Financial Information

Once again, Pepperdine University finished its fiscal year on a financial high note. The University’s total assets continue to surpass the $1 billion mark, and exhibited solid growth from one year ago. The $36 million increase in total assets during fiscal 2004 was due to both solid operational results from each of the University’s five schools, and continued improvement in investment performance as compared to fiscal 2003. The University’s net assets increased $39 million to a fiscal year-end record of $730 million, $542 million of which is unrestricted.

During fiscal 2004, the University completed major construction on the Drescher Graduate Campus, which has become home to the residential programs of the University’s three graduate schools; the Graziadio School of Business and Management, the Graduate School of Education and Psychology, and the School of Public Policy. We expect to complete the sale of fifty-six faculty and staff residences on the Drescher Graduate Campus in fiscal 2005, greatly strengthening community life on campus.

During the course of the past two years, the University’s investment portfolio has rebounded well from a period of volatility and negative returns in the capital markets in the prior three years. We believe that our long-term diversified investment strategy, combined with our five-year averaging of market values for endowment payout purposes, will continue to work well in protecting our investment portfolio and provide valuable resources to fund our academic operations long into the future. During fiscal 2004, total support from the endowment remained relatively constant as compared to last year, amounting to some $21 million.

The University’s investment portfolio generated total income and gains of approximately $56 million, for an approximate 10% total annual return. University funds functioning as endowment totaled $426 million at July 31, 2004, an 8% increase from one year ago.

The University’s long term obligations decreased slightly from one year ago, and totaled $206 million atthe end of fiscal 2004. The University’s significant debt service reserves and its strong ability to cover debt service from operating cash flow are strong contributors to our “A1” credit rating from Moody’s Investors Service.

The University currently enrolls approximately 8,300 students in its five colleges and schools. Total enrollment has increased by 5% over the past five years, with demand for each of the University’s degree programs increasing, particularly at Seaver College and the Graduate School of Education and Psychology. In fiscal 2004, total revenues increased 6% to $221 million, of which net student tuition and fees totaled $147 million. Increased demand for the University’s academic programs fueled a 7% increase in net student tuition and fee revenues. Additionally, the completion of the Drescher Graduate Campus allowed us to generate additional revenues and operating cash flow from increased student housing, the expansion of our graduate programs, and our new Villa Graziadio Executive Center operations.

The University remains committed to providing the best possible academic experience for each of its students. Accordingly, the University’s total operating expenses for fiscal 2004 increased 8% from last year to total $216 million. During fiscal 2004, our spending increased as a direct result of providing additional student instruction and support, as well as to increased facilities costs associated with the Drescher Graduate Campus. We believe that our increased investment in students should not only improve their academic experience, but also the University community in which they live and learn. Accordingly, we have endeavored to direct the University’s resources to improving our academic, social and spiritual facilities.

We remain thankful for the way in which God has blessed us with the support of a wonderful family of faculty, students, alumni, and friends – and we are confident that the years ahead will continue to unfold the great promise that is Pepperdine University.

Charles J. Pippin
Vice President for Finance and Administration