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Wednesday, February 9, 2000

revenues surge

Revenues rise 37 percent to a
record $459.7 million, helped by
its Goldman Sachs returns

By Rick Daysog


It may have been one of the most tumultuous 12 months in its 115-year history, but from a financial standpoint, 1999 was Kamehameha Schools' best year ever.

Benefiting from the initial public offering of Goldman Sachs Group LP last May, the charitable trust's revenues for its year ending June 30 rose 37 percent, to $459.7 million from $334.7 million a year earlier.

Art The results easily surpassed the previous record of $377.5 million in fiscal 1997 and are nearly double its 1993 revenues of $244.1 million.

The trust's assets -- which include vast stock market and real estate holdings in Hawaii and on the mainland -- appreciated by as much as $900 million in the latest year. Overall, assets total about $6 billion.

The estate's total return on assets last year was 22.9 percent, up from the often criticized single-digit returns of recent years.

The estate's finances were recently filed in state Probate Court as an addendum to the trust's consolidated financial statements.

The audited financial statements, compiled by the accounting firm of PriceWaterhouseCoopers, also show that the trust spent about $100 million last year to educate 4,500 native Hawaiian children.

The financial boon comes as the trust has embarked on an ambitious expansion of its educational and outreach programs.

According to PriceWaterhouse, the bulk of the estate's 1999 income was generated on Wall Street and in the booming North American real estate markets. Those sectors posted revenues of $378.1 million, while the value of those mainland assets grew by as much as $1.2 billion.

Goldman Sachs' public offering in May 1999 played a major role.

The trust, which currently holds a 5 percent stake in Goldman Sachs, sold about 9 million shares in the New York investment banking firm for about $477 million in the IPO and took home an additional $144 million partnership distribution.

Overall, the trust's initial $550 million investment in Goldman Sachs has appreciated by more than $2 billion since 1992.

By contrast, the estate's Hawaii real estate holdings struggled last year. With the slow economy, the estate's Hawaii properties declined in value by as much as $373.2 million while earning about $127.8 million.

In many ways, the estate's record financial results offer a positive counterpoint to the legal woes and scandals that have plagued the trust and its former board members.

During the past year, two trustees -- Henry Peters and Richard "Dickie" Wong -- were indicted for theft relating to their duties at the Bishop Estate before the charges were tossed by a state judge.

A third, Gerard Jervis, overdosed on sleeping pills after a female trust lawyer committed suicide. Jervis and attorney Rene Ojiri Kitaoka were caught having sex in a Waikiki restroom the day before Kitaoka's suicide.

Those incidents were followed by state Probate Judge Kevin Chang's historic May 7 order temporarily removing Peters, Wong, Jervis and Lokelani Lindsey after the Internal Revenue Service threatened to revoke the trust's tax-exempt status.

All four, along with former board member Oswald Stender, have since resigned on a permanent basis.

Yesterday, Peters called his removal ironic given the financial status of the trust. Peters, who headed the estate's investments, has long complained that he, Wong and Lindsey were targets of a political conspiracy aimed at taking out the estate's all-Hawaiian board.

"We were removed because we were in danger of making too much money," Peters said.

"It's a sad commentary."

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