Bishop, partners alter
Chinese bank plan

Turmoil in Hong Kong may
slow plans to take it public

By Rick Daysog

The turmoil in Hong Kong's stock market may hamper plans by Bishop Estate and its partners to take a mainland Chinese bank public.

With the benchmark Hang Seng index losing more than a fifth of its value during the past weeks, analysts said that a proposal to list shares of Xiamen International Bank on the Hong Kong Stock Exchange could be put on hold.

The development underscores Bishop Estate's growing exposure to global economic trends. It also calls attention to the $10 billion trust's high-risk, high-reward investment strategy.

"This is a bad market for public offerings," said Jeannie Cheung, head of China research for Paribas Asia Equity in Hong Kong.

Bishop Estate, the state's largest private landholder, owns nearly 5 percent of Xiamen, which last year applied with the People's Bank of China to list its shares on the Hong Kong Stock Exchange. The application is pending.

During the past few weeks, many so-called red-chip companies -- publicly traded companies based in China -- have been hard-hit by the downturn. Some have pulled stock offerings, according to Marvin Lo, equities analyst at Amsteel Research (Hong Kong) Ltd.

Henry Peters, a Bishop Estate trustee and a member of Xiamen's board of directors, conceded that the volatile Hong Kong market may delay Xiamen's initial public offering. But he said the bank's partners are committed to taking it public, which would greatly enhance the estate's investment.

Peters said he plans to propose listing the company on the New York Stock Exchange at Xiamen's board meeting in December.

"For us, the strategy is slightly altered," said Peters, a former speaker of the state House of Representatives.

Peters noted that the estate's investments in China are for the long haul and that its exposure there is relatively small. On the upside, the investment could generate tremendous returns, he said.

Xiamen -- which operates 19 branches in Hong Kong, the Portuguese colony of Macao and China's Fujian province -- last year earned $22.5 million, up from $19.4 million in 1995, according to Lo.

The company will likely earn $24.9 million this year -- although earnings could face a slowdown as bad debts begin to mount, he said.

Bishop Estate's take from the bank amounted to $370,000 for the fiscal year ending June 30, 1996, up from $326,000 the previous year, according to recent tax filings.

Cheung estimated that a Xiamen initial public offering could raise anywhere from 12 times to 20 times the bank's annual income, or about $300 million to $490 million. The estate's nearly 5 percent stake would then be worth $15 million to $24.5 million, more than triple its initial $5 million investment.

Peters declined comment on the analysts' estimates.

Critics say the trust should not be investing in exotic companies such as Xiamen. They argue that the nonprofit foundation -- which finances Kamehameha Schools -- should avoid high-risk ventures in emerging markets such as China.

Besides Xiamen, the trust owns about $9 million in venture capital investments in China through its interests in Unison Pacific Investment (U.S.) Ltd. The estate's San Francisco-based partner, Unison International Corp., was an investor with legendary isle financier Chinn Ho in the Great Wall Hotel in Beijing during the 1980s.

"I don't think it's prudent for a trust to put money in these high-roller ventures," said Beadie Dawson, attorney for Na Pua a Ke Ali'i Pauahi, which has criticized trustees' management of Kamehameha Schools. "They're literally playing Las Vegas with the trust's money."

Dawson said some trustees are more concerned with playing Wall Street dealmaker than in serving the fiduciary interests of a charitable foundation. She said they are more interested with rubbing elbows with high-profile partners.

The list of Xiamen International Bank's investors reads like a who's who of Wall Street and Pacific Rim finance. They include former U.S. Treasury Secretary William Simon, Manila-based Asian Development Bank and Long-Term Credit Bank of Japan Ltd.

The largest shareholder is Min Xin Holdings Ltd., formerly the Panin Group, which owns 36.75 percent of the bank. An affiliated company, Panin Bank, formed Xiamen in 1985.

Panin was founded by Indonesian businessman Mu'min Ali Gunawan, a brother-in-law of Indonesian banking tycoon Mochtar Riady, according to AsiaMoney magazine. Riady, who heads the Lippo Group, is at the center of the campaign finance scandal plaguing the Clinton administration.

Peters said he was unaware of the relationship between Panin Bank and the Riady family.

But investments of Simon, Panin and the estate have been linked for years. The estate was a big shareholder in First Interstate Bank of Hawaii Inc. when Simon sold the local bank to First Hawaiian Inc. in 1991. Simon, in turn, acquired much of his stake in First Interstate in the mid-1980s from Panin Bank executives.

Peters was a director of the local affiliate Panin North America Inc. in 1983 when he was a legislator, according to filings with the state Ethics Commission.

Bishop Estate Archive

Bishop Estate revises plans
for student enrollment

By Gordon Y.K. Pang

Bring students in earlier and bring them from a more diverse field. But not necessarily more of them.

Those appear to be the major themes spelled out in the just-released education strategic plan for Kamehameha Schools.

The plan does not translate into educating more students but a shift in demographics.

Neighbor island students now make up 20 percent of the student body. That would increase to 30 percent by 2004.

The plan appears to run counter to one of the five goals of the GoForward initiative adopted by the board of trustees in 1995: "expansion of secondary school enrollment."

By the year 2000, the number of students in grades nine through 12 would drop from the current 1,824 students to 1,800 under the plan developed by the 18-member team of administrators headed by trustee Lokelani Lindsey.

Students in kindergarten through fifth grade would increase from 822 to 1,248 by 2002.

Enrollment in grades six through eight would rise from 710 to 908.

According to the plan, the goal is to "progressively achieve a reasonable representation of the statewide demographics of Hawaiian students."

The plan also calls for 15 percent of students to be orphans and indigents, groups targeted specifically by Princess Bernice Pauahi Bishop in the will that created the schools. Ten percent of new students would come from the "gifted and talented" categories, under the plan.

The 16-page document is based largely on organizational goals reached by Bishop Estate's trustees in 1994.

In 1995, Kamehameha opened satellite campuses in Hilo and Maui that cater to students from kindergarten through sixth grade.

The plan calls for a new campus in West Hawaii and a fourth feeder campus somewhere on Oahu by the beginning of 2001. While not stated in the plan, the Waianae Coast and Waimanalo have been mentioned as potential sites for the second Oahu campus.

Preschool enrollment would climb from 1,080 to 1,840 by 2003. The number of post-high school students receiving financial aid would jump from 3,050 to 4,000.

Expanding partnerships with businesses and colleges is also mentioned in the plan, although there is no discussion on renewing ties with the state Department of Education. Kamehameha cut outreach programs it had developed with the public school system in 1995, severing ties that went back more than two decades.

Ex-Punahou chief: Estate must
include faculty in planning

By Gordon Y.K. Pang

Former Punahou School President Roderick McPhee says not involving faculty and others in the long-term planning of a school is a recipe for disaster.

McPhee agreed with others who have criticized the trustees of Kamehameha Schools Bishop Estate for not including teachers or department heads on the planning team for an educational strategic plan issued this week and designed to take the school into 2005.

"Anybody can write a plan of this kind; the trick is to have something like this carried out," McPhee said. Shutting out the faculty "really guarantees it won't be carried out."

The plan was developed by a team of 18 executives of Kamehameha Schools Bishop Estate led by trustee Lokelani Lindsey. Principal executives are listed as president Michael Chun, budget officer Yukio Takemoto, legal counsel Nathan Aipa and administrator Rodney Park.

McPhee said he has been involved not only with strategic plans at Punahou, but Seabury Hall and several on the mainland. McPhee led Punahou from 1968 until his retirement in 1994.

From what he has heard of the Kamehameha plan, "it's the absolute antithesis of any strategic plan I've ever been involved in or ever heard of," McPhee said.

McPhee said he's disturbed by other recent developments at Kamehameha, particularly the treatment of teachers.

"They're getting contracts a few days before school starts, being prohibited from meeting at school," he said.

"I'm amazed the morale of the faculty remains as good as it is."

McPhee said it puzzles him to see a school where faculty are afraid of reprisals for speaking out against school policy.

"Faculties are involved in planning the educational process, and they've totally taken that away at Kamehameha," he said.

The chief task of a board of trustees at a private school is "hiring a chief executive officer and making sure he does the job properly and, if he doesn't, to get rid of him," McPhee said.

The board should also set the overall direction of the school and provide the resources to allow the administration to carry out the school's goals, he said.

"But they do not get in and manage the school," he said.

"That's clear as a bell."

Bishop Estate Archive

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