Financial review ল৻ลؗ
Hong Kong’s unique business model of racing for charity enables The Hong Kong Jockey Club to bring world-class horse racing entertainment to millions of fans and make a significant contribution to the community in the form of duties and taxes to the Government and substantial funding for charity. The Club is the single largest tax payer in the Hong Kong Special Administrative Region and ranks amongst the top charity benefactors in the world.
Group operations All activities are conducted through The Hong Kong Jockey Club and its subsidiaries (the “Group”), and The Hong Kong Jockey Club Charities Trust. The Group comprises mainly The Hong Kong Jockey Club (the “Club”), The Jockey Club Membership Services Limited, The Hong Kong Jockey Club (Managers) Limited, and The Hong Kong Jockey Club (Charities) Limited. The Hong Kong Jockey Club is a not-for-profit organisation, and is a company limited by guarantee. It holds the sole licence for the operation and management of Hong Kong’s horse racing, and it is also the authorised operator of the Mark Six lottery game. The Jockey Club Membership Services Limited manages Members’ recreational facilities and provides services and programmes for Members of the Club. It derives all its income from membership fees and charges, and is totally self-financed. The Hong Kong Jockey Club (Managers) Limited administers the employee retirement scheme and oversees the Club’s Retirement Benefits Scheme Fund. The Hong Kong Jockey Club Charities Trust serves as the vehicle through which all of the Club’s charitable donations are distributed and administered. For selected major charity projects, the Club may adopt a more
ࠗಋᑩผ˞ᑩయ෯ഁؿዟऋᅡβᏪcϤݯᅕ˞ϛຒ߮ එ྆༜А ผֺτพ৻cя༦ࠗಋᑩ ᙔʔ̇එ྆c˞ʥࠗಋڃผʥԯ ೢ֚ܧज़ؿᑩᅥcҡᔄടᖔढ़ೢވ˖ؿᑩᜮଠొԜ ൬Ϸ༜Аeඑ྆ᙔټপਥڌᑩผ෯ഁ ࠗಋᑩผܢ˳ผАˮࠇɣᘆeผܰࠗಋ Ɏͳτ̒˚߬ୂᓱcمඖc˞ʥྐྵషࢶХΈ෯ഁ྆cྦྷ ผdᑩผผࡗԑ৻τࠉʔ̇dࠗ ढ़ೢΛؿዀ࿚cࣂᙻӸͲଈɣ෯ഁ༅ХୂᓱɾͶeਂܧऋПϷ ಋᑩผଉτࠉʔ̇c˞ʥࠗಋᑩ ผ෯ഁτࠉʔ̇e ᖬτࠉړϙСؿڈࠗಋᑩผܰȹࡼ ʔ̇c͛ܰȹᏵೕಶ๑Ε̯ಋᏪ ဳଉᑩc˞ʥᏵᚬፒʒᆉԴ ؿዀ࿚e
82 participatory and proactive approach, ensuring that the benefits from these projects are sustainable in the long term. Where appropriate, equity shareholdings in these projects may be retained by The Hong Kong Jockey Club (Charities) Limited as nominee. In anticipation of football betting being legalised in Hong Kong, HKJC Football Betting Limited, a wholly owned subsidiary of the Club, has been incorporated to operate the new football betting business when it has received the necessary licence from the Hong Kong SAR Government. With the proposed dissolution of the Hong Kong Lotteries Board under the Betting Duty (Amendment) Ordinance 2003, it is anticipated that a new lotteries licence will be granted to HKJC Lotteries Limited, a wholly owned subsidiary of the Club, to operate the lottery business. To support the Club’s current and expanding business activities, a wholly owned subsidiary will be incorporated to insure the Club and its other subsidiaries against certain risks associated with their business activities. Another subsidiary will develop and hold the necessary intellectual property rights associated with the operations of the Club and its subsidiaries.
Finance and investment Notwithstanding its not-for-profit nature, the Club and all its subsidiaries adopt prudent commercial practices in the planning and management of their businesses to strengthen their status as a leader in world-class horse racing entertainment and Hong Kong’s premier charity provider.
ɔؿႈऩeΕሬੱؗ ࠗಋผᆉԴτࠉʔ̇ೕᆉԴಶ๑cܛႩٽᑩผผࡗԑ৻τࠉʔ̇c߲ஐဳଉ ਪԞ ৻ Ɏcࠗಋᑩผ෯ഁτࠉʔ̇ҡผ˞ ͅʔ߲̇ஐᏪᆉԴพ৻eרcԎݯผࡗొԜΈඖܪผࡗᅥஉ τԒི߮ؿٖᚬe ݯʻ̯ผଊτณᄈؿพ৻c̯ผܛˤΊɁӸʗ רݠ৽cνɃԞܰผࡗ˂ʥΈඖ ᙔʔ̇cڃད౨̯ಋӷଈੀผஃᆲʝc ੀഽ˫ι͓ȹࡼͲ༅ኟτؿכͅ ᑋeޔዟ͓cѧͲϬ߲ܧ৻ؿνcল ᙔʔ̇ؿพ৻൬Ϸࠓ፮ڃᙔʔ ݯ̯ผʥΈڃࠗಋᑩผଉτࠉʔ̇c߲ஐဳ ผɰഽ˫ι͓ȹࡼͲ༅ኟτؿ ᙔڃଉࡗঽིͤ߮cԎဟྦผࡗɮঽͤ ̇cΊݯࠗಋผӷଈτࠉʔ̇c ဳଉeϊ̔c̯ผ͛ੀι͓̊ȹࡼ ᙔڃτၤ̯ผʥΈܛc ʔ̇c߲ஐೕʥ܃ೕಶ๑֚ܧᏵࠗಋऋਂכڏ˞ ؿ༜АeټါСི߮ਥ ᖫଐᚬeكc߲ஐဳଉ ߲ஐᏪӷଈณพ৻e ʔ̇พ৻τᗐؿ̦߬ټপਥڌࠗಋᑩผ෯ഁ Εɀ³³ɍαೢ࠳֚߯ܧכผֺτ෯ഁࢶಁc˞ʥτᗐؿᅆಁԑ ᛆ ᘪౙࠗಋᆉԴဳଉѫcད౨ۺ෯ഁི߮cผҡዶ ૈԝɻcێʗɣכփeྦྷ ᙔʔ̇zڃੀผΉผͲ༅ኟτؿ֚ܧ Ԓི߮ॶړรҙɃ˚৽ၤc˞ᆢ
83 Financial review ল৻ลؗ
The Club has faced tough economic conditions over recent years, and this situation has been further compounded by a myriad of other unfavourable factors, such as the outbreak of Severe Acute Respiratory Syndrome (“SARS”), the Iraq War, intense competition from illegal gaming operators and other forms of entertainment, and changing customer demands. Despite these difficulties, the Club was still able to significantly improve its customer facilities to maintain its competitiveness and continue to contribute to worthy charities causes. The Club invested in upgrading racecourse facilities with the addition of the Leading Edge at Happy Valley and the MezzaOne at Sha Tin. These air-conditioned venues are fitted with advanced audio-visual equipment as well as comfortable seating, a wide variety of food and beverage offerings and convenient betting facilities. Despite the slowing economy, plans are moving ahead to build a new Members and a new public entrance at Happy Valley and a Diamond Vision screen at Sha Tin will be ready next season, similar to but larger than the one at Happy Valley, for racegoers to keep constant watch on the progress of races. Over the past few years, the Club has continued its quest for productivity improvement. Year 2002/2003 was no exception. In October, the Club launched the Service Value Review. It is an in-depth examination of the value and the cost of services provided by, as well as consumed by, the Club’s operating units. The objective is to identify areas for service improvement or cost reduction through proactive identification and correction of mismatches in value and cost of services. The Club has also stepped up its cost improvement programme through comprehensive reviews of operational efficiency and resource deployment, as well as in-depth reassessment of various ongoing projects.
Ɉc˘ॶᘗᙩྦྷ෯ഁʔऩАˮᘆeج ᙔʔ̇ᒖڃল৻ʥҙ༅ ผʥԯֺτ яᏵܪพ৻ؿ೪ི Ε̯α۹ʑcԭؿஉכϙСֲሔcЎྦྷڈಳяᙔ ೪c৻ұ ҝഁcൠΔᄈஉȿͱᒟఢcϤҳ̈́ܧဳଉcʋઔ͂ᄗؿਆพ ɺЎܪज़ᑩᅥዀ࿚c ؿΡሌࠕ͛ɰઢ͂eԒณஉވ˖՞ผАݯ ሁcᑹௐτͱ൬ؿ഼ᚹኂҥഒيʥ̯ಋɣ෯ഁ༅Хዀ࿚ؿΔϽe உτ˞ רαc̯ผࠍྦྷᗲ࢈ؿᏜྊcԎ ሬؿϽcҡొԜΈβΈᅚؿඝࠕٶ ܛeቱဳᏜܪؿҙ؇உڏ৻c˞ʥʿ ڈሯՇଠΛԯˢɺСΐॖؿшᒹcԝΣ உ߮ۺᇅc̯ผʋಳͲɈઐϷΈඖיሐ ᙩؒڈؿᕶೕcּ͠Кኝԑcاْێ ณؿผۺd˞ʥɺ ིcԝΣᅆಁΕൠΔጙجcΈိᅥԑพؿውईᘏ ᒾᔝᛰؿᚋ۪ұ೩eቱဳшᗒࠇࠇc ࡗɃɟʔଠɃɟcΕҳ̈́உؿ Ԟտઢ͂cԯ̔כcੀྭۮᘏ ͲณϳɣܛړcϤܪผʋॶɣఝҝഁᚋ۪உ̯ cЎೋޚɣߎྭۮၤൠΔଊτؿێ
84 The Club has made significant productivity gains over the past few years and kept full-time staff count 11.8% below the 1996/1997 level despite a 19.3% increase in the number of races over the same period. However, the continuing rapid decline in betting turnover over the past year has necessitated further restructuring of the Club’s cost structure. After careful consideration and with the support of staff, the Club opted to reduce employee costs through cuts in basic pay for management grade staff, abolition of the 13th- month pay for other full-time employees, and reduction of part-time pay rates, thus avoiding significant loss of jobs at a time when signs of economic recovery have yet to appear.
Investment portfolio management The Group and the Charities Trust’s financial assets are managed in accordance with an overall strategic framework provided by the Finance and General Purposes Committee. It reviews and approves all investment objectives and guidelines regularly. These assets are managed by external professional fund managers and by the Club’s Treasury Department. The cautious approach in risk management is demonstrated by the extensive financial modelling that takes place before investment strategies are implemented. Investment objectives, risk parameters and benchmarks are clearly defined for each strategy, while performance of the fund managers is monitored closely to ensure that any aberrations are corrected on a timely basis.
ΕᏜֆ̰Ӯτనೊ༌˿ڏ˞ሌᑩؿ ༦ᅕαؿЦɈc̯ผɰੀ́ଐɈᛷ ࡗι̯cࠍҡɣc˿ᜑɃᜮଠฟ ോ౨ංcᑷЛസಕɣ൴ᓻϽe ܛᘏ༦ೡe ടొঢ়c˘ι˲ҐͲᓻࡗɮؿɁᅕၐ ߎɈొঢ়́ଐ ΕˈȹȾȾʒĀȹȾȾȼα۹Ɂᅕᑹ߬ʭق༦˾ᅕαcผȹ ټপਥڌɈcɀ³³ɀĀɀ³³ɍα۹͛ɺԝ̔e ϛʗɾɊȹᒨɄؿˋ̡cЎΕȹ౨ංc ҙ༅ୂؿဳଉ එ྆෯ഁ ๑໎ԑѫল৻ʥȹঁܘᄈ˱ȿϛʗɾɊȾᒨɍe ؿল৻༅ଐcяڳ৻ࢽऩᏎ ᑩԑᅕרαɊ˂c̯ผն൬Ϸ˾ ᑸɎไc ԑ৻կࡗผֺԹ߯ؿ೪ɣ၊൬Ϸဳ܈ʌտҙ؇ᔾᘗᙩכಳϤcᛆ רদc૯Ƀሁ݅ΈᏪ༜௰ϽొԜʥԚ͂ ৻ ̯ผྡྷτ̦߬൬ȹүࠇኬι̯࿚e ଉeկࡗผց౨ᄗғֺτҙ༅͌ᅟʥר৻ؿࢽऩၤι̯cዶรҒˮٍ̳ ͚̔ͅංڬʵcϤτᗐؿল৻༅ଐcܞ Ɏc̯ผܛࢽऩၤι̯ʃɺɾ୮cϤ༠ϭҝ ༦ࠇϣᄬcԎΕࡗɮؿʻ ଉʥผؿ৻ဳଉeټಕဳଉज़ᓻࡗؿਥ̯ᑀ༭dՅࣱ ؿਿพਥڨ৻dಕГι̯ؿ͌ᅟe̯ผ͛ɰͲ Һցרഁ c˞ʥ ˢࠨผፓ๑ࠓ፮ဳଉʿࠍؿᄗࡈټࠍᏎদพ৻༜Аࢽଅʥ༅ሁੱؗc ԯˢͲᓻࡗؿɊɍ˂ᑀ cࠖͱ൬کਨϷҰඖҙ༅೪ɾכcڬ ࣂ૯ɃࠇณിЅΈଊϷඖ͌c˱၇ ሁГ࠹ᓻࡗɮؿᑀ༭ˋ̡cᔄ˞ࠌГ Ұඖ೪cכᅡᏃಡeྦྷܧઐϷҝഁι̯ࢽऩི߮e ϷΛωল
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The in-house portfolios are managed primarily to meet immediate operational and liquidity requirements, and are invested mainly in bank deposits and debt instruments. In the past five years, the performances of the in-house portfolios have exceeded their respective benchmark returns by a range of 103 to 200 basis points per annum, despite a dampening of their returns due to historically low interest rates currently experienced in Hong Kong. The portfolios managed by external fund managers are mainly for long-term growth. These portfolios adopt an active global balanced approach aimed at achieving diversification, and are therefore less susceptible to the high volatility of a single market. Nonetheless, the adverse impact of the Iraq War and the sudden outbreak of SARS has prolonged the continuing uncertainty in global markets for most parts of the year, thus causing the Club’s portfolios to incur some slight losses. Despite these difficult market conditions, the Club’s portfolios in total have outperformed the MSCI world index.
The year in review The Club’s betting turnover was down to HK$71,465 million in year 2002/2003, compounded by difficult economic conditions, illegal gambling, changing customer behaviour and the outbreak of SARS. This drop amounted to HK$6,694 million, or 8.6% of turnover for the previous year. As a result, betting commission revenue, that is after paying dividends and duty, came in HK$355 million below last year’s HK$4,218 million. On the other hand, Mark Six commission was higher by HK$64 million, as a result of
˚ଉဳଉؿҙ༅ୂcټցҙ༅͌ᅟd൬Ϸࠓ፮ ̔ͅංਥވผʿผฟ ౨ᄈࠤɾ͂e҈ࠨઔՅዶรؿҙٽଉ ߬АټᅟcϤਥܞଊٲിЅԹ߯ҙ༅ ˮଊ ༅೪cੀҙ༅ඖ͌яጫΔʗЗΕͲଈכړଊ͛ผՇԷʘဟྦcᆢٲؿ ٽ˞Єৱࣂя˿ʥࣂ࠳̳e Έ˚̟߬c৻ұ༠ϭΛʏʝcֺͨ Ⴚ ႩԞ႓c˿ಕႦܺȹ̟ძࣟɣఝؐ৽ܢ˳ʑဳଉؿҙ༅ୂc˚߬ͅ ϷΦಁʥඦ৻ᖬԴc͂˞Ꮆ˟Ꮺ༜ʥݚ ֺԞؿᄧᚊeᒖಳּ͠Кኝԑޯಳ टc˥Ͳଈٖ̟Εދاْێڈؿ߬eΕ༦˾ʄαcͅผ ᕶೕؿټ৽༅ ࣍Ӷබ൬עᙩɺܛ৻ဳଉؿҙ༅ୂcᒖಳ༤ɐ̯ಋዃ ̯α۹ɣʗࣂංؿ cኒߎ̯ผؿҙ༅ୂˮଊԒٽԞГؿႺϷСଅcΐϤྦྷΑంτֺᄧ ȹү֝ ଊcҰαяτ൚ ෬ᑋฌcЎቱဳ̟ੱؗబͻcԒҙٲӪΡܛړᚊcЎʋॶ ଊcʋ༖ᄾ࣓ɡɽС༅ٲᅟȹཌྷɍϭɀϛਥᒨؿΑంe ༅ୂؿኬܞˮֺց ଊݯԙeٲᅕؿܞਝ̯
86 introducing the new Mark Six game with 49 numbers. Financial income was also higher by HK$13 million, despite the historically low interest rate environment and turbulent financial markets. Total operating expenses have dropped by HK$19 million, despite the 36 more races run in 2002/2003, which resulted in higher prize money of HK$43 million (inclusive of HK$12 million in special bonuses for local winners in the Hong Kong International Races). Operating expenses per race amounted to HK$4.9 million, lower than last year by 5.4%. Furthermore, several strategic service improvement and cost management programmes have been launched during the year to enhance the long-term competitiveness and financial strength of the Club. The Club remains Hong Kong’s single largest tax payer, with total tax payments (betting duty, lottery duty and corporate profits tax) amounting to 9,517 HK$10,937 million. This payment is equivalent to
226 11.7% of the total taxes collected by the Inland Revenue Department of the Hong Kong Special 1,272 Administrative Region. 1,123 The Club’s net surplus after tax amounted to HK$987 million. A significant portion of the net surplus, HK$600 million, was appropriated for charities purposes. In 2002/2003, the Charities Trust approved a total donation of HK$1,012 million to charitable organisations to fund capital projects and agency subventions. This funding, as reported elsewhere in this annual report, included a grant of
ጪᤇ৽ᏽ೩ਐ ผʋಳܰͲಋढ़ೢΛؿዀ࿚cֺټሐ ɐዃԞГСଅؒڈα۹Αᚋ ΕᏜɺౡdܧল ೢdᆉԴೢʥʔ̇ܢ˳ᕀcඑ྆ʌαؿল৻νɃ͛ˈ˾αΛȿ ˟ೢಁ اْێڈଞϷdᚋ۪Ϸݯᔝᛰc˞ʥ ދटᕶೕ೩ΛඖΐॖᄧᚊɎcผɀ³ ȹɝɍϛຒಋʏe СೢcͳȹϛཌྷȾყɍɝȼϛຒಋ ܧ³ɀĀɀ³³ɍα۹ؿҙ؇ᐢᔾcɎࠌϭ ᒖಳɀ³³ɀĀɀ³³ɍα۹տֺᐾ ʏe̯ผֺᖔ˟ؿೢಁЌࠗಋऋਂ ȼϛȹɊ̒ყʒɝʄϛຒಋʏcၤɐտ Ϸؿᑩԑcᄈ˱ȿɍɊʒcԚᑩԑᐢ ֚ೢ৻ѫᐢೢνؿϛʗɾɊȹᒨȼe ݯȾყɄɝȼޔؿ܃Ήˮ ผʌαೢܢ˳ᄈ˱ϭ̒ɝɍϛຒಋʏټ༖cಕʭȿʒɊʒყȾɝ̒ϛຒಋ ᆉˈ ؿȹ ϛຒಋʏcԯɻЌ˿ᜮˈԝؿʒყಋיʏcൡఝ༠ϛʗɾɄᒨʒeΐϊcผ ࠗಋਝᑩԑؿ̯Δᑩ˚ೕ כټপਥڌcЎᐢᏪʻ ʏcɰᅆА෯ഁ͂பe෯ഁټνɃ͛ ɝɀϛຒಋʏऋПᆉټֺؿҙ؇Џ܃ݢʥ˟ೢכ ɎൡȿȹɝȾϛຒಋʏeҰᑩԑؿ ɀ³³ɀĀɀ³³ɍα۹cͳᅆಁɊყڳ йɎࠌcၤ˾αؿ̒ɊɀყȹɝɄϛຒ ȹɝɀϛຒಋʏʀ෯ഁዀ࿚c͂˞༅Х ޚcಕʭȿɍყʄɝʄϛຒಋ Ꮺ༜ʻݯ̒ϛȾɊຒಋʏcၤ˾αˈޚಋʏ ʏe̊ȹʿࠍcʒᆉԴΐઐˮȿ̒ ˈcɎࠌȿϛʗɾʄᒨ̒eϊ̔cαʑ Έඖི߮ዀ࿚ʻcᅆಁੱΕ̯α ৻ҝഁི߮cרνɃˈ˾ ͛ઐϷȿᅕඖ೪ֲؿټɊȾፕʒؿณ༝ᎻʿβcЏ ٽαΛȿʒɝ̒ϛຒಋʏeϊ̔cᒖಳ༤ ˞ʥι̯ဳଉི߮cᔄ˞˱ੜผؿ ɈʥলɈeجႩᘏ
87 Financial review ল৻ลؗ
HK$125 million to assist schools and day-care service centres in their SARS cleanup efforts, as well as a pledge of HK$500 million to set up a Centre for the Prevention and Control of Infectious Diseases, thereby addressing the immediate needs of school re-opening and the longer-term need for the Hong Kong medical community to be better prepared for the future.
Membership services Catering turnover was lower than last year by 8.2% as a result of cautious spending behaviour due to unfavourable economic conditions and the SARS outbreak. SARS, in particular, had a severely damaging impact on the catering and recreation industries. This year also saw investment in the extensive refurbishment and upgrading of Clubhouse facilities. The Jockey Club Membership Services Limited Development Fund, dedicated to improving membership facilities and services, has been steadily built up to HK$636 million at year end, including the HK$45 million appropriated from this year’s surplus.
ం̊τᘻ߸cԯɻȹყɀɝʄϛຒಋ ᔑeދटྦྷඝࠕʥᅥԑพι ৻ɻʶc͂˞ ʮԯҶࠇ̨ᎾeרʏcȽԜΈነ࣎ˀං Аˮҙ༅cܪc ̯ผʌα͛ྦྷΈผֺஉاْێڈ൬Ϸᅳࣱݓcᔄ˞དԉ ᓺ࠳ҝഁɮೡeێАݯι͓ඨܷञད ᔄ˞൬ϷɣڬϤ̊̔ʄყಋʏc cټԉʥઁԹɻʶؿeᔄടԭඖᅆ ᑩผผࡗԑ৻τࠉʔ̇ೕࢄਥ ৻Ϥஉ͓cҰרʥܪॶ๑ᚋነ࣎నᇾؿЩࣂ Ƚਿݯҝഁผࡗஉܫಁcผ Ⴉ߬ αяᙩτᄈ˱c̯α۹ؿ့ᐢᔾݯʒٽ˞ݯވұc͛˿ᜑࠗಋᔢᙶ ʌαؿܢ˳АΡๅௐe ყɍɝʒϛຒಋʏcԯɻ ɻᅆˮؿ̒ɝʄϛຒಋʏeޔ ˾ؿᏪพᔾcၤܪผࡗԑ৻ ̯ผඝࠕஉ αޚˈcɎࠌȿϛʗɾɄᒨɀcࡈΐΕ اْێڈᙩɺౡc˞ʥᕶೕܛᏜכ ܛړटcԚผࡗΕ̯α۹ؿࣱϷݯދ
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