101

                                       
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                           _________________________
                                       
                                   FORM 10-K


[ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
              for the fiscal year ended April 30, 1997
                                       
[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 2-53193
                                       
                            COMPUSERVE CORPORATION
            (Exact Name of Registrant as specified in its charter)
                                       
                  Delaware                                31-1459598
       (State or other jurisdiction of                 (I.R.S. Employer
        incorporation or organization)               Identification No.)

                        5000 Arlington Centre Boulevard
                             Columbus, Ohio 43220
                   (Address of principal executive offices)

Registrant's Telephone Number including area code: (614) 457-8600

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities  Registered Pursuant to Section 12(g) of the Act: Common Stock,  par
value $0.01 per share

      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 requirement 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.      Yes   X      No

      The aggregate market value of the common stock held by non-affiliates  of
the  Registrant,  based  upon the closing sale price of  the  common  stock  on
July  21,  1997  as  reported  on the NASDAQ Stock  Market,  was  approximately
$211.1  million.  Shares of common stock held by each officer and director  and
by  each  person who owns 5% or more of the outstanding common stock have  been
excluded  in  that  such  persons  may  be  deemed  to  be  affiliates.    This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

      As of July 21, 1997, the Registrant had outstanding 92,600,000 shares  of
common stock.


                                    PART I

ITEMS 1 AND 2.  BUSINESS AND PROPERTIES

Overview

      CompuServe  Corporation  ("Company")  was  incorporated  in  Delaware  on
February  16, 1996 and holds all of the outstanding capital stock of CompuServe
Incorporated.   CompuServe  Incorporated was founded  in  1969  as  a  computer
timesharing  service  and  introduced  its  first  online  service   in   1979.
CompuServe  Incorporated holds all of the outstanding capital  stock  of  SPRY,
Inc.  ("SPRY").  Until April 1996, CompuServe Corporation  was  a  wholly-owned
subsidiary  of  H&R  Block Group, Inc. ("Parent").  Parent  is  a  wholly-owned
subsidiary  of  H&R  Block,  Inc. ("Block").  CompuServe  Corporation  and  its
consolidated  subsidiaries are collectively referred to  as  the  "Company"  or
"CompuServe."

     In April 1996, CompuServe Corporation completed an initial public offering
of  18,400,000 shares of its common stock.  CompuServe Corporation's shares are
quoted on the Nasdaq stock market under the symbol "CSRV."

     On July 16, 1996, Block announced that its Board of Directors had approved
plans  to  spin-off  (the "Spin-off") Block's remaining 80.1%  interest  in
CompuServe.   The  Spin-off  was subject to, among  other  things,  shareholder
approval at Block's annual meeting expected to take place in September 1996 and
a  favorable ruling from the Internal Revenue Service as to the tax-free nature
of the transaction.

      On  August 28, 1996, Block announced that its Board of Directors  decided
not to present the proposed Spin-off to shareholders at the Block September 11,
1996  annual  meeting.   The  decision  not  to  present  the  Spin-off  for  a
shareholder vote on September 11 was based, in part, on the Company's  reported
first  quarter  and  projected  second  quarter  losses,  market  uncertainties
regarding  the  online industry and the planned September 1996 introduction  of
new interfaces for the CompuServe Interactive Service ("CSi").

     On April 3, 1997, it was announced that the Company and Block were engaged
in  external  discussions  regarding possible business  combinations  involving
CompuServe.  There are no assurances that such discussions will result  in  any
agreement or transaction.

      CompuServe operates primarily through two divisions: Interactive Services
and  Network  Services.   Interactive  Services  offers  worldwide  online  and
Internet  access  services  for  consumers,  while  Network  Services   provide
worldwide network access, management and applications, and Internet services to
businesses.

      For  convenience,  a glossary of certain technical  terms  used  in  this
document has been set forth at the end of this section.

Interactive Services

     CompuServe Interactive Service

      CompuServe Interactive Service ("CSi") is one of the two largest consumer
online  services  in  the  world.  As of April 30,  1997,  the  number  of  CSi
subscribers, exclusive of the subscribers of NIFTY SERVE, CompuServe's Japanese
licensee,  was  approximately  2.8 million,  a  decrease  of  about  12%  since
April 30, 1996.  CSi targets the more experienced PC user in both the home  and
office  who  values  breadth  and depth of professional  and  business-oriented
content.  CSi provides over 2,000 content areas such as finance, current events
and  online reference; over one thousand managed forums where subscribers  with
similar interests can meet to exchange information, hold online discussions and
download files and programs; e-mail; integrated Internet access; and electronic
commercial  services.   CSi  has  been  building  its  extensive  content   and
associated  relationships  for  over fifteen years.   Management  believes  CSi
offers  the  broadest  and most comprehensive content in  the  consumer  online
industry,  resulting in a service which would be difficult for  competitors  to
replicate.

      CompuServe, its licensee and its distributors provide local access to CSi
in  approximately 100 cities outside of the United States, from offices  in  21
countries around the world.  They offer multilingual interfaces, feature  local
content and provide customer service.

      CompuServe  and  its  licensee had approximately 3.6 million  subscribers
outside  of  the United States as of April 30, 1997, 1.2 million of which  were
supported  directly  by  CSi  and  the remainder  of  which  were  NIFTY  SERVE
subscribers.   CompuServe has licensed its core technology  and  network  model
relating to its online service to NIFTY, a joint venture of Fujitsu Limited and
Nissho Iwai.  NIFTY is licensed to operate its own online service, NIFTY SERVE,
in  Japan based on CompuServe technology.  In addition, NIFTY has the exclusive
right to distribute CSi in Japan.  NIFTY has also been authorized by CompuServe
to  license a subdistributor in Taiwan and another in South Korea to distribute
CSi  in those countries.  NIFTY has a right of first refusal to distribute  CSi
in  14  additional  Asian  countries should  CompuServe  decide  to  license  a
third-party distributor in those countries.

      NIFTY's  license  with  respect to CompuServe  technology  is  perpetual.
NIFTY's  license to act as a distributor of CSi is for an unlimited  number  of
five-year renewable terms, and is next up for renewal in calendar 2001.   NIFTY
has  the right to terminate its license to distribute CSi at any time, upon one
year's  advance  notice.  CompuServe does not believe that the  termination  of
this  relationship  would  have  a material adverse  effect  on  its  financial
condition or results of operations.

     NIFTY pays CompuServe a royalty fee on the gross monthly usage revenues of
the  NIFTY  SERVE  online service.  During each of the last three  years,  such
royalties accounted for less than 1% of CompuServe's total Interactive Services
revenues.   CompuServe  pays  NIFTY a royalty for  the  CSi  business  that  it
generates  and  the  associated  support  services  that  it  provides  to  CSi
subscribers.

      In  addition,  CompuServe has arrangements with various  distributors  in
Australia, New Zealand, Hong Kong, Mexico, Argentina, Chile, Venezuela,  Israel
and  South  Africa,  whose  main function is to  generate  customers  for  CSi.
CompuServe  pays  royalties to these distributors for the  business  that  they
generate  and  the  associated  support  service  that  they  provide  to   CSi
subscribers in countries in which they operate.

     WOW!

      In  March  1996,  CompuServe launched WOW!,  a  consumer  online  service
targeted to the mass consumer home market.  WOW! complemented the existing  CSi
service  by  targeting  the  less  experienced computer  user  who,  management
believed,  were  not adequately served by existing online services.   The  WOW!
service  employed a unique, intuitive navigation structure designed  to  mirror
the  manner in which non-computer trained individuals perceive the world.   The
underlying  technology was transparent to the user.  CompuServe applied  for  a
patent on the WOW! navigation structure.

      On  November 21, 1996, the Company announced a "Back-to-Basics"  strategy
aimed at building on its leadership in the business, professional and technical
market  sectors  while focusing on profitable segments in the consumer  market.
As  part  of  this  change in market strategy, the WOW! service  was  withdrawn
effective January 31, 1997.

     SPRYNET

      SPRY,  CompuServe's  Internet  subsidiary, provides  Internet-access-only
services  through  SPRYNET to those more technically  sophisticated  users  who
choose  to access the Internet directly without availing themselves of services
offered  through CSi.  As of April 30, 1997, SPRYNET had approximately  280,000
subscribers.   SPRYNET offers subscribers a choice of unlimited access  to  the
Internet for a competitive fixed monthly fee, or a fixed amount of access for a
lower monthly fee with a competitive hourly rate thereafter.

Network Services

     CompuServe Network Services ("CNS") provides virtual private networking,
Internet, Intranet, Extranet services plus groupware application and web
hosting services to corporate clients around the world.  In addition to
providing network connectivity and Internet access for CompuServe's CSi and
SPRYNET services, CNS offers dial and dedicated connectivity solutions that
allow corporate customers' dispersed users to gain secure, seamless access to
IP-based applications as well as proprietary systems.  Customer applications
supported by CNS include Vital Processing Services LLC (Visa International
Inc.'s point-of-sale network) for credit card authorization, Federal Express
Corp.'s package tracking system, Experian Inc.'s (formerly TRW's credit data
unit) credit data transmission to 200,000 corporate clients, and Charles
Schwab's Street Smart product.  At the end of fiscal year 1997 CNS had a client
base of 1,200 corporate customers.

Strategy

      CompuServe's  goal  is to lead in the development and  implementation  of
personal   and   commercial   applications  with   computer-based   interactive
technology.   CompuServe intends to grow its subscriber  base  for  online  and
Internet  services,  expand  its market position in  the  corporate  networking
sector  and  continue to seek opportunities to increase the value  of  the  new
medium of computer-based interactive technology to individuals and businesses.

      CompuServe  intends  to  accomplish these  strategic  goals  through  the
following initiatives:

          Refocus  the  flagship  CSi service.  In the  U.S.  consumer  market,
     CompuServe  will continue to provide a distinctive experience in  the  CSi
     online and Internet service, with focused retention and growth efforts  in
     the business, professional, and technical user markets.

          Targeted Service Offerings.  CompuServe offers differentiated  online
     and  Internet  services  to appeal to subscribers'  varied  interests  and
     comfort   levels   with   computer  technology.   Via   its   wholly-owned
     subsidiary,   SPRY,   CompuServe  offers  Internet-access-only   for   the
     technically  sophisticated PC user who desires only direct access  to  the
     Internet.   Additionally, the CSi service is offered for  the  experienced
     computer  user  who, in addition to direct access to the  Internet,  wants
     the  benefits  of  CSi  proprietary services.   All services  are  further
     customized through content and pricing to better match the preferences  of
     distinct  subscriber segments.  CompuServe will continue  to  review  this
     mix,  however, as the Internet-access-only service industry  continues  to
     evolve.

          Accelerated  International  Expansion.  CompuServe  is  focusing  its
     international  efforts on Western Europe where it  has  a  leading  market
     position  and existing infrastructure and where it believes the  potential
     exists  for  further growth.  Efforts abroad will include expanding  local
     content  offerings  and  continuing  to  examine  new  opportunities   for
     synergistic  marketing  and  distribution  efforts.   CompuServe  is  also
     continuing  to upgrade its network by installing POPs in various  European
     cities,  including ISDN connections in some of these cities.   Outside  of
     Europe,  CompuServe is focusing on specific countries or regions where  it
     believes there is potential for significant and profitable growth  in  the
     subscriber base.

          Migration to Open Standards  CompuServe is migrating from its legacy,
     proprietary  back-end  technical platform for  building,  maintaining  and
     delivering  content  and  online services  to  a  new  platform  based  on
     Internet-compliant  open standards.  Among other things,  this  will  ease
     product  maintenance  as  well  as  help  speed  time-to-market  for   new
     products,  and  it  will  broaden the methods by which  both  present  and
     future customers can access CompuServe's information services.
     
          Enhancing CNS' Existing Value-Added Network Services.  CNS is
     continuing its focus on providing value-added data communication services
     that differentiate CNS from its competition.  These services include the
     integration of best-of-breed technology into its network infrastructure
     and customer premise equipment such that CNS can extend its industry-
     recognized leadership position in the remote access and host access
     markets.  CNS' best-of-breed technology partners include Cisco Systems,
     Microsoft, AT&T, US Robotics and Citrix.   CNS will continue to
     aggressively pursue technology partners who deliver products that can be
     seamlessly integrated into services that address critical corporate
     connectivity needs.
     
          Expand CNS Services Portfolio In High Growth Markets.  In addition to
     enhancing its position in existing markets, CNS is expanding its services
     portfolio in new high growth markets.  In areas like application hosting
     and premium Internet/Intranet access, CNS is focusing on non-commodity-
     based services that provide opportunities for increased operating margins.
     In these new high-growth markets, CNS is partnering with key technology
     providers like Cisco Systems, Microsoft, Lotus and Netscape.
     
          Enhancement of Network Infrastructure.  In addition to continuing its
     support for established protocols such as X.25 and SDLC, CNS will proceed
     with on-going improvements to its IP ("Internet Protocol") based
     infrastructure.  This includes expansion of native IP dial and dedicated
     POP's and the supporting nationwide ATM ("Asynchronous Transfer Mode")
     technology backbone, enhanced Internet peering relationships, movement to
     higher dial speeds such as 56kbps and ISDN, and implementation of new
     customer provisioning, security and billing systems.  Management believes
     these network infrastructure enhancements will enable CNS to continue to
     offer high-quality value-added differentiated communication solutions.
     Management believes that CNS' ability to support both proprietary and open
     systems protocols is a competitive advantage, especially with corporate
     customers who need to integrate existing systems into Internet and
     Intranet environments.

          Business Synergies.  CompuServe leverages its network and host server
     infrastructure across all of its businesses to reduce time to  market  and
     exploit  cost  advantages.  For example, CompuServe's  extensive  existing
     network  enabled  it  to  more rapidly roll out  its  Internet-access-only
     service,  SPRYNET.  In addition, CompuServe's strong consumer and business
     presence  allows  CompuServe's  sales force  to  cross-sell  services  and
     positions  CompuServe to assume a leadership role in the commercialization
     of   the   Internet.    Management  believes  that   CompuServe's   secure
     proprietary    network   for   financial   transactions   and    sensitive
     communications  is a valuable complement to its growing  emphasis  on  the
     Internet and open protocol systems.

The Market

     Interactive Services Market

      Management  believes that consumer online and Internet services  are  the
first stage in the evolution of a fully-integrated new medium that will embrace
online  services, the Internet, multimedia and other interactive  technologies.
This new medium has the potential to provide, in a more appealing and cost- and
time-efficient  manner, many of the functions now provided by mail,  telephone,
television  and  written  materials.  The evolution  of  this  new  medium  has
enormous  implications  for the way individuals communicate,  work,  learn  and
relax.

     Key factors driving the demand for online and Internet services include:

          PC  Penetration  in  the  Home  and Office.   The  network-connected,
     multimedia  PC has become the platform of choice for meeting a wide  range
     of  information, entertainment, and communication needs.  Currently,  more
     than  44  million American households have personal computers and,  as  of
     December  31,  1996, this number was expected to grow to over  63  million
     households  by the year 2000.  Almost all new PCs are being acquired  with
     high  speed  modems  and  CD-ROM drives and  with  online/Internet  access
     software  included.   As  PC  penetration increases,  not  only  does  the
     universe  of  potential subscribers increase, but an increased  subscriber
     base  substantially enhances the utility of the service as a  vehicle  for
     communication.

          Ease of Use and Engaging Content.  Graphical user interfaces combined
     with  multimedia  presentation have made PCs and applications  running  on
     them  far easier to use.  As the size of the online services market grows,
     more content is being produced for this market.

          Increased  Awareness.   Awareness of  consumer  online  services  has
     dramatically  increased  because  of the combination  of  media  publicity
     about  the  Internet and the significant amount of advertising being  done
     by  larger  companies  in  the  market promoting  the  concept  of  online
     interactivity.   Additionally, there are now millions  of  subscribers  to
     consumer  online  services  worldwide who are likely  to  communicate  the
     advantages  of online services to non-users.  Also, arrangements  such  as
     Microsoft Corp.'s agreement with CompuServe to place the CSi icon  in  the
     online  services  folder  on  the Windows  95  desktop  greatly  increases
     awareness  of  consumer online services as Windows 95 becomes increasingly
     prevalent on home PCs.

          The Internet.  As of calendar 1996, usage of the Internet, especially
     the  World Wide Web, was expected to grow at a compounded rate of 31%  per
     year  through  the year 2000.  By the year 2000, it is estimated  that  as
     many  as  250  million people worldwide will have access to the  Internet,
     through  almost 96 million computers permanently attached to the  Internet
     running  on  some  70,000 networks providing access.  Management  believes
     that   value-added  content  aggregation,  billing  and  support  services
     represent  a  significant  opportunity for qualified  companies  providing
     Internet access, such as CompuServe.

     Network Services Market

     Management believes that the demand for data communication services will
continue to experience dramatic growth.  The key market segments upon which CNS
will focus to capture this demand include virtual private networking (Intranet
and Extranet), premium Internet services, application hosting services,
transaction processing services and broadband communication services.

     Key factors driving the need for CNS services include:
     
          Increasing complexity in data communications.   Given the rate at
     which data communications technology is changing, especially in the
     Internet/Intranet environment, it is becoming increasingly difficult for
     corporations to maintain their own data communications facilities, while
     at the same time such communications are becoming more strategic.
     Consequently, the need for outsourcing of data communications is becoming
     increasingly necessary for many corporations.
     
          Increasingly mobile workforce.  As working from home and traveling
     employees become more prevalent among corporate workforces, the need for
     integrated remote access solutions will continue to grow.
     
          Increasing need to communicate outside the corporation.  An
     increasing number of commercial customers are finding it critical to
     develop applications that interface with entities outside of the
     organization (i.e., Extranets), including business partners, customers and
     suppliers.
     
          Increasing desire to leverage the Internet as a strategic tool.  As
     the desire to utilize the Internet as a corporate communication vehicle
     and distribution channel increases, so will the need for secure, cost-
     effective and managed Internet solutions.

     Rapidly Changing Markets and Technology

      The markets served by CompuServe are characterized by rapid technological
change  resulting  in  dynamic customer demands and frequent  new  product  and
service introductions.  CompuServe's markets can change rapidly as a result  of
innovation   in  computer  hardware,  software  and  communication  technology.
CompuServe's future results will depend, in part, on its ability to make timely
and  cost-effective enhancements and additions to its technology and  introduce
new services that meet customer demands.  Maintaining flexibility to respond to
technological and market dynamics may require substantial expenditures.

      An  integral  part  of CompuServe's technology has been  its  proprietary
software.   Early releases of software often contain errors or defects.   There
can  be no assurance that, despite extensive testing by CompuServe, errors will
not  be  found in CompuServe's new product releases and services  prior  to  or
after commencement of commercial deployment, resulting in product redevelopment
costs  and loss of, or delay in, market acceptance.  Similar experiences  could
occur with CompuServe's recently announced initiative to use an Internet-based,
open-standard  architecture for delivery and support of its online  information
services.    Furthermore,  any  of  these  possibilities  could   result   from
CompuServe's  own activities or those of its suppliers.  Once  these  products,
processes  and initiatives are introduced, no assurance can be given that  they
will  be generally accepted and used, or that they will fill the strategic role
that CompuServe intends for them.

     Acquisitions and Investments

       To   stay  at  the  forefront  of  the  rapidly  changing  business  and
technological environment in which CompuServe operates, CompuServe may need  to
acquire technology, products or services, through acquisitions or take majority
or  minority equity positions in software, hardware or content providers.  Such
acquisitions may not be available to CompuServe, or may not be available at the
times  or  on  terms acceptable to CompuServe.  In order for  the  Spin-off  to
qualify as a tax-free distribution under the Internal Revenue Code of 1986,  as
amended,  H&R  Block must control 80% of the total voting power of CompuServe's
outstanding  voting  stock  at  the  time  of  the  Spin-off.   As  a   result,
CompuServe's  ability  to  effect acquisitions and mergers  using  CompuServe's
Common Stock will be severely limited until after the Spin-off.

      In  addition, many of the acquisitions which CompuServe might make  could
involve  risks, including the successful integration and management of acquired
technology,  operations and personnel.  The integration of acquired  businesses
may  also  lead  to  the  loss of key employees of the acquired  companies  and
diversion  of  management attention from other ongoing business  concerns.   In
addition,  acquisitions  may  result  in  significant  charges  for  in-process
research and development or other matters.

Products and Services

     Interactive Services

      CompuServe  offers  an  extensive range  of  communication,  information,
entertainment and commerce services to its subscribers.

      Communication.  Interactive services and the Internet are revolutionizing
communication by linking together individuals around the globe at  modest  cost
through  e-mail,  electronic  bulletin boards and  online  discussions.   These
communication applications are the single greatest use of the CSi  service,  an
area  which management believes has significant potential for expansion through
creative  deployment of technology.  Through e-mail, CSi subscribers  can  send
messages to other subscribers or to non-subscribers through a variety of means,
including  the  Internet.   Online chat enables  subscribers  to  hold  virtual
discussions  with  individuals or groups or merely monitor  discussions  taking
place.   Managed forums provide a location for people of similar  interests  to
share  information, ranging from expression of opinion to downloading  computer
programs.

      Information.   CompuServe  makes available to  the  mass  market  a  vast
universe  of  information available on CSi and the Internet.   Because  of  the
medium's unique characteristics, online information is capable of being updated
and  expanded  on a real-time basis.  Management believes that CSi  offers  the
broadest and deepest array of content in the consumer online industry, which is
augmented   by   information   available  on  the  Internet;   Internet-sourced
information  is  also  available through SPRYNET.  CSi,  as  CompuServe's  most
comprehensive  information  service offering, provides  subscribers  local  and
worldwide   news,  sports  and  financial  information,  North   American   and
international newspapers and periodicals and, via gateways to hundreds of other
databases,  extensive  reference resources.  Management  believes  CSi  is  the
preferred  source  for  computing information  and  support  among  online  and
Internet  users.  CompuServe provides extensive databases of computer  oriented
information  and  offers  the  largest number of  support  areas  dealing  with
computer hardware and software of any online service.

      CompuServe  views  its role as a content aggregator  to  be  one  of  its
principal  value-added functions.  In this role, CompuServe not only identifies
information  of  interest  to  its  subscribers,  but  also  develops  software
applications  to facilitate manipulation of that information and  communication
applications  that  facilitate the exchange and understanding  of  information.
CompuServe  believes  these  tools dramatically increase  the  utility  of  the
information  to its customers.  For example, CompuServe Executive News  Service
enables subscribers to establish a personalized electronic "clipping folder" to
automatically  identify and store information from news wires such  as  AP  and
Reuters  that  will  be  of  particular interest to  the  subscriber.   In  the
financial area, CompuServe augments its financial market and economic news  and
analysis  with  portfolio tracking, interactive forums with financial  experts,
and electronic brokerage services.

      Entertainment.  Interactive services and the Internet are a new  form  of
media  to  provide  entertainment  to  consumers.   CSi's  entertainment   news
services,  such  as  Entertainment  Drive, Hollywood  Hotline  and  Soap  Opera
summaries,  are  used extensively.  Entertainment Drive offers CSi  subscribers
moderated  chat  sessions with celebrities and other  content  focused  on  the
entertainment industry.  Subscribers can also access movie reviews,  restaurant
ratings  and  a  variety of interactive and multi-player games.   In  addition,
CompuServe   believes  that  moderated  forums  and  online   chat   serve   as
entertainment outlets for many CSi subscribers.

      Commerce.   CompuServe  has  been  a leader  in  establishing  electronic
commerce through its CSi service.  CSi subscribers have access to an electronic
mall,  which  gives  them  access to approximately 80 merchants  who  offer  or
advertise  products  online.  Businesses utilizing CSi's  online  merchandising
opportunities  include FTD, Shopper's Advantage, American  Greetings,  and  The
Sharper  Image.  CompuServe also offers subscribers a number of travel  related
services.  For example, CSi subscribers may check availability and make  travel
plans and reservations online via several interactive travel services including
Sabre Interactive, WorldSpan, and Travel, Inc.

     Network Services

     CNS provides managed business communication solutions to corporate
customers.  CNS integrates the best-of-breed Internet, Intranet and Virtual
Private Networking technologies into services that shield its customers from
the business and technology risks associated with managing complex global data
communication environments.  Providing highly reliable cost-effective managed
data communication solutions is not a competency of most corporations; it is
however, a CNS core competency.

     The CNS network, with more than 500 global points of presence, provides
worldwide remote access, Intranet and Internet solutions to major corporations
throughout the North America, Europe and the Pacific Rim.  By integrating
leading data communications technology into its network infrastructure, CNS
provides managed end-to-end solutions that shield customers from the increasing
complexity associated with global wide-area communications.  For example, CNS'
remote access solutions utilize CompuServe's network infrastructure in
connection with technology from Microsoft, Cisco and Citrix to provide seamless
multiprotocol host and LAN access.  Customers use these remote access solutions
for mission critical corporate applications.  CNS also provides dedicated
connectivity services, including Frame Relay, X.25 and high speed Internet
links.

     CNS is a leading provider of value-added communication solutions for point
of sale services such as credit card authorizations.  Since 1984, CNS has been
providing point of sale authorization to Vital Processing Services LLC (Visa
International Inc.'s point-of-sale network), and in fiscal year 1997 processed
over one billion point of sale transactions.

     CNS is also focusing it product development efforts on the application
hosting market.  By integrating leading client-server software platforms in its
data centers, CNS provides state-of-the-art groupware application and Web
hosting facilities.  To provide these services, CNS works with industry leaders
in client-server platforms such as Microsoft, Lotus and Netscape.

Marketing and Distribution

     Subscriber Acquisition and Retention

      CompuServe employs a number of approaches to position and strengthen  its
brands  in the consumer market place.  The goal of these programs is to promote
subscriber  acquisition  and build long-term loyalty  and  increased  usage  by
providing  the right combination of content and utility, customer  support  and
pricing for the targeted market segments.

     Marketing and Promotion

      CompuServe  promotes its online services through a variety  of  marketing
efforts   such  as  direct  mail,  publication  inserts,  national   television
advertising  and  print  advertisements  in  general  business  and   specialty
periodicals.  During fiscal 1997, in the U.S. CompuServe began to more narrowly
tailor  these  marketing  efforts  in  conjunction  with  the  "Back-to-Basics"
strategy,  as management believes such action will enable CompuServe to  better
target  appropriate and distinct market segments and help manage  the  cost  of
these  programs.  As part of CompuServe's efforts to expand  its  international
subscriber  base, marketing in European markets included substantial  increases
in  distribution  of  trial  software disks through  direct  mail,  publication
inserts  and  special event promotions, as well as increased  general  consumer
advertising on television and in periodicals in support of CSi.   Also, new CSi
subscribers receive ten free hours of access in their first month.   CompuServe
believes  that  this  industry-wide practice has been a significant  factor  in
encouraging new signups.

      In common with other companies with which CompuServe competes, CompuServe
expects  subscriber turnover as subscribers cancel for various  reasons.   Some
industry analysts believe that both existing and prospective online users  will
examine the World Wide Web and the Internet as an alternative to online service
providers.   Management of CompuServe believes this could be a  cause  of  high
online turnover, as well as a cause of slowing new subscriber growth.  At April
30,  1997,  CompuServe had retained approximately 54% of  new  CSi  subscribers
after  3 months, 42% after 6 months, 35% after 9 months and 31% after 12 months
of  service.  There can be no assurance that CompuServe's subscriber  retention
rates  will  not decline below these levels.  Since April 30, 1996,  CompuServe
has seen a decline in CSi membership.

      Microsoft  Corp.  ("Microsoft") has placed the CSi  icon  in  the  online
services folder on the Windows 95 desktop, thus enhancing market awareness  and
accessibility  of  this key service.  In addition, CompuServe has  co-marketing
agreements  with  most major personal computer hardware and  peripheral  device
manufacturers.  For example, CompuServe bundles its online access software with
the  hardware shipped by PC manufacturers, which gives the new PC owner an easy
and immediate opportunity to sign up for CSi or SPRYNET.

     Customer Support

      To  complement its marketing efforts, CompuServe has invested in customer
service to improve customer retention.  These efforts have reduced busy signals
when  customers  call  for assistance and enhanced response  time  to  customer
questions.   CompuServe  plans  to continue to  monitor  its  customer  service
function  to optimize staffing in light of costs, benefits and the  effects  of
improvements  the  Company  is able to achieve in the  quality  of  its  online
services and network and overall ease-of-use of its information service.

     Pricing

      CSi  subscribers  currently  pay a membership  fee  of  $9.95  per  month
entitling them to five hours of service with additional hours costing $2.95 per
hour.   CSi  also  offers a pricing package for more frequent  users,  charging
$24.95  per  month for 20 hours of service with additional hours costing  $1.95
per  hour.   Certain  CSi services are subject to surcharges  in  both  pricing
packages.   SPRYNET  offers  three  pricing  packages:  $19.95  per  month  for
unlimited  usage,  $4.95 per month for three hours of service  with  additional
hours  costing  $1.95,  and $9.95 per month for seven  hours  of  service  with
additional  hours  costing  $1.95 per hour.  See "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

     Network Services

     CNS has sales offices in over thirty cities in North America and Europe,
and employs over 400 sales associates.  These sales associates, unlike many of
CNS' competitors, are focused on selling data communication services
exclusively.  Management believes that this direct sales channel is one of the
key strengths of CNS because of the sales associates' ability to build and
maintain strong customer relationships and provide higher levels of response
with direct presence in distributed markets.  Management believes that these
strong customer relationships are built on trust in CNS' ability to deliver
highly reliable cost-effective data communication solutions.  This trust leads
to new applications in existing accounts and new customer relationships.

Delivery of Interactive Services

     Interfaces to CompuServe's Services

     A major factor affecting subscriber satisfaction with an online service is
the  appearance  and  utility  of  the user  interface  which  controls  how  a
subscriber can navigate the service.  Subscribers navigate within a service  by
clicking  on  icons  or  words, or by entering text-based  instructions  via  a
keyboard.

      In  November 1995, CompuServe introduced for CSi the CIM 2.0.1  interface
with  an  integrated Internet World Wide Web browser and the  ability  to  move
between  CSi  and  related Internet areas.  CompuServe makes  available  at  no
additional charge to subscribers of CSi parental control software that  assists
parents  in  controlling their children's access to content.  In October  1996,
CompuServe  introduced  CompuServe 3.0 which has an  easier  to  use  graphical
interface,  integrated Internet access and upgradable modules.  CompuServe  3.0
also  features the Internet Explorer browser from Microsoft, which  is  closely
integrated into CompuServe 3.0 for greatly enhanced ease of use.

      SPRYNET  permits CompuServe's Internet-access-only customers  to  utilize
CompuServe's  Mosaic World Wide Web browser as well as any  other  browser  the
customer prefers, including the industry leaders, Microsoft's Internet Explorer
and Netscape's Navigator.

      The  Company  supports open standards, and believes that  access  to  the
Company's  proprietary  online services will eventually  be  available  through
Internet  browser software.  Recently, the Company announced that its  services
would  adopt Internet-based open standards.  Ultimately, this will allow  users
who  are subscribers to enter Internet fee-based services with standard browser
software  as  well  as proprietary services through CSi.   The  open  standards
approach  also will allow developers to more easily create and provide  content
that can be offered by the Company.  The Company and Microsoft jointly unveiled
their  alliance to deploy Microsoft's Commercial Internet System  architecture.
The Company is the first company to license this technology.

     Internet Access

      CompuServe  provides Internet access services through  CSi  and  SPRYNET,
CompuServe's stand-alone Internet-access-only service for both the consumer and
business  markets.  A CSi subscriber using the current version of the interface
may  fully utilize the Internet.  In addition, during an online session, a  CSi
subscriber using the current software version has seamless access to both CSi's
proprietary  content  and  some  of the more popular  Internet-based  features.
CompuServe  believes  CSi provides subscribers a value-added  approach  to  the
Internet through its content direction, which makes finding useful material  on
the Internet easier.

Content Providers and Alliances

      CompuServe  actively  recruits new information providers  to  expand  and
enhance  the  appeal  of  its  consumer online service  offerings.   CompuServe
currently  has  content  agreements with more than 200 providers.   While  each
agreement  may contain its own unique terms, these contracts generally  provide
for  a  one  year duration, with automatic renewal, and usually provide  for  a
range  of  fixed or variable fees, which depend upon subscriber  usage  of  the
content.

      CompuServe  believes  it is a leader in providing  high  quality  branded
content.   For  example,  CompuServe has an arrangement  with  Time  Warner  to
provide the online versions of its Time and Sports Illustrated magazines in the
consumer  online  market.  Due to the increasing competition  in  the  consumer
online  industry  and  the  growth  of the World  Wide  Web  on  the  Internet,
CompuServe has seen a decrease in the value and the cost of well-known  branded
content.

      Whenever  possible,  CompuServe  seeks exclusive  arrangements  with  its
content  providers.  Many providers are free to make similar data available  on
an  Internet  site  they  might operate or sponsor.  Other  providers,  and  in
particular  the  managers  of forum areas on CSi, are contractually  restricted
from  providing  similar information in a manner competitive  with  CompuServe,
often expressly including the Internet.  Because CompuServe is a major Internet
access provider, however, it can be beneficial to CompuServe even if a provider
places similar content on the Internet since CompuServe often can arrange to be
the  Internet access provider of choice in such cases and is able to enter into
other   advantageous  arrangements  with  these  content  providers,  such   as
cross-marketing.

      CompuServe  also  has  arrangements with AT&T by  which  AT&T's  WorldNet
subscribers  can access CSi on a discounted basis, and an alliance  with  Time,
Inc.  by which CompuServe subscribers can access -- at no additional charge  --
Time's  new  Power  Pathfinder service.  These are examples of  how  CompuServe
plans  to  integrate the increasing popularity of the World Wide  Web  and  the
entire  Internet with its proprietary online services to produce a synergistic,
value-added experience for both existing and new users worldwide.

      CompuServe believes that its relationships with content providers,  which
have been developed over 16 years, are an important competitive advantage.

      As  competition in the online services market continues to intensify  and
content  providers consider the distribution of their content on  the  Internet
directly rather than through online service providers, the Company will look to
partner   with  such  content  providers  on  the  Internet.   Such  partnering
opportunities  may include allowance for CompuServe subscribers  to  have  free
access   to   subscription-based   Internet  sites,   and   content/promotional
programming  which in response drives traffic from the Internet  to  CompuServe
Internet  based and proprietary products.  While the Company does  not  believe
that any single content provider is material to its operations, there can be no
assurance  that  the loss of a number of content providers  would  not  have  a
material  adverse  effect  on  the Company's business.   Although  the  Company
believes  the  online service providers offer advantages to  content  providers
that  the  Internet does not, there can be no assurances that content providers
will continue to distribute their content through online service providers.  It
is for this reason that it is critical for the Company to continue to find ways
to  partner  with  content  providers on the  Internet  and  generate  mutually
beneficial business arrangements.

Other Business

      In  addition  to  Interactive Services and Network  Services,  CompuServe
continues  to  provide certain computer hosting services to  certain  corporate
customers.  CompuServe's other businesses contribute a small percentage of  its
revenues and are expected to decline in importance in the future.

Network, Host Server Infrastructure and Properties

      CompuServe's customers connect to its network through their  PCs  --  the
"client" computer.  These connections are established through local access,  or
toll-free  or  long  distance  services  where  local  access  is  unavailable.
CompuServe  has  the  capability to provide local access to  over  90%  of  the
U.S.  population  living  in  metropolitan areas  of  25,000  people  or  more.
CompuServe's  network connects clients to computers that act  as  "servers"  to
store  data to be accessed by clients.  Servers comprise an array of  computers
owned  by  CompuServe,  its corporate customers or entities  connected  to  the
Internet.   Network  connection is made through  a  variety  of  communications
hardware, such as telephone lines, switches and routers, which serve to  direct
data  and  enable  communication over a variety of computer operating  systems.
All  other  customers  can access the network through  toll-free  numbers.   On
average,  CompuServe's customers are able to connect to the  network  on  their
first  attempt 98% of the time, with the lower success rate being  during  peak
usage.   Depending on the type of connection, customers may also  experience  a
failure to successfully negotiate a connection an additional approximately  two
percent of the time.  The network is deployed in over 500 POPs worldwide.   The
POPs  are  located throughout the world in leased office space.   A  number  of
these  POPs are in H&R Block tax offices and are subject to arms-length leases,
typically terminable upon 90 days notice by either party.  CompuServe  believes
that any or all of these lease agreements could easily be replaced upon similar
terms  within  the 90 days notice of termination required by the  leases.   The
network consists of a backbone comprised of broadband lines leased from  common
carriers,  approximately 8,500 digital switches (nodes) deployed by CompuServe,
and  over  85,000  dial-in  ports  connected to  local  exchange  carriers  all
accessible at 33.6 kbps access speeds.  Via point-to-point protocol conversion,
CompuServe  enables its users to access the Internet from any  of  its  dial-in
ports.

      On  average,  the measured throughput of CompuServe's network,  including
CSi,  is  90%  of  modem  speed.  However, customers may  experience  decreased
throughput  depending on the time of day, the area of the network accessed  and
temporary  hardware  or  software  problems.  CompuServe  continually  monitors
network  throughput  and makes necessary hardware and software  adjustments  to
maximize network throughput.

      CompuServe maintains three physically distinct and remote data centers in
the Columbus, Ohio vicinity, each one supplied with two independent sources  of
commercial  power  as  well as diesel generators to provide  emergency  back-up
power.   Telecommunications connectivity for each center  is  from  a  separate
Ameritech  central office and all three centers are connected by a fiber  optic
ring  for  redundancy.  Three types of host server technologies  are  currently
employed:  Systems Concepts SC-30/SC-40 36 bit servers run under a  proprietary
operating  system;  DEC  Vax servers run VMS; and Intel  32  bit  machines  run
Windows  NT.   In  total, CompuServe operates approximately 2,500  servers  and
maintains approximately one terrabyte of storage.  CompuServe is in the process
of migrating its servers to the Windows NT environment.

      CompuServe's  executive  offices are located  in  an  office  complex  in
suburban Columbus, Ohio owned by CompuServe.  CompuServe also owns and occupies
two other facilities in the Columbus area.

      Management  of  the  software  and hardware which  comprise  CompuServe's
technology  is  a complex undertaking.  CompuServe has generally  released  new
software and deployed new computer and data communications hardware on a timely
basis.   When  delays  have been encountered, they have not  been  material  to
CompuServe's operations.  Unlike its major OSP and ISP competitors,  CompuServe
had  its own engineering and manufacturing capabilities that traditionally  had
permitted  it  to  build or buy  proprietary hardware  for  its  network.   The
manufacturing  capability  was  sold to a third  party  in  fiscal  year  1997.
Although  CompuServe believes that this expertise has in the past permitted  it
to  more  quickly  implement a more reliable and cost-effective infrastructure,
this  has  been challenged by CompuServe's new open standards initiative  which
recognizes that advances in architecture technology have been difficult to keep
pace  with  while  CompuServe is simultaneously competing in  its  core  online
services business.  This has led CompuServe to adopt a buy-versus-build bias to
its  infrastructure,  an approach that has been carried  over  to  CompuServe's
network  and  hardware,  as  well  as  to its  operating  system  and  protocol
decisions.

      CompuServe  is  also implementing a new customer billing and  information
management  system to upgrade or replace its current proprietary  system  which
has become difficult to use and maintain.

Employees

      As  of  April  30,  1997,  CompuServe had approximately  3,050  full-time
employees.  None of CompuServe's employees are covered by collective bargaining
agreements.   CompuServe  believes that its relations with  its  employees  are
good.

Intellectual Property

      CompuServe  holds  a variety of trademark, copyright,  patent  and  other
intellectual property rights.  For example, CompuServe has registered the  name
CompuServe with the United States Patent and Trademark Office.  CompuServe  has
developed  proprietary hardware solutions, such as telecommunications  switches
and  modems, and software which CompuServe believes have given it a competitive
advantage.   CompuServe has filed several patent applications covering  certain
elements  of  its  technology.   All  of CompuServe's  software  is  under  the
protection of the copyright laws and other laws.

      In  addition to copyright and patent protection, CompuServe  attempts  to
protect  its  proprietary  technology under trade  secret  laws,  employee  and
third-party   non-disclosure  agreements  and  other  methods  of   protection.
CompuServe  grants  its  customers a license to use CompuServe's  products  and
services  under  agreements that contain terms and conditions  prohibiting  the
unauthorized reproduction of CompuServe's products.  Despite these precautions,
it  may be possible for unauthorized third parties to copy certain portions  of
CompuServe's  products  or  reverse engineer  or  obtain  and  use  information
CompuServe regards as proprietary.  While CompuServe's competitive position may
be  affected by its ability to protect its proprietary information, due to  the
technological innovation within CompuServe's industry, CompuServe believes that
patent  and copyright protections are less significant to CompuServe's  success
than  other  factors,  such  as  the  knowledge,  ability  and  experience   of
CompuServe's  personnel, name recognition and on-going product development  and
customer support.

      CompuServe  believes that its software, products,  and  services  do  not
infringe  on  the  proprietary rights of third parties.   From  time  to  time,
however,  CompuServe has received communications from third  parties  asserting
that features or content of certain of its services may infringe copyrights and
other  rights  of  such party.  To date, no such claims  have  had  a  material
adverse effect on CompuServe's ability to develop, market and sell its products
or operate its services.  There can be no assurance that third parties will not
assert  infringement claims against CompuServe in the future  with  respect  to
current or future products or services.  In fact, management believes there may
be  an  increase  in claims of this sort as the importance of software  patents
grows  and  as  lucrative means of leveraging inventions, as  applied  to  this
still-developing interactive information industry, are sought.  These kinds  of
assertions  could  require  CompuServe to enter into  royalty  arrangements  or
result in costly litigation.

Government Regulation and Legal Uncertainties

      In  the  United  States, CompuServe is not currently  subject  to  direct
regulation  other  than federal and state regulation applicable  to  businesses
generally.   However,  changes in the regulatory environment  relating  to  the
telecommunications  and  media industry, including the  areas  of  privacy  and
regulation of content deemed to be inappropriate for children, indecent  or  in
other  ways  improper, could affect CompuServe's business.  A  portion  of  the
recently  adopted telecommunications reform legislation in the  United  States,
the  Communications  Decency  Act, would have generally  made  it  illegal  for
persons  to  knowingly use an interactive computer service to send  or  display
"indecent" communications to minors or to knowingly and intentionally permit  a
telecommunications  facility controlled by such persons to  be  used  for  such
purposes.   Although  the United Stated Supreme Court recently  held  that  the
Communications  Decency Act was unconstitutional, there  are  indications  that
additional  legislative  action in this area may be forthcoming.   The  Company
cannot  predict the scope of such legislation or the impact on its  operations.
There  also  are  laws  that make it illegal to traffic  in  obscene  or  child
pornographic  materials,  including by computer.   While  CompuServe  does  not
believe  that its activities will violate these laws, it cannot predict  how  a
court  would interpret any of these laws in the online or Internet  context  or
whether  a  court  would  hold that there is a duty on  CompuServe  to  monitor
material  being  transmitted or, if notified that  illegal  material  is  being
transmitted, to attempt to stop or restrict such transmissions.

      In  November 1995, the German federal prosecutors office in Munich, 
Bavaria, began an inquiry into  the  issue of availability, to CompuServe 
members in Germany, of Internet newsgroups  alleged to be illegal under 
German law.  Felix Somm, who  was  then the  general manager of CompuServe 
GmbH (Munich), was named as the  subject  of this  inquiry.  Based upon the 
preliminary inquiry, an official accusation  has been  filed against 
Mr. Somm in the Munich law court.  The materials assembled by the federal 
prosecutor's office have been turned over to the Munich court.  After  
reviewing  these  materials and others, the Munich court will decide whether
the prosecutor's  accusations have sufficient merit. As part of this process,
the Company will continue to have the opportunity to submit further 
information to the court.  Mr. Somm has since resigned from his position as
general manager of CompuServe GmbH to start his own business.

      The  Company believes that the accusations against Mr. Somm are  entirely
groundless  and  that  he will ultimately be vindicated.  CompuServe  plans  to
vigorously   oppose  this  action  against  Mr.  Somm,  not  withstanding   his
resignation.

      In  response  to  market needs and CompuServe's desire to  place  greater
access  control  in  the  hands  of adults, and  in  contemplation  of  content
regulation  initiatives  under  way  both in  the  United  States  and  abroad,
CompuServe  makes  available at no additional charge  to  subscribers  parental
control  tools  that assist parents in controlling their children's  access  to
content.    CompuServe  cannot  predict  whether  providing  parental   control
capabilities will satisfy present or future laws regulating access to  indecent
communications or other types of content.

      Additionally,  the  applicability to  OSPs  and  ISPs  of  existing  laws
governing  issues  such  as  intellectual property  ownership,  defamation  and
personal  privacy  is  uncertain.  Courts have indicated  that,  under  certain
circumstances,  OSPs and ISPs could be held responsible for the publication  of
defamatory material or for failure to prevent the distribution of material that
infringes  on others' copyrights or patents.  While CompuServe historically 
has  generally avoided  editing or otherwise monitoring the content accessed
by its customers, industry trends may require it to engage more actively in
the selection, presentation and  editing of relevant content in connection 
with its information services.  The future interpretation by the courts 
relating to online defamation, privacy,  copyright infringement and other 
legal issues is uncertain.

      CompuServe is aware of certain industry requests of the FCC to review the
impact  of  Internet  usage on U.S. telecommunications  service  including  the
generally  lower  cost  structure for local connections regarding  data  versus
voice  transmission.  FCC regulatory review and rulemaking could result in  new
regulation  of  the  Internet and online industry,  changes  in  current  rules
governing  telecommunications or both.  In turn, this could result in increased
telecommunications  costs  for  the Internet  and  online  industry,  including
CompuServe.  CompuServe cannot predict whether or to what extent any  such  new
rulemaking will occur.

      The  online  and Internet industry have been under close scrutiny  and
inquiry  by  the Federal Trade Commission, taxing authorities and a  number  of
state  attorneys  general.   Additional federal,  state  and  local  government
agencies  may  also  scrutinize  such industry or  initiate  inquiries.   Costs,
and other ramifications, incurred  as  a result of government inquiries, 
initiatives, investigations  or lawsuits  relating  to  any of the foregoing
(as well as  process  or  business changes   resulting  therefrom)  could  have
a material adverse effect on CompuServe's business, financial condition or
results of operations.

      Subsequent to April 30, 1997, the Company received an assessment from the
German  taxing authority related to value-added taxes on the Company's services
provided  in  Germany.   Management is not  able  to  estimate  the  amount  of
potential  loss  related to this assessment.  The Company believes  that  after
reviewing  such  matters  and consulting with the Company's  counsel  that  the
ultimate  resolution of this matter will not have a material adverse effect  on
the Company's consolidated financial statements.

Competition

      CompuServe  competes in the online services industry as well  as  in  the
Internet  and  networking services industries.  Each  of  these  industries  is
highly competitive and includes a number of significant participants.
CompuServe's  primary  direct  competitors in the proprietary online  services
industry  are  America  Online, Inc. ("AOL"), Microsoft  Network  ("MSN"),  and
Prodigy  Services Company. Among the larger ISPs competing with  CompuServe  in
the Internet-access-only business are AT&T Corp. ("AT&T"), MCI
Telecommunications Corporation ("MCI"), NETCOM On-Line Communications Services,
Inc.,  Earthlink,  BBN Corporation, and UUNET Technologies,  Inc. CompuServe's
Network Services business competes with local and international
telecommunications companies and other data communications services,  including
ANS (a division of AOL), AT&T, MCI, Sprint Corp., Advantis, a joint venture  of
IBM and Sears, Roebuck & Co. and British Telecom plc.  An increasing number  of
publishing, broadcasting and other media and technology companies are  expected
to  enter the online services market, either directly or through alliances,  in
order  to  enhance  distribution of their content  and  programming.   Regional
telephone  operating companies, long distance carriers and cable companies  may
also  enter  the  markets served by CompuServe.  Many of  the  competitors  and
possible  future  competitors  referred to  above  have  significantly  greater
financial, technical, marketing and personnel resources than CompuServe.

      Microsoft's  position as the leading personal computer  operating  system
software  company  may  continue  to give MSN certain  competitive  advantages,
including distribution and marketing synergies.  Management believes  that  MSN
may  yet  enjoy  a cost advantage relative to other online services,  including
CompuServe's,  in terms of distribution through OEMs, as the  MSN  software  is
included  with Microsoft's Windows 95 operating system.  Other online services,
including  CompuServe, traditionally have needed to make payments  to  OEMs  to
have  their software pre-loaded onto new PCs.  It is unclear whether  Microsoft
incurs  any  costs  for  the  distribution of  MSN  through  the  OEM  channel.
Microsoft  has agreed to bundle CompuServe's icons and interface  software  for
CSi  with Windows 95.  CompuServe cannot predict the extent to which technical,
economic,  competitive  or other pressures will arise to  affect  the  relative
benefits of this development.

      CompuServe has entered into a non-exclusive agreement with AT&T  pursuant
to  which  AT&T's  WorldNet subscribers will be offered  discounted  access  to
CompuServe.   CompuServe  also  signed license and  marketing  agreements  with
Microsoft and Netscape Communications, Inc. ("Netscape") under which CompuServe
will  license  the  Microsoft  and  Netscape  browsers.   Under  the  Microsoft
arrangements,  CompuServe will place the CSi icon in  the  Windows  95  desktop
folder  for  online services.  These arrangements will help provide simple  and
widespread  access to CompuServe's CSi services.  CompuServe has also  recently
entered into an agreement with Time Inc. New Media, an affiliate of Time Warner
Inc., whereby CompuServe will begin offering to CSi and SPRYNET subscribers, at
no  charge,  access  to  two  new Time Inc. New Media  services  that  will  be
available to non-members on a paid subscription basis.

     CompuServe believes that the principal competitive factors in the consumer
online  services  industry include the ability to aggregate  engaging  content,
ease  of use, established user base, brand name awareness, competitive pricing,
customer   service,  and  a  low  cost  and  reliable  network  infrastructure.
CompuServe  believes  that  its extensive existing network  infrastructure  and
reliability,  breadth and depth of content for CSi, brand name recognition  and
large  user  base  have been its competitive advantages in the consumer  online
services  industry.   The  main competitive factors  in  the  Network  Services
business  are the number and location of POPs, speed, bandwidth and reliability
of  the  network,  sales and support able to meet the needs  of  customers  and
competitive pricing.  CompuServe believes that its ability to meet the needs of
its  customers  with  respect to these factors,  as  well  as  its  ability  to
differentiate  itself by providing value-added services to its customers,  have
been its competitive advantages in the Network Services business.

      In  addition  to  competing  against  other  OSPs  and  ISPs  to  attract
subscribers,  CompuServe  also competes to retain subscribers  once  they  have
signed with one of CompuServe's services.  Industry subscriber attrition rates,
or the rates at which subscribers leave an online service, continue to be high.
CompuServe  is  introducing a number of initiatives  to  reduce  attrition  and
increase  usage.   There  can be no assurance that these  initiatives  will  be
successful.   Sustained high rates of attrition would materially and  adversely
affect CompuServe's business, financial condition and results of operations.

     Management believes that competitive pressures on pricing will continue as
current  and  new Internet and online providers seek to increase market  share.
Price  changes  and possible increased spending in areas such as marketing  and
product  development could limit CompuServe's opportunities to enter  into  and
renew agreements with content providers and distribution partners, develop  new
products  and services, and continue to grow its subscriber base, all of  which
could  result in increased attrition of CompuServe's subscribers.  Any of these
events could have a material adverse effect on CompuServe's business, financial
condition and results of operations.

                                   GLOSSARY

ATM                 Asynchronous   Transfer  Mode.   An  information   transfer
                    standard  for routing traffic based on an address contained
                    within  the  first  five bytes of a fifty-three  byte-long,
                    fixed length data packet.

Backbone            A   centralized   high-speed  network  that   interconnects
                    smaller, independent networks.

Bandwidth           The number of bits of information which can move through  a
                    communications medium in a given amount of time.

Broadband           A  telecommunications  transmission  facility  that  has  a
                    bandwidth greater than a voice grade line, for example  T-1
                    and T-3 lines.

Data packet         A   data  transmission  technique  whereby  information  is
                    segmented  and  routed  in discrete data  envelopes  called
                    packets,  each  with  its own appended control  information
                    for routing, sequencing and error checking.

Frame-relay         An  information  transfer  standard  for  relaying  traffic
                    based  on  an address contained in the header of a variable
                    length  data  packet  that  is  up  to  2,106  bytes  long.
                    Frame-relay  has  less  overhead  than  ATM  but   may   be
                    difficult to operate at speeds greater than 45 Mbps.

Graphical user interface   A   means  of  communicating  with  a  computer   by
                    manipulating  icons, menus and windows  rather  than  using
                    text commands.

Groupware           Software  which permits multiple users of data to retrieve,
                    use   and   manipulate  information  within  a   controlled
                    environment over a network.

Home page           An  entry  point for a collection of information  presented
                    through the World Wide Web.

Internet            A  global  collection of interconnected data communications
                    networks   which   use  TCP/IP,  a  common   communications
                    protocol.

ISDN                Integrated   Services  Digital  Network.   An   information
                    transfer  standard for transmitting digital voice and  data
                    over telephone lines at speeds up at 128 kbps.

ISP                 Internet service provider.

Kbps                Kilobits  per  second.   A  data  transmission  rate.   One
                    Kilobit equals 1,024 bits of information.

LAN                 Local   Area   Network.   A  data  communications   network
                    designed  to interconnect personal computers, workstations,
                    minicomputers,  file servers and other  communications  and
                    computing devices within a localized environment.

Mbps                Megabits  per  second.   A  data  transmission  rate.   One
                    megabit equals 1,024 kilobits.

Modem               A  device  for  transmitting digital  information  over  an
                    analog telephone line.

Node                The point in a network which connects a single computer  to
                    the network.

Interactive services      Commercial information services that offer a computer
                    user   access   to   a  specified  slate  of   information,
                    entertainment and communications menus on what  appears  to
                    be a single system.

OSP                 Online service provider.

PC                  Personal computer.

POPs                Points-of-presence.   Geographic areas  within  which  OSPs
                    and ISPs provide local access.

Port                The  interface  through which data is transmitted  into  or
                    out of a computer.

PPP                 Point-to-Point Protocol.  An information transfer  standard
                    for  transmitting  data  packets over  network  connections
                    between two points.

Router              A  system placed between networks that relays data to those
                    networks based upon a destination address contained in  the
                    data packets being routed.

Shareware           Software  that  is  uploaded by  its  owner  to  an  online
                    service  or  the  Internet for use by others,  and  usually
                    paid for after a trial period.

TCP/IP              Transmission Control Protocol/Internet Protocol.   A  suite
                    of  network  protocols that allow computers with  different
                    architectures and operating system software to  communicate
                    with other computers on the Internet.

T-1                 A  data communications circuit capable of transmitting data
                    at 1.5 mbps (sometimes called DS-1).

T-3                 A  data communications circuit capable of transmitting data
                    at 45 mbps (sometimes called DS- 3).

Unix                A  computer  operating  system  frequently  found  on  work
                    stations  and  PCs  and  noted  for  its  portability   and
                    communications functionality.

Wide area network   A  data  communications  network designed  to  interconnect
                    personal  computers,  workstations,  microcomputers,   file
                    servers  and  other  communications and  computing  devices
                    that  covers  an  area  larger than a  single  building  or
                    campus.

World Wide Web or Web      A  collection  of  computer  systems  supporting   a
                    communications    protocol   that    permits    multi-media
                    presentation of information over the Internet.


ITEM 3.  LEGAL PROCEEDINGS

      During fiscal 1997, the Company, certain current and former officers  and
directors  of the Company and Parent were named as defendants in four purported
class  action lawsuits and one lawsuit based on the same allegations  in  which
the  plaintiff does not seek class action status.  One purported  class  action
lawsuit  was  voluntarily dismissed by the plaintiffs and such plaintiffs  have
joined  plaintiffs  in one of the remaining class action  lawsuits.   One  suit
names  the  lead  underwriters  of the Company's  initial  public  offering  as
additional defendants and as representatives of a defendant class consisting of
all  underwriters who participated in such offering.  Each pending suit alleges
similar  violations  of  the  Securities Act of 1933  based  on  assertions  of
omissions  and  misstatements of fact in connection with the  Company's  public
filings  related  to  its  initial  public offering.   One  suit  also  alleges
violations   of  the  Ohio  Securities  Code  and  common  law   of   negligent
misrepresentation.  Another suit also alleges violations of Colorado,  Florida,
and Ohio statutes and common law of negligent misrepresentation.  Relief sought
is  unspecified, but includes pleas for rescission and damages.  In addition to
the  five  previously  mentioned lawsuits, an action for  discovery  was  filed
during  fiscal 1997 solely against the Company.  In such action, the  plaintiff
seeks  factual  support  for a possible additional claim  relating  to  initial
public  offering disclosures.  All of these existing lawsuits  are  before  the
State  and  Federal  courts in Columbus, Ohio.  The defendants  are  vigorously
defending these suits.

       During   fiscal   1997,  TeleTech  Teleservices,   Inc.   and   TeleTech
Telecommunications, Inc. (collectively, "TeleTech") commenced an action in  the
United  States  District  Court, Southern District of Ohio  against  CompuServe
Incorporated  for  alleged violations of certain outsourcing contracts  between
TeleTech and CompuServe Incorporated related primarily to the WOW! online
service.  Teletech seeks recovery under a liquidated damages provision and
other compensatory damages, but has not asserted a specific amount to which it
believes it would be entitled.  CompuServe Incorporated has filed counterclaims
alleging  multiple breaches by TeleTech of the outsourcing contracts, including
breach  of  fiduciary duty, breach of confidentiality, and breach of  the  non-
compete  and employee non-solicitation provisions of the outsourcing  contracts
by   TeleTech.    The  Company  believes  it  has  meritorious   defenses   and
counterclaims, and is vigorously pursuing this litigation.

     The Company in the ordinary course of business is threatened with or named
as  a  defendant  in  various lawsuits.  It is not possible  to  determine  the
ultimate  disposition of these matters; however, management is of  the  opinion
that,  except  for  the matters described herein, the final resolution  of  any
threatened  or  pending  litigation is not likely to have  a  material  adverse
effect on the financial statements of the Company.


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

      On March 21, 1997, the Company submitted various matters to a vote of its
stockholders  at  its Annual Meeting of Stockholders.  A brief  description  of
matters voted upon at the Meeting and the results of the voting follows:

          1.   The  election of two Class I directors to serve until the third
          succeeding annual meeting of stockholders.

               Nominated and accordingly elected to office as Class I directors
               were Frank L. Salizzoni and Morton I Sosland:

                                   Frank L.       Morton I.
                                   Sallizoni       Sosland
                                --------------  ------------

             For                  88,362,004     88,354,493

             Against or                 
             Withheld                118,687        126,198

             Abstentions                   0              0

             Broker Non-votes              0              0


       2.   To  consider  and act upon a proposal to ratify the appointment  of
       Deloitte & Touche LLP as the Company's independent auditors for the year
       ending April 30, 1997

                                       
             For              88,415,022

             Against or  
             Withheld             65,669

             Abstentions               0

             Broker Non-votes          0



                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     CompuServe Corporation common stock began trading on April 19, 1996 on the
Nasdaq Stock Market, under the symbol "CSRV".  As reported by the NASDAQ  Stock
Market, the high and low sales prices were as shown below:

                                            High           Low
                                           ------         -----               
   Fiscal Year 1996                              
   ----------------------                                                 

   Fourth  Quarter (April  19-30,         $35.50         $27.75
   1996)

                                                       
   Fiscal Year 1997                                    
   ----------------------
                                                       
   First Quarter                          $29.25         $10.75
   Second Quarter                         $16.75          $8.63
   Third Quarter                          $13.50          $9.25
   Fourth Quarter                         $13.63          $8.88

      CompuServe  Corporation has never declared, nor has  it  paid,  any  cash
dividends  on  its Common Stock.  The Company currently intends to  retain  its
earnings  to  finance future growth and, therefore, does not anticipate  paying
any  cash dividends on its Common Stock in the foreseeable future.  During  the
year ended April 30, 1995, CompuServe Incorporated declared a non-cash dividend
of  $272.4  million to Parent. Any determination as to the payment of dividends
will  depend  upon  the future results of operations, capital requirements  and
financial condition of the Company and its subsidiaries and such other  factors
as  the  Board  of  Directors  of  the  Company  may  consider,  including  any
contractual  or  statutory  restrictions  on  the  Company's  ability  to   pay
dividends.

     As of July 21, 1997, there were approximately 1,200 shareholders of record
and approximately 20,000 beneficial holders of CompuServe Common Stock.


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

                                              Year Ended April 30,
                                  --------------------------------------------
                                   1997      1996      1995     1994     1993
                                  ------    ------    ------   ------   ------
                                      (In thousands, except per share data)

  Operating Results:                                                  
  Revenues:                                                           
  Interactive Services revenues  $556,597  $561,428  $395,954 $266,919  $174,882
  Network Services revenues       257,639   198,828   147,673  109,402    81,740
  Other revenues (a)               27,651    32,909    39,166   53,565    58,777
                                 --------  --------  -------- --------  --------
  Total Revenues                  841,887   793,165   582,793  429,886   315,399
                                                                           
                                                                            
  Costs and Expenses:                                                       
   Costs of revenues              546,152   387,470   231,189  179,366   125,642
   Marketing (c)                  263,126   175,213   104,828   65,591    51,542
   General and administrative      47,268    39,634    30,750   32,641    30,199
   Depreciation and amort.        113,921    74,708    45,310   31,447    22,198
   Equipment leasing                5,276                                     
   Product development             27,734    28,304    18,929   16,101    10,403
   Purchased research & dev. (b)                       83,508                 
   Nonrecurring items (e)          34,754                                     
                                ---------   -------   -------  -------   -------
   Total Costs and Expenses     1,038,231   705,329   514,514  325,146   239,984
                                        
  Operating Earnings (loss)      (196,344)   87,836    68,279  104,740    75,415
                                                                              
  Interest income                   9,842                                     
  Interest(expense)-related party            (5,555)                           
                                ---------   -------   -------  -------   -------
  Earnings(loss)before taxes     (186,502)   82,281    68,279  104,740    75,415
  Income tax expense(benefit)     (66,668)   33,187    59,481   42,647    29,838
                                ---------   -------   -------  -------   -------
  Net earnings (loss)(c)        ($119,834)  $49,094    $8,798  $62,093   $45,577
                                =========   =======   =======  =======   =======
                                                                            
  Earnings (loss) per share      ($1.29)      $.66      $.12     $.84     $.61
                                =========   =======   =======  =======   =======

                                                                      
                                               As of April 30,
                                 -------------------------------------------
                                 1997      1996      1995      1994     1993
                                 ----      ----      ----      ----     ----
                                                (In thousands)
                                                                      
Balance Sheet Data:                                                   
Total assets                    $802,536  $965,828  $323,557 $330,867  $240,365
Cash, cash equivalents and
  investments                   $161,419  $309,991    $4,913   $3,633    $3,669
Due from Parent                  $70,228   $17,377                             
Due to Parent                                       $142,400                   
Stockholders' equity            $651,436  $770,666   $79,858 $241,677  $179,389


                                          Year Ended April 30,
                                 ----------------------------------------
                                 1997     1996     1995     1994     1993
                                 ----     ----     ----     ----     ----

                            (In thousands, except Network Services customers)
                                                                            
Online/Internet Subscribers:                                                
CSi                                                                         
 U.S.                            1,527    2,072    1,737    1,139     780
 Europe                            892      694      278      119      54
 Other international               348      391      177      120      90
                                -------  -------  -------  -------  -------
      Total CSi                  2,767    3,157    2,192    1,378     924
 SPRYNET                           280      132       29                 
 WOW!                                        63                          
                                -------  -------  -------  -------  -------
      Total CompuServe hosted    3,047    3,352    2,221    1,378     924
                                                                           
 Licensee                        2,326    1,674      809      640     480
                                -------  -------  -------  -------  -------
      Total                      5,373    5,026    3,030    2,018   1,404
                                =======  =======  =======  =======  =======
                                                                      
 CSi subscriber hours          124,973  123,023   50,326   27,271  14,123
 SPRYNET subscriber hours       26,124    1,545                          
 Network Services customers      1,200      966      743      586     484
 Network Services customer
    hours                       57,139   45,146   31,539   20,058  14,149
                                                                            
                                                                            

Quarterly Data:                                                
(In thousands, except per   
   share data)                             Fiscal 1997 Quarter Ended
                             ------------------------------------------------
                             July 31,   October 31,   January 31,   April 30,
                               1996        1996          1997         1997
                             --------   -----------   -----------   ---------

Revenues                     $208,642    $214,343      $210,975      $207,927
Costs and Expenses            259,843(e)  308,838(c,e)  234,987       234,563(e)
Net Earnings (Loss)           (29,615)    (58,035)      (14,233)      (17,951)
Earnings (Loss) per share       ($.32)      ($.63)        ($.15)        ($.19)
                                                               
                                                               
                                           Fiscal 1996 Quarter Ended
                             ------------------------------------------------
                             July 31,   October 31,  January 31,    April 30,
                               1995        1995          1996         1996
                             --------   -----------  -----------    ---------

Revenues                     $186,549    $188,374     $203,032      $215,210
Costs and Expenses            140,944     164,639      185,785       213,961(d)
Net Earnings (Loss)(c)         26,835      13,966        9,398        (1,105)
Earnings (Loss) per share        $.36        $.19         $.13         ($.02)


(a)  Other  revenues include the operations of, and the gain of $2,680  on  the
     sale  of,  Collier-Jackson, Inc. sold in June 1994, and the operations  of
     other   businesses  sold  in  1993  and  1994  which  are  not  considered
     significant.

(b)  The  Company  recorded a charge for purchased research and development of
     $83,508  in  connection with the acquisition of SPRY, Inc. in April  1995,
     which  is not deductible for income tax purposes.  See note 3 of notes to
     the consolidated financial statements.

(c)  On May 1, 1995, the Company changed its method of accounting for direct
     response advertising costs to conform with the American Institute of 
     Certified Public Accountants Statement of Position 93-7, "Reporting on 
     Advertising Costs." Effective February 1, 1996, the Company changed further
     the method of accounting for these costs.  The net effect of these changes
     in accounting was to increase assets by $96,636 as of April 30, 1996.  Net
     earnings increased $6,271, $9,310, $23,587, and $18,524 for the quarters
     ended July 31, 1995,October 31, 1995, January 31, 1996 and April 30, 1996,
     respectively and $57,692 for the year ended April 30, 1996.

     In October 1996, the Company changed its rate of amortization of deferred
     subscriber acquisition costs to more closely correlate with the recent 
     trends in subscriber retention rates and member net revenues.  The new rate
     of amortization is 50% in the first 3 months, 30% in the next 9 months, and
     20% in the subsequent year, compared to the previous policy of 60% in the
     first 12 months and 40% in the subsequent year.  In conjunction with this
     change in amortization rates, the Company accelerated amortization of
     previously deferred CSi subscriber acquisition costs with a writedown
     totaling $34.5 million as of October 31, 1996.  Additionally, all 
     previously deferred subscriber acquisition costs totaling $8.3 million for
     WOW! and $2.5 million for SPRYNET were also written off, reflecting the
     high costs to service these high usage, flat-priced services.  WOW! was
     withdrawn from service effective January 31, 1997.  See note 2 of notes
     to the consolidated financial statements.

(d)  During  the  fourth  quarter of fiscal 1996, the Company  reduced  certain
     accruals  for  incentive  compensation  and  value  added  taxes  totaling
     $7,000.

(e)  In the first quarter of fiscal 1997, the Company incurred a nonrecurring
     pretax charge of $17.7 million relating to the sale of certain assets  and
     business  operations  of the corporate computer software  group  of  SPRY,
     Inc.;   the  consolidation  of  U.S.-based  staff  functions  and   office
     facilities;  the  renegotiation of certain  third-party  customer  service
     agreements;  and  the  write-off of certain obsolete  software  costs  for
     billing  and customer service systems.  Of the total charge, $9.8  million
     required  the  outlay  of  cash; the remaining $7.9  million  involved  no
     commitment of funds.

     In the second quarter of fiscal 1997, the Company also incurred a
     nonrecurring pretax charge of $7.9 million  relating to the withdrawal of
     the family-oriented WOW! online service.  Of the total charge, $5.6
     million required the outlay of cash; the remaining $2.3 million involved
     no commitment of funds.

     In  the fourth quarter of fiscal 1997, the Company incurred a nonrecurring
     pretax  charge  of  $9.2 million relating to the further consolidation  of
     office facilities and the write-off of investments in certain content  and
     technology providers due to their deteriorated financial performance.   Of
     the  total  charge,  $1.8  million  required  the  outlay  of  cash;   the
     remaining $7.4 million involved no commitment of funds.

     See note 9 of the notes to consolidated financial statements.


ITEM  7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS  OF  FINANCIAL  CONDITION  AND
           RESULTS OF OPERATIONS

Overview

      CompuServe  Corporation ("Company") is a majority  owned  subsidiary  of
Parent,  which  is  a  wholly owned subsidiary of  H&R  Block ("Block").   The
Company's  consolidated financial statements include the accounts of SPRY  Inc.
("SPRY", a wholly-owned subsidiary of the Company) since the date of
acquisition   by   Parent.   For  additional  information  relating   to   this
acquisition, see note 3 of notes to the consolidated financial statements.

      On  April  19, 1996, the Company completed an initial public offering  of
18,400,000  shares  of  its common stock at $30 per  share.   This  transaction
reduced Parent's ownership to 80.1%.  On July 16, 1996, Block announced that
its  Board of Directors had approved plans to spin-off Parent's remaining 80.1%
interest  in  CompuServe.   The Spin-off was subject to,  among  other  things,
shareholder  approval  at  Block's  annual meeting  in  September  1996  and  a
favorable ruling from the Internal Revenue Service as to the tax-free nature of
the Spin-off.

      On  August 28, 1996, Block announced that its Board of Directors  decided
not to present the proposed Spin-off to shareholders at the Block September 11,
1996 annual meeting.  The decision not to present the CompuServe Spin-off for a
shareholder vote on September 11 was based, in part, on the Company's  reported
first  quarter  and  projected  second  quarter  losses,  market  uncertainties
regarding  the  online industry and the planned September introduction  of  new
interfaces for the CompuServe Interactive Service ("CSi").

     On April 3, 1997, it was announced that the Company and Block were engaged
in  external  discussions  regarding possible business  combinations  involving
CompuServe.  There are no assurances that such discussions will result  in  any
agreement or transaction.

     The Company's revenues have increased over the last three years, primarily
because  of  the  growth  in subscriber count driven by the  rapidly  expanding
market  for  consumer  online and Internet services,  and  because  of  Network
Services  revenue growth due to market and market share increases.  Interactive
Services  revenues are generated principally from subscribers paying a  monthly
membership fee and charges based on usage.  Since these members pay  a  monthly
fee,  the  Company considers them to be active.  The usage of  the  service  by
members  who have a complimentary account is not material.  Royalties  received
from  NIFTY, a licensee of the Company's online technology, represent less than
1% of the Interactive Services revenues.  The Company does not expect royalties
received  from  NIFTY  to  materially change in the future.   Network  Services
revenues  are  generated based upon terms negotiated as to price and  duration.
Other  revenues  consist  primarily of computer  hosting  services  to  certain
corporate customers and network services to H&R Block.

      Traditionally  both  the  acquisition and usage patterns  of  Interactive
Services  subscribers have been seasonal from October to March.   Historically,
there has been no seasonality in the Company's Network Services business.

Pricing

      Competitive  dynamics in the online services market have  resulted  in  a
series of price adjustments by the major online service providers over the last
several  years.  Historically, the adverse impact of such price  reductions  on
earnings has been more than offset by increased volume and economies of scale.

      In  September 1995, CompuServe introduced a new pricing schedule for  CSi
intended to encourage subscribers to explore more features of the service, stay
on  the service longer and increase CSi's price competitiveness with the  other
major  consumer online services.  The new pricing schedule reduced revenue  per
subscriber  but contributed to significant increases in subscriber acquisitions
and usage.

      Comparison  of  the current year's revenues, earnings, and  revenues  per
customer  to the prior year are affected by the change in pricing in  September
1995.   Historically, declines in pricing have been offset by  increased  usage
and  economies of scale.  However, increased usage and economies of scale  only
partially  offset  the impact of the September 1995 price  change.   Management
believes that competitive pressures on pricing will continue as current and new
Internet  and  online  providers  seek to increase  market  share.   Management
believes  that  potential  new  sources of revenues  such  as  advertising  and
transaction  processing will help offset the effects of potential future  price
decreases  or  declines in revenue per customer.  There can be  no  assurances,
however,  that  these new revenue sources will be sufficient to offset  further
pricing adjustments or a decline in revenue per customer.

      The  Company  also offers fixed pricing for SPRYNET.  Because  the  fixed
monthly  prices  are above the current average monthly revenue  per  subscriber
before  the  change to fixed pricing, revenues have increased.   The  Company's
costs  of providing the service have also increased as subscribers expand their
usage  of  the  service because they experience no marginal cost in  doing  so.
Management  does not expect SPRYNET or its fixed pricing option  to  materially
impact the Company's results of operations or liquidity.

Subscriber Acquisition and Retention

      Prior  to  fiscal  1997,  the Company experienced  rapid  growth  in  its
subscriber  base.  During fiscal 1997, the Company experienced  a  downturn  in
monthly  subscriber acquisitions and subscriber retention rates due to  several
factors  including the emergence of numerous Internet access providers  in  the
marketplace  and  competitive pricing issues.  One of  the  key  components  of
increased  subscriber growth is the extent to which those  who  try  an  online
service remain customers.

      The  Company  has  promoted its services through a variety  of  marketing
efforts   such  as  direct  mail,  publication  inserts,  national   television
advertising  and  print  advertisements  in  general  interest,  business   and
specialty  periodicals.  During 1997, the Company announced a  "Back-to-Basics"
strategy aimed at building on its leadership in the business, professional, and
technical  user  market while focusing on profitable segments in  the  consumer
market.  As part of this strategy, the Company introduced in the fourth quarter
an enhanced business menu service built on its CSi service with focused content
designed  for  business people and professionals.  In addition  in  the  fourth
quarter, the Company debuted an enhanced version of its flagship online service
for  the important U.S. market.  The new version organizes thousands of current
content  areas  --  business,  professional, computing  and  shopping;  Forums;
searchable databases; communications capabilities; and select Internet sites --
into   21   easy-to-use,  menu-driven  CSi  Communities.    The  reorganization
showcases  the  content and capabilities that have proven  most  attractive  to
CSi's  base  of sophisticated members, many of whom are business,  professional
and  technical  users. These Communities and the way information  is  organized
within  them  are  based  on extensive research into the  wants  and  needs  of
CompuServe's  U.S.  subscribers and its larger target market  of  business  and
technical professionals -- at work, at home and at play.

      Similar  to  its competitors, the Company expects subscriber turnover  as
subscribers cancel for various reasons.  While offering free access  during  an
introductory  period  has significantly encouraged new  signups,  it  has  also
resulted in a higher percentage of subscribers canceling in the first 90  days.
Similarly,  the types of marketing and promotion undertaken by the Company  can
also  have  an  impact  on  subscriber retention  rates.  At  April  30,  1997,
CompuServe  had  retained  approximately 54% of new  CSi  subscribers  after  3
months,  42%  after  6 months, 35% after 9 months and 31% after  12  months  of
service. There can be no assurance that CompuServe's subscriber retention rates
will not decline below these levels.

Components of Revenues and Costs of Revenues

     Revenues from Interactive Services customers are based primarily on online
usage  and  monthly fees.  Revenues from Network Services customers  are  based
primarily  on  usage and value-added fees.  Revenues per customer  for  Network
Services  customers can vary significantly based upon the individual customer's
requirements.

      Variable  costs of revenues for Interactive Services increase with  usage
due to royalty payments to information providers, bankcard costs based upon the
number  of  customers,  customer service costs, and  data  communication  costs
shared  by  Interactive and Network Services.  While a significant  portion  of
data communications costs is fixed in the short term, data communications costs
are variable in the long term.

      The  major component of the costs of revenue for Network Services is  the
cost  of  network  links.   The  ratios of these  costs  to  revenue  have  not
materially changed.  The major components of the costs of revenue for  CSi  and
SPRYNET  services  are the network, content acquisition and  customer  services
costs  as a function of member growth and retention.  The SPRYNET service  cost
structure does not have a material content component.

Strategic Initiatives

     Interactive Services

      The  Company  has announced a "Back-to-Basics" global strategy  aimed  at
building  on  its leadership in the business, professional and  technical  user
market  while  focusing  on profitable segments in the  consumer  market.   The
Company  will  continue  pursuing growth in higher-margin  European  and  other
international consumer markets.  In the U. S. consumer market, the Company  has
discontinued  undifferentiated mass marketing efforts  that,  with  intensified
competition, have produced high attrition rates.  The Company will continue  to
provide  a distinctive experience in the CSi online and Internet service,  with
its  focus retention and growth efforts on CSi's traditional and loyal base  of
users.

      As  part  of this "Back-to-Basics" global strategy, the Company  recently
introduced  an  enhanced version of its flagship online service  for  the  U.S.
market.   The  new  version  organizes thousands of  current  content  areas --
business,   professional,  computing  and  shopping;  Forum  areas;  searchable
databases;  communications capabilities; and select Internet sites into  21
easy-to-use,  menu-driven  CSi Communities.  The reorganization  showcases  the
content  and  capabilities that have proven most attractive to  CSi's  base  of
sophisticated  members, many of whom are business, professional, and  technical
users.  These communities and the way information is organized within them  are
based  on  extensive  research into the wants and needs  of  CompuServe's  U.S.
subscribers   and   its  larger  target  market  of  business   and   technical
professionals at work, at home, and at play.

     Network Services
     
     CNS is continuing its focus on providing value-added data communication
services that differentiate CNS from its competition.  These services include
the integration of best-of-breed technology into its network infrastructure and
customer premise equipment such that CNS can extend its industry-recognized
leadership position in the remote access and host access markets.  CNS' best-of-
breed technology partners include Cisco Systems, Microsoft, AT&T, US Robotics
and Citrix.   CNS will continue to aggressively pursue technology partners who
deliver products that can be seamlessly integrated into services that address
critical corporate connectivity needs.
     
     In addition to enhancing its position in existing markets, CNS is
expanding its services portfolio in new high growth markets.  In areas like
application hosting and premium Internet/Intranet access, CNS is focusing on
non-commodity-based services that provide opportunities for increased operating
margins.  In these new high-growth markets, CNS is partnering with key
technology providers like Cisco Systems, Microsoft, Lotus and Netscape.

     In addition to continuing its support for established protocols such as
X.25 and SDLC, CNS will proceed with on-going improvements to its IP ("Internet
Protocol") based infrastructure.  This includes expansion of native IP dial and
dedicated points of presence (POP's) and the supporting nationwide ATM
("Asynchronous Transfer Mode") technology backbone, enhanced Internet peering
relationships, movement to higher dial speeds such as 56kbps and ISDN, and
implementation of new customer provisioning, security and billing systems.
Management believes these network infrastructure enhancements will enable CNS
to continue to offer high-quality value-added differentiated communication
solutions.  Management believes that CNS' ability to support both proprietary
and open systems protocols is a competitive advantage, especially with
corporate customers who need to integrate existing systems into Internet and
Intranet environments.

New Accounting Standards

      In  February  1997,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial Accounting Standards No. 128,  "Earnings  per  Share,"
effective for financial statements for interim and annual periods ending  after
December 15, 1997.  Earnings per share calculations under this Standard are not
materially  different  from those disclosed in the consolidated  statements  of
operations.

Results of Operations

      Fiscal Year Ended April 30, 1997 Compared to Fiscal Year Ended April  30,
1996

     Interactive Services Revenues.  Interactive Services revenues for the year
ended April 30, 1997 decreased 0.9% from the prior year to $556.6 million  from
$561.4 million.  The decrease in revenues was primarily the result of decreased
usage  by  subscribers    This decrease in usage was  partially  offset  by  an
increase  in  revenue earned from base monthly service fees due to  an  average
larger subscriber base during fiscal year 1997 as compared to fiscal year 1996.
The  average number of CSi subscribers during the fiscal year ended  April  30,
1997, exclusive of NIFTY SERVE subscribers, increased 8.4% to 2.97 million from
2.74 million in 1996.

      The  average monthly CSi revenue per subscriber decreased to  $14.90  for
1997  from  $17.01 for 1996 primarily due to a new pricing structure introduced
in  September 1995.  Revenue per subscriber excludes royalties and  subscribers
from NIFTY SERVE, SPRYNET and WOW!.

      Network Services Revenues.  Network Services revenues increased 29.6%  to
$257.6  million  from  $198.8 million for 1996, while  the  number  of  Network
Services customers increased 24.2% to 1,200.  The increase in revenues was  due
to the increase in the number of network customers and higher usage by existing
customers.

      Other  Revenues.   Other revenues decreased 16.0% to $27.7  million  from
$32.9  million  due  primarily to decreased usage by the  Company's  commercial
timeshare customers.  Additionally, a one-time $2.4 million gain on the sale of
a  minority-interest investment was recognized in 1996.  These  decreases  were
partially  offset  by  an  increase in revenues  earned  for  corporate  remote
computing services from H&R Block Tax Services, Inc. for electronic tax  filing
support.

       Costs  of  Revenues.   Costs  of  revenues  consist  primarily  of  data
communication  costs,  royalties  paid to information  and  service  providers,
salaries  associated  with providing customer support and  operating  the  data
centers  as  well  as  property  and other direct  costs.   Costs  of  revenues
increased as a percent of total revenues to 64.9% in 1997 from 48.9%  in  1996.
The 16.0 percentage point increase is due primarily to lower revenue per member
during   the   current  fiscal  year  (6.2  percentage  points),  higher   data
communication costs particularly with respect to the buildout and upgrading  of
the  European network (6.6 percentage points), increased customer service costs
(2.4  percentage points), and increased costs associated with uncollected  fees
(1.2 percentage points).

     Marketing.  Marketing expenses include costs incurred to acquire and
retain subscribers, the Network Services sales organization and other marketing
costs.  Effective May  1, 1995, acquisition costs for online subscribers were
deferred and charged to operations over 24 months beginning the month after
such costs were incurred, with 60% amortized in the first twelve months.  In
October 1996, the rate of amortization was accelerated to more closely
correlate with the recent trends in subscriber retention rates.  See note 2 of
notes to the consolidated financial statements.  Marketing expenses as a
percent of total revenues increased in 1997 to 31.3% compared to 22.1% in 1996.
The increase in marketing expenses is primarily attributable to the
amortization of previously deferred CSi subscriber acquisition costs and the
write-off of previously deferred subscriber acquisition costs related to the
SPRYNET and WOW! services which occurred in the second quarter of 1997.
Marketing expenses, exclusive of the amortization of previously deferred costs,
declined as a percent of revenues from 34.3% in 1996 to 25.0% in 1997.  The
decrease reflects primarily cutbacks in domestic CSi advertising prior to the
repositioning of CSi for the business, professional, and technical user
communities.

      General and Administrative.  As a percent of total revenues, general  and
administrative  expenses increased to 5.6% in 1997 from  4.9%  in  1996.   This
increase is due primarily to increases in property and other taxes.

     Depreciation and Amortization.  Depreciation and amortization as a percent
of  total  revenues increased to 13.5% in 1997 compared to 9.4% in  1996.   The
increase  reflects  the capital expenditures to increase network  capacity  and
upgrade service in the U.S. and Europe.

     Equipment Leasing.  During the second quarter of fiscal year 1997, the
Company initiated an equipment leasing program.

     Product Development.  Product development costs as a percent of total
revenues for 1997 decreased to 3.3% from 3.6% in the prior year. The prior year
included the costs to develop WOW! as well as costs associated with the
software development business of SPRY which was sold in the second quarter of
1997.

      Nonrecurring  Items.   During  fiscal year  1997,  the  Company  incurred
nonrecurring  pretax charges totaling $34.8 million relating  to  the  sale  of
certain assets and business operations of the corporate computer software group
of  SPRY;  the  withdrawal  of the family-oriented  WOW!  online  service;  the
consolidation  of  U.S.-based  staff  functions  and  office  facilities;   the
renegotiation of certain third-party customer service agreements; the write-off
of  certain  obsolete software costs for billing and customer  service  systems
which  are  no  longer  being  utilized by the Company  and  the  write-off  of
investments  in  certain  content  and  technology  providers  due   to   their
deteriorated financial performance. Of the total charge, $17.2 million required
the  outlay  of  cash;  the remaining $17.6 million involved no  commitment  of
funds.

     Taxes on Earnings.  The effective tax rate decreased to 36% in 1997
compared to 40% in 1996.  The decrease resulted from goodwill amortization in
1997 that is not fully deductible for tax purposes.

      Fiscal Year Ended April 30, 1996 Compared to Fiscal Year Ended April  30,
1995

     Interactive Services Revenues.  Interactive Services revenues for the year
ended April 30, 1996 increased 41.8% over the prior year to $561.4 million from
$396.0  million.   The increase in revenues was primarily  the  result  of  the
increase  in  the Company's subscriber base.  The number of CSi subscribers  at
April  30, 1996, exclusive of NIFTY SERVE subscribers, increased 46.7%  to  3.2
million from 2.2 million in 1995.

      The  average monthly CSi revenue per subscriber decreased to  $17.01  for
1996 (an average of $16.45 for the fourth quarter) from $19.17 for 1995 due  to
a  price  reduction  implemented in February 1995 and a new  pricing  structure
introduced  in September 1995.  (Revenue per subscriber excludes royalties  and
subscribers  from  NIFTY SERVE and SPRYNET.) During 1996, the  average  monthly
usage per CSi subscriber increased 51.4% compared to 1995.

      Network Services Revenues.  Network Services revenues increased 34.6%  to
$198.8  million  from  $147.7 million for 1995, while  the  number  of  Network
Services customers increased 30.0% to 966.  The increase in revenues was due to
the  increase in the number of network customers and higher usage  by  existing
customers.

      Other  Revenues.   Other revenues decreased 16.0% to $32.9  million  from
$39.2  million due primarily to the sale of Collier-Jackson, Inc. in 1995 ($2.0
million  revenue from this divested business and a $2.7 million pretax gain  on
sale),  and  $1.5  million from H&R Block Tax Services for development  of  tax
preparation software in 1995.  These amounts were partially offset  by  a  $2.4
million  gain  on the sale of a minority-interest investment  in  1996.   Other
revenues  also  include corporate remote computing services and fees  from  H&R
Block Tax Services, Inc. for electronic tax filing support.

       Costs  of  Revenues.   Costs  of  revenues  consist  primarily  of  data
communication  costs,  royalties  paid to information  and  service  providers,
salaries  associated  with providing customer support and  operating  the  data
centers and property and other direct costs.  Costs of revenues increased as  a
percent  of  total revenues to 48.9% in 1996 from 39.7% in 1995.   Of  the  9.2
percentage point increase, 5.8 percentage points reflect costs associated  with
increased  network hours, and 2.1 percentage points reflect increased  customer
service costs.

      Marketing.   Marketing  expenses include costs incurred  to  acquire  and
retain  subscribers,  other marketing expenses and the Network  Services  sales
organization.  Effective May  1, 1995, acquisition costs for online subscribers
were  being  deferred  and charged to operations over 24 months  beginning  the
month  after  such costs are incurred, with 60% amortized in the  first  twelve
months.   See  note  2  of  notes  to  the consolidated  financial  statements.
Marketing  expenses as a percent of total revenues increased in 1996  to  22.1%
(34.3%  before deferral of subscriber acquisition costs) compared to  18.0%  in
1995.   The  increase  in  marketing  expenses  is  primarily  attributable  to
increased  general  consumer advertising on television and  in  periodicals,  a
greater  use of publication inserts, expanded international marketing  efforts,
distribution of trial software disks through direct mail, the launch  of  WOW!,
and special event promotions and advertising expenses incurred by SPRY.

      General and Administrative.  As a percent of total revenues, general  and
administrative  expenses decreased to 4.9% in 1996 from  5.3%  in  1995.   This
decrease  primarily reflected the favorable outcome of certain  legal  matters,
sales tax audits and VAT issues which had been provided for in prior periods.

     Depreciation and Amortization.  Depreciation and amortization as a percent
of  total  revenues increased to 9.4% in 1996 compared to 7.8%  in  1995.   The
increase  was due to increased capital expenditures to double network  capacity
during  1996  to  support the Company's rapid growth, and the  amortization  of
goodwill  related  to the SPRY acquisition which is being amortized  over  five
years.

      Product  Development.  Product development costs as a  percent  of  total
revenues  for 1996 increased to 3.6% from 3.2% in the prior year.  The increase
was  due  primarily to the acquisition of SPRY in April 1995 and  increases  in
software  development and personnel costs for the new WOW!  online  service  as
well as enhancements to the CSi interface.

      Taxes  on  Earnings.  The effective tax rate decreased to 40.3%  in  1996
compared  to 87.1% in 1995.  The decrease resulted from a charge for  purchased
research  and  development  in  1995 that was not  deductible  for  income  tax
purposes.

     Liquidity and Capital Resources

     In April 1996, the Company sold 18.4 million shares of its common stock in
a  public  offering  and received $518.8 million net of underwriting  fees  and
expenses.

     Historically, the Company had participated in H&R Block's centralized cash
management system whereby cash received from operations was transferred to  H&R
Block's  centralized cash accounts and cash disbursements were funded from  the
centralized cash accounts on a daily basis.  Accordingly, cash requirements for
operating purposes and for capital expenditures were met from this source.  The
Company  began  utilizing its own centralized cash management system  following
the public offering of its common stock in April 1996.

      In March 1995, the Company declared a non-cash dividend of $272.4 million
to  H&R  Block  Group which reduced "Due From Parent" by the same  amount.   At
October 31, 1995, the Company's "Due to Parent" (which constituted payables  to
HRB  Management)  was  $199.8  million.   Interest  income  (expense)  was  not
calculated prior to October 31, 1995 due to H&R Block Group's prior  policy  of
not  crediting  (charging)  interest  with respect  to  intercompany  accounts.
Interest  income (expense) related to intercompany accounts is not  appropriate
because  it was not credited or charged, and management believes that it  would
not  have  been  material  in  periods prior to October  31,  1995.   Effective
October  31, 1995, this intercompany balance was replaced with a $124.8 million
contribution  to  capital and a $75.0 million intercompany payable.   In  April
1996, the Company repaid $205 million in intercompany accounts, which reflected
the  Company's continued investment in capital expenditures and marketing,  and
which  included  $5.6  million  for  interest  from  November  1,  1995.    All
outstanding  intercompany  balances were evidenced by  an  intercompany  credit
facility between the Company and HRB Management.  Intercompany borrowings  bear
interest  at the applicable prime rate, adjusted monthly.  At April  30,  1996,
the  Company was owed $17.4 million by Parent.  This increased to $70.2 million
at April 30, 1997 reflecting primarily the tax benefits which resulted from the
Parent's ability to reduce U.S. Federal income taxes through utilization of the
Company's tax losses.  The tax sharing agreement between the Company and Parent
provides  for the remittance of the balance due to the Company within ten  days
of the filing of its U.S. Federal income tax return.

      The Company's primary source of liquidity has historically been cash flow
from operating activities.

      From 1995 through 1997, the Company generated $152.3 million in cash from
operations, primarily net earnings, depreciation and amortization and purchased
research  and development.  Total cash invested during this period  was  $491.5
million,  mainly reflecting capital expenditures for computers,  network  nodes
and modems.

      Beginning in 1996, the Company significantly accelerated its expenditures
to  grow  its  subscriber  base  and to expand its  infrastructure  to  support
substantial increases in system usage.  The Company invested approximately $160
million  in 1996 for subscriber acquisition and marketing, a fourfold  increase
over 1995.  In mid-1997, the Company announced its "Back-to-Basics" strategy --
discontinuing  its  WOW!  mass consumer initiative and  reducing  its  domestic
advertising  for  CSi  prior  to repositioning the service  for  the  business,
professional,  and  technical  user  communities.   As  a  result,   subscriber
acquisition and marketing investments declined to approximately $110 million in
1997.   The  Company expects to spend approximately $100 million for subscriber
acquisition and marketing in 1998.

      The Company expects to invest up to $100 million for capital expenditures
in 1998.  This will be supplemented by equipment leasing with an estimated cash
purchase  value of $25 million.  The expenditures for 1997 included $7  million
for deployment of TCP/IP across the Company's network; the planned expenditures
for 1998 include an additional $14 million to bring deployment to a total of 30
major  city  markets.   The cost to fully deploy TCP/IP  across  the  Company's
network  will  be  dependent  upon  current  and  future  assessments  of  each
additional market and the associated revenue and profit potential.

     The Company's depreciation and amortization expense in future periods will
likely approximate current levels as leasing and other acquisition alternatives
substitute  for  higher levels of capital expenditures.  The  Company  believes
that cash from operations, the proceeds from the public offering of common 
stock coupled  with  the receipt  of  tax benefits from Parent will be 
sufficient to meet the Company's presently anticipated  funding requirements.  
Thereafter, if internally generated cash is insufficient to meet the Company's
capital needs, the Company may be required to seek additional sources of funds.

      In  June  1996, the Company agreed to an unsecured $25 million  revolving
credit  facility  with  Bank  One, Columbus, NA.   Management  of  the  Company
determined that, based on the most recent financial information available, this
credit  facility  was no longer necessary, and accordingly,  the  facility  was
allowed to expire in June 1997.

      Approximately 29% of the Company's revenues were generated  from  sources
outside of the United States, an increase of 9% from the prior year.

      Except  for  the  historical information contained  herein,  the  matters
discussed in this report are forward-looking statements which involve risks and
uncertainties   including,   but  not  limited   to,   economic,   competitive,
governmental,  and  technological factors affecting the  Company's  operations,
markets, products, services and prices and other such factors.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         INDEPENDENT AUDITORS' REPORT

To the Stockholders and Directors
  of CompuServe Corporation:

     We have audited the accompanying consolidated balance sheets of CompuServe
Corporation  (a  majority-owned  subsidiary  of  H&R  Block  Group,  Inc.)  and
subsidiaries  as  of  April  30, 1997 and 1996, and  the  related  consolidated
statements of operations, stockholders' equity, and cash flows for each of  the
three  years in the period ended April 30, 1997.  Our audits also included  the
consolidated  financial statement schedule listed in Item 14.  These  financial
statements  and  financial  statement schedule are the  responsibility  of  the
Company's  management.  Our responsibility is to express an  opinion  on  these
financial statements and financial statement schedule based on our audits.

      We  conducted  our audits in accordance with generally accepted  auditing
standards.   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, such consolidated financial statements present fairly, in
all  material  respects, the financial position of CompuServe  Corporation  and
subsidiaries  at  April 30, 1997 and 1996, and the results of their  operations
and  their cash flows for each of the three years in the period ended April 30,
1997 in conformity with generally accepted accounting principles.  Also, in our
opinion, the financial statement schedule, when considered in relation  to  the
basic  consolidated financial statements taken as a whole, presents  fairly  in
all material respects the information set forth therein.

      As  discussed  in  Note 2 to the consolidated financial  statements,  the
Company changed its method of accounting for direct response advertising during
the year ended April 30, 1996.



Deloitte & Touche LLP
Columbus, Ohio
June 12, 1997


                                       
                    COMPUSERVE CORPORATION AND SUBSIDIARIES
                                       
                         CONSOLIDATED BALANCE SHEETS
                  (Amounts in Thousands, Except Share Data)
                                                                         
                                                               April 30,
                                                          ------------------
                                                           1997        1996
                                                          ------      ------
ASSETS                                                                   
Current Assets                                                                 
 Cash and cash equivalents                                $138,777     $280,646
 Investments                                                22,642       29,345
 Receivables, less allowance for doubtful accounts of              
 $4,884 and $3,429, respectively                           118,336      119,186
 Due from Parent                                            70,228       17,377
 Prepaid expenses                                           16,909       14,103
 Other current assets                                       15,924       25,233
                                                          ---------    ---------
    Total current assets                                   382,816      485,890
                                                                               
INTANGIBLE ASSETS, less accumulated amortization of                      
$14,587 and $10,610, respectively                            8,153       22,809
PROPERTY AND EQUIPMENT, net                                355,212      348,059
                                                                               
OTHER ASSETS:                                                       
 Deferred subscriber acquisition costs, net                 43,959       96,636
 Other assets                                               12,396       12,434
                                                          ---------    ---------
    Total other assets                                      56,355      109,070
                                                          ---------    ---------
TOTAL                                                     $802,536     $965,828
                                                          =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY                                           
CURRENT LIABILITIES                                                            
 Accounts payable                                          $54,529      $89,236
 Accrued salaries, wages and payroll taxes                  15,417       15,475
 Accrued taxes                                               8,016        4,070
 Accrued royalties                                           3,170        6,361
 Deferred revenue                                            5,824        4,077
 Other accrued expenses                                     28,033       19,180
                                                          ---------    ---------
    Total current liabilities                              114,989      138,399
                                                                               
DEFERRED INCOME TAXES                                       36,111       56,763
                                                                               
COMMITMENTS AND CONTINGENCIES                                                  
                                                                               
STOCKHOLDERS' EQUITY                                                
 Common stock, par value $.01 per share: 250,000,000                           
 shares authorized; 92,600,000 shares issued        
 and outstanding                                               926          926
 Additional paid-in capital                                744,288      744,288
 Retained earnings (accumulated deficit)                   (92,713)      27,121
 Cumulative translation adjustments                         (1,065)     (1,669)
                                                          ---------    ---------
    Total stockholders' equity                             651,436      770,666
                                                          ---------    ---------
TOTAL                                                     $802,536     $965,828
                                                          =========    =========
                                                                               
                                                                               
                See notes to consolidated financial statements.
                                       
                    COMPUSERVE CORPORATION AND SUBSIDIARIES
                                                                         
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    Amounts in Thousands, Except Share Data
                                                                         
                                                      Year Ended April 30,
                                                 -----------------------------
                                                  1997       1996        1995
                                                 ------     ------      ------
REVENUES:                                                                      
 Interactive Services revenues                 $556,597    $561,428   $ 395,954
 Network Services revenues                      257,639     198,828     147,673
 Other revenues                                  27,651      32,909      39,166
                                              ----------  ----------  ----------
     Total revenues                             841,887     793,165     582,793
                                                                         
COSTS AND EXPENSES:                                                      
 Costs of revenues                              546,152     387,470     231,189
 Marketing                                      263,126     175,213     104,828
 General and administrative                      47,268      39,634      30,750
 Depreciation and amortization                  113,921      74,708      45,310
 Equipment leasing                                5,276                        
 Product development                             27,734      28,304      18,929
 Purchased research and development                                      83,508
 Nonrecurring items                              34,754                        
                                             -----------  ----------  ----------
     Total costs and expenses                 1,038,231     705,329     514,514
                                                                         
OPERATING EARNINGS (LOSS)                     (196,344)      87,836      68,279
                                                                         
INTEREST INCOME                                   9,842                        
INTEREST (EXPENSE) - related party                          (5,555)            
                                             -----------  ----------  ----------
EARNINGS (LOSS) BEFORE TAXES                  (186,502)      82,281      68,279
                                                                         
INCOME TAX EXPENSE (BENEFIT)                   (66,668)      33,187      59,481
                                             -----------  ----------  ----------
NET EARNINGS (LOSS)                          ($119,834)     $49,094      $8,798
                                             ===========  ==========  ==========
EARNINGS (LOSS) PER COMMON SHARE                ($1.29)       $0.66       $0.12
                                             ===========  ==========  ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   92,600,000   74,803,279  74,200,000
                                                                         
                                                                         
                See notes to consolidated financial statements.
                                                                         

                                       
                  COMPUSERVE CORPORATION AND SUBSIDIARIES
                                                                        
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            Amounts in Thousands
                                      
                                                 Retained                 
                                   Additional    Earnings    Cumulative      
                            Common  Paid-in    (Accumulated  Translation     
                             Stock  Capital      Deficit)    Adjustments   Total
                            ------ ----------  -----------  -----------  -------
BALANCE AS OF APRIL 30, 1994  $742     $(741)   $241,621       $55     $241,677
                                                                      
Net earnings                                       8,798                  8,798
Dividends to Parent                             (272,392)              (272,392)
Change in foreign currency                                                  
   translation adjustment                                      155          155
Parent contribution to                                                      
   capital                           101,620                            101,620
                             -----  ----------  ----------  ---------  ---------
BALANCE AS OF APRIL 30, 1995   742   100,879     (21,973)       210      79,858

Net earnings                                      49,094                 49,094
Sale of common stock           184   518,635                            518,819
Change in foreign currency                                                  
   translation adjustment                                    (1,879)     (1,879)
Parent contribution  to                                                     
   capital                           124,774                            124,774
                             -----  ----------  ----------  --------   ---------
BALANCE AS OF APRIL 30, 1996   926   744,288       27,121    (1,669)    770,666

Net loss                                         (119,834)             (119,834)
Change in foreign currency                                      604         604
   translation adjustment
                             -----  ----------  ----------  --------   ---------
BALANCE AS OF APRIL 30, 1997  $926  $744,288     ($92,713)  ($1,065)   $651,436
                             =====  ==========  ==========  ========   =========
                                                                            
                                                                            
              See notes to consolidated financial statements.

                                       
                    COMPUSERVE CORPORATION AND SUBSIDIARIES
                                                                          
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             Amounts in Thousands
                                                     Year Ended April 30,
                                               --------------------------------
                                                 1997         1996       1995
CASH FLOWS FROM OPERATING ACTIVITIES:          --------     --------   --------
 Net earnings (loss)                          ($119,834)     $49,094     $8,798
 Adjustments to reconcile net earnings                                         
 (loss) to  net cash provided
 (used) by operating activities:
   Noncash, nonrecurring items                   17,565                       
   Other noncash property writedown               6,500                       
   Depreciation and amortization                113,921      74,708     45,310
   Amortization of deferred subscriber                                 
     acquisition costs                          120,836      22,585
   Provision for deferred taxes on earnings     (14,840)     46,018     (1,912)
   Gain on sale of subsidiary                                           (2,680)
   Purchased research and development                                   83,508
   Changes in:                                                                 
      Receivables                                   650     (38,164)   (29,576)
      Prepaid expenses                           (5,091)     (9,047)    (2,510)
      Due from Parent                           (52,851)                       
      Other current assets                        2,936     (11,133)      (150)
      Deferred subscriber acquisition costs     (68,159)   (119,221)
      Accounts payable                          (34,707)     46,901      9,018
      Accrued salaries, wages and                                          
        payroll taxes                               (58)     (3,224)     5,004
      Accrued taxes                               3,946      (3,559)    (2,671)
      Accrued royalties                          (3,191)         27      2,123
      Deferred revenue                            1,747       2,702     (6,545)
      Other accrued expenses                      8,853       5,666      3,017
                                               ----------  ----------  ---------
         Net cash provided (used) by                       
             operating activities               (21,777)     63,353    110,734
                                                                               
                                                                               
CASH FLOWS FROM INVESTING ACTIVITIES:                                          
 Purchases of property and equipment           (120,590)   (219,172)  (101,603)
 Purchases of short term investments           (145,082)    (29,345)           
 Maturities of short term investments           151,785                       
 Proceeds from sale of subsidiary                                        5,195
 Other, net                                      (6,205)    (22,919)    (3,546)
                                               ----------  ----------  ---------
         Net cash used by                                          
             investing activities              (120,092)   (271,436)   (99,954)
                                                                               
                                                                               
CASH FLOWS FROM FINANCING ACTIVITIES:                                          
 Proceeds from the sale of common stock,                                       
 net of costs of $33,181                                    518,819
 Repayments to Parent                                      (205,000)           
 Advances from Parent                                       169,997     (9,500)
                                                ---------  ----------  ---------
       Net cash provided (used) by                                             
           financing activities                             483,816     (9,500)
                                                ---------  ----------  ---------
NET INCREASE (DECREASE) IN CASH AND                         
   CASH EQUIVALENTS                             (141,869)   275,733      1,280
                                                                          
CASH AND CASH EQUIVALENTS AT BEGINNING                            
   OF YEAR                                       280,646      4,913      3,633
                                                ---------  ----------  ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR        $138,777    $280,646    $4,913
                                                =========  ==========  =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW                                          
INFORMATION:
                                                                          
   Cash paid to Parent for income taxes                      $33,187    $59,481
                                                =========   =========  =========
   Interest paid to Parent                                    $5,555           
                                                =========   =========  =========
                                                                          
                                                                          
                See notes to consolidated financial statements.



                    COMPUSERVE CORPORATION AND SUBSIDIARIES
                                       
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED APRIL 30, 1997, 1996 AND 1995
                   (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

1.  ORGANIZATION

          CompuServe Corporation ("Company") is a majority-owned subsidiary of
H&R Block Group, Inc. ("Parent").  Parent is a wholly-owned subsidiary of H&R
Block, Inc. ("Block").

      On  April  19,  1996, the Company entered into an agreement  with  Parent
whereby  Parent  contributed  all  of  its shares  of  CompuServe  Incorporated
("Inc.")  (at the time a wholly-owned subsidiary of Parent) to the  Company  in
exchange  for 74,199,000 shares of Company common stock.  This transaction  has
been  accounted  for  similar to a pooling of interests, and  accordingly,  the
accompanying  financial statements have been restated to include  the  accounts
and  operations  of  the  combined companies  for  all  periods  prior  to  the
transaction.

     In April 1995, Block acquired SPRY, Inc. ("SPRY"), as described in note 3.
On  January  30, 1996, Parent contributed its investment in SPRY  to  Inc.  The
accompanying  consolidated financial statements include the  accounts  of  SPRY
since the date of acquisition by Parent.

      On  April  19, 1996, the Company completed an initial public offering  of
18,400,000  shares of its common stock at $30.00 per share.   This  transaction
reduced the Parent's ownership in the Company to 80.1%. On July 16, 1996, Block
announced that its Board of Directors had approved plans to spin-off (the "Spin-
off")  Parent's  80.1% interest in the Company.  The Spin-off was  subject  to,
among  other  things,  shareholder approval at Block's  September  1996  annual
meeting,  a favorable ruling from the Internal Revenue Service as to  the  tax-
free  nature  of  the  transaction, and  the absence of any  change  in  market
conditions  or  other  circumstances that cause  Block  to  conclude  that  the
distribution  is not in the best interests of its stockholders.  Prior  to  the
initial public offering, the Parent owned all 1,000 shares outstanding.

       On August 28, 1996, Block announced that its Board of Directors decided
not to present the proposed Spin-off to shareholders at the Block September 11,
1996 annual meeting.  The decision not to present the Spin-off for a
shareholder vote on September 11 was based, in part, on the Company's reported
first quarter and projected second quarter losses, market uncertainties
regarding the online industry and the planned September introduction of new
interfaces for the CompuServe Interactive Service ("CSi").

     The Company provides computer-based information and communication services
to  businesses  and  individual  owners of  personal  computers,  and  operates
primarily  through  two  business  groups:  Interactive  Services  and  Network
Services.

      Interactive  Services revenues are generated primarily  from  subscribers
paying a monthly membership fee and charges based on usage as well as from fees
received  from  a  licensee  and distributors of the Company's  online  service
technology.   Network  Services  revenues are  generated  by  providing  secure
turnkey,  value added global network interconnectivity and access  services  to
individuals  and  major corporate customers internationally.  Network  revenues
are  generated  based  upon terms negotiated as to price and  duration.   Other
revenues  consist  primarily  of  computer time  sharing  services  to  certain
corporate customers and network services to Block.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Principles  of  Consolidation  -- The consolidated  financial  statements
include  the  accounts of the Company and its wholly-owned  subsidiaries.   All
material intercompany transactions and balances have been eliminated.

      Management  Estimates  --  The preparation  of  financial  statements  in
conformity with generally accepted accounting principles requires management to
make  estimates and assumptions that affect the reported amounts of assets  and
liabilities and disclosure of contingent assets and liabilities at the date  of
the  financial  statements, and the reported amounts of revenues  and  expenses
during  the  reporting  periods.   Actual  results  could  differ  from   those
estimates.

      Revenue  Recognition -- Revenues are recorded in the period in which  the
service is provided or the product is shipped.

      Property  and  Equipment -- Buildings, computer hardware,  furniture  and
equipment are recorded at cost and depreciated over the estimated useful  lives
of  the assets, ranging from 3 to 10 years for computer hardware, furniture and
equipment  and  45  years  for  buildings,  using  the  straight-line   method.
Leasehold  improvements are amortized over the period of the  respective  lease
using  the  straight-line  method.  Maintenance and  repairs  are  expensed  as
incurred.  Expenditures which significantly increase the value of the assets or
extend useful lives are capitalized.

      Deferred  Subscriber  Acquisition Costs -- Effective  May  1,  1995,  the
Company  prospectively  changed its method of accounting  for  direct  response
advertising  costs to conform with the American Institute of  Certified  Public
Accountants Statement of Position 93-7, "Reporting on Advertising Costs," which
specifies   the  accounting  for  direct  response  advertising.   Under   this
accounting method, direct response advertising costs that meet certain criteria
are reported as assets and are amortized on a cost-pool-by-cost-pool basis over
the  period during which the future benefits are expected to be received.   The
net effect of the change in accounting increased assets by $96,636 at April 30,
1996 and increased net earnings by $57,692 for the year then ended.  Subscriber
acquisition  costs  include  primarily magazine and  newspaper  advertisements,
broadcast  costs,  direct  mail  costs including  mailing  lists  and  postage,
payments  to OEMs, and disk and CD-ROM costs related directly to new subscriber
solicitations.   These  costs  consist of  incremental  direct  costs  paid  to
independent  third  parties.   No  indirect  costs  are  included  in  deferred
subscriber acquisition costs.

     Effective February 1, 1996, the Company changed its policy of capitalizing
subscriber  acquisition costs related to magazine and newspaper  advertisements
and  broadcast costs to expensing those costs which do not result in  a  direct
revenue-generating  response.  Additionally, the Company  began  to  capitalize
related  payroll, outsourcing and disk and CD-ROM costs for activities directly
associated with direct-response advertising.  All costs capitalized before this
change will continue to be amortized.

      Prior  to  October 1996, the Company amortized its subscriber acquisition
costs  over a 24-month period, on an accelerated basis (60% in the first twelve
months  and 40% in the subsequent year), to match subscriber acquisition  costs
with   associated  Interactive  Services  revenues,  beginning  in  the   month
subsequent to the expenditure.  In October 1996, the Company changed  its  rate
of  amortization  of  deferred subscriber acquisition  costs  to  more  closely
correlate  with the recent trends in subscriber retention rates and member  net
revenues.   The new rate of amortization is 50% in the first 3 months,  30%  in
the  next  9 months, and 20% in the subsequent year.  In conjunction with  this
change   in  amortization  rates,  the  Company  accelerated  amortization   of
previously deferred CSi subscriber acquisition costs with a writedown  totaling
$34.5  million  as of October 31, 1996.  Additionally, all previously  deferred
subscriber  acquisition costs totaling $8.3 million for WOW! and  $2.5  million
for  SPRYNET were also written off, reflecting the high costs to service  these
high  usage,  flat-priced services.  WOW! was withdrawn from service  effective
January  31,  1997.  The total $45.3 million adjustment of deferred  subscriber
acquisition  costs  ($28.6 million after taxes, or $0.31  per  share)  for  the
quarter ended October 31, 1996 is included in marketing expenses.  Amortization
of direct response advertising assets was $120,836 (including the $45.3 million
adjustment for deferred subscriber acquisition costs) for the year ended  April
30, 1997 and is included in marketing costs.  Direct response advertising costs
incurred to obtain new online service subscribers are recoverable from  monthly
revenues  generated from those subscribers within a short period of time  after
the related costs are incurred.

      The  Company expenses advertising costs not classified as direct response
the first time the advertising takes place.

      Product  Development Costs -- The Company capitalizes costs incurred  for
the development of computer software when the project has reached technological
feasibility,  and  continues  to capitalize such costs  until  the  product  is
available for release to the general public.  Capitalized costs include  direct
labor and related fringe benefits for software produced by the Company and  the
costs of software purchased from third parties.  Research and development costs
incurred  prior  to technological feasibility are expensed  as  incurred.   The
Company  amortizes  product development costs based upon  the  greater  of  the
amount  using (a) the rates that current gross revenues for a product bears  to
the total of current and anticipated future gross revenues for that product  or
(b)  the  straight-line method over the remaining estimated life of the product
commencing the month after the date of product release.

      Unamortized product development costs of $2,814 and $4,494 at  April  30,
1997  and  1996 are included in intangible assets with amortization expense  of
$2,055  and  $449 recorded for the years then ended.  Amounts of  capitalizable
product development costs were not material in previous years.

      Intangible Assets -- The excess cost of purchased subsidiaries  over  the
fair  value  of  net  tangible assets acquired and other intangibles  is  being
amortized  over  periods ranging from 5 to 20 years on a  straight-line  basis.
Unamortized  goodwill  of $5,339 and $18,315 at April  30,  1997  and  1996  is
included in intangible assets with amortization expense recorded for the  years
ended April 30, 1997, 1996 and 1995 was $3,348, $3,123, and $809, respectively.

      At  each  balance sheet date, a determination is made by  Management,  in
accordance with Statement of Financial Standards No. 121, "Accounting  for  the
Impairment  of Long-Lived Assets and Long-Lived Assets to Be Disposed  Of",  to
ascertain  whether property, plant and equipment, goodwill and other intangible
assets have been impaired based on the sum of expected future undiscounted cash
flows  from  operating activities.  In accordance with this  provision,  during
fiscal 1997, the Company adjusted the carrying value of certain property assets
due  to  obsolescence  with a write-down of $6.5 million.   At  year  end,  the
Company  believes  that  property, deferred subscriber acquisition  costs,  and
intangible  assets  at  April  30,  1997  and  1996  are  realizable  and   the
depreciation and amortization periods are appropriate.

      Foreign  Currency Translation -- Assets and liabilities of the  Company's
foreign  operations  are  translated  into  U.S.  dollars  at  exchange   rates
prevailing  at the end of the period.  Substantially all revenues from  foreign
sources  are  billed  and  collected  in U.S.  dollars.   Expense  transactions
conducted  in foreign currency are translated at the average of exchange  rates
in  effect  during  the  period.  Translation gains  and  losses  are  recorded
directly to Stockholders' equity.

      International  Revenues  -- The Company received  revenues  from  foreign
sources  totaling $242,151, $173,963, and $107,863  for the years  ended  April
30, 1997, 1996 and 1995, respectively.

      Taxes on Earnings -- The Company files a consolidated Federal income  tax
return  with  its  Parent  on a calendar year basis.   Therefore,  the  current
liability for taxes on earnings recorded in the consolidated balance  sheet  at
year end consists principally of taxes on earnings for the period January 1  to
the end of each financial reporting period.  The Company provides for taxes  on
earnings  on a separate-company basis.  Deferred taxes on earnings are provided
for  temporary  differences between financial and tax reporting, which  consist
principally  of deferred subscriber acquisition costs and depreciation.   As  a
result of the Company filing a consolidated Federal income tax return with  its
Parent,  the Company has recorded the current income tax receivable as part  of
the Due From/To Parent balance in the consolidated balance sheets.  The Company
follows the provisions of Statement of Financial Accounting Standards No.  109,
"Accounting for Income Taxes."

      The Company has entered into a Tax Sharing Agreement Plan with its Parent
(see note 12).

      Cash and Cash Equivalents -- The Company considers all highly liquid debt
instruments  with  an original maturity of three months  or  less  to  be  cash
equivalents.   Substantially  all cash and cash equivalents  are  held  in  one
financial institution.

      Investments  --  Investments  consist of corporate  debt  securities  and
U.S.  government  agency obligations, maturing prior to April  30,  1998.   The
Company  classifies these investments as available for sale in accordance  with
Statement  of Financial Accounting Standards No.  115, "Accounting for  Certain
Investments  in Debt and Equity Securities." Accordingly, such investments  are
carried at market value, which approximates cost.

       Disclosures  Regarding  Financial  Instruments  --  For  all   financial
instruments,  including  cash and cash equivalents,  investments,  receivables,
accrued  liabilities and accounts payable, the carrying value is considered  to
approximate  fair value due to the relatively short maturity of the  respective
instruments.

      Earnings  Per  Share -- Net earnings per common share  is  based  on  the
weighted  average  number of shares outstanding during the  periods  presented.
All  share and per share information have been retroactively adjusted  for  the
74,199,000  common shares issued to Parent in exchange for all  of  the  common
shares of Inc. as described in note 1.

      New  Accounting  Standard -- In February 1997, the  Financial  Accounting
Standards  Board  issued Statement of Financial Accounting Standards  No.  128,
"Earnings per Share," effective for financial statements for interim and annual
periods ending after December 15, 1997.  Earnings per share calculations  under
this  Standard  are  not  materially different  from  those  disclosed  in  the
consolidated statements of operations.

3.  BUSINESS COMBINATION AND DISPOSAL

      On April 4, 1995, Block acquired SPRY for $41,785 in cash and convertible
preferred stock valued at $54,194.  In addition, outstanding options  for  SPRY
common  stock  were  converted into options for Block's  convertible  preferred
stock,  valued at $5,641.  Block subsequently transferred SPRY to  Parent.   In
January  1996,  Parent  contributed  its  investment  in  SPRY  to  Inc.   This
transaction   has  been  accounted  for  at  Parent's  historical   cost   and,
accordingly, the consolidated financial statements include the accounts of SPRY
since  the  date  of  Parent's acquisition.  In connection with  the  purchase,
certain  intangible assets, including software technology,  tradenames  and  an
assembled  workforce  totaling $11,656 were acquired.   These  intangibles  are
being  amortized  on  a  straight-line basis over  five  years.   Research  and
development  projects  related  to SPRY's next  product  generation  were  also
acquired.   These  projects represent SPRY's research and  development  efforts
prior  to  the  merger,  which had not yet reached the stage  of  technological
feasibility  and  had  no alternative future use; thus,  the  ultimate  revenue
generating capability of these projects was uncertain.  The purchased  research
and  development was valued at $83,508 using a discounted, risk-adjusted future
income approach.  The fiscal 1995 consolidated statement of operations includes
a  charge  for  purchased research and development which is not deductible  for
income tax purposes.  The fair value of assets acquired, including intangibles,
was  $106,371;  liabilities  assumed  were  $4,751.   Liabilities  assumed  are
non-cash  items excluded from the consolidated statements of cash  flows.   Had
the acquisition occurred at the beginning of fiscal 1994, operating results  on
a  pro  forma basis would not have been significantly different.   See  note  9
regarding  the  disposition of certain assets and business  operations  of  the
computer software group of SPRY.

      In  accordance  with  the  terms of the merger  agreement,  certain  SPRY
employees are entitled to additional consideration of up to $3,100 if financial
and   operational  goals  set  forth  therein  are  achieved.   The   incentive
compensation ultimately paid, if any, will increase the excess of cost of  fair
value  over  net  intangible assets acquired related to  SPRY.   Subsequent  to
April  30,  1996,  approximately $674 in incentive compensation  was  paid  and
increased intangible assets.

      On  June  30,  1994, Inc. sold the stock of its wholly-owned  subsidiary,
Collier-Jackson,  Inc.,  for  $5,195  in  cash.   The  operating   results   of
Collier-Jackson  are  reflected  in  the consolidated  statements  of  earnings
through the date of disposition, and the gain on the sale of $2,680 is included
in other revenues.

4.  PROPERTY AND EQUIPMENT

     A summary of property and equipment follows:

                                                            April 30,
                                                    ------------------------
                                                        1997         1996
                                                    -----------   ----------
   Land                                                $4,504        $4,504
   Buildings                                           75,895        69,698
   Computer equipment                                 489,954       407,375
   Furniture and equipment                             55,914        47,122
   Leasehold improvements                              18,246        11,641
                                                    -----------   ----------
                                                      644,513       540,340

   Less accumulated depreciation and amortization     289,301       192,281
                                                    -----------   ---------- 
      Total                                          $355,212      $348,059
                                                    ===========   ==========

      Depreciation  and amortization of property and equipment  for  the  years
ended April 30, 1997, 1996 and 1995 amounted to $106,055, $69,823, and $43,716,
respectively.

      Software license fees with net unamortized values of  $11,142 and  $7,931
as  of  April  30,  1997  and 1996 are included in other assets.   Amortization
expense  for the years ended April 30, 1997, 1996 and 1995 was $2,463,  $1,313,
and $784, respectively.

5.  TAXES ON EARNINGS

      The  provision  (credit)  for  taxes on  earnings  is  comprised  of  the
following:

                                                    Year Ended April 30,
                                            -----------------------------------
                                               1997         1996        1995
                                            ---------    ---------    ---------
   Currently payable:                                                          
       Federal                              ($46,753)    ($11,308)     $53,075
       State                                  (5,075)      (1,523)       8,318
                                            ---------    ---------    ---------
           Total                             (51,828)     (12,831)      61,393
                                                                               
   Deferred:                                                                   
       Federal                               (13,387)      40,557       (1,653)
       State                                  (1,453)       5,461         (259)
                                            ---------     --------    ---------
           Total                             (14,840)      46,018       (1,912)
                                            ---------     --------    ---------
   Total                                    ($66,668)     $33,187      $59,481
                                            =========     ========    =========

      The  following table reconciles the U.S. Federal income tax rate  to  the
Company's effective income tax rate:

                                                    Year Ended April 30,
                                             -----------------------------------
                                                1997         1996        1995
                                             ----------   ----------  ----------
   Statutory Rate                                35.0%       35.0%       35.0%
   Increase in income taxes resulting from:                                    
        Purchased research and development                               42.8
        Goodwill amortization                    (1.6)        1.3          .4
        State income taxes, net of Federal                                     
           tax benefit                             2.3        3.1         7.7
        Other                                                  .9         1.2
                                              ----------  ----------  ----------
   Effective rate                                 35.7%      40.3%       87.1%
                                              ==========  ==========  ==========


     A summary of deferred income taxes follows:
 
                                                              April 30,
                                                       ----------------------
                                                         1997          1996
                                                       --------      --------
   Gross deferred tax assets:                                     
     Difference between accrual and cash               
         basis accounting                              ($2,170)      ($7,366)
     Other                                                (195)         (811)
                                                       --------      --------
         Current                                        (2,365)       (8,177)
                                                       --------      --------

      Deferred Compensation                             (2,573)       (3,213)
      State Net Operating Loss Carryforward             (2,530)            
      Impairment of Non-Performing Assets               (2,572)            
      Other                                                             (443)
                                                       --------      --------
         Noncurrent                                     (7,675)       (3,656)
                                                       --------      --------
    Total                                              (10,040)      (11,833)
                                                       ========      ======== 
                                                                  
   Gross deferred tax liabilities:                                
      Depreciation                                      26,328        22,394
      Deferred subscriber acquisition costs             16,172        36,654
      Product development costs                          1,286         1,371
                                                       --------      --------
         Noncurrent                                     43,786        60,419
                                                       --------      --------
   Net deferred tax liabilities                        $33,746       $48,586
                                                       ========      ========

      Provision is not made for possible income taxes payable upon distribution
of  accumulated  earnings of foreign subsidiaries.  Such  accumulated  earnings
aggregated  $1,616 at December 31, 1996.  Management believes  that  the  taxes
associated with repatriating these earnings would not be material.   The  state
net  operating  loss carryforwards included in deferred tax  assets  expire  on
various dates through the year 2011.

6.  FOREIGN EXCHANGE RISK MANAGEMENT

      During  fiscal years 1994 and 1996, the Company purchased forward foreign
exchange  contracts  to  hedge currency fluctuations for  expenses  payable  in
selected currencies in fiscal years 1995 and 1996.  No maturities extend beyond
the  fiscal  year  for which the expenses are hedged.  Gains  and  losses  from
forward contracts are recognized in earnings upon maturity, and directly offset
the currency fluctuation for expenses paid.  There are no open forward contract
commitments at April 30, 1997.

7.  COMMITMENTS

      A portion of the Company's operations are conducted in leased facilities.
Also,  during  the  second  quarter of fiscal 1997, the  Company  initiated  an
equipment  leasing program.  Total lease expense for the years ended April  30,
1997, 1996 and 1995 was $24,037, $13,283, and $8,397, respectively.

      Future minimum lease payments under noncancellable operating leases as of
April 30, 1997 were as follows:

   Year Ended April 30,                           
   ------------------------                                               
    1998                                             $25,842
    1999                                              23,020
    2000                                              16,819
    2001                                               6,494
    2002                                               3,794
    2003 and thereafter                                7,076
                                                   -----------        
        Total                                        $83,045
                                                   ===========

      At  April  30,  1997, the Company had a commitment for  an  unsecured $25
million  revolving  line of credit with a bank.  The line  of  credit  bears
interest  at either the bank's prime rate or the London Interbank Offered  Rate
("LIBOR") plus .25% and expired in June 1997.  There were no borrowings  during
1997.

8.  CONTINGENCIES

      During fiscal 1997, the Company, certain current and former officers  and
directors  of the Company and Parent were named as defendants in four purported
class  action lawsuits and one lawsuit based on the same allegations  in  which
the  plaintiff does not seek class action status.  One purported  class  action
lawsuit  was  voluntarily dismissed by the plaintiffs and such plaintiffs  have
joined  plaintiffs  in one of the remaining class action  lawsuits.   One  suit
names  the  lead  underwriters  of the Company's  initial  public  offering  as
additional defendants and as representatives of a defendant class consisting of
all  underwriters who participated in such offering.  Each pending suit alleges
similar  violations  of  the  Securities Act of 1933  based  on  assertions  of
omissions  and  misstatements of fact in connection with the  Company's  public
filings  related  to  its  initial  public offering.   One  suit  also  alleges
violations   of  the  Ohio  Securities  Code  and  common  law   of   negligent
misrepresentation.  Another suit also alleges violations of Colorado,  Florida,
and Ohio statutes and common law of negligent misrepresentation.  Relief sought
is  unspecified, but includes pleas for rescission and damages.  In addition to
the  five  previously  mentioned lawsuits, an action for  discovery  was  filed
during  fiscal 1997 solely against the Company.  In such action, the  plaintiff
seeks  factual  support  for a possible additional claim  relating  to  initial
public  offering disclosures.  All of these existing lawsuits  are  before  the
State  and  Federal  courts in Columbus, Ohio.  The defendants  are  vigorously
defending these suits.

       During   fiscal   1997,  TeleTech  Teleservices,   Inc.   and   TeleTech
Telecommunications, Inc. (collectively, "TeleTech") commenced an action in  the
United  States  District  Court, Southern District of Ohio  against  CompuServe
Incorporated  for  alleged violations of certain outsourcing contracts  between
TeleTech  and  CompuServe  Incorporated related to  the  WOW!  online  service.
Teletech  seeks  recovery  under  a  liquidated  damages  provision  and  other
compensatory  damages,  but  has not asserted a specific  amount  to  which  it
believes it would be entitled.  CompuServe Incorporated has filed counterclaims
alleging  multiple breaches by TeleTech of the outsourcing contracts, including
breach  of  fiduciary duty, breach of confidentiality, and breach of  the  non-
compete  and employee non-solicitation provisions of the outsourcing  contracts
by   TeleTech.    The  Company  believes  it  has  meritorious   defenses   and
counterclaims, and is vigorously pursuing this litigation.

      Subsequent to April 30, 1997, the Company received an assessment from the
German  taxing authority related to value-added taxes on the Company's services
provided  in  Germany.   Management is not  able  to  estimate  the  amount  of
potential  loss  related to this assessment.  The Company believes  that  after
reviewing  such  matters  and consulting with the Company's  counsel  that  the
ultimate  resolution of this matter will not have a material adverse effect  on
the Company's consolidated financial statements.

     The Company in the ordinary course of business is threatened with or named
as  a  defendant  in  various lawsuits.  It is not possible  to  determine  the
ultimate  disposition of these matters; however, management is of  the  opinion
that,  except  for  the matters described herein, the final resolution  of  any
threatened  or  pending  litigation is not likely to have  a  material  adverse
effect on the financial statements of the Company.


9.  RESTRUCTURING RESERVES

      During fiscal year 1997, the Company incurred nonrecurring pretax charges
totaling  $34.8  million relating to the sale of certain  assets  and  business
operations of the corporate computer software group of SPRY; the withdrawal  of
the  family-oriented WOW! online service; the consolidation of U.S.-based staff
functions  and  office  facilities; the renegotiation  of  certain  third-party
customer  service agreements; the write-off of certain obsolete software  costs
for billing and customer service systems which are no longer being utilized  by
the  Company and the write-off of investments in certain content and technology
providers due to their deteriorated financial performance. Of the total charge,
$17.2  million  requires  the  outlay of cash;   the  remaining  $17.6  million
involves  no  commitment  of funds.  As of April 30,  1997,  substantially  all
employees  who  were  included  in the employee  severance  accrual  have  been
terminated by the Company.

The activity of these special charges is as follows:

                                           1997                    Balance at
                                         Provision    Activity    April 30, 1997
                                       ------------  ----------  ---------------
                                                       
     Computer software group sale          $9,397      $8,282          $1,115
     WOW! discontinuation                   8,642       7,301           1,341
     Facilities consolidation               4,728       1,120           3,608
     Employee severance                     2,637       2,167             470
     Writedown of assets                    9,350       9,350          
                                       ------------  ----------  ---------------
                                          $34,754     $28,220          $6,534
                                       ============  ==========  ===============

The balances in these restructuring reserves at April 30, 1997 are included  in
other  accrued expenses.  Total revenues and operating losses for the  computer
software  group  of  SPRY  were immaterial to the 1997  consolidated  financial
statements.   Total revenues for WOW! during fiscal 1997 totaled $6.5  million.
Direct  operating expenses attributable to WOW!, exclusive of allocable network
and host computing costs, totaled $33.9 million for fiscal year 1997.

10.  EMPLOYEE BENEFIT PLAN

      The  Company  sponsors  a  401(k) Investment  Plan  for  all  U.S.  based
employees.  The Investment Plan allows for employees to defer up to 10  percent
of   their   compensation.   The  Company  matches  50  percent   of   employee
contributions,  up  to 6 percent, with such amounts vesting ratably  over  five
years of service.  Prior to fiscal year 1997, the Company's contributions  were
made  at  management's  discretion.  Contributions by  the  Company  under  the
Investment  Plan  amounted  to  $2,829, $0, and  $1,126  for  the  years  ended
April 30, 1997, 1996 and 1995, respectively.

11.  LONG-TERM INCENTIVE PLANS

      Executive  Deferred  Compensation Plan - In  January  1997,  the  Company
initiated  an  Executive Deferred Compensation Plan,  under which  certain  key
employees of the Company may elect to defer portions of compensation  and  earn
interest on the deferred amounts.   The Company matches contributions at a rate
of 25%.  The Company match in fiscal year 1997 was not material.

      Stock  Option Plans -- In March 1996, the Company adopted the  CompuServe
Corporation  Long-Term Incentive Plan and Outside Directors Plan (the  "Plans")
which authorize the grant of stock options, stock appreciation rights ("SARs"),
stock  grants  (which  may be subject to restrictions), performance  stock  and
performance  units,  and authorizes the establishment  of  one  or  more  stock
purchase  programs. The number of shares which may be awarded under  the  Plans
shall  not  exceed 4,090,000 shares in the aggregate, and no more than  500,000
shares for stock options or stock appreciation rights may be awarded to any one
individual in any one-year period.  Awards under the Plans vest based on  terms
established  by  the  Compensation Committee and are exercisable  over  periods
established by the Compensation Committee not to exceed 10 years.   Options  to
directors  vest  on  the  day preceding the Company's next  annual  meeting  of
stockholders.   Under  the terms of the Plans, options and  stock  appreciation
rights  are to be granted at exercise prices equal to the fair market value  of
such stock as of the date of grant.

      The  following  summarizes the stock option activity for  the  CompuServe
Corporation Long-Term Incentive Plan from May 1, 1995 to April 30, 1997:

                                        Year Ended              Year Ended
                                      April 30, 1996          April 30, 1997
                                   -------------------     --------------------
                                             Weighted                 Weighted
                                  Number     Average      Number      Average
                                    of       Exercise       of        Exercise
                                  Shares      Price       Shares       Price
                                ----------   ---------  ----------  -----------

     Outstanding at                                
        beginning of period             0                3,677,142     $30.00
     Granted                    3,677,142      $30.00      548,578     $13.13
     Exercised                          0                        0              
     Canceled                           0                2,385,715     $29.82
                                ----------   ---------   ---------  ----------
     Outstanding at end                                               
        of period               3,677,142      $30.00    1,840,005     $25.20
                                ==========               =========         

     Exercisable at end of year         0                        0             
                                ==========               =========
 
     The  following table summarizes information about options outstanding  at
     April 30, 1997:

                                                  
                                               Options Outstanding
                               -----------------------------------------------
                                            Weighted Average        Weighted
                                               Remaining            Average
     Range of Exercise                        Contractual           Exercise
     Prices                     Number           Life               Price
                                                  
     $9.00 - $14.75             524,003          9.40               $13.13
     $30.00                   1,316,002          8.98               $30.00
                              ----------                             
                              1,840,005                             $25.20
                              ==========                          

      As  of  April 30, 1997, there were 56,400 options outstanding  under  the
Outside Directors Plan of which 33,900 were granted in fiscal year 1997.  As of
April  30,  1997,  36,400  options under this plan are  exercisable  at  prices
ranging  from  $8.81  -  $30.00 per share.  All options  to  directors  have  a
weighted-average remaining contractual life of 9.32 years.

      The  Company  applies APB Opinion No. 25 and related  Interpretations  in
accounting for its stock option plans.  Accordingly, no compensation  cost  has
been recognized for the plans in 1997 or 1996.  All options under the Long-Term
Incentive Plan will expire on October 24, 1997 if the Company has not been spun-
off from Parent.  The fair value of options are expected to be of nominal value
based  on  management's  expectations of exercisability  given  current  market
conditions.   Accordingly, the options have no compensation cost considerations
under  the provisions of FASB Statement No. 123.  Subsequent to April 30, 1997,
the  Board  of  Directors  eliminated the expiration  clause  from  the  option
agreements.

      Stock  Purchase  Plan  --  The  Company has  established  the  CompuServe
Corporation 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan") which
is  intended to facilitate open market purchases of Common Stock by  employees.
All  shares purchased by employees through the Stock Purchase Plan are at  fair
market  value  on the date of purchase.  Generally, all regular  employees  who
work  at  least  20  hours per week are eligible to participate  in  the  Stock
Purchase  Plan  after  90  consecutive days of  employment.   Participants  may
authorize payroll deductions of between 2% and 6% of their pay to be  used  for
purchases under the Stock Purchase Plan.  All costs of administering the  Stock
Purchase  Plan,  the  fees and expenses of the Agent and  other  administrative
expenses are paid by the Company.

12.  RELATED PARTY TRANSACTIONS

      Due From/To Parent -- Amounts due to Parent consist of cash advances  for
purchases   of  property  and  equipment,  acquisitions,  current  income   tax
liabilities and fluctuating working capital needs, offset by payments  made  by
the Company from its operating bank accounts and tax benefits which result from
Block's ability to reduce U.S. Federal income taxes through utilization of  the
Company's  tax  losses.  Effective November 1, 1995, the  Company  was  charged
interest  at the prime rate of Commerce Bank of Kansas City, adjusted  monthly.
Prior to this date, Parent did not charge (credit) the Company interest expense
(income)  on  the balance.  Following the sale of common stock as described  in
note 1, the Company paid Parent $205,000 to satisfy the balance owed, including
interest  of  $5,555.  The supplemental earnings per share for the  year  ended
April 30, 1996 would have been $0.64 assuming this balance and related interest
expense  would  have  been  eliminated at the  beginning  of  the  period.   At
April  30,  1997  and 1996, the Company is owed $70,228 and $17,377  by  Parent
reflecting  primarily the tax benefits which resulted from Block's  ability  to
reduce  U.S.  Federal  income taxes through utilization of  the  Company's  tax
losses.

      The  fiscal  1995 financial statements include a dividend to  Parent  for
$272,392,  and Parent's contribution of its investment in SPRY of  $101,620  to
Inc.  In  October  1995,  Parent made an additional  contribution  to  Inc.  of
$124,774.  These transactions were recorded in the Due To/From Parent  account;
accordingly,  they are considered non-cash items excluded from the consolidated
statements of cash flows.

      Prior to the Company's public offering of common stock in April 1996, the
Parent  provided various services to Inc., including certain tax, treasury  and
internal audit functions.  The estimated costs of these services, which are not
material, have not been reflected in the consolidated statements of earnings.

     Tax Sharing Agreement -- The Company and Block have entered into an Income
Tax Sharing Agreement, pursuant to which the Company generally is obligated  to
pay  Block  the Company's liability for federal, state and local  income  taxes
incurred during any taxable period or, in the event of tax losses, the  Company
receives payment equal to the amount by which Block's U.S. Federal income taxes
are reduced..

      Executive  Deferred Compensation Plan -- Until January 1997,  certain  key
employees   of   the   Company  participated  in  Block's  Executive   Deferred
Compensation Plan.  This Plan permitted its participants to defer  portions  of
compensation and earn interest on the deferred amounts.  The salaries  and  the
Company's  matching  of  deferred salaries are  included  in  the  consolidated
statements of operations.  Since Block is liable for all distributions made  or
to  be  made under the Plan, the Company has recorded the deferred compensation
and  the  matching  thereon as part of the Due From/To Parent  balance  in  the
consolidated  balance sheets.  Any contributions made to  this  Plan  prior  to
January  1997  were  permitted to remain in the Plan  and  continue  to  accrue
interest.  Subsequent to January 1997, these employees were no longer permitted
to  contribute to this plan, however the Company established its own  Executive
Deferred Compensation Plan (see note 11).

      Stock Option Plans -- The Company's employees participated in several  of
Block's  stock  option plans for its common stock.  Any remaining  options  not
exercised  by  90  days after the expected split-off or spin-off  date  by  the
Parent  will  expire.   Under these plans, options  were  granted  to  selected
employees to purchase Block's common stock for periods not exceeding ten  years
at  a  price not less than 100 percent of fair market value on the date of  the
grant.

      In  connection  with  the  acquisition of SPRY,  outstanding  options  to
purchase  SPRY common stock under an employee stock option plan were  converted
on April 5, 1995 to purchase shares of Block's convertible preferred stock.

      Computer  Programming  and Processing Services --  The  Company  provides
certain  programming and electronic processing services related to  tax  return
filings  with  the Internal Revenue Service and in various state  jurisdictions
for  an  affiliate  of Parent.  The terms of this arrangement are  renegotiated
annually.   Revenues generated in connection with this arrangement amounted  to
$9,680, $8,012, and $12,500 for the years ended April 30, 1997, 1996 and  1995,
respectively.

      Corporate Services Agreement -- The Company and HRB Management,  Inc.,  a
wholly-owned subsidiary of Parent, entered into a corporate services  agreement
pursuant to which HRB Management, Inc. will provide to the Company from time to
time,  upon  request  of  the Company, certain routine and  ordinary  corporate
services,  including financial, accounting, tax and legal services.  For  these
services, Parent will be reimbursed for its costs (including the pro rata costs
of  Parent  employees  performing such services and allocable  overhead).   The
initial  term  of this agreement is one year.  Thereafter, unless either  party
provides the other with at least 60 days' prior written notice to the contrary,
the agreement will be automatically renewed for successive one year terms until
terminated.  No amounts were paid in 1997, 1996 or 1995.


ITEM  9.   CHANGES  IN  AND DISAGREEMENTS WITH ACCOUNTANTS  ON  ACCOUNTING  AND
           FINANCIAL DISCLOSURE

           Not Applicable.
                                       
                                       
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The  Board  of Directors of the Company is divided into three classes  of
directors,  with each class elected to a three-year term every third  year  and
holding office until their successors are elected and qualified.  The following
table  sets forth information with respect to directors and executive  officers
of the Company for the fiscal year ended April 30, 1997:

Name                                Age                 Position
-----------------------           -------      -------------------------
Frank L. Salizzoni                  60        Chairman of the Board of Directors
                                              and Acting Chief Executive Officer

Lawrence A. Gyenes                  46        Executive Vice President and
                                              Chief Financial Officer

Herbert J. Kahn                     57        Executive Vice President, 
                                              Corporate Operations

Dennis D.  Matteucci                58        President, Interactive Services

Peter F. Van Camp                   41        Executive Vice President,
                                              Network Services 

Henry F. Frigon                     62        Director

Roger W. Hale                       54        Director

Morton I. Sosland                   72        Director

Edward E. Lucente                   57        Director


     Frank L. Salizzoni has served as a director of the Company since June 1996
and  has served as the Chairman of the Board of the Company since October  1996
and  acting  Chief  Executive Officer since February 1997.  Mr.  Salizzoni  has
served  as President and Chief Executive Officer of H&R Block since June  1996.
He  served  as  President  and  Chief Operating Officer  of  USAir,  Inc.  from
March  1994 until April 1996.  From November 1990 to March 1994, he  served  as
Executive Vice President-Finance of USAir, Inc. Mr. Salizzoni is a director  of
H&R Block, Orbital Sciences Corporation and SKF USA Inc.

      Lawrence  A. Gyenes has served as Executive Vice President
and Chief Financial Officer of the Company since May 1, 1996.  Prior to joining
the  Company,  he  was  Corporate Vice President, Finance and  Chief  Financial
Officer of Helene Curtis, Inc. since July 1994.  Mr. Gyenes was Corporate  Vice
President,  Finance of G.D.  Searle & Co. from October 1992 to July  1994,  and
was Corporate Controller for such company from July 1991 to September 1992.  He
was Vice President, Commercial Operations of Lorex Pharmaceuticals from 1988 to
June 1991.

      Herbert  J.  Kahn  has  served  as Executive  Vice  President,  Corporate
Operations  of  the  Company since March 1995.  He was Senior  Vice  President,
Administration   from  May  1992  to  March  1995,  and  was  Vice   President,
Administration  from  the  time  he joined the Company  in  September  1991  to
May  1992.  Prior to joining the Company, Mr. Kahn was Executive Vice President
of  Operations for ABB Process Automation, Inc. Mr. Kahn is a director of Cross
Medical, Inc.

      Dennis D. Matteucci has served as President, Interactive Services of  the
Company  since  May  1,  1996.  Mr. Matteucci served  as  Group  Executive  for
Transmission  and  Components, Sales and Marketing  of  Northern  Telecom  from
January  1994  until  his  retirement in September 1994.   From  June  1993  to
January  1994  he  served  as Chief Operating Officer  of  such  company,  from
February 1993 to June 1993 he served as Executive Vice President, Sales  of  an
operating company of Northern Telecom, and from September 1991 to February 1993
he   held  various  other  positions  at  Northern  Telecom.   Prior  to  that,
Mr. Matteucci held various positions with IBM.

      Peter F. Van Camp has served as Executive Vice President
of Network Services since August 1995.  He was Vice President Sales for Network
Services, including the management of that division's European operations  from
January  1991  to  August 1995.  He joined the Company in  1982  and  has  held
various field management positions in the Company throughout the United States.

     Mr. Frigon has served as a director of the Company since February 1996 and
served  as  Chairman of the Board of Directors of the Company  from  June  1996
until  October  1996.   Mr. Frigon is a private investor  and  consultant.   He
retired  as  CEO and President of BATUS, Inc. in March 1990 after serving  with
that  company  for  some 10 years.  He most recently served as  Executive  Vice
President-Corporate  Development & Strategy  and  Chief  Financial  Officer  of
Hallmark  Cards  Incorporated, Kansas City, Missouri,  from  December  1990  to
December  1994.   Mr.  Frigon also served on the Board  of  Directors  for  BAT
Industries  p.l.c., and Hallmark, Inc. during his time there.   Mr.  Frigon  is
presently  a director of H&R Block, Group Technologies, Inc., Buckeye Cellulose
Corp. and Dimon, Inc.

      Mr.  Hale  has  served as a director of the Company since February  1996.
Mr.  Hale has served as Chairman, President and Chief Executive Officer of LG&E
Energy  Corporation,  Louisville, Kentucky, since August  1990.   He  has  also
served  as  Chairman  of the Board of Louisville Gas & Electric  Company  since
February  1990  and Chief Executive Officer of such company  since  June  1989.
Mr. Hale is a director of H&R Block and PNC Bank Corp.

       Mr. Sosland has served as a director of the Company
since  February 1996.  Mr. Sosland has served as Chairman of Sosland Companies,
Inc.,  Kansas  City,  Missouri, since January 1993 and as Chairman  of  Sosland
Publishing Company since 1984.  He was President of such company from July 1968
to  December  1992.   Mr. Sosland is a director of H&R Block  and  Kansas  City
Southern Industries, Inc.

      Mr.  Edward  E.  Lucente has served as a director of  the  Company  since
October  1996.   Mr. Lucente has served as President and CEO of Liant  Software
Corporation since 1995; as a marketing consultant from May 1994 to  1995;  head
of  worldwide  sales and marketing of Digital Equipment Corp. from  March  1993
until  April  1994; Executive Vice-President of Northern Telecom  Limited  from
January  1992  until  March 1993; Member of the Executive  Office  of  Northern
Telecom  Limited from February 1991 until March 1993; Senior Vice President  of
Marketing  for  Norther Telecom Limited from February 1991 until January  1992;
Corporate Vice President of International Business Machines Corporation ("IBM")
from  1981  until  February  1991.   Mr.  Lucente  is  a  director  of  Genicom
Corporation and Information Resources Inc.

      Robert J. Massey resigned as President and Chief Executive Officer of the
Company  in  February  1997  and  Steven P. Stanbrook  resigned  as  President,
CompuServe Europe in October 1996.

Information Regarding the Board of Directors and Committees

     The Company's By-laws provide for a minimum of two directors and a maximum
of  fifteen directors and empower the Company's Board of Directors to  fix  the
exact  number of directors and to fill any vacancies on the Board of Directors.
The  Company's Board of Directors currently consists of five directors.   Under
the Company's Certificate of Incorporation, the Company's Board of Directors is
divided  into  three classes with each class of directors serving  a  staggered
three-year  term.   The terms of Messrs. Frigon and Hale  will  expire  at  the
annual meeting of stockholders to be held in 1997, the term of Mr. Lucente will
expire  at the annual meeting of stockholders to be held in 1998 and the  terms
of  Messrs.  Salizzoni  and  Sosland  will expire  at  the  annual  meeting  of
stockholders to be held in 1999.

      Under the Company's By-laws, the Board of Directors may establish one  or
more committees, appoint one or more members of the Board of Directors to serve
on  each  committee, fix the exact number of committee members, fill vacancies,
change  the  composition of the committee, impose or change the duties  of  the
committee  and terminate the committee.  The Board of Directors has established
Audit  and  Compensation Committees.  The members of the  Audit  Committee  are
currently  Messrs.  Hale (Chairman), Frigon, Lucente and  Sosland.   The  Audit
Committee is empowered by the Board of Directors to review the financial  books
and  records of the Company in consultation with the Company's accounting staff
and  its  independent  auditors and to review with  the  accounting  staff  and
independent  auditors  any  questions raised with  respect  to  accounting  and
auditing  policy and procedure.  The members of the Compensation Committee  are
currently   Messrs.  Frigon  (Chairman),  Hale,  Lucente  and   Sosland.    The
Compensation  Committee makes recommendations to the Board of Directors  as  to
general  levels  of compensation for all employees of the Company,  the  annual
salary  of  each  of  the  executive officers of the  Company,  and  awards  to
employees  under the Company's Incentive Plan described in Item 11 and  reviews
and approves compensation and benefit plans of the Company.

ITEM 11.  EXECUTIVE COMPENSATION

                          Summary Compensation Table

      The following table sets forth the amounts earned during the fiscal years
ended  April 30, 1997, 1996 and 1995 by the Company's chief executive  officers
and other persons named below (collectively, the "Named Executive Officers").


                                                          Long-Term        
                                                          Compensation      
                                                          Awards         
                                         Annual           Shares         
                                       Compensation       Underlying
Name and Principle Position  Year    Salary    Bonus      Options #   Other(1)
---------------------------  ----   --------  -------    -----------  ---------
                                                                          
Robert J. Massey (2)         1997   $223,173                          $125,478
Former President and Chief   1996    263,402   $42,340     399,000         783  
Executive Officer                                          90,000(7)
                             1995    197,358   188,474     135,000(7)   11,348
                                                                      
Frank L. Salizzoni (3)                                                
Chairman  of the  Board  of                                           
Directors and acting  Chief
Executive Officer
                                                                      
Dennis D. Matteucci (4)      1997    300,000                20,000
President, Interactive       1996     11,539    37,383     100,000
Services                       
                                               
Lawrence A. Gyenes (5)       1997    250,000                20,000
Executive Vice President                  
and Chief Financial Officer  1996      9,615    50,000     100,000
                                                                      
Herbert J. Kahn              1997    198,558                20,000
Executive Vice President,                                           
Corporate Operations         1996    187,598    40,420     188,500      53,598
                                                            40,000 (7)
                             1995    165,673    94,160      65,000 (7)  51,221
                                                                      
Peter Van Camp               1997    177,115                20,000
Executive Vice President,    1996    126,216   107,670
Network Services             1995    112,000   125,875
                                                                      
Steven P. Stanbrook (6)      1997    167,601                             8,939
Former President,            1996     28,346               100,000
CompuServe Europe                                           
                              
Chester Scott                1997    130,962    84,000
Vice President,              1996    122,621    70,625      70,500         
Network Sales                1995    112,000   139,375
                                                                      

(1)   Includes severance payments and any payments under the Company's Deferred
Compensation  Plan  and  H&R  Block's  Executive  Survivor  Plan  and  Deferred
Compensation Plan.

(2)  Mr.  Massey was promoted to President and Chief Executive Officer  of  the
Company  in June 1995 and resigned in February 1997.  Mr. Massey's annual
base salary was $275,000.

(3)   Mr. Salizzoni has been a director of the Company since June 1996 and  has
served  as  the  Chairman of the Board of the Company since  October  1996  and
acting  chief  executive officer since February 1997.  Mr. Salizzoni  does  not
receive any compensation from the Company.

(4)  Mr.  Matteucci  was hired by the Company in April 1996.   Mr.  Matteucci's
annual base salary is $300,000.

(5)  Mr.  Gyenes  was hired by the Company in April 1996.  Mr. Gyenes's  annual
base salary is $250,000.

(6)  Mr. Stanbrook was hired by the Company as President, CompuServe Europe  in
March 1996 and resigned in October 1996.  Mr. Stanbrook's annual base salary
was $275,000.

(7)  Represents  options to acquire H&R Block common stock granted pursuant  to
H&R Block's 1993 Long-Term Executive Compensation Plan.


Stock Option Grants

      The  following  table summarizes options granted during the  fiscal  year
ended  April  30, 1997 to the Named Executive Officers.  The amounts  shown  as
potential realizable values on the options identified in the table are based on
assumed  annualized  rates of appreciation in the price  of  the  common  stock
underlying  the options of five percent and ten percent over the  term  of  the
options,  as  set forth in the rules of the Securities and Exchange Commission.
Actual  gains, if any, on stock option exercises are dependent upon the  future
performance  of  the  common stock underlying the options.   There  can  be  no
assurance that the potential realizable values reflected in this table will  be
achieved.  No stock appreciation rights of the Company were granted during  the
Company's 1997 fiscal year.


                    Stock Option Grants in Last Fiscal Year

                                                                  Potential
                                                                Realizable Value
                                                                       at
                                                                 Assumed Annual
                                                                    Rates of
                      Shares                                      Stock Price
                    Underlying            Exercise               Appreciation
                      Options   % Total   of Base   Expiration  for Option Term
NAME                  Granted   Granted    Price       Date       5%       10%
------------------  ----------  -------  --------   ---------- -------- --------
                                                                        
Dennis D. Matteucci  20,000(1)    3.6%   $295,000   10/24/97   $185,524 $470,154
                                                            
Lawrence A. Gyenes   20,000(1)    3.6%    295,000   10/24/97    185,524  470,154
                                         
Herbert J. Kahn      20,000(1)    3.6%    295,000   10/24/97    185,524  470,154

Peter Van Camp       20,000(1)    3.6%    295,000   10/24/97    185,524  470,154
                                                                        


(1)  Represents  options to purchase shares of CompuServe common stock  awarded
     by  the  CompuServe Compensation Committee.  The vesting of  such  options
     are tied to the performance of the Company's stock price.


Option Exercises and Fiscal Year-End Values

      The  following table presents the number and value of unexercised options
to  acquire shares of the Company's common stock as of April 30, 1997  for  the
Named  Executive  Officers.  No options to acquire the Company's  common  stock
were exercised by the Named Executive Officers during the year ended April  30,
1997.

                                       FISCAL YEAR END VALUES
                                                          
                                   Number of            Value of
                                   Unexercised        Unexcerised
                                     Options          In-the-Money
                                  at FY-End (#)     Options at FY-End
                                 Exercisable (E)      Exercisable (E)
                                Unexercisable(U)     Unexercisable(U)
                              -------------------   ------------------      

   Frank L. Salizzoni                  0 E                $0
                                   6,400 U                 0

   Dennis D. Matteucci                 0 E                $0
                                 120,000 U                 0

   Lawrence A. Gyenes                  0 E                $0
                                 120,000 U                 0

   Herbert J. Kahn                     0 E                $0
                                 208,500 U                 0

   Peter Van Camp                      0 E                $0
                                 155,334 U                 0

   Chester Scott                       0 E                $0
                                  70,500 U                 0


Employee Benefit Plans

      The  Board of Directors of the Company has adopted the following employee
benefit plans to provide incentives to attract and retain qualified employees.

     Long-Term Incentive Plan

      On  March  12,  1996,  the  Company adopted  the  CompuServe  Corporation
Long-Term Incentive Plan (the "Incentive Plan") which was approved by Parent in
March 1996.  The number of shares which may be awarded under the Incentive Plan
shall  not  exceed  4,000,000  shares  in  the  aggregate,  and  no  more  than
500,000 shares for stock options or stock appreciation rights may be awarded to
any  one  individual in any one-year period.  Shares issued under the Incentive
Plan may be authorized and unissued shares or treasury shares.  In the event of
certain  transactions affecting the type or number of outstanding  shares,  the
number  of  shares subject to the Incentive Plan, the number or type of  shares
subject  to  outstanding  awards,  and the exercise  price  thereof,  shall  be
appropriately  adjusted.   The Incentive Plan authorizes  the  award  of  stock
options, stock appreciation rights ("SARs"), stock grants (which may be subject
to  restrictions), performance stock and performance units, and authorizes  the
establishment  of  one  or  more  stock purchase  programs.   The  Compensation
Committee  of  the  Board  of Directors has been appointed  to  administer  the
Incentive  Plan.  Subject to the terms of the Incentive Plan, the  Compensation
Committee determines which employees or other individuals providing services to
the  Company shall be eligible to receive awards under the Incentive Plan,  and
the  amount,  price, timing and other terms and conditions applicable  to  such
awards.

      Options  awarded under the Incentive Plan may be either  incentive  stock
options  which are intended to satisfy the requirements of Section 422  of  the
Internal  Revenue  Code  of 1986 (the "Code"), or non-qualified  stock  options
which are not intended to satisfy Section 422 of the Code.  SARs may be granted
in  tandem  or  otherwise in connection with options,  or  may  be  granted  as
free-standing  awards.  Exercise of an option will result in the  corresponding
surrender  of  any tandem SAR.  Under the terms of the Incentive Plan,  options
will  have  an  exercise price that is not less than the greater  of  the  fair
market  value of a share of Common Stock at the time the option is granted,  or
par  value.  SARs are the right to receive, in cash or stock, the excess of the
fair  market value of a specified number of shares of Common Stock at the  time
of  exercise over a specified price not less than 100% of the fair market value
of  the  Common Stock when the SAR is granted or, if granted in tandem with  an
option,  the  option  exercise price.  Options and SARs become  exercisable  in
accordance with the terms established by the Compensation Committee, which  may
include  conditions relating to completion of a specified period of service  or
achievement  of performance standards.  Options and SARs shall  expire  on  the
date determined by the Compensation Committee which shall not be later than the
earliest  to  occur of (i) the tenth anniversary of the grant  date,  (ii)  the
first  anniversary of the participant's termination of employment by reason  of
death   or  disability,  (iii)  the  third  anniversary  of  the  participant's
termination  of  employment by reason of retirement, or (iv)  the  three  month
anniversary  of  the  participant's termination of  employment  for  any  other
reason.   Shares  transferred to a participant pursuant to the exercise  of  an
option or SAR may be subject to such additional restrictions or limitations  as
the Compensation Committee may determine.

      Under the Incentive Plan, the Compensation Committee may grant awards  of
Common  Stock  to participants, which shall be subject to such  conditions  and
restrictions, if any, as the Compensation Committee may determine.  During  the
period   a  stock  award  is  subject  to  restrictions  or  limitations,   the
Compensation  Committee may award the participant dividend rights with  respect
to  such  shares.   The  Incentive  Plan also provides  that  the  Compensation
Committee  may establish one or more stock programs which may permit  purchases
of  Common Stock at up to a 50% discount, or provide for the award of  matching
Common  Stock  at a matching rate which is not greater than one matching  share
for  each share of Common Stock purchased by the participant.  Matching  awards
may not be made in connection with discount purchases of stock.

      The  Compensation Committee may award performance stock to  participants,
the  distribution of which is subject to achievement of performance objectives,
or  performance units which entitle the participant to receive  value  for  the
units  at  the  end  of a performance period to the extent provided  under  the
award.   In  either  case, the number of shares or units  and  the  performance
measures and periods shall be established by the Compensation Committee at  the
time the award is made.

      In  the event that the holder of an option pays all or a portion  of  the
exercise price in shares of Common Stock, the Compensation Committee may  award
an  option (a "Reload Option") to purchase the number of shares surrendered  in
payment  of the exercise price.  The exercise price of the Reload Option  shall
be  fair  market  value of a share of Common Stock on the date  of  grant,  the
Reload  Option shall not be exercisable for a period of six months,  and  shall
expire  on  the same date as the original option with respect to which  it  was
granted.

     A participant who is granted a stock option will not be subject to federal
income tax at the time of grant, and the Company will not be entitled to a  tax
deduction  by  reason  of such grant.  Upon exercise of a nonqualified  option,
generally the difference between the option price and the fair market value  of
the Common Stock on the date of exercise will be considered ordinary income  to
the  participant, and generally the Company will be entitled to a corresponding
tax deduction.

      Upon  exercise  of an incentive stock option, no taxable income  will  be
recognized  by  the  participant and the Company  is  not  entitled  to  a  tax
deduction  by reason of such exercise.  If the participant makes no disposition
of  shares acquired pursuant to an incentive stock option within two years from
the  date  of grant of such option, or within one year of the transfer  of  the
shares  to  the  participant,  any  gain  or  loss  realized  on  a  subsequent
disposition of such shares will be treated as a long-term capital gain or loss.
Under such circumstances, the Company will not be entitled to any deduction for
Federal income tax purposes.  If the foregoing holding period requirements  are
not  satisfied, then the difference, with certain adjustments, between the fair
market  value of the Common Stock at the date of exercise and the option  price
will  be  considered  ordinary  income to the participant,  and  generally  the
Company will be entitled to a corresponding tax deduction.

      Upon  the exercise of an SAR, the amount paid to the participant will  be
considered  ordinary income to the participant, and generally the Company  will
be  entitled  to  a  corresponding tax deduction.  Stock awards,  Common  Stock
purchased by participants under the Incentive Plan, and matching shares awarded
with  respect to such purchased shares, are considered ordinary income  to  the
participant  in an amount equal to the fair market value of the shares  granted
or purchased (less any amount paid for the Common Stock by the participant), at
the  later  of the grant date or the date the shares are no longer  subject  to
a  substantial risk of forfeiture, unless the participant elects to be taxed at
the grant date.  Generally, the Company will be entitled to a corresponding tax
deduction  at  the  time and in the amount the participant recognizes  ordinary
income.

     Employee Stock Purchase Plan

     The Company has established the CompuServe Corporation 1996 Employee Stock
Purchase Plan (the "Stock Purchase Plan") which is intended to facilitate  open
market  purchases  of  Common Stock by employees after the  completion  of  the
Offerings.   Generally, all regular employees who work at least  20  hours  per
week   are   eligible  to  participate  in  the  Stock  Purchase   Plan   after
90   consecutive  days  of  employment.   Participants  may  authorize  payroll
deductions of between 2% and 6% of their pay to be used for purchases under the
Stock Purchase Plan.  The Company remits the accumulated payroll deductions  to
an  independent agent who then makes purchases in the open market on behalf  of
the  participants  on  a monthly or more frequent basis.   The  agent  may  not
purchase shares from the Company or its affiliates.

      The  shares acquired by the agent are allocated to participants' accounts
monthly,  based  on the average price paid for shares during the  month.   Cash
dividends  received by the agent for shares held in participants' accounts  are
automatically  reinvested  in shares of Common Stock,  unless  the  participant
elects  otherwise.   When  the participant terminates employment  or  otherwise
withdraws  from the Stock Purchase Plan, the participant receives a certificate
for  the  whole shares held in the participant's account, and receives cash  in
lieu of fractional shares.

      Generally, the agent is responsible for the administration of  the  Stock
Purchase Plan in accordance with its terms, although the Compensation Committee
may  assist the Agent with respect to issues which arise under the  Plan.   All
costs  of administering the Stock Purchase Plan, the fees and expenses  of  the
Agent and other administrative expenses are paid by the Company.

     Annual Incentive Plan

      The Company has established the CompuServe 1996 Short-Term Incentive Plan
for  employees of the Company and its subsidiaries.  The plan consists  of  two
parts, the Key Executive Incentive Plan ("KEIP") Program and the MBO Program.

      Under  the KEIP Program, employees selected by the Compensation Committee
will  have  the  opportunity to receive a cash incentive  award  based  on  the
attainment of KEIP Program Goals established by the Compensation Committee  for
a Performance Period (which shall be the fiscal year of the Company).  The KEIP
Program also permits participants to be selected, and KEIP Program Goals to  be
established   for   those  participants,  by  the  Executive  Vice   President,
Administration  and  the  Chief Executive Officer of  the  Company.   The  KEIP
Program Goals are based on one or more of the following elements, as determined
by  the  Compensation  Committee: (i) Company  income,  (ii)  Company  revenue,
(iii)  net  new  CSi and SPRYNET customers, and (iv) net new  Network  Services
customers.   The KEIP Program Goals are to be established, and may be  revised,
by the Compensation Committee, provided that such establishment or revision may
occur not later than 90 days after the beginning of the Performance Period (but
in  no  event after 25% of the Performance Period has elapsed), and  while  the
outcome  as  to  the  goals is substantially uncertain.  If actual  performance
exceeds  the established goals, participants may earn up to 150% of the  target
amount.  (However, in no event may the amount payable to any participant  under
the KEIP Program for any Performance Period exceed $500,000.) If actual results
fall  short  of  the KEIP Program Goals, awards will be less  than  the  target
amount.  Awards for the KEIP Program for any Performance Period will be paid as
soon  as  practicable after the end of the Performance Period,  and  after  the
Compensation Committee has approved the report of the performance results.

     Employees selected by the Compensation Committee, or selected by the Chief
Executive  Officer of the Company (or by such officer's designees)  from  among
groups  designated by the Compensation Committee, will participate in  the  MBO
Program.   Each  MBO Program participant will have the opportunity  to  receive
a cash incentive award based on the attainment of MBO Program Goals established
by  the  participant's direct supervisor in consultation with the  participant.
The  MBO  Program Goals for any participant may be revised by the participant's
supervisor  to  take  into  account  changes  that  render  achievement   moot,
inconsistent  with  applicable objectives, unreasonable or undesirable,  or  to
take   account  of  circumstances  not  within  the  control  of  or  area   of
responsibility of the participant.  The amount of the incentive award which may
be  paid  to  a  participant under the MBO Program will be established  by  the
Compensation Committee, or by the Chief Executive Officer of the Company (or by
such  officer's designees) from within a range established by the  Compensation
Committee.   Under the MBO Program, a participant shall be entitled  to  up  to
100%  of  the  designated bonus amount, based on the extent to  which  the  MBO
Program Goals are met, as determined by the participant's direct supervisor  in
consultation with the participant.

     The KEIP Program may be amended or terminated by the Board of Directors of
the Company at any time.

     Compensation Committee Interlocks and Insider Participation

      Compensation information with respect to the Named Executive Officers for
1996  reflects compensation earned in part while the Company was a wholly owned
subsidiary  of  H&R Block.  Until April 1996, the Company had  no  compensation
committee.  Executive compensation levels during 1996 were established  by  the
Company's  Chief Executive Officer, except that the compensation level  of  the
Chief  Executive Officer was established by the Compensation Committee and  the
Chief Executive Officer of H&R Block.

     Compensation of Directors

     Beginning on November 1, 1996, the Directors of the Company receive $6,000
per fiscal quarter in cash compensation for their services.  This fee is 
payable at the first meeting of each fiscal quarter.  Prior to this date, the 
Directors did not receive any annual cash retainers or cash fees for
attendance at board or committee meetings.

      On  March  12, 1996, the Company adopted the CompuServe Corporation  1996
Outside  Directors  Plan  (the "Directors Plan")  which  was  approved  by  the
Company's  sole  stockholder,  H&R  Block Group,  in  March  1996.   Under  the
Directors  Plan, each non-employee Director of the Company (an "Outside 
Director") is  automatically granted  an  option to purchase 7,500 shares of
Common Stock upon being elected a new Director.  Individuals  who first  
become  Outside  Directors on other than  an  annual  meeting  date  are
eligible  for an option award, subject to a pro rata reduction to  reflect  the
period during which they were not an Outside Director.  Directors who are 
reelected are granted an option for each such additional term, to purchase 5,000
shares of Common Stock, the award being effective on the date of the Annual
Meeting of Stockholders at which they are reelected.  

      The  exercise  price  of the shares subject to the option  shall  be  the
greater  of the fair market value of a share of Common Stock on the  date  that
the  option  is granted or par value.  Options become exercisable  on  the  day
immediately  preceding  the  next  annual  stockholders  meeting   and   remain
exercisable until the earlier of the ten-year anniversary of the grant date, or
the  first anniversary of the Outside Director's termination of service on  the
Board.   If  the Outside Director terminates service on the Board  for  reasons
other  than  death  or  disability prior to the vesting date,  such  option  is
forfeited.   All  options become immediately exercisable in the  event  of  the
Outside Director's death or disability.  Options are not transferable except as
designated by the holder by will or the laws of descent and distribution.   The
option purchase price shall be payable in cash or in shares of Common Stock.

      The  number of shares which may be awarded under the Directors Plan shall
not  exceed 90,000 shares.  Shares issued under the Plan may be authorized  and
unissued  shares  or  treasury shares.  In the event  of  certain  transactions
affecting  the  type  or number of outstanding shares,  the  number  of  shares
subject  to  the  Directors  Plan, the number or  type  of  shares  subject  to
outstanding  options,  and the exercise price thereof,  shall  be  adjusted  to
reflect the transaction.

      An Outside Director who is granted a stock option will not be subject  to
federal  income tax at the time of grant, and the Company will not be  entitled
to  a tax deduction by reason of such grant.  Upon exercise of the option,  the
difference  between the option price and the fair market value  of  the  Common
Stock on the date of exercise will be considered ordinary income to the Outside
Director,  and  generally the Company will be entitled to a  corresponding  tax
deduction.

     The following table sets forth the number of options to purchase shares of
Common Stock which have been awarded under the Outside Director's Plan.

                                                         Shares Underlying
                                                         Options Granted(1)
                                                     ------------------------

Director Group (5 persons)                                     56,400


(1)   The  options reported in this column consist of non-qualified options  to
acquire  Common  Stock  which have been awarded to the Company's  four  Outside
Directors.   As  of  April 30, 1997, 36,400 options are exercisable  at  prices
ranging from $8.81 - $30.00 per share.  No options have been exercised.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of April 30, 1997, the ownership of the
Company's common stock by beneficial owners of more than five percent  (5%)  of
the  outstanding shares of the Company, the directors of the Company, the Named
Executive Officers, and all directors and executive officers as a group.
                                             
                                      Sole Voting   Shared Voting
                      Total Shares       and             and       
                      Beneficially    Investment     Investment    Percent of
NAME                   Owned (1)        Power           Power        Class
--------------------  ------------    -----------   -------------  ----------
Dennis D. Matteucci                                           

Lawrence A. Gyenes          1,000          1,000                         .01
  
Herbert J. Kahn               500            500                         .01

Peter F. Van Camp             500            500                         .01

Chester E. Scott           10,000         10,000                         .11

Henry F. Frigon             9,000          3,000             6,000       .10

Roger W. Hale                 500            500                         .01

Morton I. Sosland          15,000         15,000                         .16

Edward E. Lucente                                             

Frank L. Salizzoni          7,500          7,500                         .08

All directors and                                         
executive officers         44,000         38,000             6,000       .48
as a group(10 persons)

H&R Block, Inc.        74,200,000     74,200,000                       80.13
4400 Main Street                                           
Kansas  City, MO 64111
                                                              

(1)  As  of  April  30, 1997.  For purposes of this disclosure, the  Securities
     and  Exchange  Commission has defined "beneficial  ownership"  to  include
     securities  over  which the individual has sole or  shared  investment  or
     voting  power  regardless  of the economic incidents  of  ownership.   The
     shares  reported  in  the  table include shares  held  by  certain  family
     members  of the directors or in trusts or custodianships for such  members
     (directly or through nominees).

Ownership of H&R Block Stock

      The following table sets forth, as of June 1, 1997, the ownership of  H&R
Block  common  stock by the Company's directors, the Named Executive  Officers,
and all directors and executive officers as a group.

                                               Sole Voting     Shared Voting
                              Total Shares        and               and
                              Beneficially     Investment       Investment
Name                             Owned(1)        Power            Power(1)
------------------------      ------------     -----------     -------------

Dennis D. Matteucci                  260                             260
Lawrence A. Gyenes                 1,000         1,000                
Herbert J. Kahn                   10,466(2)     10,466(2)
Peter F. Van Camp                  4,216         4,216
Chester E. Scott                   3,000         3,000
Henry F. Frigon                   13,999(2)      5,999(2)          8,000
Roger W. Hale                     13,169(2)     13,169(2)
Morton I. Sosland                282,397(2)     97,809(2)        184,588
Edward E. Lucente
Frank L. Salizzoni                25,333        23,333             2,000

All directors and executive
officers as a group 
(10 persons)                     346,624       151,776           194,848


(1)  As  of June 1, 1997.  For purposes of this disclosure, the Securities  and
     Exchange   Commission  has  defined  "beneficial  ownership"  to   include
     securities  over  which the individual has sole or  shared  investment  or
     voting  power  regardless  of the economic incidents  of  ownership.   The
     shares  reported  in  the  table include shares  held  by  certain  family
     members  of the directors or in trusts or custodianships for such  members
     (directly  or  through nominees).  The reported shares  also  include  260
     shares  owned  by Mr. Matteucci's wife, 8,000 shares held by a  charitable
     foundation  of  which  Mr.  Frigon is a director,  9,000  shares  held  by
     a  charitable  foundation  of  which Mr.  Sosland  is  an  officer  and  a
     director, 104,592 shares held by a corporation of which Mr. Sosland is  an
     officer  and a director, and 2,000 shares held by a charitable  foundation
     of  which  Mr.  Salizzoni  is an officer.  The respective  directors  have
     disclaimed any beneficial ownership of those shares held by or  for  their
     family  members,  Mr.  Frigon has disclaimed any beneficial  ownership  of
     those shares held in the name of the charitable foundation of which he  is
     a  director,  and Mr. Sosland has disclaimed any beneficial  ownership  of
     those  shares  held by said corporation or in the name of  the  charitable
     foundation  of  which he is an officer and director.   Mr.  Salizzoni  has
     disclaimed  any beneficial ownership of those shares held in the  name  of
     the charitable foundation of which he is an officer.

(2)  Includes  shares  which  the specified person has the  right  to  purchase
     within  60 days pursuant to options granted in connection with H&R Block's
     stock  option plans, as follows: Mr. Kahn -- 10,166; Mr. Frigon --  5,999;
     Mr. Hale -- 11,999; Mr. Salizzoni -- 19,333; and Mr. Sosland -- 19,999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The  Company is controlled by H&R Block, which beneficially owns not less
than  80.1% of the outstanding Common Stock of the Company.  On July 16,  1996,
H&R  Block announced that its Board of Directors had approved plans to spin-off
H&R  Block's remaining 80.1% interest in CompuServe.  The Spin-off was  subject
to,  among  other  things, shareholder approval at H&R Block's  annual  meeting
expected  to  take  place  in September 1996 and a favorable  ruling  from  the
Internal  Revenue  Service as to the tax-free nature of the  transaction.   H&R
Block  announced  that  it expected the Spin-off to be completed  on  or  about
November 1, 1996.

      On  August 28, 1996, Block announced that its Board of Directors  decided
not to present the proposed Spin-off to shareholders at the Block September 11,
1996 annual meeting.  The decision not to present the CompuServe Spin-off for a
shareholder vote on September 11 was based, in part, on the Company's  reported
first  quarter  and  projected  second  quarter  losses,  market  uncertainties
regarding  the  online industry and the planned September 1996 introduction  of
new interfaces for the CompuServe Interactive Service ("CSi").

      The  taxable  income  and  losses of the  Company  and  its  consolidated
subsidiaries,  including  SPRY  (the "Company  Group"),  are  included  in  the
consolidated federal income tax returns filed by H&R Block and its consolidated
subsidiaries  (the "Parent Group").  The Company and H&R Block entered  into  a
Tax  Sharing Agreement (the "Tax Sharing Agreement") which requires the Company
to  pay  H&R  Block an amount in respect of federal income taxes equal  to  the
amount of the federal income taxes that the Company Group would be required  to
pay  if the Company Group were to file its own consolidated federal income  tax
return  and  was never part of the Parent Group.  Effectively, this results  in
the  Company's  annual income tax provision being computed as  if  the  Company
filed  a  separate tax return, except that items such as net operating  losses,
capital  losses, foreign tax credits, investment tax credits or  similar  items
which might not be immediately recognizable in a separate return, are allocated
according  to  the Tax Sharing Agreement and reflected in the Company's  annual
income tax provision to the extent that such items reduce the current or future
Parent Group federal income tax liability.

     At April 30, 1997, the Company is owed $70.2 million by Parent, due
primarily for income tax benefits resulting from the Company's pretax losses
for the sixteen months ended April 30, 1997.

      The  Company  and  H&R  Block  executed a Registration  Rights  Agreement
pursuant to which H&R Block may demand registration under the Securities Act of
shares  of the Company's capital stock held by it at any time, subject  to  its
agreement  not to sell any shares prior to the expiration of 180 days,  subject
to  waiver  by the Company, from the date of the Prospectus filed in connection
with the initial public offering.  The Company may postpone such a demand under
certain  circumstances.   In addition, H&R Block may  request  the  Company  to
include  shares  of  the  Company's capital stock held  by  H&R  Block  in  any
registration proposed by the Company of such capital stock under the Securities
Act.

      CompuServe  has  entered into a number of agreements  whereby  CompuServe
leases  space to house telephone accessible points of presence in some  of  the
local  offices  of  H&R  Block and its franchisees  in  cities  throughout  the
country.   CompuServe makes annual aggregate rental payments  of  approximately
$148,000 in connection with such agreements.

      The  Company has entered into a Credit Card Program Agreement with  Block
Financial Corporation ("Block Financial"), an affiliate of H&R Block,  for  the
issuance by Block Financial of a CompuServe Visa or Mastercard credit  card  to
employees  and  subscribers  of  the  Company.   CompuServe  does  not  receive
royalties in respect of this agreement.

      The  Company  provides  certain  programming  and  electronic  processing
services related to tax return filings with the Internal Revenue Service and in
various  state jurisdictions for an affiliate of H&R Block.  The terms of  this
arrangement  may  be renegotiated annually.  Revenues generated  in  connection
with this arrangement amounted to approximately $9.7 million for the year ended
April 30, 1997.

      In  April 1996, the Company and HRB Management, a wholly-owned subsidiary
of the H&R Block Group, entered into a Corporate Services Agreement pursuant to
which  HRB  Management  will provide to the Company from  time  to  time,  upon
request  of  the  Company,  certain routine and  ordinary  corporate  services,
including  financial, accounting, tax, legal and internal audit services.   For
these services, HRB Management will be reimbursed for its costs (including  the
pro  rata  costs of the HRB Management employees performing such  services  and
allocable  overhead).   The  initial  term  of  this  agreement  is  one  year.
Thereafter, unless either party provides the other with at least 60 days' prior
written notice to the contrary, the agreement will be automatically renewed for
successive one year terms until terminated.  No amounts were paid in 1997.

      In connection with Robert J. Massey's resignation in February 1997 as the
Company's President and Chief Executive Officer and a director of the  Company,
the  Company  and Mr. Massey entered into an agreement pursuant  to  which  Mr.
Massey  is  to  be paid over a one-year period severance pay in the  amount  of
$550,000  (equal  to  twice Mr. Massey's then current annual  base  pay).   Mr.
Massey  is  also  entitled to continuation of certain medical benefits  through
August  31,  1997.  In the event of the occurrence of a "change in control"  of
the  Company prior to August 17, 1997 or the execution prior to such date of  a
definitive  agreement, binding letter of intent or binding letter in  principle
regarding  a "change in control" of the Company, subject to certain exceptions,
Mr. Massey will become entitled to a bonus equal to $600,000 and, under certain
circumstances,  an  additional $137,500.  Mr. Massey  had  three  months  after
February  17,  1997  to exercise any outstanding options to acquire  H&R  Block
common stock then exercisable.  On various dates during these three months, Mr.
Massey  exercised a total of 18,001 options.  All options to acquire shares  of
Common  Stock  of  the  Company  will  expire  unexercised.   Pursuant  to  the
agreement,  Mr. Massey has agreed not to engage in any activity in  the  United
States  or Europe for a period of 12 months following the date of the agreement
that  would compete with the Company's online interactive information services,
Internet access services or network services.

      In  connection with Alexander B. Trevor's resignation in June 1996 as the
Company's  Executive Vice President and Chief Technology Officer,  the  Company
and Mr. Trevor entered into an agreement pursuant to which, among other things,
Mr.  Trevor  became  entitled to 24 weeks of severance pay and  certain  earned
incentive compensation.  In addition, Mr. Trevor became entitled to 20 weeks of
additional base pay.

      The Company has adopted a plan which could apply as a result of a "change
in control" of the Company.  The following are the material terms of such plan.
In  the event of the termination of an employee in connection with a "change in
control"  of  the Company, such employee would be entitled to  either  (i)  two
times  annual  base salary and target bonus for executive vice  presidents  and
above,  (ii) one times annual base salary and target bonus for vice  presidents
and  director level employees and (iii) two weeks base salary for each year  of
service  (with  a  minimum of three months and a maximum  of  six  months  base
salary)  for  all other employees.  Such severance will be paid to an  employee
terminated (i) without "cause" within two years of a "change in control" or who
resigns  with "good reason" or (ii) without "cause" during a "potential  change
of  control" and a "change of control" in fact occurs within three months after
such  person's  termination  date.   In addition,  options  awarded  under  the
Company's  1996 Long-Term Incentive Plan would immediately vest upon a  "change
of  control."  The Company's Board of Directors may revoke or materially modify
these  severance benefits on 180 days notice.  A "change of control"  includes,
but  is  not limited to, (i) the acquisition by any person of more than 25%  of
the voting power of the Company's Common Stock, (ii) stockholder approval of  a
merger involving the Company unless more than 50% of the successor is owned  by
the  prior  owners of the Company, (iii) a majority of the Company's  board  of
directors  are  not  nominated by the incumbent board or (iv)  if  the  Company
ceases  to own all or substantially all of its Interactive division or  Network
division.


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     A.  Consolidated Financial Statements

      The following consolidated financial statements of CompuServe Corporation
and the Report of Independent Auditors thereon are included in Item 8, above.

Description

Independent Auditors' Report

Consolidated Balance Sheets as of April 30, 1997 and 1996

Consolidated Statements of Operations for the Years Ended April 30, 1997, 1996
and 1995

Consolidated Statements of Stockholders' Equity for the Years Ended  April  30,
1997, 1996 and 1995

Consolidated Statements of Cash Flows for the Years Ended April 30, 1997,  1996
and 1995

Notes to Consolidated Financial Statements

     B.  Financial Statement Schedules

     Schedule II -- Valuation and Qualifying
     Accounts for the Years Ended April 30,
     1997, 1996 and 1995

     C.  Exhibits

Exhibit
Number

 3.1      Certificate of Incorporation (incorporated by reference to  similarly
          numbered   exhibit  to  Registration  Statement  on  Form  S-1   (No.
          333-1498) of CompuServe Corporation)

 3.2      By-laws  (incorporated by reference to similarly numbered exhibit  to
          Registration  Statement  on Form S-1 (No.   333-1498)  of  CompuServe
          Corporation)

 4.1      Form  of  Certificate for Common Stock (incorporated by reference  to
          Exhibit  5  to Registrant's Registration Statement on Form  8-A  (No.
          2-53193) of CompuServe Corporation)

 4.2      Form  of  Rights Agreement between CompuServe Corporation and  Rights
          Agent  (including the Form of Certificate of Designation, Preferences
          and  Rights  of  Series A Junior Preferred Stock and Form  of  Rights
          Certificate)   (incorporated  by  reference   to   Exhibit   4.3   to
          Registrant's  Registration Statement on Form 8-A  (No.   2-53193)  of
          CompuServe Corporation)

10.1      Network  Services  Agreement dated June 5,  1992  between  CompuServe
          Incorporated  and  VISA  U.S.A.  Inc., as  amended  by  Amendment  to
          Network  Services Agreement dated November 14, 1994 (incorporated  by
          reference to similarly numbered exhibit to Registration Statement  on
          Form S-1 (No.  333-1498) of CompuServe Corporation)

10.2      Form  of  License  and Distributorship Agreement  between  CompuServe
          Incorporated  and  its  international distributors  (incorporated  by
          reference to similarly numbered exhibit to Registration Statement  on
          Form S-1 (No.  333-1498) of CompuServe Corporation)

Exhibit
Number

10.3      Special  Customer Arrangement Agreement dated July  5,  1994  between
          CompuServe  Incorporated and MCI Telecommunications  Corporation,  as
          amended by First Amendment to MCI Special Customer Arrangement  dated
          November  20,  1995  and  Third Amendment  to  MCI  Special  Customer
          Arrangement  dated  February 5, 1996 Arrangement dated  November  20,
          1995  and  Third Amendment to MCI Special Customer Arrangement  dated
          February  5,  1996  (incorporated by reference to similarly  numbered
          exhibit  to  Registration Statement on Form S-1  (No.   333-1489)  of
          CompuServe Corporation)

10.4      Form  of  Credit Card Program Agreement dated October 1, 1994 between
          CompuServe    Incorporated    and   Block    Financial    Corporation
          (incorporated   by  reference  to  similarly  numbered   exhibit   to
          Registration  Statement  on Form S-1 (No.   333-1498)  of  CompuServe
          Corporation)

10.5      Form  of  Rapid Refund Agreement between CompuServe Incorporated  and
          H&R  Block Tax Services, Inc. (incorporated by reference to similarly
          numbered   exhibit  to  Registration  Statement  on  Form  S-1   (No.
          333-1498) of CompuServe Corporation)

10.6      Tax  Sharing Agreement among CompuServe Corporation, H&R Block,  Inc.
          and certain subsidiaries of CompuServe Corporation  (incorporated  by
          reference to similarly numbered exhibit to Registration Statement  on
          Form S-1 (No.  333-1498) of CompuServe Corporation)

10.7      Form  of Registration Rights Agreement between CompuServe Corporation
          and  H&R Block, Inc. (incorporated by reference to similarly numbered
          exhibit  to  Registration Statement on Form S-1  (No.   333-1498)  of
          CompuServe Corporation)

10.8      Form  of  Sub-Lease  Agreement  between CompuServe  Incorporated  and
          H&R  Block,  Inc.  for POP equipment (incorporated  by  reference  to
          similarly  numbered  exhibit to Registration Statement  on  Form  S-1
          (No.  333-1498) of CompuServe Corporation)

10.9      Contract  dated  August 13, 1983 between CompuServe Incorporated  and
          American Telephone and Telegraph Company, as amended by Amendment  to
          Contract  between  AT&T  Corp.  and  CompuServe  Incorporated   dated
          September  16,  1994,  Amendment No.  2 dated October  27,  1995  and
          Amendment  No.  3 dated February 16, 1996 (incorporated by  reference
          to  similarly numbered exhibit to Registration Statement on Form  S-1
          (No.  333-1498) of CompuServe Corporation)

10.10     Form  of  Corporate Services Agreement between the  Company  and  HRB
          Management,  Inc.  (incorporated by reference to  similarly  numbered
          exhibit  to  Registration Statement on Form S-1  (No.   333-1498)  of
          CompuServe Corporation).

10.11     CompuServe  Corporation 1996 Long-Term Incentive  Plan  (incorporated
          by  reference to similarly numbered exhibit to Registration Statement
          on  Form  S-1 (No.  333-1498) of CompuServe Corporation).   S-1  (No.
          333-1498) of CompuServe Corporation).

10.12     CompuServe  Corporation 1996 Outside Directors Plan (incorporated  by
          reference to similarly numbered exhibit to Registration Statement  on
          Form S-1 (No.  333-1498) of CompuServe Corporation).

10.13     CompuServe   Corporation   1996   Employee   Stock   Purchase    Plan
          (incorporated   by  reference  to  similarly  numbered   exhibit   to
          Registration  Statement  on Form S-1 (No.   333-1498)  of  CompuServe
          Corporation).
Exhibit
Number

10.14     CompuServe 1996 Short-Term Incentive Plan (incorporated by  reference
          to  similarly numbered exhibit to Registration Statement on Form  S-1
          (No.  333-1498) of CompuServe Corporation).

10.15     Form  of  Intercompany Credit Facility (incorporated by reference  to
          similarly  numbered  exhibit to Registration Statement  on  Form  S-1
          (No.  333-1498) of CompuServe Corporation).

21.1      Subsidiaries  of the Company (incorporated by reference to  similarly
          numbered   exhibit  to  Registration  Statement  on  Form  S-1   (No.
          333-1498) of CompuServe Corporation).

27        Financial Data Schedule.

                                  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, thereunto duly authorized, on the 29th day of
July, 1997.

                                   COMPUSERVE CORPORATION

                                   By:  _______________________
                                        Lawrence A. Gyenes
                                        Executive Vice President
                                        and Chief Financial 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 indicated.

Signatures                           Title                        Date

      *                      
-------------------           Chairman of the Board and         July 29, 1997
Frank L. Salizzoni            Director and Acting Chief
                              Executive Officer         

      *                     
-------------------           Executive Vice President          July 29, 1997
Lawrence A. Gyenes            and Chief Financial Officer
                              (Principle Accounting Officer)

      *                       Director                          July 29, 1997
-------------------
Henry F. Frigon
  
  
      *                       Director                          July 29, 1997
-------------------
Roger W. Hale

  
      *                       Director                          July 29, 1997
-------------------
Morton I. Sosland


      *                       Director                          July 29, 1997
-------------------
Edward E. Lucente


*By: Lawrence A. Gyenes
     Lawrence A. Gyenes, as
     Attorney-In-Fact for each
     of the persons indicated


               Schedule II -- Valuation and Qualifying Accounts
                            (Amounts in thousands)
               For the Years Ended April 30, 1997, 1996 and 1995


     Column A          Column B   Column C -- Additions   Column D    Column E
  ---------------    ----------- ----------------------- ----------  ----------
                     Balance at  Charged to   Charged to             Balance at
                     Beginning   Costs and      Other                  End of
    Description      of Period    Expenses     Accounts  Deductions    Period
  ---------------    ----------- ----------------------- ----------  ----------

Year Ended
April 30, 1997  
Allowance for
Doubtful Accounts     $3,429      $24,269                  $22,814     $4,884

Year Ended 
April 30, 1996
Allowance for 
Doubtful Accounts     $3,986      $11,505                  $12,062     $3,429

Year Ended 
April 30, 1995
Allowance for
Doubtful Accounts     $3,283       $4,223                   $3,520     $3,986




                                 EXHIBIT INDEX

Exhibit
Number    Description

27        Financial Data Schedule