How would you characterise the challenges of this year? It has been a tough year. The

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1 Face to face with the Chief Executive In a year which saw Hong Kong tested by SARS, triumphant in its international races, and move ahead with football betting, Lawrence Wong responds to some of the key issues faced by the Club. How would you characterise the challenges of this year? It has been a tough year. The poor economy and the continued activities of illegal operators meant we had to work harder than ever to satisfy customers and maintain our charity commitment. SARS pushed the Club hard, not only financially but in human terms. Several staff were taken ill and one part-time colleague sadly passed away. Yet the Club came through, and our development plans remain on track. We saw probably our best racing to date, not only in our international events but in our domestic programme. Facilities and service improvements continued apace. Charity donations remained at pre-downturn levels. Achieving this has not been easy. We worked hard on our racing programme and we re-doubled cost management efforts. But above all our success was down to the team effort of management and staff. That spirit has sustained us throughout the downturn and this year took us through the trauma of SARS. Board of Management is immensely proud of all our colleagues and grateful for their dedicated support. What was the significance of the Club s SARS related donations? How is the Club using its charity resources to help those hit by the downturn? One of the most anxious times during SARS was the closure of schools and kindergartens. There was real concern amongst parents and the community at large. That was why we stepped in to help fund the cleaning of schools and kindergartens plus community care centres. Getting those back open was in retrospect something of a psychological turning point; Hong Kong showed to itself and the world that it was determined to beat the virus. Our subsequent support for a Centre for the Prevention and Control of Infectious Diseases followed logically from this. Having got involved with the immediate crisis we wanted to help Hong Kong address the longer term issues of disease control. 10

2 The Club has been targeting funds at those affected by the downturn for some time. This year we are funding job skills training for young people and supporting agencies providing debt counselling and suicide prevention. Next year we will be helping to support Intensive Employment Assistance projects, which the Social Welfare Department is developing to help the unemployed return to work. Of course it should not be forgotten that we continue to fund a broad cross section of charities and community projects; some 120 this year. We aim to provide for longer term needs as well as the immediate issues created by events like SARS and the downturn. The Club has made rapid strides towards its vision of world class sporting entertainment. How has it achieved this? What has this meant for Hong Kong? We started out with a clear objective. We knew that Hong Kong could not survive on its reputation for large betting pools. If we wanted to retain the loyalty of sporting fans in an increasingly globalised entertainment market we had to raise ourselves to the international standard. The issue was how, given that we can only accommodate a small horse population and have no breeding industry. Lawrence (Larry) T Wong, Chief Executive Ϸ ܧ ᐢസ ඡϭࡄ The first step was to get the right team. We recruited international talent and blended them with the best of our in-house management. Then, building on their expertise, we launched a strategy to simultaneously showcase Hong Kong internationally and build racing at home, with our international races as the centrepiece and driver. Hence attracting top racing stars and participating in the World Series Racing Championship both raised our profile overseas and gave Hong Kong owners a benchmark and target to aim for. To incentivise them further, we increased prize money substantially, reduced livery charges through our stables productivity campaign, and adjusted our racing programme and race distances to provide suitable preparation for international competition. And through the Hong Kong International Sale and our work with overseas Һ c ࠨʹടʹ୮ଉ ٽ Ⴉ ؿ ਐᕀc ݯ Ԝ ވ ज़ᑩ ᅥ ผ ٶ ࠨ ؿ ਝ ΔϽc ᜑ Δ ȿ ᅆ ԾХ ಋ ܧ ι ඨ ञདԉʥ α ؿ ᅟe ผΣЄ ү༠ϭ ވ ኋ ؿ ᘏᑩˋ c Ϥᆢ Ϭɯ Թɻʶe ᅟj ᅟ ಋ෮ຮЄΕj ؿ ᅟe ݯ ȿ൬ȹүར ʠ ʞ ٶ αc ࠨɺᒾሁ ԾХՇ Ꮬ ࠨ ؿ ᅟ ڈ ע ᆢe ࠨ૯ ك ɺॶ ؿ ሔ c ࠨ ᑩԑᆉ ټ ɣఝሁঢ়c ɺౡᄧᚊ ؿ ɁɡeΕʌα㛾c ࠨᅆ ንኟτᕡɣ ϑϥϭ e ᅥ ༦ҝ ଐɈԞಕГቔ cԏ ᎳХα ڇ Ɂc ݯ ˢࠨ Ԝᓻพ ফh ᑭΉͲଈʝc ࠨ Ґ ಋᑩ ؿ ሔ ᑩԑ ؿ ᇁખʥபೡАˮሁኬcᜑ ʞ τ Хҁᗙዀ ݯ Ԝඦ Ⴄኒʥ ʠϭਝ ˋ cɷ ܛړ ؿ ጙ τሬ ؿ ᆅӸʹ ٴ ኝਝ ᑩԑeϊ c དԉϬ ೩ ר e ע αc ࠨԎผ Х መe c ಋ ؿ ቔ உ ܪ τࠉcɍ ॠ ࠨҡᐾፒ ಋਝ ʞ ሒผcԎ م ผ Сອ ઐˮ ؿ ૯Ƀగพ Х Δө พcᑩ ˋ ɌΣЄ ʠՙj ʞ ሒϷ၇ Аc ұ ҡλ cᎳх พɁɡࠇ ٵ ɮА Ͻe ͱc ࠨዶร ۺ ȹ Ӟ ؿ ሔ ʞʵ൬ ಋe ಳcΕዶรΑᎶ م ผ ؿ ʘ ұɾ අe ࠨາᇼ ވ ΈΔɁɷԞಋc ঢ়ጙ Ԓ ܧ ೪ɰՅ ι eଊε c ࠨ ɺॶ م ผΈආᄙ ٽؿ Ⴉ ผʑ ؿ ଉ၀ߜᙙʹ Аeንടˢࠨ ࠨҰαᐾፒ ؿ ʄඖਝ ᑩԑя ݯ cʌα ผ ڏ ХȿȹϛɀɊΛ ؿ كپ ᖫcȹʿࠍΕਝ ɐઐᄤ ಋ ਝ ȹज़ᑩc ᑩ ʞԞϬ ވ ΈΔe ෯ ʥ م ผ ר e ؿ ᑩ ݠ h ȹʿࠍߎɈ Δᑩ ࠨ ፒ ؿ ಋਝ ᑩ ႓ Ͳଈ ਝ ԑcዶรмʵ ވ ज़Ί ʥᕉ Ԟಋ ʝ ؿ ኋଞԑe ʦᎶᆅईcɺ ᘏ cԏ ވ ᅟԀ ᑩc ʠ ᒾᑪɃ ज़Ӫ cԯɻɺʭя౦ε 11

3 Face to face with the Chief Executive auction houses, we have sought to bring the best horses to Hong Kong. So far, the results have exceeded expectations. Now all five international races are rated international Group One, and with nations from all hemispheres competing, the Hong Kong International Races are probably the most international racing event in the world. Owners have responded enthusiastically, importing top horses, many with distinguished overseas records. Indeed with a record 14 horses in the International Classifications, there are signs that we are breaking into the quality end of world racing. Crucially this has translated not just into the victories we saw in December but to a domestic programme that week in week out brings real quality to Hong Kong racing. Aside from the transformation at home, these achievements have enabled Hong Kong to play a greater role internationally. This year the Club assumed the Chairmanship of the Asian Racing Federation (ARF), which now encompasses 20 members from Turkey to New Zealand, and represents some 66% of world betting turnover. Hong Kong also now holds a seat on the Executive Council of the International Federation of Horseracing Authorities, while in December we will host the International Handicappers Conference for the first time. All of these developments reflect the greater respect for Hong Kong, and recognition that our experience and expertise can contribute to world racing. I should also mention that we continue to help mainland China in equine matters. We participate in the standing committee of the China Horse Industry Association and we continue to send retired racehorses to China, this year to Xinjiang. What capabilities does the Club bring to football betting? What has the Club done to prepare? As Government pointed out when it identified the Club as the licensee, we possess some unique strengths. We have a long record of providing regulated betting services to Hong Kong. We have a strong reputation for integrity. And our not-for-profit business model, which is matched by no commercial gambling operator, is explicitly designed to maximise return to the community. Proof of our commitment lies in the extensive preparations and substantial resources already allocated to ensure a fast and smooth roll out. Leveraging on our IT expertise, we have developed a state-of-the-art football betting and risk management system. Industry professionals have been recruited and staff trained. We are prepared, and we will make sure that our football betting service fully accords with the needs of Hong Kong. 12

4 You have long warned, both in Hong Kong and overseas, of the dangers of illegal and unauthorised offshore gambling. With many countries now feeling the impact, how do you see the threat now? Why is an international Good Neighbour Policy needed? The threat is serious and growing with the latest manifestation, betting exchanges, already raising major concerns in many countries. This is not just because of their impact on revenue, serious though this is. Rather, the ability to use exchanges to back horses to lose as well as win, and the opportunity this provides for corrupt individuals to fix races, has the potential to significantly undermine racing integrity. Betting exchanges are just one example of how offshore operators are seeking to penetrate jurisdictions. Today the opportunities provided by the Internet and mobile communications technology mean they know no boundaries. Every country is a target, with social welfare, law and order, government revenue and community funding under threat. What can be done? Governments must take action. Some already have; for example Hong Kong s Gambling (Amendment) Ordinance of last year. But if more are to follow suit, world racing and betting must take a clear and united stand. This is why we need a worldwide Good Neighbour Policy. By committing to respect and defend each other s territory, and by using our collective power to raise public awareness, we can show our unity and pave the way for decisive government action. I should also add one further benefit; signatories can potentially use the Good Neighbour Policy as a framework for legitimate exploration of overseas opportunities. Last December saw a promising beginning, with the signing of a Good Neighbour Policy agreement between the Japan Racing Association and the Club. With the Asian Racing Federation already endorsing the policy in principle, we are confident more will soon join. Why has the Club set itself the target of becoming the best membership club in Hong Kong and Asia? How is the Club planning to achieve this? The Club is already the largest quality membership club in Hong Kong, with a long and distinguished tradition. But as we strive to meet the evolving needs of Members, we believe the Club has the potential to become the leader in hospitality service. Setting a Hong Kong and Asian benchmark is our way of achieving this without losing sight of our unique personality. Why? Because Asia already has some of the finest membership clubs in the world. But more than this, Asia possesses a distinctive service culture, blending hospitality and value, which our Members know and appreciate. This vision is a reflection of our long-standing commitment to Total Customer Satisfaction, which has already 13

5 Face to face with the Chief Executive seen a rolling programme of Clubhouse refurbishments. For example, at Happy Valley the Gallop and Fortune Room, and this year the new Gym and Derby Restaurant and Bar. But it is of course people who give character to service. This is why we have recruited professionals from leading establishments in Hong Kong and overseas to join our in-house hospitality talent and embarked on our award winning Our Journey to Excellence staff training programme. We have further to go, but I believe Members are already starting to see and appreciate the transformation that is underway. The Club has announced cuts in remuneration for all employees. Why did the Club take this step and what issues did it take into consideration? It is important to remember that up to now we have maintained wage stability thanks to the cost, performance management and productivity initiatives of the last few years. For example headcount is now back to 1990/1991 levels, even though our business activity has expanded significantly. However the economic environment, the continuing impact of illegal gambling, and the effect of SARS this year meant that turnover decline has outpaced our ability to manage costs down. We also realised that the wage market had shifted and we needed to re-align ourselves. In these circumstances Management considered a number of options, including redundancy. However, we were very concerned at the distress the latter would cause given Hong Kong s high unemployment rate. Management therefore recommended, and Stewards accepted, that an across-the-board cut in remuneration was the most appropriate approach. We recognise that this will cause some hardship. But we believe that sharing the burden, and working together to provide the Club with the resources it needs, are the best means to ensure our future. What does next season hold for the Club? Clearly we will have to dig deep to overcome the difficulties of the downturn, but this will not stop us investing for the future. With racing there is much more to do as we take Hong Kong s great sport forward. There will be a new high resolution screen at Sha Tin and new entrances at Happy Valley, and work will start on a multi-purpose covered parade ring at Sha Tin. We will pursue our objective of making the Hong Kong International Races into the effective world championship of turf racing. And of course we look forward to developing our football betting service. Above all, in all our endeavours, we will continue to serve Hong Kong and Hong Kong people. 14