e focal nursery schools and child care centers, including church-affillated and other non-profit

e focal nursery schools and child care centers, including church-affillated and other non-profit centers; e providers of child care services that operate out of homes; and « substitutes for group child care, such as relatives, nannies and stay-at-home parents. In many markets, the Company faces competition from preschool services and before and after schoo! programs offered by public schools that provide such services at little or no cost to parents. The number of school districts offering these services is growing, and we expect increased competition from such services in the future. In addition, local nursery schools, child care centers and in-home providers generally charge less for their services than the Company. Many denominational and other non-profit child care centers have lower operating expenses than the Company and may receive donations and/or other funding to subsidize operating expenses. Consequently, operators of such centers often charge lower tuition rates than us. Moreover, fees for home-based care are normally substantially Jower than fees for center-based care. 6.1.6 The Company may acquire companies that are not well-established or are experiencing financial difficulties The Company may acquire less established companies. Acquisitions of interests in such companies may involve greater risks than are generally associated with acquisitions of more established or stable companies. For example, such companies may have shorter operating histories on which to predict future performance and may have negative cash flow. Their performance may be more volatile and they may be unable to sustain the growth rates or success achieved by established companies. In the case of start-up enterprises, such companies may not have significant or any operating revenues. Such companies aiso may have a lower capitalization and fewer resources (including cash) and may be more vulnerable to failure, resulting in the loss of the Company's entire investment in such company. In addition, less mature companies could be more susceptible to irregular accounting or other fraudulent practices. In such event, the Company may suffer a partial or total loss of capital invested in that company. The Company has invested in troubled companies in the past, and may make future investments in companies that are experiencing, or are expected to experience, financial difficulties. !f such difficulties are not overcome, the Company may lose part or all of any equity investment in such companies. 6.1.7 KUE will rely on the management teams of its subsidiaries While KUE will retain overall contro! and set the strategic direction of the Company, day-to-day operations at the subsidiary level will be the responsibility of the management teams at the subsidiary level. There can be no assurance that the existing management teams, or any successor, of any acquired business will be able to operate such business in accordance with KUE’s plans and/or objectives. 6.1.8. The Company has a non-controlling interest in ki2 with limited rights as a shareholder and may acquire minority interests in other entities The Company holds a non-controlling interest in k12 and may in the future acquire minority interests in other companies. Holding a minority interest limits the Company's ability to protect its interests in and to influence management of k12. Any future investments in mincrity interests of other companies will likely involve similar limitations. In addition, the Company may co-acquire interests in businesses or develop businesses with third parties through joint ventures or other entities, which may have larger or controlling ownership interests in such companies. in such cases, the Company will rely significantly on the existing management and boards of directors of such companies, which may include representatives of other investors with whom the Company is not affiliated and whose interests may at times conflict with the interests of the Company. 47 HOUSE_OVERSIGHT_024480