6.3 Capital Levy and Nomination Right

When CDNIS was started in September 1991, there was an early recognition of the necessity to make parents to appreciate the capital needs of a school. Capital Levy and Nomination Right were introduced, at the start of CDNIS, to supplement CDNIS’ fund requirements.

A capital levy is payment of a non-refundable annual fee and a nomination right is a prepayment of capital levies and is a one-time refundable payment. 

The funds from both sources were used for capital improvements and/or general revenue purposes. 

In 1991, Capital Levy was set at HK,000.00 and the Nomination Right price was HK,000.00. 

In 1992, both were adjusted to HK$ 8,000.00 and HK$ 25,000.00 respectively. Nomination Right was adjusted to become refundable up to three years in units of one-third and a “Corporate Debenture” was introduced for the first time. This entitled the holder to be free from Capital Levy and any future calls on capital. It was priced at HK$ 75,000.00 and only 2 corporate debentures were sold. As a result of the poor response, this element of the program was put on hold to allow CDNIS to build on its profile before opening up to the market. 

6.1 Introduction

This was particularly challenging to CDNIS as the Canadian government has no constitutional jurisdiction over education here in Hong Kong and no financial support is available.

It was, therefore, a rather arduous task for CDNIS to look for funds to cover the building cost of the new campus on Nam Long Shan Road, which was originally estimated at approximately HK0 million, including furniture and fixture. 

The size of the project had forced CDNIS to canvass and hold many in-depth discussions with other schools to explore the possibility of building one facility to house two schools but these discussions came to no avail. 

The underprivileged position of CDNIS as compared to many other international schools in Hong Kong, in terms of funding sources, had made it mandatory that it should secure its major funding from one major benefactor of Hong Kong – The Hong Kong Jockey Club (“the Jockey Club”) and improvised other means to satisfy its capital funding requirements. 

6.2 The Donation from the Jockey Club

After securing the Site and detailed planning of the design of the campus, the next important step was to ensure sufficient funds in the coffers to commence the construction process.

The donation from the Jockey Club was the key source of funding which allowed CDNIS to build its present campus. 

Fund-raising has never been easy. This applies in particular to secure donation from an institution such as the Jockey Club which is the target from many charitable organizations for funding. In 1995, the Board, chaired by Chisholm Lyons, invited Maria Mui, a governor, to join CDNIS’ Special Events Committee for fund-raising. 

CDNIS was blessed with the fact that Maria Mui had the proper channel to reach both then Chairman of the Jockey Club, Sir John Swaine, and its Deputy Chairman, Mr. C.H. Wong. 

The introduction of CDNIS to Sir John Swaine was started in April 29, 1994 at the Reception Dinner to host the Canadian Governor General, Mr. Ramon Hnatyshyn. 

Subsequent to that occasion, Maria Mui had arranged a preliminary meeting with Mr. C.H. Wong informally in 1994 to have an understanding of the proper approach to the Jockey Club for funding. The meeting was attended together with John Crawford. 

On January 7, 1995, Ching-Wo Ng met with David Yau, an official of the Jockey Club so as to enable the latter to prepare a report on CDNIS to the Jockey Club. The initial request was for the sum of 110 million was considered as too large. Another concern was that international schools were generally perceived as for the privileged class only. The philosophy of CDNIS on quality education at an affordable price and its ability to carry out that mandate consistently since its inception were conveyed and David Yau had a better grasp of the situation to begin his report. 

The report prepared by David Yau made it possible and opportune to follow up with a meeting with the stewards. 

On January 15, 1995, Maria Mui hosted a luncheon party at Toscana, an Italian Restaurant at Ritz Carlton Hotel. For CDNIS, Chisholm Lyons, John Crawford, Ed Rubin and Vincent Lee attended and for Jockey Club, by Sir John Swaine, C.H. Wong and David Gairns. 

 

The representatives of the stewards from the Jockey Club were key members in the Jockey Club’s decision on allocation of funds. This fact was actually ascertained by both Maria and Vincent so as to ensure the approach by the Board was on the right track. That crucial meeting together with the clear support from Hong Kong government of the project through the initiative of Madam Anson Chan and Mr. Garrett Lambert, then Commissioner for Canada, were able to open door for CDNIS that would not otherwise be opened. 

Having explained the project to the senior stewards of the Jockey Club and converting some with sympathetic ears, Chisholm responded to the numerous initial questions raised and attended to the technical side of the quests raised by David Yau and a formal application to the Jockey Club was made in March 1995. The original request was for 0 million – which consisted of 150 million for the school construction and 60 million for slope costs, road widening and additional foundation works. 

The application was conducted with expediency and the Jockey Club responded for further queries by a letter dated April 6, 1995 and John Crawford, Li Ho-kin, Nick Burns, Ching-Wo Ng, Vincent Lee, Bill Lam and Ed Rubin all helped prepare the collective answers to the queries raised by, and to the satisfaction of, the Jockey Club. 

As stated in Chisholm’s memo to all the members of the Board on May 6, 1995, “The future of the School is now in the hands of the Jockey Club and the government.” The hand of fate turned in favour of CDNIS and the Jockey Club agreed to donate 90 million to cover the proposed construction cost of the superstructure in the same year and CDNIS was therefore able to commence construction and put itself on the map.

6.4 Capital Debenture

 

A capital debenture is a method by which CDNIS can raise funds for its capital requirements. It is an obligation of CDNIS to repay the debenture holder, without interest, the face value of the debenture.

Under normal circumstances, CDNIS will not redeem the debenture. The general practice is that holders will transfer their debenture to new parents to recoup their investment.

This program is an important element in raising capital to building the campus at the Site.

In 1993, John Crawford proposed the Debenture Program as a structured scheme to enable CDNIS to raise large amounts of capital on an extended basis. This program was to replace the Nomination Rights Program started by the Founding Members.

Another key member of the Debenture Committee was Eric Kong, a lawyer by profession. John and Eric became the core members of the Debenture Committee to develop the Debenture Program. Key features of the Debenture Program were as follows:

(i) The debenture price was to start at a level appropriate to the size and stature of CDNIS at the time and the program also provided for the conversion and phasing out of the Nomination Rights Program;

(ii) A key marketing strategy was to limit sales to small tranches which would encourage purchases before prices increased;

(iii) Another key element to the program was the structuring of the Annual Capital Levy. All parents who did not hold a debenture was required to pay a Capital Levy. The level of the Capital Levy was set to coincide with the debenture sale prices so that debenture holders were given an approximate 9% return by exemption from paying the Capital Levy;

(iv) By allowing for the controlled transfer of Capital Debentures and raising prices with subsequent tranches in a controlled manner, an additional marketing feature was created; and

(v) Transfer fee is charged at 50% of the appreciation in market transfer prices over the original prices to give additional income to CDNIS.

By adopting the Debenture Program and maintaining the number of debentures issued to the number of parents paying the Capital Levies in a pre-determined ratio of 50:50, CDNIS was able to secure large capital funding and revenue from their transfers as well as from the Capital Levy to meet Capital debt requirements. 

This is an important program to allow CDNIS to raise and supplement capital to complete the campus and meet its capital indebtedness. 

6.5 The Government interest-free Loan HK$ 66.6 million

In order to assist the building of the campus at the Site, the Hong Kong government was prepared to grant an interest-free loan in the sum of HK$ 66.6 million to CDNIS.

One of the conditions for granting the loan was that CDNIS was required to pledge its “not yet built facility” as security. The original Land Grant relating to the Site restricted CDNIS from pledging such assets. 

The awkward situation was finally resolved upon the government graciously agreeing to remove the restriction and to allow for such an arrangement. 

The loan is effectively a long-term financing of funds to be repaid over a period of 10 years. 

6.6 Transfer fees

As mentioned in 6.4 above, the income from transfer fees secured from Debenture sales/transfers over the years is another important source of funding for CDNIS.

6.7 The Blue Lagoon Ball

The Ball was held on April 20, 2002 at Grand Hyatt Hotel to raise funds for the new indoor swimming pool. The Ball Committee was chaired by Alan Dick and Perveen Crawford and was a tremendous success. The Ball raised close to HK$ 2 million.

6.8 Other donors

Other donors have also contributed to the funding of CDNIS.

The major ones include Dr. Stanley Ho & Mrs. Lucina Ho, Madam Lam Mei-yip and the Hutchison Whampoa Group under the Gold Maple Leaf category; the Hongkong Bank Foundation, “In Memory of Mr. Kwong Yun Chwin”, David & Dorothy Lam Foundation, Manulife (International) Limited and Canadian International School Parents’ Association under the Jade Maple Leaf category; Mr. Raymond Chan, “In Memory of Kitty Y.K. Fung”, the Chinese-Canadian Association (H.K.) Limited, Mr. & Mrs. Song Yeung and Mrs. Chiang Cheung Chun Fong under the Silver Maple Leaf category and many others under the Red Maple Leaf category plus many other donors of lesser sums.