ITF

(continued from previous page) Investments The Investing section of the Consolidated Income Statement shows that the investment portfolio increased in value in 2012 by $2.8m or 8%, in line with the benchmark set for our portfolio managers; the performance of the portfolio managers and the investment guidelines continue to be the subject of regular review with the ITF's independent investment advisors, Cambridge Associates, and in 2012 the decision was taken by the Board of Directors to replace one of the incumbent managers, Pictet, with an alternative manager, Julius Baer, with effect from the start of 2013. The total surplus in relation to investments, including portfolio management charges, interest income and exchange gains, was $3.1m. Further comment on Investments is provided below. Consolidated Statement of Financial Position Investment in Information Technology continued in 2012, with $1.5m of expenditure on projects which either support income generating activity or improve the efficiency of our business operations; these included the launch of successful mobile apps for Davis Cup, Fed Cup and the Olympic Tennis Event, the continued upgrade and enhancement of our websites, the launch of the Officiating Portal and National Association Portal and the continuation of the major project to transition our core tennis management system to current technology. Total Trade and other receivables decreased by $2.9m to $15.8m in the year. The reduction in Trade receivables of $1.5m was a result of lower levels of sponsorship income invoiced in advance for 2013, early payment of some 2013 sponsorship invoices and a general reduction in trade receivables due to an increased focus on debtor management. Other receivables reduced by $0.6m largely due to improved turnaround times on payments due from the UK tax authorities. Prepayments and Accrued Income reduced by $0.8m to more usual levels, having been unusually high at 31 December 2011 due to Olympic ticketing and accommodation prepayments. Other financial assets represent the ITF investment portfolio 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 2012 being taken to reserves due to hedge accounting being adopted. The value of the investment portfolio at 31 December 2012 was $36.5m, an increase of $2.8m in the year, taking us above our stated target of $35m of investment reserves. Nevertheless, we continued to see significant volatility in the valuation of our investment portfolio during 2012, 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. 40 ITF FINANCIAL STATEMENTS At 31 December 2012, we did not hold any short term investments; the balance of $3.8m at 31 December 2011 was the remainder of the income from the Beijing Olympic Games and was released in 2012 for operational purposes, as planned. The gross income from the London Olympic Games of $23m was received late in 2012 and placed on short term cash deposits which matured at the year end; it is therefore included in Cash and cash equivalents at year end and will be invested in low risk deposits in early 2013. Total Trade and other payables increased by $5.4m to $27.1m in the year; as shown in note 28, the majority of the increase relates to deferred income, which rose by $5.7m; $5.4m of the increase is the Olympic income deferred to 2013. In addition, Receipts in advance rose by $1m due to prompt invoicing of amounts due in 2013 under the new contract for provision of ITF Official Data. The balance on the Grand Slam Development Fund reduced by $0.7m as a result of agreed use of the reserves of the Fund in 2012. The remainder of the Olympic income, which will be recognised in 2014 and 2015, is shown as Deferred Income under the heading Non-current liabilities. 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 32e. In closing my report last year, I emphasised the challenges that lay ahead in 2012, the fragility of the global economic climate and the importance of our investment reserves during this period. One year on, the picture looks very similar. The positive news is that the ITF is well positioned, with a strong balance sheet and closely managed expenditure, to meet the challenges ahead. David Jude Honorary Treasurer

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