ITF

Operating expenses As detailed above, total operating expenses excluding centenary costs decreased by 1% to $56.7m. Professional Tennis costs remained at the same levels as the previous year at $31.2m despite distributions of Data Sales profits to National Associations increasing by $1.0m, in line with total Data Sales revenues. Hopman Cup costs decreased by $1.4m to $6.6m in 2014. There were increases of 3% to prize money for both the Davis Cup and Fed Cup. Tennis Development expenditure increased 1% to $8.6m in 2014 with the expenditure of the ITF Development programme increasing by $0.2m. Olympic Solidarity funding was maintained at the same level as per the previous year, meaning associated expenditure was also maintained, as was expenditure from the Grand Slam Development Fund. Development Assistance grants awarded by the ITF remained at $2,500 per award in 2014 and a $51,000 disaster contribution has been pledged to repair flood damage to facilities in member nations. The activities of the Development department benefitted over 150 countries in 2014. Commercial costs saw savings of $0.3m in 2014, with total department expenditure of $2.8m. The Sponsorship team maintained its level of activity in seeking new sponsors, and supporting and renewing existing agreements. Expenditure on Sponsorship was $0.2m lower than 2013 as certain properties remained unsold, and there was a departmental restructure resulting in $0.4m lower costs. Television costs increased by $0.3m to $1.4m in 2014 due to the sporting results in the Davis Cup and Fed Cup requiring additional productions to be funded by the ITF. Presidential & Communications costs increased by $0.2m. Continued investment was made in social media and websites as well as marketing activities including the "Show Your Colours" campaign. Tight cost control was maintained over routine expenditure and savings were made in travel costs and Board of Directors costs. Science & Technical saw a decrease in costs of $0.2m in 2014 due to fewer cases requiring legal costs. This area is earmarked for continued investment in the Anti-Doping programme with a greater focus on out of competition testing and the Athlete Biological Passport. Finance & Administration costs reduced by $0.6m in 2014 as a result of reductions in legal costs and insurance premiums. We continue to provide for doubtful debts, however there continues to be a year on year reduction in old debt. Foreign exchange operating losses of $0.4m were recognised in 2014 (2013: $0.1m), predominantly due to the revaluation of the balance sheet at year end. Taxation expense was $0.3m (2013: $0.4m) arising from taxation on the profits of the Hopman Cup in Australia and withholding tax arising on Television receipts, which is offset against any UK tax liability to the fullest extent possible. The decrease in depreciation expense is a result of a number of assets fully depreciating in the year, and also assets held by Hopman Cup being disposed of during the year as the new licensing agreement was entered into with Tennis Australia for the 2015 event. Investments The Investing section of the Consolidated Income Statement shows gross investment income of $1.2m for the year (2013: $3.6m). The two investment portfolios increased in value in 2014 by $0.9m, 2.5% (2013: $3.4m, 9%) after costs, which was below the 3.6% portfolio benchmark. The performance of the portfolio managers and the investment guidelines are overseen by the ITF's independent investment advisors, Cambridge Associates who report on performance and make recommendations where appropriate. In 2014, Investing activities generated $0.2m profit for the ITF (2013: $3.9m), after taking into account income and expenditure from the investment portfolio, income generated on the short term investment of sterling Olympic funds, and the associated year end foreign exchange losses. In March 2014 the Board of Directors approved a change in the equity benchmark index to the MSCI All Country World Index. The fixed income credit rating for asset purchases was lowered from A- to BBB, and the portfolio USD exposure lowered from 70% to 65%. Also included within the investing section are foreign exchange losses in relation to the revaluation of the Olympic deposits, held in sterling, of $0.9m (2013: $0.5m gain). The total surplus in relation to investments, including portfolio management charges, interest income and exchange gains, was $0.2m (2013: $3.9m). REPORT OF THE CHAIRMAN OF THE FINANCE COMMITTEE 43

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