Apollo Group Inc.

Shareowner, Jul/Aug 2004

Apollo is the world's largest provider of forprofit, post-secondary education for working adults. The company's programs and services are offered at 75 campuses and 125 learning centers in 38 states, Puerto Rico and Canada. Over 128,000 students (56% of the total) are enrolled in on-campus programs.

Educational Scope

The company delivers its programs to working adults through a variety of institutions including: The University of Phoenix (over 90% of consolidated tuition revenues), Institute for Professional Development, The College for Financial Planning Institutes Corporation and Western International University.

The University of Phoenix is the largest non-profit university in the U.S. It offers: associate, bachelor, masters and doctoral degree programs in business, criminal justice, education, health care, human services, information technology, management and nursing. In addition, University of Phoenix offers professional education programs for teachers, custom training, and many programs leading to certification in the areas of business, technology, and nursing.

Demand for higher education among 1824 year olds is projected to grow faster than existing higher education infrastructure can handle, therefore, University of Phoenix has lowered its minimum age requirement from 23 to 21. This new market is expected to significantly enlarge the university's base of potential students.

The Institute for Professional Development provides educational program development and management services to regionally accredited private colleges and universities. In exchange, the Institute receives a contractual share of the tuition revenues generated from these programs.

The College for Financial Planning and Western International University offer: (1) undergraduate and graduate degrees in business and public administration; and, (2) concentrations in financial planning and analysis that prepare students for CFP and CFA examinations.

Western International University is about to launch Axia College which is designed specifically for the 18-to-24-year-old student.

Online Programs

Started in 1989, The University of Phoenix Online is the world's largest provider of accredited, educational programs delivered over the Internet. Current enrollment is approximately 99,000 students, spread over more than 100 countries.

Quality in online programs is maintained by delivering essentially the same material as is available through the University's on-campus courses.

In 2003, the company was awarded two contracts to offer graduate degree programs to U.S. military personnel stationed around the world.

Tuition Assistance

Approximately 50% of students receive tuition assistance from employers. In addition, approximately 50% of new student enrollments are through referrals.

University of Phoenix Online - A "Tracking" Stock

In 2000, Apollo Group Inc. issued a special class of shares to help fund and track the performance of its high-growth online educational programs offered by its wholly-owned subsidiary, the University of Phoenix Inc. This special class of non-voting shares trades on NASDAQ as University of Phoenix Online (UOPX). Apollo owns 85.6% of the University of Phoenix Online shares.

Tracking shares do not represent ownership of University of Phoenix assets linked to online educational programs. Instead, the shares represent a 13.4% interest in Apollo's assets.

Since its inception, University of Phoenix Online has relied on Apollo Group to finance its operations and no related thirdparty debt has been incurred. As a result, UOPX's reported financial position and operational results may not be comparable to those for other firms in the industry.

For example, certain costs incurred by Apollo and the University of Phoenix (e.g. legal, accounting, centralized student services, etc. arc allocated to UOPX on the basis of its revenues in relation to those of Apollo Group and University of Phoenix.

As well, Apollo Group charges UOPX a license fee of 4% of its net revenues for the use of curriculum, trademarks, and copyrights.

Because of this close and unique relationship between the UOPX tracking stock and Apollo common stock, separate financial and operating fundamentals arc not included in this profile of the UOPX tracking shares.

There are provisions for the tracking shares to be converted into Apollo shares under certain circumstances in the future at a specified 10% premium over their value should Apollo force the conversion.

Career Education's programs are offered at 79 campuses located in the U.S., Canada, France, the United Kingdom and the United Arab Emirates. Over 70,000 students (81% of the total) are enrolled in on-campus programs.

Educational Scope

Through its colleges, schools and universities, the company offers associate, bachelor, masters and doctoral degrees and diplomas. Fields of study include such career-orientated disciplines as: visual communication and design technology; information technology; business; culinary arts; and, health care.

Online Programs