RisksRelating to our Private Company Partners  RISKS RELATING TO OUR MATERIAL PRIVATE COMPANY PARTNERS Risks Relating Specifically to KMH  Risks Relating Specifically to Killick  Management Discussion & Analysis  Annual Report  2013  33  Our material Private Company Partners, being KMH, Killick, Quetico, Labstat, SCR, Sequel, and SMi face a number of business,  operational and other risks which if realized, could have a material impact on our operating results and conditions. These risks are  outlined in more detail below.  Customer Risk  Any development that would reduce the affordability to pay for private healthcare will negatively  affect KMH's volumes and revenue. A loss or reduction of personal income, due to higher than  expected unemployment in the U.S., and uncertain economic conditions, has a direct impact on  the ability of U.S. citizens to pay for private insurance. Medical Reimbursement  Rates  KMH derives the majority of its revenue from public health insurance programs. Therefore, any  major change in these programs would negatively impact KMH. The largest risk KMH faces in the  U.S. is the fact that reimbursement rates are largely dictated by Medicare. If Medicare decides to  cut these rates significantly, all issuers follow, leading to a decrease in margins. Referral Loss  KMH's revenue is dependent in part on referrals from centers that do not have in-house medical  imaging capabilities. The loss of any of these referrals would have a significant adverse effect on  KMH's business. Aside from a general decline in referrals, a complete loss of a referral channel  could result if a private practice sells its business to a local hospital which has its own internal  imaging capabilities. Supplier Base  KMH relies on key suppliers for the supply of isotopes. Isotopes are essential to conducting  nuclear medical imaging and diagnostic tests. The supply of isotopes can be affected by a number  of factors, including, without limitation, an interruption of operations at any nuclear reactors around  the world or increased regulation with respect to the production of nuclear power. If KMH loses its  supply of isotopes, for even a short period of time, it could result in a significant decrease in  nuclear tests conducted, affecting revenue. Regulation  KMH operates in a strictly regulated industry. All KMH facilities are subject to scrutiny by the  regulators and any failures to comply with set requirements could result in the loss of KMH's  operating licenses. In addition, any change in governmental regulation and licensing requirements  or interpretation and application of the same relating to healthcare services could have an adverse  impact on the scope of KMH's activities.  Foreign Exchange Rate  Fluctuations  Though minimal, KMH is exposed to foreign exchange rate fluctuations from the U.S. operations  as they do not have USD expenses to completely offset USD profits. KMH could experience a  decrease in its exchange adjusted CAD income from U.S. operations if affected negatively by a  significant USD to CAD dollar rate change. A weaker CAD vs the USD is generally a benefit to  KMH.  Government Regulation  The size and scope of the global maintenance, repair & overhaul market is determined largely by  government regulatory requirements created to ensure the safety of the air traveling public. Any  change in the governmental regulation and licensing requirements or interpretation and  application of the same relating to aircraft maintenance and service could have an adverse impact  on the scope of Killick's operations and volumes.  New Product Risk  The threat of a new model of commercial jet engine coming to market has the potential to  significantly reduce the demand for the types of engines and engine parts and accessories that  Killick has inventory. However, an event can generally be predicted and planned for well in  advance of the product arriving in the market.