FY 2006 Strong for Kamehameha Schools

December 21, 2006

Contributed by Thomas Yoshida

The launch of Kamehameha's Education Strategic Plan (ESP) marked a refined focus on education within its broader 15-year Strategic Plan through three major strategic priorities. Based on this work, Kamehameha Schools exceeded target numbers of Hawaiians served for the fiscal year and impacted more than 28,000 learners, with an additional 15,000 learners participating through one-time or intake programs.

"Kamehameha Schools was blessed in FY 2006 with a very strong financial performance. It serves us well as we continue to move forward in our schools and with communities to educate our people," said CEO Dee Jay Mailer. "Every day, students on our campuses and in our preschools can flourish because of the strength of our endowment. And, through outreach, we are able to improve the education provided within our communities. Through all of these thresholds, we will succeed with others to build hope and confidence through education for generations of Native Hawaiians to come. This is what Kamehameha Schools exists to do."

Strong performance in FY'05-06 in real estate, stocks and other equity investments boosted the fair value of Kamehameha Schools' total endowment by $897 million to $7.66 billion. In the same period, Kamehameha Schools spent nearly $221 million on education – on par with trust spending levels over the past five fiscal years, which, cumulatively, has yielded more than $1.1 billion in educational spending by Kamehameha Schools since 2002.

Kamehameha Schools' spending policy targets annual spending on education at 4.0 percent of the five-year average fair value of its endowment. Spending in FY '05-06 was 3.8 percent and was allocated as follows:

Spending in FY '05-06 included funding of Kamehameha's campus-based and community outreach programs as well as financing of capital projects and repairs. Also included in that amount is nearly $4 million from Kamehameha Schools that went to charter schools.

Enrollment in Kamehameha's preschool and K-12 classes increased to 1,317 and 5,398 students respectively. For the first time in its history, Kamehameha Schools celebrated the graduation of high school students at the Hawai'i and Maui campuses with a total of 722 students graduated from all three campuses. Other progress toward achieving Kamehameha's educational strategic priorities included:

• Served 3,000 more children and caregivers for a total of 10,000 through KS center-based preschools, preschool scholarships, literacy instruction, and caregiver and early childhood education collaborations
• Increased by 80 percent the number of preschool scholarships (622) and doubled the amount awarded to $3 million. Awarded $12.6 million to 2,200 students to fund post-high school education with new emphasis on high-risk and non-traditional populations and selected fields of study
• Increased emphasis reaching more children from families in indigent circumstances, resulting in a 17 percent increase in enrollment of students in these categories.

Summarized Financial Results for FY ending June 30, 2006:

In FY 2006, Kamehameha Schools' endowment increased $897 million. After expenses, the year's financial activity netted a 17.0 percent total return, bringing the endowment's overall fair value to $7.66 billion.

"This strong performance allowed Kamehameha Schools to considerably exceed our long-term annual endowment growth target and contributed to an educational mission that will last into perpetuity," shared Kirk Belsby, Vice President for Endowment. He added, "While it's encouraging to have strong years like this, we know that factors beyond our control can push things in the other direction too, so we rely on the diversified nature of our portfolio and the trailing five-year rolling average value of the portfolio to provide a stable model on which to base spending and budgeting decisions. Peaks like this year help smooth out valleys like we experienced in the period between 2000 and 2002."

Kamehameha Schools evaluates its investment performance using multiple benchmarks for various purposes. Kamehameha's FY2006 endowment performance exceeded its internal (Blended Portfolio) benchmark by 5.9 percent and its peer group (Cambridge Associates Large Endowment Fund Median) benchmark by 2.6 percent. It also significantly exceeded Kamehameha Schools' longer term benchmark of CPI + 5 percent by 7.7 percent.

Investment return highlights for fiscal year 2006 included: