KENDENCARE LEARDING CENTERS, Inc. -sec.gov · Childcare Learning Centers, Inc. (Exaknet -Name of Registrant as specified in his charter) Delaware 63-0941966 (State or other (I.R.S. -[PDF document] (2024)

US Securities and Exchange Commission

Washington, D.C. 20549 ___________________

Form 10-K

___________________

(Mark One) [] Annual report according to section 13 or 15 (d) in

Securities Exchange Act FRA 1934

For the financial year that ended on May 31, 2002

[] Transitional report in accordance with section 13 or 15 (d) of Securities Exchange Act from 1934

Commission File Number 333-42137

Kindercare Learning Centers, Inc.

Delaware 63-0941966 (State or other (I.R.R.S. Employer Jurisdiction for establishment) Identification number)

650 Ne Holladay Street, Suite 1400 Portland ELL 97232

(Address to give offices)

(503) 872-1300 (telephone number of the registrant, including area code)

Securities registered in accordance with section 12 (b) of the law:

Nee

Securities registered under section 12 (g) of the law: none

(Title of class)

Indicate with Mark whether the registrant: (1) has submitted all reports that must be submitted in section 13 or 15 (d) in the Securities Exchange Act from 1934 during the previous 12 months (or in such a shorter period that the registrantwas required to submit such reports) and (2) are subject to such submission requirements in the past 90 days.Yes No []

Indicate whether the disclosure of criminal files in accordance with paragraph 405 of the Regulation S-K is not included and will not be included, on the best of the knowledge of the registrant, included in definitive proxy or information declaration as a reference inPart III in this Form10-K or any change to this form 10-K.

The total market value of the voting portfolio of non-associated companies by the registrant (on condition that for this calculation, but without admitting that all directors and drivers on 23 August 2002 are "affiliated companies") $ 9,727 .538.

The number of shares in the joint share of the registrant, $ 0.01 nominal value per share, outstanding on August 23, 2002 was 19,699,514.

Childcare Learning Centers, Inc. and subsidiaries

Table of contents

Of the I. .....................................................

Point 1. Business .................................................. .... .................................................. ........ ............................................. 1 point 2. Features .... .............................................. ............ .......................................... ................ ............................. 15 point 3. Legal procedures ............... .................................. .................... .............................. ........................ ..... 17Point 4. Submitting questions for a reconciliation of security holders ........ ......................... ......................... ........... 17

Of the II ..............................................................

Point 5. Market for the joint equity of the registrant and the associated shareholder cases ..................................... .. ........................................................ ...... ................... 18

Point 6. Selected historically consolidated economic and other data ............................................ .................... 20 point 7. Discussion of the management and analysis of financial

Condition and Business Subscriptions ...................................................Qualitative market risk -information ....................................................Point 9. Changes and disagreements with accounting people

Accounting and financial disclosure .................................................. ................................................ 54 part III ... ...................................................... .... .................................................. ........ .............................................. ............ ............... 55

Point 10. Directors and directors of the registrar ...................................... ............................... 55 point 11. Compensation of executive power ................ .......................................................58 Point 12. Property possession of certain owners of useful owners ............................................ ...... ........................ 61 point 13. Certain conditions and related transactions ........... ...... .................................................... .......... ....... 63

From IV ........................................................ ...................................................... ...................................................... .................... 65

Point 14. Exhibitions and accounting plans .......................................................... ................................................. ......... ............................................. ............. .... 69

From the i

Point 1. Affairs

Forward -looking statements

In this report, KinderCare has made statements that form future -oriented statements because this term is defined in federal securities legislation.Number of educational and care centers in early childhood are expected to be added in the coming years;Systems and policy and their intended results;our expectations and goals to increase the income from the middle and improve our operational efficiency;Lease Back Centers.de Forward -Kooking agreements are subject to various known and unknown risks, uncertainties and other factors.Forward -looking statements.

Although we believe that our forward statements are based on reasonable assumptions, our expected results cannot achieve.

• the effects of general financial conditions;

• competing circ*mstances in childcare and early educational industry;

• various factors that influence the coating levels, including, but not limited to, reducing or changes in the general workforce that would reduce the need for childcare services;

• the availability of a qualified work pool, the impact of efforts for work organization and the impact of government regulations with regard to work and employment issues;

• Federal and national regulations with regard to changes in childcare programs, welfare reform, transport safety, minimum wage increases and licensing standards;

• the loss of state financing for childcare programs;

• our inability to successfully implement our growth strategy;

• the availability of financing or extra capital;

• our difficulty to meet or inability to fulfill our obligations to repay our debt;

• the availability of sites and/or license or legal requirements, so that we cannot open new centers;

• our ability to integrate acquisitions;

• our inability to successfully defend negative advertisem*nts or to combat requirements involving alleged events in our centers;

• our inability to obtain insurance at the same levels;

• the effects of potential environmental pollution on any real estate that is the property of or rented by us;

• Other risk factors that are discussed in this report and from time to time in our other effects and the reports and archives of the Exchange Commission.

We warn you that these risks may not be exhaustive.

You should not rely on forward statements, except as explanations about our current intentions and our current expectations that occur or not.We are not an obligation to update or revise the forward -looking statements or to update the reasons why the actual results may differ from that projected in the forward -looking statements.

Overview

KinderCare is the most important provider of profit motive and care in the early childhood in the US.Most children are most children from six weeks to five years old.166,000 on August 23, 2002.

We operate childcare centers among two brands as follows:

• KinderCare - On August 23, 2002 we operated 1,189 KinderCare Centers.

• Mulberry- We operated 72 Moerbeibergentra and 12 pre-school programs on August 23, 2002.Mulberry is mainly active in the northeastern region of the United States and southern California.

Within each brand we operate two types of centers: social centers and employers supported center.Most are social centers.

Our centers are open all year round.06: 30 to 18: 00s typical.Children are usually registered weekly for full or half -day sessions.Time sign is permitted where the capacity allows.

Midden -based childcare, however, remains our primary undertaking.

Distance.Our's subsidiary, KC distance Learning, Inc., is located in Bloomsburg, Pennsylvania.kc -Dscope Teaching drives three business units as follows:

• Keystone National High School, an accredited for correspondence -based high school program;

• Keystone Eschool that supplies online delivery of the same courses as Keystone National High School;

• Learning and evaluation center that topic extension or makeup and extra credit courses delivers for high school students.

KC -Fjord Teaching sells and/or delivers its gymnasium -leesplan via kcdistancelearning.com, keystonehighschool.com and credit poleup.com -websites.The information on our sites is not included as a reference in this report.

Charter Schools.Charter Schools have emerged as an alternative financed by the government for public schools in the adopted states, which makes legislation possible.Westborough, Massachusetts.On August 23, 2002, Chancellor Beacon Charter and private schools operate mainly in the northeastern region of the United States.

Educational content and delivery to public schools.We have a stock investment of a minority in Voyager Expanded Learning, Inc., based in Dallas, Texas.oyager developed Universal Literacy Systems ™, a reading program for students in kindergarten up to and including six.de and high schools.

Educational content and delivery within our centers.We work together with Gateway Learning Corporation to offer addicted to Phonics® Reading and Literacy Program in selected centers.Hijk on Fonics improves the educational services that are offered for four years and older participants in our centers.2002 offered more than 800 of our centers the four -week program.

Our most important executive offices are on 650 N.E.HOLDAY Street, Suite 1400, Portland, Oregon 97232. Our telephone number is (503) 872-1300.our's site addresses include KindCareTwork.com, mulberrychildcare.comKcdistancelearning.com, keyhighschool .com and credit poleup.com.in details on our sites are not included as a reference in this report.

Business strategy

We follow a business strategy that contains the following important elements:

Keep opening and acquiring centers.We intend to expand by opening around 30 to 35 new centers per year.believes that there are still opportunities to find centers in many attractive markets in the US.We opened 35 new centers in the 2002 financial year.

We also intend to continue to do selective acquisitions of existing high -quality regional operators.

Korsten on strong brand identity and reputation.Faith, the fact that this brand recognition improves our new center marketing efforts and encourages potential customers to try our centers.

We believe that our market position makes us an attractive strategic partner for companies with compatible products and services, and our large, national customer base gives us a valuable distribution network for the products and services of these companies.Industries.Our market position also gives us the opportunity to spread the costs of programs and services over a large number of centers.

Furtherers strategic growth through acquisitions and investments.We plan to continue to pursue opportunities at companies in our industry that offer educational content and services to children, teenagers and adults.Our educational services based on the center and would make us a more competitive and widely based education company.Sub -areas that we intend to pursue are the following:

• Educational content and services,

• distance education,

• Charter -schools and

• Private schools.

Prepared childcare services sponsored by the employer.Provide childcare on the site or on site to attract and retain employees.

Increase the existing center income.We have current initiatives to increase the income from the center with:

• Sharing best practices;

• providing stimuli for center directors;

• Use of targeted marketing;

• Recruitment, preservation and training of qualified personnel;

• Maintenance of competitive educational prices.

To better support our centers, we implemented a center visit program in the 2002 financial year.The program requires the management to visit centers and offer an automated way to collect best practices and to assess quality.

In the 2003 financial year we extended our bonus program to Reward Center Directors for Registration Growth in addition to the total operating result.

Our local marketing efforts include a request for direct mail, telephone catalog and internet -yellow pages and customer references.These methods communicate with parents our dedication to quality assurance.

We focus on recruiting and retaining high -quality staff.

The educational percentages are usually adjusted throughout the year in the fall.

Improve our educational programs.We have developed a high -quality Curricula with age -specific learning programs based on the latest educational research.At school and in life.We offer curriculum -specific training for our staff to make our programs an effective delivery of our programs possible.We periodically revise our educational programs to take advantage of recent developments in education in early childhood.

Improve our operational efficiency.We believe that strong overhead controls will help us limit costs.Of the 2002 financial year of an automated purchasing system.Center director responsible for central costs.We believe that this focus has a positive effect on cost control at our centers.

Increase the number of recognized centers.Education and care for quality.We believe that the accreditation process strengthens the quality of our centers by motivating the educational staff and strengthening their understanding of development that is suitable for practices in early childhood.Different phases of the accreditation process.

Educational programs

We have developed a complete range of educational programs, including five separate age -specific curricula.Take advantage of the latest research into the development of children.

Our educational programs and materials are designed to meet the needs of our children, parents and families and to prepare children for success at school and in life.linguistic.

Education.We offer curriculum -specific training for teachers and carers to help them effectively offer our programs.From the selection of staff that ensures adults who respond to the needs of children.of the Excellence program.We also make more advanced educational possibilities available, including reimbursem*nt of education for employment -related college courses or course work to obtain associated institutions from children.

The curricula of the baby and toddler.Our's baby and toddler program, Welcome to Learning®, is designed for children from six weeks to two years.

15 months is based on building relationships with the child and the family and focusing on offering a safe and caring environment.

Two years old curriculum.Our curriculum for early learning focuses on the use of the latest research in brain development to offer learning experiences to children in one of their most critical development phase.Around them with both daily and long -term extensive activities and projects.The early curriculum is offered for children from 24 to 36 months.

Kindergarten Curricula.We have two pre -school programs designed for children for three to five years.Improvement.This reading and reading and reading of the Nick program is available for a fee in selected centers.

Monthly themes are subdivided into two -week units to give children long to make in -depth exploration and discovery.Recognition.The discovery areas support the learning of children of fundamental mathematics and science concepts, computer consciousness, creative art, blocks, cooking and homemade.

Kindergarten at KinderCare-Leesplan focuses on four-year-olds.And language skills.Discovery areas offer opportunities for exploration and choices based on the interests of children.

Kindergarten curriculum.Practical exploration, activities and experiences that are the real world and are sensory.and meet the instructional plan requirements of the state before the first class.

School curriculum.Our KC Imagination Highway® program is a project-based curriculum designed for children from six to twelve years old.And involved.

Summer plan.We offer a summer program called Summer Explorationsm for Folkeskolen.

• Abracadabra • Megamages • Contraction • Outer space • American Pride • RHYTHM & ROCK • By the leader of the class • Science Mania

• Can you dig it • Games • Cartoon tournament • Up and off • Crazy creations • Wild, wild wilderness • Foodle for your noodle

Accreditation.We continue to emphasize the importance of offering high quality programs and services to children and families.

Childcare services sponsored by the employer

Through KinderCare on Work® we offer a more flexible format to our services by individually evaluating the needs of each sponsor company to find the right format that fits in with the need for childcare on site or on site.Or rented by us and different types of management contracts.At Work® it can also help organizations in one or more aspects of implementing a childcare-related benefit, including needs assessments, economic analysis, architectural design and development plans.

On August 23, 2002 we operated 47 on site/almost Place employer sponsored Education and Care Centers in the early childhood for 44 different employers, including Universal Studios Florida, Saturnus, Fred Meyer, LEGO Systems and various other companies, universities and hospitals.Employer -supported centers were 42 owned or rented by us, and five were operated under management costs.

We also offer backup childcare, a program that uses our existing centers to offer backup childcare services to the staff of subscribed employers.

KinderCare on Works® website address is KindercareatWork.com.The information on our sites is not included as a reference in this report.

Marketing, Advertising and Campaigns

We carry out our marketing efforts through various promotional activities and customer reference programs.Attention to marketing to our existing customers in an attempt to increase the detention of these customers.We offer continuous sales and service training that focuses on registration and preservation of families., KinderCare.com and Mulberrychildcare.com to find their nearest center or to get information.

We have focused on center-specific marketing options such as (1) to choose sites that are practical for customers to encourage drive-by identification, (2) renovation of our existing centers

To improve their appeal to the sidewalk and (3) to upgrade the signage on our centers to a uniform standard to improve customer recognition of our centers.

Our local marketing programs include periodic extensive evening hours and a five -bonnic snack that is delivered to the children because they are picked up by their parents.New registration.Center directors and field Operation Management is encouraged to market parents through local speaking engagements and interaction with local regulatory authorities, which can then refer potential customers.In addition to policy and procedures.

Our pre-opening marketing efforts of the center include direct postal and newspaper support and support for local public relations.Computers.

Education

We determine education costs based on a number of factors, including age of the child, complete or part -time participation, location and competition.Valleys.The quality of our services, demand and other market conditions supports such increases.

• The financial year 2002 $ 137.72

• The financial year 2001 $ 129.34 • The financial year 2000 $ 120.75

Seasonal facility

New registrations are generally highest in the traditional autumn "Back to the School" period and after the calendar of the year.

Selection from place to new centers

We want to identify attractive new places for our centers in large, metropolitan markets and smaller growth markets that achieve our operational and economic goals.Average rates.Our real estate department carries out extensive studies of geographical markets to determine potential areas for the development of new center.Employment opportunities.

We are the target at locations that offer convenience for our customers, are located in attractive markets and offer opportunities for stimulating interest.Modeling.Within a potential area we often analyze different alternative places.

Our real estate and development personnel work closely with our activities, purchases, human resources and marketing staff to streamline the new opening process of the center.

Our Property Management Program for Real Estate

On August 23, 2002 we had 764 or 61%of our 1,261 centers.

During the fourth quarter of the 2002 financial year we started marketing efforts to sell centers to individual real estate investors and then rent them back.THE.Negotiate an extra turnover of $ 55.0 million.We expect that this effort will take place in the 2004 financial year if the market remains favorable for such transactions.

In the financial years 2001 and 2000 we used a synthetic lease facility to build 44 centers.

We routinely analyze the profitability of our existing centers through a detailed evaluation that considers the lease versus property status, leasing options, business history, local expenditures, capital requirements, demography, competition and place assessment.A plan for the property that reflects our strategic direction and marketing goals.If a center continues to suppress, exit strategies are used in an attempt to minimize our financial responsibility.affected families.2002 we closed 13 centers.

Our Asset Management department also manages the decision of all surplus ownership owned by OS.DS -Occupational assets include undeveloped places, non -occupied buildings and closed centers.Two surplus property was sold up to the 2002 financial year until 23 August 2002.

Staff

On August 23, 2002 we employed around 27,000 people.

• Medium directors,

• Assistant -directors,

• Regular teachers on full and partial time,

• Temporary and replacement teachers

• Helpers of teachers and

• Non-educational staff, including chefs and drivers.

There are approximately 310 employees at the company's head office and 330 field management and support staff.Agreement with every trade union and think that we have good relationships with our employees.

Human Resources

Regional and semi -rank.On August 23, 2002, our childcare centers were organized in three geographical regions, each led by a region of vice president..The six regional functions are responsible for checking the activities in our most important geographical markets.and accreditation leaders assigned to each region.

Individual centers are managed by a center director and in most cases an assistant director.All central directors participate in periodic training programs or meetings and must be the current state and local license instructions in the financial year.Storage investigation.The results to build initiatives to increase our support from center directors and to improve the operating results.

Due to the high entry homes of employees in the childcare segment in the educational industry in general, we emphasize the recruitment and preservation of qualified personnel.Salary wage earn from our employees and are partly employees.

Educational programs.All central teachers and other non-management personnel are obliged to participate in a first half-day training session before they are allocated full tasks and complete a basic education program of six weeks.A video series.And area managers who focus on registration and preservation of families, education in the delivery of our educational programs, health and safety-related education.Education and health -related children of children.

Employee benefits.Bus Human Resources Department monitors wages and benefits for competitiveness.In the 2002 financial year, the processing of benefits was automated throughout the company.

Communication and information systems

We have a fully automated information, communication and financial reporting system for our centers.Registrations, participation, pair of payers and personnel hours.

Our national network includes the internet and company-resistant intranet and e-mail applications.Center Lists Daily.And for management to assess the quality and to identify best practices.

Competition in the childcare segment in the Education Industry

The childcare segment in the Education Industry is competitive and very fragmented with the most important competitive factors that are generally based on reputation, location and price.

• Other for-profit, center-based childcare providers;

• Present, nursery and kindergarten programs delivered by public schools;

• local kindergartens and childcare centers, including ecclesiastical and other non-profit centers;

• providers of childcare services operating from home;

• Compensation for organized childcare, such as family members, nanny and a parent who usually does full time for a child.

Our competition includes other large, national companies with profit motive that offer childcare and educational services, many of which offer childcare at a lower price than we are currently active or plan to work.We compete through (a) training and recreational programs of high quality, (B) modern, well -equipped facilities, (c) trained teachers and supervisory staff and (D) a number of services, including infants and toddlers, drop in service and transport ofOlder children who are registered in our pre and post -school program between our centers and schools.

In some markets we are also confronted with competition with regard to kindergarten and pre- and post-school programs from public schools that offer such services to small or no costs for parents.We expect that this kind of competition will increase in the future.

Local nursery schools, childcare centers and home providers generally charge less for their services than we do.Brind operators of such centers often educational rates that are lower than our rates.

Home care providers are not always obliged to comply with the same health, safety, insurance or operational rules as our centers.

Our centers sponsored by the employer compete with center -based childcare chains, some of which have divisions that compete for employer sponsor options, and with other organizations that focus exclusively on the workplace segment on the market for childcare.

Insurance

Our insurance program currently includes the following types of policies: employee compensation, extensive general responsibility, autodiability, ownership, surplus "umbrella" responsibilities, responsibilities of directors and responsibility of the employment practice.Subject to different boundaries and include a considerable self -assured or self -confident deduction.

Claims that are or are not included in our coverage can be claimed.. By way of $ 23.5 million credit letter to guarantee obligations under retrospective and self -insurance programs.

State laws and regulations that make us

Centrelice -Requirements.Our centers are subject to various national and local regulations and license requirements.Checking or other approval procedures for new employees in childcare centers.Intentagne errors in a center to comply with the applicable rules can expose sanctions that may include probation period or, in more serious cases, suspension or withdrawal of the center's license to operate and can also lead to sanctions against our otherscenters in the same jurisdiction.

We believe that our activities are considerably in accordance with all material rules that apply to our company.centers in the same jurisdiction.

Tax stimuli for childcare.

Credit may be required with a maximum of $ 2,400 in eligible costs.Up to $ 3,000 for a child and $ 6,000 for two or more children in 2003. The reimbursem*nts that are eligible for us by eligible taxpayers for childcare services for these tax credits, subject to section 21.it 21.INTRE Care of the code.

The Economic Growth and Tax Character Protection Act of 2001 created new code section 45F.This section offers incentives to employers to equalize the costs related to employer-Toegestane childcare facilities.Center (B) that operates an existing childcare center, or (c) who contracts with an independent childcare operator to take care of the children to the employees of the taxpayer.Services is also adopted.Maximum available credit from 2002 is $ 150,000 per year for each taxpayer. Tax year.

Many states offer tax credits in addition to the federal credits mentioned above.

Childcare programs.In the 2002 financial year, ca.22.0% of our net income that was generated from federal and national childcare programs, mainly childcare and development blocks and programs.benefit from such additional financing.

Americans with a disability law.The federal Americans with a handicap called ADA, and a similar state law prohibit discrimination based on disability in public accommodation and employment.Impossible for new construction or technically impossible for changes.In order not to comply with ADA, the introduction of command lighting, fines, a granting of compensation to private lawsuits and additional capital costs for remedying such a non -compliance.Significant negative impact due to these laws.

Federal transport instructions.In August and September 1998, the National Highway Transportation Safety Administration, issued as NHTSA, interpretative letters that seem to change the interpretation of rules for the sale of car dealers of vehicles intended for the transport of children to and off-school of childcare providers.DESSE LETTERS indicate that dealers no longer sell trucks for this use with 15 passengers and that every vehicle designed to transport eleven people or more, must meet the federal school bus standards if this will probably be used considerably for transport children to and fromthe school or school-related events.The interpretations have influenced the type of vehicle that can be purchased by us for use in the transport of children between schools and our centers.Transport instructions have increased the costs of transporting children, because school buses are more expensive to buy and maintain and in some areas of law require drivers with commercial licenses.

On August 23, 2002 we had 1,070 school buses on a total of 2,381 vehicles that are used to transport children.

Trademarks and service signs

We own and use various registered and non -registered trademarks and service signs that relate to the name Kindcare, our schoolhouse logo and a number of other names, slogans and designs, including

• Help the busiest family -seeking in America • I think I can. ™ • Kindergarten at Kindcare ... Journey

Til Discovery® • KC Imagination Highway® • Keystone National High School ™ • Kid's Choice ™ • Kindercare På Work® • KinderCare Connections ™ • Lakemont Academy ™

• Let's move, let's play® • Mulberry Childcare Centers, Inc.® • Mulberry Child Care and Førskole® • My Window at World® • Razzmatazz® • Smalltalk® • Summer Exploration Hero • The whole child is the whole idea ™ •Welcome • The whole idea • The whole idea is • The whole idea • The whole idea ™ • The whole idea • The whole idea is the whole idea ™ • The whole idea • The whole idea is the whole idea ™ • Welcome learning •The whole idea is the whole idea ™ • welcome learning.® • Your child First Classroom®

A federal registration in the United States is in force for ten years and can be extended in periods of ten years that are always subject to required archives based on the continued use of the brand by the registrant.By the registrant and notification on the exclusive right to use such a brand in the United States in connection with the goods or services that are specified in the registration.Our registration fees and because we have not done business in other national countries than the United Kingdom, we cannot maintain our registration fees in all other foreign countries.To maintain and extend our trademark and service brand - registrations in the US and the UK.

Point 2. Properties

Education and care centers in the early childhood

We had 764 of our childcare centers in operation on August 23, 2002, we rented 492 and operated five management contracts.The future development of centers.

Society and Employer -Supported Centers, we operated at 1 pm.23 August 2002 was as follows:

Location society

Employer sponsored in the middle

Center collected the United States:

Alabama 9 - 9 Arizona 19 2 21 Arkansas 3 - 3 Californien 136 1 137 Colorado 35 - 35 Connecticut 16 2 18 Delaware 5 - 5 Florida 66 7 73 Georgia 31 - 31 Illinois 94 1 95 Indiana 25 1 26 Iowa8 3 11 Kansas 16 -16 Kentucky 13 1 14 Louisiana 9 2 11 Maryland 25 1 26 Massachusetts 46 1 47 Michigan 31 2 33 Minnesota 38 - 38 Mississippi 4 - 4 Missouri 35 - 35 Nebraska 10 1 11 Nevada 10 - 10 New Hampshire 4 - 4 New Jersey 474 51 New Mexico 7 - 7 New York 7 2 9 North Carolina 33 - 33 Ohio 77 4 81 Oklahoma 6 - 6 Oregon 16 4 20 Pennsylvania 65 1 66 Rhode Island - 1 1 Tennessee 21 2 23 Texas 105 1 106 Utah 6 17 Virginia 54 - 54 Washington 56 1 57 Wisconsin 24 1 25

VK 2 - 2 1.214 47 1.261

Our typical community center is a building with a floor, with air conditioning built based on our design and is located on about one hectare of land..And visual tools, educational supplies, games, riddles, toys and outdoor play equipment.Centers also have vehicles used for excursions and transports children who are registered in our pre- and post-school program.Educational programs.

KinderCare on Work® supplies childcare programs sponsored by the employer that are individualized for every such sponsor.Facilities are on or near the employer's website and are in capacity of 75 to 250 children.

Additional maintenance program in the middle

We use a centralized maintenance program to guarantee uniform maintenance of the high quality of our facilities throughout the country.Orders via Palm Top Computers.On August 23, 2002, specific geographical areas were checked by two regional directors and 13 facility leaders, each between six and ten technicians.

Renovation program of the center

We still have a renovation program with renovations of the interior and the playground and replacement of signage to ensure that all our centers meet specific standards that we create.Future needs.

Compliance with environmental legislation

We are not aware of existing environmental conditions that can currently be reasonably expected to have a significant negative effect on our financial position, business results or cash flow.ownership or rented real estate.For around ten years ago we drawn up a process to reach environmental assessment reports to reduce the chance of obligations under applicable federal, national and local environmentalets after acquiring or leasing potential new centers or places.us.It is no less possible that these assessment reports will not reveal all environmental obligations, and it is also possible that sites obtained before the establishment of our current process will have from time to time.Have further limited environmental studies and recovery activities for some of our past and current centers.

Moreover, it cannot be given that: do not impose significant environmental responsibility for future laws, regulations or regulations;presence of leaking underground storage tanks) or by third parties not related to us;

Others will not violate tenants by introducing dangerous or toxic substances in our own or rented centers that can expose us to responsibilities according to federal, national or local environmentalets.

Headquarters

Our head office is located in Portland, Oregon.We have signed a ten -year lease of approximately 73,000 square meters of office space, which started on November 17, 1997. The lease requires annual rental payments of $ 22.50 per year. Square foot in the first five years of the lease period and $ 26.50For the past five years, with a five -year expansion option on market rental.23.00 per day. For the refusal of the first five years of the lease and will rise to $ 26.50 per year. For the other five years of the rental period.

Point 3. Legal proceedings

We do not believe that there is a hanging or endangered test that, if negatively determined, would have a significant negative impact on our company or activities.Involving allegations of physical or sexual abuse of children.Believe that none of these accusations, claims or disputes, nor individual nor uniform, will have a significant negative influence on our financial position, business results or cash flow.Claim, claim or process.

Point 4. Submitting questions for a reconciliation of the Main Security

Nee.

Point 5. Market for the joint equity of the registrant and the corresponding shareholder

Inventory

On July 15, 2002, the Board of Directors approved a 2-for-1 sharing division of our joint share and an increase in authorized joint shares to 10.0 million shares.2-for-1 stock department was in force on 19 August 2002 for shareholders in the post on 9 August 2002. All information in this report, including all references to the number or price of shares in joint shares, are effective.Plan in both cases to display the share distribution.

Market information

In February 1997, Affiliates from Kohlberg Kravis Roberts & Co., called KKR, were owned by 15.7 million shares of our joint share in a recapitalization transaction.Pink Sheets "Published by the National Quote Bureau. It is mentioned on the OTC record board under the" KDCR."

The market for our joint shares must be characterized as very limited because of the very low trade volume, the small number of brokerage companies that act as market producers and the sporadic nature of the trading activity.Was less than 1,000 shares.may not represent actual transactions.

General shares -High offer with a low bid for the financial year ending on 31 May 2002: first quarter $ 13.00 $ 12.75 second quarter 15.00 12.75 third quarter 15.00 8.00 Fourth quarter 11.50 8.50Consident year ending on 1 June 2001: first quarter $ 12.00 $ 11.00 second quarter 11.06 10.50tredje Quarter 11.00 11.00 Fourth quarter 12.88 9.75

See “Point 12. Protection of security of certain owners and management and related

Shareholder means something, effects that are authorized for issue under share compensation plans. "

Estimated the number of security holders

On August 23, 2002 there were 134 holders of registration of our joint share.

Yield policy

During the last three tax years we have not issued or paid in a cash return or distribution on our capital share.We are not going to pay cash returns in a nearby future.Our company.A willingness to pay for dividends in the future will be discuncant of our council and will depend on our activities of activities, financial situation, contractual restrictions, restrictions imposed by the applicable legislation and other factors considered relevant by our board of directors.

Point 6. Selected historically consolidated economic and other data

The following table shows selected historically consolidated financial and other data with dollars in thousands, except per day. Share amounts and data about childcare center.Our financial year ends the Friday that is closest to 31 May. The financial years usually consist of 52 weeks.

31. Maj,

2002 1. June,

2001 2. June 2000

(53 weeks) May 28,

1999 29. Maj,

1998

Declaration of operational data: income, net ...................................................

Other costs, just .................................................. ...................................................... ...................................................... ................. OUS u: "U .756 565.238 546.376 RESSTRATION AND OTHER COSTS, NET (B) ............. - ((100) - 4,157 5.201

Total operating costs ................................ 756.307 668.432 619.756 569.395 551.577 Business income ........ ............................... 73,127 74.965 77.090 63.590 45.493

Investment revenues ................................................ 560 582386 490 612 interest charges ................................................... ........ .. (44.078) (48.820) (45.375) (41.843) (40,677) Losses on investments in minorities ..................... ........ (2,265) - - -

Income before income taxes and cumulative effect of a change in the accounting principle .. 27.344 26.727 32.101 22.237 5.428

Income tax costs ........................................................... ...................................................... ....................................10,266 12.1388.

Accounting principle ................................... 16.543 16.461 19.963 13.526 3,426 Cumulative effect of a change in accounting

Principle, Netto by income tax (C) ....................- (790) -----Net income ............

Netto -income Perpendant Power (D): Basic income before the cumulative effect of a change

In accounting principle ........................................................... ...................................................... .... 0.71 $ 0.18 cumulative effects a change in accounting

Principle, just ........................................................... .... (0.04) ---- Net income .................................. .. ............. $ 0.83 $ 0.82 $ 1.05 $ 0.71 $ 0.18

Diluted income before the cumulative effect of a change in the accounting principle ....................... $ 0.82

$ 0,85 $ 1,04 $ 0,70 $ 0,18

Cumulative effect of a change in the accounting principle, net ............................................... .. .............. - (0.04) - - -

Net income .................................................

Balanced data (at the end of the period): ownership and equipment, net ....................................... 666,227 $ 613,206 $ 566,365 $ 508,113 Total assets ....................................... .. ............... 844.185 805.367 695.570 638.797 591.539 Collected long -term obligations, including current

of the .................................................

540.602

475.175

441.371

415.368

The equity of shareholders ........................................................... ...................................................... ...................... Ous U: "E" "" "'' '' '' '900 other financial data: EBITDAR (s) .. ............................................................................. ......................... .... 132,420 121,497 117.132 105.131 93,247 EBITDA -Marge .............. ....................... .......... 16.0% 16.3% 16.8% 16.6% 15.6% cash flows from operations ... .............. ............... 87,466 69,671 61,197 61,810 56.577 depreciation and amortization ............. .............. 95.843 94,269 82,473 92.139 84,954 Given 1,242 1,169 169 160 147 License capacity of the center at the end of the financial year ..... 166,000 162,000 150,000 146,000 143,000 coating (f) ...................... ............... ............ 65.6% 68.3% 69.8% 69, 9% 70.6% average educational percentage (g) ....... ...... .......................... $ 137.72 $ 129.75 $ 113.45 $ 106.81 See accompanying notes to select Historically Consolidated.

Comments to select selected historically consolidated economic and other data

(a) Our fiscal year ends the Friday that is closest to 31 May.

(b) restructuring and other reimbursem*nts, net, include the following with dollars in thousands:

The financial year ended on May 31,

2002 1. June,

2001 2. June 2000

(53 weeks) May 28,

1999 29. Maj,

1998

Restructuring costs, net ............ $ - $ (100) $ - $ 3,561 $ 5,697 offers costs .....................

(c) In the 2001 financial year we adopted Securities and Exchange Commission Personnel Accounting ("SAB") No. 101, income recognition in accounts whose impact was registered as a cumulative effect of a change in the accounting principle.

(d) the amounts per

(e) EBITDAR and EBITDA were calculated as a dollars in thousands:

The financial year ended

31. Maj,

2002 1. June,

2001 2. June 2000

(53 weeks) May 28,

1999 29. Maj,

1998

Netto -Inkomen ............................................. $ 16,543$ 15,671 $ 19,963 $ 13,526 $ 3,426 interest costs, net .............................. 43,518 48.238 44,989 41,353 40.065 income tax......................................... 10.801 10.266 12.138 8,711 2,002 depreciation andAmortization ...... ......... 59.293 46.632 40.042 37,384 42.553 restructuring and other reimbursem*nts, net ..... - (100) - 4.157 5.201loss on Minority Investments ............... .. 2,265 - - - - -cumulative effect of a change in

Reconcile Principe ......................... —790 -------- EBITDA ................. ..................... 132,420 121.497 117.132 105.131 93.247

Beautiful ........................................................ 49,120 39,240 29,949 29,536 27,985bitdar ........................................................................................... .... $ 160,737 $ 147,081 $ 134,667 $ 121,232

EBITDAR and EBITDA are not intended to indicate that the cash flow is sufficient to finance all our cash needs or to represent cash flow from activities as defined by accounting principles that are generally accepted in the United States of America.As a tool for comparison because the calculation may not be the same for all companies.

(F) Coating is a measure of the use of the center capacity.Time children based on a weighted average.For example, a registered full -time child corresponds to an FTE, while a part -time child registered in five half days corresponds to 0.5 FTEs.The actual number of complete and partial children who are registered.

(g) We calculate the average degree of education such as net income, exclusive costs and non-educational income, divided by FTE participation in the related period of time.Between full and part -time children in every center, this average can significantly influence with regard to any specific center.

Point 7. Discussion of the management and analysis of economic situation and business results

Introduction

The following discussion must be read with the consolidated accounts and the related notes elsewhere in this report. The information ends the 52 weeks that ends on 31 May 2002, when "Tax 2002", the 52 weeks ending on 1 June 2001, as "fiscal2001 ", and the 53 weeks end2.Juni 2000 as" Fiscal 2000. "Our first tax quarter usually has 16 weeks, and the remaining quarters have every 12 weeks.

A center is included in the similar center -Netto income when it is open and driven by us for at least one year and it is not rebuilt or permanently moved within that year.last year.

Tax policy 2002 compared to the 2001 financial year

The following table shows the comparative business results of KinderCare with dollars in thousands, except rate:

The financial year ended

31. Maj 2002

Percentage of

Income

The financial year ended

1. June 2001

Percentage of

Income

Change the amount of increase/

(Autumn) turnover, net .................................... $ 829,434 100.0% $ 743,397100.0% $ 86,037 operating costs:

Wages, wages and benefits: Central costs .......................... 428.848 51.7 379.352 51.0 49,496 Region and business costs ... 31,943 3, 9 28,638 3.93 .305

Total wages, wages and benefits ............................... 460,791

55.6 407.990

54,9 52.801

Depreciation and amortization ...... 59.293 7.1 46,632 6.3 12,661 rent ............................................... 49.120 5.9 39.240 5.2 9,880 Other .................................... ............. 187.103 22.6 174.670 23.5 12.433 Restructuring costs (reversals) .. - (100) 0.0 100

Total operating costs ........... 756,307 91.2 668.432 89.9 87,875 Business income ......................... 10,1% $ (1,838)

Coating ........................................ 65.6% 68, 3% (2.7)% average education degree .......................... $ 137.72 $ 129.34 $ 8.38

Turnover, net.netto Income rose by $ 86.0 million, or 11.6%, from the same period last year to $ 829.4 million in the 2002 financial year. The increase was mainly due to the acquisition of the Mulberry centersIn the fourth quarter of 2001 financial year and they generated extra net income by the newly opened centers.

Similar center -Netto turnover rose by $ 6.1 million or 0.8%.

The financial year ended on 31 May 2002 1 June 2001 Number of centers at the start of the financial year .... 1,242 1,169 openings ...................... .......................................................... ...................... 35 44 acquisitions ......................... ............................. .................. - 75 closures ............................. ..................... ........................ (13) (46?

Number of centers at the end of the financial year .......... 1,264 1.242

The average course increased $ 8.38 or 6.5% to $ 137.72 in the 2002 financial year as a result of mainly increase in education.The older center population.The total capacity for the center was 166,000 and 162,000 respectively at the end of the 2002 and 2001 financial year. See "Point 6. Selected historically consolidated financial and other data, comments (s) and (F)" for descriptions of the average degree ofEducation and coating.

Wages, wages and benefits.For the 2002 financial year compared to 54.9% for the 2001 financial year.

The costs that were linked directly to the centers were $ 428.8 million, an increase of $ 49.5 million compared to the same period last year.Wage increases."The center level sought, wages and benefits of a percentage of the net result to 51.7% of 51.0% for the same period last year due to the higher medical insurance costs.

The costs of regional management and business administration were $ 31.9 million, an increase of $ 3.3 million compared to the same period last year.Six regional leaders added in the 2002 financial year to give more supervision of our most important geographical market.See "Point 1. Business, Human Resources."

Value reduction and amortization.The depreciation and amortization costs rose by $ 12.7 million from the same period last year to $ 59.3 million.The depreciation increased as a result of the acquisition of Mulberry centers, increased capital costs, especially for new center development and an activation tax of 3.6 million dollars.

During the fourth quarter of the 2002 financial year, 38 under -priesting centers and certain undeveloped properties were destined to be reduced, which resulted in a depreciation of $ 3.6 million for the financial year compared to $ 1.0 million last year.The value of the center of the center.

The depreciation of goodwill and other intangible assets increased by $ 2.2 million as a result of the acquisition of Mulberry in the fourth quarter of the 2001 financial year. See "Recently published accounting overviews."

Rent.Finance New Center Construction in the 2001 and 2000 financial year. See "Liquidity and Capital sources".

The rents that are experienced at new and renewed center -laying contracts are higher than those experienced in earlier accounting periods.

Other operational costs.Other operational costs rose $ 12.4 million, or 7.1%, from the same period last year to $ 187.1 million.Since a percentage of the net turnover fell to 22.6% of 23.5% for the same period last year as a result of cost control over variable mid -level and business costs.

Other operating costs include costs that are directly related to the centers, such as food, insurance, transport, caregiver, maintenance, utilities and marketing costs and costs with regard to field management and business management.

Business income.A percentage of the net result was 8.8% compared to 10.1% for the same period last year.

Interest charges.Interest charges were $ 44.1 million compared to $ 48.8 million for the same period last year.Vulnerable financing costs were 7.8% and 9.7% respectively for the 2002 financial year and the 2001 financial year.

Losses in the field of minority investments.The fourth quarter of the 2002 financial year we wrote the value of the network of an investment of a cost method.

Income tax costs.Mainly state and foreign income tax, compensated by tax credits.

The net income.Net -income was $ 16.5 million, an increase of $ 0.9 million or 5.6%compared to the same period last year.Income as a result of the primary limitation of $ 3.6 million. The share was $ 0.83 and $ 0.82 respectively for the 2002 financial year. For the 2001 financial year, the net income was diluted per year.The cumulative effect of a change in the accounting principle $ 0.86 and $ 0.85 and was $ 0.82 and varied $ 0.81 after such an effect.

We have implemented sections and Exchange Commission SAB # 101 with regard to non-residual reimbursem*nt income in the first quarter of the 2001 financial year.

Tax policy 2001 (52 weeks) compared to tax policy 2000 (53 weeks)

The following table shows the comparative business results of KinderCare with dollars in thousands, except rate:

The financial year ended

June 1, 2001 (52 weeks)

Percentage of

Income

The financial year ended

2 June 2000 (53 weeks)

Percentage of

Income

Change the amount of increase/

(Reduce)

Turnover, net .................................. $ 743,397 100.0% $ 696,846 100, 0 % $ 46,551 operating costs:

Wages, wages and benefits: Center costs ............................ 379.352 51.0 356,828 51.2 22,524 region and business costs..

Total wages, wages and benefits .................................

407.990

54.9

383.719

55.1

24.271

Depreciation and amortization ........ 46.632 6.3 40,042 5.7 6,590 rent ..................................................... 39.240 5.2 29.949 4.3 9,291 Other ............................................... 174.670 23.5 166.046 23.8 8.624 Restructuring costs (reversals) .... (100) 0.0 - - (100)

Total operating costs ............. 668,432 89.9 619.756 88.9 48,676 Business income ..................... $ 74,965 10,1 % $ 77,09011 .1 % $ (2,125)

Coating ................................... 68.3% 69.8% (1, 5)% Average teaching rate ......................... $ 129.34 $ 120.75 $ 8.59

Income, Netto.netto income rose by 46.6 million, in the 2001 financial year. Similar income from the Middennetto rose $ 26.2 million, or 4.0%, on an adapted basis of 52 weeks., acquired and closed centers as follows:

The financial year ended on June 1, 2001 2 June 2000 Number of centers at the start of the financial year .... 1,169 1,160 openings ..................... ............................................................... ................. 75 13 closures .............................. ...............................................(46) (39)

Number of centers at the end of the financial year ......... 1.242 1.169

The average tuition fee increased $ 8.59 or 7.1%to $ 129.34 in the 2001 financial year of $ 120.75 due to the education increases and to a lesser extent higher than the average degree of education experienced to newly opened centers.From 69.8% in the same period last year as a result of reduced full -time equivalent participation in some of the older centers and the effect of the new centers that open with lower coating than adult centers.of the 2001 and 2000 financial year.

Wages, wages and benefits.Percentage of the net result was 54.9% for the 2001 and 55.1% financial year for the 2000 financial year.

The costs directly linked to the centers were $ 379.4 million, an increase of $ 22.5 million compared to the same period last year.Middle level, wages, wages,

Salary and income costs as a percentage of the net result fell slightly to 51.0% of 51.2% for the same period last year.

The costs of regional management and business administration were $ 28.6 million, an increase of $ 1.7 million or 6.5%compared to the same period last year.

Value reduction and depreciation.The depreciation and amortization costs rose by $ 6.6 million from the same period last year to $ 46.6 million.

Rent.years.

Other operational costs.The percentage of the net income fell to 23.5% of 23.8% for the same period last year.

Restructuring tax (reversal).In the fourth quarter of the 1999 tax policy, the Board of Directors approved a provision of $ 4.0 million for the planned early termination of certain centers rental agreement.Closed: 36 in the 2001 and 25 financial year of the financial year 2000. We have paid or obliged to pay $ 3.9 million for lease and closing costs for such closed centers.0.1 million reverse.

Operational income.ro-income was $ 75.0 million, a decrease of $ 2.1 million or 2.8%compared to the same period last year.The financial year 2001. Business income as a percentage of the net result was 10.1% compared to 11.1% in 53 weeks in tax in 2000. Compared to the Financial Policy 2000, the business income was negatively influenced by the significant rise in $ rental costs9.3 million, which is mainly related to the synthetic lease facility used to finance the construction of a new center.expenditure.

Interest charges.Interest costs were $ 48.8 million compared to $ 45.4 million for the same period last year.2001 and 2000 respectively for the 2001 and 2000 financial year.

Income tax costs.Income tax costs were $ 10.3 million, or 38.4% of the income before tax, in the financial year 2001 and $ 12.1 million, which are not deductible for tax purposes.For income.

Net income.Net income was $ 15.7 million compared to $ 20.0 million in the financial year 2000. The decrease was due to higher interest costs and the impact of the operation of the extra week in the financial year 2000. Moreover, we have SAB # 101implemented in the 2001 financial year, which resulted in IDE -off -expotation of $ 0.8 million income, net by taxes, from the fourth quarter of the previous financial year, exposure to one time of $ 0.8 million was registered as oneCumulative effect of a change in the accounting principle.

For the 2001 financial year, 2001 was fundamental and diluted net income per year. Division before the cumulative effect of a change in the accounting principle $ 0.86 and $ 0.85 respectively and was $ 0.82 and $ 0.81 respectively respectively.Was $ 1.05 and $ 1.04 for the 2000 financial year respectively.

Liquidity and capital sources

Our most important sources of liquidity are the cash flow generated by operation and loans under a $ 300.0 million. credit facility of the credit.The 31 May 2002 we had drawn $ 175.0 million under the rotating credit facility, had committed to an outstanding credit letter of a total of $ 28.5 million and had funded $ 97.9 million under the synthetic lease facilities mentioned below.The rotating credit facility on 31 May 2002 was $ 96.5 million.The rotating credit facility is planned on February 13, 2004.

Our consolidated net cash provided by operational activities for the 2002 financial year was $ 87.5 million compared to $ 69.7 million in the same period last year.was $ 8.6 million per year.31 May 2002 compared to $ 3.7 million per1 June 2001, and the relationship between current assets and short -term obligations was 0.46 to a 31 May 2002 against 0.41 and one 1 June2001.

EBITDAR is profit, adapted for the cumulative effect of a change in the accounting principle, loss of investments of minorities and restructuring costs, before interest, taxes, depreciation, amortization and rent.

The financial year ended

31. May 2002 June 1, 2001 2. June 2000

(53 weeks)

Netto -income ............................................. 15,671 $19,963 interest costs, net ................................ 43,518 48.238 44,989 Income tax costs ........ ......................... 10.801 10.266 12.138 Depreciation and amortization ................... 2,265 -- cumulative effect of a change in

Accounting principle, net after tax .......... - -

790 -

EBITDA ............................................... 132.420 121.497 117.132 LejeJuds .. .. ....................................... 49,120 39,240 29,949

EBITDAR ....................................... $ 181,540 $ 160,737 $ 147,081EBITDAR - percentage of sales ........ 21.9% 21.6% 21.1%

During the 2002 financial year, the EBITDAR $ 20.8 million, or 12.9%, rose from the 2001 financial year due to the addition of Mulberry Centers and the extra contribution of the newer centers.9.3%, from the financial year 2000. After adjusting the 2000 financial year to a comparable basis of 52 weeks, EBITDAR would have risen $ 16.3 million in the financial year 2001.Bitdar is not intended to indicate that the cash flow is sufficient to finance all our cash needs or Cash flow from activities as defined by accounting principles that are generally accepted in the United States of America.

Moreover, EBITDAR should not be used as a comparison tool, because the calculation may not be the same for all companies.

Our most important use of liquidity is to meet the requirements for debt service, financial capital costs and the delivery of operational capital.In 1997 we borrowed $ 50.0 million during a period of the loan facility and we spent $ 300.0 million of 9.5% senior subordinate notes because of 2009. The Term loan facility ripens on 13 February 2006 and offers the nominal annual depreciation.Million.This transaction resulted in the depreciation of deferred financing costs of $ 0.3 million and a profit of approximately. $ 0.1 million.

In the 2001 financial year, our acquisition costs, including transaction costs, for Mulberry, NLKK, an educational education company and two independent operational centers $ 32.4 million in addition to the cash payments that we have spent 860,000 shares of our joint share to the sellers of Mulberry and took moreThen $ 3.3 million debts.In August 2002, 119,838 of the 860,000 shares were reduced to the US, including 99,152 shares released by damage and 20,686 shares of certain former shareholders in Mulberry.Millions for a regional childcare operator.

We have made minority investments of $ 10.1 million in the 2001 financial year and $ 5.5 million in the 2000 financial year in two educational companies., Where we have a minority investment.In the course of the 2002 financial year, $ 2.2 million was converted into extra shares of the professional company.With $ 2, 3 million.

In the 2000 financial year we entered into a synthetic lease facility of $ 100.0 million, with a syndicate of money lenders financing the construction of 44 centers to lease for us for a period of three to five years that can be expanded, subject topermission from Landsbaas permission.The related lease contracts are classified as operational lease contracts for financial reporting purposes.

The synthetic leasing facility closed for positions on 13 February 2001, and on 31 May 2002, $ 97.9 million was financed via the facility.is on 13 February 2004. We are obliged to inform the landlords before 14 May 2003, whether we will exercise our chance at the purchasing centers at the end of the rental period.We are obliged to market the rented centers to third parties.

The synthetic leasing company includes covenants and limitations that are considerably identical to those in our credit facility.

In June 2002, the Board of Directors issued financial accounting standards an exposure design for a proposed interpretation, consolidation of certain units for special purposes.After consolidation we will register the assets as property and equipment and the rental room as a

Obligation.

During the fourth quarter of the 2002 financial year we started marketing efforts to sell centers to individual real estate investors and then rent them back.The.Transactions remain favorable.se "Point 8. Financial settlement and additional data, comment 7. Long -term debt."

We expect to finance the future new center development through the rotating credit facility and the proceeds from sales supply, although alternative forms of financing will be evaluated and new events can be closed in the future.

We have certain contractual obligations and commercial obligations.Other conditional events, such as credit lines.Our contractual obligations and commercial obligations on 31 May 2002 were as follows with dollars in thousands:

The financial year a total of 2003 2005 2005 2006 2007 then

Long -term debt ................ $

357.317

$ 6.237

$ 1.144

$ 4.554

$ 46,417

$ 263

298.702 Capital provision.- - $ 995.171 $ 89,976 $ 311.160 $ 35,289 $ 74,525 $ 26,879 $ 457,342

Other obligations include the obligations and obligations of Center Development to buy vehicles.

During the summer months and calendar, we can experience reduced liquidity after the end of the holiday due to reduced participation in these periods.

We have spent around $ 29.3 million to perform net operational losses to compensate taxable income in our tax year in 2000 to 2002. About 5.7 million net operational losses are available to be used in future financial years.Reduced due to a change in control or otherwise, we are asked to pay extra taxes and interest, which would reduce the available cashes.

We believe that the cash flow generated by operations and loans during the rotating credit facility will sufficiently offer our operational capital and debt service needs and will finance our expected capital costs in a near future.Extra capital require, and such a capital may not be available for acceptable conditions or not at all., Including but not limited to, operating conditions, cash flow requirements, debt games, competitive factors and seasonal regulations with openings.

Our future capital costs.If these costs were to be considerably reduced, our activities and cash flow would be influenced by the opinion of management.

Building investment

In the financial years 2002 and 2001 we opened 35 and 44 new centers respectively.We can acquire existing centers of local or regional educational and care providers in regional youth.New centers.

New centers are located on detailed site analyzes that include feasibility and demographic studies and economic modeling.Or canceled or the construction is delayed for various reasons, many of which are outside of our control. The community center usually varies from $ 1.8 million to $ 2.6 million, depending on the size and location of the center.

Our new centers usually have an licensed capacity of 180, while the centers built during the 1997 financial year and have rather an average licensed capacity of 125.When they are ripe, these larger centers are designed to generate higher income, business income and margins than our older centers.These new centers also have higher average construction costs and usually take three to four years to become average.End of the second year of the operation.As various new centers are developed and opened, profitability will be adversely affected in the short term, but it is expected that it will be improved in the long term if these new, more profitable centers reach the expected levels.

We continue to incur capital costs in connection with a renovation program that includes interior and playground renovations and signposting replacements.

Capital costs include the following with dollars in thousands:

The financial year ended on May 31,

2002 1. June,

2001 2. June 2000

(53 weeks)

New center development ................. $ 63,990 $ 44.254 $ 36,631 renovation of existing facilities ...... 18.979 37,829 36,646 equipment of equipment .........

During the 2001 and 2000 financial year we used a synthetic lease facility to build 44 centers.In our capital costs.

Capital costs under our credit facilities for the 2003 financial year are $ 190.0 million.

Periods and are subject to exceptions.We also have some option to make extra debts, including by priority loans or sales leaseback transactions, depending on the limitations introduced by the penetration in which the senior subordinate notes were issued and issued and credit facilities.

Critical accounting policy

The preparation of accounts in accordance with the accounting principles that are generally accepted in the United States of America requires that management makes estimates and assumptions that influence the amounts reported in the financial statements and predict associated notes.Requires the use of judgment.

For a description of our important accounting policy, see "Point 8. Accounting and additional data, note 1. Summary of a significant accounting policy."Estimate processes involved in their use.

Income recognition.Criteria for SAB # 101, including the existence of a scheme, delivery of services, a specific compensation and a likely collection.

Claims.Our claims mainly consist of teaching that is due to government agencies, parents and employers presented to estimated to estimated net realizable value.We use estimates to determine the collection of our progress and must rely on our evaluation of historical trends, state financing levels, specific customer questions and current financial tendencies to achieve appropriate reserves.

Long term and intangible assets.Immaterial things and acquired goodwill when events or changes indicate in circ*mstances that the lower value cannot be found.The accounting value of Asset.result in considerable differences in the requirements for value reduction.142, goodwill and other intangible assets and SFAs no. 144, in which the limitation or removal of long -term assets was explained in the 2003 financial year.See "Recently published accounting opinions."

Self -insurance obligations.We are self-insurance from our general responsibility, compensation for employees, car, real estate and employee medical insurance programs.For several years requires a considerable judgment.We estimate the obligations for obligations, but not yet reported or paid on the basis of available claim data and

Historical trends and experience, as well as future projections of ultimate losses, costs, prices and administrative costs. “Our internal estimates are assessed annually by an actuaris from third parties.Negative impact on our financial position, cash flows or operating results.

Income tax.We estimate the chance of restoring these assets, which depend on future levels of profitability and assumed tax rates.Significant effect on our financial position or operating results.

Recently published accounting opinions

SFAS No. 142, goodwill and other intangible assets, must release the depreciation of goodwill and other intangible assets with indefinite use of use.Expect that such an amortization will stop in the 2003 financial year. However, we are still evaluating the effect of the approval of all provisions in SFAS No. 142 and has not yet determined the impact of approval on our financial position and operational results.

SFAS no. 144, which explains the restriction or removal of long -term assets, tackles accounting and reporting for limiting or removing assets in the long term.-Term assets must be the decision and reporting provisions in the accounting principles results of the activities of the activities of the activities and the effects of the removal of a segment of a company and extraordinary, unusual and rarely occurring events and transactions report to a segment ofa segment of things to be removed.Years 2003. However, we still assess SFAS No. 144 and have not yet determined the impact of approval on our financial position and business results.

SFAS No. 145, intake of SFAS NRS. 4, 44 and 64, Change of SFAS No. 13 and technical corrections, require analysis of profits and losses in extinguishing debts to determine whether they should be classified as an extraordinary item orinterest costs.SFAS # 145 also requires that certain rental contracts with financial effects are comparable to sales leaseback transactions are justified.

Showing activities started after December 31, 2002. We assess SFAS no. 146 and have not yet determined the impact of approval on our financial position and business results.

Seasonal facility

See "Point 1. Business, seasonal motability."

State laws and regulations that make us

See "Point 1. Affairs, state laws and regulations that make us."

Inflation and wages are increasing

We do not believe that the impact of inflation on the results of our activities has been considerable in the past periods, including the last three tax years.

The costs of wages, wages and benefits represented approximately.55.6% of the net income for the 2002 financial year. We believe that by increasing our educational rates we can reclaim any future increase in costs caused by adjustments tothe federal or government minimum wage or adjustments to the second market.Being able to increase is sufficient to compensate for such increased costs.

Point 7a.-Quantitative and qualitative information about market risk

Market risk represents the risk of losses that can influence our consolidated financial position, operating results or cash flows.

Interest rates

Our exposure to market risk for changes in interest rates mainly relates to debt obligations.31 May 2002. We also have no postponement2002. We have cash flow exposure at our rotating credit facility, our term loan facility and certain industrial income bonds subject to variable liboror or adapted base interest rate in 31 May2002 collects $ 235.1 million.Rate and the adjusted basic interest rate have led to interest costs with around $ 2.3, $ 2.2 and $ 1.4 million in the 2002, 2001 and 2000 financial year.

We have had exposure to the cash flow on our synthetic leasing facility subject to variable Libor -Price Fixing.We also have cash flow exposure on our vehicle rental with variable interest rates.The lease agreement would have led to the rental costs with approximately changed. $ 1.5, $ 2.1 and $ 2.8 million in the 2002, 2001 and 2000 financial year.

Currency risks

We are exposed to currency risks in the scope of fluctuations in the British pound of Sterling.Money rolls.

Point 8. Accounting and additional data

Childcare Learning Centers, Inc.en and subsidiaries consolidated balance

(Dollars in thousands, except amount per share)

May 31, 2002 1 June 2001 Switch on current assets:

Cash and cash equivalents .................................................. .................... $ 8,619 $ 3,657 progress, net ....................... ...................................................... .... ......... 31,657 28,523 Prepaid editions and supplies ............................... .... ......................... 9,948 7,835 deferred income taxes ................ ..... ................................................. .......... 13.904 13.514

Total current assets ........................................................... ......................... 64.128 53.529

Ownership and equipment, net ..................................................... ....................... 702,160 666,227

Delayed income tax ............................................... ............................... 8 358 Goodwill .............. .................................................. ........ .................................. 42.565 44.100 Other assets............ .............................................. ............ ...............................35,324 41,153 $ 844,185 $ 805,367

Bank cover ........................................................ ..... ................................. $ 9,779 $ 9,328 accountsThey have to be paid ... .... .................................................. ........ ..................... 9,836 8,296 The current part of long -term debt ............. ........ ................................. 6,237 2.588 editions and other obligations ... ............................................. 112,667 108,796

Total current obligations ........................................................... ...................................................... .... .................................................. ........ ................... 138.519 129.008

Long-term debt ................................................ ....................................... 526,080 524,370 self -insurance for long -term obligations...... .......................................................... ............................... 12,208 5,737 other non -current obligations............ .......................................... ................ ........ 28,386 23,702

Total responsibility ........................................................ .............................. 720.916 698.636

Obligations and events (comments 7 and 13)

The equity of the shareholders: preference shares, $ 0.01 nominal value;

Excellent ................................................................................ -

Ordinary shares, $ 0.01 subject value;.................. 198 198

Payed capital ........................................................... .................... 28,107 28,107 comments from shareholders ........................ ........................... (1,426) (1,355) retain income ............... ...................................................... .... .............. 96,882 80.339 collected other extensive loss .......................... .... ............... (492) (558)

The equity of the shareholders ...................................................

Childcare Learning Centers, Inc. and subsidiaries Consolidated statements about operations

(Dollars in thousands, except amount per ......................................$ 829,434 $ 743,397 $ 696,846 operating costs:

Wages, wages and benefits ................................ 460.791 407.990 383.719 Depreciation and amortization ............................. 59.293 46.632 40.042 rent ......................................................................... 49,12039.240 29,949 Order Conditions Accounts ........................... 7,499 6,394 5,107 Other .................. .................................................. ........

Total operating costs ............................. 756,307 668,432 619.756 business income ............. ............................... 73,127 74.965 77.090

Investment revenues ............................................... ............. (2,265) - - -

Income before income tax and cumulative effect of a change in the accounting principle, net .............................. .. ...

Income tax Costs ....................................................... .. 10,801 10,266 12.138 income before the cumulative effect of a change in

Accounting Principle, Net ................................. 16.543 16,461 19,963 Cumulative effect of a change in accounting

Principle, Net Income Tax Advantage of $ 484 ........ - (790) - Netto -income ........................... ........................... $ 16,543 $ 15,671 $ 19,963

Netto -income Perpendant Power: Basic income before the cumulative effect of a change

In the accounting principle, net ................................ $ 0.83 $ 0.86 $ 1.05

Cumulative effect of a change in the accounting principle, net after taxes ...............................................

-(0,04)-

Net income .................................................

In the accounting principle, net ................................ $ 0.82 $ 0.85 $ 1.04 cumulativeEffect of a change in accounting

Principle, net by taxes ..........................................

-(0,04)-

Net income .................................................

Weighted average joint shares outstanding: basic ........................................................... ...................................................... .... .................................................. ........ .............................................. ............ .......................................... .............. 19,819................. ....................... 20,110,688 19,274,502 19,194,170

See associated notes for consolidated accounts.

Childcare Learning Centers, Inc. and subsidiaries Consolidated declarations of equity and extensive income from shareholders

(Dollars in thousands)

Comments Cumulidated Further debitable other general shares owed from certain extensive share amount amount Capital shareholders Entry Table Total balance on 28 May 1999 ......................... 18,961 .674 $190 $ 8,260 $ (1,128) $ 44,705 $ (237) $ 51,790 Extensive income:

Netto meeting ...................................... - - - - - - - ------

Totally extensive income .......... 19,787 established shares ....................... 40.216 -452 (338) -114 return ofOrdinary shares .................. (38.016)- (396) --- (396) stems from the assembly of the assembly

Notes of the shareholders debitible ............- 280--2080 reversal of pre-fresh starting supply ...- 5,098 --- 5.098

Balance on 2 June 2000 .................. 18.963.874 190 13.414 (1.186) 64.668 (413) 76.673 Extensive income:

Netto meeting ...................................... - - - - - - - -------15,671- 15.671 Cumulative translation ...----- (145) (145)

Totally extensive income .......... 15,526 edition of joint shares ........................... 882.024 8 12.074 (264) - - 11,818Recovery of joint stock .................. (26.546) - (324) - - - (324) is from the assembly of

Notes of shareholders claim ............- 95--95 reversal of pre-fresh starting tools ...- 2,943 --- 2.943

Balans 1 June 2001 .................. 19,819.352 198 28.107 (1.355) 80.339 (558) 106.731 Extensive income:

Netto meeting ...................................... - - - - - - - ------- 16.543- 16.543 Cumulative translation overview ...---- 66 66

Totally extensive income .......... 16,609 income from the collection of

Notes of shareholders debitible ............ - -

- 35

35 issues of notes of shareholders

Claims ............................................ - - - - -- - (106) - - (106) Balance on May 31, 2002 ................ 19,819,352 $ 198 $ 28,107 $ (1,426) $ 96,882 $ (492) $ 123.269

See associated notes for consolidated accounts.

Childcare Learning Centers, Inc. and subsidiaries Consolidated statements about Cash Flow

(Dollars in thousands)

The tax year ended on 31 May 2002 1 June 2001 2 June 2000 Cash Flows from Operations:

Net income .................................................

Provided by operational activities: depreciation ............................................. ............ 55,968 45,480 40,042 shielding the financing costs,

Goodwill and other intangible assets ............... 6,311 4.132 3,056 Determination of questionable accounts .......................... 7,499 6,394 5,107 losses on investments of minorities ............................................

Equipment ........................................................ (529) (1,125) (680) Deposited tax costs (benefit) ............................... 6.431 (116) 4,271 changes in operational assets and obligations:

Increase the claims ................................... (10.387) (9,492) (10.102) Fall(increases) in prepaid editions and

Supplies ....................................................... (2,113) 273 (1,188) decrease (increase) in other assets .................. (1,485) 3.852 (5.611) Increase the accounts paid,to pay, built up

Expenditure and other obligations ...................... 6.897 4.747 6,515 other, net ................................................................ 66 (145)(176)

Net cash provided by operational activities ................ 87.466 69.671 61.197 Cash flows of investment activities:

Purchase of ownership and equipment ......................... (95.843) (94.269) (82.473) Acquisitions of previously constructed centers ........... - (17.257) (9,490) Acquisition of a new subsidiary, Netto after acquired cash ... - (15.189) - Investments Responsible under the cost method ...... - (10.074) (5,460) (5,460) Expenditure of the issue of claims ........................................................ - (4,836) - Proceeds from the sale of real estate and equipment .......... 8,862 7,948 1,709 yield from collecting claims .............. 26 145 63

Net cash used by investment activities ....................... (86,955) (133.532) (95.651) Cash flows of financing activities:

Proceeds from long -term loans .......................... 57.128 108,000 78,000 payments in long -term loans ............. ............... (51.769) (44.836) (43.349) Payments on capital rental contracts ................. .. ...... ................... (1,288) (1,647) (1,258) comes from publishing joint shares ...........

Reception ..................................................... ............... 35 95 280 Purchase of joint shares ............................ ........ - (324) (396) issues of the claims of shareholders ................ (106) (264) (338)Bank cover ..... ............................................

Net cash provided by financing activities ................ 4,451 66.073 30.149 Increase (VAL) in cash and kasequivalents 4,962 2.212 (4,305)

Cash and kasequivalents at the start of the financial year ................................................... ...................... 3,657

1.445 5.750

Cash and kasequivalents at the end of the financial year ................................................... ............................ $ 8,619

$ 3,657 $ 1,445

Additional cash flow information:

Paid interest ........................................................ ... ................ $ 41,360 $ 45.415 $ 41,193 paid income tax, net .................... .... ......................... 11.614 12.552 3,387

Non-contract economic activities: real estate and equipment under capital contracts .............. $ 4,390 $ 559 $ 410

See associated notes for consolidated accounts.

Childcare Learning Centers, Inc.en and subsidiaries comments on consolidated accounts

1. Summary of a significant accounting policy

Business of Business and Basis.KinderCare is the leading provider of profit motive of educational services and care for children aged six weeks and twelve years in the US.And around 129,000 children and their families served.Of the 1,264 centers, 1,262 were located in 39 states in the United States and two centers were located in the UK.

On 3 October 1996 we signed an agreement and plan for merger with KCLC Acquisition Corp., called KCLC.KCLC was a complete subsidiary of KLC Associates, L.P., referred to as partnership, a partnership founded in the direction of Kohlberg Kravis Roberts & Co., Called KKR, a private investment company.On May 31, 2002, the partnership had 79.0% of our excellent joint share.

Consolidated accounts include accounts for KinderCare and our entire subsidiaries.All with important intercompany -balance and transactions have been removed in consolidation.

Financial years.The year ends Friday closest to May 31.

Income recognition.We acknowledge income for childcare services as earned in accordance with the accounting bulletin of the staff ("SAB") nr. 101, income reconciliation in accounting education and other services.Education costs are debited during the estimated average registration period, so to not be longer than 12 months.

We implemented SAB # 101 on 3 June 2000.For non-residual registration and education costs, which were initially recognized in the fourth quarter of tax policy 2000. This one-off tax was registered as a cumulative effect of a change in the change in the accounting principle change.

Advertisem*nt.Computer software developed or obtained for internal use.

Cash and cash equivalents.The cash and kasequivalents consist of cash in banks and liquid investments with a duration on the date of acquisition, no more than 90 days.

Ownership and equipment.To practice such a chance.

Our property and equipment are written off using the following estimated useful time:

Life Buildings ........................................................... ........................................................ .. 2 to 15 years of improving lease ............................................ ........... ....... 2 to 15 years of computer equipment .......................... ............ ....................... 3 to 5 yearsAll other equipment ........ ............ .......................................... ......... 3 to 10 years old

Activation effects.Long -term assets and certain identifiable immaterial things to be determined and used are assessed on limitations when events or changes in circ*mstances indicate that the accounting quantity of the active cannot be restored for each active with the accounting value of such an active one.-Downs of $ 3.6, $ 1.0 and $ 1.1 million, registered with regard to certain under -priests and undeveloped centers.

Deferred financing costs.Authorized financing costs are depreciated linearly about the lifetime of the related debt facilities.

Investments.Investments in which we do not exert significant influence or have more than 20% of the investment votes that are accounting under the cost method.

Self -insurance programs.We are confident for certain levels of general responsibility, employee compensation, car, real estate and medical coverage of employees.Claims made.

31 May 2002 1 June 2001 2 June 2000 balance at the start of the financial year ..... $ 31,483 $ 29,485 $ 30,341 costs ........................................................................ .. (27.764) (21.594) (21,646)

Balance at the end of the tax year ........ 35,473 31,483 29,485 Less current part of Self

Insurance obligations .................................. 19,750 15,664 14,271 long term part of self -insurance policies

Obligations ..................................... $ 15,723 $ 15,819 $ 15,214

Income taxes.The income tax costs are based on financial accounting income before tax.The income taxes used are mainly due to the expected tax consequences of temporary differences between

Financial and tax reporting.If it is more likely than not that part or all deferred tax capacity will not be realized, a valuation surcharge will be determined.

On shares -based compensation.We measure the compensation costs for our shares -based employee compensation plans using the method prescribed by Accounting Principles Board Opinion ("APB") Nr.

Extensive income.Including income does not include reversing of certain safety safety security as a result of a new starting report with regard to our emergence of bankruptcy in March 1993. Such emergency security represents reserves that correspond to the tax benefit of prior operational operational operation.

Net income per shares. The power was a result of the diluted effect of options that considered potential ordinary shares.

The fiscal year ended on 31 May 2002 1 June 2001 2 June 2002 Basic Average Ordinary shares weighted

Excellent ................................................................. 291.336 201.776 240,250 damn weighted average orders

Excellent ..................................... 20.110.688 19,274.502 19.194.excluded from potential shares

Because of their anti-dilual effect ............ 299.060 394,910 185,000

Reporting for segments.We work in a reportable segment.

Derived instruments and coverage activities.SFAS No. 133, in which derivated instruments are explained and discovering activities that have changed the accounting and reporting positions for derivative instruments, including certain derived instruments embedded in other contracts and for hedging activities.2, 2001, without any resulting influence on our financial position or business results.

Recently published accounting issues.We have adopted SFAS No. 141, business combinations, during the first quarter of the 2002 financial year.

SFAS No. 142, goodwill and other intangible assets, must release the depreciation of goodwill and other intangible assets with indefinite use of use.In the 2002, 2001 and 2000 financial year. We expect such a depreciation of goodwill in the financial year 2003. However, we still assess the impact of the approval of all provisions of

SFAS No. 142 and has not yet determined the impact of acceptance on our financial position and business results.

SFAS no. 144, which explains the restriction or removal of long -term assets, tackles accounting and reporting for limiting or removing assets in the long term.-Term assets, from removal of a segment from a company and extraordinary, unusual and rare events and transactions to record the activities to record more removal transactions.We believe that most of our future center closures will now be categorized as stopped operations..

SFAS No. 146, which takes into account the costs related to starting or removal activities, requires registration costs in connection with start or removal activities on their real value when a responsibility is obliged, instead of the date of obligation to an exit or exit orremoval plan.Stfas.No.146 is effective for removal activities initiated after December 31, 2002.We assess SFAS No. 146 and have not yet determined the impact of approval on our financial position and business results.

Use estimates.Yields and expenditure during the reporting period.

Reclassifications.The amount of the previous period has been classified again to comply with the presentation of the current year.

2. Debtors

Claims consisted of the following with dollars in thousands:

31 May 2002 1 June 2001 Education ............................................. .................. $ 33,996 $ 32,037 supplement for doubtful accounts ............... (6,381) (5.713) 27,61526,324 Other things ................................................. ......... 4.042 2,199 $ 31,657 $ 28,523

3. Prepaid editions and supplies

Prepaid editions and supplies consisted of the following with dollars in thousands:

31 May 2002 1 June 2001 Inventory ............................................. ............ $ 4,167 $ 4.001 prepaid rent .................................... ................. 2,211 2.104 Other .............................. ............................. 3,570 1,730 $ 9,948 $ 7,835

4. Ownership and equipment

Ownership and equipment consisted of the following with dollars in thousands:

31 May 2002 1 June 2001 Land ......................................... .. ..... …………… ........................................ ...... 193,308 175.991 Construction in implementation ........................................ 34.641 58,234 972.603 899.911 Collected depreciation and amortization .. (270.443) (233.684) $ 702,160 $ 666.227

5. Other activation

Other assets consisted of the following with dollars in thousands:

May 31, 2002 1 June 2001 Minority investments, cost method ............................. $ 15,757 $ 15,554 deferred financing costs .. .. .. .......................................... 11.405 14,390 comments debtors .... ........................................................ ...... .... 2.548 4,779 Other ..................................... ...... .................................. 5.614 6,430 $35.324 $ 41,153

6. Acquired costs and other obligations

Costs and other obligations consisted of the following with dollars in thousands:

31 May 2002 1 June 2001 Compensation, Benefits and related taxes ...... $ 30,589 $ 28,151 deferred income ........................ ................................. 20,032 18,483 The current part of self -insurance ....... .. ........ 19,750 15,664 included interest ...................................... ......................... 8,879 8,293 income tax .................................

7. Long term debt

Long -term debt consisted of the following with dollars in thousands:

31 May 2002 1 June 2001 Secure:

Loan under the rotating credit facility, interest on: • 31 May 2002 - adapted Leibor plus 1.50% from 3.34% to 3.67% • 1 June 2001:

- Adapted Libor Plus 1.50% from 5.56% to 5.85% - Alternative basic rate plus 0.25%, equal to 7.25% ........................ $ 175,000 $ 167,000

Thermilan facility, interest on adapted Libor Plus 2.50%, corresponding to 4.43%and 6.56%............................... .................................... 48,000

Industrial income income bonds for variable interest rates from 1.60% to 2.50% and 4.10% to 5.00% respectively, supported by credit letter, aged calendar 2002 to 2009 .............. .... ................................... 12,598 12,598

Industrial turnover bonds protected with real estate with due date for calendar 2005 to interest rates from 3.33% to 4.55% and 4.90% to 9.75% ....................... ................................................... ............................... 3,846 4.033

Real and personal mortgage loan that must be paid in monthly installments via calendar 2005, interest from 8.00% to 8.25% .............................. 920 2.164

Unsecured: senior subordinate banknotes as a result of calendar 2009, interest of 9.5%to pay

Half -yearly ............................................... ....................................................290,000 290,000

Comments that must be paid in monthly installments via agenda 2008, the interest rate of 8.00% ................................. .. ........................................................ ...... .................. 2,453 3.163

532,317 526.958 Less current part of long -term debts .................................................... .. .................... 6,237 2.588 $ 526,080 $ 524,370

Credit facilities.We have provided credit facilities by a syndicate of financial institutions. Loan Facility, of which $ 50.0 million was drawn in 1997 and $ 40.0 million. Is since then expired and the $ 300.0 million. Respasting credit facility.The rotating credit facility comprises the loan capacity of a maximum of $ 75.0 million for credit letters and up to $ 25.0 million for selected short -term loans.Separation capacity.

Credit facilities bear interest rates according to our possibility at one of the following rates that can be adjusted in quarterly steps based on achieving performance goals:

• An adapted Libor -speed Plus

• In the case of the term loan, a debt for EBITDA-dependent rate is of 2.50% to 3.00%.

• In the case of the rotating credit facility, a debt to EBITDA or EBITDA has an interest -tax rate from 1.25% to 2.50%.

• An alternative basic rate plus

• In the case of the term loan, a debt for EBITDA-dependent rate is of 1.25% to 1.75%.

• In the case of the rotating credit facility, a debt to EBITDA or EBITDA has an interest -tax rate from 0.00% to 1.25%.

EBITDA is defined in the credit facilities such as net income before interest costs, income taxes, depreciation and amortization.

On May 31, 2002, the outstanding amount was $ 47.5 million on the term loan and the interest was 4.43%, which was adapted Libor Plus 2.50%., with dollars in thousands, May 31, 2002:

Customized libor plus 1.50%: 3.67%........................................ ....................... $ 65,000 3.43% ..................... ................................... 55,000 3, 56%........ ............................................... ....... ........ 50,000 3.34%............................ ......... ...................... 5,000

$ 175.000

We also pay a obligatory allowance to the rotating credit facility intended at a rate that can be adapted quarter in steps based on a debt to EBITDA or EBITDA for interest -cost conditions ranging from 0.25% to 0.50% per year.The miracles of the obligations under the credit facilities.0.5 million.

Moreover, we pay a credit allowance, which is 0.125% per year.28.5 million dollars committed under the outstanding credit letter.

The installment loans are subject to compulsory payment with the income from the specified sale of assets;No reinvestment in our company.Close the credit facilities, but only insofar as such income is generally larger than 50 million dollars.

Credit facilities contain usual covenants and provisions that limit our assets to:

• Change his business,

• explain yield,

• Subsideerlinks,

• Make extra debts and

• Low capital costs.

In addition, the credit facilities that we must meet the defined interest rate inclination conditions contain and the lever conditions are not allowed to exceed.

Series A via e -industrial income bonds.We are obliged to various issues of industrial income bonds called reimbursed IRBs.31, 2002, The repaid IRBs wore interest rates against variable rates from 1.60% to 2.50%, and each is secured with a credit letter under the continuous credit facility.

Other industrial income bonds.We are also mandatory to various issues of other industrial income bonds that grow up to calendar 2005. The most important amount of such IRBs was used to the costs of acquiring, building and equipping specific childcare centers..On May 31, 2002, the IRBs wore interest rates at 3.33% to 4.55%.

Senior subordinate banknotes.In the 1997 financial year we spent $ 300.0 million spent main amount of 9.5% unsuccessful senior subordinate banknotes under an indentation between Marine Midland Bank, as manager and US.The amount of our 9.5% senior subordinate notes at a total price of $ 9.6 million.This transaction resulted in the depreciation of deferred financing costs of $ 0.3 million and a profit of approximately. $ 0.1 million.

The 9.5% banknotes are due to February 15, 2009 and are general uncovered obligations, arranged behind all existing and future debts that are not explicitly arranged or equalized to the banknotes.5% per year to pay semi -annual on 15 February and 15 August every year.The 9.5% banknotes can be exchanged at any time, in whole or part the most important amount of the notes in the first year and fell annually to couples in February15, 2005, plus built up and unpaid interest, if present, to theDate of repayment.

After a change in control, we are obliged to make an offer to reduce all notes that are correctly offered at a price that is equal to 101% of the most important amount plus accrued and unpaid interest for the return date.

Introduction of the notes contains connected that limit our power to:

• Get up extra debts or mortgage rights,

• to pay other debts,

• Pay dividend or make other benefits,

• Fighting of share interests,

• completion of assets,

• Enter the transaction with affiliated companies,

• merger or consolidation with another person or sale, assignment, transfer, leasing, distribution or other removal of all or essentially all our assets, and

• Go into guarantees of debts.

Connected.Many of our loan agreements contain the standard pags and limitations of the lender.

Main payments.The total minimum annual duration of the long -term debts for the five financial years after 31 May 2002 is as follows, with dollars in thousands:

Consident Year: 2003 ...................................................... ....................................................... ....... ........... 176,1442005 ............................. ......... ............................................. ... 4.5542006 ......... ....................................... ................... ................... 46,4172007 ......... ..................... ............................. ....................... 263sters.............................. .................. 298,702 $ 532,317

8. Restructuring tax (reversal)

During the fourth quarter of the tax policy in 1999, the Board of Directors approved a provision of $ 4.0 million for the planned early termination of certain Center -Drift League contracts.Costs related to the closure of centers.61 Under -performing rental centers were closed: 36 in the financial year 2001 and 25 of the financial year 2000.

We have paid contractual obligations and/or entered into to pay $ 3.9 million in termination and closing costs for such closed centers.

A summary of the final reserve of the lease was due to dollars in thousands:

Balance on May 28, 1999 .................................................... ... ............................................ $ 4,000 payments related to center ........................................................... ...... ......... (1,054) reversal related to abandoned exit plans and remaining reserves ....................... .. (1,282) Reduction related to the expansion of closing data in the 2001 financial year ..................... (111) Provision with regard to new exit plans initiated in the financial year 2001. ............................... 1.393

Balance on 2 June 2000 .................................................... .............................................. 2,946Payments regarding the closed center ...................................................... ... ......... (2,176) Contract obligations with regard to the closed centers ........................... ... ............................ (100)

Balance on June 1, 2001 .................................................... ... ...................................................

An overview of the total financial operational benefit in the 61 closed centers was due to dollars in thousands:

The financial year ending on 31 May 2002 1 June 2001 2 June 2000 Net income ............................... $ 2,131 $16.188 Operational loss..................... 139 938 3,448

9. Income tax

The provision for income taxes that can be attributed to income before income tax and cumulative effect of a change in the accounting principle consisted of the following, with dollars in thousands:

The financial year ended on 31 May 2002 1 June 2001 2 June 2000 Current:

Federal .............................. $ 3,042 $ 7,025 $ 5,212 is .................................... 1.388 3,403 2.736 foreign ................................ (60) (46) (81) 4.370 10.382 7.867

Sent: federal ................................ 5.868 152 3,825 state .................................... 753 23 478 foreign ................................ (190) (291) (32) 6.431 (116) 4,271 $ 10,801 $ 10,266 $ 12.138

A reconciliation between the legal federal income tax rate and the effective income tax rates for income before income tax and cumulative effect of a change in the accounting principle was as follows, with dollars in thousands:

The financial year ending on 31 May 2002 1 June 2001 2 June 2000 expected tax provision to Federal

The rate of 35% ....................................................... ... (780) (1,050) (1,002) Other, net ................................... ....................... 8 706 209

$ 10,801 $ 10,266 $ 12.138

The tax effects of temporary differences that give rise to important parts of the deferred tax assets and deferred tax obligations were summarized as follows, with dollars in thousands:

May 31, 2002 1 June 2001 deferred tax assets:

Self -insurance reserves .................................................... .. $ 11,693 $ 10,486 -operational losses for earlier ...................................... 1,9873,481 capital loss distribution .......................................... .....- 76 ownership and equipment, basic differences ...................... 226 1,082 tax credits ........... .......... ............................................ .............. 7.214 8.733 Compensation payments .................................... ........... ...... 4.668 4.211 Other .............................. ....... ...................................... 5,302 4.823

Totally exposed tax assets ......................................... 31,090 32,892 less rating allowance ...

Net deferred tax assets ...................................................

Ownership and equipment, basic differences ...................... (14,707) (9,785) Property and equipment, basic differences between foreign

Subsidiaries ..................................................... ................ (5,716) (5,945) Stock basis for foreign subsidiary .........................) (10)

Induced exposed tax obligations at gross .................. $ 1,704 $ 8,135

Waarderstoarlag fell by $ 0.2 million in the 2002 financial year due to the exploitation of domestic capital loss and foreign net loss transfers.Time The amount of deferred tax assets that are considered realizable can be adjusted in the future, since estimates of taxable income or the timing are revised.Required in valuation allowance due to an increase in tax costs in future periods.

On May 31, 2002 we had $ 5.7 million net operational losses available for performance that runs over various data until the financial year 2022. The use of net operational losses is subject to an annual limitation.We have tax credits available for federal income tax purposes of $ 7.2 million, which are available to compensate for future federal income tax during the 2022 financial year.

10. Benefit clover

Acquisition and option plans. And subsidiaries, called the 1997.1997 plan plan approves subsidies for share or share options for 5,000,000 shares of our joint share.-Qualified stock options or other types of rights specified in the 1997 plan.

During the 2001 and 2000 financial year, certain officers bought 22,024 and 40,216 shares of limited joint shares together in accordance with the 1997 plan to buy limited shares.Up to 4.44% per year, half annually paid on 30 June and 31 December. On 31 May 2002, the term banknotes amounted to $ 1.4 million and are reflected and reflected.

Subsidies or prices under the 1997 plan are provided at real value as determined by the Board of Directors. Share. The 31 May 2002 Options Out had popults, ranging from $ 9.50 to $ 14.15.a overview of excellent options wasas follows:

The number of

Stock

Weighted average

Excellent exercise of the price 28 May 1999 .................... 1,474,186 $ 9.54Granted .................

Excellent on 2 June 2000 .................. 1,669,684 9,87Grant ........................

Excellent on June 1, 2001 .................. 1,772,378 10.12 Grant ........................

Excellent on May 31, 2002 ................ 1,862,378 $ 10.32

The assigned stock options were non-qualified options that earned 20% per year for a period of five years.A total of 1,410.464 and has a weighted average usage price of $ 9.75.

As stated in comment 1. Summary of a significant accounting policy, we only have the information in SFAS no. 123.

The financial year ended on 31 May 2002 1 June 2001 2 June 2000 Adapted net result ....................................... ... ............... $ 15,702 $ 14,695 $ 19,176 adapted net result per stock:

Basic income Persion Before the cumulative effect of a change in the accounting principle, net ............ $ 0.79 $ 0.81 $ 1.01

Cumulative effect of a change in the accounting principle, net after taxes ...............................................

-(0,04)-

Adapted net result ................................ $ 0.79 $ 0.77 $ 1.01Damn income perstock pre -accumulated

Effect of a change in the accounting principle, net .. $ 0.78 $ 0.80 $ 1.00

Cumulative effect of a change in the accounting principle, net after taxes ...............................................

- (0,04) 1,00

Adapted net result ................................ $ 0.78 $ 0.76 $ 1.00

A summary of the weighted average daily values was as follows:

The financial year ended on 31 May 2002 1 June 2001 2 June 2000 weighted average real value using black

Scholes Option Price Model ....................... $ 5.55 $ 5.07 $ 4.91 Agegenuments used to estimate the present

The value of options on the allocation date: Volatility ............................................................ 0.0% 0.0% 0.0% Number of years for training options ....... 7 7

Savings and Investment Plan. Savings and Investment Plan, referred to as a savings plan, with effect from 1 January 1990 and approved The transformation of savings plan employees is eligible to participate in the savings plan on the three-month entry date after the employee at least six monthshas been employed and is employed by more than 1,000 hours of service.Participants can contribute in steps of 1% to 18% of their reimbursem*nt for the savings plan.

Non -qualified compensation plan.The Board of Directors, KinderCare Learning Centers, Inc.Niet -qualified postponed compensation plan, with effect of 1 August 1996 and approved the transformation with effect from 1 August 1996. Under the non -qualified deferred compensation plan, determined,

Very compensated or important management employees are given the opportunity to postpone the receipt and income tax of the reimbursem*nt of such employees.

The deferred compensation plan of the director.On May 27, 1998, the Board of Directors expressed the Childcare Learning Centers, Inc. de Directors compensation plan.are credited to a Phantom sharing account The number of shares in the Phantom share that is attributed to the director's account will be determined on the basis of the amount of deferred compensation shared by the then real value per share.

Benefits of the deferred compensation plan of the director are made in cash and reflects the value per. The share of the joint share at the time of distribution multiplied by the number of Phantom shares attributed to the director's account.The benefits of the deferred compensation plan of the director come on the previous (1) on the first day of the year after the director after retirement or separation of the Board of Directors or (2) the termination of the deferred compensation plan of the director.

11. Information about the daily value of financial instruments

Estimations of real value, methods and assumptions are described below for our financial instruments on 31 May 2002 and 1 June 2001.

Cash and kasequalents, progress, investments and current obligations.

Long -term debt.The estimated real value of our $ 290.0 million on 9.5% senior subordinate banknotes were $ 290.0 and $ 285.7 million on 31 May 2002 and 1 June 2001, based on recent market activities.Remaining long -term debt of $ 242.3 and $ 237.0 million per year.31 May 2002 and 1 June 2001 approach approximately the market value based on current rates that, according to management, can be reached for similar debts.

12. Acquisitions

In April 2001 we have Mulberry Child Care Centers, Inc.taken over, called Mulberry, a company for childcare and early education based in Dedham, Massachusetts.We have taken over 100% of Mulberry's share in exchange for 860,000 shares in our joint share worth $ 11.8 million.Shares that have been exchanged from certain former shareholders in Mulberry.Our's subsidiary, KC distance Learning, Inc., take over NLKK, Inc., referred to as NLKK, an external training company based in Bloomsburg, Pennsylvania in June 2000. NLKK was purchased for $ 15, 1 million cash.Se "consolidated statements about cash flow."

Both acquisitions were explained during the purchase method.Million, which was deterred using the linear method above 20

Several years.Goodwill from the purchase of NLKK amounted to $ 15.2 million, which was written off using the linear method for 20 years.

13. Obligations and possibilities

We carry out part of our activities of rented or subleasable daycare center.Limitations, as we were everyone in accordance with 31 May 2002. A majority of leases is classified as operational lease contracts for financial reporting purposes.

During the fourth quarter of the 2002 financial year we started marketing efforts to sell centers to individual real estate investors and then rent them back.THE.

Each vehicle in our fleet is rented in accordance with the conditions of a non-channelable master lease of 12 months that can be extended after the first rental period of 12 months., the type, model and age of the rented vehicles.and $ 11.1 million respectively for the 2002, 2001 and 2000 financial year.

The following is a timetable for future minimum lease contracts under capital and operational lease contracts with initial or remaining non-defined lease conditions for a year on 31 May 2002 with dollars in thousands:

Capital letters

Operation of lease contracts

Consident Year: 2003 ......................................................... ................................................. ......... ... 2.234 28,520 2006 ....................................... ........ .................... 2,290 25,818 2007 ................... ........ ...................................... 2,400 24.216 Next year ......... ............................................. ............. ... 18,836 139,804 31,092 $ 390,599 Small amounts that represent interest ......................... ......................

Registration value of leasing payments with minimal capital ............................................... ................. $ 16,923

The current value of the future minimum lease for rental contracts classified as capital contracts was as follows, with dollars in thousands:

May 31, 2002 1 June 2001 Contemporary value of minimum capitalization -Leasing payments ... $ 16,923 $ 13,644 less the current part of the lease ... 854 1,668

Long -term activated lease obligations ................ $ 16,069 $ 11.976

Owned and equipment registered under capital camp contracts were $ 21.9 and $ 17.3 million, respectively, respectively.31 May 2002 and 1 June 2001.

On May 31, 2002 we had a rotating credit facility of $ 300.0 million, of which $ 28.5 million was committed under the outstanding credit letter and $ 175.0 were drawn.

The synthetic leasing facility closed for positions on 13 February 2001, and on 31 May 2002, $ 97.9 million was financed via the facility.is on 13 February 2004. We are obliged to inform the landlords before 14 May 2003, whether we will perform our chances or Ejat merchant centers at the end of the rental period.We are obliged to market the rented centers to third parties.

The synthetic leasing company includes covenants and limitations that are considerably identical to those in our credit facility.

We are currently and are subject to claims and lawsuits that occur in the normal business process from time to time.cannot be given with regard to the ultimate result of such actions.

14. DiMIEMINATION RESULTS (not revised)

A summary of the operating results for the 2002 financial year and the 2001 tax policy was due to dollars in thousands, except per year. Share.The first quarter of each financial year contained 16 weeks and the second, third and fourth quarter contained every 12 weeks.

First fifteen minutes

Second fifteen minutes

Third quarter

Fourth quarter (A)

The financial year ended on 31 May 2002 income, net ............................................... .. .... $ 248,450 $ 192,148 $ 187,600 $ 201.236 business income .................................. 11,095 19.305 21.437 21,290 Netto Income (loss) ............................... (1,770)5,453 7.148 5,712 Netto -Income (loss) PER.

Basic Net income (loss) Per share ........ $ (0.09) $ 0.27 $ 0.36 $ 0.29 damn net result (loss) perstock ..... (0.09)0.27 0.35 0.29

The financial year ended on 1 June 2001 income, net ............................................... ..... $ 216,492 $ 166,901 $ 168.007 $ 191,997 Business income ............................. 14.698 17,145 19,872 23,250 Nettores result (loss) ............................... (1,045) 3.661 5.451 7,604 Netto-Income (loss) per part:

Basic income (loss) per

Cumulative effect of a change in the accounting principle, net after taxes ...

(0,04)

Netto -income (loss) ........................ $ (0.05) $ 0.19 $ 0.29 $ 0.39 diluted income(loss) P. Supply for

Cumulative effect of a change in the accounting principle, net ................. $ (0.01) $ 0.19 $ 0.28 $ 0.39

Cumulative effect of a change in the accounting principle, net after taxes ...

(0,04)

Netto -income (loss) ........................ $ (0.05) $ 0.19 $ 0.28 $ 0.39

(a) Net income in the fourth quarter of the 2002 financial year included a loss of minority investments of $ 1.4 million, net after taxes.The financial year compared to $ 0.3 million in the same period last year.

15. Subsequent event

On July 15, 2002, the Board of Directors approved a 2-for-1 sharing division of our nominal value of $ 0.01 with effect from 19 August 2002 for shareholders in the position on August 9, 2002. All references to the number of joint shares andPr.T. The equity amount within these consolidated accounts and comments thereof for the 2002, 2001 and 2000 financial year have been changed to display the sharing division.shares.

Independent Auditors Report The Board of Directors and shareholders Childcare Learning Centers, Inc.We have the corresponding consolidated balances of KinderCare Learning Centers, Inc.en and subsidiaries of 31 May 2002 and 1 June 2001 and the associated consolidated consolidated activities, equity and comprehensive and comprehensive and extensive incomeCash flows for each of the years ending on 31 May 2002, 1 June 2001 and 2 June 2000. These accounts are responsible for the management of the company.Our responsibility is to give an opinion about these accounts based on our audits.Financial statements are free of considerable error information.of the financial statements.We believe that our audits provide a reasonable basis for our opinion. And subsidiaries per31 May 2002 and 1 June 2001 and the results of their activities and their cash flows to each of the years ending on 31 May 2002, 1 June 2001 and 2 June2000, in accordance with the accounting principles that are generally accepted in the United States States.Deloitte & Touche LLP Portland, Oregon July 26, 2002

Point 9. Changes in and disagreements with accounting people about accounting and financial information

Nee.

Of 3

Point 10. Directors and directors of the registrant

Drivers

The following table shows information about our board of directors.For information about the ownership of the directors of the joint share, see "Point 12. Property possession of certain affordable owners and management and related shareholders."

Name and age

Position with us, the first selected director of the year,

Most important occupation in the course of at least the past five years and other director

David J. Johnson (56) ............................. 1996 earned Mr. Johnson as president, CEO and chairman of the boardOr Red Lion Hotels, Inc., who was previously a KKR company or its predecessor.Johnson, a general partner for Hellman & Friedman, a private equity investment company located in San Francisco.From 1986 to 1988 he was a president, chief operating officer and director of Dillingham Holdings, a diversified company with headquarters in San Francisco.From 1984 to 1987 was Mr.Johnson President and CEO of Cal Gas Corporation, a very important subsidiary of Dillingham Holdings.

Henry R. Kravis (58) (A) ................... Henry R. Kravis has been on our board of directors since February 1997.He is the CEO of KKRE & CO.L.L.C., Limited Liability Company, which acts as the general partner for KKR.HAN is also director of Accell-KR Company, Decuride Corporation, Alliance Imaging, Inc., Amphenol Corporation, BRW Acquisition, Inc(Bristol West Insurance Group), signs Chemical, Inc., Boyds Collection Ltd., Evenflo Company, Inc., KSL Recreation Corporation, Primedia, Inc., Sotheby's Holdings, Inc., US, US NATURAL Resources, Inc.,,United Rictus Company and Willis Group Holdings Limited.

George R. Roberts (58) (A) ................ George R. Roberts has been on our board of directors since February 1997.He is the CEO of KKR & CO.L.L.C., the company with limited liability, which acts as the general partner of KKR.HAN is also director of Accell-KR Company, Decay Corporation, Alliance Imaging, Inc., Amphenol Corporation, Chemical signs, Incd, Boyds Collection, Ltd., Dyton Power & Light, Inc., EvenFlo Company, Inc., Inc., KSL Recreation Corporation, Owens-Vaillinois, Inc., Primedia, Inc., Safeway Inc., u.s.natural resources,Inc., United Rictus Company and Willis Group Holdings Limited.

Name and age

Position with us, the first selected director of the year,

Most important occupation in the course of at least the past five years and other director

Michael W. Michelson (51) .......... Inc. en Owens-Abinis, Inc.

Scott C. Nutall (29) .......................... Scott C. Nutall has been on our board of directors since December 1999.Mr. Mr.Nuttalt Harhar has been playing at KKR since 1996.Before that time he was director of the Blackstone Group L.P. He is also director of Alea Group Holdings, Ltd., Amphenol Corporation, BRW Acquisition, Inc. (Bristol West Insurance Group), Walter Industries Inc.en Willis Group Holdings Limited.

Richard J. Goldstein (37) .................. Richard J. Goldstein has been on our board since May 2001.He has been a senior vice-president and for that before that, a vice-president of Oaktree Capital Management, LLC ("Oaktree") since 1995. Oaktree has been offering investment management services to TCW Asset Management Company, the general partner of TCW Special Credits Fund V-Hoveedfonds under a sub-management agreement.Mr.Goldstein was assistant vice -president of trust company of the West from 1994 to 1995.

(a) Mrs. Kravis and Roberts are the first cousins.

Commission for our Executive Board

The Board of Directors has three permanent committees: (1) an audit committee, (2) a compensation committee and (3) an executive committee.

Executive Committee.Hr.Johnson, Michelson and Nutall form the Board of Directors of the Board of Directors.

Audit committee.The audit committee consists of Mrs. Michelson and Nutall.

Compensation committee.hr.michelson and Nutalll act as members of the Compensation Committee.

Drivers

Below is information about our executive officials:

Navn Aldersposition David J. Johnson ....................... 56 Administrerende Direktør OG Formand voor Bestyrelsen Robert Abeles ........................... 56 Executive Vice President, Chief Financial Officer Edward L. Brewington .............. 59 Senior Vice President, Humanressourcer S. WrayHutchinson .................. 42 Senior Vice President, Operations Dan R. Jackson ......................... 48 Senior Vice President, Finance Eva M. Kripalani ....................... 43 Senior Vice President, General Counsel OG SecretaryBruce A. Walters....................... 45 Senior Vice President, Chief Development Officer

David J. Johnson has been CEO and chairman of the Board of Directors since February 1997.Between September 1991 and November 1996, Mr.Johnson as President, CEO and chairman of the Board of Directors of Red Lion Hotels, Inc., who was previously a KKR -associated company or its predecessor.johnson, a general partner for Hellman & Friedman, a private equity investment company based in San Francisco.From 1986 to 1988 he was a president, chief operating officer and director of Dillingham Holdings, a diversified company with headquarters in San Francisco.From 1984 to 1987 was Mr.Johnson President and CEO of Cal Gas Corporation, a very important subsidiary of Dillingham Holdings.

Robert Abeles is CEO, CFO since October 1999. Mr.abeles served as CEO, CFO and director of Transamerica Life Companies from June 1996 to October 1998. Before that time, Mr.abeles 24 years First Interstate Bank of California and was of July 1990Until May 1996 CEO -Vice -President and CFO.

Edward L. Brewington was promoted in July 2001 to Senior Vice President Human Resources.Brewington with Times Mirror, where his last attitude was vice -president, Human Resources for the Times Mirror Training Group.Brewington 25 years with IBM in various Human Resources, Sales- and marketing positions.

S. Wray Hutchinson was promoted to Senior Vice President, October 2000. Illinois Market.

Dan R. Jackson was promoted in October 1999 to Senior Vice President, Finance and was appointed CFO of KC Distance Learning in June 2001, Inc .. He recorded us in February 1997 as vice president of financial control and planning.jacksonAs a vice -president, controller for Red Lion Hotels, Inc.OF are predecessor, from September 1985 to January 1997. From 1978 to 1985 Mr.Jackson various financial management positions at Harsch Investment Corporation, a real estate therapy in Portland, Oregon.

Eva M. Kripalani was promoted to Senior Vice President, Attorney General and Secretary in July 2001. Since July 1997 she was vice -president, attorney general and secretary.In Portland, Oregon, where she has been working since 1987.

Bruce A. Walters has been a senior vice president, Chief Development Officer since July 1997. From June 1995 to February 1997, Mr. Walters as CEO Vice President of Store Development for Hollywood Entertainment Corporation in Portland, Oregon.walters 14 years of McDonald's Corporation in differentDomestic and international development positions.

Punkt 11. Executive compensation

The following table shows the compensation assigned or paid to or earned by the CEO and chairman of the Board of Directors and each of the other four most compensated directors, which are together mentioned as the aforementioned directors:

Fiscal policy

Annual reimbursem*nt

Long -term compensation

Price security

below

All other compensation

Name and main position Annual salary bonus Other institutions (A) (B) (C) (D) David J. Johnson ......................... .. ..2002 $ 698,325 $ 416,900 $ 4,687 - $ 112,475

CEO EN 2001 673,197 308.997 140 - 113.172CHAirman of the board 2000 663.381 489.575 134 - 113.399

Robert Abeles ............................... 2002 $ 268.524 $ 123.118 $ 1.684 - $ 54.816 Executive Vice President, 2001 256, 599106.991 97 - 54.816 Chief Financial Officer 2000 158.654 87.101 25.440 69.690 131.135

Dan R. Jackson ............................. 2002 $ 223.446 $ 97.646 $ 2.816 - $ 17.726Senior vice -president, 2001 199.38577.009 77 8.000 17.588Finance 2000 186.206 90.541 61 10.000 17.505

Eva M. Kripalani .......................... 2002 $ 220.735 $ 84.873 $ 3.831 10.000 $ 8.918Senior Vice President, 2001 191.404 67.158 68 68.000 9.324General Counsel and Secretary 2000 173.625 73.834 37 - 9.333

Bruce A. Walters .......................... 2002 $ 231.998 $ 88.159 $ 1.765 - $ 15.581SEIOR Vice President, 2001 223,326 70.521 60 6,00015, 580 Chief Religious Development 2000 219.065 104.275 35 - 15.606

_______________

(a) stock options granted under 1997 -purchase and option plan from 1997.

(b) matching contributions during our savings and investment plan and non -qualified deferred compensation plan were as follows:

Non -qualified postponed compensation plan

Savings and Investment Plan

Boekjaar 2002 2002 2000 2002 2002 2001 2000 David J. Johnson ............................. $ 10.846 $ 11.543 $ 11.430 $ - $ - $ 340 ROBERT ABELES ........................................ - - - - - - - - - Dan R. Jackson ............................... 3.226 2.909 2.668 - 179 337 Eva M. Kripalani ... ... ...................... 2.418 2.660 2.496 - 164 337 Bruce A. Walters ............... ... .......... 3.281 3.280 3.306 - -

(c) Life insurance premiums paid on behalf of the executive officials for divided dollar lifestyle arrangements for each of the financial years 2002, 2001 and 2000 were as follows:

David J. Johnson .............................. $ 101.629 Robert Abeles ....................................... 54.816 Dan R. Jackson ................................. 14.500 Eva M. Kripalani .............................. 6.500 Bruce A.Walters .............................. 12.300

(D) Mr.Appes was a consideration of $ 76,319 for relocation costs in the 2000 financial year.

1997 stock purchase and option plan

The 1997 plan authorizes subsidies for shares or options to buy shares in authorized but non -published or obtained shares in our joint shares, subject to adaptation to display events such as sharing dividends, shark divisions, re -capitalization, mergers or reorganisations.Planen can take the form of purchased shares, limited shares, stimulans or non -qualified stock options or other types of rights specified in the 1997 plan.The total 5,000,000 shares of joint share have been approved for issue under the 1997 plan and the maximum number of shares that can be awarded.A person is the plan of 1,000,000.1997 is intended to reach the following:

• Promote our financial interests and long -term growth by attracting and maintaining management staff with education, experience and the ability to enable them to make an important contribution to our company, success,

• Motivate management staff using growth -related stimuli to achieve long -range goals and

• Adjust the interests of the participants further with our other shareholders through possibilities for increased shares or shares -based property.

The Compensation Committee of the Board of Directors manages the 1997 plan and determines the employees who will be granted, subject to the number of shares in joint shares to each subsidy and the various conditions for such subsidies, including the period of earning.Conditions of a subsidy, but such action cannot affect the rights of a participant in accordance with the 1997 plan with regard to the possibilities without the permission of such a participant, except one of the following:

• adjustments made by a change in our unique ordinary shares as a result of a sharing division, spin-off, share results, stock combination or reclassification, re-capitalization or merger, change of control or similar event and

1 resolution, optional fairs can be carried out that can be exercised for a while before such an event and then terminated when such an event is made to the board.

Option fairs in the 2002 financial year

The following table shows the individual option fairs in the financial year, which ended on 31 May 2002 to the aforementioned directors:

Number

Underlying options

Assigned (A)

Percentage of the total options

Admitted to employees during the financial year

Prize

Per.

Expiration date

The award date present

Value (B) David J. Johnson ............... - -% $ - -$ -Robert Abeles ................... - - - - - Dan R. Jackson ................. - - - - - Eva M.- _________________

(a) The options can be exercised 20% per year for a period of five years, whereby the first 20% can be exercised on the first anniversary of the earned start date.ii) the first birthday of death or disability or retirement, (iii) a certain period after another termination of employment and (v) the date of a merger or certain other transactions.

(b) Although we think it is not possible to place a value on an option in accordance with the rules of Securities and Exchange Commission, a changed black-school model for appreciating the option used to the cash has been usedvalue.The actual value that is realized, if present, can vary considerably from the values estimated by this model.exerted.

Aggregated option -exercises in the 2002 and 2002r accounting year the financial year option values

The following table shows the unused institutions that are held on 31 May 2002 by the aforementioned executive officers:

Number of unused options on 31 May 2002

The value of unused "input money"

Options on 31 May 2002 (A) Important Invested Practical Enterprise Research Research David J. Johnson ........................ 842,106 - $ 4,227,372 $ - Robertabeles............................ 27.876 41.814 92.270 138.404 Dan R. Jackson ........................ 55.374 12,400 265.441 32,404 Eva M. Kripalani ....................... 32.779 22,695 161.239 59.581 Bruce A.

(a) The value of options represents the total difference between the real value, as determined by the Board of Directors, on 31 May 2002 of $ 14.52 and the current exercise price.

No shares were acquired by the exercise of options in the 2002 financial year.

Compensation of Kindercares directors

In the 2002 financial year, our non-employee managers received an annual holder of $ 30,000, paid in advance in quarterly rates.Other costs incurred in connection with the performance of their duties.

On 27 May 1998, the board of directors adopted the deferred compensation plan of the director.Shared by the then real value Persdeel, as defined in the director's plan, of our joint share.

Benefits of the plan plan are made in cash and reflects the value of the share of the joint share at the time of distribution multiplied by the number of Phantom shares that is attributed to the director's account.Distributions of the director's plan take place on the previous (1) the first day of the year after the pension of the director or divorce of the board of directors or (2) the termination of the termination of the plan of the term director.

Compensation Committee Committee and Insider Participation

The Board of Directors approved the appointment of a compensation committee compiled by Michael W. Michelson and Scott C. Nutall.mr.michelson is a member of KKR & Co.L.L.C., the company Limited Liability, who acts as the general partner for KKR, and andMr.Nuttall is a director of KKR.SE "Point 13. Certain conditions and related transactions."

Point 12. Property possession of certain affordable owners and management and related shareholders' affairs

Security possession of certain owners and management

The following table shows information regarding the affordable ownership of our joint share on 23 August 2002 of each of the following:

• Every person who is known to us to have more than 5% of our normal shares,

• The aforementioned directors,

• Each of our directors and

• All directors and directors as a group.

The amounts and percentage joint share that is advantageous ownership are reported on the basis of the rules of Securities and Exchange Commission that controls the decision of affordable property of securities.The authority to remove or lead the arrangement of such safety.Unless otherwise stated in the footnotes after the following table, the persons mentioned in the table, only vote and investment force with regard to the joint share in their hands.A person is also considered a useful owner of all the effects that this person has the right to acquire an advantageous ownership within 60 days in accordance with these rules, more than one person can be considered a useful owner of the same effects and a personCan be considered a useful owner of securities that such a person has no financial interest.will be before October 22, 2002, it is considered excellent to calculate the percentage of the percentage of the person, but is not considered unique to calculate the percentage of ownership of another person.

Parts with advantage

Property

Percentage class

Excellent KKR-KLC L.L.C.and affiliated devices (A) ..........................................

c/o Kohlberg Kravis Roberts & Co. L.P. 9 West 57th Street New York, New York 10019

15.657.894 79,5%

TCW Group, Inc.en affiliated devices (B) .................................................... ................ 865 South Figueroa Street Los Angeles, California 90017

1.898.488 9,6%

David J. Johnson (c) .................................................................................................................. 1.157.896 5,6% Robert Abeles (c) ........................................................................................................... 69.690 * Dan R. Jackson (c) ......................................................................................................... 76.884 * Eva M. Kripalani (c) ...................................................................................................... 59.664 * Bruce A. Walters (C).......................................................................................................... 94,504 *Henry R. Kravis (A) ............................................................................................................... - George R. Roberts (a) ........................................................................................................ - - Michael W. Michelson (A) ................................................................................................. - - Nils P. Brous (A) ............................................................................................................ - - Scott C. Nuttall (A) .......................................................................................................... - - Richard J. Goldstein (B) ................................................................................................. - - Alle Direktører OG Direktoe Som Gruppe (13 Individ) (d) .......................... 1.585.518 7,6%

______________

* Percentage of shares in joint equity that is advantageous ownership is no more than one percent.

(a) Shares of a joint share shown as affordable ownership of KKR-KLC L.L.C.is stored directly by KLC Associates, L.P.KKR-KLC L.L.C.is the only general partner for KKR Associates (KLC), L.P., the only general partner for KLC Associates, L.P., and has the only voice and investment force with regard to such shares.kkr-KLC L.L.C.Company with limited liability whose members Mrs. Henry R. Kravis, George R. Roberts, Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Perry Golkin, Scott M. Stuart and Edwarda are.gilhuly.hr.Kravis and Roberts are members of the Executive Committee in KKR-KLC L.L.C.And his instructors from KinderCare.mr.michelson is also a director of KinderCare.KKR-KLC L.L.C., was 203.684 owned by KKR Partners II, L.P., his affiliated company.

(b) Oaktree Capital Management, LLC, called Oaktree, offers investment factories to the general partner of TCW Special Credits Fund V -Hoveedfonds in accordance with a subcouning agreement.Goldstein, as a senior vice -president of Oaktree, participates in the voting process of suchto remove shares, it can be considered such circ*mstances for section 13 of the Exchange Act to make the owner of such shares. Goldstein is affordably rejected ownership of such shares in ordinary shares.

(c) The shares that are beneficial ownership of the aforementioned directors include shares that are subject to options that can currently be used or can be exercised before October 22, 2002 as follows:

The number of

Opties David J. Johnson ............................................. .... ................... 842,106 Robert Abeles ........................ .... ................................................. 41,814 Dan R. Jackson .................................................. .... ..................... 56.974 Eva M. Kripalani .................... .... .................................................... 43.874 BRUCEEA .Walters ..................................................... .... ................... 68,190

(d) The shares that are beneficial for all directors and directors as a group include 1,146,214 shares subject to options that can currently be used or can be used before October 22, 2002. Shares owned by our executive officers are subject tothe limitations on transfer.

Effects authorized for issue under share compensation plans

The following table summarizes our capital compensation plans on 31 May 2002, all of which have been approved by the shareholders:

Plank category

Number of effects that must be issued

Exercise of excellent options (A)

Weighted average exercise price of

Excellent options

Number of effects available for future issue under Equity compensation

Plans (B) Planning for share compensation

Approved by security holders ...

1.862.378 $ 10,32 2.599.322

(a) represents the shares with ordinary shares issued by the exercise of outstanding options during the 1997 plan, which was approved by shareholders in the 1998 financial year.

(b) represents the remaining shares that are available for future issue under the 1997 plan (excluding shares that are reflected in the first column).Qualified stock options or other types of rights that are specified in the 1997 plan.

Point 13. Certain conditions and related transactions

Relationship with KKR

On August 23, 2002, affiliated companies of KKR ownership, which were beneficial for a total of approximately.79.5% of our outstanding shares in joint shares.Certain affordable owners and management, note (A). "

KKR receives reimbursem*nts and reimbursem*nts of costs for management, advice and financial services provided to us and can receive usual investment bank costs for services plus reimbursem*nt of the corresponding costs.

Registration fees

Each of KLC Associates, L.P.and its affiliated company, KKR Partners II, L.P., has the right to demand that we register in accordance with the Securities Act of 1933 shares in joint shares included in the context of a registration right agreement.Partners II, until the registration under the Securities Act is no longer necessary to resell the IT share of the Joint Agree of the registration rights.II, and in connection with any registration that we initiated as a primary offer.Certain exceptions.

Management debt

The following table shows the amount of debts of more than $ 60,000 because of the term notes carried out by the executive officers on August 23, 2002:

Robert Abeles ................................................................. $ 156.245 Edward L. Brewington ................................................... 96.804 S. Wray Hutchinson ................................................ 122.198dan R. Jackson ................................................... 74.145 Eva M. Kripalani ........................................................ 75.005

The amount of the debt remained constantly for all executive officers in the past year except the Heerabeses.The largest amount of debts in the 2002 financial year for the Heerabeses was $ 231,245.

The installment tickets ripen from calendar 2008 to 2009 and bears interest at a rate of 4.44% per year to be paid half annually on 30 June and 31 December. The term banknotes are protected with shares with limited shares that are performed by the executiveOfficials have been purchased in accordance with the conditions of the 1997 plan.

Point 14. Exhibitions and accounting plans

The following is an index for financial statements, schedules and exhibitions that are included in this report or are included as a reference:

(A) (1) Accounting:

Side Consolidated Balance bij

31 May 2002, 1 June 2001 and 2 June 2000 ............................ 35 consolidated statements of equity and roaming around

Income for the tax years ending on 31 May 2002, 1 June 2001 and 2 June 2000 .............................. .................................................. 36

Consolidated statements about cash flows for the financial year ending on 31 May 2002, 1 June 2001 and 2 June 2000 ..........................

Comments for consolidated accounts .................................................. 38-53-dependent auditors report ................................................... .......... ............... 54

(a) (2) Accounting schedules: None.

(a) (3) Exhibitions: The following exhibitions are submitted to this report or included as a reference:

Exhibition number

Description of exhibitions

2 (a) Agreement of the shareholders between KinderCare and the shareholders' parties (included as a reference of exhibition 2.3 of our registration statement on form S-4, submitted on 11 March 1997, file no. 333-23127).

3 (a) amended and amended certificate for recording childcare.

3 (b) Original articles from Association of Kindcare with effect from 1 September 2001 (included as a reference of exhibition 3 (A) to our quarterly report on form 10-q for the quarterly period ending on September 21, 2001).

4 (a) Indent dated per13 February 1997 Between Kagecare and Marine Midland Bank, as manager (included by referral from exhibition 4.1 of our registration statement on form S-4, submitted on 11 March 1997, file no. 333-23127).

4 (b) First additional indenting dated per1 September 1999 to the recess dated per.13 February 1997 between KinderCare and HSBC Bank USA (formerly known as Marine Midland Bank), as Trustee (included as a reference of exhibition 4 (A) to usQuarterly report on form 10-q for the quarterly period that ended on September 17, 1999).

4 (c) form of 9.5% Series B senior subordinate note because of 2009 (included as a reference from exhibition 4.3 of our registration statement on form S-4, submitted on 11 March 1997, file no. 333-23127).

Exhibition number

Description of exhibitions

10 (a) Credit agreement, dated per13 February 1997, under Kind-Care, the various lenders from time to time parties there, and Chase Manhattan Bank as an administrative agent (included as a reference of exhibition 10.1 of our registration statements on form S-4, submitted to11 March 1997, file no.

10 (b) Registration rights agreement, dated per13 February 1997, under KCLC Acquisition, KLC Associates L.P.en KKR Partners II, L.P. (included as a reference from exhibition 10.2 of our registration declaration on form S-4, submitted on 11 March 1997, File Nr.333-23127).

10 (c) Rent between 600 Holladay Limited Partnership and KinderCare of 2 June 1997 (included as a reference from exhibition 10 (F) in our annual report on form 10-K for the financial year, which ended on 30 May 1997).

10 (d) subsidies from 28 June 2000 to Lease of 2 June 1997 between 600 Holladay Limited Partnership and KinderCare (included by referral from exhibition 10 (A) to our quarterly report on form 10-q for the quarter, ending on September 22, 2000).

10 (E)* 1997 ACTIE ACQUISITION AND OPTION Plan for important employees in KinderCare Learning Centers, Inc.en and subsidiaries (included as a reference of exhibition 10 (C) to our quarterly report on form 10-q for the quarterly period that ends on 19 September1997).

10 (f)* Form of repaired administration treatment agreement (included as a reference of exhibition 10 (f) to our annual report on form 10-K for the financial year, which ended on 1 June 2001).

10 (g)* form of non-qualified stock option agreement (included by referral from exhibition 10 (g) to our annual report on form 10-K for the financial year, which ended on 1 June 2001).

10 (h)* Form of turnover agreement for amended turnover (included as a reference of exhibition 10 (h) to our annual report on form 10-K for the financial year, which ended on 1 June 2001).

10 (i)* Form of terminary (included by referral from exhibition 10 (g) to our quarterly report on form 10-q for the quarterly period ending on September 19, 1997).

10 (J)* Form of mortgage level agreement (included by referral from exhibition 10 (h) to our quarterly report on form 10-q for the quarterly period ending on September 19, 1997).

10 (K)* Agreement of the shareholders dated per.14 February 1997 between Kagecare and David J. Johnson (included as a reference of exhibition 10 (l) to our quarterly report on form 10-q for the quarterly period ending on September 19, 1997).

10 (l)* Non-qualified stock option agreement dated per14 February 1997 between KinderCare and David J. Johnson (included by reference of exhibition 10 (J) to our quarterly report on form 10-q for the quarterly period ending on 19 September 1997).

10 (m)* Sales Participation Agreement dated per14 February 1997 under KKR Partners II, L.P., KLC Associates, L.P.en David J. Johnson (included as a reference of exhibition 10 (K) to our quarterly report on form 10-Qi The quarterly period ending inSeptember 19, 1997).

10 (s)* deferred compensation plan of the director (included as a reference of exhibition 10 (q) to our annual report on form 10-K for the financial year, which ended on 29 May 1998).

10 (O)* Form of compensation Agreement for directors and officers of KinderCare (included by referral from exhibition 10 (s) to our annual report on form 10-K for the financial year, which ended on 29 May 1998).

Exhibition number

Description of exhibitions

10 (p)* Originally non-qualified deferred compensation plan with effect from 1 January 1999 (included as a reference of exhibition 10 (A) to our quarterly report on form 10-q for the quarterly period that ended on March 5, 1999).

10 (q)* Form of performing Split Dollar Life Insurance Agreement (included as a reference of exhibition 10 (B) to our quarterly report on form 10-q for the quarterly period ending on March 5, 1999).

10 (s) credit agreement between KinderCare Real Trust 1999, as a borrower, Chase Manhattan Bank, as an agent and the lenders, dated from 2 September 1999 (included as a reference of exhibition 10 (A) to our quarterly report resort 10-q for the quarterlyPeriod ending on September 17, 1999).

10 (s) Participation agreement between KinderCare, as a tenant, Ben Kinnercare Realty Trust 1999, as a lease, Scotiabanc Inc., as an investor, Chase Manhattan Bank, as an agent and the lender, dated from 2 September 1999 (included reference (included reference.From exhibition 10 (B) to our quarterly report on form 10-q for the quarterly period that ended on September 17, 1999).

10 (t) first amendment to the participation agreement between KinderCare, which rents out, KinderCare Realty Trust 1999, such as Leiner, Scotiabanc Inc., as an investor, Chase Manhattan Bank, as agent and lender, dated by 7 August 2000 (included as a reference of exhibition 10(U) to our annual report on Form 10-K for the financial year, which ended on 1 June 2001).

10 (u) Second change in the participation agreement between KinderCare, which rents out, KinderCare Realty Trust 1999, such as Leiner, Scotiabanc Inc., as an investor, Chase Manhattan Bank, as an agent and leaser, dated by 12 February 2001 (included as a reference of exhibition 10(v) to our annual report on form 10-K for the financial year, which ended on 1 June 2001).

10 (V) Rules for use and definitions under the participation agreement (included as a reference of exhibition 10 (C) to our quarterly report on form 10-q for the quarterly period ending on September 17, 1999).

10 (W) Agency agreement between KinderCare Real Trust 1999, as a lesson, and KinderCare, as the tenant, dated 2 September 1999 (included as a reference of exhibition 10 (d) to our three-month report on Quartal Period of Form 10-q finishedon September 17, 1999).

10 (x) Warranty made by KinderCare, as a tenant, and others, dated per.2 September 1999 (included by referral from exhibition 10 (s) to our quarterly report on form 10-q for the quarterly period ending on September 17, 1999).

10 (y) lease contract, security agreement and financing statement between KinderCare Real Trust 1999, as a lesson and childcare, as a tenant, dated from 2 September 1999 (included by referral from exhibition 10 (F) to our quarterly report on Form10 -Q for thequarterly twice -monthly.

21 subsidiaries of KinderCare.

23 Independent Auditor's permission - Deloitte & Touche LLP.

* Management contract or compensatory plan or scheme.

(a) (3) Additional information that must be provided with reports submitted by registrants who have no effects registered on the basis of section 12 of the Act: We do not intend to send an annual report and proxy materials to shareholdersIn the 2003 financial year.

(b) reports on form 8-k: The registrant did not submit any reports on form 8-k during the fourth quarter of the 2002 financial year.

(c) Exhibitions required by paragraph 601 in the Regulation S-K: The exhibitions for this report are stated under paragraph 14 (a) (3) above.

Signatures

According to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has received this report properly to be signed on behalf of it the undersigned, after which they were properly authorized on 27 August 2002.

Kindercare Learning Centers, Inc. AF: / S / David J. Johnson David J. Johnson

Managing director and chairman of the board of directors

(Principal Executive Officer)

According to the requirements of the Securities Exchange Act of 1934, this report is signed by the following persons on behalf of the registrant and in the capacity, on 27 August 2002:

AF: / S / David J. Johnson David J. Johnson

Managing director and chairman of the board of directors

(Principal Executive Officer) AF: / S / Robert Abeles Robert Abeles

Executive Vice President, Chief Financial Officer

(Most important financial and accounting officer) AF: / S / Henry R. Kravis Henry R. Kravis

Director of: / S / George R. Roberts George R. Roberts

Van Director: / S / Michael W. Michelson Michael W. Michelson

Directeur AF: / S / Scott C. Nuttall Scott C. Nuttall

Van Director: / S / Richard J. Goldstein Richard J. Goldstein

Manager