ITF

REPORT OF THE CHAIRMAN OF THE FINANCE COMMITTEE (CONT.) 44 REPORT OF THE CHAIRMAN OF THE FINANCE COMMITTEE Consolidated statement of financial position Investment in Information Technology continued in 2013, with $1.2m of expenditure on projects which either support income generating activity or improve the efficiency of our business operations; these included the launch in 2013 of the new Tennis iCoach website, the introduction of online payments for Officiating Portal memberships, provision of live scoring services for Pro Circuit tournaments, and the continued upgrade and enhancement of our websites, Officiating and National Association Portals, and internal CRM system. Total trade and other receivables decreased by $3.1m to $12.7m in the year. The reduction in trade receivables of $2.4m was a result of lower levels of sponsorship income invoiced in advance for 2014, early payment of some 2014 sponsorship invoices and a general reduction in trade receivables due to an increased focus on debtor management, especially in Professional Tennis and Television. Other financial assets represent the ITF investment portfolio, Olympic deposits and assets on forward contracts entered into for hedging purposes. Further detail is provided in note 26 to the financial statements. The forward contracts are cash flow hedges and have been treated in the accounts as described in note 5(m), with the fair value adjustment arising at 31 December 2013 being taken to reserves due to hedge accounting being adopted. The value of the investment portfolio at 31 December 2013 was $39.9m, an increase of $3.3m in the year, remaining above our stated target of $35m of investment reserves. Nevertheless, we continued to see significant volatility in the valuation of our investment portfolio during 2013, reflecting global market conditions. It is, as ever, important to note that the investment portfolio is a fund invested for long term return, with investment guidelines which reflect that objective; returns, whether positive or negative, should therefore be viewed in a long term context. The Olympic deposits have been invested in high quality bonds and cash deposits which will mature and be utilised evenly over the current Olympic cycle to meet operating requirements. Cash and cash equivalents reduced by $17.5m primarily because the income from the London Olympic Games was received late in 2012 and placed on short term cash deposits to the end of the year; it was therefore included in Cash and cash equivalents at 2012 year end and was subsequently invested in deposits in 2013 as referred to above. Total trade and other payables reduced by $1.3m to $25.8m in the year. As shown in note 27, deferred income fell by $2.3m, $1.9m of which related to receipts in advance which fell as a result of the contractual billing requirements of the current mix of sponsors. Accruals increased by $1.5m, mainly as a result of the Data Sales activity ($2.2m) which is due for payment in early 2014. This was offset by reduced Davis Cup and Fed Cup prize money accruals. Other Financial Liabilities represent the liabilities arising on forward contracts entered into for hedging purposes. The forward contracts are treated as described above. Further detail on hedging is provided in note 31e. The remainder of the Olympic income, which will be recognised in 2015, is shown as Deferred Income under the heading Non-current liabilities. This has reduced from 2012 as one year of income has been released to the income statement. Rene Stammbach Chairman of the Finance Committee SOURCES AND USES OF FUNDS 45 SOURCES AND USES OF FUNDS Operating income 20,139 8,741 7,123 6,076 5,114 3,009 2,950 1,631 3,405 Sponsorship Hopman Television & Olympics Receipt from Subscription & Data Sales Grand Slam Other rights Cup Licensing events Authorisation Development Fees Funds $000 25,000 20,000 15,000 10,000 5,000 0 Operating expenses 20,794 8,268 8,007 5,207 4,994 3,005 2,991 2,401 1,637 Professional Tennis Hopman Presidential & Finance & Commercial Science & Data Sales Depreciation & Tennis Development Cup Communications Administration Technical Foreign Exchange $000 25,000 20,000 15,000 10,000 5,000 0

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