Creating Opportunities Apollo Group, Inc. 2009 Annual Report Apollo Group, Inc. was founded in response to a gradual shift in higher education demographics from a student population dominated by youth to a more diverse population, the majority of which are working adults. It began with the belief that the era of lifelong employment with a single employer was ending, and workers would have to become lifelong learners to stay competitive in the global economy. Lifelong learning requires an institution dedicated to meeting the educational needs of the working learner. Since 1973, Apollo Group has been creating opportunities for students and employees to reach their full potential, while enriching society as a whole. Today, Apollo Group continues to strengthen and capitalize on its position as a leading provider of high quality, accessible education for individuals around the world. Through its subsidiaries, University of Phoenix, Apollo Global, College for Financial Planning, Institute for Professional Development, Meritus University and Western International University, Apollo Group has established itself as a leading provider of quality educational programs by focusing on serving the needs of the working learner. Creating Opportunities Page 1 Standing left to right: robert Moya, Brian Swartz, Charles edelstein, Gregory Cappelli, Joseph D’Amico, William Pepicello Seated left to right: Peter Sperling, Terri Bishop, John Sperling letter to our ShareholDerS Dear ShareholDerS: Fiscal 2009 was a momentous and rewarding year for Apollo Group and our stakeholders, as we embarked on a company-wide initiative to enhance our strategic plan and position the Company for responsible growth into the future. It also represented the 20th anniversary of the launch of our online educational offering at University of Phoenix. Apollo Group has twice reinvented education—initially by pioneering education tailored to the needs of the working learner and then by leading the way in online education. Fiscal 2009 marks the beginning of our efforts to reinvent education, again. a year in review. Apollo Group’s financial performance continued to show strong momentum in fiscal 2009, as consolidated revenue grew to $4.0 billion, a 27 percent increase over the prior year, and net income increased to $598.3 million, or $3.75 per diluted share. These results are a testament to the success we are seeing in the marketplace as we advance our mission of providing high quality, accessible education to individuals around the world. Average quarterly degreed enrollment at University of Phoenix increased 21 percent over the previous year, and during the fourth quarter, we achieved a record 443,000 in degreed Apollo Group, Inc. 2009 Annual report Page 2 enrollment, a 22 percent increase over the fourth quarter of fiscal 2008. In addition, primarily through Apollo Global, we continue to broaden our network of international educational institutions to serve a growing number of students outside of the United States. aligning our Strategy with our valueS. We firmly believe that historically education has been—and remains today—one of the primary factors that enable individuals to improve their prospects in life. We also believe that to remain competitive in an increasingly global economy, countries will need to foster a broadly educated society, not just a small educated elite. With this in mind, our principal focus is to provide access to high quality educational products and services to our students in order for them to maximize the benefit of their educational experience. We believe that a superior student experience, enabled by our engaged faculty and employees, is essential for our shareholders to achieve attractive returns on their investment over time. Creating Opportunities Page 3 During fiscal 2009 we began to execute on our refined strategy to achieve these goals in a manner that is consistent with our core organizational values of changing students’ lives through education, operating with integrity and responsibility, being the employer of choice within the education sector, and building long-term value for our shareholders. inveSting for the future. We are focused on changing students’ lives by providing an educational offering that is valuable to them through a platform that is accessible to today’s working learners. In fiscal 2009 we continued to significantly reinvest in our students to enhance the student experience and increase the value they derive from their education. Academic quality remains at the heart of our mission, and we continue to invest in both content and delivery of our educational offering. We are also committed to leading the industry in transparency and accountability in the area of academic quality; and to that end, University of Phoenix recently released its second Academic Annual report. looking forward, we are making technology investments in a next-generation learning platform to more effectively deliver content in ways that students will want to learn in the years to come. Apollo Group, Inc. 2009 Annual report Page 4 We emphasize the importance of operating with integrity and responsibility in everything we do. We have advocated a culture focused on operating with the highest of ethical standards and making decisions based, first and foremost, on the best interests of our students. We are committed to providing access to high quality education but want to balance this with our responsibility to ensure that only students who have a reasonable chance to succeed enroll in our universities. To this end, we are investing in initiatives to help students become responsible borrowers and determine if they are prepared for the rigors of higher education and committed to making the effort required to succeed in our programs before they enroll or incur debt. We are also refining certain marketing efforts and making investments both to attract better prepared students and to focus on our higher level degree programs. We understand that these actions may add some near-term volatility to our financial results; but importantly, we believe it’s the right thing to do for our students and our institutions, and that it should ultimately enhance the overall value of our company. Acting with integrity and responsibility also means we strive to demonstrate industry leadership in the area of regulatory compliance by continually assessing our systems and procedures, self-reporting any areas of concern, and fostering an open and constructive dialogue with those bodies charged with ensuring the quality of the postsecondary education system. Creating Opportunities Page 5 We endeavor to be the employer of choice within the education sector and are focused on attracting, developing and motivating talented people across our organization. In fiscal 2009 we made significant strides in this area, including investing in our human resources capabilities. We have made several key strategic hires throughout the organization and elevated a number of individuals to better align the organization with our strategy, and we also continue to add talented faculty members who are passionate about serving our students. By keeping students’ interests at the center of everything we do and remaining committed to maximizing the student experience, we believe we will be able to maximize the long-term value that we deliver to our shareholders. This will be achieved by maintaining our primary focus on maximizing the value of our flagship University of Phoenix business, which continues to produce our highest returns on capital. In fiscal 2009 we made investments to enhance our programs and elevate our brand equity, while improving operating efficiency. We also strive to increase long-term value through strategic investments that enable us to expand intelligently beyond University of Phoenix to build a global education network. We have created a high caliber financial and operating infrastructure at Apollo Global and, in 2009, Apollo Group, Inc. 2009 Annual report Page 6 1000 1200 200 400 600 800 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 1000 1200 200 400 600 800 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 committed to leading the way as we reinvent education, again. Overall, we are pleased with the accomplishments we made during 2009, and we remaininvestments today that we believe will benefit us in the growing global education learningindustry. experience to our students through academic quality and innovation. areWe making experienced team of employees who are focused on providing an energizing and compelling We enter 2010 with a strong and focused management team, dedicated faculty,to Apollo andGlobal, we are anlaying the foundation for global growth in the future. and throughout acquired BPP Holdings, which provides us with a platform to operate in the United Kingdom Chairman of Apollo Global Co-Chief Executive Officer, g regory w . Cappelli e urope. By applying our 35 years of experience and organizational capabilities ’ ’ ’ 05 05 05 $2.30 $697.7 INCOME OPERATING $2.3 1000 1200 200 400 600 800 DILUTED EPS ’ 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 ’ ’ 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 06 06 06 ( ( 0 $inmillions REVENUE $2.35 $650.0 $2.5 $inbillions ( $ ’ ’ ’ 07 07 07 $2.35 ) $625.7 $2.7 ) ) ’ ’ ’ 08 08 $2.87 $749.5 08 $3.1 ’ ’ ’ 09 09 09 $3.75 $1,039.5 $4.0 ’ ’ ’ 05 05 05 $2.30 $697.7 INCOME OPERATING $2.3 Co-Chief Executive Officer Charles B. DILUTED EPS ’ ’ ’ 06 06 06 ( ( $inmillions REVENUE $2.35 $650.0 $2.5 $inbillions ( $ ’ ’ ’ 07 07 07 $2.35 ) $625.7 $2.7 ) ) ’ e ’ ’ 08 08 08 delstein $2.87 $749.5 $3.1 ’ ’ ’ 09 09 09 $3.75 $1,039.5 $4.0 Creating Opportunities ’ ’ ’ 05 05 05 $2.30 $697.7 INCOME OPERATING $2.3 DILUTED EPS ’ ’ ’ 06 06 06 ( ( $inmillions REVENUE $2.35 $650.0 $2.5 $inbillions ( $ ’ ’ ’ 07 07 07 $2.35 ) $625.7 $2.7 Page 7 ) ) ’ ’ ’ 08 08 $2.87 $749.5 08 $3.1 ’ ’ ’ 09 09 09 $3.75 $1,039.5 $4.0 Opportunities through Accessibility Marqueta Rodgers Student, University of Phoenix I know how hard it is to balance work, family, and school.