiliate of the Company.
6.		Risks and Uncertainties
		The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.

The H&R Block Retirement Savings Plan
Notes to Financial Statements
December 31, 2005 and 2004

7.		Other
		In 2004, the Company identified possible operational defects in the administration of the Plan while conducting an internal review of the Plan. None of the operational items identified had or will have a material impact on the Plan’s financial statements. On December 21, 2004, the Company requested from the IRS a compliance letter and approval of the correction methods used to fix the operational items. The request was made under the IRS Voluntary Correction Program (VCP), which allows the Company to take corrective measures for the items identified. The Company will take such corrective measures as may be required in connection with the VCP request to maintain the Plan’s qualified tax-exempt status.

The H&R Block Retirement Savings Plan
EIN: 43-1910017, Plan Number: 002

								(e)
(b)		(c)						Current
(a) Identity of Issuer or Borrower		Description of Investment		Shares Held				Value
*   H&R Block, Inc. Common		H&R Block, Inc. Common Stock			618,059			$	15,173,348
Stock Fund		Cash and other assets, net			868,656				868,656
									16,042,004
Mutual funds:
AIM Family of Funds		AIM Constellation Fund Class A			80,122				1,984,611
AIM Family of Funds		AIM Premier Equity Fund Class A			64,675				671,969
AIM Family of Funds		Invesco Technology Fund Class A			22,039				576,331
AIM Family of Funds		AIM Weingarten Fund Class A			18,791				262,134
Calamos Funds		Calamos Growth Fund			443,351				24,410,900
Dodge & Cox Funds		Dodge & Cox Stock Fund			576,979				79,173,022
American Funds Group		EuroPacific Growth Fund			825,046				33,909,375
Franklin Templeton Investments		Franklin DynaTech Fund A			18,235				476,482
Franklin Templeton Investments		Franklin Small-Mid Cap Fund			35,746				1,348,354
American Funds Group		Growth Fund of America Class A			43,531				1,342,741
American Funds Group		Growth Fund of America Class R5			1,133,119				34,956,728
American Funds Group		Investment Company of America Fund			27,151				851,464
Lord Abbett Family of Funds		Lord Abbett Mid-Cap Value A Fund			1,274,332				28,557,775
American Funds Group		New Perspective Fund			25,248				722,837
PIMCO Funds		PIMCO Total Return Fund			2,147,865				22,552,586
Harbor Funds		Harbor Small Cap Value Fund			1,021,543				20,257,193
Vanguard Group		Vanguard Institutional Index Fund			509,703				58,111,292
Vanguard Group		Vanguard Wellington Fund			5,125,505				155,559,065
American Funds Group		Washington Mutual Fund			62,470				1,926,563
The Reserve Funds		Reserve Primary Institutional Fund			3,450				3,450
									467,654,872

See accompanying report of independent registered accounting firm.

The H&R Block Retirement Savings Plan
EIN: 43-1910017, Plan Number: 002
Schedule H, Line 4i — Schedule of Assets (Held at End of Year)
December 31, 2005

(e)

(b)

(c)

Current

(a) Identity of Issuer or Borrower

Description of Investment

Shares Held

Value

Common Collective Trust:

SEI Investments

SEI Stable Asset Fund

46,532,871

46,532,871

Self-directed brokerage accounts

11,733,198

*  Plan participants

Participant Loans, Interest rate range: 4.0% to 10.5%

13,332,032

Total investments

$

555,294,977

See accompanying report of independent registered accounting firm.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

		H&R Block Retirement Savings Plan
Date 6/29/06		By:		/s/ Jeffrey E. Nachbor
				Jeffrey E. Nachbor
				Senior Vice President and Corporate Controller H&R Block, Inc.