VOLVO PGA CHAMPIONSHIP

May 24, 2001

Ken Schofield

KEN SCHOFIELD: Thank you. I echo Gordon's comments on being late and keeping everyone late. Probably enough of that the next couple of nights with a one-tee start and a big field. But, I think it's important that we came straight to you this evening. We have with us Arthur Andersen and Patrick Loftus, the managing partner, who together with his team have conducted the comprehensive financial review of the Tour accounts, particularly over the period 1996 to and including the year 2000, and in general terms to prepare and present a comprehensive report together with recommendations to the Tour. Patrick is here this evening with a number of his colleagues. They are available for questions. But, if I could maybe start by giving an overview of this evening's meeting. Clearly, this meeting this evening, the mandatory meeting was agreed prior to the commissioning of the Arthur Andersen report. It was agreed around about the time of last year's AGM at Celtic Manor. Firstly, the attendance was excellent. I don't have a count, but I would suggest that substantially the Tour's members who are participating this week came and joined in this meeting. Gordon says 126 players came. That speaks for itself. The overview and the meeting for the report, bearing in mind that other executives had the opportunity of hearing the initial stages of the report, both at the board of directors meeting in Valencia and the tournament directors meeting last week in Heidelberg. I would describe tonight's meeting as constructive. The general consensus of the report over the period I think states quite clearly that the Tour's accounts have been well constructed and well constituted; that in general terms, many areas of both practice are observed. The recommendations that Arthur Andersen have brought forward, which are quite numerous, and take account of major partnership arrangements or venture arrangements, perhaps, I should say, including the television company, Tour Productions, including the Ryder Cup and including our stake in Tour courses, have all been commented upon. And it would be fair so say, my judgment is almost without exception the board will adopt Andersen's recommendations. Clearly, on behalf of the Tour's executives, we welcome this report. We welcome it very strongly. We wanted to cooperate with it from day one, as those of you who were provided the opportunity to speak with last year at Valderrama would be aware. The opportunity to bring forth a number of those recommendations, perhaps in a speedier light, will be one of the many pluses of this report. It would be fair to say that as you may expect, the general conclusions that the accounts are well founded, are not a surprise to myself or my senior colleagues. You would understand that to be quite important to me, and, indeed, our executive team. Not a surprise, but nevertheless, very pleased with this report and actually, very anxious to build upon it. The independence of Arthur Andersen has been complete, and we believe has been matched by our team's cooperation under our Chief Financial Officer, Jonathan Orr, who has worked long and hard with his team to get this report to come in on time. We have always targeted the Volvo PGA Championship as the time when this report could would come forward. I think that's all I will say or should say. We will have a release, and I'll be happy to take questions, as I'm sure Patrick Loftus, will.

KEN SCHOFIELD: There were no votes tonight. There were no proposals for voting tonight, no.

KEN SCHOFIELD: The main recommendations, really, relate to the ongoing arrangements in the Ryder Cup where obviously a lot has changed in nine short years since the Tour and the PGA concluded it's first formal agreement. Obviously, the Continental European connection to the Ryder Cup has increased dramatically and is increasing dramatically, and I think there is a very strong feeling throughout the membership that the reinvestment of surpluses, which happily, are ever increasing, are really for the benefit of the game as a whole, from the grass roots through to obviously the challenge Tour and regular Tour player can be maximised. So, I think there is a very strong feeling on that. I think there probably has been for some time. I think there's a feeling that in Tour Productions, which we believe is a very, very successful joint venture with TWI that the revenues, the most recent contracts have generated, particularly the successes with Sky and the Golf Channel meets that surplus. The remaining surplus in investments in tournament budgets has and is growing quite rapidly. Again, the question will be asked, can the maximum length of those surpluses remain within the game, and I think here again, those discussions at our partner, TWI, IMG, are quite familiar that we will be exercising. I think Tour courses is more complex. I personally think that we were right as a Tour to go into the business of Tour courses nearly 13 years ago, and I hope that in the time span -- and in general terms, Arthur Andersen suggested that those major issues be reviewed and determined hopefully within a two-year period. Some of them I think they feel could be a matter of month. Some may take close to the limit of two years, but it may well be the courses needs a bit longer than the other two ventures.

KEN SCHOFIELD: I think that hopefully an end product. I think the real call will be to perhaps try to isolate the event -- match-by-match costs on the one hand, and then the distribution of surpluses thereafter.

KEN SCHOFIELD: Well, I think that process can be expedited perhaps more readily. Separate from Andersen's report was the board's offer toward the end of last year to extend the board from the ten places to 12, effectively giving two extra spots; in other words, from five to seven places to the Tournament Committee; and clearly on those playing issues of Ryder Cup representation, that, in effect, could give them a clear majority. And there was an agreement reached recently in the Tournament Committee that following this match, the representation for the Tour will be reviewed by the full board, and the Tour Committee will review the method of qualification for the team going to Detroit.

KEN SCHOFIELD: Certainly, no, to the second part of your question. I don't think there's anyone looking for vindication. I think this report, we've welcomed. I think all of you know that we had welcomed it. If we had any concerns last November, it would have been to dispel any perception that we had any wish not to cooperate with any, if you like, bringing forth of fuller management accounts. I think that was one's only concern then, and at this stage in the procedure, in the process -- because we genuinely know that Arthur Andersen can help us enormously, add more value. The Tour has grown and fortunately continues to go dramatically, and that I think came through loudly and clearly this evening and was commented upon, indeed, by several players.

KEN SCHOFIELD: Yes. I think without question.

KEN SCHOFIELD: Yes.

KEN SCHOFIELD: Well, I think it's for every individual member to make their own comments. But, certainly, most of you who have been with the Tour going through all of its stages have seen myself and other colleagues come out of a variety of player meetings in various places throughout Europe. I think the spirit is normally quite good, but I would describe tonight's spirit as exceptional.

KEN SCHOFIELD: I don't think it's a question of winning them over. That's for others to determine. I think the challenge that was put in front of us was after the AGM, to have the players ballot for their preferred independent accountant; that became Arthur Andersen; that would give them the brief that was determined in December. They order from my office and the chairman's office was to give complete cooperation to Arthur Andersen, and we believe that we have fulfilled that. We certainly know that they have, as you would expect, from the pedigree of that company, brought forward their report very professionally and brought forward the recommendations that we think can add value to the Tour.

KEN SCHOFIELD: Well, I don't think that you can say tonight when we've given the first full presentation to the full membership that everything that is being recommended is either currently underway or will be underway tomorrow. But, I think it will -- a number of the recommendations are underway. I think that is acknowledged, and it's probable that the remainder will be adopted by the board when it meets next, which will be quite quickly.

KEN SCHOFIELD: From the accountants?

KEN SCHOFIELD: I think what the report contains on that front is that in the present economic climate, which I think they as experts, in that area would counsel. We may be entering some tougher waters, would counsel caution and continued reviews of all costs. I think they stated clearly in the meeting, as indeed their company was.

KEN SCHOFIELD: We've been very fortunate. We've been able to add sponsors or licensees. We made through Gordon some announcement regarding Reuters replacing Axa and Royal Bank of Scotland providing sponsorship during Benson and Hedges. We've been very fortunate that other than for probably the final confirmation of a title sponsor, the one remaining outstanding title sponsor for Loch Lomond, most of our other major arrangements have been in place before. Certainly in United States, people have only forecast frost days for -- matter of fact, frosty days in the United States will follow to Europe. We've got to be prepared for it. We've heard that before.

KEN SCHOFIELD: I don't think anyone has suggested that the Tour is either vastly or grossly overstaffed or vastly or grossly overpaid. Patrick may want to make a comment on that. I rather doubt it. And actually from the floor, the question was not raised this evening.

KEN SCHOFIELD: I think they have been discussed very, very clearly, and I think the strength of this evening was the clarity of the Arthur Andersen report to the members. I think the membership felt that the brief that Arthur Andersen explained to them at the outset of the meeting was very largely consistent with their wishes in terms of the subjects that Arthur Andersen addressed, included all of those things. And yes, Arthur Andersen feels with the numbers of people travelling, all costs would be looked at. I don't think there's been any comment made on whether one is turning too many people or turning left or right on aircrafts.

KEN SCHOFIELD: From the time of the commissioning after the ballot and the terms of reference being agreed, the approximate time has been just under three months. The answer to the second question is that, we will certainly recommend to our board an ongoing relationship with Arthur Andersen on key issues and best practice.

KEN SCHOFIELD: Obviously, we've got probably 20 or just under 20 of the PGA complement in the field who either may not be in membership at this time or in full membership and probably took a view that the meeting was for the regular members, which was 136. So, it looks like we may have lost ten, which seemed to me to be quite reasonable. I'm sure those guys had good reason for not coming.

KEN SCHOFIELD: Well, you'd like to think that no one was going to lose their job. The Tour is an expanding business. The legitimate desire of the membership is to have more services, better services, better golf tournaments, higher rewards, and all of those things need to be generated. As I said in December, we must be conscious that we are asking many people, and many of them would be known to you, particularly perhaps in the field, but it's not only the field staff that work 12 -, 14- and 16-hour days continuously and they are doing that really because they have a love and passion for the game; is probably the reason that you good people are here at 8:00 this evening, same reason.

KEN SCHOFIELD: I'd prefer not to, but obviously addressing it is transparency, but we also have areas of confidentiality with Arthur Andersen, and it would be very unfair and perhaps unprofessional. What I would say and what I've said to the board from day one is that we really believe that the Tour over this period -- this review has been like five years. It's actually stretched into a sixth because concurrent with the review has been the audit for the year 2000. I personally have welcomed it for my own reasons and probably George O'Grady and other executives, some of us think there should be a review every five years and think the review very timely. We think the value of to the Tour of this going exercise and the ongoing relationship can really be significant. I think when you are very close to a business, sometimes and you've grown with it, sometimes don't maybe realise the extent of which the forward momentum has taken us.

KEN SCHOFIELD: Just that perception, if there would be any perception that there was no wish to cooperate, which I frankly think was around for probably hours rather than days, it would have only been at that time, if for no other reason. These four players, all of whom came this evening, made their contributions together with others have been very, very responsible for the rise and for the image of all the European Tour, and certainly in my time. If they want to have a review of the operations, financial and otherwise of the executives and those that give the executives the authority, that should be supported by all of us.

KEN SCHOFIELD: I can't comment on how any individual player would perceive either going into the meeting or coming from the meeting. I think it's probably more relevant to speak with players as they would have left the meeting. We can all have our own perceptions going to meetings. Sometimes they are fulfilled and sometimes her not. If they are referring to documentation, then Arthur Andersen has said that the documentation will go to the membership to their residences in due course, which will be in a short time scale and in advance of this year's annual general meeting at K Club.

KEN SCHOFIELD: Well, I think the membership , probably the best test of that, clearly, always for many years now, the competitive playing strengths of our membership individually through the major championships and collectively through the Ryder Cup have been very, very strong. The job of the administration is to maximise that and give the best possible opportunity for the next generation to come forward and take the places of those players. I don't know how you benchmark the progress, but in product terms during this five-year review, we've doubled prize money. Now, that's not for me to say if it is good, bad or indifferent, but what I know is it's the best we could do.

KEN SCHOFIELD: Thank you, and have a good week.