ITF

The financial statements of the ITF Trust (ITF) record a successful year despite the continuation of challenging trading conditions first encountered by the organisation in 2012. The result benefitted from prudent cost control which has combined with favorable income generation to give to an operating surplus of $2.1m for the year. This represents a significant improvement on the expected result for the year primarily due to increased operating income generated from data rights sales and from commercial income from the Davis Cup. Operating income for the year was $58.7m compared to $57.8m in 2013 and operating costs were $56.7m compared to $57.9m (including Centenary expenses of $0.6m) contributing to an overall surplus before taxation of $2.2m for the year. Factors contributing to the increase in operating income include data rights sales, which now represent a full year's activity (2013: seven months) performing better than anticipated along with favorable income generation from the Davis Cup arising in particular from France and Switzerland's progression to the Final, both hosting two ties at home. This generated significant ticket revenues as well as TV Rights revenues and sponsorship income for tie-by-tie deals. The Hopman Cup was held for the second year at its new home, the Perth Arena. Although overall income was lower than in 2013, attendances were the second highest on record at 84,043 (2013: 104,468). Cost savings were secured ensuring that the reduction in the profit of Hopman Cup Pty Ltd was limited. The total profit for the year was US$227,000 (2013: US$483,000). Operating costs reduced to $56.7m (2013: $57.9m). Close control over expenditure budgets was maintained, and actual expenditure was carefully managed resulting in the reduction of $0.6m year on year (excluding the impact of $0.6m Centenary Expenditure in 2013). However, when the $1.0m increase in data sales distributions to National Associations is taken into consideration, like for like operating costs were actually $1.6m below 2013. Maintaining tight control over routine expenditure allowed for a year on year increase for the Davis Cup and Fed Cup Promotional Fund which was invested in marketing activities including the "Show Your Colours" campaign. The published result takes account of the performance of the ITF's investment portfolio which increased in value by $0.9m or 2.5% in 2014 (2013: $3.3m, 9%), to $40.8m, reflecting an overall performance of 1.1% below the portfolio benchmark due to the respective managers' implementation of the ITF's risk averse mandate. Investing activities in 2014 generated net profit for the organisation of $0.2m, significantly less than in 2013 ($3.9m). The overall surplus for 2014 after tax was $1.9m (2013: $3.4m). This includes net investment surplus of $0.2m in 2014 (2013: $3.9m) and therefore demonstrates a significant improvement in operating surplus in the year. Operating income The increase in total operating income of $0.9m in 2014 arose largely from increased Data Sales and income generated from TV rights and ticket sales contributions from the Davis Cup, offset by a reduction in income generated by the 2014 Hopman Cup event which reduced by $1.6m from the previous year to $7.1m. Whilst global Sponsorship sales remain challenging a number of deals were signed for Davis Cup ties and a significant global sponsor signed an upgraded long term agreement. Total sponsorship for the year totalled $17.9m which was $2.2m lower than 2013 due to expiring contracts. Television and licensing income increased by $1.3m (18%) in 2014 to $8.4m due to sporting results in the Davis Cup and Fed Cup. Receipts from events grew by $1.7m to $6.8m in 2014. Higher Davis Cup ticket sales were achieved due to sporting results and IPIN membership continues to grow. Data Sales activity, which commenced in June 2013, generated performance based revenue share of $2.3m over and above the minimum contractual revenues of $1.9m. 80% of the net income is distributed to the member nations leaving $0.8m as the ITF's share. Income from the Olympic Games is recognised in the Consolidated Income Statement over the four year period of the Olympiad. Total income received from the IOC relating to the 2012 Olympic Games amounted to $23.6m, an increase of 84% over the 2008 Olympics. This income is recognised over the four years from 2012 to 2015. Further detail is provided in note 30 to the financial statements. 42 REPORT OF THE CHAIRMAN OF THE FINANCE COMMITTEE REPORT OF THE CHAIRMAN OF THE FINANCE COMMITTEE

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