ITF

An -doping income increased by $0.7m to $4.3m (2017: $3.6m), and the corresponding costs of the Integrity, Science and Technical department increased $0.5m to $6.3m (2017: $5.8m). The ITF provided enhanced an -doping services to the Grand Slam tournaments and ATP/WTA tours during 2018 under a new cost-sharing agreement which saw a greater level of expenditure incurred and therefore a higher level of income received. In addi on, the forfeiture of prize money as a consequence of an -doping viola ons helped supplement the income level. Finance and Administra on costs, including the cost of head office expenditure incurred in GBP, remained constant at $4.9m despite an adverse movement in the USD to GBP hedge rate for 2018 compared with 2017. Foreign exchange losses of $0.2m were recognised in 2018 (2017: gain of $0.5m). Taxa on arising from the profits of the Hopman Cup Licence Agreement in Australia and withholding tax on global television rights (which is offset against UK tax liability) was $0.1m (2017: $0.2m). strategic initiatives Strategic Ini a ves represent expenditure directly related to delivering the objec ves of ITF2024, that are not considered ongoing ac vi es. Strategic ini a ves totalled $3.7m in 2018 (2017: $1.1m). Professional Tennis strategic ini a ves are focused on the extensive due diligence and legal costs required to reform the Davis Cup with the addi on of a new season-ending Davis Cup World Cup of Tennis Madrid Finals event ($1.5m). The ITF is commi ed to investment in both the Davis Cup and Fed Cup compe ons, and $0.2m of Strategic Ini a ve expenditure was to further explore the feasibility of different format op ons for the Fed Cup. In addi on, expenditure of $0.2m is to develop, design, promote and implement the ITF World Tennis Tour, which was successfully launched January 2019. Development Strategic Ini a ve expenditure is focused on the crea on of a World Tennis Ra ng project which will provide our Na onal Associa ons with the means to iden fy the level of par cipa on in their na on, while also providing meaningful ra ngs to recrea onal and professional players alike. The Development department is also inves ng in an Online Coaches Academy which will offer cer fied coaching courses. This expenditure has been capitalised as an intangible so ware development project in progress. Once this system is fully tested and live, the amor sa on associated with the project will be recognised as a development strategic expense. Commercial Strategic Ini a ves see investment in the streaming of junior and wheelchair events, and the crea on of a digital video archive that can generate future revenues as well as being an important historical archive of past ITF footage. In addi on, the Communica ons department are crea ng a digital photo archive and digi sing a significant volume of images currently stored in non-digital format. Integrity, Science and Technical Strategic Ini a ves include the costs of a new gender equality ini a ve to further improve tennis's posi on as one of the most gender equal sports. In addi on, the cost of compliance with GDPR legisla on is as a Strategic Ini a ve within the department. Finance and Administra on Strategic Ini a ves comprise the improvement of the IPIN system, as well as the design and implementa on of a new fit- for-purpose ITF Tennis website. Much of the so ware development required for these two systems has been capitalised, resul ng in a Strategic Ini a ve deprecia on and amor sa on expense in the year. Uncapitalised costs include annual so ware licences for the new IT strategy of migra ng the databases and certain components of the IPIN system onto the cloud with the utmost care and a en on to safety and security of data in accordance with GDPR rules and regula ons. investing activities Inves ng income (excluding the Olympic deposits) in the Consolidated Income Statement shows a gross investment loss of $1.8m for the year (2017: gain $5.0m), a net loss of $2.1m a er costs, giving a return of nega ve 4.2% (2017: net gain $4.7m, posi ve 11.0%). Investment guidelines and por olio performance are overseen by the ITF's Investment Advisory Panel which reports to the ITF Finance and Audit Commi ee and Board on a regular basis. The por olio is diversified to mi gate against market vola lity with exposure to bonds and alterna ve funds as well as equi es, illustrated by the net return of nega ve 4.2% being well above the benchmark net return for the year of nega ve 6.6%. The ITF's investments are closely monitored by the Investment Advisory Panel who are comfortable that the current por olio remains appropriate to the long term strategy of reasonable growth without too high a degree of risk. Short term investment of Olympic funds are held in US Dollar denominated bonds. During 2018, the funds made gains of $0.2m (2017: gain of $0.3m) in line with expecta ons. The resul ng total deficit for Inves ng Ac vi es a er financing is $1.9m. ITF ANNUAL REPORT AND FINANCIAL STATEMENTS / 02 REPORT OF THE CHAIRMAN OF THE ITF FINANCE COMMITTEE (CONTINUED)

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