Kamehameha Schools Releases FY 2008 Education and Financial Summary

January 9, 2009

Contributed by Thomas Yoshida

Despite a year that marked the beginning of a national recession that substantially devalued most investment portfolios, Kamehameha Schools served more than 38,100 students and delivered more than $273 million in trust spending – 2,100 more learners and $23 million more than in FY2007.

Additionally, Kamehameha's FY2008 endowment performance recorded a total return of 7.5 percent (compared to a -2% return posted by its Endowment Fund Composite benchmark), and exceeded its peer group benchmark by 7.4 percent.

Three years into its Education Strategic Plan (ESP), Kamehameha Schools has increased its educational reach into communities by 36.1% - serving more than 10,100 additional learners since 2005. This extension of Kamehameha's reach is a key focus of its overall 15-year strategic plan, a plan created in 2000 by over 4,000 statewide stakeholders who understood that the only way to achieve its mission of improving the well-being of the Hawaiian people was for Kamehameha Schools to offer broad support to education in communities.

In FY2008, KS exceeded its target numbers of Hawaiians served for the fiscal year by 7.2 percent from 36,000 to over 38,100 learners. Those learners include preschoolers, charter school students, young and old going back for their high school diplomas, public school elementary students improving their literacy, scholarship recipients from preschool to post-high and others. An additional 30,200 learners participated through one-time or intake programs.

"We have surpassed the aggressive outreach target we set for the initial three-year ramp-up of our educational outreach," said Dee Jay Mailer, CEO of Kamehameha Schools. "We are extremely proud of the work of the Kamehameha Schools staff and community collaborators who work hard every day to realize Pauahi's vision and offer our ÿohana multiple opportunities to thrive through education. By supporting educational efforts in our communities, we hope to strengthen education where our people live, which benefits all who live there. It is our hope that collaborating with other schools, both public and private, will help to strengthen Hawai'i's entire education system."

With Hawai'i's strong real estate market in FY 2008, along with the rise in energy costs, Kamehameha Schools' boosted the fair value of its total endowment to $9.44 billion. In the same period, Kamehameha Schools spent over $273 million on education. With FY 2008's total, trust spending levels over the past five fiscal years, cumulatively, has yielded more than $1.1 billion in educational spending by Kamehameha Schools.

Kamehameha Schools' spending policy targets annual spending on education at 4.0 percent of the rolling five-year average fair value of its endowment. Spending on education in FY 2008 was 4.1 percent, allocated as follows:

Spending in FY 2008 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 $5.73 million in per-pupil funding at 14 public charter schools statewide and another $4.11 million in other assistance through Kamehameha Schools' Public Education Support Division.

Enrollment in Kamehameha's preschool and K-12 classes stands at 1,485 and 5,372 students respectively. Other progress toward achieving Kamehameha's educational strategic priorities included:

• • Served more than 10,100 keiki ages 0-8 through KS center-based preschools, preschool scholarships, literacy instruction, and various educational collaborations
  • Increased by nearly 48 percent the number of kindergarten and pre-k scholarships (1,264 keiki) and increased total keiki scholarship awards from $4.4 million the previous year to $6.7 million in FY 2008.
  • Awarded $17.2 million to 2,443 students for post-high scholarships, to new graduates and continuing students of all ages.

Summarized Financial Results for FY ending June 30, 2008:

In FY 2008, Kamehameha Schools' total endowment fair value increased from $9.05 billion in FY07 to $9.44 billion in FY08. Revenues, gains and other support was $367.9 million.

"While the overall diversification of our portfolio enabled us to weather the initial volatility of the 2008 equity markets, we are by no means immune to the effects of the dramatic fluctuations triggered by the U.S. and global financial challenges that unfolded in the last half of the year," shared Kirk Belsby, Vice President for Endowment. He added, "Our portfolio's strong performance in early 2008 gave us a good cushion, but barring a significant turnaround in the next six months, our numbers for fiscal 2009 will be well below what we're seeing now."

Preliminary figures for the first four months of Kamehameha's FY 2009 indicate the trust's total endowment value is down by 18%, to $7.7 billion. Final audited numbers for the endowment's FY 2009 financial performance will not be available until December 2009.

"Despite the challenges we are all facing in this state and around the world, Kamehameha Schools will preserve our effective campus, early education and community educational programs," affirmed CEO Mailer. "This is a time for prudence and for focus on harvesting the efforts of our educational plans. As responsible stewards of Pauahi's resources, we will do what is needed to sustain effective services to our keiki and our communities for as long as it takes to bring us through the turmoil."

Kamehameha Schools evaluates its investment performance using multiple benchmarks for various purposes. Kamehameha's FY2008 endowment performance recorded a one-year total return of 7.5 percent and exceeded its Endowment Fund Composite Benchmark by 9.5 percent and its peer group (Cambridge Associates' Large Endowment Fund Median) benchmark by 7.4 percent.

Kamehameha Schools' investment portfolio return highlights for fiscal year 2008 included:
Energy 29.0%
Hawaii Real Estate 23.3
Venture/private equity 11.6
U.S. Fixed Income 11.5

A full copy of Kamehameha Schools' audited Consolidated Financial Statements and Supplemental Schedules for the fiscal year ending June 30, 2008, will be available at www.ksbe.edu by February 1, 2009.

Kamehameha Schools is a private, educational, charitable trust founded and endowed by the legacy of Princess Bernice Pauahi Bishop. Kamehameha Schools operates a statewide educational system enrolling more than 6,700 students of Hawaiian ancestry at K-12 campuses on O'ahu, Maui and Hawai'i and at 31 preschool sites statewide. Thousands of additional Hawaiian learners are also being served through a range of other Kamehameha Schools outreach programs, community collaborations and financial aid opportunities in Hawai'i and across the continental United States.