929887--10/28/2008--APOLLO_GROUP

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{regulation, government, change}

{system, service, information}

{financial, litigation, operation}

{loan, real, estate}

{acquisition, growth, future}

{investment, property, distribution}

{operation, international, foreign}

{operation, natural, condition}

{regulation, change, law}

{product, market, service}

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{competitive, industry, competition}

Risks Related to the Highly Regulated Industry in Which We Operate If we fail to comply with the extensive regulatory requirements for our business, we could face significant monetary liabilities, fines and penalties, including loss of access to U.S. federal student loans and grants for our students. The recent reauthorization of the federal Higher Education Act, signed by the President in August 2008, includes substantially increased reporting and other requirements which may impair our reputation and adversely affect our enrollments. In addition, not all of these new requirements are clear on their face. Our failure to accurately interpret these new requirements may subject us to penalties and other sanctions imposed by the Department of Education. If regulators do not approve or delay their approval of transactions involving a change of control of our company, our state licenses, accreditation, and ability to participate in Title IV programs may be impaired. If regulators do not approve our acquisitions, the acquired schools state licenses, accreditation, and ability to participate in Title IV programs may be impaired. If we are not recertified to participate in Title IV programs by the Department of Education, we would lose eligibility to participate in Title IV programs. Action by the U.S. Congress to revise the laws governing the federal student financial aid programs or reduce funding for those programs could reduce our student population and increase our costs of operation. Student loan defaults could result in the loss of eligibility to participate in Title IV programs. If any regulatory audit, investigation or other proceeding finds us not in compliance with the numerous laws and regulations applicable to the postsecondary education industry, we may not be able to successfully challenge such finding and our business could suffer. If we fail to maintain our institutional accreditation, we would lose our ability to participate in Title IV programs. If we fail to maintain any of our state authorizations, we would lose our ability to operate in that state and to participate in Title IV programs there. A failure to demonstrate administrative capability or financial responsibility may result in the loss of eligibility to participate in Title IV programs. Our schools and programs would lose their eligibility to participate in federal student financial aid programs if the percentage of our revenues derived from those programs is too high. We will be subject to sanctions if we fail to calculate and make timely payment of refunds of Title IV program funds for students who withdraw before completing their educational program. We are subject to sanctions if we pay impermissible commissions, bonuses, or other incentive payments to individuals involved in certain recruiting, admission, or financial aid activities. Increased scrutiny by various governmental agencies regarding relationships between student loan providers and educational institutions and their employees have produced significant uncertainty concerning restrictions applicable to the administration of the Title IV loan programs and the funding for those programs which, if not satisfactorily or timely resolved, could result in increased regulatory burdens and costs for us and could adversely affect our student enrollments. If IPD s Client Institutions were sanctioned due to non-compliance with Title IV requirements, we could suffer adverse impacts on our business. The online public high schools that Insight Schools operates under contractual arrangements are subject to uncertain regulatory implications that could materially and adversely affect Insight Schools business. These risks include the following: The complexity of regulatory environments in which we operate has increased and may continue to increase our costs, and failure to comply with applicable laws and regulations could have a material adverse effect on our business. Government regulations relating to the Internet could increase our cost of doing business, affect our ability to grow or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows. Risks Related to Our Business If we are unable to successfully conclude the litigation, governmental investigations and inquiries pending against us, our business, financial condition, results of operations and cash flows could be adversely affected. We may not be able to sustain our recent growth rate or profitability, and we may not be able to manage future growth effectively. If we cannot maintain student enrollments, our results of operations may be adversely affected. Our financial performance depends on our ability to continue to develop awareness among, and recruit and retain students. If the proportion of our students who are enrolled in our associate s degree programs continues to increase, we may experience increased cost and reduced margins. The significant uncertainty about the asset portfolios of companies in both the U.S. and worldwide financial services sector, dramatic volatility in trading markets and recent failures and near failures of financial institutions may adversely impact our investment portfolio and investment returns. Our business may be adversely affected by a general economic slowdown or recession in the U.S. or abroad. The current unprecedented disruptions in the credit and equity markets worldwide may impede or prevent our access to the capital markets for additional funding to expand or operate our business and may affect the availability or cost of borrowing under our existing credit facilities. Our principal credit agreement limits our ability to take various actions. If we do not maintain existing, and develop additional, relationships with employers, our future growth may be impaired. Our financial performance depends, in part, on our ability to keep pace with changing market needs and technology; if we fail to keep pace or fail in implementing or adapting to new technologies, our business, financial condition, results of operations and cash flows may be adversely affected. Capacity constraints of our computer networks and changes to the acceptance and regulation of online programs could have a material adverse effect on our ability to recruit and retain students and grow our online programs. System disruptions and security threats to our computer networks could have a material adverse effect on our ability to attract and retain students. A failure of our information systems to properly store, process and report relevant data may reduce our management s effectiveness, interfere with our regulatory compliance and increase our operating expenses. The personal information that we collect may be vulnerable to breach, theft or loss that could adversely affect our reputation and operations. If a substantial number of our students cannot secure Title IV loans as a result of decreased lender participation in the Title IV programs or if lenders increase the costs or reduce the benefits associated with the Title IV loans they provide, we could be materially adversely affected. A substantial decrease in private student financing options, including Title IV programs, or a significant increase in financing costs for our students, could have a material adverse effect on our business, financial condition, results of operations and cash flows. We face intense competition in the postsecondary education market. Our expansion into new markets outside the United States, if successful, will subject us to risks inherent in international operations. We may experience movements in foreign currency exchange rates which could negatively affect our operating results. Our investments in auction rate securities are subject to market risks which may cause losses and affect the liquidity of these investments. We may not be able to successfully identify, pursue or integrate acquisitions; acquisitions may result in additional debt or dilution to our shareholders. As a relatively new type of school, online public high schools that Insight Schools operates under contractual arrangements are subject to uncertain funding implications and operational issues that could materially and adversely affect Insight Schools business. These risks include the following: Our future operating results and the market price of our common stock could be materially adversely affected if we are required to write down the carrying value of goodwill and other indefinite-lived intangible assets associated with any of our reporting units in the future. We rely on exclusive proprietary rights and intellectual property that may not be adequately protected under current laws, and we encounter disputes from time to time relating to our use of intellectual property of third parties. We may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions. Our investment portfolio is sensitive to interest rate changes and a significant decrease in interest rates could adversely impact the performance of our investment portfolio. If students fail to pay their outstanding balances, our business may be harmed. Terrorist attacks and other acts of violence or war, natural disasters or breaches of security could have an adverse effect on our operations. Risks Related to the Use of Incorrect Measurement Dates for Stock Option Grants and the Restatement of our Consolidated Financial Statements The matters relating to an investigation by the Special Committee of the Board of Directors and the restatement of our consolidated financial statements may result in additional litigation and governmental enforcement actions. We are subject to the oversight of the Securities and Exchange Commission and other regulatory agencies, and investigations by those agencies could divert management s focus and have a material adverse impact on our reputation and financial condition.

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929887--10/28/2008--APOLLO_GROUP_INC