2017 ITF Annual Report and Financial Statements

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4 control on administra ve expenses, helped by a favourable USD to GBP hedge rate for 2017 compared with 2016. Foreign exchange gains of $0.5m were recognised in 2017 (2016: $0.3m). 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 $0.2m (2016: $0.3m). As the television income from historic mul -year contracts declines as a consequence of the implementa on of the beIN SPORTS contract, exposure to withholding tax will also decline. STRATEGIC INITIATIVES Strategic ini a ves represent expenses directly related to delivering the objec ves of ITF2024, but that are not ongoing or normal ac vi es. Strategic ini a ves totalled $1.1m in 2017. Note 15 of these financial statements breaks down the expenditure by ITF department. Professional Tennis strategic ini a ve expenditure is to develop, design, promote and implement the new transi on tour concept, due to be launched January 2019. Commercial strategic ini a ves see investment in sponsorship sales materials, the televising of junior and wheelchair events, and the beginning of a new ITF brand and marke ng strategy. Presiden al and Communica ons strategic ini a ves are focused on improving the ITFs social media presence and capability, and the investment in providing financial support to na ons to a end the Annual General Mee ng. Integrity, Science and Technical, and Finance, Administra on and ICT strategic ini a ves are all aimed at ensuring compliance, security and safety at the ITF with a data protec on review, digital review and ICT security review with subsequent costs for implemen ng the recommenda ons. INVESTING ACTIVITIES Inves ng income in the Consolidated Income Statement shows a gross investment gain of $5.0m for the year (2016: $2.8m), a net gain of $4.7m a er costs, giving a return of 11.0% (2016: net gain $2.5m, 6.3%). The management of the por olio is in transi on with Cambridge Associates taking on an advisory mandate. Because the process has been con nuing throughout 2017 the fees have been higher than they will be once the transi on has been completed. 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. Short term investment of Olympic funds are now held in US Dollars. During 2017, the funds made gains of $0.3m (2016: loss of $0.5m) but as the funds are held in US Dollars, there is no longer an effect of foreign exchange transla on (2016: $0.8m gain). CONSOLIDATED STATEMENT OF FINANCIAL POSITION Net assets of the ITF Group have increased from $49.6m at 31 December 2016 to $57.8m at 31 December 2017. Investment in informa on technology amounted to $1.2m in 2017 (2016: $1.1m), with expenditure on projects which either support income genera ng ac vity or improve the efficiency of business opera ons. These included the con nued development and enhancement of our online presence, core opera ons and data management systems. Total trade and other receivables decreased by $1.1m to $16.6m in the year (2015: $17.7m). Trade receivables and other receivables have increased by $3.3m mainly due to one large media rights invoice raised before the year-end. This increase is offset by a $4.4m decrease in prepayments and accrued income. The 2016 accrued income included the final tranche of the Rio 2016 Olympic income, and the final payment for the revenue sharing por on under the previous data rights agreement. Total trade and other payables (current & non-current combined) increased by $2.3m in the year to $45.1m (2016: $42.8m). Trade payables increased $0.6m with prize money payments owed to member associa ons for par cipa on in the Fed Cup. Accruals increased $3.4m partly due to accrued data rights payment accrual increase of $1.8m. The increase would have been higher, but the ITF implemented a policy to pay an interim payment to Na onal Associa ons in July. Deferred income remained level with the corresponding offse ng effects of releasing one year's worth of Olympic income and a large data rights invoice being deferred. Other financial assets represent the ITF investment por olios and Olympic deposits. The value of the investment por olios at 31 December 2017 was $47.1m (2016: $42.3m), an increase of $4.7m a er fees. A further $2.8m of cash deposits are held in addi on to the $47.1m of investments detailed in Note 27 of these financial statements to fund ming differences in selling and buying assets as part of the transi oning process to new fund management arrangements. Once the transi oning is completed $2.8m will be drawn back into the ITF cash balance. The ITF reserves policy provides for holding funds for long term financial stability and for investment in strategic ini a ves. The investment guidelines reflect the long term objec ve and returns should therefore be viewed in this context. Olympic deposits are held in cash and high quality bonds which will mature and be u lised evenly over the Olympic cycle to meet expenditure commitments. Cash and cash equivalents (excluding investment cash deposits) have increased by $2.5m in the year despite the short-term use of $2.8m to aid the investment por olio transi on. The consolidated cash flow statement provides detailed informa on on the movements in the REPORT OF THE CHAIRMAN OF THE ITF FINANCE COMMITTEE (CONTINUED)

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