ITF

STRATEGIC REPORT See the Report of the Chairman of the Finance Committee on page 1 for further details. By order of the Board David Haggerty René Stammbach President Chairman of the Finance Committee ITF, Bank Lane, Roehampton, London SW15 5XZ, United Kingdom Business Review: A review of the group's business is outlined in the Report of the Chairman of the Finance Committee on page 1. The ITF prepares and reviews its risk register on a biannual basis. The major risks identified in the risk register, updated in June and November 2019 and reviewed by the Finance and Audit Committee and the Board, include: Principal Risks and Uncertainties: The Board remains confident that the strong balance sheet, closely managed expenditure and long-term revenue contracts will adequately meet the challenges ahead. The Davis Cup licensing agreement, signed for a 25-year period, sees revenues which are annually linked with inflation. For 2020, the new format Fed Cup Finals will see further increases in revenue for a two-year period. This guarantees the ITF's main income streams for a significant length of time. Key Performance Indicators: · Commercial - Sponsorship income: $5.7m (2018: $19.5m) · Commercial - Broadcast income: $3.0m (2018: $14.4m) · Commercial - Data rights income: $12.6m (2018: $12.7m) · Corporate services - Operating surplus before financing: $2.3m (2018: Surplus $0.2m) · Corporate services - Investment portfolio return: 16.6% (2018: negative 4.2%) 9 March 2020 · Commercial - Davis Cup licence fee: $40.3m (2018: $0.0m) The group has $53.6m of net current assets (2018: $46.8m) helped by the investment portfolio valued at $53.8m (2018: $47.3m), and a cash position of $5.5m (2018: $28.7m). - Tennis events at the Tokyo 2020 Olympic and Paralympic Games are cancelled or not completed - Sponsorship packages remain unsold and existing packages are not renewed - Non-recent allegations of abuse are discovered that were either not reported or not dealt with appropriately - Corrupt players, officials or "unauthorised persons" manipulating match results for personal gain - The risk of the partnership with Kosmos or the new Davis Cup format being unsuccessful - The risk of the Fed Cup licensing agreement or the new Fed Cup format being unsuccessful The overall result in 2019 sees equity increase to $57.7m, despite the planned expenditure in support of the Strategic Initiatives undertaken in the year, due to the result of the investment portfolio. The ITF implements as many reasonable mitigating actions as possible to reduce the inherent risks within the business. Performance During the Financial Year The ITF Trust made a net surplus after taxation on ongoing operating activities of $1.7m (2018: $0.1m), a planned deficit on Strategic Initiative expenditure of $3.8m (2018: $3.7m) and a net surplus on the investment activities of $8.1m (2018: deficit $1.9m) making a total surplus after tax of $5.9m (2018: deficit $5.5m). Further details of the financial performance of the ITF Trust during the financial year can be found in the Report of the Chairman of the Finance Committee on page 1. Position at the End of the Year In June 2017 the ITF Board of Directors reaffirmed their agreement to a revised Reserves Policy which identified $10.5m of funding for investment in Strategic Initiatives in pursuance of the objectives of ITF2024. Throughout the period of investment, prudent financial management will be maintained to ensure that reserves are not unnecessarily diminished. At the time of writing the annual report, the sporting world is faced with the coronavirus epidemic which has recently spread to over 68 countries. Sporting events have been cancelled or postponed until later in the year. A number of World Tennis Tour events in China, Japan and Korea have been cancelled. In this context of uncertainty there is a possibility that this virus could cause disruption to other individual and team ITF tennis events. 4

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