In 2005 the University was again blessed by strong operations and growth of assets, while continuing the focus on excellence in all areas of University life and endeavor. Total assets now exceed $1 billion, increasing nearly 7 percent from one year ago. The $69 million increase in total assets we enjoyed during fiscal 2005 was the result of favorable investment performance and net operating surpluses.
The University's investments and cash increased $92 million during fiscal 2005, again resulting from positive operations and investment returns. The University's investment portfolio has rebounded well from the period of volatility and negative returns in the capital markets we experienced four years ago. Our continued long-term diversified investment strategy, combined with our five-year averaging of market values for determining the level of endowment support has produced outstanding results in protecting the investment portfolio and providing stable resources to fund our academic operations. During fiscal 2005, our investment portfolio generated total income and gains of approximately $82 million, for an approximate 14 percent total annual return.
We have truly been blessed to witness the dramatic growth in the University's endowment over the last 33 years, since we moved to the Malibu campus. It is a sobering thought to realize that only 33 years ago, the University's endowment was a mere $1 million. At the end of fiscal 2005, University investment funds functioning as endowment totaled $483 million, a 13 percent increase from one year ago. During fiscal 2005, total endowment support increased to $23 million, a near 11 percent increase from last year. Over time, we would hope to see support from our endowment increase, providing more opportunities to expand financial aid to our students or create ongoing support for other University operations.
During fiscal 2005, we completed the construction of our Drescher Graduate Campus, the home to three of the University's four graduate schools: the George L. Graziadio School of Business and Management, the Graduate School of Education and Psychology, and the School of Public Policy. The final phase of construction included 56 faculty and staff residences, the majority of which were sold in fiscal 2005, generating $21 million in resources that are now available to fund further campus investment. Over the past several years, we have dramatically increased the function and beauty of our Malibu campus, as evidenced by our significant investment in property, facilities, and equipment of $143 million during the past five years. The Drescher Graduate Campus was of course the largest component of this increase. Looking forward, we see this trend continuing through the renovation and expansion of our Malibu campus.
The University's long-term obligations decreased slightly from one year ago, and totaled $203 million at the end of fiscal 2005. The University's significant general asset reserves and our ability to cover debt service from operating cash flow are strong contributors to our recently reaffirmed "A1" credit rating from Moody's Investors Service. The value of the University's financial strength was proven shortly after our fiscal year-end, when in August of 2005, we took advantage of a very favorable interest rate environment, and refinanced over $106 million of our outstanding debt, realizing present-value interest savings of nearly $6 million.
The University's net assets now total over $804 million, with almost $600 million of that balance "unrestricted" or available to cover any possible contingency. Only six years ago, the University's net assets totaled $674 million, with $484 million unrestricted at that time. The last several years have seen impressive growth.
Today, the University enrolls approximately 8,000 students in its five colleges and schools. The University's academic operations remain strong, due primarily to our diversified enrollment base and a significant increase in student demand. This demand growth has been particularly remarkable during the past decade for our increasingly prestigious undergraduate programs. Seaver College now accepts just 28 percent of undergraduate applicants, compared to 78 percent 10 years ago. During that same time frame, applications to Seaver College have more than doubled and Seaver's yield rate on accepted applicants increased to 38 percent from 29 percent, illustrating our significant improvement in stature among undergraduate college applicants. Today we compete for the best students against the best public and private academic institutions, and we are winning students' hearts and minds.
While on balance we are well positioned for continued application growth, enrollment declines at the Graziadio School of Business and Management have caused us to reexamine that school's business model and future goals. While we would certainly prefer to have experienced stable enrollment rates at the Graziadio School, its enrollment declines have been in line with decreases noted in the national MBA marketplace.
Application and enrollment trends are extremely important to the University, since our operating revenue is comprised primarily of student-related revenues (items such as tuition, fees, and auxiliary revenue). These items account for approximately 80 percent of the University's total revenue. We have been fortunate to see our net tuition per student grow 31 percent since 2000 to approximately $19,000 in 2005, resulting from the University's mix of graduate programs and increasing undergraduate demand.
Of course, along with increased net tuition revenues we know we must continue to increase our investment in our students' academic and community experience. Accordingly, we have endeavored to direct the University's resources to improving our academic, social, and spiritual programs and facilities. During fiscal 2005, the University's instruction, research, and student service expenses increased by over $4 million, to nearly $114 million. Including these items and academic support, fully 95 percent of each net tuition and fee dollar received is expended on products and services that directly impact each student's experience here at Pepperdine University.
We remain thankful for the many ways we have been blessed at Pepperdine University. Close examination of the progress we have made over the past 68 years, and the past year alone, removes any doubt that God's hand is in our work. With such continued blessings, 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