education providers. According to Harris Nesbitt Research, industry experts estimate that the $21.8 billion in revenues generated by for-profit education providers in 2004 will increase to over $29.7 billion in 2010, 5.3% annual growth. 8 However, these estimates reflect only spending by institutions on educational material and do not reflect the growing segment of direct to consumer educational materials, which represented roughly an additional $20 billion in 2004.8 For-Profit K-12 Education (2004 — 2010E $30 $26.8 $28.2 $29.7 $25.5 poi [aera ea $25 $21.8 $23.0 wo, Sr —— aes. ‘an ° a) i || EE a i x k= mz $0 2004 2005 2006E 2007E 2008E 2009E 2010E = Professional Development & Print Publishing © Supplemental Services © Technology = Assessment = School Management Source: Harris Nesbitt estinates based on Eduventures’ “The Education Industry: Learning Markets and Opportunities 2004” report (December 2004). Standards and Accountability. Due to the unsatisfactory performance of American students in grades K- 12, parents and lawmakers are demanding increased standards and accountability in schools. This demand has focused on establishing guidelines for every school and every subgroup of students and then holding the school (and its staff) accountable to students’ performance relative to those standards. The Company expects continued focus on academic standards, assessments, and accountability in the near future. Despite this increased attention on standards and accountability, many parents continue to remain concerned with the overall effectiveness of the public school system and are increasingly relying on for-profit education providers. Charter Schools and Virtual Academies. There has also been a significant rise in the number of charter schools in the U.S. in the past decade. Since Minnesota first enacted legislation in 1991, 40 states and the District of Columbia have passed charter school legislation. Under the typical charter school statute, an identified entity, su