1. Introduction to round table panel Cezary Mech PhD President of Association of Capital Market UNFE, Poland

2. Pension reforms in CEE Poland and Hungary are countries with experience from late 90-ties In the rest of the CEE region pension reforms were implemented later (like in Croatia and Bulgaria), are just before starting implementation like in Macedonia Important to final valuation results of those reforms is the question of investment activity of pension funds as reforms are based on DC rules in funded components

3. Risk profile Should pension managers manage only one open pension fund or more than one with different risk profile? Advantages: better adequacy to participants needs, age, acceptable level of risk Disadvantages: lower transparency, higher cost, problems with fees and transfers and competition

4. What are safe investments? Shares/ debt instruments Rating State as issuer or guarantor Short time – long time profits

5. Poland – pension funds type B According to Polish law from 2005 pension managers should created pension funds type B, with limited number of accepted investment categories, available for members older than 50

6. Yield-to-maturity Yield Default Premium Spread Risk Premium Default-Free Yield-to-maturity {

7. What should be a subject of pension funds investments Financial instruments Conservative Safe or liquid Investment rating grade

8. Derivatives Derivatives versus minimum rate of return Valuation problems Risk related to possible manipulation and loses Lack of transparency in case of derivatives

9. Real estate direct investments Valuation problems Lack of liquidity Maintenance costs and risks Not financial assets Risk of manipulation Lack of transparency

10. The Valuation Process Cost of Capital Estimation Free Cash Flow Forecast Results Analysis Terminal Value Estimation Components Value Drivers Forecast assumptions Market rates Target levels Market value weighting k d, k e, WACC Forecast horizon Long term growth assumptions Sensitization Reassess assumptions Market comparisons

11. Pension funds as shareholders Active or passive role Transparency Role of agent Possible conflict of interest Is market liquid enough to vote by selling and buying shares

12. The Use of Predicted Ratios to Compute Predicted Price EBIT Margin Sales Assets Sales Fixed Assets Sales Inventory Sales Receivables Sales Cash Profits Sales EBIT Sales Profits EBIT Profits Equity Profits Assets Equity Shares Profits Shares Price EPS Operating Efficiency Coverage ROA ROE EPS P/E Ratio Book Value Leverage Turnover Production Efficiency x x x x x x SHAREPRICESHAREPRICE

13. Foreign investments Size of the domestic market Development of domestic capital market Expected returns in EEC countries Economic growth Influence to future old age benefits Currency risk Knowledge of local market