##### Table of Contents



UNITED STATES
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 June 30, 2003


OR

|     |  |                                                          
|---- |  | ---------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|     |  | SECURITIES EXCHANGE ACT OF 1934                          

For the transition period from
_______to____


Commission File Number 0-20774

ACE CASH EXPRESS, INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Texas                                                          |  | 75-2142963                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1231 Greenway Drive, Suite 600           |  |           
|Irving, Texas                            |  | 75038     
|(Address of principal executive offices) |  | (Zip Code)

(Registrants telephone number, including area code) (972) 550-5000

Securities registered pursuant to Section 12(b) of the Act:

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of each exchange
|Title of each class |  | on which registered  
|                    |  |                      

None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  [X]  No  [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ]

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).
Yes  [  ]  No  [X]

As of September 19, 2003, 10,344,979 shares of Common Stock were outstanding.
As of such date the aggregate market value of voting stock (based upon the last
reported sales price in The Nasdaq Stock Market) held by nonaffiliates of the
registrant was approximately $105,396,104.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III is incorporated by reference from the
registrants definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.





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TABLE OF CONTENTS



|                                                                         |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                  
|                                                                         | ITEM 1. BUSINESS                                                                             
|                                                                         | ITEM 2. PROPERTIES                                                                           
|                                                                         | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                                         | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II                                                                 
|                                                                         | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                                                         | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                                         | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                                         | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                                         | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                                         | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                                                         | ITEM 9A. CONTROLS AND PROCEDURES                                                             
|PART III                                                                
|PART IV                                                                 
|                                                                         | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES                                                              
|REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                      
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                
|CONSOLIDATED BALANCE SHEETS                                             
|CONSOLIDATED STATEMENTS OF EARNINGS                                     
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY                         
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              
|REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                      
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
|Schedule II  Valuation and Qualifying Accounts                         
|INDEX TO EXHIBITS                                                       
|EX-21 Subsidiaries of the Company                                       
|EX-23 Consent of Grant Thornton LLP                                     
|EX-31 Certifications of CEO & CFO to Section 302                        
|EX-32 Certifications of CEO & CFO to Section 1350                       



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PART I




ITEM 1. BUSINESS

General

Ace Cash Express, Inc. (ACE or the Company) is a significant provider of
retail financial services in the United States. The Company is also the
largest owner, operator, and franchiser of check-cashing stores in the United
States. As of August 31, 2003, the Company had a total network of 1,168 stores
in 36 states and the District of Columbia, consisting of 968 company-owned
stores and 200 franchised stores. The Company seeks to provide a full range of
retail financial services and transaction processing in its markets and to
develop and maintain the largest network of stores in each of the markets where
the Company operates. The Companys growth strategy is to integrate
acquisitions, new store openings, and franchising in new and existing markets
and to develop new products for introduction into the existing store base.

ACE stores offer check-cashing services and other retail financial services at
competitive rates in clean, convenient settings. The Companys services also
include offering short-term consumer loans; selling money orders; providing
money transfer services using the MoneyGram network; offering bill-payment
services and other retail financial transaction processing services.

Industry Overview

The primary industry in which ACE operates is check-cashing. Industry sources
indicate that there are approximately 11,000 check-cashing stores nationally.
Though there is limited public information available, the Company believes that
there are four other check-cashing companies operating or franchising over 100
stores and five companies that operate or franchise between 50 and 100
locations, with the remaining companies operating fewer than 50 stores, in the
United States.

The Company believes that it and other check-cashing companies focus on and
offer services to a customer segment that banks do not service and operate at
locations and during hours that are more convenient than those traditionally
offered by banks. Unlike many banks, check-cashing stores are willing to
assume the risk that checks they cash will bounce. For instance, it is not
unusual for a bank to refuse to cash a check for a customer who does not
maintain a deposit account with the bank and to require its depositors to
maintain sufficient funds in an account to cover a check to be cashed or wait
several days for the check to clear. As a result, the Company believes
check-cashing stores provide an attractive alternative to customers without
bank accounts or with relatively small account balances. Although these
customers might save money by depositing their checks in a bank and waiting for
them to clear, many prefer paying a fee to take advantage of the convenience
and availability of immediate cash offered by check-cashing stores.

The core business of check-cashing stores is generally cashing checks for a
fee. These fees are intended to provide the check casher with a profit after
covering operating expenses, including any interest expense incurred by the
check casher on the funds advanced to customers between the time checks are
cashed and the time the checks clear through the banking system. The risk a
check-cashing store assumes upon cashing a check is that the check will be
uncollected because of insufficient funds, stop payment orders, or fraud. In
order to minimize this risk and the losses associated with uncollected checks,
many check-cashing stores cash only payroll or government entitlement checks,
charge higher fees, or have stricter approval procedures for cashing personal
checks. ACE does not promote the cashing of personal checks in its stores.
For the fiscal year ended June 30, 2003, less than 1% of the checks cashed by
the Company were one-party personal checks.

In addition to check-cashing services, most check-cashing stores offer
customers a range of other services, including access to short-term consumer
loans, bill-payment services, money orders, and wire transfer services. Some
check-cashing stores also offer public transportation passes, copying and fax
transmission services, and postage stamps.

The Company believes that the deregulation of the banking and savings and loan
industry has increased the role played by check-cashing stores in providing
basic retail financial services to low-income and middle-income customers. At
the same time, the Company believes that competition, regulatory scrutiny and
complexity are contributing to consolidation of the industry. The Companys
strategy is to position itself to benefit from industry consolidation and the
competitive advantages available to large operators and franchisers of retail
financial services.

Growth Strategy

ACEs growth strategy consists principally of combining acquisitions and new
store openings (both company-owned and franchised stores), with the objective
of having the largest number of retail financial services locations in each of
its markets and developing new products for introduction into the existing
store base, and by increasing same store sales of existing products. ACE
defines its target markets as cities of 100,000 or more. In fiscal 2003, the
Company opened 14 newly constructed stores, acquired 2 stores, franchised 26
stores, and sold 23 and closed 28 company-owned stores. The Company

2



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currently anticipates that it will construct and open 40 company-owned stores,
primarily in existing markets, during the fiscal year ending June 30, 2004. The
Companys growth strategy depends upon the availability of adequate financing,
as well as suitable locations, acquisition opportunities, and experienced
management employees, and is subject to the risk that any of these conditions
may not be met. The Companys growth in owned stores in fiscal 2003 was
smaller than the Companys historical growth primarily because of limitations
on capital expenditures imposed by the Companys bank credit agreement through
March 31, 2003. The Companys new and longer-term financing arrangements
entered into as of March 31, 2003, however, should enable the Company to pursue
its traditional growth strategy, as well as to expand the Companys franchise
network (which requires a minimal amount of capital).

3



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The following table illustrates the development of company-owned stores since
June 30, 1997 by showing the number of stores open in each market area at the
end of each of the indicated periods:

|                                                                               |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|------------------------------------------------------------------------------ |  | -------------------- | --- | ---- |  | ---- | ----- | ---- |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                                                                               |  | Company-owned stores
|                                                                               |  |                     
|                                                                               |  | June 30,            
|                                                                               |  |                     
|Market Area                                                                    |  | 2003                 |     | 2002 |  | 2001 |       | 2000 |  | 1999 |     | 1998 |  | 1997
|                                                                               |  |                      |     |      |  |      |       |      |  |      |     |      |  |     
|Texas:                                                                         |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Dallas/Fort Worth/East Texas
Houston/Corpus Christi
San Antonio/Austin/El Paso |  |                      | 328 |      |  |      | 329   |      |  |      | 326 |      |  |      | 309 |  |  |  | 264 |  |  |  | 244 |  |  |  | 230 | 
|California:                                                                    |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Los Angeles/San Bernadino/
Sacramento/San Francisco/Fresno/
Oakland            |  |                      | 85  |      |  |      | 88    |      |  |      | 90  |      |  |      | 30  |  |  |  | 16  |  |  |  | 9   |  |  |  |    | 
|Maryland/Washington,
D.C./Virginia:                                            |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Baltimore/Washington, D.C./
Northern VA/Norfolk/Virginia Beach                 |  |                      | 84  |      |  |      | 84    |      |  |      | 85  |      |  |      | 93  |  |  |  | 81  |  |  |  | 77  |  |  |  | 72  | 
|Arizona:                                                                       |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Phoenix/Tucson/Nogales/Douglas                                                 |  |                      | 75  |      |  |      | 72    |      |  |      | 75  |      |  |      | 73  |  |  |  | 69  |  |  |  | 59  |  |  |  | 58  | 
|Florida:                                                                       |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Jacksonville/Orlando/Palm Beach/Tampa                                          |  |                      | 68  |      |  |      | 91    |      |  |      | 91  |      |  |      | 90  |  |  |  | 73  |  |  |  | 60  |  |  |  | 46  | 
|Colorado:                                                                      |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Denver/Colorado Springs/Pueblo                                                 |  |                      | 53  |      |  |      | 56    |      |  |      | 53  |      |  |      | 52  |  |  |  | 51  |  |  |  | 45  |  |  |  | 44  | 
|Georgia:                                                                       |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Atlanta/Augusta/Macon/ Savannah                                                |  |                      | 46  |      |  |      | 50    |      |  |      | 50  |      |  |      | 54  |  |  |  | 52  |  |  |  | 50  |  |  |  | 47  | 
|Louisiana:                                                                     |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|New Orleans/Baton Rouge/Shreveport                                             |  |                      | 27  |      |  |      | 27    |      |  |      | 25  |      |  |      | 25  |  |  |  | 25  |  |  |  | 25  |  |  |  | 25  | 
|North & South Carolina:                                                        |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Charlotte/Charleston/Columbia/
Greenville/Spartanburg/Orangeburg               |  |                      | 26  |      |  |      | 29    |      |  |      | 29  |      |  |      | 34  |  |  |  | 29  |  |  |  | 17  |  |  |  | 16  | 
|Indiana:                                                                       |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Indianapolis/Fort Wayne/Muncie                                                 |  |                      | 26  |      |  |      | 25    |      |  |      | 25  |      |  |      | 25  |  |  |  | 23  |  |  |  | 14  |  |  |  | 9   | 
|Ohio:                                                                          |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Cleveland, Youngstown                                                          |  |                      | 25  |      |  |      | 24    |      |  |      | 18  |      |  |      | 11  |  |  |  | 10  |  |  |  | 10  |  |  |  | 10  | 
|Oklahoma:                                                                      |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Oklahoma City, Tulsa                                                           |  |                      | 21  |      |  |      | 23    |      |  |      | 23  |      |  |      | 12  |  |  |  | 14  |  |  |  | 13  |  |  |  | 13  | 
|Tennessee:                                                                     |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Memphis/Nashville                                                              |  |                      | 18  |      |  |      | 18    |      |  |      | 19  |      |  |      | 26  |  |  |  | 22  |  |  |  | 18  |  |  |  | 15  | 
|Pennsylvania:                                                                  |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Pittsburgh                                                                     |  |                      | 16  |      |  |      | 16    |      |  |      | 9   |      |  |      | 3   |  |  |  |    |  |  |  |    |  |  |  |    | 
|Nevada:                                                                        |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Las Vegas                                                                      |  |                      | 14  |      |  |      | 14    |      |  |      | 14  |      |  |      | 14  |  |  |  | 11  |  |  |  | 4   |  |  |  |    | 
|Washington:                                                                    |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Seattle/Tacoma/Everette                                                        |  |                      | 13  |      |  |      | 13    |      |  |      | 13  |      |  |      | 14  |  |  |  | 12  |  |  |  | 10  |  |  |  | 8   | 
|Missouri:                                                                      |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|St. Louis                                                                      |  |                      | 11  |      |  |      | 11    |      |  |      | 11  |      |  |      | 11  |  |  |  | 10  |  |  |  | 6   |  |  |  | 6   | 
|New Mexico:                                                                    |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Albuquerque                                                                    |  |                      | 11  |      |  |      | 10    |      |  |      | 10  |      |  |      | 8   |  |  |  | 8   |  |  |  | 7   |  |  |  | 7   | 
|Arkansas:                                                                      |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Little Rock/Pine Bluff/West Memphis                                            |  |                      | 8   |      |  |      | 8     |      |  |      | 8   |      |  |      | 8   |  |  |  | 7   |  |  |  | 7   |  |  |  | 6   | 
|Oregon:                                                                        |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Portland                                                                       |  |                      | 8   |      |  |      | 8     |      |  |      | 7   |      |  |      | 9   |  |  |  | 8   |  |  |  | 5   |  |  |  | 5   | 
|Kansas:                                                                        |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Wichita                                                                        |  |                      | 4   |      |  |      | 4     |      |  |      | 4   |      |  |      | 4   |  |  |  | 3   |  |  |  | 2   |  |  |  |    | 
|Alabama:                                                                       |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Birmingham/Homewood                                                            |  |                      | 1   |      |  |      | 3     |      |  |      | 3   |      |  |      | 3   |  |  |  | 4   |  |  |  | 1   |  |  |  |    | 
|Utah:                                                                          |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Salt Lake City/Layton/Ogden                                                    |  |                      |    |      |  |      |      |      |  |      |    |      |  |      | 5   |  |  |  | 3   |  |  |  |    |  |  |  |    | 
|Kentucky:                                                                      |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Paducah /Murray                                                                |  |                      |    |      |  |      |      |      |  |      |    |      |  |      | 2   |  |  |  | 3   |  |  |  |    |  |  |  |    | 
|                                                                               |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Total                                                                          |  |                      | 968 |      |  |      | 1,003 |      |  |      | 988 |      |  |      | 915 |  |  |  | 798 |  |  |  | 683 |  |  |  | 617 | 
|                                                                               |  |                      |     |      |  |      |       |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 

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Acquisitions.During fiscal 2003, the Company acquired two stores in two
separate transactions. The Company believes its experience with acquisitions
permits it to successfully integrate additional acquisitions. Of the 968 ACE
company-owned stores in operation as of June 30, 2003, 382, or 39%, have been
acquired stores. The Company does not have any current plan or expectation as
to the number of stores that it may acquire during the fiscal year ending June
30, 2004. The Company intends to continue searching for strategic opportunities
in both existing and new markets.

Self-service machines. The Company has developed self-service machines
(SSMs) which are able to cash checks, sell prepaid long-distance telephone
cards, sell money orders, and process third-party bill payments. The Company
increased the number of self-service machines in H&R Block Tax Services, Inc.
(H&R Block) retail locations, to over 200 during the 2003 tax season (i.e.,
January through March). Those machines only cashed tax-refund checks issued to
customers at H&R Block locations. The Company currently has 21 machines in
company-owned locations and more than 200 machines available for deployment at
H&R Block locations during the 2004 tax season. The Company currently has 22
bill-payment only SSMs located at a third-party service providers locations.
The Company plans to deploy 15 additional bill-payment-only SSMs at such
service providers locations in fiscal 2004.

Franchise Operations

The Company is one of the largest franchisers of check-cashing stores in the
United States. ACE franchises are marketed through an employee sales force,
supplemented by advertising in newspapers, trade journals, and other media.
The following table illustrates the development of franchised stores since June
30, 1998 by showing the number of stores open in each state at the end of each
of the indicated periods:

|               |  |                                 |     |      |  |      |     |      |  |      |     |      |  |  |     |  |  |  |     |  |  |  |    | 
|-------------- |  | ------------------------------- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  |  | --- |  |  |  | --- |  |  |  | -- | 
|               |  | Number of Stores as of June 30,
|               |  |                                
|               |  | 2003                            |     | 2002 |  | 2001 |     | 2000 |  | 1999 |     | 1998
|               |  |                                 |     |      |  |      |     |      |  |      |     |     
|Texas          |  |                                 | 55  |      |  |      | 56  |      |  |      | 55  |      |  |  | 48  |  |  |  | 42  |  |  |  | 23 | 
|Ohio           |  |                                 | 18  |      |  |      | 16  |      |  |      | 14  |      |  |  | 9   |  |  |  | 8   |  |  |  | 2  | 
|Florida        |  |                                 | 16  |      |  |      | 14  |      |  |      | 13  |      |  |  | 12  |  |  |  | 10  |  |  |  | 7  | 
|South Carolina |  |                                 | 13  |      |  |      | 8   |      |  |      | 8   |      |  |  | 7   |  |  |  | 5   |  |  |  | 2  | 
|Louisiana      |  |                                 | 12  |      |  |      | 12  |      |  |      | 12  |      |  |  | 13  |  |  |  | 14  |  |  |  | 10 | 
|Oklahoma       |  |                                 | 11  |      |  |      | 11  |      |  |      | 9   |      |  |  | 11  |  |  |  | 1   |  |  |  |   | 
|California     |  |                                 | 10  |      |  |      | 11  |      |  |      | 12  |      |  |  | 15  |  |  |  | 12  |  |  |  | 12 | 
|Tennessee      |  |                                 | 7   |      |  |      | 7   |      |  |      | 7   |      |  |  | 2   |  |  |  | 1   |  |  |  | 2  | 
|Colorado       |  |                                 | 6   |      |  |      | 4   |      |  |      | 3   |      |  |  | 3   |  |  |  | 1   |  |  |  | 1  | 
|Georgia        |  |                                 | 6   |      |  |      | 6   |      |  |      | 7   |      |  |  | 6   |  |  |  | 5   |  |  |  | 7  | 
|North Carolina |  |                                 | 6   |      |  |      | 7   |      |  |      | 7   |      |  |  | 5   |  |  |  | 6   |  |  |  | 4  | 
|Arizona        |  |                                 | 5   |      |  |      | 3   |      |  |      | 2   |      |  |  | 2   |  |  |  |    |  |  |  |   | 
|Kansas         |  |                                 | 5   |      |  |      | 4   |      |  |      | 1   |      |  |  |    |  |  |  |    |  |  |  |   | 
|Missouri       |  |                                 | 4   |      |  |      | 3   |      |  |      | 3   |      |  |  | 3   |  |  |  | 1   |  |  |  | 1  | 
|Oregon         |  |                                 | 4   |      |  |      | 4   |      |  |      | 4   |      |  |  | 3   |  |  |  | 3   |  |  |  | 3  | 
|Kentucky       |  |                                 | 3   |      |  |      | 2   |      |  |      | 2   |      |  |  | 2   |  |  |  | 1   |  |  |  | 1  | 
|Delaware       |  |                                 | 2   |      |  |      | 1   |      |  |      | 1   |      |  |  | 1   |  |  |  |    |  |  |  |   | 
|Idaho          |  |                                 | 2   |      |  |      | 2   |      |  |      | 1   |      |  |  | 1   |  |  |  |    |  |  |  |   | 
|Indiana        |  |                                 | 2   |      |  |      | 2   |      |  |      | 2   |      |  |  | 2   |  |  |  | 2   |  |  |  | 2  | 
|Minnesota      |  |                                 | 2   |      |  |      | 2   |      |  |      | 2   |      |  |  | 2   |  |  |  |    |  |  |  |   | 
|Mississippi    |  |                                 | 2   |      |  |      | 1   |      |  |      | 1   |      |  |  |    |  |  |  |    |  |  |  |   | 
|Arkansas       |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  | 2   |  |  |  | 2   |  |  |  | 2  | 
|Hawaii         |  |                                 | 1   |      |  |      |    |      |  |      |    |      |  |  |    |  |  |  |    |  |  |  |   | 
|Maine          |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  | 1   |  |  |  | 1   |  |  |  | 1  | 
|Michigan       |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  |    |  |  |  |    |  |  |  |   | 
|New Jersey     |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  | 1   |  |  |  |    |  |  |  |   | 
|South Dakota   |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  |    |  |  |  |    |  |  |  |   | 
|Virginia       |  |                                 | 1   |      |  |      | 1   |      |  |      |    |      |  |  |    |  |  |  |    |  |  |  |   | 
|Wisconsin      |  |                                 | 1   |      |  |      | 1   |      |  |      |    |      |  |  |    |  |  |  |    |  |  |  |   | 
|Wyoming        |  |                                 | 1   |      |  |      | 1   |      |  |      | 1   |      |  |  | 1   |  |  |  | 1   |  |  |  | 1  | 
|Alabama        |  |                                 |    |      |  |      |    |      |  |      | 1   |      |  |  | 1   |  |  |  | 1   |  |  |  | 1  | 
|Connecticut    |  |                                 |    |      |  |      |    |      |  |      | 2   |      |  |  | 2   |  |  |  |    |  |  |  |   | 
|Massachusetts  |  |                                 |    |      |  |      |    |      |  |      |    |      |  |  |    |  |  |  | 1   |  |  |  | 1  | 
|Pennsylvania   |  |                                 |    |      |  |      |    |      |  |      |    |      |  |  |    |  |  |  |    |  |  |  |   | 
|Utah           |  |                                 |    |      |  |      |    |      |  |      |    |      |  |  |    |  |  |  |    |  |  |  | 1  | 
|Washington     |  |                                 |    |      |  |      |    |      |  |      |    |      |  |  | 2   |  |  |  | 2   |  |  |  | 5  | 
|               |  |                                 |     |      |  |      |     |      |  |      |     |      |  |  |     |  |  |  |     |  |  |  |    | 
|Total          |  |                                 | 200 |      |  |      | 184 |      |  |      | 175 |      |  |  | 157 |  |  |  | 120 |  |  |  | 89 | 
|               |  |                                 |     |      |  |      |     |      |  |      |     |      |  |  |     |  |  |  |     |  |  |  |    | 

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The Company intends to continue its expansion through the sale of new
franchises and the opening of additional stores under existing franchise
agreements. The Company is actively marketing several types of ACE franchises,
which vary by the level of business being conducted. These include a standard
store franchise, a store-within-a-store (or kiosk) franchise, a small market
franchise for market areas under 15,000 in population, and a conversion
franchise that permits an existing check-cashing business to convert to an ACE
franchisee. The Company opened 26 franchised stores, acquired two former
franchised stores, and closed eight franchised stores during fiscal 2003. The
majority of franchised stores operate under the ACE name, by license from the
Company.

Customers and Services

Management believes the Companys core customer group is composed primarily of
individuals whose average age is between 25 and 34 and who rent their house or
apartment and hold a wide variety of jobs in the service sector or are clerical
workers, craftsmen, and laborers. These customers tend to change jobs and
residences more often than average, have annual family incomes of approximately
$30,000, often pay their bills with money orders, and prefer the availability
of immediate cash provided by cashing checks at the Companys stores.

The following table reflects the major categories of services that ACE
currently offers and the revenues (in thousands) from these services for the
indicated fiscal years:

|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                        |  | Year Ended June 30,
|                        |  |                    
|Revenue Category        |  | 2003                |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                        |  |                     |         |      |  |      |         |      |  |     
|Check cashing fees      |  | $                   | 125,703 |      |  | $    | 118,907 |      |  | $    | 105,479 |  |  | $ | 89,641  |  |  | $ | 78,839  | 
|Loan fees and interest  |  |                     | 70,806  |      |  |      | 74,197  |      |  |      | 54,771  |  |  |   | 17,872  |  |  |   | 14,257  | 
|Bill payment services   |  |                     | 13,507  |      |  |      | 10,156  |      |  |      | 10,376  |  |  |   | 9,447   |  |  |   | 8,394   | 
|Money transfer services |  |                     | 10,898  |      |  |      | 10,998  |      |  |      | 10,270  |  |  |   | 8,944   |  |  |   | 7,951   | 
|Money order fees        |  |                     | 6,960   |      |  |      | 7,554   |      |  |      | 7,245   |  |  |   | 7,032   |  |  |   | 5,332   | 
|Franchise revenues      |  |                     | 2,346   |      |  |      | 2,199   |      |  |      | 2,257   |  |  |   | 2,537   |  |  |   | 2,117   | 
|Other fees              |  |                     | 4,069   |      |  |      | 5,255   |      |  |      | 6,377   |  |  |   | 5,163   |  |  |   | 5,424   | 
|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Total revenue           |  | $                   | 234,289 |      |  | $    | 229,266 |      |  | $    | 196,775 |  |  | $ | 140,636 |  |  | $ | 122,314 | 
|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 

Check cashing. ACEs primary business is cashing checks for a fee. The
principal type of check the Company cashes is a payroll check. The Company
also cashes government assistance, tax refund, and insurance checks or drafts.
Subject to market conditions at different locations, the Companys
check-cashing fees for payroll checks approximate 2.3% of the face amount of
the check. The Company may charge higher rates for cashing out-of-state
checks, handwritten checks, money orders, and insurance checks or drafts,
depending on risk and market factors. Unlike many of its competitors, the
Company displays its check-cashing fees in full view of its customers on a
menu board in each store and provides a detailed receipt for each
transaction. Although the Company has established guidelines for approving
check-cashing transactions, it has no preset limit on the size of the checks it
will cash.

If a check cashed by the Company is not paid for any reason, the Company
accounts for the amount of the check as a loss in the period in which it is
returned. ACE then transfers the check to its collection department, which
contacts the maker and payee of each returned check and, if necessary,
commences legal action. The collection department utilizes an automated
tracking system on the Companys proprietary information system to monitor the
status of all returned items. See Selected Financial Data  Collections
Data.

Loan services.The Company is engaged in the small consumer loan business
because the Company believes that many consumers may have limited access to
other sources of consumer credit. In general, the small, short-term loan
product or service (commonly referred to as a payday loan) offered at the
Companys stores consists of providing a customer cash in exchange for the
customers check or an Automated Clearinghouse (ACH) authorization to debit
the customers bank account, along with an agreement to defer the presentment
or deposit of that check or the initiation of that ACH debit on the customers
account, as the case may be, until the customers next payday (typically two to
four weeks later).

Until December 31, 2002, the Company was a party to a Master Loan Agency
Agreement and ancillary agreements (the Goleta Agreement) with Goleta
National Bank (Goleta), a national bank located in Goleta, California. Under
the Goleta Agreement, the parties developed and implemented an arrangement
under which short-term loans made by Goleta (Goleta Loans) were offered at
company-owned locations. Under the Goleta Agreement, the Company purchased
from Goleta a participation representing 90% of each Goleta Loan made on a
previous day. Goleta determined the interest rate (and other terms) of the
Goleta Loans. Interest equal to $17 per $100 of Goleta Loan was charged by
Goleta for each 14-day period. As of January 1, 2003, the Company no longer
offered Goleta Loans at any of its stores.

Since January 1, 2003, all of the small, short-term loan products or similar
services offered at the Companys stores have consisted of either (1)
short-term loans or deferred-deposit services made or entered into by the
Company, or (2) deferred-

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deposit loans or services made or entered into by Republic Bank & Trust
Company, a Kentucky state-chartered bank (Republic Bank). As of June 30,
2003, the Company was offering its own small short-term loan or
deferred-deposit service in 512 of its owned stores, and Republic Bank was
offering its deferred-deposit loan or service in 350 of the Companys owned
stores in Texas, Pennsylvania, and Arkansas. All of these loans and services,
regardless of type, are made in accordance with state regulation; therefore,
the terms of the loans and services vary from state to state.

Both the Companys and Republic Banks short-term loan service or product
consists of providing a customer cash in exchange for the customers check or
an ACH authorization to debit the customers bank account, along with an
agreement to defer the presentment or deposit of that check or the initiation
of that ACH debit on the customers account, as the case may be, for a period
of 14 to 30 days. The amount of the customers check or ACH authorization is
the amount of the cash provided to the customer plus a fee. Because payday
loans are authorized by statute or rule in the states in which they may be
offered, they are subject to extensive regulation. The scope of that
regulation, including the terms on which payday loans may be made, by the
states is not consistent. Almost all states establish allowable fees and other
charges to consumers for these payday loans. In addition, many of the states
regulate the maximum amount, maturity, and renewal or extension of these payday
loans. To comply with the laws and regulations of the states in which payday
loans are offered at the Companys stores, the terms of those payday loans must
vary from state to state. As required, ACE is a licensed provider of payday
loans under the laws and regulations of the states in which the Company
provides loan services or products.

Bill-payment services.The Companys stores serve as payment locations for
customers to pay many of their utility, telephone, and other bills to third
parties. Upon acceptance of the customers payment, the Company remits the
amount owed to the third-party payee under an agreement with that payee and
either receives a service fee from the payee or collects a fee from the
consumer. The company offers the bill-payment services primarily through
agreements directly with various product and service providers. To a lesser
extent, the Company also offers services through an agency agreement (the
MoneyLine Agreement) with Travelers Express Company, Inc. (Travelers
Express) and its affiliate MoneyLine Express, Inc., which in turn has
agreements directly with various product and service providers.

Money transfer services.ACE is an agent for the transmission and receipt
of wire transfers through the MoneyGram network. Through this network, ACE
customers can transfer funds electronically to any of approximately 60,000
MoneyGram agent locations worldwide (including other ACE stores). MoneyGram
Payment Systems, Inc. establishes the fees for this service, and the Company is
paid a percentage of the fees it collects from customers as a commission and
remits the balance to MoneyGram Payment Systems, Inc.

Money orders. The Company sells money orders issued by Travelers Express
in denominations up to $1,000. These money orders are generally used by the
Companys customers for bill payments, rent payments, and other general
disbursements. The Company sold 10.3 million money orders during fiscal 2003.
The fees charged for money orders depend on local market conditions and the
size of the money order. The Company remits the face amount of each money order
sold to Travelers Express. ACEs money order revenues include that portion of
the fees retained by the Company.

Franchise revenues.The Company markets several types of ACE franchises, which
vary by the level of business being conducted. These include a standard store
franchise, a store-within-a-store (or kiosk) franchise, a small market
franchise for market areas under 15,000 in population, and a conversion
franchise that permits an existing check-cashing business to convert to an ACE
franchisee. The Companys franchise revenues consist of royalties and initial
franchise fees and fees for future franchise purchase options. There were 200
company-franchised stores in operation as of June 30, 2003, compared to 184 as
of June 30, 2002.

Self-service machines. The Companys SSMs are able to cash checks, sell
prepaid long-distance telephone cards, sell money orders, and process
third-party bill payments. The Company currently has 21 SSMs in company-owned
locations, 22 bill-payment only SSMs located at a third-party service
providers locations, and more than 200 SSMs available for deployment at H&R
Block locations during the 2004 tax season (i.e., January through March). These
machines use the Companys proprietary software that, among other things, reads
checks and analyzes customer and check-issuer history, thereby enabling the
Company to assess credit risk before cashing a check. Each of the SSMs
incorporates the Companys point-of-sale computer system.

The Company is a party to a license agreement with H&R Block under which the
Company placed over 240 SSMs in H&R Block retail locations during the 2003 tax
season. Those SSMs were available only to cash tax-refund checks and tax
refund anticipation loan checks issued to customers of H&R Block. The Company
obtained the cash that constituted the inventory for those SSMs through
separate agreements with two banks. See Managements Discussion and Analysis
of Financial Condition and Results of Operations  Liquidity and Capital
Resources  SSM Funding Arrangements. Based on the agreement with H&R Block,
the Company anticipates placing more than 200 SSMs at H&R Block retail
locations during the 2004 tax season.

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##### Table of Contents



Other services and products. In many company-owned stores, ACE also offers a
variety of other retail financial products and services to its customers,
public transportation passes, copying and fax transmission services, postage
stamps, and various prepaid services, such as long-distance telephone cards.

Store Operations

The Companys objective is to locate its company-owned stores in highly
visible, accessible locations and to operate the stores during hours convenient
for its customers. The Company attempts to locate stores on high traffic
streets or intersections, in many cases in or near destination shopping
centers. The Companys stores occupy 1,100 square feet on average and are
located in strip shopping centers, free-standing buildings, and kiosks located
inside major retail stores. The Company is focused on increasing the
customers awareness of ACE by using consistent signage and design at each
store location. All but two of the company-owned stores are leased.

Normal business hours of the company-owned stores are from 9:00 a.m. until 7:00
p.m., Monday through Thursday, 9:00 a.m. until 8:00 p.m. on Friday, and 9:00
a.m. until 6:00 p.m. on Saturday. Currently, 169 stores are also open on
Sunday, generally from 10:00 a.m. until 5:00 p.m., and several stores are open
24 hours. The business hours of any store may be changed due to local market
conditions.

New Store Economics

The Companys store construction and facilities planning staff reviews and
negotiates lease agreements for store locations, supervises the construction of
new stores and the remodeling of existing stores, and performs lease management
services once the leases are executed. Although the size and shape of a
company-owned store may vary, and since many of the stores are built within
existing space, the work area of each store is a modular-designed unit that can
be customized to meet the requirements of each location while giving a uniform
appearance. These modular units may be moved from one location to the next,
thus reducing the costs associated with opening new stores and relocating
existing stores.

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##### Table of Contents



The following tables show the average annual store revenues and the average
store contribution for company-owned stores which were opened in the year
indicated and remain open as of June 30, 2003:

|                 |  |                |     |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|---------------- |  | -------------- | --- | -------------- |  | ---------------------- | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                 |  |                |     |                |  | Average Store Revenues
|                 |  |                |     |                |  | Year Ended June 30,   
|                 |  | Number of      |     | (in thousands)
|                 |  | stores open at |     |               
|Year Opened:     |  | June 30, 2003  |     | 2003           |  | 2002                   |       | 2001 |  | 2000 |       | 1999
|                 |  |                |     |                |  |                        |       |      |  |      |       |     
|1994 and earlier |  |                | 225 |                |  | $                      | 268.1 |      |  | $    | 278.6 |      |  | $ | 245.7 |  |  | $ | 202.9 |  |  | $ | 190.1 | 
|1995             |  |                | 33  |                |  |                        | 278.5 |      |  |      | 239.2 |      |  |   | 209.6 |  |  |   | 167.3 |  |  |   | 158.6 | 
|1996             |  |                | 25  |                |  |                        | 269.2 |      |  |      | 264.4 |      |  |   | 246.1 |  |  |   | 194.4 |  |  |   | 173.8 | 
|1997             |  |                | 34  |                |  |                        | 245.3 |      |  |      | 239.6 |      |  |   | 206.1 |  |  |   | 159.6 |  |  |   | 143.5 | 
|1998             |  |                | 46  |                |  |                        | 240.7 |      |  |      | 226.5 |      |  |   | 189.7 |  |  |   | 132.1 |  |  |   | 99.5  | 
|1999             |  |                | 66  |                |  |                        | 199.4 |      |  |      | 195.5 |      |  |   | 160.6 |  |  |   | 92.3  |  |  |   | 30.3  | 
|2000             |  |                | 62  |                |  |                        | 187.3 |      |  |      | 176.5 |      |  |   | 124.2 |  |  |   | 26.4  |  |  |   |      | 
|2001             |  |                | 43  |                |  |                        | 181.9 |      |  |      | 138.7 |      |  |   | 33.5  |  |  |   |      |  |  |   |      | 
|2002             |  |                | 39  |                |  |                        | 123.6 |      |  |      | 32.7  |      |  |   |      |  |  |   |      |  |  |   |      | 
|2003             |  |                | 13  |                |  |                        | 33.8  |      |  |      |      |      |  |   |      |  |  |   |      |  |  |   |      | 
|                 |  |                |     |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                | 586 |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|Acquired stores  |  |                | 382 |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                |     |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                | 968 |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                |     |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 

|                 |  |                |     |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|---------------- |  | -------------- | --- | -------------- |  | ------------------------------ | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                 |  |                |     |                |  | Average Store Contribution (1)
|                 |  |                |     |                |  | Year Ended June 30,           
|                 |  | Number of      |     | (in thousands)
|                 |  | Stores open at |     |               
|Year Opened:     |  | June 30, 2003  |     | 2003           |  | 2002                           |       | 2001 |  | 2000 |       | 1999
|                 |  |                |     |                |  |                                |       |      |  |      |       |     
|1994 and earlier |  |                | 225 |                |  | $                              | 108.1 |      |  | $    | 118.5 |      |  | $ | 82.8  |   |  | $ | 89.9  |   |  | $ | 82.0  |  
|1995             |  |                | 33  |                |  |                                | 118.3 |      |  |      | 86.6  |      |  |   | 56.9  |   |  |   | 54.2  |   |  |   | 47.1  |  
|1996             |  |                | 25  |                |  |                                | 106.2 |      |  |      | 107.9 |      |  |   | 91.1  |   |  |   | 82.0  |   |  |   | 61.7  |  
|1997             |  |                | 34  |                |  |                                | 88.1  |      |  |      | 87.8  |      |  |   | 55.2  |   |  |   | 41.9  |   |  |   | 33.4  |  
|1998             |  |                | 46  |                |  |                                | 82.3  |      |  |      | 79.7  |      |  |   | 43.4  |   |  |   | 27.0  |   |  |   | 0.7   |  
|1999             |  |                | 66  |                |  |                                | 55.5  |      |  |      | 54.1  |      |  |   | 15.8  |   |  |   | (11.7 | ) |  |   | (15.5 | )
|2000             |  |                | 62  |                |  |                                | 44.9  |      |  |      | 42.2  |      |  |   | (8.7  | ) |  |   | (12.8 | ) |  |   |      |  
|2001             |  |                | 43  |                |  |                                | 35.6  |      |  |      | 5.5   |      |  |   | (21.6 | ) |  |   |      |   |  |   |      |  
|2002             |  |                | 39  |                |  |                                | (5.3  | )    |  |      | (24.9 | )    |  |   |      |   |  |   |      |   |  |   |      |  
|2003             |  |                | 13  |                |  |                                | (17.6 | )    |  |      |      |      |  |   |      |   |  |   |      |   |  |   |      |  
|                 |  |                |     |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                | 586 |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|Acquired stores  |  |                | 382 |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                |     |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                | 968 |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                |     |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  



| | (1) |  | Average store contribution equals revenues less direct store
expenses and store-related depreciation. Direct store expenses
consist of store salaries and benefits, occupancy costs (rent,
maintenance, taxes and utilities), returned checks net of
collections, cash shortages, armored and security costs, loan
losses, and bank charges. Direct store expenses exclude region or
corporate overhead, non-store depreciation, and amortization
expenses.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The capital cost of opening a new store varies depending on the size and type
of store. During fiscal 2003, the Company opened 14 company-owned stores at an
average capital cost of approximately $65,000 per store.

There can be no assurance that the Companys stores will continue to generate
the same level of revenues or revenue growth as in the past or that any new or
acquired store will perform at a level comparable to any of the Companys
existing stores, or that the capital cost to open a new store will not
increase.

SSM Operation

During fiscal 2003, the Company operated 21 SSMs in company-owned stores. The
Company placed over 240 SSMs at H&R Block retail offices during the 2003 tax
season. During fiscal year 2003, the Companys SSMs (located in Company stores
or in H&R Block offices) cashed 233,000 checks with a face value of $242
million, which generated net check-cashing fees to the Company of $5.6 million
(4.4% of the Companys total check-cashing fees). The majority of the checks
cashed by the SSMs were tax checks in H&R Block offices. There also can be no
assurance that the SSMs will continue to generate the same level of revenues as
in the past or that the SSMs can be successfully deployed at H&R Block offices
during the 2004 tax season.

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Advertising and Marketing

ACE markets and promotes service and product offerings by a variety of methods.
The Company believes that its most effective marketing is through in-store
programs, combining the selling efforts of store personnel with various selling
messages on point-of-purchase material. The Company emphasizes courteous
service and trains service associates to recognize and develop good
relationships with customers. All check-cashing customers participate in the
ACE PLUS gold card retention program, which rewards members with benefits like
free check-cashing commensurate with the volume of check-cashing done at ACE.
Also, through its branding with standardized signage and store design, the
Company attempts to foster an image that attracts customers and inspires
consumer confidence. The Company also benefits from vendor-sponsored media
advertising in some markets.

Supervision and Training

The Companys operations are organized in regions, which generally correspond
to the market areas in which ACE operates its stores. Each region has a
regional vice president (RVP), who reports to one of two division vice
presidents of operations and is responsible for the operations, administration,
training, and supervision of the company-owned stores in his or her region. The
Company currently has 11 RVPs who supervise an average of 88 stores each. The
Company currently has 72 district managers, each of whom reports to the RVP for
his or her region and is directly responsible for the general management of up
to 20 stores within his or her territory. These district managers are
responsible for hiring, scheduling, operations, local marketing, and employee
relations. Each center or store manager reports to a district manager, and has
direct responsibility over his or her stores operations.

Service associates, center managers, district managers, and RVPs must complete
formal training programs conducted by the Company. ACE has a Company-wide
training program, with higher-level training conducted at the corporate office
and new-hire training conducted in each regional office by corporate-trained
personnel. The purpose of this training, which covers topics ranging from
customer service to loss reduction, is to improve the Companys delivery of
products and services and facilitate compliance with legal and regulatory
requirements.

Point-of-Sale System

ACEs proprietary personal computer-based point-of-sale system is fully
operational in all company-owned stores and is used by the Companys SSMs for
cashing checks and accepting bill-payments. In addition to other management
information and control functions, the point-of-sale system allows the Company
to:



|1.  |  | capture, analyze, and update on a daily basis data relating to customers
and transactions, including the makers of checks cashed, which allows the
Company to provide service associates with on-demand access to current
information for use in approving check-cashing transactions;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|2.  |  | utilize an automated decision methodology to guide service associates to
take appropriate actions and to better manage risk in check-cashing
transactions;                                                                                                                            
|   
|3.  |  | monitor daily revenues by product or service on a company, regional, per
store, and per employee basis;                                                                                                                                                                               
|   
|4.  |  | monitor and manage daily store exception reports, which record, for
example, any cash shortages and late store opening times;                                                                                                                                                         
|   
|5.  |  | identify cash differences between bank statements and the Companys
records (such as differences resulting from missing items and deposits);                                                                                                                                          
|   
|6.  |  | determine, on a daily basis, the amount of cash needed at each store
location, allowing centralized cash management personnel to maintain the
optimum amount of cash inventory in each store;                                                                                         
|   
|7.  |  | reduce the risk of transaction errors by, for example, automatically
calculating check-cashing and other transaction fees;                                                                                                                                                            
|   
|8.  |  | provide products and services in a standardized and efficient manner,
which the Company believes allows it to operate its stores with fewer
personnel than many of its competitors (with many of the Companys stores
being operated by only one person);                             
|   
|9.  |  | electronically transmit information and documents to third-party
providers of services or products offered at the stores;                                                                                                                                                             
|   
|10. |  | determine optimal scheduling of store personnel; and                                                                                                                                                                                                                                  
|   
|11. |  | facilitate compliance with regulatory requirements.                                                                                                                                                                                                                                   

The data captured by the point-of-sale system is transmitted daily from each
store to a centralized database maintained at ACEs headquarters and is
automatically integrated into its general ledger system. The proprietary
point-of-sale system is also licensed to the Companys franchisees.

Security

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Because employee-safety is critical, all company-owned store employees work
behind bullet-resistant Plexiglas and steel-reinforced partitions. Each
company-owned stores security measures include safes, alarm systems monitored
by third parties, teller area entry control, perimeter opening entry detection,
and tracking of all employee movement in and out of secured areas. All centers
are currently using centralized security; acquired centers are typically
converted within one month of acquisition. The centralized system includes the
following security measures in addition to those described above: identical
alarm systems in all stores, remote control over alarm systems,
arming/disarming and changing user codes, and mechanically and electronically
controlled time-delay safes.

Because ACEs business requires its stores to maintain a significant supply of
cash, the Company is subject to the risk of cash shortages resulting from
employee and non-employee theft and employee errors. Although the Company has
implemented various programs to reduce these risks and provide security for its
facilities and employees, there can be no assurance that these problems will be
eliminated. During 2003 and 2002, cash shortages from employee errors and from
theft were approximately $1.3 million (0.6% of revenues) and $2.1 million (0.9%
of revenues), respectively.

The Companys point-of-sale system allows management to detect cash shortages
on a daily basis. In addition to other procedures, district managers conduct
audits of each company-owned stores cash position and inventories on an
unannounced, random basis.

Daily transportation of currency and checks is provided by nationally
recognized armored carriers. ACE employees are not authorized to transport
currency or checks.

Employees

At June 30, 2003, ACE employed 2,174 persons: 842 service associates at
company-owned stores, 976 store managers, 72 district managers, 11 regional
vice presidents, 169 region support personnel (located in region offices and
the corporate office), 97 corporate employees and 7 franchise personnel.
Third-party firms hired by the Company conduct background checks of all Company
new hires.

The Company considers its employee relations to be good. ACEs employees are
not covered by a collective bargaining agreement, and the Company has never
experienced any organized work stoppage, strike, or labor dispute. Generally,
the Companys employees are not bonded.

Competition

The Company believes that the principal competitive factors in the
check-cashing industry are location, customer service, fees, convenience, and
range of services offered. The Company faces intense competition and believes
that the check-cashing market is becoming more competitive as the industry
matures and consolidates. The Company competes with other check-cashing stores,
grocery stores, banks, savings and loans, short-term consumer lenders, other
financial services entities, and any retail businesses that cash checks, sell
money orders, provide money transfer services, or other similar financial
services. Certain competitors of the Company, other than check-cashing stores,
cash checks without charging a fee under limited circumstances. Some of the
Companys competitors that are not check-cashing companies have larger and more
established customer bases and substantially greater financial, marketing, and
other resources. The Companys stores have also recently been facing
competition from automated check-cashing machines deployed in supermarkets,
convenience stores, and other public venues by large financial services
organizations. There is no assurance that the Company will be able to compete
successfully with its competitors.

Trademarks and Patents

The Company has obtained several federal trademark registrations, including for
A-C-E Americas Cash Express®, ACE® and its logo design

The Companys two process patent applications related to its software used in
the SSMs, filed during fiscal 2002, are still pending.

Regulation

General.The Company is subject to regulation in several jurisdictions in
which it operates, including jurisdictions that regulate check-cashing fees or
require the registration of check cashing companies or money transmission
agents. The Company is also subject to federal and state regulation relating
to the recording and reporting of certain financial transactions and relating
to the privacy of customer information. Further, the Companys loan-related
activities are subject to state regulation and, in certain respects, federal
regulation.

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State Regulations.In some states, check-cashing companies or money
transmission agents are required to meet minimum bonding or capital
requirements and are subject to record-keeping requirements. The Company
operates in 17 states or jurisdictions that have licensing and/or fee
regulations regarding check cashing: Arkansas, Arizona, California, Florida,
Georgia, Indiana, Louisiana, Maryland, Nevada, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia, Washington, and the District
of Columbia. The Company is licensed in each of the states or jurisdictions in
which a license is currently required for it to operate as a check cashing
company. To the extent these states have adopted ceilings on check cashing
fees, those ceilings are in excess of or equal to the fees charged by the
Company.

In those states in which the Company operates or has operated as a short-term
consumer or payday lender, it is or has been licensed as such and is or has
been subject to the various states regulations governing the terms of
short-term consumer or payday loans. Typically, the states regulations
limit the amount that a lender or service-provider may lend or provide (and, in
some cases, the number of loans or transactions that a lender or
service-provider may make) to any customer at one time, restrict the amount of
finance or service charges or fees that the lender or service-provider may
assess in connection with any loan or transaction, and limit a customers
ability to renew any loans or transactions. The lender or service-provider
must also comply with various consumer-disclosure requirements, which are
typically similar or equivalent to the federal Truth in Lending Act and
corresponding federal regulations, in connection with the loans or
transactions. Collection activities regarding past-due loans or similar
transactions may also be subject to consumer-debt-collection laws and
regulations adopted by the various states.

The Company is subject to franchising laws and regulations in the states in
which it offers and sells franchises. Those laws and regulations vary by
state, but generally include filing or registration requirements,
record-keeping requirements, and mandated disclosures to prospective
franchisees

Federal Regulations.Under the Bank Secrecy Act regulations of the United
States Department of the Treasury (the Treasury Department), transactions
involving currency in an amount greater than $10,000 or the purchase of
monetary instruments for cash in amounts from $3,000 to $10,000 must be
reported. In general, every financial institution, including the Company, must
report each deposit, withdrawal, exchange of currency or other payment or
transfer, whether by, through or to the financial institution, that involves
currency in an amount greater than $10,000. In addition, multiple currency
transactions must be treated as single transactions if the financial
institution has knowledge that the transactions are by, or on behalf of, any
person and result in either cash in or cash out totaling more than $10,000
during any one business day. Management believes that the Companys
point-of-sale system and employee-training programs permit the Company to
comply with these requirements.

The Bank Secrecy Act also requires the registration of money services
businesses, like the Company, that engage in check cashing, currency exchange,
money transmission, or the issuance or redemption of money orders, travelers
checks, and similar instruments. This registration is intended to enable
governmental authorities to better enforce laws prohibiting money laundering
and other illegal activities. The Company is registered as a money services
business with the Treasury Department, and must re-register with the Financial
Crimes Enforcement Network of the Treasury Department (FinCEN), by December
31, 2003, and at least every two years thereafter. The Company must also
maintain a list of names and addresses of, and other information about, its
agents and must make that list available to any requesting law enforcement
agency (through FinCEN). That agent list must be updated at least annually.
The Company does not believe that compliance with the these existing
requirements has had or will have any material impact on its operations.

In addition, federal regulations require money services businesses like the
Company to report suspicious transactions involving at least $2,000 to FinCEN.
The regulations generally describe three classes of reportable suspicious
transactions  one or more related transactions that the money services
business knows, suspects, or has reason to suspect (1) involve funds derived
from illegal activity or are intended to hide or disguise such funds, (2) are
designed to evade the requirements of the Bank Secrecy Act, or (3) appear to
serve no business or lawful purpose. Because of the Companys point-of-sale
system and employee-training programs, the Company does not believe that
compliance with the existing reporting requirement, and the corresponding
recordkeeping requirements, has had or will have any material impact on its
operations.

The Gramm-Leach-Bliley Act and its implementing federal regulations require the
Company to generally protect the confidentiality of its customers nonpublic
personal information and to disclose to its customers its privacy policy and
practices, including those regarding sharing the customers nonpublic personal
information with third parties. That disclosure must be made to customers at
the time that the customer relationship is established and at least annually
thereafter.

The USA PATRIOT Act of 2001 and its implementing federal regulations require
the Company, as a financial institution, to establish and maintain an
anti-money-laundering program. Such a program must include (1) internal
policies, procedures, and controls designed to identify and report money
laundering, (2) a designated compliance officer, (3) an ongoing
employee-training program, and (4) an independent audit function to test the
program. Because of its compliance with other

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federal regulations having essentially a similar purpose, the Company does not
believe that compliance with these requirements has had or will have any
material impact on its operations.

Short-term Loans.Since January 1, 2003, all of the small, short-term loan
products or similar services offered at the Companys stores have consisted of
either (1) short-term loans or deferred-deposit services made or entered into
by the Company, or (2) deferred-deposit loans or services made or entered into
by Republic Bank. The Companys activities as a short-term consumer or
payday lender obligate it to comply with the consumer-disclosure requirements
of the federal Truth in Lending Act and Regulation Z adopted under that act.
The Companys activities as a collection agent for past-due Republic Bank loans
(see  Short-Term Loans below) obligate it to comply with the federal Fair
Debt Collection Practices Act and corresponding regulations.

Republic Bank is subject to supervision by the Federal Deposit Insurance
Corporation (the FDIC). In July 2003, the FDIC issued guidelines governing
permissible arrangements between a state-chartered bank and a loan marketer and
servicer regarding short-term consumer loans. Those guidelines apply to the
arrangements between Republic Bank and the Company regarding the offering of
Republic Bank loans at the Companys stores in Arkansas, Pennsylvania, and
Texas and the Companys servicing activities regarding those loans. The
guidelines describe the FDICs expectations for a banks prudent
risk-management practices regarding short-term consumer loan marketing and
servicing relationships; they address bank capital requirements, allowances for
loan losses, and loan classifications as well as income recognition,
collection-recovery practices, and compliance with consumer-protection laws.
The Company does not believe that the FDICs guidelines will have a material
impact on its existing relationship with Republic Bank. Nevertheless, if the
FDICs implementation of those guidelines were to ultimately restrict the
ability of all or certain state-chartered banks (including Republic Bank) to
maintain relationships with short-term consumer loan servicers, it could have a
material adverse impact on the Companys loan-related activities and revenues.

As a state-chartered, FDIC-insured bank, Republic Bank is subject to regular
examination by state and regulatory bank authorities, including the FDIC.
Because of the Companys contractual relationship with Republic Bank, the
Companys activities regarding the Republic Bank loans are also subject to
examination by the FDIC and the other regulatory authorities to which Republic
Bank is subject. To the extent an examination involves review of the Republic
Bank loans and related processes, the regulatory authority may require the
Company to provide requested information and to grant access to the Companys
pertinent locations, personnel, and records.

Most states in which the Company conducts business authorize, or at least
permit, short-term consumer or payday loans to be offered and made. Over the
past few years, however, consumer-advocacy groups and certain media reports and
stories have advocated governmental action to prohibit or severely restrict
loans of this kind. The consumer groups and media stories typically focus on
the cost to a consumer for this type of loan, which is higher than the interest
typically charged by credit-card issuers to a more creditworthy consumer. This
difference in credit cost is more significant if a consumer does not promptly
repay the short-term loan, but renews (or rolls over) that loan for one or
more additional short-term periods. The consumer groups and media stories
typically characterize short-term lending activities as abusive toward
consumers. The Office of the Comptroller of the Currency, which supervises
national banks, has taken actions in the past year to effectively prohibit
certain national banks from offering and making short-term consumer loans,
because of various risks posed to those banks. Also, during the last few
years, legislation has been introduced in the United States Congress and in
certain state legislatures, and regulatory authorities have proposed or
publicly addressed the possibility of proposing regulations, that would
prohibit or severely restrict short-term consumer loans. The Company is not
aware of any such federal legislation or federal regulatory proposal that has
made any significant progress in the legislative or regulatory process. But
legislation and regulatory action that affects consumer lending has recently
become effective in a few states and could be taken in other states. The
Company intends to continue, with others in the short-term consumer loan
industry, to inform and educate legislators and to oppose legislative or
regulatory action that would prohibit or severely restrict short-term consumer
loans. But if legislative or regulatory action with that effect were taken on
the federal level or in states such as Texas, in which the Company has a
significant number of stores, that action could have a material adverse effect
on the Companys loan-related activities and revenues.

Relationships with the Money Order and MoneyGram Suppliers

Money Order Agreement.In April 1998, the Company signed a money order
agreement with Travelers Express which became effective December 17, 1998.
Under this five-year agreement, the Company exclusively sells Travelers Express
money orders that bear the Companys logo. In conjunction with this agreement
and the MoneyLine Agreement for bill-payment services (which also has a
five-year term), the Company received $3 million from Travelers Express in
April 1998, and received $400,000 in each of the remaining years of the
contract, for a total of $5 million. See Managements Discussion and Analysis
of Financial Condition and Results of Operations  Liquidity and Capital
Resources and Note 10 of Notes to Consolidated Financial Statements. The
existing money order agreement expires as of December 31, 2003. If the money
order agreement is terminated under certain circumstances before that
expiration, the Company will be obligated to

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repay a portion of the amounts received from Travelers Express. The money
order agreement obligates the Company to make prompt remittances of money order
proceeds. The Companys payment and other obligations to Travelers Express
under the money order agreement and the MoneyGram agreement are secured by a
subordinated lien on the Companys assets in accordance with security
agreements described Note 4 of Notes to Consolidated Financials Statements.

The Company and Travelers Express are negotiating an agreement to amend the
existing money order agreement (with terms that are substantially the same as
the terms of the existing money order agreement) and to extend the term to
December 31, 2007. The Company anticipates that such an amendment will be
entered into with Travelers Express, but no amendment has been executed, and
the Company cannot give any assurance that such an amendment will be executed.
If the Company is unable to enter into such an amendment with Travelers
Express, it will attempt to negotiate and enter into an agreement with another
issuer of money orders, which the Company believes to be possible.

MoneyGram Services Agreement.The Company is an agent for the receipt and
transmission of wire transfers of money through the MoneyGram network in
accordance with a Money Transfer Agreement with Travelers Express and MoneyGram
Payment Systems, Inc. (MPS), an affiliate of Travelers Express, that became
effective on January 1, 2001 (the MoneyGram Agreement). The Company agreed
to offer and sell only MoneyGram wire transfer services during the seven-year
term of the MoneyGram Agreement. Under the MoneyGram Agreement, the Company
earns commissions for each transmission and receipt of money through the
MoneyGram network effected at a company-owned location; those commissions equal
varying percentages of the fees charged by MPS to consumers for the MoneyGram
services.

Under the MoneyGram Agreement, the Company is also entitled to receive a total
of approximately $12.5 million in bonuses, payable in equal monthly
installments (without interest) over the seven-year term. The amount of those
monthly installments will be subject to reduction if the Company closes or
sells a significant number of those locations at which MoneyGram services were
offered at the beginning of the MoneyGram Agreement. In addition, the Company
will be entitled to receive certain incentive payments regarding new MoneyGram
service locations that it opens or acquires during the term of the MoneyGram
Agreement.

General.The Companys relationship with Travelers Express and its affiliates
includes the money order agreement and the MoneyGram Agreement as well as (less
significantly) the MoneyLine Agreement for bill-payment services, and is
therefore significant to the Companys business. Though the Company
anticipates that the MoneyLine Agreement will expire at the end of December
2003, the Company does not anticipate any disruption of the more significant
aspects of its relationship with Travelers Express and its affiliates. If such
a disruption were to occur, however, the Companys business could be materially
and adversely affected.

Short-Term Loans

Until December 31, 2002, the Company was a party to the Goleta Agreement.
Under the Goleta Agreement, short-term loans made by Goleta (Goleta Loans)
were offered at most company-owned locations. A Goleta Loan could be up to
$500 and had to be repaid or renewed in 14 days. Under the Goleta Agreement,
the Company purchased from Goleta a participation representing 90% of each
Goleta Loan made on a previous day. Goleta determined the interest rate (and
other terms) of the Goleta Loans. As of January 1, 2003, the Company no longer
offered Goleta Loans at any of its stores.

Since January 1, 2003, all of the small, short-term loan products or similar
services, commonly referred to as payday loans, offered at the Companys
stores have consisted of either (1) short-term loans or deferred-deposit
services made or entered into by the Company, or (2) deferred-deposit loans or
services made or entered into by Republic Bank. As of June 30, 2003, the
Company was offering its own small short-term loan or deferred-deposit service
in 512 of its owned stores, and Republic Bank was offering its deferred-deposit
loan or service in 350 of the Companys owned stores in Texas, Pennsylvania,
and Arkansas. All of these loans and services, regardless of type, are made in
accordance with state regulation; therefore, the terms of the loans and
services vary from state to state.

In general, the Companys payday loan product or service consists of providing
a customer cash in exchange for the customers check or an ACH authorization to
debit the customers bank account, along with an agreement to defer the
presentment or deposit of that check or the initiation of that ACH debit on the
customers account, as the case may be, until the customers next payday. The
amount of the customers check or ACH authorization is the amount of the cash
provided to the customer plus a fee to the Company. The term of the deferral
of the check presentment or ACH debit is typically two to four weeks. During
the year ended June 30, 2003, the average amount of cash provided to a customer
in such a transaction was $262, and the average fee to the Company was $39.41.
As of June 30, 2003 and June 30, 2002, the gross receivable for the Companys
payday loans was approximately $20.2 million and $2.3 million, respectively.

Republic Bank offers and makes its deferred-deposit loans or services at the
Companys stores in accordance with a Marketing and Servicing Agreement with
the Company dated as of October 21, 2002, as amended (the Republic Bank

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Agreement). The terms of those deferred-deposit loans or services are
generally similar to those of the Companys own loan products or services,
though Republic Bank has sole discretion regarding the terms of its loans or
services. As of June 30, 2003, Republic Bank authorized loans up to $425 with
a term of 14 days. Under the terms of the Republic Bank Agreement, Republic
Bank pays the Company an agency fee for the Companys services in marketing or
processing the Republic Bank loans at the stores and in collecting outstanding
Republic Bank loans. The Company does not acquire or own any participation
interest in any of the Republic Bank loans, but the Companys fees are subject
to reduction by the losses from uncollected Republic Bank loans.

Loan fees and interest include the Companys interest and fees received from
its participation interests in Goleta Loans, its fees and interest received
from customers of the Companys payday loan product or service, and its agency
fees received from Republic Bank related to Republic Bank loans. Loan fees and
interest revenues are recognized ratably over the term of each loan, regardless
of the type of revenue or loan.

The Company has established a loan loss allowance regarding its economic
interests in all of the loans, regardless of type (i.e., whether Goleta Loans
or the Companys payday loans). The Companys policy for determining the loan
loss allowance is based on historical loan loss experience generally, as well
as the results of managements review and analysis of the payment and
collection of the loans within the last fiscal quarter. The Companys policy
is to charge off interests in all of the Goleta Loans and the Companys payday
loans which are 180 days or more past due. Charge-offs are applied as a
reduction to the allowance for loan losses and any recoveries of previously
charged off loans are applied as an increase to the allowance for loan losses.
The Company establishes a payable to Republic Bank to reflect the Companys
obligation to, in effect, bear Republic Bank loan losses; that payable
estimates such losses from such loans that are 180 days or more past due.

Relationship with H&R Block/SSM Arrangements

The Company is a party to a multi-year license agreement with H&R Block under
which the Company may place its SSMs in various H&R Block retail offices during
the tax season (i.e., January through March) of each year. Those SSMs are
available to cash only tax refund and tax refund anticipation loan checks for
H&R Blocks customers. The Company receives check-cashing fees from customers
who use those SSMs, and the Company pays H&R Block fees that vary according to
the value of the checks cashed in those SSMs. The Company placed over 240 SSMs
in H&R Block retail offices during the 2003 tax season, and anticipates placing
up to more than 200 SSMs at H&R Block retail offices during the 2004 tax
season.

The arrangements by which the Company has obtained cash or currency for the
SSMs in the H&R Block retail offices are described in Managements Discussion
and Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources  SSM Funding Arrangements.

Liquidation of Investment in ePacific

In March and April 2000, the Company purchased approximately 14% of the shares
of preferred stock of ePacific Incorporated (ePacific), a private company
that provided customized debit-card payment systems and electronic funds
transfer processing services, for a total of $1 million. ePacific, formerly a
controlled subsidiary of Goleta, provided the debit-card system and processing
services to Goleta to enable it to make the Goleta Loans.

The Companys investment in ePacific was made at the same time, and on the same
terms, as the investment by two venture capital investors. The Company
purchased approximately 14% of the shares of ePacifics Series A Convertible
Preferred Stock purchased by the group of investors. Under a stockholders
agreement with ePacific and its other stockholders, the Company had the right
to designate one person to serve as a director of ePacific. Jay B. Shipowitz,
the Companys President and Chief Operating Officer, served as a director of
ePacific until August 22, 2003.

As part of the agreement with Goleta entered into as of November 1, 2002, under
which the Company and Goleta terminated their relationship, the Company
acquired, for a nominal amount, all of the shares of common stock of ePacific
that were owned by Goletas corporate parent.

On June 2, 2003, the board of directors of ePacific elected to dissolve the
corporation and liquidate its assets, resulting in a cash distribution to the
Company of $297,000 and a loss on investment to the Company of $703,000.

Payment of Secured Notes

In December 1996, the Company issued $20 million of its 9.03% Senior Secured
Notes (Notes) to Principal Life Insurance Company (formerly known as
Principal Mutual Life Insurance Company). Interest on the unpaid principal
amount of the Notes, accruing at 9.03% per annum, was payable semiannually on
May 15 and November 15 of each year, and the principal

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amount of the Notes was payable in five equal installments of $4 million on
November 15 of each year. In March 2003, the Company paid all amounts due
under the Notes by prepaying the final installment of $4.0 million of principal
which was payable on November 15, 2003, all accrued interest, and expenses
related to prepayment of $270,000 under the terms of the Notes.

Credit Facilities

Until March 31, 2003, the Company was a party to an Amended and Restated Credit
Agreement (the Credit Agreement) with a syndicate of banks (the Lenders),
led by Wells Fargo Bank Texas, National Association (Wells Fargo Bank).

The Credit Agreement provided the Company with a revolving line-of-credit
facility and a term-loan facility. The revolving facility was available for
working capital of the Company, and the term-loan facility was available for
capital expenditures of the Company. Also, in addition to the primary credit
facilities, the Company had available, from Wells Fargo Bank and certain of the
other Lenders, a seasonal revolving advance facility of up to $25 million from
January 1 through March 31, 2003, and, from Wells Fargo Bank, a standby
letter-of-credit facility of up to $1.5 million.

On March 31, 2003, the Company refinanced its outstanding revolving and term
loan indebtedness by entering into:



| |  | a new credit agreement with a syndicate of banks led by JP Morgan Chase
Bank, as agent and syndication agent, and Wells Fargo Bank, as
administrative agent, for themselves and other lenders that provides for
revolving credit facilities of up to $165 million; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a note purchase agreement with American Capital Financial Services, Inc.,
as agent for its affiliate American Capital Strategies, Ltd., which
purchased $40 million of the Companys senior subordinated secured
promissory notes.                                    

The credit facilities under the new credit agreement and the indebtedness
incurred under the note purchase agreement replaced the revolving and term-loan
credit facilities and the outstanding indebtedness under the Credit Agreement.
The revolving facilities under the new credit agreement replaced the revolving
facilities under the Credit Agreement, and the indebtedness incurred by the
Company under the note purchase agreement was used to fully pay the outstanding
term loans, and terminate the term loan facility, under the Credit Agreement.
For a description of the terms of the refinanced indebtedness, see Note 4 of
Notes to Consolidated Financial Statements.




ITEM 2. PROPERTIES

All but two of the Companys stores are leased, generally under leases
providing for an initial term of three years and optional renewal terms of from
three to six years. The Company owns the land and building at which two of the
Companys stores are located, one in Indianapolis, Indiana and the other in
Tampa, Florida. The Companys headquarters offices in Irving, Texas, a suburb
of Dallas, occupy approximately 56,000 square feet under an 84-month lease, the
term of which expires in 2008.




ITEM 3. LEGAL PROCEEDINGS

Goleta Loan-Related Lawsuits and Pending Settlement

The Company is a defendant in a number of lawsuits regarding its former
arrangements with Goleta National Bank (Goleta) under which small, short-term
consumer loans made by Goleta (Goleta Loans) were offered at most of the
Companys stores before January 1, 2003. See Business  Customers and
Services  Loan services and   Short-Term Loans. The lawsuits pending as
of September 26, 2003, are described below. The Company has, however, entered
into a settlement agreement in the Purdie lawsuit described below. That
lawsuit purports to be a nationwide class action on behalf of all borrowers of
Goleta Loans. The Company believes that the settlement, if finally approved by
the federal court in which the Purdie lawsuit is pending, will result in the
release of all claims against the Company (and Goleta) not only in the Purdie
lawsuit, but also in the other pending Goleta Loan-related lawsuits.

A key issue in the existing Goleta Loan-related lawsuits is whether Goleta or
the Company is properly regarded as the lender. The Company and Goleta
maintain that, as stated in the legal documents and marketing materials for the
Goleta Loans, Goleta was the lender and that, because Goleta was a national
bank located in California, the Goleta Loans, including the interest that may
legally be charged, should be governed by federal and California law. The
opposing parties in most of these lawsuits, however, maintain that the Company
should be regarded as the lender, because of its agent services in connection
with the Goleta Loans and its purchase of participation interests in the Goleta
Loans, and that the Goleta Loans, including the interest that may legally be
charged, should be governed by the laws of the respective states in which the
borrowers reside. If the Company were held to be the lender, then the interest
charged for the Goleta Loans would violate most of the applicable states usury
laws, which impose maximum rates of interest or finance charges that a non-bank
lender may charge. The

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consequences to the Company of such a holding in any lawsuit would depend on
the applicable states usury and consumer-protection laws and on the basis for
a finding of violation of those laws. But those consequences could include the
Companys obligation to refund interest collected on the illegal Goleta Loans,
to refund the principal amount of the illegal Goleta Loans, to pay treble or
other multiple damages, and to pay monetary penalties specified by applicable
statutes. The amounts that the Company might be required to pay (as damages
and other relief) if it were held to be the lender of the Goleta Loans could,
depending on the circumstances, significantly impair the Companys financial
resources and financial condition. During the last year, a federal district
court in Indiana agreed with the Companys and Goletas position that Goleta is
properly regarded as the lender of the Goleta Loans. This is the sole court
decision that has addressed the merits of this key issue.

The Company anticipates that the settlement in the Purdie lawsuit, as described
below, will receive final court approval and will be implemented. If the
settlement is not finally approved or implemented, however, the Company expects
that the defense of the lawsuits, even if successful, will continue to require
substantial time and attention of certain of its senior officers and other
management personnel that would otherwise be spent on other aspects of its
business and will continue to require the expenditure of significant amounts
for legal fees and other litigation-related costs. See Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Liquidity and Capital Resources  Litigation Expenses. In addition, the
Company would continue to have the risk of an adverse determination in the
Goleta Loan-related lawsuits.

Jennafer Long v. Ace Cash Express, Inc.: This lawsuit regarding Goleta Loans
offered and made at the Companys locations in Florida was filed in a Florida
state Circuit Court in Clay County, Florida, and was served on the Company on
November 8, 2000. The plaintiff, for herself and others similarly situated,
alleges that the Goleta Loans offered at the Companys locations in Florida are
being made by the Company rather than by Goleta and, therefore, that those
Goleta Loans violate Florida usury laws and the offering of those Goleta Loans
involves misrepresentations and deceptive practices in violation of Florida
law. The plaintiff seeks an unspecified amount of damages, including an amount
equal to all interest charged on the Goleta Loans made in Florida, the
plaintiffs attorneys fees, and court costs.

The Companys attempt to remove this case to federal court was unsuccessful.
On October 2, 2001, the court granted Goletas motion to intervene as a
defendant in this lawsuit. The Company and Goleta filed a motion to dismiss
the plaintiffs complaint on the basis that Goleta is the lender of the Goleta
Loans and, under federal law, is entitled to charge interest at the rate
permitted by California law. But on March 20, 2002, the court denied that
motion, and on April 19, 2002, each of the Company and Goleta filed its answer
to the plaintiffs complaint. The parties were conducting discovery in this
lawsuit until the settlement agreement was entered into in the Purdie lawsuit.
The plaintiffs counsel in this lawsuit is a party to, and is supporting, the
settlement agreement in the Purdie lawsuit, which, if finally approved, will
effectively settle and terminate this lawsuit as well.

Vonnie T. Hudson v. Ace Cash Express, Inc. et al.: This lawsuit regarding the
Goleta Loans offered and made at the Companys locations in Indiana was filed
on September 11, 2001 in the United States District Court for the Southern
District of Indiana. This lawsuit was filed against the Company; Goleta; the
Companys Chairman of the Board, Raymond C. Hemmig; the Companys Chief
Executive Officer, Donald H. Neustadt; the Companys President and Chief
Operating Officer, Jay B. Shipowitz; and a former employee of the Company. The
plaintiff alleged violations of (1) the Indiana Uniform Consumer Credit Code
(UCCC) and the Indiana loansharking statute, because the interest charged
for the Goleta Loans exceeded the finance charges permitted by those statutes,
(2) the federal Truth in Lending Act (TILA), Regulation Z, and the Indiana
UCCC, because the disclosures to borrowers of Goleta Loans did not comply with
the disclosure requirements of those laws, and (3) the federal Racketeer
Influenced Corrupt Organizations (RICO) Act. In the complaint the plaintiff
purported to represent a class of all persons to whom a Goleta Loan has been
made at any location of the Company in Indiana (a) since September 11, 1999,
regarding the excess-charge claims, (b) since September 11, 2000, regarding the
disclosure-violation claims, and (c) since September 11, 1997, regarding the
federal RICO Act claims. The plaintiff sought relief of various kinds,
including (i) for the members of the class of plaintiffs who were allegedly
charged excessive interest, an order declaring the Goleta Loans to them void,
the refund of all finance charges or interest paid by them in excess of the
maximum finance charges permitted under the Indiana UCCC, and a penalty (to be
determined by the court) in a maximum amount equal to the greater of either all
of the finance charges or interest received from them or up to ten times the
amount of all excess finance charges or interest received from them; (ii) for
the members of the class of plaintiffs who allegedly did not receive proper
disclosures under the federal TILA, Regulation Z, and the Indiana UCCC,
statutory damages of $500,000 each for violations of those statutes; (iii) for
the members of the class of plaintiffs allegedly damaged because of violations
of the RICO Act, an amount equal to three times those damages; and (iv) the
plaintiffs attorneys fees and court costs.

On December 17, 2001, the defendants filed a motion to dismiss the plaintiffs
complaint, and on May 30, 2002, the court granted the motion. Based on its
review of the complaint and other filed documents, the court concluded that
Goleta made the Goleta Loan to the plaintiff and then sold a participation
interest in that Goleta Loan to the Company, so that the claims

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asserted in the complaint were not sufficient to entitle the plaintiff to any
damages or other legal relief. The court, however, afforded the plaintiff an
opportunity to amend her complaint to assert legally sufficient claims.

On June 25, 2002, the plaintiff filed an amended complaint, which is
substantially similar to the complaint that was dismissed, except that the
amended complaint did not name Goleta as a defendant and does not assert any
disclosure-violation claims. On July 8, 2002, the Company and other remaining
defendants filed a motion to dismiss the amended complaint, asserting that the
amended complaint did not allege sufficient new facts to justify relief and
that the courts initial decision is dispositive. On September 30, 2002, the
court entered an order dismissing the amended complaint with prejudice. On
October 15, 2002, the plaintiff filed a notice of appeal to the United States
Court of Appeals for the Seventh Circuit. That appeal was pending when the
settlement agreement was entered into in the Purdie lawsuit. The plaintiffs
counsel in this lawsuit is a party to, and is supporting, the settlement
agreement in the Purdie lawsuit, which will effectively settle and terminate
this lawsuit as well.

Rufus Patricia Brown v. Ace Cash Express, Inc. et al.: This lawsuit regarding
both the Companys former payday loan activities and the Goleta Loans offered
and made at the Companys locations in Maryland was filed on August 20, 2001 in
the Circuit Court for Baltimore City, Maryland. On September 12, 2001, the
plaintiff filed an amended complaint against the Company and unnamed
franchisees of the Company. In the complaint, the plaintiff purports to
represent a class of all consumers with whom the Company has entered into any
payday-loan transaction or to whom a Goleta Loan has been made at any location
of the Company in Maryland since April 1, 2000. The plaintiff alleges that the
defendants loan-related activities violate the Maryland usury laws, the
Maryland Consumer Loan Law, the Maryland Unsecured Closed End Credit Regulation
Act, and the Maryland Consumer Protection Act and are unconscionable under
Maryland law. The plaintiff seeks relief of various kinds, including a
permanent injunction against any further alleged illegal activities, an order
that all obligations of the class of plaintiffs to the defendants are void, the
return (as restitution) to the class of plaintiffs of all amounts paid to the
defendants, an order dissolving the Company and prohibiting all defendants from
conducting any further financial services business, the disgorgement and return
of all profits from the loan-related activities, the plaintiffs attorneys
fees and expenses, and court costs.

On September 7, 2001, the Company removed this lawsuit to the United States
District Court for the District of Maryland, but on November 14, 2001, the
federal court granted the plaintiffs motion to remand this lawsuit back to the
Circuit Court of Baltimore City. On January 3, 2002, Goleta filed a motion to
intervene as a defendant in this lawsuit, and the court granted that motion on
January 8, 2002. The parties were conducting discovery in this lawsuit until
the settlement agreement was entered into in the Purdie lawsuit. The
plaintiffs counsel in this lawsuit is a party to, and is supporting, the
settlement agreement in the Purdie lawsuit, which, if finally approved, will
effectively settle and terminate this lawsuit as well.

Beverly Purdie v. Ace Cash Express, Inc. et al.: This lawsuit regarding both
the Companys former payday loan activities and the Goleta Loans offered and
made at the Companys locations was filed on September 6, 2001 in the United
States District Court for the Northern District of Texas. The original
complaint named as defendants the Company and certain of the executive officers
and directors and a former employee of the Company. As the result of two
amended complaints, however, only the Company and Goleta are currently
defendants in this lawsuit. In her second amended complaint, the plaintiff
purports to represent a class of all consumers in the United States with whom
the Company has entered into any payday-loan transaction or to whom a Goleta
Loan has been made at any location of the Company since September 6, 1997, as
well as sub-classes of persons who have engaged in those kinds of transactions
with the Company or at the Companys locations and are alleged to be victims of
usury or of unfair or deceptive lending practices under the laws of various
states in the United States during the time periods within the various
applicable statutes of limitations. The plaintiffs allege that the defendants
loan-related activities violate the federal RICO Act and the laws and
regulations of various states regarding usury, deceptive trade practices
(including the Texas Deceptive Trade Practices Act), and other consumer
protections. The plaintiff seeks relief of various kinds, including a
permanent injunction against any further alleged illegal activities; the return
(as restitution) to the class and sub-classes of plaintiffs of all amounts paid
to the defendants; damages equal to three times the amount of all fees and
interests paid by the class and sub-classes of plaintiffs since September 6,
1997; punitive damages of at least $250 million; the plaintiffs attorneys
fees; and court costs.

On January 18, 2002, the Company and Goleta filed a motion to dismiss the
second amended complaint, asserting that the federal RICO Act claims are
legally deficient and should be dismissed and that, if those claims are
dismissed, the court should not retain jurisdiction of the remaining state-law
claims. On October 29, 2002, the court granted the Companys and Goletas
motion to dismiss the plaintiffs complaint. The court found that the
plaintiff did not allege sufficient facts to support her federal RICO Act
claims and, accordingly, dismissed those claims with prejudice. In the absence
of federal-law claims, the court declined to retain jurisdiction over the
plaintiffs claims and, accordingly, dismissed those claims without prejudice.

On May 12, 2003, the Company entered into an agreement to settle and terminate
this lawsuit. The settlement agreement is subject to the approval of the
court, and if it is finally approved, the settlement agreement will result in
the release of substantially all of the claims of former borrowers against the
Company (and Goleta) not only in this lawsuit, but also in the

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Long, Hudson, and Brown lawsuits, and in the termination of all four lawsuits.
Court approval of the settlement agreement will also effectively settle and
terminate the Hale lawsuit described below, although (unlike the plaintiffs
counsel in the Long, Hudson, and Brown lawsuits) the plaintiffs counsel in the
Hale lawsuit is neither a party to nor supporting the settlement agreement.

In the settlement agreement, the Company agreed:



| |  | To pay:
|- |  | -------



| |  |  | At least $2.5 million as refunds to former borrowers who have repaid all of their Goleta Loans and who timely submit claims
for refunds or, if the refunds and certain other amounts paid by the Company total less than $2.5 million, the amount of the
shortfall to certain consumer-advocacy organizations. The refund payable by the Company to each eligible former borrower who
files a refund claim will be equal to approximately five percent of the interest or finance charges paid by that borrower,
but not less than $7.50 or more than $45.00.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Up to $2.1 million as attorneys fees to the plaintiffs counsel in the Purdie, Long, Hudson, and Brown lawsuits.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Notice and other administrative costs in connection with the settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| |  | To discontinue, by July 1, 2003, any further efforts to collect any amounts due under any remaining unpaid Goleta Loans,
which will be forgiven and canceled by Goleta. Because Goleta Loans were not offered on or after January 1, 2003, this
required date to cease collection activities corresponds to the Companys policy to charge off its participation interests in
Goleta Loans that are 180 days past due.                                                                         
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | To ensure that any of the Companys short-term consumer loans or deferred-deposit transactions made under state law during
the two years ending December 31, 2004 are made only in compliance with any applicable state payday-lending laws; except that
the Company may rely on federal-preemption rules in connection with acting as marketing and servicing agent for the Republic
Bank deferred-deposit loans made at or through the Companys stores in Arkansas, Pennsylvania, and Texas.
| 
| |  | For the two years following the date on which the Company makes the settlement payments (which must be within 60 days after
final court approval of the settlement and the lapse of any appeal period), to:                                                                                                                                                                                                                                                                                    



| |  |  | make specified disclosures to borrowers of the Companys payday loans regarding the expense of such loans and regarding
certain collection-related expenses to which borrowers might become subject; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | abide by specified restrictions on activities to collect its payday loans through Automated Clearinghouse (ACH) debits and on
credit reporting regarding borrowers of its payday loans.                 



| |  | Within 45 days after preliminary court approval of the settlement and at least 60 days before the scheduled hearing regarding
final court approval of the settlement, to:
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | publish in a newspaper of national circulation, mail to all former borrowers of Goleta Loans, and post in each of the
Companys owned stores, notices (in specified forms) that announce the settlement, the potential benefits of the settlement
to the former borrowers, and the procedure for borrowers refund claims; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | maintain a toll-free telephone number to facilitate communications with any former borrower who wishes to file a refund claim.                                                                                                                                                                                                

On June 13, 2003, the court granted preliminary approval of the settlement
agreement. Accordingly, the Company and began to publish, mail, and post the
settlement notices and began the other claim procedures, as contemplated by the
agreement.

The settlement agreement will also be subject to subsequent final court
approval, after a hearing to be conducted after implementation of the notice
and claims procedures. That court hearing is scheduled for October 15, 2003.
The Company will be obligated to make the settlement payments within 60 days,
and to perform its other covenants, after final approval by the court and the
lapse of any appeal period. The Company cannot predict when, after the hearing,
the court will rule on the settlement or if the court will grant final approval
of the settlement agreement.

The settlement agreement will become ineffective, and be terminated, if the
court does not grant final approval or if, on any appeal, final approval is
either reversed or modified in a manner unsatisfactory to the parties. The
Company may also withdraw from the settlement agreement and terminate it if any
of the Long, Hudson, or Brown lawsuits is not dismissed upon final approval or
if more than 1,000 eligible former borrowers of Goleta Loans elect to opt out
or exclude themselves from the settlement.

Hale v. Ace Cash Express, Inc.: On December 18, 2002, the Company was served
with a lawsuit filed in late October 2002 in the United States District Court
for the Western District of Virginia. The amended class action complaint served
on the Company names only the Company as a defendant and relates to the
Companys activities in connection with the Goleta Loans of Goleta offered at
the Companys stores in Virginia between April 1, 2000 and October 10, 2002.
The plaintiff, for

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himself and others similarly situated, alleges that the Companys loan-related
activities during that period violated the federal RICO Act, the Virginia
Consumer Finance (or Small Loan) Act, the Virginia Payday Loan Act, and the
Virginia Consumer Protection Act and constituted fraud. The plaintiff seeks
actual and punitive damages of various kinds, including (under the RICO Act) an
amount equal to three times all of the Companys proceeds from the loans made
in Virginia during the approximate two and one-half years; an amount equal to
three times the actual damages or $1,000, whichever is greater, for each
violation of the Virginia Consumer Protection Act; attorneys fees; and court
costs.

On February 5, 2003, the Company filed a motion to compel arbitration in
accordance with the terms of the plaintiffs Promissory Note Supplement and to
stay this lawsuit pending completion of arbitration. After a hearing on April
8, 2003, the court granted that motion on May 9, 2003, therefore requiring the
plaintiff to proceed against the Company, if at all, in an arbitration
proceeding. On June 9, 2003, the plaintiff filed a motion to reconsider and to
certify an appeal of the courts order, and the Company filed an opposition to
that motion. The motions are pending before the court. Although the
plaintiffs counsel is not a party to the settlement agreement entered into in
the Purdie lawsuit, and is not supporting that settlement, the Company believes
that this lawsuit will effectively be settled and terminated if that settlement
agreement receives final court approval.

General: Because each of the preceding Goleta Loan-related lawsuits purports
to be a class action, the amount of damages for which the Company might be
responsible is necessarily uncertain. Regarding each lawsuit, that amount
would depend upon proof of the allegations, on the number of persons who
constitute the class of plaintiffs (if permitted by the court) or the number or
the amount of the loan-related transactions during an applicable time period,
and (for certain of the claims) on proof of actual damages sustained by the
plaintiffs. If the settlement agreement entered into in the Purdie lawsuit is
not finally approved or implemented, the Company intends to vigorously defend
the preceding lawsuits.

Ace Cash Express, Inc. v. Illinois Union Insurance Company, et al.: On May 17,
2002, the Company filed this lawsuit in a Texas state court against two
insurers, Westchester Surplus Lines Insurance Company and Illinois Union
Insurance Company, regarding liability coverage it obtained for claims made
against the Company as a result of the Companys activities in connection with
the Goleta Loans. Each of the insurers issued an errors and omissions policy
to the Company for a one-year period and each policy provided up to $5 million
in coverage for claims made against the Company during the policy period,
subject to a $200,000 deductible for each claim. On July 11, 2003, this
lawsuit was settled, and the Company recovered $4.7 million related to the
costs of defending the Goleta Loan-related lawsuits and amounts previously paid
to settle certain former lawsuits.

Non-Loan-Related Proceeding

Ace Cash Express, Inc. v. Valley Check Cashiers, Inc., Jeffrey D. Silverman,
and Morris Silverman: On November 27, 2001, the Company filed this lawsuit in
Texas state court in Travis County, Texas, seeking damages relating to the
defendants misrepresentations and breaches of warranties in an Asset Purchase
Agreement between the Company and the defendants, and certain other entities
affiliated with the defendants, dated as of November 10, 2000. Under the Asset
Purchase Agreement, the Company acquired the assets of 107 check-cashing and
retail financial services locations owned and managed by the defendants and
their affiliated entities for a total purchase price of $29.7 million in cash.
Eleven of the acquired locations were in third-party grocery stores, operated
under the Handy Andy name, in and around San Antonio, Texas. Following the
foreclosure and sale of those grocery stores by the secured creditor of the
grocery store operator, the Company (in cooperation with the sellers under the
Asset Purchase Agreement) instituted litigation against that creditor and its
purchaser in January 2001 to maintain the Companys right to operate in those
locations. At a trial in April 2001, the court found that the lease agreement
under which the Company claimed the right to occupy those eleven locations,
which had been assigned to the Company by the defendants and their affiliated
entities, was not enforceable under Texas law. The court therefore ordered the
Company to vacate those eleven locations, which the Company did in June 2001.
Because of the courts finding, the Company requested the defendants to satisfy
their monetary obligations to the Company, based on their representations and
warranties, regarding those locations. When it appeared that further
negotiations regarding the Companys request would be unsuccessful, the Company
filed this lawsuit to recover the damages suffered in connection with, and as a
result of, the loss of those eleven locations. In its complaint, the Company
seeks actual damages in excess of $2 million. On January 14, 2002, the
defendants filed their answer denying all of the Companys material claims.

On October 15, 2002, Jeffrey Silverman and Morris Silverman, but not Valley
Check Cashiers, Inc., filed a motion for summary judgment requesting the court
to dismiss the Companys complaint against them. After a hearing held on
November 12, 2002, the court granted a motion to dismiss the Companys
complaint against those two defendants on March 24, 2003. On March 31, 2003,
the Company filed an appeal of that order. Both parties have filed appellate
briefs, and oral argument in the appellate court is scheduled for October 15,
2003.

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Estimate of Possible Loss or Gain

The Companys policy is to estimate a possible loss, or a range of possible
loss, or a possible gain, or a range of possible gain, and to disclose that
estimate, when the Company has determined that a loss or a gain is probable
and an estimate can reasonably be made. The Company accrues for probable
losses and records gains when they are received.

The settlement agreement regarding the Goleta Loan-related lawsuits, if finally
approved by the court in the Purdie lawsuit, will result in the termination of
not only the Purdie lawsuit, but also the Long, Hudson, and Brown lawsuits and,
in effect, the Hale lawsuit. Based on its estimates of the anticipated refund
claims by eligible borrowers and of the administrative and other costs related
to the settlement, the Company recorded a $5.0 million charge for its
settlement payment obligations in its financial statements as of and for the
periods ended March 31, 2003.

Although the Company believes that its legal claims asserted in the lawsuit
filed by it against Valley Check Cashiers, Inc. and others have merit, and
although the Company intends to continue to pursue that lawsuit, the Company
has not determined that its present likelihood of recovery from that lawsuit is
sufficiently probable to justify reflecting any anticipated gain or recovery in
the Companys financial statements.

Other Incidental Proceedings

The Company is also involved from time to time in various legal proceedings
incidental to the conduct of its business. Management believes that none of
these legal proceedings will result in any material impact on the Companys
financial condition and results of operations.




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

No matters were submitted to a vote of the shareholders of the Company during
the fourth quarter of fiscal 2003.




PART II




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

The Companys Common Stock is quoted on The Nasdaq Stock Market (NASDAQ)
under the symbol AACE. At September 19, 2003, there were approximately 97
holders of record of the Common Stock, and there were approximately 1,800
beneficial holders of the Common Stock held in nominee or street name.

The following table sets forth the high and low sale prices of the Common Stock
as reported by NASDAQ for the past two fiscal years:

|                                 |  |      |       |     |  |   |      | 
|-------------------------------- |  | ---- | ----- | --- |  | - | ---- | 
|                                 |  | High |       | Low
|                                 |  |      |       |    
|Fiscal 2002                      |  |      |       |     |  |   |      | 
|Quarter ended September 30, 2001 |  | $    | 10.50 |     |  | $ | 7.65 | 
|Quarter ended December 31, 2001  |  |      | 9.90  |     |  |   | 7.75 | 
|Quarter ended March 31, 2002     |  |      | 11.15 |     |  |   | 8.35 | 
|Quarter ended June 30, 2002      |  |      | 11.50 |     |  |   | 8.70 | 
|Fiscal 2003                      |  |      |       |     |  |   |      | 
|Quarter ended September 30, 2002 |  | $    | 10.00 |     |  | $ | 7.80 | 
|Quarter ended December 31, 2002  |  |      | 9.25  |     |  |   | 7.48 | 
|Quarter ended March 31, 2003     |  |      | 10.04 |     |  |   | 8.70 | 
|Quarter ended June 30, 2003      |  |      | 11.65 |     |  |   | 9.09 | 

On September 19, 2003, the last reported sale price of the Common Stock on
NASDAQ was $14.45 per share.

The Company has never paid dividends on the Common Stock and has no plans to
pay dividends in the foreseeable future. In addition, the Companys ability to
pay cash dividends is currently limited under the agreements governing its
credit arrangements (see Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources  Credit
Facilities).

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ITEM 6. SELECTED FINANCIAL DATA

|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |        |       | 
|------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------- | ------- | ----------------------------------------------- | ------ | ---- | ------- | ------ | ------ | ---- | ------- | ----- | --- | - | ------- | ------ | ----- | - | ------- | ------ | ----- | 
|                                                                                |                                                                                                      |            |         | Year Ended June 30,                            
|                                                                                |                                                                                                      |            |         |                                                
|                                                                                |                                                                                                      |            |         | 2003                                            |        | 2002 |         | 2001   |        | 2000 |         | 1999 
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |      
|                                                                                |                                                                                                      |            |         | (in thousands, except per share and store data)
|Statement of Operations Data:                                                   |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Revenues                                                                        |                                                                                                      | $          | 234,289 |                                                 |        | $    | 229,266 |        |        | $    | 196,775 |       |     | $ | 140,636 |        |       | $ | 122,314 |       
|Store expenses                                                                  |                                                                                                      |            | 155,414 |                                                 |        |      | 151,827 |        |        |      | 145,015 |       |     |   | 94,668  |        |       |   | 80,943  |       
|Region expenses                                                                 |                                                                                                      |            | 17,056  |                                                 |        |      | 17,495  |        |        |      | 14,127  |       |     |   | 11,119  |        |       |   | 9,369   |       
|Headquarters expenses                                                           |                                                                                                      |            | 17,133  |                                                 |        |      | 16,594  |        |        |      | 10,328  |       |     |   | 8,247   |        |       |   | 7,673   |       
|Franchise expenses                                                              |                                                                                                      |            | 1,225   |                                                 |        |      | 993     |        |        |      | 1,017   |       |     |   | 1,063   |        |       |   | 1,288   |       
|Other depreciation and amortization                                             |                                                                                                      |            | 5,423   |                                                 |        |      | 7,570   |        |        |      | 5,087   |       |     |   | 3,798   |        |       |   | 4,236   |       
|Interest expense                                                                |                                                                                                      |            | 16,004  |                                                 |        |      | 14,934  |        |        |      | 12,016  |       |     |   | 6,123   |        |       |   | 4,476   |       
|Other expenses:                                                                 |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|                                                                                | Restructuring                                                                                        |            |         |                                                |        |      |         | (163   | )      |      |         | 7,710 |     |   |         |       |       |   |         |       |      
|                                                                                | Legal settlements                                                                                    |            |         | 1,050                                           |        |      |         | 1,984  |        |      |         | 350   |     |   |         | 584    |       |   |         | 130    |      
|                                                                                | Other (including store closing expense)                                                              |            |         | 534                                             |        |      |         | 1,006  |        |      |         | 108   |     |   |         | 371    |       |   |         | 559    |      
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Total other expenses                                                            |                                                                                                      |            | 1,584   |                                                 |        |      | 2,827   |        |        |      | 8,168   |       |     |   | 955     |        |       |   | 689     |       
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|                                                                                | Income from continuing operations before income taxes and
cumulative effect of accounting change (1) |            |         | 20,450                                          |        |      |         | 17,026 |        |      |         | 1,017 |     |   |         | 14,663 |       |   |         | 13,640 |      
|                                                                                | Provision for income taxes                                                                           |            |         | 8,174                                           |        |      |         | 6,913  |        |      |         | 406   |     |   |         | 5,797  |       |   |         | 5,390  |      
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|                                                                                | Income from continuing operations before cumulative
effect of accounting change                      |            |         | 12,276                                          |        |      |         | 10,113 |        |      |         | 611   |     |   |         | 8,866  |       |   |         | 8,250  |      
|                                                                                | Gain on sale of discontinued operations, net of income tax (2)                                       |            |         | 499                                             |        |      |         |       |        |      |         |      |     |   |         |       |       |   |         |       |      
|                                                                                | Cumulative effect of accounting change, net of income tax (1)                                        |            |         |                                                |        |      |         |       |        |      |         |      |     |   |         | (603   | )     |   |         |       |      
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|                                                                                |                                                                                                      | Net income |         | $                                               | 12,775 |      |         | $      | 10,113 |      |         | $     | 611 |   |         | $      | 8,263 |   |         | $      | 8,250 | 
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Diluted earnings per share                                                      |                                                                                                      | $          | 1.25    |                                                 |        | $    | 1.00    |        |        | $    | .06     |       |     | $ | .82     |        |       | $ | .80     |       
|                                                                                |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Weighted average number of dilutive shares                                      |                                                                                                      |            | 10,206  |                                                 |        |      | 10,141  |        |        |      | 10,158  |       |     |   | 10,361  |        |       |   | 10,283  |       
|Balance Sheet Data:                                                             |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Cash and cash equivalents                                                       |                                                                                                      | $          | 108,110 |                                                 |        | $    | 116,264 |        |        | $    | 129,186 |       |     | $ | 105,577 |        |       | $ | 59,414  |       
|Total assets                                                                    |                                                                                                      |            | 258,768 |                                                 |        |      | 267,062 |        |        |      | 276,197 |       |     |   | 221,423 |        |       |   | 145,233 |       
|Term advances                                                                   |                                                                                                      |            | 38,269  |                                                 |        |      | 48,350  |        |        |      | 53,000  |       |     |   | 18,500  |        |       |   | 10,500  |       
|Money order principal payable                                                   |                                                                                                      |            | 6,884   |                                                 |        |      | 13,417  |        |        |      | 16,928  |       |     |   | 10,487  |        |       |   | 5,340   |       
|Revolving advances                                                              |                                                                                                      |            | 83,900  |                                                 |        |      | 97,500  |        |        |      | 109,800 |       |     |   | 95,000  |        |       |   | 40,100  |       
|Senior secured notes payable                                                    |                                                                                                      |            |        |                                                 |        |      | 8,000   |        |        |      | 12,000  |       |     |   | 16,000  |        |       |   | 20,226  |       
|Shareholders equity                                                            |                                                                                                      |            | 78,984  |                                                 |        |      | 66,139  |        |        |      | 54,726  |       |     |   | 55,159  |        |       |   | 48,274  |       
|Supplemental Statistical Data:                                                  |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|Percentage increase in comparable company-owned store
revenues from prior year: |                                                                                                      |            |         |                                                 |        |      |         |        |        |      |         |       |     |   |         |        |       |   |         |       
|                                                                                | Total revenues (3)                                                                                   |            |         | 1.5                                             | %      |      |         | 15.6   | %      |      |         | 23.3  | %   |   |         | 6.9    | %     |   |         | 10.8   | %    
|                                                                                | Exclusive of loan fees and interest (4)                                                              |            |         | 4.9                                             | %      |      |         | 7.3    | %      |      |         | 0.3   | %   |   |         | 6.0    | %     |   |         | 8.7    | %    
|                                                                                | Check cashing fees, including tax (5)                                                                |            |         | 5.1                                             | %      |      |         | 9.6    | %      |      |         | 1.4   | %   |   |         | 6.3    | %     |   |         | 6.6    | %    
|Capital expenditures                                                            |                                                                                                      | $          | 4,771   |                                                 |        | $    | 7,127   |        |        | $    | 12,655  |       |     | $ | 12,255  |        |       | $ | 10,089  |       
|Cost of net assets acquired                                                     |                                                                                                      | $          | 673     |                                                 |        | $    | 1,177   |        |        | $    | 35,841  |       |     | $ | 11,359  |        |       | $ | 8,378   |       



| | (1) |  | Before a cumulative effect of accounting change recorded in the three
months ended September 30, 1999, of $0.6 million, net of a $0.4 million
tax benefit, relating to the adoption of Statement of Position 98-5,
Reporting on the Costs of Start-up Activities.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Discontinued operations related to the Companys sale of 19
underperforming stores in Florida for a pre-tax gain of $0.8 million and
an after-tax gain of $0.5 million recorded in the three months ended
December 31, 2002.                                       
|
| | (3) |  | Calculated based on the changes in revenues of all stores open for the
years compared.                                                                                                                                                                             
|
| | (4) |  | Change in revenues computed excluding loan fees and interest for the
years compared.                                                                                                                                                                               
|
| | (5) |  | Change in check cashing fee revenue (including tax checks) for the years
compared.                                                                                                                                                                                 

22



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##### Table of Contents



SELECTED FINANCIAL DATA (continued)

|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |   |     |     |  
|---------------------------------------------------------------------------------- | ---------------------------------- | ----------------- | --------------- | ------- | ------------------- | --- | ------- | ------- | ----- | --- | ------- | ------- | ---- | ---- | ------- | - | --- | --- | ------- | - | --- | --- | -
|                                                                                   |                                    |                   |                 |         | Year Ended June 30,
|                                                                                   |                                    |                   |                 |         |                    
|                                                                                   |                                    |                   |                 |         | 2003                |     | 2002    |         | 2001  |     | 2000    |         | 1999
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |     
|Store Count Data:                                                                  |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|                                                                                   | Company-owned stores in operation: |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |   |    
|                                                                                   |                                    | Beginning of year |                 |         | 1,003               |     |         |         | 988   |     |         |         | 915  |      |         |   | 798 |     |         |   | 683 |    
|                                                                                   |                                    |                   | Acquired        |         |                     | 2   |         |         |       | 8   |         |         |      | 133  |         |   |     | 36  |         |   |     | 35  |  
|                                                                                   |                                    |                   | Opened          |         |                     | 14  |         |         |       | 39  |         |         |      | 49   |         |   |     | 99  |         |   |     | 99  |  
|                                                                                   |                                    |                   | Sold            |         |                     | (23 | )       |         |       |    |         |         |      | (4   | )       |   |     | (1  | )       |   |     |    |  
|                                                                                   |                                    |                   | Closed (1)      |         |                     | (28 | )       |         |       | (32 | )       |         |      | (105 | )       |   |     | (17 | )       |   |     | (19 | )
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|                                                                                   |                                    | End of year       |                 |         | 968                 |     |         |         | 1,003 |     |         |         | 988  |      |         |   | 915 |     |         |   | 798 |    
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|                                                                                   | Franchised stores in operations:   |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |   |    
|                                                                                   |                                    | Beginning of year |                 |         | 184                 |     |         |         | 175   |     |         |         | 157  |      |         |   | 120 |     |         |   | 89  |    
|                                                                                   |                                    |                   | Opened          |         |                     | 26  |         |         |       | 22  |         |         |      | 30   |         |   |     | 56  |         |   |     | 42  |  
|                                                                                   |                                    |                   | Acquired by ACE |         |                     | (2  | )       |         |       | (8  | )       |         |      | (4   | )       |   |     | (7  | )       |   |     | (1  | )
|                                                                                   |                                    |                   | Closed/Sold     |         |                     | (8  | )       |         |       | (5  | )       |         |      | (8   | )       |   |     | (12 | )       |   |     | (10 | )
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|                                                                                   |                                    | End of year       |                 |         | 200                 |     |         |         | 184   |     |         |         | 175  |      |         |   | 157 |     |         |   | 120 |    
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Total store network                                                                |                                    |                   | 1,168           |         |                     |     | 1,187   |         |       |     | 1,163   |         |      |      | 1072    |   |     |     | 918     |  
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|COMPANY-OWNED STORES:                                                              |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Operating Data (Check Cashing and Money Orders):                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Face amount of checks cashed (in millions)                                         |                                    | $                 | 5,040           |         |                     | $   | 4,843   |         |       | $   | 4,498   |         |      | $    | 3,839   |   |     | $   | 3,373   |  
|Face amount of money orders sold (in millions)                                     |                                    | $                 | 1,600           |         |                     | $   | 1,711   |         |       | $   | 1,709   |         |      | $    | 1,585   |   |     | $   | 1,905   |  
|Face amount of average check                                                       |                                    | $                 | 383             |         |                     | $   | 378     |         |       | $   | 358     |         |      | $    | 339     |   |     | $   | 320     |  
|Average fee per check                                                              |                                    | $                 | 9.65            |         |                     | $   | 9.36    |         |       | $   | 8.38    |         |      | $    | 7.92    |   |     | $   | 7.47    |  
|Fees as a percentage of average check                                              |                                    |                   | 2.52            | %       |                     |     | 2.48    | %       |       |     | 2.34    | %       |      |      | 2.33    | % |     |     | 2.33    | %
|Number of checks cashed (in thousands)                                             |                                    |                   | 13,148          |         |                     |     | 12,821  |         |       |     | 12,580  |         |      |      | 11,317  |   |     |     | 10,556  |  
|Number of money orders sold (in thousands)                                         |                                    |                   | 10,256          |         |                     |     | 11,562  |         |       |     | 12,787  |         |      |      | 12,339  |   |     |     | 14,495  |  
|Collections Data:                                                                  |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Face amount of returned checks (in thousands)                                      |                                    | $                 | 24,087          |         |                     | $   | 23,637  |         |       | $   | 26,536  |         |      | $    | 16,548  |   |     | $   | 12,442  |  
|Collections (in thousands)                                                         |                                    |                   | 16,935          |         |                     |     | 16,090  |         |       |     | 17,717  |         |      |      | 10,788  |   |     |     | 7,423   |  
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Net write-offs (in thousands)                                                      |                                    | $                 | 7,152           |         |                     | $   | 7,547   |         |       | $   | 8,819   |         |      | $    | 5,760   |   |     | $   | 5,019   |  
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Collections as a percentage of returned checks                                     |                                    |                   | 70.3            | %       |                     |     | 68.1    | %       |       |     | 66.8    | %       |      |      | 65.2    | % |     |     | 59.7    | %
|Net write-offs as a percentage of revenues                                         |                                    |                   | 3.1             | %       |                     |     | 3.3     | %       |       |     | 4.5     | %       |      |      | 4.1     | % |     |     | 4.1     | %
|Net write-offs as a percentage of the face amount
of checks cashed                 |                                    |                   | .14             | %       |                     |     | .16     | %       |       |     | .20     | %       |      |      | .15     | % |     |     | .15     | %
|Operating Data (Small Consumer Loans Excluding Loans Processed for
Republic Bank): |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Volume  new loans and refinances (in thousands)                                   |                                    | $                 | 420,129         |         |                     | $   | 502,013 |         |       | $   | 396,783 |         |      | $    | 137,015 |   |     | $   | 105,765 |  
|Average advance                                                                    |                                    | $                 | 268             |         |                     | $   | 269     |         |       | $   | 269     |         |      | $    | 240     |   |     | $   | 200     |  
|Average finance charge                                                             |                                    | $                 | 42.71           |         |                     | $   | 45.61   |         |       | $   | 42.30   |         |      | $    | 34.51   |   |     | $   | 30.30   |  
|Number of loan transactions  new loans and refinances
(in thousands)              |                                    |                   | 1,587           |         |                     |     | 1,866   |         |       |     | 1,477   |         |      |      | 557     |   |     |     | 460     |  
|Matured loan volume (in thousands)                                                 |                                    | $                 | 432,900         |         |                     | $   | 489,887 |         |       | $   | 370,559 |         |      | $    | 129,548 |   |     | $   | 105,765 |  
|Balance Sheet Data (in thousands):                                                 |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Gross loans receivable                                                             |                                    | $                 | 21,734          |         |                     | $   | 29,569  |         |       | $   | 27,768  |         |      | $    | 18,695  |   |     | $   | 5,543   |  
|Less: Allowance for losses on loans receivable                                     |                                    |                   | 8,734           |         |                     |     | 12,213  |         |       |     | 13,382  |         |      |      |        |   |     |     |        |  
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |   |     |    
|Loans receivable, net of allowance                                                 |                                    | $                 | 13,000          |         |                     | $   | 17,356  |         |       | $   | 14,386  |         |      | $    | 18,695  |   |     | $   | 5,543   |  
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Allowance for losses on loans receivable:                                          |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|                                                                                   | Beginning of period                |                   | $               | 12,213  |                     |     | $       | 13,382  |       |     | $       |        |      |      | $       |  |     |     | $       |  |    
|                                                                                   | Provision for loan losses          |                   |                 | 19,361  |                     |     |         | 21,924  |       |     |         | 26,429  |      |      |         |  |     |     |         |  |    
|                                                                                   | Charge-offs                        |                   |                 | (23,729 | )                   |     |         | (24,519 | )     |     |         | (13,510 | )    |      |         |   |     |     |         |   |    
|                                                                                   | Recoveries                         |                   |                 | 889     |                     |     |         | 1,426   |       |     |         | 463     |      |      |         |  |     |     |         |  |    
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |   |     |    
|                                                                                   | End of period                      |                   | $               | 8,734   |                     |     | $       | 12,213  |       |     | $       | 13,382  |      |      | $       |  |     |     | $       |  |    
|                                                                                   |                                    |                   |                 |         |                     |     |         |         |       |     |         |         |      |      |         |   |     |     |         |  
|Provision for loan losses as a percent of matured loan volume                      |                                    |                   | 4.5             | %       |                     |     | 4.5     | %       |       |     | 7.1     | %       |      |      |        |   |     |     |        |  
|Net loan charge-offs as a percent of volume (2)                                    |                                    |                   | 5.4             | %       |                     |     | 4.6     | %       |       |     | 3.3     | %       |      |      |        |   |     |     |        |  
|Allowance as a percent of gross loans receivable                                   |                                    |                   | 40.2            | %       |                     |     | 41.3    | %       |       |     | 48.2    | %       |      |      |        |   |     |     |        |  



---

|(1) |  | Includes the 85 stores closed in the fourth quarter of fiscal 2001
resulting from a plan established and executed by management during the
third quarter of fiscal 2001.                                                                                                                              
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The ratio compares the net loan charge-offs to the current year volume,
which is lower as a result of the December 31, 2002 cessation of
loan-related business in Georgia, North Carolina, and Alabama and the
transition from offering the Goleta Loans to offering ACE loans or
Republic Bank loans.

23



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##### Table of Contents



SELECTED FINANCIAL DATA (continued)

|                                                                                       |  |                     |        |      |  |      |   |      |  |      |   |  |  |   |   |  |  |   |   | 
|-------------------------------------------------------------------------------------- |  | ------------------- | ------ | ---- |  | ---- | - | ---- |  | ---- | - |  |  | - | - |  |  | - | - | 
|                                                                                       |  | Year Ended June 30,
|                                                                                       |  |                    
|                                                                                       |  | 2003                |        | 2002 |  | 2001 |   | 2000 |  | 1999
|                                                                                       |  |                     |        |      |  |      |   |      |  |     
|Operating Data for Loans Processed for Republic Bank:(1)                               |  |                     |        |      |  |      |   |      |  |      |   |  |  |   |   |  |  |   |   | 
|Volume - new loans and refinances
(in thousands)                                       |  | $                   | 63,897 |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Average advance                                                                        |  | $                   | 302    |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Number of loan transactions  new loans
and refinances (in thousands)                  |  |                     | 211    |      |  |      |  |      |  |      |  |  |  |   |  |  |  |   |  | 
|Matured loan volume (in thousands)                                                     |  | $                   | 56,040 |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Provision for loan losses payable
to Republic Bank (in thousands)                      |  | $                   | 2,932  |      |  | $    |  |      |  | $    |  |  |  | $ |  |  |  | $ |  | 
|Provision for loan losses payable to Republic
Bank as a percent of matured loan volume |  |                     | 5.2    | %    |  |      |  |      |  |      |  |  |  |   |  |  |  |   |  | 



---

|(1) |  | Republic Bank loans are short-term deferred deposit transactions offered
and made by Republic Bank and Trust Company at or through the Companys
stores in Arkansas, Pennsylvania, and Texas. Republic Bank loans have
been offered at those stores since January 1, 2003. The Company serves
only as marketing and servicing agent for Republic Bank regarding those
loans and does not acquire or own any participation interest in any of
those loans. The Companys agreement with Republic Bank provides for the
Company to receive fees paid by Republic Bank and to bear a percentage of
the losses from those loans.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations

|                                                         |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |       |                         |  |  |       |   |  |  |       |  
|-------------------------------------------------------- |  | ------------------- | ------- | ---- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  |  | ----- | ----------------------- |  |  | ----- | - |  |  | ----- | -
|                                                         |  | Year Ended June 30,
|                                                         |  |                    
|                                                         |  |                     |         |      |  | (in thousands) |         |      |  |      |         |      |  |  |       | (percentage of revenue) |  |  |       |  
|Revenue Analysis                                         |  | 2003                |         | 2002 |  | 2001           |         | 2003 |  | 2002 |         | 2001
|                                                         |  |                     |         |      |  |                |         |      |  |      |         |     
|Check cashing fees                                       |  | $                   | 125,703 |      |  | $              | 118,907 |      |  | $    | 105,479 |      |  |  | 53.7  | %                       |  |  | 51.9  | % |  |  | 53.6  | %
|Loan fees and interest                                   |  |                     | 70,806  |      |  |                | 74,197  |      |  |      | 54,771  |      |  |  | 30.2  |                         |  |  | 32.4  |   |  |  | 27.8  |  
|Bill-payment services                                    |  |                     | 13,507  |      |  |                | 10,156  |      |  |      | 10,376  |      |  |  | 5.8   |                         |  |  | 4.4   |   |  |  | 5.3   |  
|Money transfer services                                  |  |                     | 10,898  |      |  |                | 10,998  |      |  |      | 10,270  |      |  |  | 4.6   |                         |  |  | 4.8   |   |  |  | 5.2   |  
|Money order fees                                         |  |                     | 6,960   |      |  |                | 7,554   |      |  |      | 7,245   |      |  |  | 3.0   |                         |  |  | 3.3   |   |  |  | 3.7   |  
|Franchise revenues                                       |  |                     | 2,346   |      |  |                | 2,199   |      |  |      | 2,257   |      |  |  | 1.0   |                         |  |  | 0.9   |   |  |  | 1.2   |  
|Other fees                                               |  |                     | 4,069   |      |  |                | 5,255   |      |  |      | 6,377   |      |  |  | 1.7   |                         |  |  | 2.3   |   |  |  | 3.2   |  
|                                                         |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |       |                         |  |  |       |   |  |  |       |  
|Total revenue                                            |  | $                   | 234,289 |      |  | $              | 229,266 |      |  | $    | 196,775 |      |  |  | 100.0 | %                       |  |  | 100.0 | % |  |  | 100.0 | %
|                                                         |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |       |                         |  |  |       |   |  |  |       |  
|Average revenue per store
(excluding franchise revenues) |  | $                   | 235.5   |      |  | $              | 227.3   |      |  | $    | 195.9   |      |  |  |       |                         |  |  |       |   |  |  |       |  

Fiscal 2003 Compared to Fiscal 2002.Revenues increased by $5.0 million, or
2%, to $234.3 million in the year ended June 30, 2003 from $229.3 million in
the year ended June 30, 2002. This revenue growth resulted from a $3.1
million, or 1.5%, increase in comparable company-owned store revenues (906
stores) and a $1.9 million increase from stores which were not open for both of
the full periods compared. The number of company-owned stores decreased by 35,
or 3%, to 968 stores open at June 30, 2003 from 1,003 stores open at June 30,
2002. During fiscal 2003, the Company opened 14 newly constructed stores,
acquired two, sold 23, (including 19 underperforming stores in Florida during
the second fiscal quarter), and closed 28 company-owned stores.

Check cashing fees, including tax check fees, increased $6.8 million, or 6%, to
$125.7 million in fiscal 2003 from $118.9 million in fiscal 2002. Same store
check cashing fees increased 5% in fiscal 2003 from fiscal 2002. This increase
resulted from a 4% increase in the average size check and a 2% increase in the
number of checks cashed. Tax check fees of $21.5 million for fiscal 2003
increased by $0.2 million, from $21.3 million in fiscal 2002. The Company
received $4.7 million of tax check fees from over 240 self-service machines
(SSMs) located in H&R Block offices in fiscal 2003, compared to $3.8 million
of tax check fees from 100 SSMs in H&R Block offices last fiscal year. Check
cashing fees (including tax checks) were 54% of total revenue for fiscal 2003
compared to 52% of total revenue for fiscal 2002.

Loan fees and interest decreased by 5%, to $70.8 million in fiscal 2003 from
$74.2 million in fiscal 2002, and loan fees and interest were 30% of total
revenue in fiscal 2003 compared to 32% of total revenue for fiscal 2002. The
decline in fees and interest in fiscal 2003 resulted primarily from
discontinuing the Companys loan-related business in Georgia, North Carolina,
and Alabama and from transitioning from offering short-term loans made by
Goleta National Bank (Goleta), which ended December 31, 2002, to offering
state-regulated short-term loan products.

Bill payment fees increased by 33%, to $13.5 million in fiscal 2003 from $10.2
million in fiscal 2002, primarily as a result of the addition of 14 new payees
to the bill-payment program and growth from existing partners. Money order
fees decreased by 8%, to $7.0 million in fiscal 2003 from $7.6 million in
fiscal 2002, primarily because of the sale of fewer money orders, which in turn
was primarily because of increased customer usage of electronic bill-payment
services. Other fees decreased by 23%, to $4.1 million in fiscal 2003 from
$5.3 million in fiscal 2002, as a result of the discontinuation of certain
products, such as lottery ticket sales and the sale of regional publications.

During fiscal 2003, the Company opened 26 franchised stores, acquired two
former franchised stores, and closed eight franchised stores, resulting in a
total of 200 franchised stores as of June 30, 2003, compared to 184 franchised
stores as of June 30, 2002. Franchise revenues consist of royalties, and
initial franchise fees and fees for future franchise purchase options.
Franchise revenues increased by 7%, to $2.3 million in fiscal 2003 from $2.2
million in fiscal 2002, as a result of the increased number of franchised store
openings.

Fiscal 2002 Compared to Fiscal 2001.Revenues increased by $32.5 million, or
17%, from $196.8 million in the year ended June 30, 2001, to $229.3 million in
the year ended June 30, 2002. This revenue growth resulted from a $25.5
million, or 15.6%, increase in comparable company-owned store revenues (797
stores) and a $7.0 million increase from stores which were not open for both of
the full periods compared. Average revenue per store increased by $31,400
primarily because of

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increases in check cashing fees (including tax check fees) and loan fees and
interest, though these increases were partially offset by a decrease in other
fees. The number of company-owned stores increased by 15, or 2%, from 988
stores open at June 30, 2001, to 1,003 stores open at June 30, 2002. The
increase in loan fees and interest accounted for 60% of the total revenue
increase, and total check-cashing fees accounted for 41% of the total revenue
increase.

Loan fees and interest for the year ended June 30, 2002, primarily reflect the
Companys participation interests in loans made by Goleta at most of the
company-owned stores during fiscal 2002. Loan fees and interest increased
$19.4 million, or 35%, to $74.2 million in fiscal 2002 as compared to $54.8
million in fiscal 2001, due to the increased consumer awareness of Goleta loans
at the stores and to the increase in the average finance charges for these
loans. Check cashing fees, including tax check fees, increased $13.4 million,
or 13%, from $105.5 million in fiscal 2001 to $118.9 million in fiscal 2002.
This increase resulted from a 6% increase in the average size check and a 12%
increase in the average fee per check. An increase in tax check fees
contributed $6.2 million of the total $13.4 million increase. The Company
received $3.8 million of tax check fees from 100 SSMs located in H&R Block
offices in fiscal 2002, compared to $1.2 million of tax check fees from 50 SSMs
in H&R Block offices last fiscal year. Despite a decrease in the number of
money orders sold, money order fees increased $0.3 million in fiscal 2002 from
fiscal 2001 as a result of an increase in the average money order fee charged.
Other fees declined primarily as a result of reductions in foreign currency
exchange fees and fees from prepaid telephone cards.

During fiscal 2002, the Company opened 22 franchised stores, acquired eight
former franchised stores, transferred one franchised store and closed four
franchised stores. Franchise revenues consist of royalties, and initial and
optional franchise fees. Franchise revenues declined slightly as a result of
the reduced number of franchised store openings.

|                                                   |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |      |                         |  |  |      |   |  |  |      |  
|-------------------------------------------------- |  | ------------------- | ------- | ---- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  |  | ---- | ----------------------- |  |  | ---- | - |  |  | ---- | -
|                                                   |  | Year Ended June 30,
|                                                   |  |                    
|Store and SSM                                      |  |                     |         |      |  | (in thousands) |         |      |  |      |         |      |  |  |      | (percentage of revenue) |  |  |      |  
|Expense Analysis                                   |  | 2003                |         | 2002 |  | 2001           |         | 2003 |  | 2002 |         | 2001
|                                                   |  |                     |         |      |  |                |         |      |  |      |         |     
|Salaries and benefits                              |  | $                   | 58,170  |      |  | $              | 57,864  |      |  | $    | 51,969  |      |  |  | 24.8 | %                       |  |  | 25.2 | % |  |  | 26.4 | %
|Occupancy                                          |  |                     | 29,194  |      |  |                | 28,207  |      |  |      | 26,439  |      |  |  | 12.5 |                         |  |  | 12.3 |   |  |  | 13.4 |  
|Armored and security                               |  |                     | 7,782   |      |  |                | 7,708   |      |  |      | 7,442   |      |  |  | 3.3  |                         |  |  | 3.4  |   |  |  | 3.8  |  
|Returns and cash shorts                            |  |                     | 9,896   |      |  |                | 10,390  |      |  |      | 12,553  |      |  |  | 4.2  |                         |  |  | 4.6  |   |  |  | 6.4  |  
|Loan losses and provisions                         |  |                     | 22,892  |      |  |                | 22,064  |      |  |      | 24,825  |      |  |  | 9.8  |                         |  |  | 9.6  |   |  |  | 12.6 |  
|Depreciation                                       |  |                     | 6,966   |      |  |                | 7,180   |      |  |      | 6,697   |      |  |  | 3.0  |                         |  |  | 3.1  |   |  |  | 3.4  |  
|Other expenses                                     |  |                     | 20,514  |      |  |                | 18,414  |      |  |      | 15,090  |      |  |  | 8.7  |                         |  |  | 8.0  |   |  |  | 7.7  |  
|                                                   |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |      |                         |  |  |      |   |  |  |      |  
|Total store expense                                |  | $                   | 155,414 |      |  | $              | 151,827 |      |  | $    | 145,015 |      |  |  | 66.3 | %                       |  |  | 66.2 | % |  |  | 73.7 | %
|                                                   |  |                     |         |      |  |                |         |      |  |      |         |      |  |  |      |                         |  |  |      |   |  |  |      |  
|Average per store expense
(including SSM expenses) |  | $                   | 157.8   |      |  | $              | 152.0   |      |  | $    | 146.1   |      |  |  |      |                         |  |  |      |   |  |  |      |  

Fiscal 2003 Compared to Fiscal 2002.Total store and SSM expenses increased
by $3.6 million, or 2%, in fiscal 2003 over fiscal 2002, primarily as a result
of increased lease expense related to the addition of over 100 SSMs placed in
H&R Block retail offices during the 2003 tax season. Average store expense
increased by approximately $6,000 per store in fiscal 2003 as compared to
fiscal 2002. Total store and SSM expenses increased slightly as a percentage of
revenues to 66.3% in fiscal 2003 from 66.2% in fiscal 2002 due to a reduction
in loan fees and interest.

Salaries and benefits expenses increased only by $0.3 million, or 0.5%, in
fiscal 2003 from fiscal 2002 due to slightly higher wages and bonuses, offset
by improved personnel scheduling and fewer stores. Occupancy costs and armored
and security expenses combined increased $1.1 million, or 3%, primarily as a
result of maintenance expense related to the SSMs located in the H&R Block
offices ($0.6 million) and scheduled increases in lease expense ($0.4 million).
Returned checks, net of collections, and cash shortages decreased $0.5
million, or 5%, in fiscal 2003 as compared to fiscal 2002, due to continued
improvements in operational procedures and controls. Returned checks, net of
collections, and cash shortages as a percentage of revenues also decreased, to
4.2% in fiscal 2003 from 4.5% in fiscal 2002. Loan loss provision increased
$0.8 million, or 4%, in fiscal 2003 from fiscal 2002 primarily due to the
increase in the number of loans maturing as a result of the Companys
discontinuing its loan-related business in Georgia, North Carolina, and
Alabama, and its transitioning from offering the Goleta loans, which ended
December 31, 2002, to offering state-regulated short-term loan products. The
overall collectability of the short-term loans improved slightly in fiscal 2003
compared to fiscal 2002. The allowance for loan losses of $8.7 million at June
30, 2003, represented 40.2% of gross loans receivable, a decrease from the
allowance for loan losses of $12.2 million, representing 41.3% of gross loans
receivable, at June 30, 2002. Loan losses are charged to this allowance, which
is reviewed for adequacy (and may be adjusted) on a quarterly basis. Other
store and SSM expenses increased $2.1 million, or 11%, in fiscal 2003 from
fiscal 2002 primarily as a result of additional lease costs for the Companys
increased

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number of SSMs placed at H&R Block offices, increases in licensing fees related
to the transition to a state-regulated short-term loan products, and increases
in advertising expenses.

Fiscal 2002 Compared to Fiscal 2001.Total store and SSM expenses increased
$6.8 million, or 5%, in fiscal 2002 over fiscal 2001, primarily as a result of
an increased amount of performance bonuses and merit increases paid to store
employees. Average store expense increased by approximately $6,000 per store
in fiscal 2002 as compared to fiscal 2001. Total store and SSM expenses
decreased as a percentage of revenues, however, to 66.2% in fiscal 2002 from
73.7% in fiscal 2001.

Salaries and benefits expenses increased $5.9 million, or 11%, in fiscal 2002
from fiscal 2001 primarily as a result of the increased performance bonus
expense. Occupancy costs and armored and security expenses combined increased
$2.0 million, or 6%, as a result of scheduled increases in lease and armored
and security expense, along with additional armored and security expense
related to the SSMs. Returned checks, net of collections, and cash shortages
decreased $2.2 million, or 17%, in fiscal 2002 as compared to fiscal 2001, due
to improvements in operational procedures and controls. Returned checks, net
of collections, and cash shortages as a percentage of revenues also decreased
to 5% in fiscal 2002 from 6% in fiscal 2001. Loan loss provision decreased
$2.8 million, or 11%, in fiscal 2002 from fiscal 2001 primarily due to improved
collections experience. The allowance for loan losses of $12.2 million at June
30, 2002, represented 41.3% of gross loans receivable, a decrease from the
allowance for loan losses of $13.4 million, representing 48.2% of gross loans
receivable, at June 30, 2001. Loan losses are charged to this allowance, which
is reviewed for adequacy (and may be adjusted) on a quarterly basis. Other
store and SSM expenses increased $3.3 million, or 22%, primarily as a result of
lease costs for the SSMs at H&R Block offices, increases in bank charges
related to increased rates for bank services and increased use of Automated
Clearinghouse (ACH) transactions for collections, and additional expense
related to operational and marketing supplies required to support the Goleta
loan product.

|                                    |  |                     |        |      |  |                |        |      |  |      |        |      |  |  |     |                         |  |  |     |   |  |  |     |  
|----------------------------------- |  | ------------------- | ------ | ---- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  |  | --- | ----------------------- |  |  | --- | - |  |  | --- | -
|                                    |  | Year Ended June 30,
|                                    |  |                    
|                                    |  |                     |        |      |  | (in thousands) |        |      |  |      |        |      |  |  |     | (percentage of revenue) |  |  |     |  
|Other Expense Analysis              |  | 2003                |        | 2002 |  | 2001           |        | 2003 |  | 2002 |        | 2001
|                                    |  |                     |        |      |  |                |        |      |  |      |        |     
|Region expenses                     |  | $                   | 17,056 |      |  | $              | 17,495 |      |  | $    | 14,127 |      |  |  | 7.3 | %                       |  |  | 7.6 | % |  |  | 7.2 | %
|Headquarters expenses               |  |                     | 17,133 |      |  |                | 16,594 |      |  |      | 10,328 |      |  |  | 7.3 |                         |  |  | 7.2 |   |  |  | 5.2 |  
|Franchise expenses                  |  |                     | 1,225  |      |  |                | 993    |      |  |      | 1,017  |      |  |  | 0.5 |                         |  |  | 0.4 |   |  |  | 0.5 |  
|Other depreciation and amortization |  |                     | 5,423  |      |  |                | 7,570  |      |  |      | 5,087  |      |  |  | 2.3 |                         |  |  | 3.3 |   |  |  | 2.6 |  
|Interest expense                    |  |                     | 16,004 |      |  |                | 14,934 |      |  |      | 12,016 |      |  |  | 6.8 |                         |  |  | 6.5 |   |  |  | 6.1 |  
|Other expenses                      |  |                     | 1,584  |      |  |                | 2,827  |      |  |      | 8,168  |      |  |  | 0.7 |                         |  |  | 1.2 |   |  |  | 4.2 |  

Region Expenses

Fiscal 2003 Compared to Fiscal 2002.Region expenses decreased $0.4 million,
or 3%, in fiscal 2003 from fiscal 2002. The decrease results from a reduction
in salaries and benefits expense resulting from a smaller average number of
regional employees throughout the year. Region expenses decreased as a
percentage of revenues to 7.3% in fiscal 2003 from 7.6% in fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001.Region expenses increased $3.4 million,
or 24%, in fiscal 2002 over fiscal 2001. The increase is a result of additional
personnel in collections and customer-service related to the Goleta loan
product and an increase in the number of district managers in the field. Region
expenses increased as a percentage of revenues to 7.6% in fiscal 2002 from 7.2%
in fiscal 2001.

Headquarters Expenses

Fiscal 2003 Compared to Fiscal 2002.Headquarters expenses increased $0.5
million, or 3%, in fiscal 2003 over fiscal 2002. Increased salaries and
benefits related to the addition of professional personnel, including an
assistant vice president of internal audit, a compliance officer, and chief
marketing officer, constituted $0.3 million of the expense increase;
employee-performance bonus expense constituted $0.3 million of the increase;
telephone expense constituted $0.3 million of the increase; and insurance
expense constituted $0.1 million of the increase; and these increases were
partially offset by a reduction in legal and professional expenses of $0.3
million. Headquarters expenses increased slightly as a percentage of revenues
to 7.3% in fiscal 2003 from 7.2% in fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001.Headquarters expenses increased $6.3
million, or 61%, in fiscal 2002 over fiscal 2001. Increased legal expenses
associated with defending various lawsuits constituted $2.7 million of the
increase; employee-performance bonus expense constituted $1.4 million of the
increase; and the addition of headquarters personnel and their corresponding
salaries and benefits constituted most of the remaining increase. Headquarters
expenses increased as a percentage of revenues to 7.2% in fiscal 2002 from 5.2%
in fiscal 2001.

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Franchise Expenses

Fiscal 2003 Compared to Fiscal 2002.Franchise expenses relate to the
salaries, benefits, and other franchisee support costs for the sales and
support personnel in the ACE Franchise Group. Franchise expenses for fiscal
2003 increased $0.2 million, or 23%, in fiscal 2003 over fiscal 2002 as a
result of changes in departmental staffing, and increased travel, legal, and
professional expenses. Franchise expenses as a percentage of revenue increased
to 0.5% for fiscal 2003 from 0.4% for fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001.Franchise expenses relate to the
salaries, benefits, and other franchisee support costs for the sales and
support personnel in the ACE Franchise Group. Franchise expenses for fiscal
2002 remained substantially the same as those for fiscal 2001. Franchise
expenses as a percentage of revenue decreased to 0.4% for fiscal 2002 from 0.5%
for fiscal 2001.

Other Depreciation and Amortization

Fiscal 2003 Compared to Fiscal 2002.Other depreciation and amortization
decreased $2.1 million, or 28%, in fiscal 2003 from fiscal 2002. This decrease
was due to the decrease in the amount of debt financing costs amortized in
fiscal 2003 compared to fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001.Other depreciation and amortization
increased $2.5 million, or 49%, in fiscal 2002 from fiscal 2001. This increase
was due to the amortization of an additional $4.9 million of debt financing
costs in fiscal 2002 compared to fiscal 2001 resulting from amendments to the
Companys bank credit agreement, offset by a reduction of $2.3 million for the
discontinuation of goodwill amortization in accordance with SFAS 142, which the
Company adopted in the first quarter of fiscal 2002.

Interest Expense

Fiscal 2003 Compared to Fiscal 2002.Interest expense increased $1.1 million,
or 7%, in fiscal 2003 as compared to fiscal 2002. This increase was the result
of an increase in the effective interest rate on the term debt ($2.5 million)
and higher interest and cash usage fees for the increase of more than 100 SSMs
at H&R Block offices ($1.5 million), which were partially offset by lower
interest expense from lower average revolver advances and term note balances
($2.4 million) and lower interest paid on senior secured notes payable ($ 0.5
million).

Fiscal 2002 Compared to Fiscal 2001.Interest expense increased $2.9 million,
or 24%, in fiscal 2002 as compared to fiscal 2001. This increase was the
result of an increase in borrowings used to finance the higher-volume tax
season operations and higher interest rates charged in the last half of fiscal
2002 by the Companys bank lenders.

Other Expenses

Fiscal 2003 Compared to Fiscal 2002.Other expenses decreased by $1.2 million
in fiscal 2003 from fiscal 2002. Other expenses for the fiscal years ended
June 30, 2003 and 2002, included the following (in thousands):

|                                                                                                                                                     |                      |   |                    |       |      |   |       |       | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | - | ------------------ | ----- | ---- | - | ----- | ----- | 
|                                                                                                                                                     |                      |   | For the Year Ended
|                                                                                                                                                     |                      |   | June 30,          
|                                                                                                                                                     |                      |   |                   
|                                                                                                                                                     |                      |   | 2003               |       | 2002
|                                                                                                                                                     |                      |   |                    |       |     
|Legal settlements (including $5 million charge for settlement and release
of substantially all claims in the Companys Goleta loan-related lawsuits) |                      | $ | 5,750              |       |      | $ | 1,984 |      
|Insurance recovery resulting from claims related to the Goleta loan-related lawsuits                                                                 |                      |   | (4,700             | )     |      |   |      |      
|Loss on liquidation of investment in ePacific                                                                                                        |                      |   | 703                |       |      |   |      |      
|Store closing expense                                                                                                                                |                      |   | 534                |       |      |   | 1,029 |      
|Early extinguishment of senior secured debt                                                                                                          |                      |   | 270                |       |      |   |      |      
|Gain on sale of stores to franchisees                                                                                                                |                      |   | (888               | )     |      |   |      |      
|Restructuring provision                                                                                                                              |                      |   |                   |       |      |   | (163  | )    
|Other                                                                                                                                                |                      |   | (85                | )     |      |   | (23   | )    
|                                                                                                                                                     |                      |   |                    |       |      |   |       |      
|                                                                                                                                                     | Total other expenses |   | $                  | 1,584 |      |   | $     | 2,827 | 
|                                                                                                                                                     |                      |   |                    |       |      |   |       |      

Fiscal 2002 Compared to Fiscal 2001.Other expenses decreased by $5.3 million
in fiscal 2002 from fiscal 2001 as a result of the $7.7 million recorded in
fiscal 2001 for the costs associated with closing 85 unprofitable or
underperforming stores owned and operated by the Company, offset by legal
settlement expense of $2.0 million recorded in fiscal 2002 for the settlement
of legal proceedings against the Company in Colorado, Indiana, and Maryland.

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Income Taxes

Fiscal 2003 Compared to Fiscal 2002.A provision of $8.5 million was recorded
for income taxes for fiscal 2003, compared to $6.9 million for fiscal 2002.
The provision for income taxes was calculated based on a statutory federal
income tax rate of 35%, plus a provision for state income taxes. The effective
income tax rate was 40.0% for fiscal 2003 compared to 40.6% for last fiscal
year.

Fiscal 2002 Compared to Fiscal 2001.A provision of $6.9 million was recorded
for income taxes for fiscal 2002, compared to $0.4 million for fiscal 2001.
The provision for income taxes was calculated based on a statutory federal
income tax rate of 35%, plus a provision for state income taxes and
non-deductible goodwill resulting from acquisitions. The effective income tax
rate was 40.6% for fiscal 2002 compared to 39.9% for last fiscal year.

Gain on Sale of Discontinued Operations

Fiscal 2003 Compared to Fiscal 2002.The Company sold 19 underperforming
stores in Florida in late-November 2002 for a pre-tax gain of $0.8 million and
an after-tax gain of $0.5 million. The operating results of the 19 stores had
no material impact on current or historical net income or cash flow for or
during the years ended June 30, 2003, 2002, or 2001.

Balance Sheet Variations

Cash and cash equivalents, the money orders payable, and the revolving advances
vary because of seasonal and day-to-day requirements resulting primarily from
maintaining cash for cashing checks and making small consumer loans; receipts
of cash from the sale of money orders and remittances on money orders sold;
receipts of cash for wire transfers, and remittances for wire transfers; and
receipts of cash for electronic bill payments and remittances for bill
payments. For the year ended June 30, 2003, cash and cash equivalents
decreased $8.2 million, compared to a decrease of $12.9 million for the year
ended June 30, 2002.

Accounts receivable, net, at June 30, 2003 increased $0.6 million from June 30,
2002 primarily due to the $4.7 million receivable recorded in June 2003 related
to the recovery of insurance claims regarding the Goleta Loan-related lawsuits,
offset by a $4.0 million decrease in receivables from Goleta because of the
cessation of offering Goleta loans at the Companys stores effective December
31, 2002.

Loans receivable, net, at June 30, 2003 decreased $4.4 million from June 30,
2002 due to the Companys transition from offering Goleta loans at most of its
stores to offering a state-regulated short-term loan or service in a reduced
number of its stores. Also, loans receivable, net, as of June 30, 2003 does
not include any of the Republic Bank deferred-deposit loans available through
the Companys stores in Arkansas, Pennsylvania and Texas, because the Company
serves only as marketing and servicing agent for Republic Bank regarding those
loans and does not acquire or own any participation interest in any of those
loans. The Companys agreement with Republic Bank provides for the Company to
receive agency fees from Republic Bank, though such fees are subject to
reduction or offset by the losses from uncollected Republic Bank loans.

Prepaid expenses and other current assets at June 30, 2003 increased by $2.1
million from June 30, 2002 due to an increase in deferred financing costs ($2.7
million) and an increase in prepaid income taxes ($1.1 million), which were
partially offset by a reduction in the deferred tax asset balance ($1.4
million) and other prepaid expenses related to the recognition of a full years
expense associated with the lease and maintenance costs related to the SSMs,
most of which are operated only during tax season in H&R Block locations ($0.3
million).

Property and equipment, net, at June 30, 2003 decreased $4.8 million as a
result of depreciation expense ($8.2 million) and fixed asset retirements ($1.4
million) (including $0.8 million related to the sale of 19 underperforming
stores in Florida in November 2002), offset by fixed asset additions of $4.8
million (including $0.6 million for capitalized software development.)
Goodwill, net, at June 30, 2003 increased $0.6 million, from June 30, 2002 as a
result of the two stores acquired during fiscal 2003. The Company opened 14
newly constructed stores, acquired two stores, closed 28 company-owned stores
and sold 23 company-owned stores during the year ended June 30, 2003.

Revolving advances at June 30, 2003 decreased by $13.6 million from June 30,
2002 due to reduced average daily usage of the revolving credit facility, which
in turn resulted from continued improvements in cash forecasting and
operational procedures regarding store cash deliveries and more efficient
management of working capital during fiscal 2003.

Accounts payable, accrued liabilities, and other current liabilities at June
30, 2003 increased by $12.2 million from June 30, 2002, as indicated by the
following:

29



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|                              |  |                             |        |      |  |            |        |  |  |          |        |  
|----------------------------- |  | --------------------------- | ------ | ---- |  | ---------- | ------ |  |  | -------- | ------ | -
|                              |  | For the Year Ended June 30,
|                              |  |                            
|                              |  |                             |        |      |  |            |        |  |  | Increase
|                              |  | 2003                        |        | 2002 |  | (decrease)
|                              |  |                             |        |      |  |           
|                              |  | (in thousands)             
|Accounts payable  trade      |  | $                           | 10,787 |      |  | $          | 5,329  |  |  | $        | 5,458  |  
|Accrued salaries and benefits |  |                             | 7,675  |      |  |            | 6,292  |  |  |          | 1,383  |  
|Payable to Republic Bank      |  |                             | 6,662  |      |  |            |       |  |  |          | 6,662  |  
|Accrued litigation            |  |                             | 5,139  |      |  |            | 2,286  |  |  |          | 2,853  |  
|Money transfer payable        |  |                             | 4,223  |      |  |            | 3,545  |  |  |          | 678    |  
|Deferred revenue              |  |                             | 1,322  |      |  |            | 2,006  |  |  |          | (684   | )
|Interest payable              |  |                             | 423    |      |  |            | 158    |  |  |          | 265    |  
|Interest-rate swap            |  |                             | 398    |      |  |            | 1,815  |  |  |          | (1,417 | )
|Restructuring accrual         |  |                             | 203    |      |  |            | 374    |  |  |          | (171   | )
|Income taxes payable          |  |                             | 106    |      |  |            | 1,716  |  |  |          | (1,610 | )
|Other                         |  |                             | 3,818  |      |  |            | 4,991  |  |  |          | (1,173 | )
|                              |  |                             |        |      |  |            |        |  |  |          |        |  
|                              |  | $                           | 40,756 |      |  | $          | 28,512 |  |  | $        | 12,244 |  
|                              |  |                             |        |      |  |            |        |  |  |          |        |  

Senior secured notes payable at June 30, 2003 decreased by $8.0 million from
June 30, 2002 due to the Companys payment of the fourth annual $4.0 million
installment of principal in November 2002 and prepayment of the final $4.0
million installment of principal in March 2003.

Term advances decreased by a total of $10.1 million at June 30, 2003, as
compared to June 30, 2002, as the result of the Companys repayment of those
advances.

Loan Portfolio

The Company has established a loan loss allowance for its loans receivable
(which consist of the Companys payday loans and its participation interests in
outstanding Goleta Loans) at a level that the Companys management believes to
be adequate to absorb known or probable losses from payday loans made by the
Company and from the Companys participation interests in outstanding Goleta
Loans. In the first six months of fiscal 2003, the Company gradually ceased to
offer Goleta Loans and began to offer state-regulated short-term loans or
deferred-deposit-transaction services, commonly known as payday loans, at its
owned stores. As of December 31, 2002, Goleta Loans were no longer offered at
any of the Companys stores, though the Company continued to collect
outstanding Goleta Loans until June 30, 2003. Because the Companys payday
loan product is substantially similar to the Goleta Loans formerly offered, the
Companys method for determining its loan loss allowance for both types of
loans is the same.

The Companys current policy for determining the loan loss allowance is based
on historical experience generally as well as the results of managements
review and analysis of the payment and collection of the loans within the last
fiscal quarter. The Company has determined, based on recent operating history,
that it receives payment of approximately 94.5% (for loans maturing in the
first, second and fourth fiscal quarters) or 95.5% (for loans maturing during
tax refund season in the third fiscal quarter) of the loan volume, or principal
amount of the loans. Therefore, the loan loss allowance is approximately 5.5%
of the principal amount of the loans maturing in the first, second and fourth
fiscal quarters and approximately 4.5% of the principal amount of the loans
maturing in the third fiscal quarter. The Companys policy is to charge-off all
of its payday loans, or participation interests in Goleta Loans, which are 180
days or more past due or delinquent. Charge-offs are applied as a reduction to
the loan loss allowance, and any recoveries of previously charged-off loans or
participation interests in Goleta Loans are applied as an increase to the loan
loss allowance.

At the end of each fiscal quarter, the Companys management analyzes the loan
loss provision and the allowance that has been computed based on the activity
described above to determine if the allowance is adequate based on its
understanding of what is occurring in the stores with customers, past loan loss
experience, current economic conditions, volume and growth of the loan
portfolio, timing of maturity, as well as collections experience. For this
purpose, each renewal of a loan (in which no additional principal is advanced)
is treated as a continuation of the initial loan, and the Company includes only
its participation interests in the Goleta Loans (instead of the entire amount
of the Goleta Loans). If necessary, adjustments to the provision and the
allowance are made.

An analysis of the loan loss allowance with reference to the Companys gross
loans receivable (which does not include any Republic Bank loans) is as
follows:

30



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|                                                 |                                                |   |                     |         |      |   |        |         |  
|------------------------------------------------ | ---------------------------------------------- | - | ------------------- | ------- | ---- | - | ------ | ------- | -
|                                                 |                                                |   | Year Ended June 30,
|                                                 |                                                |   |                    
|                                                 |                                                |   | 2003                |         | 2002
|                                                 |                                                |   |                     |         |     
|                                                 |                                                |   | (in thousands)     
|Gross loans receivable                           |                                                | $ | 21,734              |         |      | $ | 29,569 |        
|                                                 | Less: Allowance for losses on loans receivable |   |                     | 8,734   |      |   |        | 12,213  |  
|                                                 |                                                |   |                     |         |      |   |        |        
|Loans receivable, net of allowance               |                                                | $ | 13,000              |         |      | $ | 17,356 |        
|                                                 |                                                |   |                     |         |      |   |        |        
|Allowance for losses on loans receivable:        |                                                |   |                     |         |      |   |        |        
|                                                 | Beginning of period                            |   | $                   | 12,213  |      |   | $      | 13,382  |  
|                                                 | Provision for loan losses                      |   |                     | 19,361  |      |   |        | 21,924  |  
|                                                 | Charge-offs                                    |   |                     | (23,729 | )    |   |        | (24,519 | )
|                                                 | Recoveries                                     |   |                     | 889     |      |   |        | 1,426   |  
|                                                 |                                                |   |                     |         |      |   |        |        
|                                                 | End of period                                  |   | $                   | 8,734   |      |   | $      | 12,213  |  
|                                                 |                                                |   |                     |         |      |   |        |        
|Net loan charge-offs as a percent of volume      |                                                |   | 5.4                 | %       |      |   | 4.6    | %      
|Allowance as a percent of gross loans receivable |                                                |   | 40.2                | %       |      |   | 41.3   | %      

The reduction in gross loans receivable was primarily the result of (1) the
transition during the first half of fiscal 2003 from Goleta Loans to
alternative loan products or services, (2) the decrease in the number of stores
in which loan products or services were offered, because the Company ceased to
offer loan products or services in Maryland, Georgia, North Carolina and
Alabama, and (3) the offering of Republic Bank loans, rather than the Companys
own loan product or service, at the Companys stores in Texas, Arkansas, and
Pennsylvania. These changes were in turn the result primarily of the Companys
agreements with the Office of the Comptroller of the Currency and Goleta to
discontinue offering Goleta Loans at its stores by December 31,
2002. (See  Cessation of the Goleta National Bank Relationship below.)

The schedule below indicates the progression of receipts or collections of each
quarterly portfolio of loans (consisting of both Company payday loans and
participation interests in Goleta Loans). In this case, a quarterly
portfolio is the Companys interests in all of the loans that matured in a
particular fiscal quarter. Management can track the payment rates at different
points of time for each quarterly portfolio.

Management has established the following targets regarding each quarterly
portfolio:



| |  |  | Receive or collect 91% (or 93% in the Companys third fiscal
quarter) of the total volume, or principal amount of loans, by the end
of the current quarter (i.e., by June 30 for the payday loans or
participation interests in Goleta Loans maturing between April 1 and
June 30).          
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Receive or collect a cumulative 92.9% (or 94.5% in the Companys
third fiscal quarter) by 90 days out (i.e., by September 30 for the same
quarterly portfolio).                                                                                                                              
|
| |  |  | Receive or collect a cumulative 94.5% (or 95.5% in the Companys
third fiscal quarter) by 180 days out (i.e., by December 31 for the same
quarterly portfolio). The Company charges off its payday loans or
participation interests in Goleta Loans when they become delinquent for
180 days.

The assumed higher rate of payment in the Companys third fiscal quarter is a
result of improved collections during the Companys tax season, because of
borrowers receipt of tax refunds.

Collection Progression for Quarterly Loan Portfolios

|                       |     |        |  |                       |      |             |  |             |      |   |  |  |      |   |  |  |      |  
|---------------------- | --- | ------ |  | --------------------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                       |     |        |  | Collection Percentage
|                       |     |        |  |                      
|                       |     |        |  |                       |      |             |  | Actual     
|                       |     |        |  |                       |      |             |  |            
|Days Following Quarter |     | Target |  | Fiscal 2003           |      | Fiscal 2002 |  | Fiscal 2001
|                       |     |        |  |                       |      |             |  |            
|                       |     |        |  | First Quarter        
|                       | 30  |        |  |                       | 91.0 | %           |  |             | 92.4 | % |  |  | 91.4 | % |  |  | 90.4 | %
|                       | 90  |        |  |                       | 92.9 | %           |  |             | 94.7 | % |  |  | 93.3 | % |  |  | 90.8 | %
|                       | 180 |        |  |                       | 94.5 | %           |  |             | 95.1 | % |  |  | 94.5 | % |  |  | 92.0 | %
|                       |     |        |  | Second Quarter       
|                       | 30  |        |  |                       | 91.0 | %           |  |             | 93.1 | % |  |  | 92.9 | % |  |  | 91.4 | %
|                       | 90  |        |  |                       | 92.9 | %           |  |             | 95.9 | % |  |  | 95.0 | % |  |  | 93.0 | %
|                       | 180 |        |  |                       | 94.5 | %           |  |             | 96.1 | % |  |  | 95.8 | % |  |  | 94.1 | %
|                       |     |        |  | Third Quarter        
|                       | 30  |        |  |                       | 93.0 | %           |  |             | 93.5 | % |  |  | 94.4 | % |  |  | 93.3 | %

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Collection Progression for Quarterly Loan Portfolios

|                       |     |        |                |                       |      |             |  |             |      |   |  |  |      |   |  |  |      |  
|---------------------- | --- | ------ | -------------- | --------------------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                       |     |        |                | Collection Percentage
|                       |     |        |                |                      
|                       |     |        |                |                       |      |             |  | Actual     
|                       |     |        |                |                       |      |             |  |            
|Days Following Quarter |     | Target |                | Fiscal 2003           |      | Fiscal 2002 |  | Fiscal 2001
|                       |     |        |                |                       |      |             |  |            
|                       | 90  |        |                |                       | 94.5 | %           |  |             | 95.9 | % |  |  | 96.1 | % |  |  | 94.7 | %
|                       | 180 |        |                |                       | 95.5 | %           |  |             |     |   |  |  | 96.5 | % |  |  | 95.4 | %
|                       |     |        | Fourth Quarter
|                       | 30  |        |                |                       | 91.0 | %           |  |             | 93.4 | % |  |  | 92.4 | % |  |  | 91.2 | %
|                       | 90  |        |                |                       | 92.9 | %           |  |             |     |   |  |  | 95.1 | % |  |  | 92.9 | %
|                       | 180 |        |                |                       | 94.5 | %           |  |             |     |   |  |  | 95.4 | % |  |  | 93.9 | %

Republic Bank Loans

Republic Bank loans are not included in the Companys loan portfolio or in its
loans receivable, because the Company serves only as a marketing and servicing
agent for Republic Bank regarding those loans and does not acquire or own any
participation interest in any of those loans. The Companys agreement with
Republic Bank provides for the Company to receive fees from Republic Bank,
though those fees are subject to reduction or offset by the losses from the
Republic Bank loans that are not collected.

Because of the Companys economic exposure for losses related to the Republic
Bank loans, the Company has established a payable to reflect its anticipated
losses related to uncollected Republic Bank loans that are 180 days or more
past due. Though the Company has not had any long-term experience with
Republic Bank loans, it believes, based on the similarity of those loans to its
own payday loans and the Goleta Loans, that the loss experience with Republic
Bank loans will be similar to the loss experience with those other loans.
Accordingly, the payable for amounts due to Republic Bank for losses regarding
Republic Bank loans has been established at a level similar to the loan loss
allowance for the Companys other loan products.

As of June 30, 2003, the Company provided approximately $2.9 million for losses
on Republic Bank loans and charged-off $0.9 million related to these loans.
Therefore, the balance of the liability for Republic Bank loan losses reported
in accrued liabilities as of June 30, 2003 is $2.0 million.

Cessation of the Goleta National Bank Relationship

On October 25, 2002, the Company entered into an agreement with the Office of
the Comptroller of the Currency (the OCC), and on November 1, 2002, the
Company entered into Amendment No. 3 to the Master Loan Agency Agreement with
Goleta, to end the arrangement under which Goleta offered Goleta Loans at the
Companys stores effective December 31, 2002. Accordingly, as of January 1,
2003, Goleta Loans were no longer offered in any of the Companys stores. As
permitted by the two agreements, however, the Company continued, through June
30, 2003, to service and collect outstanding Goleta Loans under the Collection
Servicing Agreement between it and Goleta.

Since January 1, 2003, the Company has offered at most of its stores, instead
of the Goleta Loans, other short-term loans or deferred-deposit-transaction
services made in accordance with state law and regulations. That transition
has required the Company to obtain state licenses in certain states where
Goleta Loans had previously been offered and has prompted the Company to enter
into the Republic Bank Agreement regarding deferred-deposit loans by Republic
Bank offered in the Companys stores in Arkansas, Pennsylvania, and Texas. As
of June 30, 2003, the Company was offering a state-regulated loan product or
service in 862, or approximately 89%, of its owned stores; the Company was not
offering any loan product or service in any of its stores in Alabama, Georgia,
Maryland, and North Carolina.

As part of the agreements with the OCC and with Goleta, the Company agreed to
indemnify 100%, instead of the previous 90%, of Goletas losses and expenses
incurred on or after November 1, 2002 from certain third-party claims regarding
the Goleta Loans, including pending lawsuits. The Companys increased level of
indemnification of Goleta regarding the Goleta Loans requires and will require
it to pay 10% more than it would otherwise have paid to defend or settle and
resolve the pending lawsuits, and any other proceedings that may arise,
regarding the Goleta Loans.

In accordance with the agreement with Goleta, the Company acquired, for nominal
amounts, (1) the shares of ePacific, that were owned by Goletas corporate
parent and (2) the rights to the credit-scoring model that Goleta used
throughout its arrangement with the Company to determine eligibility for the
Goleta Loans that were offered at the Companys stores.

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##### Table of Contents



Liquidity and Capital Resources

Cash Flows from Operating Activities

During fiscal 2003, 2002, and 2001, the Company had net cash provided by
operating activities of $34.7 million, $18.4 million, and $20.4 million,
respectively. The increase in cash flows provided from operating activities in
fiscal 2003 compared to fiscal 2002 was primarily the result of the cessation
of loan-related business in Maryland, Georgia, North Carolina, and Alabama and
the transition from offering the Goleta Loans to offering the Companys payday
loan product or Republic Bank loans and strong operational performance.

During fiscal 2003, 2002, and 2001, the Company recognized $2.2 million, $2.2
million, and $3.1 million, respectively, in deferred revenue. The MoneyGram
Agreement provides incentive bonuses for opening new locations at which
MoneyGram services are offered as well as certain other performance incentives.
Incentive bonuses are recognized as revenue over the term of the agreement.
(See Business  Relationships with the Money Order and MoneyGram Suppliers.)

Cash Flows from Investing Activities

During fiscal 2003, 2002, and 2001, the Company used $4.8 million, $7.1
million, and $12.7 million, respectively, for purchases of property and
equipment related principally to new store openings and remodeling existing
stores. Expenditures related to acquisitions were $0.7 million, $1.2 million,
and $35.8 million for the fiscal years ended June 30, 2003, 2002, and 2001,
respectively.

The Companys total capital expenditures, excluding acquisitions, are currently
anticipated to be approximately $9.5 million during its fiscal year ending June
30, 2004, in connection with the opening of 40 new stores, the relocation or
remodeling of certain existing stores, and ongoing upgrades of the Companys
computer system. The actual amount of capital expenditures will depend in part
on the number of new stores opened, the number of stores acquired, and the
number of existing stores that are relocated or remodeled. The Company
believes that its existing resources, anticipated cash flows from operations,
and credit facilities will be sufficient to finance its anticipated capital
expenditures and operational requirements during fiscal 2004. Although
management anticipates that the Company will continue to expand, there can be
no assurance that the Companys expansion plans will not be adversely affected
by the Companys actual operating performance or by competition, market
conditions, or changes in laws or regulations affecting check-cashing and
related businesses of the types conducted by the Company.

Cash Flows from Financing Activities

During fiscal 2003 and fiscal 2002, the Company had net cash used by financing
activities of $38.8 million and $23.0 million, respectively, and during fiscal
2001, the Company had net cash provided by financing activities of $51.8
million. During the year ended June 30, 2003, the Company reduced the money
order principal payable by $6.5 million; reduced the balance of the revolving
advances by $13.6 million; reduced the balance of the term advances by $10.1
million; paid the $4.0 million principal installment of its long-term notes
payable when due; prepaid the final $4.0 million principal installment of its
long-term notes payable (which was not due until November 15, 2003); and
reduced the acquisitions notes payable balance by $0.6 million.

Certain Contractual Cash Commitments

The table below summarizes the Companys cash obligations for certain leases,
term debt and acquisition notes payable outstanding as of June 30, 2003:

|                          |       |   |        |        |      |   |                          |        |      |   |                |        |  |   |       |        |  |   |          |        | 
|------------------------- | ----- | - | ------ | ------ | ---- | - | ------------------------ | ------ | ---- | - | -------------- | ------ |  | - | ----- | ------ |  | - | -------- | ------ | 
|                          |       |   |        |        |      |   | Payments Due by June 30,
|                          |       |   |        |        |      |   |                         
|                          |       |   |        |        |      |   |                          |        |      |   |                |        |  |   |       |        |  |   | 2007 and
|                          |       |   | Total  |        | 2004 |   | 2005                     |        | 2006 |   | Thereafter    
|                          |       |   |        |        |      |   |                          |        |      |   |               
|                          |       |   |        |        |      |   |                          |        |      |   | (in thousands) |        |  |   |       |        |  |   |         
|Operating leases          |       | $ | 47,533 |        |      | $ | 19,416                   |        |      | $ | 13,576         |        |  | $ | 7,821 |        |  | $ | 6,720    |       
|Term notes                |       |   | 38,269 |        |      |   | 3,833                    |        |      |   | 3,834          |        |  |   | 3,938 |        |  |   | 26,664   |       
|Acquisition notes payable |       |   | 888    |        |      |   | 780                      |        |      |   | 33             |        |  |   | 36    |        |  |   | 39       |       
|                          |       |   |        |        |      |   |                          |        |      |   |                |        |  |   |       |        |  |   |          |       
|                          | Total |   | $      | 86,690 |      |   | $                        | 24,029 |      |   | $              | 17,443 |  |   | $     | 11,795 |  |   | $        | 33,423 | 
|                          |       |   |        |        |      |   |                          |        |      |   |                |        |  |   |       |        |  |   |          |       

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Money Order Agreement and MoneyLine Agreement

In April 1998, the Company signed a five-year money order agreement with
Travelers Express, which became effective December 17, 1998. In conjunction
with this agreement and the MoneyLine Agreement, the Company received $3
million from Travelers Express in fiscal 1998, received $400,000 in each of the
remaining years of the contract. Payments are deferred and amortized on a
straight-line basis over the five-year term of the agreements, beginning
January 1999, based on the $5 million total.

Existing Credit Facilities

The Companys existing credit facilities became effective on March 31, 2003,
when the Company refinanced its outstanding revolving and term loan
indebtedness under the Expired Credit Agreement (as defined below) by entering
into:



| |  | a new credit agreement with a syndicate of banks led by JP Morgan Chase
Bank, as agent and syndication agent, and Wells Fargo Bank Texas, National
Association (Wells Fargo Bank), as administrative agent, for themselves
and other lenders that provides for revolving credit facilities of up to
$165 million; and
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a note purchase agreement with American Capital Financial Services, Inc.,
as agent for its affiliate American Capital Strategies, Ltd., which
purchased $40 million of the Companys senior subordinated secured
promissory notes.                                                                                     

The credit facilities under the new credit agreement and the indebtedness
incurred under the note purchase agreement replaced the revolving and term-loan
credit facilities and the outstanding indebtedness under the Expired Credit
Agreement. The revolving facilities under the new credit agreement replaced
the revolving facilities under the Expired Credit Agreement, and the
indebtedness incurred by the Company under the note purchase agreement was used
to fully pay the outstanding term loans, and terminate the term-loan facility,
under the Expired Credit Agreement.

The credit agreement provides for two revolving line-of-credit facilities that
expire on March 31, 2006:



| |  | a $120 million primary revolving credit facility that is available throughout the three-year term; and                                                                                       
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a $45 million seasonal revolving credit facility that is available to
the Company during each year-end holiday and tax season (i.e., December
1 through March 15) during the three-year term.

The revolving line-of-credit facilities include, subject to certain conditions,
a letter-of-credit facility from Wells Fargo Bank of up to $5 million.

In addition, the credit agreement acknowledges that the Company may, before
March 31, 2005, request an additional $10 million as part of the seasonal
revolving credit facility, but none of the lenders committed to lend any of
that amount in the credit agreement. Borrowings under the credit agreement may
be used for the Companys working capital and general corporate purposes, but
not for capital expenditures or acquisitions (which can only be made out of the
Companys cash flow from operations).

Borrowings under the credit agreement bear interest at a variable annual rate
equal to, at the Companys discretion, either:



| |  |  | The sum of (a) the greatest of (i) the prime rate publicly announced by
Wells Fargo Bank (the Prime Rate), (ii) one percent, plus the rate of
interest on the secondary market for three-month certificates of deposit
reported by the Board of Governors of the Federal Reserve System (the
Board of Governors), multiplied by a fraction, the numerator of which
is one and the denominator of which is one minus the maximum reserve
percentages required by the Board of Governors to which Wells Fargo Bank
is subject for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities of approximately three months plus the
annual assessment rate that is payable by a member of the Bank Insurance
Fund classified as well capitalized, and (iii) the federal funds rate
plus 0.5%; plus (b) a margin that varies from 1.5% to 2.75% per annum
based on the Companys debt-to-EBITDA ratio. (For this ratio, EBITDA
is the Companys earnings before interest, taxes, depreciation, and
amortization.) This interest rate adjusts on a daily basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The sum of (a) the London Interbank Offered Rate (LIBOR) for (at the
Companys discretion) one-, two-, three- or six month maturities,
multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required
by the Board of Governors to which Wells Fargo Bank is subject for
Eurocurrency funding, plus (b) a margin that varies from 3.0% to 4.25% per
annum based on the Companys debt-to-EBITDA ratio. This interest rate
adjusts, at the Companys discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |  |  | The sum of (a) LIBOR for one-month maturities, plus (b) a margin that
varies from 3.0% to 4.25% per annum based on the Companys debt-to-EBITDA
ratio. This interest rate adjusts on a daily basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The note purchase agreement was entered into as a private placement of $40
million of the Companys debt securities. Under the note purchase agreement,
the Company issued four separate $10 million senior subordinated secured notes
(Notes) to American Capital Strategies, Ltd.: a Series A Note, a Series B
Note, a Series C Note, and a Series D Note. The Notes vary by interest rates,
maturity, and payment schedule.

The annual interest rate on the outstanding principal amount of the Notes are:



| |  |  | Series A Note: LIBOR plus eight percent.
| | - |  | ----------------------------------------
|
| |  |  | Series B Note: LIBOR plus ten percent.  
|
| |  |  | Series C Note: LIBOR plus 13%.          
|
| |  |  | Series D Note: LIBOR plus 13.25%.       

Upon an event of default under the note purchase agreement, the annual interest
rate applicable to each outstanding Note is increased by two hundred basis
points. Interest on all of the Notes is payable monthly.

The unpaid principal amounts of the Notes are payable, with accrued and unpaid
interest, as follows:



| |  |  | Series A Note: eleven quarterly installments of $833,333.34, payable at
the end of each calendar quarter, beginning
June 30, 2003; and all remaining amounts at maturity on March 31, 2006.                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Series B Note: twelve quarterly installments of $125,000, payable at
the end of each calendar quarter, beginning June
30, 2003; seven quarterly installments of $1,062,500, payable at the
end of each calendar quarter, beginning June 30,
2006; and all remaining amounts at maturity on March 31, 2008.
|
| |  |  | Series C Note: At maturity on March 31, 2009.                                                                                                                                                                                                                                                             
|
| |  |  | Series D Note: At maturity on March 31, 2010.                                                                                                                                                                                                                                                             

The Company is subject to various restrictive covenants stated in the credit
agreement and in the note purchase agreement. The covenants in those documents
are substantially similar. The covenants include restrictions on the
incurrence of indebtedness from other sources, restrictions on advances to or
investments in other persons or entities, restrictions on amounts payable to
settle litigation, restrictions on the payment of dividends to shareholders and
on the repurchase of shares, and the requirement that various financial ratios
be maintained. Certain of the covenants in the credit agreement and in the
note purchase agreement require the Company to limit its capital expenditures
during each fiscal year to specified amounts and to limit any acquisition of
assets or capital stock of an entity in the retail financial services business.

To reduce its risk of greater interest expense because of interest-rate
fluctuations, the Company has entered into interest-rate swap agreements, which
effectively converted a portion of its floating-rate interest obligations to
fixed-rate interest obligations. On April 23, 2003, the Company entered into
an interest-rate swap agreement with JP Morgan Chase Bank, regarding a notional
amount of $60 million, to be effective until March 31, 2006. On June 2, 2003,
the Company entered into an interest-rate swap agreement with National City
Bank regarding a notional amount of $20 million, to be effective until March
31, 2006.

As of June 30, 2003, the Company had borrowed $83.9 million under its revolving
line-of-credit facility, and $38.3 million was outstanding under the Notes.
The Prime Rate effective on June 30, 2003 was 4.0%, and LIBOR effective on that
date was 1.125%.

For a more complete description of the terms of the existing credit facilities,
see Note 4 of Notes to Consolidated Financial Statements.

Expired Bank Credit Agreement

During the first nine months of fiscal 2003, the Company was a party to an
Amended and Restated Credit Agreement (the Expired Credit Agreement) with a
syndicate of banks (the Lenders) led by Wells Fargo Bank. The Expired Credit
Agreement was amended twice during the nine-month period before its
termination.

Because the Expired Credit Agreement in effect at the beginning of fiscal 2003
provided that the credit facilities expired on October 31, 2002, the Company
entered into an amendment to that credit agreement on that date to renew the
existing credit facilities only until November 13, 2002, in order to permit the
Company and the Lenders to negotiate the terms of an extension of the credit
facilities for an additional 12 months. On November 13, 2002, the Company
entered into a second amendment to that credit agreement which extended the
credit facilities until October 31, 2003.

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Under the Expired Credit Agreement, until October 31, 2002:



| |  | The two primary credit facilities available to the Company were a
revolving line-of-credit facility of $130 million and a term-loan
facility of $49.85 million. Borrowings under the revolving
line-of-credit facility were available for working capital and general
corporate purposes. The Company had fully borrowed under the
term-loan facility for store construction and relocation and other
capital expenditures, including acquisitions, and refinancing other
indebtedness. In addition to the two primary credit facilities, the
Company also had available a standby letter-of-credit facility of up
to $1.5 million from Wells Fargo Bank.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The Companys borrowings under the revolving line-of-credit facility
bore interest at a variable annual rate equal to, at the Companys
discretion, either the Prime Rate plus 3% or the LIBOR plus 4%. The
Companys borrowings under the term-loan bore interest at an annual
rate of 9%. Interest was generally payable monthly, except on
LIBOR-rate borrowings; interest on LIBOR-rate borrowings was payable
every 30, 60, or 90 days, depending on the period selected by the
Company.                                                                                                                                                            
| 
| |  | The Company paid commitment fees of $524,000 on April 30, 2002,
$500,000 on July 1, 2002, and $1,024,250 on October 1, 2002 for the
credit facilities and an additional commitment fee equal to 0.5% per
annum of the average daily unused portion of the revolving
line-of-credit facility.                                                                                                                                                                                                                                                                                                                                                             
| 
| |  | The Company paid the Lenders $1.0 million of principal of the
outstanding term loan on April 30, 2002, and an additional $250,000 of
principal of the outstanding term loan on the last business day of
each calendar month ending before the maturity date; each such payment
of principal was to be accompanied by the payment of all accrued
interest on the outstanding principal of the term loan.                                                                                                                                                                                                                                                  
| 
| |  | The Company was restricted from opening any new stores or entering
into any new lease agreement for additional stores other than (1)
completing construction and finish-out of five stores that the Company
had committed to construct or finish-out as of December 31, 2001, and
(2) opening ten other stores to replace stores closed in the ordinary
course of business, if the capital expenditures for the completion and
finish-out and the replacement of stores did not exceed $75,000 per
store or a total of $750,000.                                                                                                                         
| 
| |  | The Company was restricted from making aggregate capital expenditures,
including to acquire any stores, in excess of $1.5 million (in
addition to those permitted for opening new or additional stores)
without the Lenders prior written consent.                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| |  | The Company was required to obtain the Lenders prior written consent
to any settlement payment by the Company regarding any lawsuit against
the Company in excess of $1.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| |  | The Company agreed to pay the Lenders the net proceeds over $1 million
of any sale of the Companys assets outside of the ordinary course of
business, to be applied first to reduce the outstanding term loan and
then to reduce the outstanding revolving of line-of-credit loans.                                                                                                                                                                                                                                                                                                                                                                     
| 
| |  | The Company agreed to pay the Lenders a fee equal to 0.5% of all of
the credit facilities available to the Company if the Company sells,
or enters into a binding agreement to sell, all or substantially of
its outstanding stock or assets, including by any merger,
consolidation, share exchange, or other reorganization, on or before
the maturity date of the credit facilities (as they may be extended)
or within 120 days thereafter.                                                                                                                                                                                                          

On October 31, 2002, the Company and the Lenders entered into an amendment to
the Expired Credit Agreement which, among other things:



| |  | Extended all of the Companys credit facilities to November 13, 2002.                                                                                                                                            
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Reduced the amount that the Company could borrow under the existing revolving line-of-credit facility to a maximum of $110
million, subject to the previously applicable borrowing base, until November 13, 2002.
| 
| |  | Increased the interest rate on the revolving line-of-credit facility to a variable annual rate equal to, at the Companys
option, either the Prime Rate plus 3.5% or LIBOR plus 4.5%.                            
| 
| |  | Obligated the Company to pay a commitment fee to the lenders of $183,133 on October 31, 2002.                                                                                                                    

On November 13, 2002, the Company and the Lenders entered into another
amendment to the Expired Credit Agreement which, among other things:



| |  | Established the Companys revolving line-of-credit facility at a maximum of $120
million and extended that facility and the $47.35 million term-loan facility to
October 31, 2003.                                                                                                                                                                                                                                                                                         
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Provided the Company an additional $55 million seasonal revolving credit
facility available in varying amounts from December 1, 2002 until March 15,
2003. The maximum available amounts were $10 million from December 1 through
December 31, 2002, $45 million thereafter through January 15, 2003, $55 million
thereafter through February 28, 2003, and $10 million thereafter through March
15, 2003. The interest rate on this facility was the Prime Rate plus 4%.
| 
| |  | Increased the interest rate on the term-loan facility to a fixed annual rate of 15%.                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Required the Company to pay the Lenders principal of the outstanding term loan
in the amounts of $0.5 million on January 31, 2003, $5.75 million on February
28, 2003, and $0.25 million on March 31, 2003 and at the end of each                                                                                                                                                                                                                                          

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|  |  | month thereafter. Each such payment of principal was to be accompanied by the
payment of all accrued interest on the outstanding principal of the term loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Permitted the Company to arrange for separate
funding, through a special-purpose subsidiary, to
obtain cash inventory for its SSMs to be placed in
certain H&R Block retail offices during the 2003 tax
season (i.e., January through April 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | Required the Company to pay the Lenders the net
proceeds over $1 million of any sale of the Companys
assets outside of the ordinary course of business, to
be applied to reduce the outstanding term loan or, if
no such loan is outstanding, the outstanding seasonal
revolving credit loans.                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| |  | Included a covenant that restricted the Company from
opening any new stores, or entering into any new
lease agreement for additional stores, other than new
stores to replace stores closed in the ordinary
course of business if the capital expenditures for
the replacement stores do not exceed $75,000 per
store or a total of $1.5 million.                                                                                                                                                                                                                                                                                                                                                                    
| 
| |  | Included a covenant that restricted the Company from
making capital expenditures, in addition to those
permitted for replacement stores, exceeding a total
of $3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| 
| |  | Required the Company to pay commitment fees to the
Lenders for the facilities of $1,111,750 on each of
November 13, 2002 and February 28, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
| |  | Required the Company to pay the Lenders an additional
commitment fee equal to 0.5% per annum of the average
daily unused portion of the revolving line-of-credit
and seasonal revolving credit facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| 
| |  | Required the Company to use its best efforts to obtain additional
capital to be used to repay all or a portion of the
outstanding term loan and to pay the Lenders, to the extent that the
outstanding term loan is not fully repaid, a contingency fee of up to $2.625
million. The contingency fee was payable in installments of $0.375 million
on November 13, 2002, $0.5 million on April 1, 2003, $0.75 million on July
1, 2003, and $1 million on October 1, 2003. The installments of the
contingency fee payable after the Company obtains any new capital and repays
a portion of the outstanding term loan, however, would be reduced pro rata
to correspond with reductions in the outstanding term loan.

To reduce its risk of greater interest expense under the Expired Credit
Agreement upon an increase in the Prime Rate or LIBOR, the Company had entered
into interest-rate swap agreements, the last of which expired effective
December 31, 2002, which effectively converted a portion of its floating-rate
interest obligations to fixed-rate obligations, as described in Note 4 of Notes
to Consolidated Financial Statements.

SSM Funding Arrangements

A multi-year license agreement with H&R Block Tax Services, Inc. permits the
Company to place its SSMs in certain H&R Block retail offices during the tax
season of each year. The SSMs are available to cash only tax refund and tax
refund anticipation loan checks for H&R Block customers.

In early-January 2003, the Company completed two arrangements to obtain up to
$290 million in cash or currency for the more than 240 SSMs placed in the H&R
Block retail offices during the 2003 tax season. One of the arrangements was
with Texas Capital Bank, National Association, a national bank that is a
subsidiary of Texas Capital Bancshares, Inc. (Texas Capital Bank). The other
arrangement was with DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt
am Main, a German bank, as arranger and liquidity agent (DZ Bank), and
Autobahn Funding Company LLC, as lender (Autobahn Funding). The Companys
arrangement with Texas Capital Bank extended only for the 2003 tax season.
The Companys arrangement with DZ Bank and Autobahn Funding was effective for
the 2003 tax season and will be effective for the four successive annual tax
seasons, through 2007. For a description of the terms of the arrangements with
Texas Capital Bank and with DZ Bank and Autobahn Funding, see Note 4 of Notes
to Consolidated Financial Statements.

Effects of Financing Arrangements

The Company believes that its new longer term credit facilities under the new
credit agreement and the new note purchase agreement, its funding arrangements
for the SSMs in H&R Block offices during the tax season, and its anticipated
cash flows from operations will provide adequate working capital for the
Companys operations. Although the new credit agreement and the note purchase
agreement place some restrictions on capital expenditures, the Company believes
that these restrictions do not prohibit the Company from pursuing its growth
strategy as planned.

Stock Repurchase Program

In fiscal 2000, the Companys Board of Directors authorized the repurchase from
time to time of up to approximately $5 million of the Companys common stock in
the open market or in negotiated transactions. During fiscal 2002, the
Company repurchased 211,400 shares at an average price of $12.81 per share.
During fiscal 2003, no shares were repurchased. The Companys new credit
agreement and new note purchase agreement restrict the Companys right to
repurchase shares. This stock repurchase program will remain in effect,
however, until discontinued by the Board of Directors.

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Litigation Expenses

As indicated in Legal Proceedings above, the Company has been required to
defend itself and, in some matters, its directors, officers, and others in
various lawsuits and state regulatory proceedings regarding its current and
past loan-related activities. The Company has incurred significant legal
expenses in conducting that defense, and if the proposed settlement in the
Purdielawsuit is not finally approved by the court or otherwise implemented,
the Company may have to incur additional significant legal expenses in
defending itself and others, regardless of the Companys success in defending
or otherwise resolving the various proceedings. The Company is, in accordance
with its Bylaws, paying the expenses of defense for its directors, officers,
and other employees named as additional defendants in these lawsuits. The
Company also is, in accordance with the Goleta Agreement, paying all of the
expenses of Goleta as a party in these proceedings. In fiscal 2003, the
Companys expense of defense, for itself and others, was approximately $2.2
million. In light of the pendency of the proposed Purdiesettlement, and
because of the various factors involved in litigation, it is impossible to
predict an amount or a range of amounts that the Company may have to expend, in
fiscal 2004 or thereafter, to conduct that defense. Assuming the Purdie
settlement receives final court approval and is implemented, the Company
currently estimates that its legal expenses in defending, for itself and
others, the various lawsuits will be approximately $0.8 million during fiscal
2004.

Recently Issued Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment
of SFAS No. 123 (SFAS 148). SFAS 148 was issued to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS No. 123 to require disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. Entities are still permitted to account for stock-based compensation
programs using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. The Company
currently accounts for stock-based compensation using the intrinsic value
method. The interim disclosure requirements prescribed by SFAS 148 are
required for interim periods beginning after December 15, 2002, and were
included in the Companys Form 10-Q for the quarter ended March 31, 2003, and
the required annual disclosures are included in the accompanying consolidated
financial statements.

In December 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN
45). FIN 45
requires a guarantor entity, at the inception of a guarantee covered by the
measurement provisions of the interpretation, to record a liability for the
fair value of the obligation undertaken in issuing the guarantee. This applies
prospectively to guarantees the Company issues or modifies subsequent to
December 31, 2002, but has certain disclosure requirements effective for June
30, 2003. FIN 45 had no effect on the Companys financial position and results
of operations. The Company made the disclosures required by FIN 45 in these
consolidated financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46). FIN 46 requires that variable interest entities (VIE) be consolidated by
their primary beneficiary. FIN 46 became effective with all financial
statements issued after January 31, 2003. FIN 46 had no effect on the
Companys financial position and results of operations.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how
an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 will not have a material impact on the Companys financial
position and results of operations.

Critical Estimates, Uncertainties or Assessments in the Financial Statements

The preparation of the Companys financial statements in conformity with
generally accepted accounting principles in the United States of America
requires the Company 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 period. In applying the accounting
principles, management must often make individual estimates and assumptions
regarding expected outcomes or uncertainties. As might be expected, the actual
results or outcomes are generally different than the estimated or assumed
amounts. These differences are usually minor and are included in the Companys
consolidated financial statements as soon as they are known. Estimates,
judgments and

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assumptions are continually evaluated based on available information and
experience. Because of the use of estimates inherent in the financial reporting
process, actual results could differ from those estimates.

Actual results related to the estimates and assumptions made in preparing the
Companys consolidated financial statements will emerge over periods of time,
such as estimates and assumptions underlying the determination of allowance for
loan losses and self-insurance liabilities. These estimates and assumptions are
monitored and periodically adjusted as circumstances warrant. For instance, the
Companys liability for self-insurance related to workers compensation,
general liability, and medical liability may be adjusted based on higher or
lower actual loss experience. Although there is greater risk with respect to
the accuracy of these estimates and assumptions because of the period over
which actual results may emerge, such risk is mitigated by the ability to make
changes to these estimates and assumptions over the same period.

Management periodically reviews the carrying value of goodwill and other
intangible assets when events and circumstances warrant such a review. One of
the methods used for this review is performed using estimates of future cash
flows. If the carrying value of goodwill or other intangible assets is
considered impaired, an impairment charge is recorded for the amount by which
the carrying value of the goodwill or intangible assets exceeds its fair value.
The Company believes that the estimates of future cash flows and fair value are
reasonable. Changes in estimates of such cash flows and fair value, however,
could affect the evaluation.

Based on an assessment of the Companys accounting policies and the underlying
judgments and uncertainties affecting the application of those policies,
management believes that the Companys consolidated financial statements
provide a meaningful and fair perspective of the Company. The Company does not
suggest that other risk factors, such as those discussed elsewhere in this
Report and the Companys other public filings as well as changes in growth
objectives, could not adversely impact the consolidated financial position,
results of operations and cash flows in future periods.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires the Company to
make estimates and assumptions in determining 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 reported period. Actual results could differ from the Companys
estimates. The Company believes the most significant estimate made in the
preparation of the accompanying consolidated financial statements relates to
the determination of its allowance for loan losses. The next paragraph
addresses the Companys accounting policy concerning such allowance.

The Company maintains an allowance for loan losses and a payable to Republic
Bank at levels it considers sufficient to cover the anticipated losses in the
collection of the Companys loan portfolio and its liability for Republic
Banks loan losses. The allowance for loan losses and payable to Republic Bank
are determined based upon a review of historical and recent loan losses and the
loan portfolio, and takes into consideration economic conditions and trends.
The allowance for loan losses and payable to Republic Bank are periodically
reviewed by the Companys management with any changes reflected in current
operations. It is at least reasonably possible that actual loan losses may be
materially different from the recorded allowance for loan losses or recorded
amount payable to Republic Bank.

Operating Trends

Seasonality

The Companys business is seasonal to the extent of the impact of cashing tax
refund checks and tax refund anticipation loan checks. The impact of these
services is in the third and fourth quarters of the Companys fiscal year. The
Companys loan business declines slightly in the third fiscal quarter as a
result of the customers receipt of tax refund checks and tax refund
anticipation loans.

Impact of Inflation

Management believes the Companys results of operations are not dependent upon
the levels of inflation.

Forward-Looking Statements

This Report contains, and from time to time the Company or certain of its
representatives may make, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as anticipate, expect, estimate,
believe, intend, plan, should, would, and terms with similar
meanings. Although the

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Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and
the related statements, are inherently subject to risks, uncertainties, and
other factors, many of which are not under the Companys control and may not
even be predictable. Those risks, uncertainties, and other factors could cause
the actual results to differ materially from these in the forward-looking
statements.

Those risks, uncertainties, and factors include, but are not limited to:



| |  | ACEs relationships with Travelers Express Company, Inc. and its affiliates, and with ACEs
bank lenders, with American Capital Strategies, Ltd., and with H&R Block;                                                                                                                  
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | ACEs relationships with third-party providers of products and services offered by ACE or
property used in ACEs operations;                                                                                                                                                           
| 
| |  | federal and state governmental regulation of check-cashing, short-term consumer lending,
and related financial services businesses;                                                                                                                                                    
| 
| |  | the results of litigation regarding short-term consumer lending activities, including the
possibility that the Purdiesettlement will not receive final court approval or otherwise
be implemented;                                                                                     
| 
| |  | theft and employee errors;                                                                                                                                                                                                                                                             
| 
| |  | the availability of adequate financing, suitable locations, acquisition opportunities and
experienced management employees to implement the ACEs growth strategy;                                                                                                                     
| 
| |  | increases in interest rates, which would increase ACEs borrowing costs;                                                                                                                                                                                                               
| 
| |  | the fragmentation of the check-cashing industry and competition from various other sources,
such as banks, savings and loans, short-term consumer lenders, and other similar financial
services entities, as well as retail businesses that offer products and services offered by
ACE;
| 
| |  | the terms and performance of third-party products and services offered at ACE locations; and                                                                                                                                                                                           
| 
| |  | customer demand and response to products and services offered at ACE locations.                                                                                                                                                                                                        

The Company expressly disclaims any obligation to update or revise any of these
forward-looking statements, whether because of future events, new information,
a change in the Companys views or expectations, or otherwise. The Company
makes no prediction or statement about the performance of the Companys Common
Stock.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to financial market risks, particularly including
changes in interest rates that might affect the costs of its financing under
the former Credit Agreement and under the credit agreement and the new note
purchase agreement, as described in Note 4 of Notes to Consolidated Financial
Statements. To mitigate the risks of changes in interest rates, the Company
utilizes derivative financial instruments. The Company does not use derivative
financial instruments for speculative or trading purposes. To reduce its risk
of greater interest expense because of interest-rate fluctuations, the Company
has historically entered into interest-rate swap agreements, which effectively
converted a portion of its floating-rate interest obligations to fixed-rate
interest obligations, as described in Note 4 of Notes to Consolidated Financial
Statements. The Companys last interest-rate swap agreement that was effective
during the first nine months of fiscal 2003, during the effectiveness of the
former bank credit agreement, expired effective December 31, 2002. The terms
of the Companys new credit agreement and note purchase agreement, however,
require the Company to enter into one or more interest-rate swap agreements to
effectively convert to fixed-rate obligations the floating-rate obligations
outstanding under those agreements. Accordingly, on April 23, 2003, the
Company entered into an interest-rate swap agreement with JPMorgan Chase Bank
regarding a notional amount of $60 million, and on June 2, 2003, the Company
entered into an interest-rate swap agreement with National City Bank regarding
notional amount of $20 million. Both of these swap agreements are scheduled to
continue until March 31, 2006.

The fair value of the Companys existing interest-rate swaps was ($1.7) million
as of June 30, 2003. Based on the average outstanding indebtedness in the
previous quarter, a 10% change in interest rates would have changed the
Companys interest expense by approximately $192,000 (pre-tax) for the year
ended June 30, 2003 without consideration of the Companys interest-rate swaps.
The associated underlying debt has exceeded the notional amount for each swap
throughout the existence of the swaps, and it is anticipated that it will
continue to do so. The existing swaps are based on the same index as, and
repriced on a consistent basis with, their respective underlying debt.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15(a)(1) for information required for this item.

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

On June 3, 2002, the Company filed a Current Report on Form 8-K (dated May 31,
2002) to report the Companys change in its independent certified public
accountants from Arthur Andersen LLP to Grant Thornton LLP. There were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.




ITEM 9A. CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer,
the Company has evaluated the effectiveness of the design and operation of the
Companys disclosure controls and procedures, as defined in Rule 13a-14(c)
under the Securities Exchange Act of 1934, as amended, as of the end of the
period covered by this Report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that those disclosure controls
and procedures are effective. There were no changes in the Companys internal
control over financial reporting during the quarter ended June 30, 2003, that
have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.




PART III

The information called for in Part III of this Form 10-K is incorporated by
reference from the Companys definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than
October 28, 2003 (120 days after the Companys fiscal year).




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Report:

|                                                                                                  |  |  |    | 
|------------------------------------------------------------------------------------------------- |  |  | -- | 
|(1) Financial Statements.                                                                         |  |  |    | 
|Reports of independent certified public accountants                                               |  |  | 48 | 
|Consolidated balance sheets as of June 30, 2003 and 2002                                          |  |  | 50 | 
|Consolidated statements of earnings for the years ended June 30, 2003, 2002, and 2001             |  |  | 51 | 
|Consolidated statements of shareholders equity for the years ended June 30, 2003, 2002, and 2001 |  |  | 52 | 
|Consolidated statements of cash flows for the years ended June 30, 2003, 2002, and 2001           |  |  | 53 | 
|Notes to consolidated financial statements                                                        |  |  | 54 | 
|(2) Financial Statement Schedules.                                                                |  |  |    | 
|Report of independent certified public accountants                                                |  |  | 79 | 
|Schedule II - Valuation and Qualifying Accounts                                                   |  |  | 81 | 
|(3) Exhibits.                                                                                     |  |  |    | 

|               |  |                                                                                                                                                                                                                                            
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                            
|3.1            |  | Restated Articles of Incorporation of the Company, as amended through
January 31, 1998. (Included as Exhibit 3.6 to the Companys Form 10-Q as
of December 31, 1997 (Commission File Number 0-20774) and incorporated
herein by reference.)
|               |  |                                                                                                                                                                                                                                            
|3.2            |  | Amended and Restated Bylaws of the Company, as amended through January
31, 1998. (Included as Exhibit 3.7 to the Companys Form 10-Q as of
December 31, 1997 (Commission File Number 0-20774) and incorporated herein
by reference.)       

41



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##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.3            |  | Certificate of Amendment to the Companys Bylaws dated January 3, 2000.
(Included as Exhibit 3.3 to the Companys Form 10-Q as of December 31,
1999 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.1            |  | Form of Certificate representing shares of Registrants Common Stock.
(Included as Exhibit 4.1 to the Companys Registration Statement on Form
S-1 (Reg. No. 33-53286) (the Registration Statement) and incorporated
herein by reference.)                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.1           |  | Lease Agreement dated October 1, 1987, between the Company and Greenway
Tower Joint Venture, as amended by First Amendment to Lease Agreement
dated April 29, 1988, Second Amendment to Lease Agreement dated August 24,
1988, Third Amendment to Lease Agreement dated December 29, 1988 and
Fourth Amendment to Lease Agreement dated January 29, 1991. (Included as
Exhibit 10.8 to the Registration Statement and incorporated herein by
reference.)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.2           |  | Fifth Amendment to Lease Agreement dated June 13, 1994, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.10 to
the Companys Form 10-K as of June 30, 1994 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.3           |  | Ace Cash Express, Inc. 401(k) Profit Sharing Plan, adopted July 1, 1994.
(Included as Exhibit 10.13 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.4           |  | Ace Cash Express, Inc. Deferred Compensation Plan, adopted July 1, 1994.
(Included as Exhibit 10.14 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.5           |  | Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan dated
March 27, 1995. (Included as Exhibit 10.19 to the Companys Form 10-K as
June 30, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.6           |  | Sixth Amendment to Lease Agreement dated February 1, 1996, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.25 to
the Companys Form 10-Q as of March 31, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.7           |  | Amendment No.1 to the Ace Cash Express 401K Profit Sharing Plan effective
January 1, 1998. (Included as Exhibit 10.33 to the Companys Form 10-Q as
of March 31, 1998 (Commission File Number 0-20774) and incorporated herein
by reference.)#                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|11.8           |  | Amendment No. 1 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.34
to the Companys Form 10-K as of June 30, 1998 (Commission File No.
0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|11.9           |  | Amendment No. 2 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.35
to the Companys Form 10-K as of June 30, 1998 (Commission File No.
0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.10          |  | Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit A
to the Companys Proxy Statement for the 1997 Annual Meeting of
Shareholders (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.11          |  | Amendment No. 1 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.37 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.) #                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.12          |  | Form of Change-in-Control Executive Severance Agreement between the
Company and each of its three executive officers. (Included as Exhibit
10.38 to the Companys Form 10-K as of June 30, 1998 (Commission File No.
0-20774) and incorporated herein by reference.) #                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.13          |  | Money Order Agreement dated as of April 16, 1998, but effective as of
December 16, 1998, between the Company and Travelers Express Company, Inc.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934). (Included                                                                                                         

42



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|               |  | as Exhibit 10.39 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.14          |  | Amendment No.3 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.44 to the Companys Form 10-Q as of
December 31, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.15          |  | Amendment No. 2 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.45 to the Companys
Form 10-Q as of December 31, 1999 (Commission File Number 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.16          |  | Master Loan Agency Agreement dated as of August 11, 1999, between the
Company and Goleta National Bank. (Confidential treatment for a portion
of this document has been granted by the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.) (Included as Exhibit 10.47 to the Companys Form 10-K as of June
30, 2000 (Commission File No. 0-20774) and incorporated herein by
reference.)                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.17          |  | Money Transfer Agreement dated as of June 30, 2000, among the Company,
Travelers Express Company, Inc., and MoneyGram Payment Systems, Inc.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.48 to the
Companys Form 10-K as of June 30, 2000 (Commission File No. 0-20774) and
incorporated herein by reference.)                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.18          |  | Amendment No. 3 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.50 to the Companys Form 10-Q as of December 31,
2000 (Commission File No. 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.19          |  | Asset Purchase Agreement dated November 10, 2000, among the Company,
Check Cashiers of Arizona, Inc., Check Cashiers of California, Inc.,
Corpus Christi Check Cashiers, Inc., U.S. Money Order Company, Inc.,
Valley Check Cashiers, Inc., Morris Silverman, and Jeffrey D. Silverman.
(Included as Exhibit 2.1 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.20          |  | Escrow Agreement dated November 10, 2000, among the Company, Check
Cashiers of Arizona, Inc., Check Cashiers of California, Inc., Corpus
Christi Check Cashiers, Inc. U.S. Money Order Company, Inc., Valley Check
Cashiers, Inc., and Chicago Title Insurance Company, as Escrow Agent.
(Included as Exhibit 2.2 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.21          |  | Form of Amendment to Change-in-Control Executive Severance Agreement
between the Company and each of its four senior executive officers (Donald
H. Neustadt, Jay B. Shipowitz, Raymond E. McCarty, and Debra A. Bradford)
dated as of January 3, 2001. (Included as Exhibit 10.51 to the Companys
Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.22          |  | Amendment Number 1 to Master Loan Agency Agreement, with the
corresponding Amendment Number 1 to Master Loan Participation Agreement
and Amendment Number 1 to Schedule of Interest and Fees, dated of March
29, 2001, between the Company and Goleta National Bank. (Confidential
treatment for a portion of this document has been granted by the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.52 to the
Companys Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.23          |  | Change-in-Control Executive Severance Agreement dated as of May 15,
2001, between the Company and Barry M. Barron. (Included as Exhibit 10.56
to the Companys Form 10-K as of June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.24          |  | Amendment Number 2 to Master Loan Agency Agreement, with the
corresponding Amendment Number 2 to Master Loan Participation Agreement,
dated of June 30, 2001, between the Company and Goleta National Bank.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.57 to the
Companys Form 10-K as of June 30, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.25          |  | Separation Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.1 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                           

43



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.26          |  | Consulting Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.2 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.27          |  | Seventh Amendment to Lease Agreement dated December 20, 2000, between
the Company and Greenway Tower Joint Venture. (Included as Exhibit 10.66
to the Companys Form 10-K as of June 30, 2002 (Commission File No.
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.28          |  | Eighth Amendment to Lease Agreement dated May 10, 2001, between the
Company and Greenway Tower Joint
Venture. (Included as Exhibit 10.67 to the Companys Form 10-K as of June
30, 2002 (Commission File No. 0-
20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.29          |  | Ace Cash Express, Inc. Executive Non-Qualified Excess Plan Adoption
Agreement with the First Amendment to the
Ace Cash Express, Inc. Executive Non-Qualified Excess Plan, dated as of
October 1, 2001. (Included as Exhibit 10.68 to the Companys Form 10-K
as of June 30, 2002 (Commission File No. 0-20774) and incorporated herein
by reference.) #                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.30          |  | Stipulation and Consent to the Issuance of a Consent Order between
Ace Cash Express, Inc. and the Office of the
Comptroller of the Currency dated October 25, 2002. (Included as Exhibit
10.1 to the Companys Form 8-K filed on November 5, 2002 (Commission File
No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.31          |  | Consent Order issued by the Office of the Comptroller of the Currency In
the Matter of Ace Cash Express, Inc.,
Irving, Texas, as Agent and Bank Service Provider for Goleta National
Bank, Goleta, California, dated October 25, 2002. (Included as Exhibit
10.2 to the Companys Form 8-K filed on November 5, 2002 (Commission File
No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.32          |  | Amendment Number 3 to Master Loan Agency Agreement, with the
corresponding Amendment Number 1 to
Collection Servicing Agreement, dated November 1, 2002, between Ace Cash
Express, Inc. and Goleta National Bank. (Included as Exhibit 10.3 to the
Companys Form 8-K filed on November 5, 2002 (Commission File No. 0-20774)
and incorporated herein by reference.)                                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.33          |  | Amendment No. 4 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.1 to the Companys
Form 10-Q as of December 31, 2002 (Commission File No. 0-20774) and
incorporated herein by reference.) #                                                                                                                                                                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.34          |  | License Agreement dated November 22, 2000, with Addendum No. 1 thereto
dated as of May 31, 2001, by and
between H&R Block Tax Services, Inc. and the Company. (Confidential
treatment for a portion of this document has been granted by the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.1 to the
Companys Form 8-K filed on January 21, 2003 (Commission File No. 0-20774)
and incorporated herein by reference.)                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.35          |  | Cash Services Agreement dated as of December 17, 2002, by and between
the Company and Texas Capital Bank,
National Association, together with the material Exhibits and Annexes
thereto. (Confidential treatment for a portion of this document has been
granted by the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.) (Included as Exhibit 10.2 to
the Companys Form 8-K filed on January 21, 2003 (Commission File No.
0-20774) and incorporated herein by reference.)                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.36          |  | Loan and Servicing Agreement dated as of December 18, 2002, among Ace
Funding LLC, the Company, Autobahn
Funding Company LLC, DZ Bank AG Deutsche Zentral-Genossenschaftsbank
Frankfurt am Main, and U.S. Bank National Association, together with the
material Schedules, Exhibits and Annexes thereto. (Confidential treatment
for a portion of this document has been granted by the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.) (Included as Exhibit 10.3 to the Companys Form 8-K filed
on January 21, 2003 (Commission File No. 0-20774) and incorporated herein
by reference.)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.37          |  | Marketing and Servicing Agreement dated as of October 21, 2002, with
First Amendment to Marketing and
Servicing Agreement dated as of January 28, 2003, between Republic Bank &
Trust Company and the Company. (Application for confidential treatment for
a portion of this document has been submitted to the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.) (Included as Exhibit 10.1 to the Companys Form 10-Q as of
March 31, 2003 (Commission File No. 0-20774) and incorporated herein by
reference.)                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.38          |  | Restricted Stock Agreement dated January 28, 2003 between the Company
and Barry M. Barron. (Included as                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

44



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|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               |  | Exhibit 10.2 to the Companys Form
10-Q as of March 31, 2003 (Commission File No. 0-20774) and incorporated
herein by reference.) #                                                                                                                                                                                                                                                                                                                                                                                                                            
|              
|10.39          |  | Credit Agreement dated March 31, 2003, by and among the Company, Wells
Fargo Bank Texas, National
Association, as administrative agent for the lenders, JPMorgan Chase Bank,
as syndication agent and as agent for the lenders, J.P. Morgan Securities,
Inc., Bank of America, N.A., U.S. Bank National Association, and the
lenders named in Schedule 2.01, together with the Exhibits and Schedules
thereto. (Included as Exhibit 10.1 to the Companys Form 8-K filed on
April 14, 2003 (Commission File No. 0-20774) and incorporated herein by
reference.)
|              
|10.40          |  | Note Purchase Agreement dated as of March 31, 2003, by and among the
Company, the purchasers party thereto
listed in Annex A thereto, and American Capital Financial Services, Inc.,
as administrative agent for the purchasers, together with the Annex and the
Exhibits and Schedules thereto. (Include as Exhibit 10.2 to the Companys
Form 8-K filed on April 14, 2003. (Commission File No. 0-20774) and
incorporated herein by reference.)                                                                                                              
|              
|21             |  | Subsidiaries of the Company.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              
|23             |  | Consent of Grant Thornton LLP.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              
|31             |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                              
|              
|32             |  | Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                               



---

| 
|-
|*
| 
|#



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| | (i) |  | The Company filed a Current Report on Form 8-K during the fiscal
quarter ended June 30, 2003, regarding the Companys refinancing of
its outstanding revolving and term-loan indebtedness by entering into
a new credit agreement with a syndicate of banks and a new note
purchase agreement with a purchaser of $40 million of the Companys
senior subordinated secured promissory notes. The Company filed the
Report dated March 31, 2003, on April 14, 2003. The Items reported
therein were as follows:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |          |                                   
| | -------- | ----------------------------------
| | Item 5  | Other Events                      
|
| | Item 7  | Financial Statements and Exhibits:



| |                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 10.1  Credit Agreement dated March 31, 2003 by and
among the Company, Wells Fargo Bank Texas, National
Association, as administrative agent for the lenders, JPMorgan
Chase Bank, as syndication agent and as agent for the lenders,
J.P. Morgan Securities, Inc., Bank of America, N.A., U.S. Bank
National Association, and the lenders named in Schedule 2.01,
together with the Exhibits and Schedules thereto.
|
| | Exhibit 10.2  Note Purchase Agreement dated as of March 31,
2003, by and among the Company, the purchasers party thereto
listed in Annex A thereto, and American Capital Financial
Services, Inc., as administrative agent for the purchasers,
together with the Annex and the Exhibits and Schedules
thereto.                                                                                                             



| | (ii) |  | The Company filed a Current Report on Form 8-K during the fiscal
quarter ended June 30, 2003, regarding a press release announcing its
earnings for the fiscal quarter ended March 31, 2003. The Company
filed the Report dated April 24, 2003, on April 25, 2003. The Items
reported therein were as follows:
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |          |                                   
| | -------- | ----------------------------------
| | Item 7  | Financial Statements and Exhibits:



| |                                                   
| | --------------------------------------------------
| | Exhibit 99.1  Press Release dated April 24, 2003.

45



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##### Table of Contents



| |          |                                                                                                                                   
| | -------- | ----------------------------------------------------------------------------------------------------------------------------------
| | Item 9  | Regulation FD Disclosure (Information provided pursuant to Item 12, Disclosure of Results of Operations and Financial Condition)



| | (iii) |  | The Company filed a Current Report on Form 8-K during the fiscal
quarter ended June 30, 2003, regarding its entering into a settlement
agreement to resolve claims asserted against it regarding the former
offering of Goleta National Bank short-term loans at its stores and
its establishment of a $5 million reserve in its financial statements
for the quarter ended March 31, 2003 and its incurrence of a one-time
charge (net of tax) of $3 million for that quarter. The Company filed
the Report dated May 13, 2003, on May 14, 2003. The Items reported
therein were as follows:
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |          |                                                                                                                                                                 
| | -------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Item 7  | Financial Statements and Exhibits:                                                                                                                              
| |          |                                                                                                                                                                 
| |          | Exhibit 99.1  Press Release dated May 13, 2003.                                                                                                                
| |          |                                                                                                                                                                 
| | Item 9  | Regulation FD Disclosure (Information
provided pursuant to Item 12, Results of Operations and
Financial Condition in accordance with SEC Release No.
34-47583)

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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.

| |  |                        |  |                             
| |  | ---------------------- |  | ----------------------------
| |  | ACE CASH EXPRESS, INC.
| |  |                        |  |                             
| |  | By:                    |  | /s/ WILLIAM S. MCCALMONT    
| |  |                        |  |                             
| |  |                        |  | William S. McCalmont        
| |  |                        |  | Executive Vice President and
| |  |                        |  | Chief Financial Officer     
| |  |                        |  |                             
| |  | Date:                  |  | September 26, 2003          

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 on the dates indicated.

|                                               |  |                                                                
|---------------------------------------------- |  | ---------------------------------------------------------------
|Signature                                      |  | Title                                                          
|                                               |  |                                                                
|/s/ RAYMOND C. HEMMIG

Raymond C. Hemmig       |  | Chairman of the Board, Director                                
|                                               |  |                                                                
|/s/ DONALD H. NEUSTADT

Donald H. Neustadt     |  | Chief Executive Officer,
Director (Principal Executive Officer)
|                                               |  |                                                                
|/s/ JAY B. SHIPOWITZ

Jay B. Shipowitz         |  | President and Chief Operating Officer
Director                 
|                                               |  |                                                                
|/s/ WILLIAM S. MCCALMONT

William S. McCalmont |  | Executive Vice President and Chief Financial Officer
Treasurer 
|                                               |  |                                                                
|/s/ WALTER E. EVANS

Walter E. Evans           |  | Senior Vice President and General Counsel
Secretary            
|                                               |  |                                                                
|/s/ MARSHALL B. PAYNE

Marshall B. Payne       |  | Director                                                       
|                                               |  |                                                                
|/s/ MICHAEL S. RAWLINGS

Michael S. Rawlings   |  | Director                                                       
|                                               |  |                                                                
|/s/ EDWARD W. ROSE III

Edward W. Rose III     |  | Director                                                       
|                                               |  |                                                                
|/s/ CHARLES DANIEL YOST
Charles Daniel Yost    |  | Director                                                       

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders,
Ace Cash Express, Inc.:

We have audited the consolidated balance sheets of Ace Cash Express, Inc. (a
Texas corporation) and Subsidiaries as of June 30, 2003 and 2002, and the
related consolidated statements of earnings, shareholders equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. The consolidated
financial statements of Ace Cash Express, Inc. for the year ended June 30,
2001, were audited by other auditors who have ceased operations. Those
auditors expressed an unqualified opinion on these consolidated financial
statements in their report dated August 13, 2001.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ace Cash Express,
Inc. and Subsidiaries as of June 30, 2003 and 2002, and the consolidated
results of their operations and their consolidated cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.

GRANT THORNTON LLP

Dallas, Texas
August 19, 2003

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This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Ace Cash Express, Inc. filing on Form 10-K for the year
ended June 30, 2001. This audit report has not been reissued by Arthur
Andersen LLP in connection with this filing of Form 10-K. The consolidated
balance sheet at June 30, 2001 and 2000, and the consolidated statements of
earnings, shareholders equity and cash flows for the years ended June 30, 2000
and 1999, have not been included in the accompanying financial statements.




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Ace Cash Express, Inc.:

We have audited the accompanying consolidated balance sheets of Ace Cash
Express, Inc., a Texas corporation, and subsidiaries as of June 30, 2001 and
2000, and the related consolidated statements of earnings, shareholders equity
and cash flows for each of the three years in the period ended June 30, 2001.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ace Cash Express, Inc. and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2001, in conformity with accounting principles generally accepted in the United
States.

As explained in Note 1 to the consolidated financial statements, effective July
1, 1999, the Company changed its method of accounting for costs of start-up
activities, and effective July 1, 2000, the Company changed its method of
accounting for derivative instruments and hedging activities.

ARTHUR ANDERSEN LLP

Dallas, Texas
August 13, 2001

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          |  |        |         | 
|------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- |  | -------- | ------- | -------- |  | ------ | ------- | 
|                                           |  |                                                                                                                                                                    |                                                                      |  | June 30, |         | June 30,
|                                           |  |                                                                                                                                                                    |                                                                      |  | 2003     |         | 2002    
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |         
|ASSETS                                     |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Current Assets                             |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|                                           |  |                                                                                                                                                                    | Cash and cash equivalents                                            |  | $        | 108,110 |          |  | $      | 116,264 | 
|                                           |  |                                                                                                                                                                    | Accounts receivable, net                                             |  |          | 9,429   |          |  |        | 8,792   | 
|                                           |  |                                                                                                                                                                    | Loans receivable, net                                                |  |          | 13,000  |          |  |        | 17,356  | 
|                                           |  |                                                                                                                                                                    | Prepaid expenses, inventories, and other current assets              |  |          | 10,742  |          |  |        | 8,925   | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Current Assets                       |  |                                                                                                                                                                    | 141,281                                                              |  |          |         | 151,337  | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Noncurrent Assets                          |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|                                           |  |                                                                                                                                                                    | Property and equipment, net                                          |  |          | 32,352  |          |  |        | 37,161  | 
|                                           |  |                                                                                                                                                                    | Covenants not to compete, net                                        |  |          | 1,151   |          |  |        | 1,546   | 
|                                           |  |                                                                                                                                                                    | Goodwill, net                                                        |  |          | 75,586  |          |  |        | 75,015  | 
|                                           |  |                                                                                                                                                                    | Other assets                                                         |  |          | 8,398   |          |  |        | 2,003   | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Assets                               |  | $                                                                                                                                                                  | 258,768                                                              |  |          | $       | 267,062  | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Current Liabilities                        |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|                                           |  |                                                                                                                                                                    | Revolving advances                                                   |  | $        | 83,900  |          |  | $      | 97,500  | 
|                                           |  |                                                                                                                                                                    | Accounts payable, accrued liabilities, and other current liabilities |  |          | 40,756  |          |  |        | 28,512  | 
|                                           |  |                                                                                                                                                                    | Money orders payable                                                 |  |          | 6,884   |          |  |        | 13,417  | 
|                                           |  |                                                                                                                                                                    | Senior secured notes payable                                         |  |          |        |          |  |        | 4,000   | 
|                                           |  |                                                                                                                                                                    | Term advances                                                        |  |          | 3,833   |          |  |        | 48,350  | 
|                                           |  |                                                                                                                                                                    | Notes payable                                                        |  |          | 778     |          |  |        | 1,145   | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Current Liabilities                  |  |                                                                                                                                                                    | 136,151                                                              |  |          |         | 192,924  | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Noncurrent
Liabilities                    
|                                           |  |                                                                                                                                                                    | Senior secured notes payable                                         |  |          |        |          |  |        | 4,000   | 
|                                           |  |                                                                                                                                                                    | Term advances                                                        |  |          | 34,436  |          |  |        |        | 
|                                           |  |                                                                                                                                                                    | Notes payable                                                        |  |          | 110     |          |  |        | 319     | 
|                                           |  |                                                                                                                                                                    | Other liabilities                                                    |  |          | 9,087   |          |  |        | 3,680   | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Liabilities                          |  |                                                                                                                                                                    | 179,784                                                              |  |          |         | 200,923  | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Commitments and Contingencies              |  |                                                                                                                                                                    |                                                                     |  |          |         |         | 
|Shareholders Equity                       |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|                                           |  | Preferred stock, $1 par value, 1,000,000 shares authorized, none
issued and outstanding                                                                            |                                                                      |  |         |         |          |  |       |        
|                                           |  | Common stock, $.01 par value, 20,000,000 shares authorized,
10,395,113 and 10,391,988 shares issued and 10,183,713 and
10,180,588 shares outstanding, respectively |                                                                      |  | 102      |         |          |  | 102    |        
|                                           |  | Additional paid-in capital                                                                                                                                         |                                                                      |  | 24,385   |         |          |  | 24,353 |        
|                                           |  | Retained earnings                                                                                                                                                  |                                                                      |  | 58,244   |         |          |  | 45,469 |        
|                                           |  | Accumulated comprehensive loss                                                                                                                                     |                                                                      |  | (1,017   | )       |          |  | (1,078 | )      
|                                           |  | Treasury stock, at cost, 211,400 shares                                                                                                                            |                                                                      |  | (2,707   | )       |          |  | (2,707 | )      
|                                           |  | Unearned compensation - restricted stock                                                                                                                           |                                                                      |  | (23      | )       |          |  |       |        
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Shareholders Equity                 |  |                                                                                                                                                                    | 78,984                                                               |  |          |         | 66,139   | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 
|Total Liabilities and Shareholders Equity |  | $                                                                                                                                                                  | 258,768                                                              |  |          | $       | 267,062  | 
|                                           |  |                                                                                                                                                                    |                                                                      |  |          |         |          | 

The accompanying notes are an integral part of these consolidated financial statements.

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)

|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |        |         |     | 
|----------------------------------------------------- | --------------------------------------------------- | --------------------------------- | ---------- | ------ | ------------------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | --- | 
|                                                      |                                                     |                                   |            |        | Year Ended June 30,
|                                                      |                                                     |                                   |            |        |                    
|                                                      |                                                     |                                   |            |        | 2003                |        | 2002    |        | 2001   
|                                                      |                                                     |                                   |            |        |                     |        |         |        |        
|Revenues                                              |                                                     | $                                 | 234,289    |        |                     | $      | 229,266 |        |         | $      | 196,775 |       
|Store expenses:                                       |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      | Salaries and benefits                               |                                   |            | 58,170 |                     |        |         | 57,864 |         |        |         | 51,969 |        
|                                                      | Occupancy                                           |                                   |            | 29,194 |                     |        |         | 28,207 |         |        |         | 26,439 |        
|                                                      | Provision for loan losses and doubtful accounts     |                                   |            | 22,892 |                     |        |         | 22,064 |         |        |         | 24,825 |        
|                                                      | Depreciation                                        |                                   |            | 6,966  |                     |        |         | 7,180  |         |        |         | 6,697  |        
|                                                      | Other                                               |                                   |            | 38,192 |                     |        |         | 36,512 |         |        |         | 35,085 |        
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      |                                                     | Total store expenses              |            |        | 155,414             |        |         |        | 151,827 |        |         |        | 145,015 |    
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|Store gross margin                                    |                                                     |                                   | 78,875     |        |                     |        | 77,439  |        |         |        | 51,760  |       
|Region expenses                                       |                                                     |                                   | 17,056     |        |                     |        | 17,495  |        |         |        | 14,127  |       
|Headquarters expenses                                 |                                                     |                                   | 17,133     |        |                     |        | 16,594  |        |         |        | 10,328  |       
|Franchise expenses                                    |                                                     |                                   | 1,225      |        |                     |        | 993     |        |         |        | 1,017   |       
|Other depreciation and amortization                   |                                                     |                                   | 5,423      |        |                     |        | 7,570   |        |         |        | 5,087   |       
|Interest expense                                      |                                                     |                                   | 16,004     |        |                     |        | 14,934  |        |         |        | 12,016  |       
|Other expenses, net                                   |                                                     |                                   | 1,584      |        |                     |        | 2,827   |        |         |        | 8,168   |       
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      | Income from continuing operations before taxes      |                                   |            | 20,450 |                     |        |         | 17,026 |         |        |         | 1,017  |        
|                                                      | Provision for income taxes                          |                                   |            | 8,174  |                     |        |         | 6,913  |         |        |         | 406    |        
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      |                                                     | Income from continuing operations |            |        | 12,276              |        |         |        | 10,113  |        |         |        | 611     |    
|Discontinued operations:                              |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      | Gain on sale of discontinued operations, net of tax |                                   |            | 499    |                     |        |         |       |         |        |         |       |        
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      |                                                     |                                   | Net income |        | $                   | 12,775 |         |        | $       | 10,113 |         |        | $       | 611 | 
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|Basic and diluted earnings per share:                 |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      | Continuing operations                               |                                   | $          | 1.20   |                     |        | $       | 1.00   |         |        | $       | 0.06   |        
|                                                      | Discontinued operations                             |                                   |            | 0.05   |                     |        |         |       |         |        |         |       |        
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      |                                                     | Total                             |            | $      | 1.25                |        |         | $      | 1.00    |        |         | $      | 0.06    |    
|                                                      |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|Weighted average number of common shares outstanding: |                                                     |                                   |            |        |                     |        |         |        |         |        |         |       
|                                                      | Basic                                               |                                   |            | 10,181 |                     |        |         | 10,118 |         |        |         | 10,012 |        
|                                                      | Diluted                                             |                                   |            | 10,206 |                     |        |         | 10,141 |         |        |         | 10,158 |        

The accompanying notes are an integral part of these consolidated financial statements.

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands, except shares)

|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |        |  
|------------------------------------------------------- | -------------------- |  | ------------ | - | ---------- | - | -------- |  | ------------- | - | ------------- |  | -------------- | - | ------------- |  | ----- | - | ------- | - |  |  | ------- |  |  |  | ------- | - |  | - | -------- | - |  | - | ------ | ------ | -
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   | Unearned |   |  |   |       
|                                                        |                      |  | Common Stock |   | Additional |   |          |  |               |   | Accumulated   |  | Treasury Stock |   | Compensation  |  | Total
|                                                        |                      |  |              |   | Paid-In    |   | Retained |  | Comprehensive |   |               |  | - Restricted   |   | Shareholders
|                                                        |                      |  | Shares       |   | Amount     |   | Capital  |  | Earnings      |   | Income (Loss) |  | Shares         |   | Amount        |  | Stock |   | Equity 
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |        
|Balance as of July 1, 2000                              |                      |  | 9,984,563    |   |            | $ | 100      |  |               | $ | 22,715        |  |                | $ | 34,745        |  |       | $ |        |   |  |  | 181,400 |  |  |  | ($2,401 | ) |  | $ |         |   |  | $ | 55,159 |       
|Net income                                              |                      |  |             |   |            |   |         |  |               |   |              |  |                |   | 611           |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 611    |       
|Cumulative effect of accounting change                  |                      |  |             |   |            |   |         |  |               |   |              |  |                |   |              |  |       |   | 648     |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 648    |       
|Change in fair value of interest-rate swaps,
net of tax |                      |  |             |   |            |   |         |  |               |   |              |  |                |   |              |  |       |   | (1,959  | ) |  |  |        |  |  |  |        |   |  |   |         |   |  |   | (1,959 | )     
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|                                                        | Comprehensive loss   |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        | (700   | )
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Stock options exercised and related tax benefit         |                      |  | 92,557       |   |            |   |         |  |               |   | 573           |  |                |   |              |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 573    |       
|Repurchased shares, at cost                             |                      |  | (30,000      | ) |            |   |         |  |               |   |              |  |                |   |              |  |       |   |        |   |  |  | 30,000  |  |  |  | (306    | ) |  |   |         |   |  |   | (306   | )     
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Balance as of June 30, 2001                             |                      |  | 10,047,120   |   |            |   | 100      |  |               |   | 23,288        |  |                |   | 35,356        |  |       |   | (1,311  | ) |  |  | 211,400 |  |  |  | (2,707  | ) |  |   |         |   |  |   | 54,726 |       
|Net income                                              |                      |  |             |   |            |   |         |  |               |   |              |  |                |   | 10,113        |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |          |   |  |   | 10,113 |       
|Change in fair value of interest-rate swaps,
net of tax |                      |  |             |   |            |   |         |  |               |   |              |  |                |   |              |  |       |   | 233     |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 233    |       
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|                                                        | Comprehensive income |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        | 10,346 |  
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Stock options exercised and related tax benefit         |                      |  | 133,468      |   |            |   | 2        |  |               |   | 1,065         |  |                |   |              |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 1,067  |       
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Balance as of June 30, 2002                             |                      |  | 10,180,588   |   |            | $ | 102      |  |               | $ | 24,353        |  |                | $ | 45,469        |  |       |   | ($1,078 | ) |  |  | 211,400 |  |  |  | ($2,707 | ) |  |   |         |   |  |   | 66,139 |       
|Net income                                              |                      |  |             |   |            |   |         |  |               |   |              |  |                |   | 12,775        |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 12,775 |       
|Change in fair value of interest-rate swaps,
net of tax |                      |  |             |   |            |   |         |  |               |   |              |  |                |   |              |  |       |   | 61      |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 61     |       
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|                                                        | Comprehensive income |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        | 12,836 |  
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Stock options exercised and related tax benefit         |                      |  | 625          |   |            |   |         |  |               |   | 7             |  |                |   |              |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   |         |   |  |   | 7      |       
|Restricted stock                                        |                      |  | 2,500        |   |            |   |         |  |               |   | 25            |  |                |   |              |  |       |   |        |   |  |  |        |  |  |  |        |   |  |   | (23      | ) |  |   | 2      |       
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       
|Balance as of June 30, 2003                             |                      |  | 10,183,713   |   |            | $ | 102      |  |               | $ | 24,385        |  |                | $ | 58,244        |  |       |   | ($1,017 | ) |  |  | 211,400 |  |  |  | ($2,707 | ) |  |   | ($23     | ) |  | $ | 78,984 |       
|                                                        |                      |  |              |   |            |   |          |  |               |   |               |  |                |   |               |  |       |   |         |   |  |  |         |  |  |  |         |   |  |   |          |   |  |   |        |       

The accompanying notes are an integral part of these consolidated financial statements.

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |         |        |         |        | 
|--------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------------------------------------------ | ----------------------------------------- | ------- | ------------------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------ | 
|                                                          |                                                                                   |                                                  |                                                              |                                           |         | Year Ended June 30,
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                    
|                                                          |                                                                                   |                                                  |                                                              |                                           |         | 2003                |         | 2002    |         | 2001   
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |        
|Cash flows from operating activities:                     |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Net income                                                |                                                                                   | $                                                | 12,775                                                       |                                           |         | $                   | 10,113  |         |         | $       | 611     |        
|Less: Gain on sale of discontinued operations, net of tax |                                                                                   |                                                  | 499                                                          |                                           |         |                     |        |         |         |         |        |        
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Income from continuing operations                         |                                                                                   |                                                  | 12,276                                                       |                                           |         |                     | 10,113  |         |         |         | 611     |        
|                                                          | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |         |       
|                                                          |                                                                                   | Depreciation and amortization                    |                                                              |                                           | 12,389  |                     |         |         | 14,750  |         |         |         | 11,784 |        
|                                                          |                                                                                   | Provision for loan losses                        |                                                              |                                           | 22,772  |                     |         |         | 22,064  |         |         |         | 24,825 |        
|                                                          |                                                                                   | Provision for doubtful accounts                  |                                                              |                                           | 120     |                     |         |         |        |         |         |         |       |        
|                                                          |                                                                                   | Restructuring charge                             |                                                              |                                           |        |                     |         |         | (163    | )       |         |         | 6,630  |        
|                                                          |                                                                                   | Loss on disposal of property and equipment       |                                                              |                                           | 634     |                     |         |         | 688     |         |         |         |       |        
|                                                          |                                                                                   | Loss on investment in ePacific                   |                                                              |                                           | 703     |                     |         |         |        |         |         |         |       |        
|                                                          |                                                                                   | Deferred income taxes                            |                                                              |                                           | 5,818   |                     |         |         | 1,443   |         |         |         | (7,104 | )      
|                                                          |                                                                                   | Deferred revenue                                 |                                                              |                                           | (2,217  | )                   |         |         | (2,182  | )       |         |         | (3,077 | )      
|                                                          |                                                                                   | Compensation on restricted stock grants          |                                                              |                                           | 2       |                     |         |         |        |         |         |         |       |        
|                                                          |                                                                                   | Changes in assets and liabilities:               |                                                              |                                           |         |                     |         |         |         |         |         |         |        |        
|                                                          |                                                                                   |                                                  | Accounts receivable                                          |                                           |         | (757                | )       |         |         | (5,374  | )       |         |        | 2,110   |       
|                                                          |                                                                                   |                                                  | Loans receivable                                             |                                           |         | (15,483             | )       |         |         | (24,894 | )       |         |        | (20,516 | )     
|                                                          |                                                                                   |                                                  | Prepaid expenses, inventories and other current assets       |                                           |         | (3,917              | )       |         |         | 138     |         |         |        | (7,175  | )     
|                                                          |                                                                                   |                                                  | Other assets                                                 |                                           |         | (10,888             | )       |         |         | (4,453  | )       |         |        | (816    | )     
|                                                          |                                                                                   |                                                  | Accounts payable, accrued liabilities, and other liabilities |                                           |         | 13,279              |         |         |         | 6,260   |         |         |        | 13,083  |       
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          |                                                                                   |                                                  |                                                              | Net cash provided by operating activities |         |                     | 34,731  |         |         |         | 18,390  |         |        |         | 20,355 | 
|Cash flows from investing activities:                     |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          | Purchases of property and equipment, net                                          |                                                  |                                                              | (4,771                                    | )       |                     |         | (7,127  | )       |         |         | (12,655 | )     
|                                                          | Cost of net assets acquired                                                       |                                                  |                                                              | (673                                      | )       |                     |         | (1,177  | )       |         |         | (35,841 | )     
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          |                                                                                   |                                                  | Net cash used by investing activities                        |                                           |         | (5,444              | )       |         |         | (8,304  | )       |         |        | (48,496 | )     
|Cash flows from financing activities:                     |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          | Net increase (decrease) in money orders payable                                   |                                                  |                                                              | (6,533                                    | )       |                     |         | (3,511  | )       |         |         | 6,441   |       
|                                                          | Net borrowings (repayments) from revolving advances                               |                                                  |                                                              | (13,600                                   | )       |                     |         | (12,300 | )       |         |         | 14,800  |       
|                                                          | Net borrowings (repayments) from term advances                                    |                                                  |                                                              | (10,081                                   | )       |                     |         | (4,650  | )       |         |         | 34,500  |       
|                                                          | Net borrowings (repayments) of notes payable                                      |                                                  |                                                              | (576                                      | )       |                     |         | 386     |         |         |         | (258    | )     
|                                                          | Payments of senior secured notes payable                                          |                                                  |                                                              | (8,000                                    | )       |                     |         | (4,000  | )       |         |         | (4,000  | )     
|                                                          | Proceeds from stock options exercised                                             |                                                  |                                                              | 7                                         |         |                     |         | 1,067   |         |         |         | 573     |       
|                                                          | Purchase of treasury stock                                                        |                                                  |                                                              |                                          |         |                     |         |        |         |         |         | (306    | )     
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          |                                                                                   | Net cash provided (used) by financing activities |                                                              |                                           | (38,783 | )                   |         |         | (23,008 | )       |         |         | 51,750 |        
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Cash provided (used) by continuing operations             |                                                                                   |                                                  | (9,496                                                       | )                                         |         |                     | (12,922 | )       |         |         | 23,609  |        
|Cash provided by sale of discontinued operations          |                                                                                   |                                                  | 1,342                                                        |                                           |         |                     |        |         |         |         |        |        
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Net increase (decrease) in cash and cash equivalents      |                                                                                   |                                                  | (8,154                                                       | )                                         |         |                     | (12,922 | )       |         |         | 23,609  |        
|Cash and cash equivalents, beginning of year              |                                                                                   |                                                  | 116,264                                                      |                                           |         |                     | 129,186 |         |         |         | 105,577 |        
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Cash and cash equivalents, end of year                    |                                                                                   | $                                                | 108,110                                                      |                                           |         | $                   | 116,264 |         |         | $       | 129,186 |        
|                                                          |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|Supplemental disclosures of cash flows information:       |                                                                                   |                                                  |                                                              |                                           |         |                     |         |         |         |         |         |        
|                                                          | Interest paid                                                                     |                                                  | $                                                            | 15,391                                    |         |                     | $       | 12,292  |         |         | $       | 11,710  |       
|                                                          | Income taxes paid                                                                 |                                                  | $                                                            | 5,309                                     |         |                     | $       | 3,871   |         |         | $       | 5,739   |       

The accompanying notes are an integral part of these consolidated financial statements.

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

Ace Cash Express, Inc. (the Company) was incorporated under the laws of the
state of Texas in March 1982. The Company operates in one line of business
with two segments (company-owned and franchised operations) and provides
retail financial services, such as check-cashing; small, short-term consumer
loans; third-party bill-payments; money orders; wire transfers; and other
transactional services to customers for a fee. On June 30, 2003, the Company
owned and operated 968 stores and had 200 franchised stores, for a total
network of 1,168 stores in 36 states and the District of Columbia.

Principles of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses. Actual results could differ from those estimates.

Revenue Recognition Policy

Approximately 90% of the Companys revenues result from transactions at the
point-of-sale with its customers, and approximately 65% of the Companys
revenues are effectively recognized when the transaction is completed at the
point-of-sale. These transactions include check cashing, bill payment, money
transfer, money order purchases, and other miscellaneous products and services
grouped in other fees. The Company acts in an agency capacity regarding
many of the products and services offered and sold at its stores, and therefore
records revenue amounts received less all costs remitted as revenue.

For payday loans made by the Company and for the Goleta Loans (as defined
below) for which the Company acts only as marketing agent and servicer (for a
fee from the lender), revenues constituting loan fees and interest are
recognized ratably over the term of each loan, which is generally 14 days.

Contractual revenue guarantees from partners are recognized in accordance with
the terms of the contracts under which they are paid. Any bonus or incentive
payments from partners are amortized over the term or duration of the contracts
under which they are made.

Franchised store revenue consists of the franchise fees charged for opening the
franchised store and on-going royalty fees. Franchise fees, which are the
initial fees paid by the franchisees, are recognized when the franchise
location has been identified, the lease has been obtained, training has
occurred, the building has been built or leasehold improvements have been
completed, the proprietary point-of-sale system has been installed and the
store has been opened. Franchise royalty fees are a percentage of each
franchisees actual revenues, and these are recognized monthly and payable
under the franchise agreement.

The components of revenue are as follows:

|                        |  |                     |         |      |  |      |         |  |  |   |         | 
|----------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                        |  | Year Ended June 30,
|                        |  |                    
|                        |  | 2003                |         | 2002 |  | 2001
|                        |  |                     |         |      |  |     
|                        |  | (in thousands)     
|Check cashing fees      |  | $                   | 125,703 |      |  | $    | 118,907 |  |  | $ | 105,479 | 
|Loan fees and interest  |  |                     | 70,806  |      |  |      | 74,197  |  |  |   | 54,771  | 
|Bill payment services   |  |                     | 13,507  |      |  |      | 10,156  |  |  |   | 10,376  | 
|Money transfer services |  |                     | 10,898  |      |  |      | 10,998  |  |  |   | 10,270  | 
|Money order fees        |  |                     | 6,960   |      |  |      | 7,554   |  |  |   | 7,245   | 
|Franchise revenues      |  |                     | 2,346   |      |  |      | 2,199   |  |  |   | 2,257   | 
|Other fees              |  |                     | 4,069   |      |  |      | 5,255   |  |  |   | 6,377   | 
|                        |  |                     |         |      |  |      |         |  |  |   |         | 
|Total revenue           |  | $                   | 234,289 |      |  | $    | 229,266 |  |  | $ | 196,775 | 
|                        |  |                     |         |      |  |      |         |  |  |   |         | 

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Cash and Cash Equivalents

The Company considers all highly liquid investment securities purchased with an
original maturity of three months or less from the date of purchase to be cash
equivalents.

Accounts Receivable, Net

Accounts receivable, net, on the consolidated balance sheets as of June 30,
2003 and 2002 were $9.4 million and $8.8 million, respectively, and include the
receivable for incentive payments under the agreement with MoneyGram Payment
Systems, Inc., the receivable for the insurance settlement related to the
Goleta Loan-related lawsuits of $4.7 million, and other miscellaneous
receivables, net of an allowance for doubtful accounts of $0.7 million and $1.0
million as of June 30, 2003 and 2002, respectively.

Investments

During fiscal 2003, the Company had an investment of $1 million in ePacific
Incorporated (ePacific), a private company in the business of providing
customized debit-card payment systems and electronic funds transfer processing
services. This investment, which was carried at cost, was included in other
non-current assets on the consolidated balance sheets. The Company purchased
approximately 14% of the shares of ePacifics Series A Convertible Preferred
Stock during fiscal 2000.

On June 2, 2003, the board of directors of ePacific elected to dissolve the
corporation and liquidate its assets, resulting in a cash distribution to the
Company of $297,000 and a loss on investment to the Company of $703,000.

Loans Receivable, Net

Until December 31, 2002, the Company was a party to a Master Loan Agency
Agreement and ancillary agreements (the Goleta Agreement) with Goleta
National Bank (Goleta), a national bank located in Goleta, California. Under
the Goleta Agreement, short-term loans made by Goleta (Goleta Loans) were
offered at most company-owned locations. A Goleta Loan could be up to $500 and
had to be repaid or renewed in 14 days. Under the Goleta Agreement, the
Company purchased from Goleta a participation representing 90% of each Goleta
Loan made on a previous day. Goleta determined the interest rate (and other
terms) of the Goleta Loans. Interest equal to $17 per $100 of Goleta Loan was
charged by Goleta for each 14-day period. As of January 1, 2003, the Company
no longer offered Goleta Loans at any of its stores.

Since January 1, 2003, all of the small, short-term loan products or similar
services, commonly referred to as payday loans, offered at the Companys
stores have consisted of either (1) short-term loans or deferred-deposit
services made or entered into by the Company, or (2) deferred-deposit loans or
services made or entered into by Republic Bank & Trust Company, a Kentucky
state-chartered bank (Republic Bank). As of June 30, 2003, the Company was
offering its own small short-term loan or deferred-deposit service in 512 of
its owned stores, and Republic Bank was offering its deferred-deposit loan or
service in 350 of the Companys owned stores in Texas, Pennsylvania, and
Arkansas. All of these loans and services, regardless of type, are made in
accordance with state regulation; therefore, the terms of the loans and
services vary from state to state.

In general, the Companys payday loan product or service consists of providing
a customer cash in exchange for the customers check or an ACH authorization to
debit the customers bank account, along with an agreement to defer the
presentment or deposit of that check or the initiation of that ACH debit on the
customers account, as the case may be, until the customers next payday. The
amount of the customers check or ACH authorization is the amount of the cash
provided to the customer plus a fee to the Company. The term of the deferral
of the check presentment or ACH debit is typically two to four weeks. During
the year ended June 30, 2003, the average amount of cash provided to a customer
in such a transaction was $262, and the average fee to the Company was $39.41.
As of June 30, 2003 and June 30, 2002, the gross receivable for the Companys
payday loans was approximately $20.2 million and $2.3 million, respectively.

Republic Bank offers and makes its deferred-deposit loans or services at the
Companys stores in accordance with a Marketing and Servicing Agreement with
the Company dated as of October 21, 2002, as amended (the Republic Bank
Agreement) which is scheduled to continue until January 1, 2006. The terms of
those deferred-deposit loans or services are generally similar to those of the
Companys own loan products or services, though Republic Bank has sole
discretion regarding the terms of its loans or services. As of June 30, 2003,
Republic Bank authorized loans up to $425 with a term of 14 days, and the
interest charged by Republic Bank was $17.64 per $100 of loan value. Under the
terms of the Republic Bank Agreement, Republic Bank pays the Company an agency
fee for the Companys services in marketing or processing the Republic Bank
loans at the stores and in collecting outstanding Republic Bank loans. The
Company does not acquire or own any participation interest in any of the
Republic Bank loans, but the Companys fees are subject to reduction by the
losses

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from uncollected Republic Bank loans. The maximum potential future payments
the Company could be obligated to make pursuant to the Republic Bank Agreement
represent the total outstanding Republic Bank loans recorded on Republic Banks
financial statements, which were $10.4 million as of June 30, 2003. However,
consistent with the Companys loan loss allowance policy, and based on the
Companys history with this and similar loan products, the Company has recorded
$0.6 million for potential loan losses on these loans outstanding and has
included such amount in its accompanying consolidated financial statements as
of June 30, 2003.

Loan fees and interest, include the Companys interest and fees received from
its participation interests in Goleta Loans, its fees and interest received
from customers of the Companys payday loan product or service, and its agency
fees received from Republic Bank related to Republic Bank loans. Loan fees and
interest revenues are recognized ratably over the term of each loan, regardless
of the type of revenue or loan.

The Company has established a loan loss allowance regarding its economic
interests in the loans Goleta Loans and the Companys payday loans. The
Companys policy for determining the loan loss allowance is based on historical
loan loss experience generally, as well as the results of managements review
and analysis of the payment and collection of the loans within the last fiscal
quarter. The Companys policy is to charge off interests in all of the Goleta
Loans and the Companys payday loans which are 180 days or more past due.
Charge-offs are applied as a reduction to the allowance for loan losses and any
recoveries of previously charged off loans are applied as an increase to the
allowance for loan losses. The Company establishes a payable to Republic Bank
to reflect the Companys obligation to, in effect, bear all Republic Bank loan
losses; that payable estimates such losses from such loans that are 180 days or
more past due. The Companys policy in establishing the payable regarding
Republic Bank loan losses is substantially the same as its policy regarding the
loan loss allowance for the other types of loans.

Loans receivable, net, on the consolidated balance sheets as of June 30, 2003
and 2002, were $13.0 million and $17.4 million, respectively, which includes
receivables for the Companys payday loans and the Companys participation
interests in the Goleta Loans (but not regarding any Republic Bank loans,
because the Company does not own any interest in those loans). The loan loss
allowance of $8.7 million and $12.2 million as of June 30, 2003 and 2002,
respectively, represented 40.2% and 41.3% of the gross loans receivable as of
that date. Loan charge-offs for the years ended June 30, 2003 and 2002, were
$23.7 million and $24.5 million, respectively.

Inventories

Inventories consist of postage stamps, bus passes, unsold lottery tickets and
other inventory. Postage stamps and lottery tickets are stated at purchase
price and accounted for using the specific identification method. Because the
Company discontinued the sale of lottery tickets during fiscal 2003, there was
no inventory of unsold lottery tickets as of June 30, 2003. Other inventories
are stated at cost and utilize the first-in, first-out method.

|                          |  |                |     |      |  |   |     | 
|------------------------- |  | -------------- | --- | ---- |  | - | --- | 
|                          |  | June 30,      
|                          |  |               
|                          |  | 2003           |     | 2002
|                          |  |                |     |     
|                          |  | (in thousands)
|Postage stamp inventory   |  | $              | 444 |      |  | $ | 420 | 
|Bus pass inventory        |  |                | 121 |      |  |   | 94  | 
|Lottery tickets inventory |  |                |    |      |  |   | 310 | 
|Other inventory           |  |                | 103 |      |  |   | 122 | 
|                          |  |                |     |      |  |   |     | 
|                          |  | $              | 668 |      |  | $ | 946 | 
|                          |  |                |     |      |  |   |     | 

Property and Equipment

Depreciation of property and equipment is based on the lesser of the estimated
useful lives of the respective assets or the lease terms. The useful lives of
property and equipment by class are as follows: store equipment and furniture
and fixtures, five to ten years; leasehold improvements, ten years; signs,
eight years; and other property and equipment, five to ten years. Depreciation
is calculated on a straight-line basis.

Software Development Costs

The Company expenses costs incurred in the preliminary project stages, and
thereafter capitalizes costs incurred in the developing or obtaining, of
internal use software, including external direct costs of materials and
services, as well as payroll and payroll-related costs. The Company
capitalized $0.6 million for software development costs for each of the years
ended June 30, 2003 and 2002. The net book value of capitalized software
development costs were $2.7 million and $3.4 million at June 30, 2003 and 2002,
respectively.

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Accounting for Impairment of Long-lived Assets

The Company evaluates all long-lived assets, including intangible assets, for
impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. Impairment is recognized when the
carrying amounts of such assets cannot be recovered by the undiscounted net
cash flows they will generate.

Intangible Assets

The Company adopted SFAS 142, Goodwill and Other Intangible Assets, effective
July 1, 2001, and identified two reporting units: (1) company-owned stores and
(2) franchised stores. The franchised stores reporting unit had no intangible
assets, and therefore was not impacted by SFAS 142. The Company completed the
first step of the two-step impairment test by obtaining an independent
third-party appraisal of the fair value of the company-owned stores reporting
unit as of July 1, 2001, and conducting the Companys own internal tests
quarterly thereafter. The fair value of the company-owned stores reporting
unit exceeded the carrying value, and as a result, the second step of the
two-step impairment test was not required and no impairment loss has been
recorded as of June 30, 2003 or 2002. In accordance with SFAS 142, the Company
discontinued recording goodwill amortization effective July 1, 2001. Covenants
not to compete are amortized over the applicable period of the contract,
generally ranging from two to five years.

Deferred Borrowing Costs

Deferred borrowing costs are amortized over the term of the corresponding
financing arrangement. Amortization expense related to deferred borrowing
costs for the years ended June 30, 2003, 2002, and 2001 was $3.8 million, $5.8
million, and $0.9 million, respectively. The deferred borrowing cost balances
at June 30, 2003 and 2002 were $10.5 million and $0.7 million, net of
accumulated amortization of $1.4 million and $7.4 million, respectively.
Deferred borrowing costs are reflected in other current and other non-current
assets in the accompanying consolidated balance sheets.

Store Expenses

The direct costs incurred in operating the stores and the Companys
self-service machines (SSMs) have been classified as store expenses and are
deducted from total revenues to determine contribution attributable to the
stores. Store expenses include salary and benefit expense of store employees,
rent and other occupancy costs, depreciation of store property, bank charges,
armored and security costs, loan losses, net returned checks, cash shortages,
and other costs incurred by the stores and for the SSMs (whether or not located
in a store).

Returned Checks

The Company charges operations for losses on returned checks in the period such
checks are returned. Recoveries on returned checks are credited in the period
the recovery is received.

Advertising Costs

Costs incurred for producing and communicating advertising are expensed when
incurred. Advertising expense was $1.2 million, $0.9 million, and $1.3 million
in the years ended June 30, 2003, 2003 and 2001, respectively.

Derivative Instruments and Hedging Activities

The Companys objective in managing its exposure to fluctuations in interest
rates is to decrease the volatility of earnings and cash flows associated with
changes in the applicable rates. To achieve this objective, the Company has
entered into interest-rate swap agreements. The interest-rate swaps are
derivative instruments related to forecasted transactions and are considered to
hedge future cash flows. The effective portion of any gains or losses are
included in accumulated other comprehensive income (loss) until earnings are
affected by the variability of cash flows. Any ineffective portion is
recognized currently into earnings. The cash flows of the interest-rate swaps
are expected to be highly effective in achieving offsetting cash flows
attributable to fluctuations in the cash flows of the floating-rate revolving
loan facility. If it becomes probable that a forecasted transaction will no
longer occur, the interest-rate swap will continue to be carried on the balance
sheet at fair value, and gains or losses that were deferred in accumulated
other comprehensive income (loss) will be recognized immediately into earnings.
If the interest-rate swaps are terminated prior to their expiration dates, any
cumulative gains and losses will be deferred and recognized into earnings over
the remaining life of the underlying exposure. If the hedged liabilities are
to be sold or extinguished, the Company will recognize the gain or loss on the
designated financial instruments currently into earnings.

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The Company uses the cumulative approach to assess effectiveness of the cash
flow hedges. The measurement of hedge ineffectiveness is based on the
cumulative dollar offset method. Under this method, the Company compares the
changes in the floating rate component of the cash flow hedge to the floating
rate cash flows of the revolving loan facility. Changes in the fair value of
the effective cash flow hedges are recorded in accumulated other comprehensive
income (loss). The effective portion that has been deferred in accumulated
other comprehensive income (loss) will be reclassified to earnings when the
hedged items impact earnings.

The Companys adoption of SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, as of July 1, 2000 resulted in a $648,000 credit to
accumulated other comprehensive income (loss) for the cumulative effect of
accounting change representing the transition adjustment. The associated
underlying hedged liability has exceeded the notional amount for each of the
Companys interest-rate swaps throughout the existence of the interest-rate
swap, and it is anticipated that it will continue to do so with respect to the
swaps in effect as of June 30, 2003. The interest-rate swaps were and are
based on the same index as their respective underlying debt. The interest-rate
swaps were highly effective in achieving offsetting cash flows attributable to
the fluctuations in the cash flows of the hedged risk, and no amount has been
required to be reclassified from accumulated other comprehensive income (loss)
into earnings for hedge ineffectiveness or due to excluding a portion of the
value from measuring effectiveness during the year ended June 30, 2003.

The last of the original four interest rate swaps (related to indebtedness
under the former bank credit agreement) expired as of January 1, 2003, and the
Company entered into two new interest-rate swaps during the fourth quarter of
fiscal 2003. The interest-rate swaps resulted in an increase of interest
expense of $1.9 million and $3.2 million for the years ended June 30, 2003 and
2002, respectively, and a reduction of interest expense of $168,000 for the
year ended June 30, 2001. The fair value of the interest-rate swaps increased
by $61,000, net of tax, during the year ended June 30, 2003, and increased by
$233,000, net of tax, during the year ended June 30, 2002, which have been
recorded in accumulated other comprehensive loss. The estimated net amount of
existing losses expected to be reclassified into earnings during the next
fiscal year is $239,000.

Accumulated comprehensive loss balances related to the interest-rate swaps are
as follows (in thousands):

|                            |  |                                 |       |                             |  |      |        |      |  |      |        |   |  |                        |       |   |  |   |     | 
|--------------------------- |  | ------------------------------- | ----- | --------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | ---------------------- | ----- | - |  | - | --- | 
|                            |  |                                 |       |                             |  |      |        |      |  |      |        |   |  | Increase (Decrease) in
|                            |  |                                 |       |                             |  |      |        |      |  |      |        |   |  | Accumulated           
|                            |  | Accumulated Comprehensive Loss, |       | Comprehensive Loss         
|                            |  | Net of Tax, as of June 30,      |       | for the Year Ended June 30,
|                            |  |                                 |       |                            
|Corresponding Debt          |  | 2003                            |       | 2002                        |  | 2001 |        | 2003 |  | 2002
|                            |  |                                 |       |                             |  |      |        |      |  |     
|Revolving advance
(expired) |  | $                               |      |                             |  | $    | (1,078 | )    |  | $    | (1,311 | ) |  | $                      | 1,078 |   |  | $ | 233 | 
|Revolving advance           |  |                                 | (925  | )                           |  |      |       |      |  |      |       |   |  |                        | (925  | ) |  |   |    | 
|Term loan notes             |  |                                 | (92   | )                           |  |      |       |      |  |      |       |   |  |                        | (92   | ) |  |   |    | 
|                            |  |                                 |       |                             |  |      |        |      |  |      |        |   |  |                        |       |   |  |   |     | 
|                            |  | ($                              | 1,017 | )                           |  | ($   | 1,078  | )    |  | ($   | 1,311  | ) |  | $                      | 61    |   |  | $ | 233 | 
|                            |  |                                 |       |                             |  |      |        |      |  |      |        |   |  |                        |       |   |  |   |     | 

|                  |  |                                        |    |      |  |   |    | 
|----------------- |  | -------------------------------------- | -- | ---- |  | - | -- | 
|                  |  | Average Notional Amount as of June 30,
|                  |  |                                       
|                  |  | 2003                                   |    | 2002
|                  |  |                                        |    |     
|                  |  | (in millions)                         
|Revolving advance |  | $                                      |   |      |  | $ | 85 | 
|Revolving advance |  |                                        | 60 |      |  |   |   | 
|Term loan notes   |  |                                        | 20 |      |  |   |   | 

The accumulated comprehensive loss as of June 30, 2003 and 2002, is net of a
tax benefit of $678,000 and $737,000, respectively.

A summary of comprehensive income (loss) for the years ended June 30, 2003,
2002, and 2001 is presented below:

|                                   |                                                                                |   |                     |     |      |   |        |      |   |   |      |        |  
|---------------------------------- | ------------------------------------------------------------------------------ | - | ------------------- | --- | ---- | - | ------ | ---- | - | - | ---- | ------ | -
|                                   |                                                                                |   | Year Ended June 30,
|                                   |                                                                                |   |                    
|                                   |                                                                                |   | 2003                |     | 2002 |   | 2001  
|                                   |                                                                                |   |                     |     |      |   |       
|                                   |                                                                                |   | (in thousands)     
|Net income                         |                                                                                | $ | 12,775              |     |      | $ | 10,113 |      |   | $ | 611  |       
|Other comprehensive income (loss): |                                                                                |   |                     |     |      |   |        |      |   |   |      |       
|                                   | Unrealized gain (loss) on hedging instruments
before tax (expense) benefit     |   |                     | 102 |      |   |        | 388  |   |   |      | (2,203 | )
|                                   | Tax (expense) benefit                                                          |   |                     | (41 | )    |   |        | (155 | ) |   |      | 892    |  
|                                   |                                                                                |   |                     |     |      |   |        |      |   |   |      |       
|                                   | Unrealized gain (loss) on hedging instruments net
of the tax (expense) benefit |   |                     | 61  |      |   |        | 233  |   |   |      | (1,311 | )
|                                   |                                                                                |   |                     |     |      |   |        |      |   |   |      |       
|Comprehensive income (loss)        |                                                                                | $ | 12,836              |     |      | $ | 10,346 |      |   | $ | (700 | )     
|                                   |                                                                                |   |                     |     |      |   |        |      |   |   |      |       

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Franchise Accounting

The Company includes franchise fees in revenues. Franchise fees generally
include initial fees (initial fees) and future optional, exclusive store fees
(optional fees) as well as continuing franchise fees (royalty fees).

Initial fees are recognized when the Company has provided substantially all of
its initial services in accordance with the franchise agreements. Generally,
this occurs when the franchise location has been identified, the lease has been
obtained, training has occurred, the building has been built or leasehold
improvements have been completed, the proprietary point-of-sale system has been
installed and the store has been opened. Optional fees for providing exclusive
arrangements until the franchisee opens the store are recognized either when
the option expires or when the commitments pursuant to the option are
completed. Franchise royalty fees are a percentage of each franchisees
actual revenues, and these are recognized monthly and payable under the
franchise agreement.

The following table presents the components of franchise fees recognized in
revenues for the years ended June 30, 2003, 2002, and 2001:

|                                         |                         |   |          |       |      |   |                |       |  |   |       |       | 
|---------------------------------------- | ----------------------- | - | -------- | ----- | ---- | - | -------------- | ----- |  | - | ----- | ----- | 
|                                         |                         |   | June 30,
|                                         |                         |   |         
|                                         |                         |   | 2003     |       | 2002 |   | 2001          
|                                         |                         |   |          |       |      |   |               
|                                         |                         |   |          |       |      |   | (in thousands) |       |  |   |      
|Initial fees and option to
purchase fees |                         | $ | 265      |       |      | $ | 320            |       |  | $ | 581   |      
|Royalty fees                             |                         |   | 2,074    |       |      |   | 1,872          |       |  |   | 1,669 |      
|Other                                    |                         |   | 7        |       |      |   | 7              |       |  |   | 7     |      
|                                         |                         |   |          |       |      |   |                |       |  |   |       |      
|                                         | Total franchise revenue |   | $        | 2,346 |      |   | $              | 2,199 |  |   | $     | 2,257 | 
|                                         |                         |   |          |       |      |   |                |       |  |   |       |      

Cash payments received under franchise agreements prior to the completion of
the earnings process are deferred until the initial and optional fees are
recognized in accordance with the preceding paragraph. As of June 30, 2003 and
2002, approximately $268,000 and $185,000, respectively, of deferred franchise
fees are recorded in other current and other non-current liabilities in the
accompanying consolidated balance sheets.

Income Taxes

The Company provides deferred taxes for temporary differences between the tax
and financial reporting bases of assets and liabilities at the rate expected to
be in effect when the taxes become payable.

Earnings Per Share

Earnings per share have been computed based on the weighted average number of
common and dilutive shares outstanding for the respective periods. Dilutive
shares include employee and non-employee director stock options.

Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
computed by dividing net income by the weighted average number of common shares
outstanding, after adjusting for the dilutive effect of stock options. The
following table presents the reconciliation of the numerator and denominator
used in the calculation of basic and diluted earnings per share:

|                                  |                                                                             |   |                     |        |      |   |        |        |  |   |     |        | 
|--------------------------------- | --------------------------------------------------------------------------- | - | ------------------- | ------ | ---- | - | ------ | ------ |  | - | --- | ------ | 
|                                  |                                                                             |   | Year Ended June 30,
|                                  |                                                                             |   |                    
|                                  |                                                                             |   | 2003                |        | 2002 |   | 2001  
|                                  |                                                                             |   |                     |        |      |   |       
|                                  |                                                                             |   | (in thousands)     
|Income from continuing operations |                                                                             | $ | 12,276              |        |      | $ | 10,113 |        |  | $ | 611 |       
|                                  | Gain on sale of discontinued operations, net of tax                         |   |                     | 499    |      |   |        |       |  |   |     |       | 
|                                  |                                                                             |   |                     |        |      |   |        |        |  |   |     |       
|Net income                        |                                                                             | $ | 12,775              |        |      | $ | 10,113 |        |  | $ | 611 |       
|                                  |                                                                             |   |                     |        |      |   |        |        |  |   |     |       
|Reconciliation of denominator:    |                                                                             |   |                     |        |      |   |        |        |  |   |     |       
|                                  | Weighted average number of common shares
outstanding - basic                |   |                     | 10,181 |      |   |        | 10,118 |  |   |     | 10,012 | 
|                                  | Effect of dilutive stock options                                            |   |                     | 25     |      |   |        | 23     |  |   |     | 146    | 
|                                  |                                                                             |   |                     |        |      |   |        |        |  |   |     |       
|                                  | Weighted average number of common and
dilutive shares outstanding  diluted |   |                     | 10,206 |      |   |        | 10,141 |  |   |     | 10,158 | 
|                                  |                                                                             |   |                     |        |      |   |        |        |  |   |     |       

For fiscal years ended June 30, 2003, 2002, and 2001, options to purchase
1,179,121, 1,275,818, and 862,560 shares of common stock, respectively, were
not included in the computation of diluted earnings per share because the
exercise prices of those options were greater than the average market price of
the common stock; and therefore, the effect would be anti-dilutive.

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Fair Value of Financial Instruments

The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. The amounts reported in the
consolidated balance sheets for trade receivables, trade payables, notes
receivable, revolving advances, money order payable, and notes payable all
approximate fair value. The carrying value and fair value of the interest-rate
swaps is ($1.7) million and ($1.8) million as of June 30, 2003 and 2002,
respectively, and is calculated using the forward market rates available as of
the end of each fiscal year.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current
year presentation.

Stock Incentive Plans

At June 30, 2003, the Company sponsored one employee stock incentive plan,
which permits the grant of stock options and restricted stock, and one
non-employee director stock option plan. The Company accounts for those plans
under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
Stock-based employee compensation cost of $2,000 is reflected in the Companys
reported net income for the year ended June 30, 2003, corresponding to 2,500
shares of restricted stock granted under the employee stock incentive plan
during the year. No other stock-based employee compensation is reflected in
the Companys reported net income, because all stock options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect
on net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

|                                                                                                                                                          |                                 |   |                                          |      |      |   |        |      |  |    |        |      |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | - | ---------------------------------------- | ---- | ---- | - | ------ | ---- |  | -- | ------ | ---- | -
|                                                                                                                                                          |                                 |   | Year Ended June 30,                     
|                                                                                                                                                          |                                 |   |                                         
|                                                                                                                                                          |                                 |   | 2003                                     |      | 2002 |   | 2001  
|                                                                                                                                                          |                                 |   |                                          |      |      |   |       
|                                                                                                                                                          |                                 |   | (in thousands, except per share amounts)
|Net income, as reported                                                                                                                                   |                                 | $ | 12,775                                   |      |      | $ | 10,113 |      |  | $  | 611    |     
|Deduct: Total stock-based employee compensation expense
determined under fair value based methods for all awards, net of
related tax effects              |                                 |   | (1,158                                   | )    |      |   | (1,306 | )    |  |    | (1,226 | )   
|Deduct: Total stock-based non-employee director compensation
expense determined under fair value based methods for all
awards,
net of related tax effects |                                 |   | (65                                      | )    |      |   | (78    | )    |  |    | (118   | )   
|Add: Total stock-based employee compensation expense included in
net income                                                                               |                                 |   | 2                                        |      |      |   |       |      |  |    |       |     
|                                                                                                                                                          |                                 |   |                                          |      |      |   |        |      |  |    |        |     
|Pro forma net income                                                                                                                                      |                                 | $ | 11,554                                   |      |      | $ | 8,729  |      |  | ($ | 733    | )   
|                                                                                                                                                          |                                 |   |                                          |      |      |   |        |      |  |    |        |     
|Earnings per share:                                                                                                                                       |                                 |   |                                          |      |      |   |        |      |  |    |        |     
|                                                                                                                                                          | Basic and diluted  as reported |   | $                                        | 1.25 |      |   | $      | 1.00 |  |    | $      | 0.06 |  
|                                                                                                                                                          |                                 |   |                                          |      |      |   |        |      |  |    |        |     
|                                                                                                                                                          | Basic and diluted  pro forma   |   | $                                        | 1.13 |      |   | $      | 0.86 |  |    | ($     | 0.07 | )
|                                                                                                                                                          |                                 |   |                                          |      |      |   |        |      |  |    |        |     

The fair value of each employee option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in fiscal 2003, 2002, and 2001,
respectively: expected volatility of 46%, 49%, and 49%, expected lives of 6.2,
6.7, and 5.1 years; risk-free interest rates of 3.3%, 4.6%, and 3.3%, and no
expected dividends.

The fair value of each non-employee director option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in fiscal 2003, 2002, and 2001,
respectively: expected volatility of 46%, 49%, and 49%; expected lives for each
year of 5.0 years; risk-free interest rates of 3.3%, 4.6%, and 3.3%; and no
expected dividends.

Recently Issued Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment
of SFAS No. 123 (SFAS 148). SFAS 148 was issued to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based

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employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS No. 123 to require disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. Entities are still
permitted to account for stock-based compensation programs using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. The Company currently accounts for
stock-based compensation using the intrinsic value method. The interim
disclosure requirements prescribed by SFAS 148 are required for interim periods
beginning after December 15, 2002, and were included in the Companys Form 10-Q
for the quarter ended March 31, 2003 and the required annual disclosures are
included in the accompanying consolidated financial statements.

In December 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN
45). FIN 45
requires a guarantor entity, at the inception of a guarantee covered by the
measurement provisions of the interpretation, to record a liability for the
fair value of the obligation undertaken in issuing the guarantee. This applies
prospectively to guarantees the Company issues or modifies subsequent to
December 31, 2002, but has certain disclosure requirements effective for June
30, 2003. FIN 45 had no effect on the Companys financial position and results
of operations. The Company made the disclosures required by FIN 45 in these
consolidated financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46). FIN 46 requires that variable interest entities (VIE) be consolidated by
their primary beneficiary. FIN 46 became effective with all financial
statements issued after January 31, 2003. FIN 46 had no effect on the
Companys financial position and results of operations.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 will not have a material impact on the Companys financial
position and results of operations.

2. OPERATING SEGMENTS

The Companys reportable segments are strategic business units that
differentiate between company-owned and franchised stores. Company-owned store
revenue is generated from store customer-transaction processing, and franchised
store revenue is generated from the franchise fees charged for opening the
store and on-going royalty fees. The accounting policies of the segments are
the same as those described in the summary of significant accounting policies.

Segment information for the years ended June 30, 2003, 2002, and 2001 was as
follows:

|                          |                                          |  |                                             |         |            |  |       |        |       |  |    |         |   |  |   |         |  
|------------------------- | ---------------------------------------- |  | ------------------------------------------- | ------- | ---------- |  | ----- | ------ | ----- |  | -- | ------- | - |  | - | ------- | -
|                          |                                          |  | Company-owned                               |         | Franchised |  | Other |        | Total
|                          |                                          |  |                                             |         |            |  |       |        |      
|                          |                                          |  | (in thousands, except for number of stores)
|Year ended June 30, 2003: |                                          |  |                                             |         |            |  |       |        |       |  |    |         |   |  |   |        
|                          | Revenue                                  |  | $                                           | 231,943 |            |  | $     | 2,346  |       |  | $  |        |   |  | $ | 234,289 |  
|                          | Gross margin                             |  |                                             | 76,529  |            |  |       | 2,346  |       |  |    |        |   |  |   | 78,875  |  
|                          | Region, headquarters, franchise expenses |  |                                             | (34,189 | )          |  |       | (1,225 | )     |  |    |        |   |  |   | (35,414 | )
|                          | Other depreciation and amortization      |  |                                             |        |            |  |       |       |       |  |    | (5,423  | ) |  |   | (5,423  | )
|                          | Interest expense                         |  |                                             |        |            |  |       |       |       |  |    | (16,004 | ) |  |   | (16,004 | )
|                          | Other expenses                           |  |                                             |        |            |  |       |       |       |  |    | (1,584  | ) |  |   | (1,584  | )
|                          |                                          |  |                                             |         |            |  |       |        |       |  |    |         |   |  |   |        
|                          | Income (loss) before taxes               |  | $                                           | 42,340  |            |  | $     | 1,121  |       |  | ($ | 23,011  | ) |  | $ | 20,450  |  
|                          |                                          |  |                                             |         |            |  |       |        |       |  |    |         |   |  |   |        
|                          | Total assets                             |  | $                                           | 258,203 |            |  | $     | 565    |       |  | $  |        |   |  | $ | 258,768 |  
|                          | Number of stores at June 30, 2003        |  |                                             | 968     |            |  |       | 200    |       |  |    |        |   |  |   | 1,168   |  

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|                          |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |         |  
|------------------------- | ---------------------------------------- |  | ------------------------------------------- | ------- | ---------- |  | ----- | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|                          |                                          |  | Company-owned                               |         | Franchised |  | Other |        | Total
|                          |                                          |  |                                             |         |            |  |       |        |      
|                          |                                          |  | (in thousands, except for number of stores)
|Year ended June 30, 2002: |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Revenue                                  |  | $                                           | 227,067 |            |  | $     | 2,199  |       |  | $ |        |   |  | $ | 229,266 |  
|                          | Gross margin                             |  |                                             | 75,240  |            |  |       | 2,199  |       |  |   |        |   |  |   | 77,439  |  
|                          | Region, headquarters, franchise expenses |  |                                             | (34,089 | )          |  |       | (993   | )     |  |   |        |   |  |   | (35,082 | )
|                          | Other depreciation and amortization      |  |                                             |        |            |  |       |       |       |  |   | (7,570  | ) |  |   | (7,570  | )
|                          | Interest expense                         |  |                                             |        |            |  |       |       |       |  |   | (14,934 | ) |  |   | (14,934 | )
|                          | Other expenses                           |  |                                             |        |            |  |       |       |       |  |   | (2,827  | ) |  |   | (2,827  | )
|                          |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Income (loss) before taxes               |  | $                                           | 41,151  |            |  | $     | 1,206  |       |  | $ | (25,331 | ) |  | $ | 17,026  |  
|                          |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Total assets                             |  | $                                           | 266,570 |            |  | $     | 492    |       |  | $ |        |   |  | $ | 267,062 |  
|                          | Number of stores at June 30, 2002        |  |                                             | 1,003   |            |  |       | 184    |       |  |   |        |   |  |   | 1,187   |  
|Year ended June 30, 2001: |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Revenue                                  |  | $                                           | 194,518 |            |  | $     | 2,257  |       |  | $ |        |   |  | $ | 196,775 |  
|                          | Gross margin                             |  |                                             | 49,503  |            |  |       | 2,257  |       |  |   |        |   |  |   | 51,760  |  
|                          | Region, headquarters, franchise expenses |  |                                             | (24,455 | )          |  |       | (1,017 | )     |  |   |        |   |  |   | (25,472 | )
|                          | Other depreciation and amortization      |  |                                             |        |            |  |       |       |       |  |   | (5,087  | ) |  |   | (5,087  | )
|                          | Interest expense                         |  |                                             |        |            |  |       |       |       |  |   | (12,016 | ) |  |   | (12,016 | )
|                          | Restructuring charge                     |  |                                             | (7,710  | )          |  |       |        |       |  |   |        |   |  |   | (7,710  | )
|                          | Other expenses                           |  |                                             |        |            |  |       |       |       |  |   | (458    | ) |  |   | (458    | )
|                          |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Income (loss) before taxes               |  | $                                           | 17,338  |            |  | $     | 1,240  |       |  | $ | (17,561 | ) |  | $ | 1,017   |  
|                          |                                          |  |                                             |         |            |  |       |        |       |  |   |         |   |  |   |        
|                          | Total assets                             |  | $                                           | 275,546 |            |  | $     | 651    |       |  | $ |        |   |  | $ | 276,197 |  
|                          | Number of stores at June 30, 2001        |  |                                             | 988     |            |  |       | 175    |       |  |   |        |   |  |   | 1,163   |  

3. RESTRUCTURING CHARGES  ACCELERATED STORE CLOSINGS

In the third quarter of fiscal 2001, the Company recorded charges for the costs
associated with closing 85 unprofitable or underperforming stores. The
restructuring charge of $8.7 million consisted of costs associated with $7.7
million of write-offs for goodwill and covenants not to compete, fixed asset
and inventory disposals, and lease terminations related to the store closings,
and $1.0 million of impaired goodwill associated with nine underperforming
stores not closed. As of June 30, 2003 and 2002, the accrual balance was $0.2
million and $0.4 million, respectively. The accrual provides for the leases
that will be paid out over their remaining terms, and the Company anticipates
that the completion date for the remaining liabilities will be approximately
February 2005.

4. FINANCING ARRANGEMENTS AND MONEYGRAM AGREEMENT

Senior Secured Notes Payable

On March 31, 2003, immediately before executing its new credit agreement and
the new note purchase agreement, the Company prepaid the remaining $4 million
principal installment of its 9.03% Senior Secured Notes due November 15, 2003
that were issued to Principal Life Insurance Company in November 1996. The
total of $4.3 million paid by the Company to discharge the Senior Secured Notes
included accrued and unpaid interest and a prepayment premium of $270,000 under
the terms of the agreement with Principal Life Insurance Company. For the
years ended June 30, 2003, 2002, and 2001, there was $0.5 million, $0.9
million, and $1.2 million of interest expense, respectively, incurred on the
Senior Secured Notes which is included in interest expense.

Credit Facilities

On March 31, 2003, the Company refinanced its outstanding revolving and term
loan indebtedness by entering into:



| |  |  | a credit agreement with a syndicate of banks led by JP Morgan Chase Bank,
as agent and syndication agent, and Wells Fargo Bank Texas, National
Association (Wells Fargo Bank), as administrative agent, for themselves
and other lenders that provides for revolving credit facilities of up to
$165 million; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a note purchase agreement with American Capital Financial Services, Inc.,
as agent for its affiliate American Capital Strategies, Ltd., which
purchased $40 million of the Companys senior subordinated secured
promissory notes.                                                                                 

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The credit facilities under the credit agreement and the indebtedness incurred
under the note purchase agreement replaced the revolving and term loan credit
facilities and the outstanding indebtedness under the Companys Amended and
Restated Credit Agreement dated as of November 9, 2000, as amended, with a
syndicate of bank lenders. The new borrowings were used to fully pay the
outstanding term loans and terminate the term loan facility under the former
credit agreement. The Companys former credit agreement was scheduled to
expire on October 31, 2003.

The credit agreement provides for two revolving line-of-credit facilities that
expire on March 31, 2006:



| |  | a $120 million primary revolving credit facility that is available throughout the three-year term; and                                                                                       
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a $45 million seasonal revolving credit facility that is available to
the Company during each year-end holiday and tax season (i.e., December
1 through March 15) during the three-year term.

The revolving line-of-credit facilities include, subject to certain conditions,
a letter-of-credit facility from Wells Fargo Bank of up to $5 million.

In addition, the credit agreement acknowledges that the Company may, before
March 31, 2005, request an additional $10 million as part of the seasonal
revolving credit facility, but none of the lenders committed to lend any of
that amount in the credit agreement. Borrowings under the credit agreement may
be used for the Companys working capital and general corporate purposes, but
not for capital expenditures or acquisitions (which can only be made out of the
Companys cash flow from operations).

Borrowings under the credit agreement bear interest at a variable annual rate
equal to, at the Companys discretion, either:



| |  |  | The sum of (a) the greatest of (i) the prime rate publicly announced by
Wells Fargo Bank (the Prime Rate), (ii) one percent, plus the rate of
interest on the secondary market for three-month certificates of deposit
reported by the Board of Governors of the Federal Reserve System (the
Board of Governors), multiplied by a fraction, the numerator of which
is one and the denominator of which is one minus the maximum reserve
percentages required by the Board of Governors to which Wells Fargo Bank
is subject for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities of approximately three months plus the
annual assessment rate that is payable by a member of the Bank Insurance
Fund classified as well capitalized, and (iii) the federal funds rate
plus 0.5%; plus (b) a margin that varies from 1.5% to 2.75% per annum
based on the Companys debt-to-EBITDA ratio. (For this ratio, EBITDA
is the Companys earnings before interest, taxes, depreciation, and
amortization.) This interest rate adjusts on a daily basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The sum of (a) the London Interbank Offered Rate (LIBOR) for (at the
Companys discretion) one-, two-, three- or six month maturities,
multiplied by a fraction, the numerator of which is one and the
denominator of which is one minus the maximum reserve percentages required
by the Board of Governors to which Wells Fargo Bank is subject for
Eurocurrency funding, plus (b) a margin that varies from 3.0% to 4.25% per
annum based on the Companys debt-to-EBITDA ratio. This interest rate
adjusts, at the Companys discretion, at one-, two-, three-, or six-month
intervals, in accordance with the corresponding LIBOR.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | The sum of (a) LIBOR for one-month maturities, plus (b) a margin that
varies from 3.0% to 4.25% per annum based on the Companys debt-to-EBITDA
ratio. This interest rate adjusts on a daily basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

The Company has selected the third alternative described above as the annual
interest rate for its current borrowings under the credit agreement, and as of
June 30, 2003, that interest rate was 4.125% (calculated using LIBOR plus
3.0%). Upon an event of default under the credit agreement, the applicable
annual interest rate is increased by three hundred basis points.

Interest on the outstanding principal amount borrowed under the credit
agreement is payable monthly. The outstanding principal amount borrowed and
all interest accrued under the primary revolving line-of-credit facility
provided in the credit agreement is payable on March 31, 2006. The outstanding
principal amount and all interest accrued under the seasonal revolving
line-of-credit facility provided in the credit agreement is payable on March 15
of each year. At the end of each fiscal quarter, beginning June 30, 2003, the
Company must pay the bank lenders a commitment fee equal to 0.5% per annum of
the average daily unused portion of the credit available under the credit
agreement. The Company must also pay Wells Fargo Bank an annual agency fee of
$60,000 in advance on each March 31. The Company paid $1.7 million in
arrangement fees and up-front fees relating to the credit agreement. Subject
to certain conditions, the Company may prepay, in whole or in part, the
revolving credit facilities provided by the credit agreement without penalty or
premium.

The note purchase agreement was entered into as a private placement of $40
million of the Companys debt securities. Under the note purchase agreement,
the Company issued four separate $10 million senior subordinated secured notes
(Notes) to American Capital Strategies, Ltd.: a Series A Note, a Series B
Note, a Series C Note, and a Series D Note. The Notes vary by interest rates,
maturity, and payment schedule.

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The annual interest rate on the outstanding principal amount of the Notes are:



| |  |  | Series A Note: LIBOR plus eight percent.
| | - |  | ----------------------------------------
|
| |  |  | Series B Note: LIBOR plus ten percent.  
|
| |  |  | Series C Note: LIBOR plus 13%.          
|
| |  |  | Series D Note: LIBOR plus 13.25%.       

Upon an event of default under the note purchase agreement, the annual interest
rate applicable to each outstanding Note is increased by two hundred basis
points. Interest on all of the Notes is payable monthly.

The unpaid principal amounts of the Notes are payable, with accrued and unpaid
interest, as follows:



| |  |  | Series A Note: eleven quarterly installments of $833,333.34, payable at
the end of each calendar quarter, beginning
June 30, 2003; and all remaining amounts at maturity on March 31, 2006.                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Series B Note: twelve quarterly installments of $125,000, payable at
the end of each calendar quarter, beginning June
30, 2003; seven quarterly installments of $1,062,500, payable at the
end of each calendar quarter, beginning June 30,
2006; and all remaining amounts at maturity on March 31, 2008.
|
| |  |  | Series C Note: At maturity on March 31, 2009.                                                                                                                                                                                                                                                             
|
| |  |  | Series D Note: At maturity on March 31, 2010.                                                                                                                                                                                                                                                             

The Company must prepay all amounts due under the Notes upon any change in
control of the Company, as defined in the note purchase agreement. The
Company must also prepay the Series B Note and then the Series A Note as
follows:



| |  |  | by the amount the Company receives upon the sale of any individual
asset or issuance of equity securities that results in
net cash proceeds to the Company in excess of $50,000;                                                                                                                                                                                                                                                                                              
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | by the amount the Company receives upon the sale of assets or issuance
of equity securities in any fiscal quarter that
results in net cash proceeds to the Company in excess of $10,000 since the
last prepayment relating to asset sales by
the Company;                                                                                                                                                                                                                     
|
| |  |  | by the amount of net cash proceeds received by the Company from any
issuance of indebtedness for borrowed money
(other than indebtedness under the credit agreement);                                                                                                                                                                                                                                                                                                         
|
| |  |  | by an amount equal to 50% of the cash collected by the Company from
payday loans in a state during the 90 days after
the Company is prohibited from, or becomes subject to legal or
administrative action for, making payday loans in such
state (subject to certain adjustments if the Company resumes making payday
loans in such state within two years after
the Company is prohibited from or becomes subject to legal action for
making payday loans in such state); and
|
| |  |  | within 90 days after the end of each fiscal year (beginning with the
fiscal year ending June 30, 2004), by an amount
equal to 50% of the Companys excess cash flow for the 15 months ending
June 30, 2004, and each fiscal year
thereafter.                                                                                                                                                                                                                                  

The Company may prepay the principal amount of the Notes, but any such
voluntary prepayment must be (i) made in order from the Series B Note to the
Series A Note, the Series C Note, and the Series D Note, and (ii) during all
but the last year of the respective terms of the Notes, accompanied by payment
of not only accrued interest, but also a prepayment premium in an amount equal
to a percentage of the principal being prepaid. The prepayment premium under
the Series A Note is one percent before March 31, 2004; the premium under the
Series B Note is three percent before March 31, 2004, and one percent before
March 31, 2005; the premium under the Series C Note is four percent before
March 31, 2004, and decreases by one percent per year until March 31, 2007; and
the premium under the Series D Note is five percent before March 31, 2004, and
decreases by one percent each year until March 31, 2008.

Upon execution of the note purchase agreement, the Company paid American
Capital Financial Services, Inc., as agent for the purchaser of the Notes, a
closing processing fee of $1 million and a structuring fee of $1.575 million.
The Company also paid placement fees of $1.2 million to Stephens, Inc. and
$200,000 to JPMorgan Chase Bank. Under the note purchase agreement, the
Company must pay American Capital Financial Services, Inc. an administrative
fee of $300,000 per annum, in equal quarterly installments beginning on June
30, 2006, until the Notes are paid in full. The administrative fee will,
however, decrease to (a) $270,000 per annum upon payment in full of the Series
A Note, (b) $225,000 per annum upon payment in full of the Series B Note, and
(c) $120,000 per annum upon payment in full of the Series C Note. The Company
must also pay American Capital Financial Services, Inc. a facility fee of
$425,000 per annum, in equal monthly installments beginning on April 30, 2006,
until payment in full of the Series D Note; that facility fee will decrease to
$300,000 per annum upon payment in full of the Series C Note.

The credit agreement may be terminated before the stated expiration or maturity
date of the revolving credit facilities  requiring all unpaid principal and
accrued interest to be paid to the bank lenders  upon any event of default
as defined in the credit agreement. Similarly, the Notes may become due and
payable before their respective stated maturity dates upon
64Table of Contents

any event of default as defined in the note purchase agreement. The credit
agreement and the note purchase agreement also contain cross-default provisions
to each other and to the then existing Money Order Agreement (the Money Order
Agreement) between the Company and Travelers Express Company, Inc.
(Travelers). The events of default in the credit agreement and in the note
purchase agreement are substantially similar. They include (a) nonpayment of
amounts due under the credit agreement and under the Notes and the note
purchase agreement, respectively, (b) the failure to observe or perform
covenants set forth in the credit agreement and in the note purchase agreement,
respectively, and in the documents ancillary thereto that are not cured, (c) a
change in control of the Company, and (d) any event or circumstance that has a
material adverse effect on the collateral secured under the credit agreement
and the note purchase agreement, respectively, or on the Companys business,
assets, liabilities, condition (financial or otherwise), or prospects.

The Company is subject to various restrictive covenants stated in the credit
agreement and in the note purchase agreement. The covenants in those documents
are substantially similar. The covenants include restrictions on the
incurrence of indebtedness from other sources, restrictions on advances to or
investments in other persons or entities, restrictions on amounts payable to
settle litigation, restrictions on the payment of dividends to shareholders and
on the repurchase of shares, and the requirement that various financial ratios
be maintained. Certain of the covenants in the credit agreement and in the
note purchase agreement require the Company:



| |  |  | to limit its capital expenditures during each fiscal year to specified
amounts, which are, in the credit agreement, $5
million for the Companys 2003 fiscal year (ending June 30, 2003), $9.75
million for the Companys 2004 fiscal year,
$11 million for the Companys 2005 fiscal year, and $12.25 million for the
nine months of the Companys 2006 fiscal
year (though the annual maximum amounts are slightly higher in the note
purchase agreement);                          
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to limit any acquisition of assets or capital stock of an entity in the
retail financial services business to a purchase price
of no more than $7 million and to assets or entities that have positive cash
flow for the 12 months preceding such
acquisition, unless otherwise agreed upon by the Lenders (with respect to
the credit agreement) or the holder(s) of at
least 66-2/3% of the outstanding principal amount of the Notes (with respect
to the note purchase agreement);
|
| |  |  | to reduce its risk of increases in interest rates by entering into one or
more interest-rate swap agreements, on and after
July 1, 2003, to convert to fixed-rate obligations its floating- or
variable-rate interest obligations with respect to at least
$60 million of its indebtedness under the credit agreement and 50% of the
outstanding principal amount of the Notes; and                                                                                                   
|
| |  |  | to obtain, by June 30, 2003, and thereafter maintain collateral
arrangements with (a) financial institutions holding at least 95% of the
aggregate dollar amount of the Companys deposits of cash and instruments,
and (b) armored couriers
transporting at least 95% of the aggregate dollar amount of the Companys
cash and instruments.                                                                                                                                          

Both the credit agreement and the note purchase agreement specifically
acknowledge and permit the activities conducted by the Company and Ace Funding,
LLC, a Delaware limited liability company wholly owned by the Company (Ace
Funding), in providing cash to the Companys SSMs located in various H&R Block
retail locations, and do not interfere with the separate operations and
financing arrangements of Ace Funding.

The Companys payment and performance of its obligations under the credit
agreement and the note purchase agreement and the documents ancillary thereto
are secured by liens on all or substantially all of the Companys and its
subsidiaries (other than Ace Fundings) assets. All of the companys
subsidiaries (other than Ace Funding) guaranteed the obligations of the Company
under the credit agreement and the note purchase agreement. The collateral
arrangements entered into by the Company and its guarantor subsidiaries are
substantially similar for each of Wells Fargo Bank, as administrative agent for
the Lenders; American Capital Financial Services, Inc., as agent for the
holder(s) of the Notes; and Travelers Express Company, Inc. (Travelers
Express), which has a subordinate lien to secure the Companys payment and
performance of its obligations under the Money Order Agreement and under the
Money Transfer Agreement (regarding MoneyGram services) and the Bill-Payment
Processing and Funds Transfer Services Agreement (regarding bill-payment
processing services) with Travelers Express and its affiliates. The Company
and all of its secured creditors or agents for them, Wells Fargo Bank, American
Capital Financial Services, Inc., and Travelers Express, entered into an
Intercreditor Agreement dated as of March 31, 2003 (the Intercreditor
Agreement), that includes agreements regarding the priority of distributions
to the Lenders, the holder(s) of Notes, and Travelers Express upon foreclosure
and liquidation of the collateral subject to the security agreements executed
by the Company and its guarantor subsidiaries and certain other intercreditor
arrangements. The Intercreditor Agreement superseded the collateral trust
arrangement that was in effect with the Companys preceding credit
arrangements.

To reduce its risk of greater interest expense because of interest-rate
fluctuations, the Company has entered into two interest-rate swap agreements,
which effectively converted a portion of its floating-rate interest obligations
to fixed-rate interest obligations. On April 23, 2003, the Company entered
into an interest-rate swap agreement with JP Morgan Chase Bank, regarding a
notional amount of $60 million, to be effective until March 31, 2006. On June
2, 2003, the Company entered into an interest-rate swap agreement with National
City Bank regarding a notional amount of $20 million, to be effective until
March 31, 2006.

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As of June 30, 2003, the Company had borrowed $83.9 million under its revolving
line-of-credit facility, and there was indebtedness of $38.3 million
outstanding under the Notes. The Prime Rate effective on June 30, 2003 was
4.0%, and LIBOR effective on that date was 1.125%.

The following table provides summarized data related to the revolving advances
under the new credit agreement and under the former credit agreement
(Revolving Advances) and outstanding indebtedness under the Notes and the
term advances under the former credit agreement (collectively, Term
Advances) as of June 30, 2003 and 2002:

|                                |                        |                        |        |                                        |      |               |         |       |      |      |        |       |       |   |        |       |      |  
|------------------------------- | ---------------------- | ---------------------- | ------ | -------------------------------------- | ---- | ------------- | ------- | ----- | ---- | ---- | ------ | ----- | ----- | - | ------ | ----- | ---- | -
|                                |                        |                        |        | As of and for the Years Ended June 30,
|                                |                        |                        |        |                                       
|                                |                        |                        |        | Revolving Advances                     |      | Term Advances
|                                |                        |                        |        |                                        |      |              
|                                |                        |                        |        | 2003                                   |      | 2002          |         | 2003  |      | 2002
|                                |                        |                        |        |                                        |      |               |         |       |      |     
|                                |                        |                        |        | (dollars in thousands)                
|Ending balance                  |                        | $                      | 83,900 |                                        |      | $             | 97,500  |       |      | $    | 38,269 |       |       | $ | 48,350 |      
|Average balance                 |                        | $                      | 96,345 |                                        |      | $             | 114,626 |       |      | $    | 43,531 |       |       | $ | 51,817 |      
|Interest expense                |                        | $                      | 5,612  |                                        |      | $             | 5,998   |       |      | $    | 5,403  |       |       | $ | 3,602  |      
|Swap expense                    |                        |                        | 1,901  |                                        |      |               | 3,110   |       |      |      |       |       |       |   |       |      
|                                |                        |                        |        |                                        |      |               |         |       |      |      |        |       |       |   |        |      
|                                | Total interest expense |                        | $      | 7,512                                  |      |               | $       | 9,107 |      |      | $      | 5,403 |       |   | $      | 3,602 |     
|                                |                        |                        |        |                                        |      |               |         |       |      |      |        |       |       |   |        |      
|Accrued interest expense        |                        | $                      | 9      |                                        |      | $             | 48      |       |      | $    | 412    |       |       | $ | 36     |      
|Weighted average interest rate: |                        |                        |        |                                        |      |               |         |       |      |      |        |       |       |   |        |      
|                                |                        | Excluding swap expense |        |                                        | 5.82 | %             |         |       | 5.23 | %    |        |       | 12.41 | % |        |       | 6.95 | %
|                                |                        | Including swap expense |        |                                        | 7.80 | %             |         |       | 7.95 | %    |        |       | 12.41 | % |        |       | 6.95 | %
|Unused advance commitment fees  |                        | $                      | 185    |                                        |      | $             | 166     |       |      | $    |       |       |       | $ | 17     |      

SSM Funding Arrangements

A multi-year license agreement with H&R Block Tax Services, Inc. permits the
Company to place its SSMs in certain H&R Block retail offices during the tax
season of each year. The SSMs are available to cash only tax refund and tax
refund anticipation loan checks for H&R Block customers.

In early-January 2003, the Company completed two arrangements to obtain up to
$290 million in cash or currency for the more than 240 SSMs placed in the H&R
Block retail offices during the 2003 tax season. One of the arrangements was
with Texas Capital Bank, National Association, a national bank that is a
subsidiary of Texas Capital Bancshares, Inc. (Texas Capital Bank). The other
arrangement was with DZ Bank AG Deutsche Zentral-Genossenschaftsbank Frankfurt
am Main, a German bank, as arranger and liquidity agent (DZ Bank), and
Autobahn Funding Company LLC, as lender (Autobahn Funding). The Companys
arrangement with Texas Capital Bank extended only for the 2003 tax season.
The Companys arrangement with DZ Bank and Autobahn Funding was effective for
the 2003 tax season and will be effective for the four successive annual tax
seasons, through 2007.

Under the Cash Services Agreement with Texas Capital Bank, Texas Capital Bank
agreed to make available up to $100 million of its cash or currency for use in
certain of the SSMs in H&R Block retail offices. For the use of Texas Capital
Banks cash, as well as corresponding transportation and custodial services
provided by the bank, the Company agreed to pay fees to the bank that varied
depending on the volume of checks cashed in the SSMs and the Companys use of
corresponding services. The cash in the SSMs, as well as the cashed checks
deposited in the SSMs in exchange for that cash, were assets of Texas Capital
Bank, not of the Company. Also, under the Cash Services Agreement, the
availability of the cash or currency was subject to any need of Texas Capital
Bank for that property for its own business or purposes. The Company agreed to
maintain, during the term of this agreement (i.e., the 2003 tax season), a
deposit account at Texas Capital Bank of at least $1 million, pledged as
assurance of the Companys performance of its obligations under the Cash
Services Agreement. The Company was entitled to all of the check-cashing fees
earned from the SSMs subject to this arrangement upon the expiration of this
agreement, after the payment to Texas Capital Bank of all amounts to which it
was entitled. This agreement expired on March 31, 2003.

The Loan and Servicing Agreement with DZ Bank and Autobahn Funding includes a
revolving line-of-credit of up to $190 million for cash or currency for SSMs
located in the H&R Block retail offices during the tax season. The revolving
credit facility is available not to the Company, but to Ace Funding LLC (Ace
Funding), a Delaware limited liability company that is a recently formed
wholly owned subsidiary of the Company. Ace Funding owns the cash or currency
used in, and provides corresponding transportation and custodial services to,
only the SSMs subject to this arrangement, and conducts no other business. The
cash in the SSMs subject to this arrangement, as well as the cashed checks
deposited in such SSMs in exchange for that cash, are the assets of Ace
Funding, not of the Company. Ace Funding granted the lender a first priority

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lien in all of its assets as collateral for the loan facility. The Company
capitalized Ace Funding with $1 million and agreed to provide revolving
subordinated loans to Ace Funding in an amount up to $1.9 million. The Company
has no liability to repay the obligations of Ace Funding, has not guaranteed
the obligations of Ace Funding to the lender, and has no interest in any of the
assets of Ace Funding. Under the Loan and Servicing Agreement, the Company
agreed to operate the SSMs subject to this arrangement as a licensed
check-casher and agreed to various conditions and limitations, required by the
lender, regarding the business and affairs of Ace Funding. In general, those
conditions and limitations are intended to protect Ace Fundings assets (the
lenders collateral) from creditors of the Company, and include requirements
that Ace Fundings business activities be limited to those activities for the
SSMs subject to this arrangement, that Ace Funding function independently of
the Company, and that Ace Fundings assets be kept separate from the Companys
assets. In addition, Ace Funding is subject to various restrictive covenants
stated in the Loan and Servicing Agreement that are typical of those found in
credit agreements, including restrictions on Ace Fundings sale of assets,
merger or consolidation, and incurrence of other indebtedness.

Under the Loan and Servicing Agreement, Ace Funding may borrow under the
revolving credit facility from time to time during the tax season each year,
and interest accrues on the borrowed funds at an annual rate equal to the
weighted average of the annual rates paid by Autobahn Funding in respect of its
commercial paper or, if Autobahn Funding obtains funds to lend by means other
than its issuance of commercial paper, at a rate determined by reference to the
rate of interest DZ Bank pays on U.S. dollar deposits of a similar length of
time as the loan. Ace Funding is required to make payments of interest monthly
and of all outstanding principal and interest at the end of each tax season.
Ace Funding may prepay amounts at any time. Ace Funding is responsible for
repayment of all of the indebtedness to the lender, all fees and administrative
costs of the lenders agents in connection with this arrangement, and the fees
and expenses of third-party providers of currency transportation and custodial
services. The Company will be entitled to receive all check-cashing fees from
the SSMs subject to this arrangement, net of amounts paid to Ace Funding for
providing the cash to the SSMs, at the end of the tax season.

For financial reporting purposes, Ace Funding is a consolidated subsidiary of
the Company, and all borrowings by Ace Funding under this arrangement, all
amounts paid by Ace Funding under this arrangement, and all check-cashing fees
received by the Company from the SSMs subject to this arrangement are reflected
in the consolidated financial statements of the Company. As of June 30, 2003,
these loans had been fully repaid.

Notes Payable

Notes payable, related to acquired stores, normally bear interest at
approximately 5%, and are due six months after the related acquisition.
However, at June 30, 2003, two of the three notes payable were
non-interest-bearing notes, $856,000 dated November 10, 2000, and $200,000
dated November 8, 2001. One of these notes is payable in monthly installments
of $23,778 until maturity November 1, 2003 and the other note is payable in
annual installments of $40,000 until maturity in October 2006. Interest was
imputed on these notes at an interest rate of 6% and 8%, respectively. Notes
payable were approximately $0.9 million and $1.5 million as of June 30, 2003
and 2002, respectively. For the years ended June 30, 2003, 2002, and 2001,
there was $60,000, $100,000, and $81,000, respectively, included in interest
expense related to the acquisition notes payable.

The note payable of $856,000 is the escrowed portion of the total purchase
price for the 107-store acquisition in November 2000. Eleven of the acquired
locations were in third-party grocery stores, operated under the Handy Andy
name, in and around San Antonio, Texas. Following the foreclosure and sale of
those grocery stores by the secured creditor of the grocery store operator, the
Company instituted litigation against that creditor and its purchaser in
January 2001 to maintain the Companys right to operate in those locations. At
a trial in April 2001, the court found that the lease agreement under which the
Company claimed the right to occupy those 11 locations, which had been assigned
to the Company by the sellers, was not enforceable under Texas law. The court
therefore ordered the Company to vacate those 11 locations, which the Company
did in June 2001. Because of the courts finding, the Company made demand for
indemnification from the sellers and their majority shareholders under the
purchase agreement. When it appeared that further negotiations regarding the
Companys demand for indemnification would be unsuccessful, in November 2001
the Company filed a lawsuit against the sellers and their majority shareholders
to recover the damages suffered in connection with, and as a result of, the
lost 11 locations. In light of the Companys pending lawsuit against the
sellers and their majority shareholders, the Company has not authorized the
monthly release of $23,778 from escrow since the monthly release in June 2001.

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Debt Maturity Schedule

Scheduled maturities of debt for the years following June 30, 2003, including
the Notes payable to American Capital Strategies, Ltd. and other notes payable
are as follows (in thousands):

|                     |  |   |        | 
|-------------------- |  | - | ------ | 
|Year Ending June 30: |  |   |        | 
|2004                 |  | $ | 4,613  | 
|2005                 |  |   | 3,867  | 
|2006                 |  |   | 3,974  | 
|2007                 |  |   | 4,289  | 
|2008                 |  |   | 2,414  | 
|Remaining years      |  |   | 20,000 | 
|                     |  |   |        | 
|                     |  | $ | 39,157 | 
|                     |  |   |        | 

MoneyGram Agreement

The Company is an agent for the receipt and transmission of wire transfers of
money through the MoneyGram network. In June 2000, the Company signed a Money
Transfer Agreement with Travelers Express and MoneyGram Payment Systems, Inc.
(MPS), an affiliate of Travelers Express, that became effective on January 1,
2001 (the MoneyGram Agreement). The MoneyGram Agreement provides for a
revenue guarantee on acquired stores for the conversion of wire transfer
services to MoneyGram from another supplier. The amount of the guarantee is
equivalent to the annual aggregate wire transfer revenue for the acquired
stores derived from another supplier. The amount of guarantee revenue, which
represents the difference between the guarantee and the Companys actual wire
transfer service revenue from the acquired stores, under the MoneyGram
Agreement and a similar preceding agreement with MPS for the fiscal years ended
June 30, 2003, 2002, and 2001 was approximately $3.7 million, $3.9 million, and
$3.3 million, respectively. Accounts receivable from MoneyGram related to
these guarantees as of June 30, 2003 and 2002 was $ 0.8 million and $0.9
million, respectively.

The Company agreed to offer and sell only MoneyGram wire transfer services
during the term of the MoneyGram Agreement ending December 31, 2007. The
Company earns commissions for each transmission and receipt of money through
the MoneyGram network effected at a Company location; those commissions equal
varying percentages of the fees charged by MPS to consumers for the MoneyGram
services.

Under the MoneyGram Agreement, the Company is receiving a total of
approximately $12.5 million in bonuses, payable in equal monthly installments
(without interest) over the seven-year term. The amount of those monthly
installments will be subject to reduction if the Company closes or sells a
significant number of those locations at which MoneyGram services are offered
at the beginning of the MoneyGram Agreement. In addition, the Company will be
entitled to receive certain incentive bonuses regarding new MoneyGram service
locations that it opens or acquires during the term of the MoneyGram Agreement.

During the fiscal years ended June 30, 2003, 2002, and 2001, $2.5 million, $2.5
million, and $2.7 million, respectively, of revenue was recognized related to
bonuses and incentive bonuses under the MoneyGram Agreement and a similar
preceding agreement with MPS. The total deferred revenue related to these
bonuses and incentive bonuses as of June 30, 2003 and 2002, was $3.7 and $4.2
million, respectively and are included in other current and non-current
liabilities in the accompanying consolidated balance sheets.

Derivative Instruments and Hedging Activities

To reduce its risk of greater interest expense because of floating-rate
interest obligations under its credit facilities under the Credit Agreement,
the Company has entered into interest rate swap agreements. Those agreements
effectively converted a portion of the Companys floating-rate interest
obligations to fixed-rate interest obligations.

During the effectiveness of the bank credit agreement that was terminated on
March 31, 2003, the Company entered into three interest-rate swap agreements
with Bank of America and one interest-rate swap agreement with Wells Fargo Bank
in fiscal 1999 and 2000. The notional amounts of those swaps were determined
based on the Companys minimum projected borrowings during calendar years 1999
through 2002. The last of these four interest rate swaps expired January 1,
2003. Since March 31. 2003, the Company has entered into two new interest-rate
swap agreements with JP Morgan Chase Bank and National City Bank, which had a
fair value of ($1.7) million as of June 30, 2003.

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The following table provides the information regarding the individual swap
agreements:

|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  |           |  |           |  |           |   |       |   |       |  
|-------------------- |  | ------------------ |  | ------------- | -- | ------------- | -------- | ------ | --------- | ------------------- | --------- | ------------------------- | ---------- | -------- | ---- | ---------- | ---- | ---------------- | --------- | ---- | --------- |  | --------- |  | --------- |  | --------- | - | ----- | - | ----- | -
|                     |  |                    |  |               |    |               |          |        |           | Swap Agreement Term |           | Interest Rate Applies to: |            | Fixed   
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            | Interest
|                     |  |                    |  |               |    | Notional      |          |        |           |                     |           |                           |            |          |      | For        |      | To Specific Term |           | Rate
|Bank                 |  | Debt               |  | Amount        |    |               |          |        |           |                     |           |                           |            | Calendar |      |            |      | Before          
|Name                 |  | Type               |  | (in millions) |    | Beginning     |          | Ending |           | Year                |           | From                      |            | To       |      | Margin (1)
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |           
|Bank of America      |  | Revolving Advances |  | $             | 33 |               |          |        | 1/4/1999  |                     |           |                           | 1/3/2001   |          |      |            | 1999 |                  |           |      |           |  |           |  |           |  |           |   | 5.14  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  | 2000      |      |           |  |           |  |           |  |           |   |       |   | 5.23  | %
|Bank of America      |  | Revolving Advances |  | $             | 10 |               |          |        | 9/3/1999  |                     |           |                           | 12/31/2000 |          |      |            | 1999 |                  |           |      |           |  |           |  |           |  |           |   | 5.25  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  | 2000      |      |           |  |           |  |           |  |           |   |       |   | 5.25  | %
|Wells Fargo Bank     |  | Revolving Advances |  | $62 (avg)     |    |               | 1/1/2000 |        |           |                     | 1/31/2001 |                           |            |          |      |            |      |                  | 11/1/2000 |      |           |  | 1/31/2001 |  |           |  | 6.945     | %
|                     |  |                    |  |               |    | increasing to |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  |           |  |           |  |           |   |       |  
|                     |  |                    |  |               |    | $85 (avg)     |          |        | 2/1/2001  |                     |           |                           | 1/1/2003   |          |      |            |      |                  |           |      | 2/1/2001  |  |           |  | 1/1/2003  |  |           |   | 6.045 | %
|Bank of America      |  | Term Advance       |  | $9.4 (avg)    |    |               | 1/4/1999 |        |           |                     | 1/3/2001  |                           |            |          | 1999 |            |      |                  |           |      |           |  |           |  |           |  | 6.23      | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  | 2000      |      |           |  |           |  |           |  |           |   |       |   | 6.38  | %
|JP Morgan Chase Bank |  | Revolving Advances |  | $             | 60 |               |          |        | 4/23/2003 |                     |           |                           | 3/31/2006  |          |      |            |      |                  |           |      | 4/23/2003 |  |           |  | 6/30/2003 |  |           |   | 1.32  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2003  |  |           |  | 6/30/2004 |   |       |   | 1.715 | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2004  |  |           |  | 6/30/2005 |   |       |   | 2.965 | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2005  |  |           |  | 3/31/2006 |   |       |   | 3.925 | %
|National City Bank   |  | Term Advance       |  | $             | 20 |               |          |        | 1/2/2003  |                     |           |                           | 3/31/2006  |          |      |            |      |                  |           |      | 6/2/2003  |  |           |  | 6/30/2003 |  |           |   | 1.34  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2003  |  |           |  | 6/30/2004 |   |       |   | 1.34  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2004  |  |           |  | 6/30/2005 |   |       |   | 2.17  | %
|                     |  |                    |  |               |    |               |          |        |           |                     |           |                           |            |          |      |            |      |                  |           |      |           |  | 7/1/2005  |  |           |  | 3/31/2006 |   |       |   | 2.99  | %



| | (1) |  | Based on the credit agreement, the margin on the Revolving Advances
varies from 1.5% to 4.25% per annum based on the Companys
debt-to-EBITDA ratio and whether the Company uses the Prime Rate or
LIBOR based calculation. The annual interest rate for the Companys
Revolving Advance borrowings under the credit agreement as of June 30,
2003, was 4.125% (calculated using LIBOR plus 3.0%). The margin on the
Term Advance varies by note from 8% to 13.25%. The composite annual
interest rate for the Companys Term Advance borrowings under the credit
agreement as of June 30, 2003, was 12.376%.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. OTHER EXPENSES

Other store expenses consisted of the following:

|                               |  |                     |        |      |  |      |        |  |  |   |        | 
|------------------------------ |  | ------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                               |  | Year Ended June 30,
|                               |  |                    
|                               |  | 2003                |        | 2002 |  | 2001
|                               |  |                     |        |      |  |     
|                               |  | (in thousands)     
|Net returns and cash shortages |  | $                   | 9,896  |      |  | $    | 10,390 |  |  | $ | 12,553 | 
|Armored and security           |  |                     | 7,782  |      |  |      | 7,708  |  |  |   | 7,442  | 
|Bank charges                   |  |                     | 5,314  |      |  |      | 5,207  |  |  |   | 3,972  | 
|Center supplies                |  |                     | 4,064  |      |  |      | 3,995  |  |  |   | 3,832  | 
|Telephone                      |  |                     | 3,027  |      |  |      | 3,844  |  |  |   | 3,524  | 
|SSM lease expense              |  |                     | 2,079  |      |  |      | 1,309  |  |  |   | 105    | 
|Other                          |  |                     | 6,030  |      |  |      | 4,059  |  |  |   | 3,657  | 
|                               |  |                     |        |      |  |      |        |  |  |   |        | 
|                               |  | $                   | 38,192 |      |  | $    | 36,512 |  |  | $ | 35,085 | 
|                               |  |                     |        |      |  |      |        |  |  |   |        | 

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Other expenses consisted of the following:

|                                                                                                                                                     |  |                     |        |      |  |      |       |   |  |   |       | 
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ------ | ---- |  | ---- | ----- | - |  | - | ----- | 
|                                                                                                                                                     |  | Year Ended June 30,
|                                                                                                                                                     |  |                    
|                                                                                                                                                     |  | 2003                |        | 2002 |  | 2001
|                                                                                                                                                     |  |                     |        |      |  |     
|                                                                                                                                                     |  | (in thousands)     
|Legal settlements (including $5 million charge for
settlement and release of substantially all claims in the
Companys Goleta loan-related lawsuits) |  | $                   | 5,750  |      |  | $    | 1,984 |   |  | $ | 350   | 
|Insurance recovery resulting from claims related to the
Goleta loan-related lawsuits                                                                 |  |                     | (4,700 | )    |  |      |      |   |  |   |       | 
|Loss on liquidation of ePacific investment                                                                                                           |  |                     | 703    |      |  |      |      |   |  |   |      | 
|Store closing expense                                                                                                                                |  |                     | 534    |      |  |      | 1,029 |   |  |   | 108   | 
|Early extinguishment of senior secured debt                                                                                                          |  |                     | 270    |      |  |      |      |   |  |   |      | 
|Gain on sale of stores to franchisees                                                                                                                |  |                     | (888   | )    |  |      |      |   |  |   |      | 
|Restructure provision                                                                                                                                |  |                     |       |      |  |      | (163  | ) |  |   | 7,710 | 
|Other                                                                                                                                                |  |                     | (85    | )    |  |      | (23   | ) |  |   |      | 
|                                                                                                                                                     |  |                     |        |      |  |      |       |   |  |   |       | 
|                                                                                                                                                     |  | $                   | 1,584  |      |  | $    | 2,827 |   |  | $ | 8,168 | 
|                                                                                                                                                     |  |                     |        |      |  |      |       |   |  |   |       | 

6. PREPAID EXPENSES, INVENTORIES, AND OTHER CURRENT ASSETS

Other prepaid expenses and other current assets consisted of the following:

|                       |  |                |        |      |  |   |       | 
|---------------------- |  | -------------- | ------ | ---- |  | - | ----- | 
|                       |  | June 30,      
|                       |  |               
|                       |  | 2003           |        | 2002
|                       |  |                |        |     
|                       |  | (in thousands)
|Deferred tax asset     |  | $              | 5,493  |      |  | $ | 6,900 | 
|Deferred finance costs |  |                | 2,993  |      |  |   | 322   | 
|Prepaid income taxes   |  |                | 1,143  |      |  |   |      | 
|Inventories            |  |                | 668    |      |  |   | 946   | 
|Other prepaid invoices |  |                | 445    |      |  |   | 757   | 
|                       |  |                |        |      |  |   |       | 
|                       |  | $              | 10,742 |      |  | $ | 8,925 | 
|                       |  |                |        |      |  |   |       | 

7. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

|                                 |                                          |   |                |         |      |   |        |         |  
|-------------------------------- | ---------------------------------------- | - | -------------- | ------- | ---- | - | ------ | ------- | -
|                                 |                                          |   | June 30,      
|                                 |                                          |   |               
|                                 |                                          |   | 2003           |         | 2002
|                                 |                                          |   |                |         |     
|                                 |                                          |   | (in thousands)
|Property and equipment, at cost: |                                          |   |                |         |      |   |        |        
|                                 | Store equipment, furniture, and fixtures |   | $              | 43,251  |      |   | $      | 41,507  |  
|                                 | Leasehold improvements                   |   |                | 24,648  |      |   |        | 25,022  |  
|                                 | Signs                                    |   |                | 8,102   |      |   |        | 8,009   |  
|                                 | Other property and equipment             |   |                | 1,507   |      |   |        | 795     |  
|                                 |                                          |   |                |         |      |   |        |        
|                                 |                                          |   | 77,508         |         |      |   | 75,333 |        
|                                 | Less  accumulated depreciation          |   |                | (45,156 | )    |   |        | (38,172 | )
|                                 |                                          |   |                |         |      |   |        |        
|                                 |                                          | $ | 32,352         |         |      | $ | 37,161 |        
|                                 |                                          |   |                |         |      |   |        |        

Depreciation expense was $8.2 million, $8.3 million, and $7.9 million in fiscal
2003, 2002, and 2001, respectively.

8. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company adopted SFAS 142 effective July 1, 2001, and has identified two
reporting units: (1) company-owned stores and (2) franchised stores. The
franchised stores reporting unit has no intangible assets, and therefore it is
not impacted by SFAS 142. The Company completed the first step of the two-step
impairment test by obtaining an independent third-party appraisal of the fair
value of the company-owned stores reporting unit as of July 1, 2001. The fair
value of the company-owned stores reporting unit exceeded the carrying value,
and as a result, the second step of the two-step impairment test is not
required and no impairment loss has been recorded as of June 30, 2003 and 2002.
In accordance with SFAS 142, the Company discontinued recording goodwill
amortization effective July 1, 2001.

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Transitional Disclosures

Net income and earnings per share, excluding the after-tax effect of
amortization expense related to goodwill, for the years ended June 30, 2003,
2002, and 2001 are as follows:

|                                                     |                                                      |   |                                         |      |      |   |        |      |  |   |       |      | 
|---------------------------------------------------- | ---------------------------------------------------- | - | --------------------------------------- | ---- | ---- | - | ------ | ---- |  | - | ----- | ---- | 
|                                                     |                                                      |   | Year Ended June 30,                    
|                                                     |                                                      |   |                                        
|                                                     |                                                      |   | 2003                                    |      | 2002 |   | 2001  
|                                                     |                                                      |   |                                         |      |      |   |       
|                                                     |                                                      |   | (in thousands except per share amounts)
|Reported net income                                  |                                                      | $ | 12,775                                  |      |      | $ | 10,113 |      |  | $ | 611   |     
|Add back: Goodwill amortization, net of income taxes |                                                      |   |                                        |      |      |   |       |      |  |   | 1,390 |     
|                                                     |                                                      |   |                                         |      |      |   |        |      |  |   |       |     
|Adjusted net income                                  |                                                      | $ | 12,775                                  |      |      | $ | 10,113 |      |  | $ | 2,001 |     
|                                                     |                                                      |   |                                         |      |      |   |        |      |  |   |       |     
|Basic and diluted earnings per share:                |                                                      |   |                                         |      |      |   |        |      |  |   |       |     
|                                                     | Reported earnings per share                          |   | $                                       | 1.25 |      |   | $      | 1.00 |  |   | $     | 0.06 | 
|                                                     | Add back: Goodwill amortization, net of income
taxes |   |                                         |     |      |   |        |     |  |   |       | 0.14 | 
|                                                     |                                                      |   |                                         |      |      |   |        |      |  |   |       |     
|                                                     | Adjusted earnings per share                          |   | $                                       | 1.25 |      |   | $      | 1.00 |  |   | $     | 0.20 | 
|                                                     |                                                      |   |                                         |      |      |   |        |      |  |   |       |     

Total intangible amortization expense for fiscal 2003, 2002, and 2001, was $0.4
million, $0.5 million, and $3.0 million, respectively.

Acquisitions

The following table provides information concerning the acquisitions made
during the years ended June 30, 2003, 2002, and 2001:

|                          |                          |   |                                        |     |      |   |       |       |  |   |        |        | 
|------------------------- | ------------------------ | - | -------------------------------------- | --- | ---- | - | ----- | ----- |  | - | ------ | ------ | 
|                          |                          |   | Year Ended June 30,                   
|                          |                          |   |                                       
|                          |                          |   | 2003                                   |     | 2002 |   | 2001 
|                          |                          |   |                                        |     |      |   |      
|                          |                          |   | (in thousands, except number of stores
|                          |                          |   | and number of transactions)           
|Number of stores acquired |                          |   | 2                                      |     |      |   | 8     |       |  |   | 133    |       
|Number of transactions    |                          |   | 2                                      |     |      |   | 4     |       |  |   | 5      |       
|Total purchase price      |                          | $ | 736                                    |     |      | $ | 1,412 |       |  | $ | 36,745 |       
|Amounts allocated to:     |                          |   |                                        |     |      |   |       |       |  |   |        |       
|                          | Goodwill                 |   | $                                      | 658 |      |   | $     | 1,094 |  |   | $      | 33,917 | 
|                          | Covenants not to compete |   |                                        | 10  |      |   |       | 65    |  |   |        | 1,285  | 
|                          | Property and equipment   |   |                                        | 50  |      |   |       | 135   |  |   |        | 1,468  | 
|                          | Other assets             |   |                                        | 16  |      |   |       | 118   |  |   |        | 75     | 

Amortizable Intangible Assets

Covenants not to compete are as follows:

|                                  |  |                |        |      |  |   |        |  
|--------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                  |  | June 30,      
|                                  |  |               
|                                  |  | 2003           |        | 2002
|                                  |  |                |        |     
|                                  |  | (in thousands)
|Covenants not to compete, at cost |  | $              | 2,281  |      |  | $ | 2,687  |  
|Less  accumulated amortization   |  |                | (1,130 | )    |  |   | (1,141 | )
|                                  |  |                |        |      |  |   |        |  
|                                  |  | $              | 1,151  |      |  | $ | 1,546  |  
|                                  |  |                |        |      |  |   |        |  

Covenants not to compete are amortized over the applicable period of the
contract. The weighted-average amortization period is 5.2 years.

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Amortization expense related to the covenants not to compete for the year ended
June 30, 2003 and estimated for the five succeeding fiscal years are as
follows:

|                                                  |  |        |     |           |  |   |     | 
|------------------------------------------------- |  | ------ | --- | --------- |  | - | --- | 
|Amortization Expense for Covenants Not to Compete
|                                                 
|For the Year                                      |  |        |     |           |  |   |     | 
|Ended June 30,                                    |  | Actual |     | Estimated
|                                                  |  |        |     |          
|(in thousands)                                   
|2003                                              |  | $      | 405 |           |  |   |     | 
|2004                                              |  |        |     |           |  | $ | 345 | 
|2005                                              |  |        |     |           |  |   | 256 | 
|2006                                              |  |        |     |           |  |   | 138 | 
|2007                                              |  |        |     |           |  |   | 100 | 
|2008                                              |  |        |     |           |  |   | 96  | 

Intangible Assets Not Subject to Amortization

The carrying value of the Companys goodwill is as follows:

|                                |  |                |        |      |  |   |        |  
|------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                |  | June 30,      
|                                |  |               
|                                |  | 2003           |        | 2002
|                                |  |                |        |     
|                                |  | (in thousands)
|Goodwill  cost                 |  | $              | 83,716 |      |  | $ | 83,185 |  
|Less  accumulated amortization |  |                | (8,130 | )    |  |   | (8,170 | )
|                                |  |                |        |      |  |   |        |  
|                                |  | $              | 75,586 |      |  | $ | 75,015 |  
|                                |  |                |        |      |  |   |        |  

Changes in the carrying value of goodwill for the years ended June 30, 2003 and
2002 are as follows:

|                               |                                                           |   |                     |     |      |   |        |       | 
|------------------------------ | --------------------------------------------------------- | - | ------------------- | --- | ---- | - | ------ | ----- | 
|                               |                                                           |   | Year Ended June 30,
|                               |                                                           |   |                    
|                               |                                                           |   | 2003                |     | 2002
|                               |                                                           |   |                     |     |     
|                               |                                                           |   | (in thousands)     
|Balance, beginning of the year |                                                           | $ | 75,015              |     |      | $ | 73,892 |      
|                               | Goodwill from acquisitions                                |   |                     | 663 |      |   |        | 1,123 | 
|                               | Goodwill written off related to sale
of stores in Florida |   |                     | (92 | )    |   |        |      | 
|                               |                                                           |   |                     |     |      |   |        |      
|Balance, end of the year       |                                                           | $ | 75,586              |     |      | $ | 75,015 |      
|                               |                                                           |   |                     |     |      |   |        |      

There were no impairment losses for the years ended June 30, 2003 and 2002.

9.     ACCOUNTS PAYABLE, ACCRUED LIABILITIES, AND OTHER LIABILITIES

Accounts payable, accrued liabilities and other current liabilities consisted
of the following:

|                                 |  |                |        |      |  |   |        | 
|-------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                                 |  | June 30,      
|                                 |  |               
|                                 |  | 2003           |        | 2002
|                                 |  |                |        |     
|                                 |  | (in thousands)
|Accounts payable  trade         |  | $              | 10,787 |      |  | $ | 5,329  | 
|Accrued salaries and benefits    |  |                | 7,675  |      |  |   | 6,292  | 
|Payable to Republic Bank & Trust |  |                | 6,662  |      |  |   |       | 
|Accrued litigation               |  |                | 5,139  |      |  |   | 2,286  | 
|Money transfer payable           |  |                | 4,223  |      |  |   | 3,545  | 
|Deferred revenue                 |  |                | 1,322  |      |  |   | 2,006  | 
|Interest payable                 |  |                | 423    |      |  |   | 158    | 
|Interest-rate swap               |  |                | 398    |      |  |   | 1,815  | 
|Restructuring accrual            |  |                | 203    |      |  |   | 374    | 
|Income taxes payable             |  |                | 106    |      |  |   | 1,716  | 
|Other                            |  |                | 3,818  |      |  |   | 4,991  | 
|                                 |  |                |        |      |  |   |        | 
|                                 |  | $              | 40,756 |      |  | $ | 28,512 | 
|                                 |  |                |        |      |  |   |        | 

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Other liabilities non-current consisted of the following:

|                         |  |                |       |      |  |   |       | 
|------------------------ |  | -------------- | ----- | ---- |  | - | ----- | 
|                         |  | June 30,      
|                         |  |               
|                         |  | 2003           |       | 2002
|                         |  |                |       |     
|                         |  | (in thousands)
|Deferred tax liabilities |  | $              | 4,563 |      |  | $ | 151   | 
|Deferred revenue         |  |                | 3,227 |      |  |   | 3,529 | 
|Interest-rate swap       |  |                | 1,297 |      |  |   |      | 
|                         |  |                |       |      |  |   |       | 
|                         |  | $              | 9,087 |      |  | $ | 3,680 | 
|                         |  |                |       |      |  |   |       | 

10. MONEY ORDER AND BILL-PAYMENT SERVICE AGREEMENTS

In April 1998, the Company signed a money order agreement with Travelers
Express Company, Inc. (Travelers Express), effective December 17, 1998.
Under this five-year agreement, the Company exclusively sells Travelers Express
money orders that bear the Companys logo. The Company also signed a five-year
agreement with an affiliate of Travelers Express, effective in April 1998, to
offer an electronic bill-payment service to the Companys customers.

Under these agreements, $5 million was to be paid to the Company over the term
of the agreements and all such payments have been received. Payments have been
deferred and amortized on a straight-line basis over the five-year term of the
agreements beginning January 1999. If the money order agreement is terminated
under certain circumstances before the expiration of its five-year term, the
Company will be obligated to repay a portion of the amounts received from
Travelers Express. The money order agreement with Travelers Express does not
allow an extended deferral of remittances of money order proceeds. The
Companys payment and other obligations to Travelers Express under the
agreements are secured by a subordinated lien on the Companys assets. The
deferred revenue balances as of June 30, 2003 and 2002, are $0.4 and $1.1
million, respectively, and are included in other current and non-current
liabilities in the accompanying consolidated balance sheets. Revenue of $1.0
million was recognized for each of the three years in the period ended June 30,
2003.

11. SHAREHOLDERS EQUITY

Preferred Stock

Under the Companys Certificate of Incorporation, the Board of Directors has
the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations, or restrictions thereof, if any. At June 30, 2003, 2002, and
2001, one million shares of preferred stock were authorized with a par value of
$1.00, none of which were issued and outstanding.

Stock Incentive Plans

Employee Stock Incentive Plan.The Company sponsors the 1997 Stock Incentive
Plan, which permits the grant of stock options and restricted stock to eligible
employees. The 1987 Stock Option Plan expired during fiscal 1998, though
options granted thereunder continued to be effective, in accordance with their
terms, through November 2002. As of June 30, 2003, there were 1,675,715 shares
of Common Stock reserved for grants of options or restricted stock under the
1997 Stock Incentive Plan. Options and restricted stock are granted at the sole
discretion of the Board of Directors or its Compensation Committee to selected
employees of the Company. Outstanding options are generally exercisable
annually in installments over a three- to four-year period from the date of
grant at an exercise price of not less than the fair market value at the grant
date. The options expire at ten years after date of grant. Restricted stock
generally vests over a three- to four-year period from the date of grant.

Exercise prices for employee options outstanding as of June 30, 2003, ranged
from $7.90 to $18.00 (fair market value on dates of grant). The following
table provides certain information with respect to stock options outstanding
and exercisable at June 30, 2003, under the 1997 Stock Incentive Plan:
73Table of Contents

|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 
|------------------------ |  | ------------- | --------- | ----------- |  | ---------------- | ----- | ----------- |  | -------- | --- | ------- |  | --------- | ------- |  |  | - | ----- | 
|                         |  | Outstanding   |           | Exercisable
|                         |  |               |           |            
|                         |  |               |           |             |  | Weighted-        |       | Weighted-   |  |          |     |         |  | Weighted-
|                         |  |               |           |             |  | average          |       | average     |  | Stock    |     | average
|                         |  | Stock options |           | exercise    |  | remaining        |       | options     |  | exercise
|Range of exercise prices |  | outstanding   |           | price       |  | contractual life |       | exercisable |  | price   
|                         |  |               |           |             |  |                  |       |             |  |         
|Under    $  9.00         |  |               | 141,800   |             |  | $                | 8.72  |             |  |          | 8.9 |         |  |           | 13,125  |  |  | $ | 8.12  | 
|$  9.01  $10.80         |  |               | 527,384   |             |  |                  | 9.62  |             |  |          | 8.2 |         |  |           | 160,648 |  |  |   | 9.45  | 
|$10.81  $12.60          |  |               | 200,113   |             |  |                  | 11.84 |             |  |          | 5.9 |         |  |           | 151,738 |  |  |   | 11.97 | 
|$12.61  $14.40          |  |               | 305,919   |             |  |                  | 13.45 |             |  |          | 5.8 |         |  |           | 251,732 |  |  |   | 13.44 | 
|$14.41  $16.20          |  |               | 31,250    |             |  |                  | 14.71 |             |  |          | 5.9 |         |  |           | 28,125  |  |  |   | 14.68 | 
|$16.21  $18.00          |  |               | 123,750   |             |  |                  | 17.06 |             |  |          | 6.5 |         |  |           | 92,812  |  |  |   | 17.06 | 
|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 
|                         |  |               | 1,330,216 |             |  | $                | 11.55 |             |  |          |     |         |  |           | 698,180 |  |  | $ | 12.64 | 
|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 

The weighted average fair value of options granted during the years ended June
30, 2003, 2002, and 2001, calculated using the Black-Scholes option pricing
model, was approximately $4.67 per share, $5.28 per share, and $4.81 per share,
respectively. The number of stock options exercisable as of June 30, 2002,
and 2001 were 533,455 and 424,274 at a weighted average exercise price of
$12.96 and $11.51, respectively.

The following table summarizes stock option activity under the 1987 Stock
Option Plan and the 1997 Stock Incentive Plan:

|                        |  |             |           |       |  |                 |                 |  |  |          |       | 
|----------------------- |  | ----------- | --------- | ----- |  | --------------- | --------------- |  |  | -------- | ----- | 
|                        |  |             |           |       |  | Price Per Share
|                        |  |             |           |       |  |                
|                        |  |             |           |       |  |                 |                 |  |  | Weighted
|                        |  | Outstanding |           | Range |  | Average        
|                        |  |             |           |       |  |                
|Shares at July 1, 2000  |  |             | 1,058,310 |       |  | $               | 4.11  $18.00   |  |  | $        | 12.60 | 
|Granted                 |  |             | 469,698   |       |  |                 | 8.06    13.63  |  |  |          | 10.21 | 
|Exercised               |  |             | (73,476   | )     |  |                 | 4.11    11.19  |  |  |          | 5.88  | 
|Canceled                |  |             | (233,091  | )     |  |                 | 4.11    17.00  |  |  |          | 12.97 | 
|                        |  |             |           |       |  |                 |                 |  |  |          |       | 
|Shares at June 30, 2001 |  |             | 1,221,441 |       |  |                 | 6.67    18.00  |  |  |          | 12.05 | 
|Granted                 |  |             | 340,002   |       |  |                 | 7.90    11.25  |  |  |          | 9.58  | 
|Exercised               |  |             | (95,218   | )     |  |                 | 6.67
     9.70 |  |  |          | 7.39  | 
|Canceled                |  |             | (179,362  | )     |  |                 | 7.00    17.25  |  |  |          | 10.77 | 
|                        |  |             |           |       |  |                 |                 |  |  |          |       | 
|Shares at June 30, 2002 |  |             | 1,286,863 |       |  |                 | 7.90    18.00  |  |  |          | 11.93 | 
|Granted                 |  |             | 272,100   |       |  |                 | 8.87    11.30  |  |  |          | 9.53  | 
|Exercised               |  |             | (625      | )     |  |                 | 8.58
     8.58 |  |  |          | 8.58  | 
|Canceled                |  |             | (228,122  | )     |  |                 | 8.58    17.75  |  |  |          | 11.26 | 
|                        |  |             |           |       |  |                 |                 |  |  |          |       | 
|Shares at June 30, 2003 |  |             | 1,330,216 |       |  | $               | 7.90   $18.00  |  |  | $        | 11.55 | 
|                        |  |             |           |       |  |                 |                 |  |  |          |       | 

Non-employee Director Stock Option Plan.In 1995, the Board of Directors and
the shareholders of the Company approved the non-employee director stock option
plan. The purpose of this plan is to permit the Company to grant options to the
Companys outside directors as part of their compensation. The plan originally
had 135,000 shares reserved for issuance and in November 1998, an amendment was
approved to increase the number of shares to 260,000. Outstanding options are
generally exercisable annually in installments over a three-year period from
the date of grant at an exercise price of not less than the fair market value
at the grant date. The options expire five years after date of grant.

Exercise prices for non-employee director options outstanding as of June 30,
2003, ranged from $9.09 to $16.38 (fair market value on dates of grant). The
following table provides certain information with respect to stock options
outstanding and exercisable at June 30, 2003 under the non-employee director
stock option plan:

|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 
|------------------------ |  | ------------- | ------- | ----------- |  | ---------------- | ----- | ----------- |  | -------- | --- | ------- |  | --------- | ------ |  |  | - | ----- | 
|                         |  | Outstanding   |         | Exercisable
|                         |  |               |         |            
|                         |  |               |         |             |  | Weighted-        |       | Weighted-   |  |          |     |         |  | Weighted-
|                         |  |               |         |             |  | average          |       | average     |  | Stock    |     | average
|                         |  | Stock options |         | exercise    |  | remaining        |       | options     |  | exercise
|Range of exercise prices |  | outstanding   |         | price       |  | contractual life |       | exercisable |  | price   
|                         |  |               |         |             |  |                  |       |             |  |         
|Under   $ 9.00           |  |               | 25,000  |             |  | $                | 8.01  |             |  |          | 4.4 |         |  |           |       |  |  |   |       | 
|Under    $10.80          |  |               | 25,000  |             |  |                  | 9.09  |             |  |          | 3.4 |         |  |           | 8,330  |  |  | $ | 9.09  | 
|$10.81  $12.60          |  |               | 36,250  |             |  |                  | 11.31 |             |  |          | 2.4 |         |  |           | 27,915 |  |  |   | 11.40 | 
|$12.61  $14.40          |  |               | 20,000  |             |  |                  | 13.25 |             |  |          | 0.4 |         |  |           | 20,000 |  |  |   | 13.25 | 
|$16.21  $18.00          |  |               | 20,000  |             |  |                  | 16.38 |             |  |          | 1.4 |         |  |           | 20,000 |  |  |   | 16.38 | 
|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 
|                         |  |               | 126,250 |             |  | $                | 11.33 |             |  |          | 2.5 |         |  |           | 76,245 |  |  | $ | 12.94 | 
|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 

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The weighted average fair value of options granted during the years ended June
30, 2003, 2002, and 2001, calculated using the Black-Scholes option pricing
model, was approximately $3.56 per share, $4.37 per share, and $5.27 per share,
respectively. The number stock options exercisable as of June 30, 2002, and
2001 were 79,912 and 96,496 at a weighted average exercise price of $13.08 and
$10.44, respectively.

The following table summarizes stock option activity under the non-employee
director stock option plan:

|                        |  |          |         |             |  |       |         |       |  |               |         |         |  |          |       | 
|----------------------- |  | -------- | ------- | ----------- |  | ----- | ------- | ----- |  | ------------- | ------- | ------- |  | -------- | ----- | 
|                        |  |          |         |             |  |       |         |       |  |               |         |         |  | Weighted
|                        |  |          |         |             |  |       |         |       |  | Available for |         | Average
|                        |  | Reserved |         | Outstanding |  | Grant |         | Price
|                        |  |          |         |             |  |       |         |      
|Shares at July 1, 2000  |  |          | 244,250 |             |  |       | 121,000 |       |  |               | 123,250 |         |  | $        | 10.28 | 
|Granted                 |  |          |        |             |  |       | 36,250  |       |  |               | (36,250 | )       |  |          | 11.31 | 
|Exercised               |  |          | (15,750 | )           |  |       | (15,750 | )     |  |               |        |         |  |          | 4.11  | 
|                        |  |          |         |             |  |       |         |       |  |               |         |         |  |          |       | 
|Shares at June 30, 2001 |  |          | 228,500 |             |  |       | 141,500 |       |  |               | 87,000  |         |  |          | 11.23 | 
|Granted                 |  |          |        |             |  |       | 25,000  |       |  |               | (25,000 | )       |  |          | 9.09  | 
|Exercised               |  |          | (38,250 | )           |  |       | (38,250 | )     |  |               |        |         |  |          | 6.58  | 
|                        |  |          |         |             |  |       |         |       |  |               |         |         |  |          |       | 
|Shares at June 30, 2002 |  |          | 190,250 |             |  |       | 128,250 |       |  |               | 62,000  |         |  |          | 12.20 | 
|Granted                 |  |          |        |             |  |       | 25,000  |       |  |               | (25,000 | )       |  |          | 8.01  | 
|Canceled                |  |          |        |             |  |       | (27,000 | )     |  |               | 27,000  |         |  |          | 12.42 | 
|                        |  |          |         |             |  |       |         |       |  |               |         |         |  |          |       | 
|Shares at June 30, 2003 |  |          | 190,250 |             |  |       | 126,250 |       |  |               | 64,000  |         |  | $        | 11.33 | 
|                        |  |          |         |             |  |       |         |       |  |               |         |         |  |          |       | 

Stock Repurchase Program

In fiscal 2000, the Companys Board of Directors authorized the repurchase from
time to time of up to approximately $5 million of the Companys common stock in
the open market or in negotiated transactions. During fiscal 2002, the
Company repurchased 211,400 shares at an average price of $12.81 per share.
During fiscal 2003, no shares were repurchased. The Companys new credit
agreement and new note purchase agreement restrict the Companys right to
repurchase shares. This stock repurchase program will remain in effect,
however, until discontinued by the Board of Directors.

12. INCOME TAXES

The provision for income taxes consists of the following:

|           |                    |   |                     |       |      |   |       |       |  |   |        |        |  
|---------- | ------------------ | - | ------------------- | ----- | ---- | - | ----- | ----- |  | - | ------ | ------ | -
|           |                    |   | Year Ended June 30,
|           |                    |   |                    
|           |                    |   | 2003                |       | 2002 |   | 2001 
|           |                    |   |                     |       |      |   |      
|           |                    |   | (in thousands)     
|Current -  |                    |   |                     |       |      |   |       |       |  |   |        |       
|           | Federal income tax |   | $                   | 2,332 |      |   | $     | 4,709 |  |   | $      | 6,323  |  
|           | State income tax   |   |                     | 357   |      |   |       | 761   |  |   |        | 1,187  |  
|           |                    |   |                     |       |      |   |       |       |  |   |        |       
|           |                    |   | 2,689               |       |      |   | 5,470 |       |  |   | 7,510  |       
|Deferred - |                    |   |                     |       |      |   |       |       |  |   |        |       
|           | Federal income tax |   |                     | 5,091 |      |   |       | 1,174 |  |   |        | (6,139 | )
|           | State income tax   |   |                     | 727   |      |   |       | 269   |  |   |        | (965   | )
|           |                    |   |                     |       |      |   |       |       |  |   |        |       
|           |                    |   | 5,818               |       |      |   | 1,443 |       |  |   | (7,104 | )     
|           |                    |   |                     |       |      |   |       |       |  |   |        |       
|           |                    | $ | 8,507               |       |      | $ | 6,913 |       |  | $ | 406    |       
|           |                    |   |                     |       |      |   |       |       |  |   |        |       

The net deferred tax asset consists of the following:

|                       |  |                |        |      |  |   |        |  
|---------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                       |  | June 30,      
|                       |  |               
|                       |  | 2003           |        | 2002
|                       |  |                |        |     
|                       |  | (in thousands)
|Gross assets           |  | $              | 8,611  |      |  | $ | 10,653 |  
|Gross liabilities      |  |                | (7,681 | )    |  |   | (3,905 | )
|                       |  |                |        |      |  |   |        |  
|Net deferred tax asset |  | $              | 930    |      |  | $ | 6,748  |  
|                       |  |                |        |      |  |   |        |  

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The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:

|                              |  |                |        |      |  |   |        |  
|----------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                              |  | June 30,      
|                              |  |               
|                              |  | 2003           |        | 2002
|                              |  |                |        |     
|                              |  | (in thousands)
|Loan loss provision           |  | $              | 3,538  |      |  | $ | 4,885  |  
|Accrued liabilities and other |  |                | 1,193  |      |  |   | 1,564  |  
|Deferred revenue              |  |                | 1,785  |      |  |   | 2,125  |  
|Depreciation and amortization |  |                | (6,264 | )    |  |   | (2,552 | )
|Interest-rate swap            |  |                | 678    |      |  |   | 726    |  
|                              |  |                |        |      |  |   |        |  
|                              |  | $              | 930    |      |  | $ | 6,748  |  
|                              |  |                |        |      |  |   |        |  

The provisions for taxes on income as reported differ from the tax provision
computed by applying the statutory federal income tax rate of 35% in each of
2003 and 2002, and 34% in 2001, as follows:

|                                                         |  |                     |       |      |  |      |       |  |  |   |      |  
|-------------------------------------------------------- |  | ------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ---- | -
|                                                         |  | Year Ended June 30,
|                                                         |  |                    
|                                                         |  | 2003                |       | 2002 |  | 2001
|                                                         |  |                     |       |      |  |     
|                                                         |  | (in thousands)     
|Federal income tax provision on income at
statutory rate |  | $                   | 7,449 |      |  | $    | 5,959 |  |  | $ | 346  |  
|State taxes, net of federal benefit                      |  |                     | 959   |      |  |      | 928   |  |  |   | 63   |  
|Amortization of goodwill                                 |  |                     |      |      |  |      |      |  |  |   | 112  |  
|Other                                                    |  |                     | 99    |      |  |      | 26    |  |  |   | (115 | )
|                                                         |  |                     |       |      |  |      |       |  |  |   |      |  
|Income tax provision                                     |  | $                   | 8,507 |      |  | $    | 6,913 |  |  | $ | 406  |  
|                                                         |  |                     |       |      |  |      |       |  |  |   |      |  

13. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases its facilities and certain equipment under non-cancelable
operating leases. Most of the Companys facility leases contain options that
allow the Company to renew leases for periods that generally range from three
to nine years. At June 30, 2003, future minimum rental payments under existing
leases were as follows (in thousands):

|                      |  |   |        | 
|--------------------- |  | - | ------ | 
|Year Ending June 30,: |  |   |        | 
|2004                  |  | $ | 19,416 | 
|2005                  |  |   | 13,576 | 
|2006                  |  |   | 7,821  | 
|2007                  |  |   | 4,039  | 
|2008                  |  |   | 2,203  | 
|Remaining years       |  |   | 478    | 
|                      |  |   |        | 
|                      |  | $ | 47,533 | 
|                      |  |   |        | 

Lease expense was approximately $19.1 million, $19.2 million, and $17.9
million, for the years ended June 30, 2003, 2002, and 2001, respectively.

14. EMPLOYEE BENEFITS PLANS

The Company maintains a 401(k) savings plan (the Benefit Plan) on behalf of
its employees. Employees may contribute up to 20% of their annual compensation
to the Benefit Plan, subject to statutory maximums. The Benefit Plan provides a
matching of 25% of employee contributions made to the Benefit Plan. The
Companys matching contributions for the Benefit Plan were approximately
$239,000, $229,000, and $219,000 for the years ended June 30, 2003, 2002, and
2001, respectively.

Effective July 1, 2001, the Company established an executive non-qualified
deferred compensation plan (the Executive Benefit Plan). Company executives
may contribute up to 25% of their annual compensation to the Executive Benefit
Plan. The Executive Benefit Plan provides a match of 25% of employee
contributions up to the current 401(k) savings plan deferral limit. The
Companys matching contributions for the Executive Benefit Plan were
approximately $37,000 and $24,000 for the years ended June 30, 2003 and 2002,
respectively.

15. RELATED PARTY TRANSACTIONS

In fiscal 2000, the Company purchased approximately 14% of the shares of Series
A Convertible Preferred Stock of ePacific, Incorporated (ePacific) for $1
million. ePacific is a private company in the business of providing customized
debit-card

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payment systems and electronic funds transfer processing services. ePacific,
formerly a controlled subsidiary of Goleta, provided the debit-card system and
processing services to Goleta to enable it to make the Goleta Loans described
above in Note 1, Summary of Significant Accounting Policies  Loans Receivable,
Net. For the fiscal year ended June 30, 2003, 2002 and 2001, the Company
purchased 47,000, 150,000, and 484,000 debit-cards for a total of $0.1 million,
$0.5 million, and $1.5 million, respectively. In conjunction with the
transition from the Goleta Loans and to state-regulated loan products,
ePacific provided its loan processing service directly to the Company. The
Company paid ePacific a total of $300,000 during fiscal 2003 for loan
processing.

Under a stockholders agreement with ePacific and its other stockholders,
the Company had the right to designate one person to serve as a director of
ePacific. Jay B. Shipowitz, the Companys President and Chief Operating
Officer, served as a director of ePacific until August 22, 2003.

Primarily as a result of the termination of the relationship between the
Company and Goleta, on June 2, 2003, ePacifics board of directors decided to
dissolve the corporation and distribute the remaining assets. The Company
received a cash distribution of $297,000 and, therefore, recorded a loss on
investment of $703,000.

16. DISCONTINUED OPERATIONS

During the quarter ended December 31, 2002, the Company sold 19 underperforming
stores in Florida for a pre-tax gain of $0.8 million and an after-tax gain of
$0.5 million. The gain on the sale of the 19 stores has been classified as
discontinued operations, and includes the write-off of $0.8 million of fixed
assets and $0.1 million of goodwill related to the 19 stores. The operating
results of the 19 stores had no material impact on current or historical net
income or cash flow for or during the first six months of fiscal 2003.
Operating results for the 19 stores for the years ended June 30, 2003 and 2002
are shown below.

|                                 |  |                                          |      |      |  |      |       |  |  |   |       |  
|-------------------------------- |  | ---------------------------------------- | ---- | ---- |  | ---- | ----- |  |  | - | ----- | -
|                                 |  | Year Ended June 30,                     
|                                 |  |                                         
|                                 |  | 2003                                     |      | 2002 |  | 2001
|                                 |  |                                          |      |      |  |     
|                                 |  | (in thousands, except per share amounts)
|Revenue                          |  | $                                        | 966  |      |  | $    | 2,537 |  |  | $ | 1,952 |  
|Gross margin (loss)              |  |                                          | (37  | )    |  |      | 103   |  |  |   | (57   | )
|After-tax income (loss)          |  |                                          | (22  | )    |  |      | 62    |  |  |   | (34   | )
|Diluted earnings (loss)per share |  |                                          | 0.00 |      |  |      | 0.01  |  |  |   | 0.00  |  

17. PENDING LAWSUITS AND SETTLEMENTS

The Company is a defendant in a number of lawsuits regarding its arrangements
with Goleta regarding the Goleta Loans that were offered at most of the
Companys locations. A key issue in those lawsuits regarding the Goleta Loans
was whether Goleta or the Company is properly regarded as the lender. If the
Company, rather than Goleta, were held to be the lender, then the terms of the
Goleta Loans, and the Companys activities in connection with those Goleta
Loans, would likely violate usury and other consumer-protection laws in certain
states and, accordingly, the Company would likely become obligated to pay
damages and other relief that could significantly impair the Companys
financial condition and financial resources. The Company and Goleta, however,
strongly maintained that Goleta, and not the Company, was the lender of the
Goleta Loans. A federal district court in Indiana agreed with the Companys and
Goletas position that Goleta is properly regarded as the lender of the Goleta
Loans. This is the sole court decision to-date that has addressed the merits
of this key issue. In addition, the Company has settled other lawsuits and
administrative proceedings with state authorities regarding the Companys
activities related to the Goleta Loans.

On May 12, 2003, however, the Company entered into a settlement agreement
regarding the purported nationwide class-action Goleta Loan-related lawsuit,
Purdie v. Ace Cash Express, Inc. et al., pending in the United States District
Court in Dallas, Texas. That settlement agreement, if finally approved by the
court and implemented, will result in the release of substantially all of the
claims of former borrowers against the Company (and Goleta) not only in the
Purdielawsuit, but also in the other pending Goleta Loan-related lawsuits. In
the settlement agreement, the Company agreed, among other things, to pay:



| |  |  | at least $2.5 million as refunds to former borrowers who have repaid all
of their Goleta Loans and who timely submit claims for refunds or, if the
refunds and certain other amounts paid by the Company total less than $2.5
million, the amount of the shortfall to certain consumer-advocacy
organizations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | up to $2.1 million as attorneys fees to the plaintiffs counsel in the
lawsuits being settled and terminated; and                                                                                                                                                                                             
|
| |  |  | notice and other administrative costs in connection with the settlement.                                                                                                                                                                                                                                      

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The refund payable by the Company to each eligible former borrower who files a
refund claim will be approximately five percent of the interest or finance
charges paid by that borrower, but not less than $7.50 or more than $45.00.

Based on estimates of anticipated claims by eligible borrowers and of
administrative and other costs related to the settlement, the Company recorded
a $5 million charge for its settlement payment obligations in its financial
statements in the third quarter of fiscal 2003.

On June 13, 2003, the federal court granted preliminary approval of the
proposed settlement in the Purdielawsuit. The court hearing regarding the
fairness of the terms of the proposed settlement, at which the Company hopes to
obtain final court approval, is scheduled for October 15, 2003.

The Company provided $5.8 million, $2.0 million, and $0.4 million,
respectively, for the settlement of lawsuits in its financial statements for
the years ended June 30, 2003, 2002, and 2001 to satisfy its settlement
obligations. In the fourth quarter of the fiscal year ended June 30, 2003, the
Company recovered $4.7 million from liability insurance coverage for claims
related to various Goleta Loan-related lawsuits.

18. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the fiscal years ended June 30, 2003,
2002, and 2001, are as follows:

|                                                      |  |                    |        |            |  |                                          |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|----------------------------------------------------- |  | ------------------ | ------ | ---------- |  | ---------------------------------------- | ------ | ------- |  | ------- | ------ | - |  | - | ------ |  |  | - | ------- | 
|                                                      |  | Unaudited          |        |            |  |                                         
|                                                      |  |                    |        |            |  |                                         
|                                                      |  | Three Months Ended |        |            |  |                                         
|                                                      |  |                    |        | Year Ended
|                                                      |  | Sept 30            |        | Dec 31     |  | Mar 31                                   |        | June 30 |  | June 30
|                                                      |  |                    |        |            |  |                                          |        |         |  |        
|                                                      |  |                    |        |            |  | (in thousands, except per share amounts) |        |         |  |        
|2003:                                                 |  |                    |        |            |  |                                          |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|Revenues                                              |  | $                  | 56,061 |            |  | $                                        | 57,295 |         |  | $       | 67,167 |   |  | $ | 53,765 |  |  | $ | 234,289 | 
|Income from continuing operations                     |  |                    | 2,406  |            |  |                                          | 1,910  |         |  |         | 2,616  |   |  |   | 5,344  |  |  |   | 12,276  | 
|Diluted earnings per share from
continuing operations |  |                    | .24    |            |  |                                          | .19    |         |  |         | .26    |   |  |   | .52    |  |  |   | 1.20    | 
|Net income                                            |  |                    | 2,406  |            |  |                                          | 2,409  |         |  |         | 2,616  |   |  |   | 5,344  |  |  |   | 12,775  | 
|Diluted earnings per share                            |  |                    | .24    |            |  |                                          | .24    |         |  |         | .26    |   |  |   | .52    |  |  |   | 1.25    | 
|2002:                                                 |  |                    |        |            |  |                                          |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|Revenues                                              |  | $                  | 51,910 |            |  | $                                        | 54,662 |         |  | $       | 68,091 |   |  | $ | 54,603 |  |  | $ | 229,266 | 
|Net income                                            |  |                    | 1,989  |            |  |                                          | 1,995  |         |  |         | 4,170  |   |  |   | 1,959  |  |  |   | 10,113  | 
|Diluted earnings per share                            |  |                    | .20    |            |  |                                          | .20    |         |  |         | .41    |   |  |   | .19    |  |  |   | 1.00    | 
|2001:                                                 |  |                    |        |            |  |                                          |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|Revenues                                              |  | $                  | 40,238 |            |  | $                                        | 45,100 |         |  | $       | 60,193 |   |  | $ | 51,244 |  |  | $ | 196,775 | 
|Net income (loss)                                     |  |                    | 1,386  |            |  |                                          | 1,997  |         |  |         | (4,155 | ) |  |   | 1,383  |  |  |   | 611     | 
|Diluted earnings (loss) per share                     |  |                    | .14    |            |  |                                          | .20    |         |  |         | (.41   | ) |  |   | .13    |  |  |   | .06     | 

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders,
Ace Cash Express, Inc.:

In connection with our audit of the consolidated financial statements of Ace
Cash Express, Inc. and Subsidiaries referred to in our report dated August 19,
2003, which is included in Part IV of this Form 10-K, we have also audited
Schedule II for the years ended June 30, 2003 and 2002. In our opinion, this
schedule presents fairly, in all material respects, the information required to
be set forth therein. The information presented in this schedule for the year
ended June 30, 2001 was audited by other auditors who have ceased operations.
These auditors expressed an unqualified opinion on this schedule in their
report dated August 13, 2001.

GRANT THORNTON LLP

Dallas, Texas,
August 19, 2003

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This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Ace Cash Express, Inc. filing on Form 10-K for the year
ended June 30, 2001. This audit report has not been reissued by Arthur
Andersen LLP in connection with this filing of Form 10-K. The consolidated
balance sheet at June 30, 2001 and 2000, and the consolidated statements of
earnings, shareholders equity and cash flows for the year ended June 30, 2000
and 1999 have not been included in the accompanying financial statements.




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders of Ace Cash Express, Inc.:

We have audited, in accordance with auditing standards generally accepted in
the United States, the consolidated balance sheets of Ace Cash Express, Inc., a
Texas corporation, and subsidiaries as of June 30, 2001 and 2000, and the
related consolidated statements of earnings, shareholders equity and cash
flows for each of the three years in the period ended June 30, 2001, included
in this Form 10-K and have issued our report thereon dated August 13, 2001.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule referred to
below is the responsibility of the Companys management.

Schedule II  Valuation and Qualifying Accounts is presented for the purpose of
complying with the Securities and Exchange Commissions rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Dallas, Texas
August 13, 2001

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ACE CASH EXPRESS, INC. AND SUBSIDIARIES(a)




Schedule II  Valuation and Qualifying Accounts

(in millions)


|               |                                      |           |            |          |          |          |           |            |   |        |   |     |        |  |   |       |         |  |   |      | 
|-------------- | ------------------------------------ | --------- | ---------- | -------- | -------- | -------- | --------- | ---------- | - | ------ | - | --- | ------ |  | - | ----- | ------- |  | - | ---- | 
|               |                                      |           |            |          |          |          | Additions |            |   |        |   |     |        |  |  
|               |                                      |           |            |          |          |          |           |            |   |        |   |     |        |  |  
|               |                                      |           |            |          |          |          | Charged   |            |   |        |   |     |        |  |   |       | Balance
|               |                                      |           | Balance at |          | to costs |          | Charged   |            |   |        |   |     | at    
|               |                                      |           | beginning  |          | and      |          | to other  |            |   |        |   |     | end of
|Description    |                                      | of period |            | expenses |          | accounts |           | Deductions |   | period
|               |                                      |           |            |          |          |          |           |            |   |       
|June 30, 2003: |                                      |           |            |          |          |          |           |            |   |        |   |     |        |  |   |       |         |  |   |     
|               | Loan loss allowance                  |           | $          | 12.2     |          |          | $         | 19.3       |   |        | $ |    |        |  | $ | (22.8 | )       |  | $ | 8.7  | 
|               | Loan loss liability to Republic Bank |           | $          |         |          |          | $         | 2.9        |   |        | $ |    |        |  | $ | (0.9  | )       |  | $ | 2.0  | 
|               | Restructure reserve                  |           | $          | 0.4      |          |          | $         |           |   |        | $ |    |        |  | $ | (0.2  | )       |  | $ | 0.2  | 
|June 30, 2002: |                                      |           |            |          |          |          |           |            |   |        |   |     |        |  |   |       |         |  |   |     
|               | Loan loss allowance                  |           | $          | 13.4     |          |          | $         | 21.9       |   |        | $ |    |        |  | $ | (23.1 | )       |  | $ | 12.2 | 
|               | Loan loss liability to Republic Bank |           | $          |         |          |          | $         |           |   |        | $ |    |        |  | $ |      |         |  | $ |     | 
|               | Restructure reserve                  |           | $          | 1.2      |          |          | $         | (0.2       | ) |        | $ |    |        |  | $ | (0.6  | )       |  | $ | 0.4  | 
|June 30, 2001: |                                      |           |            |          |          |          |           |            |   |        |   |     |        |  |   |       |         |  |   |     
|               | Loan loss allowance                  |           | $          |         |          |          | $         | 24.8       |   |        | $ | 1.6 | (b)    |  | $ | (13.0 | )       |  | $ | 13.4 | 
|               | Loan loss liability to Republic Bank |           | $          |         |          |          | $         |           |   |        | $ |    |        |  | $ |      |         |  | $ |     | 
|               | Restructure reserve                  |           | $          |         |          |          | $         | 8.7        |   |        | $ |    |        |  | $ | (7.5  | ) (c)   |  | $ | 1.2  | 



| | (a) |  | This schedule should be read in conjunction with the Companys audited
consolidated financial statements and related notes thereto.                                                                                                                                                                        
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | In connection with the establishment of the loan loss provision, $1.6
million was reserved for loans re-established.                                                                                                                                                                                       
|
| | (c) |  | Includes $6.5 million of costs associated with the write-off of goodwill
and covenants not to compete, fixed asset and inventory disposals, and
lease terminations related to store closings and impairments, and $1.0
million adjustment related to the Companys estimate of remaining lease
obligations.

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INDEX TO EXHIBITS

|               |  |                                                                                                                                                                                
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit                                                                                                                                                                        
|               |  |                                                                                                                                                                                
|21             |  | Subsidiaries of the Company.                                                                                                                                                   
|               |  |                                                                                                                                                                                
|23             |  | Consent of Grant Thornton LLP.                                                                                                                                                 
|               |  |                                                                                                                                                                                
|31             |  | Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|               |  |                                                                                                                                                                                
|32             |  | Certifications of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

82