2016 CFA INSTITUTE RESEARCH CHALLENGE RESEARCH REPORTS WHAT

2016 CFA INSTITUTE RESEARCH CHALLENGE RESEARCH REPORTS: WHAT TO FOCUS ON? LOCAL ROUND –TEAMS ORIENTATION OCTOBER 2015

TEAMS ORIENTATION PROGRAM Research Report writing essentials Lessons from Amsterdam 2015 Student Recommendations

KEY QUESTIONS § What is a research report? § What is the most important part of the research report? § How detailed should be the descriptive part? § What is financial analysis for? § In which part of the research report is the greatest value added of the analyst? § Lessons from London 2013

WHAT IS A RESEARCH REPORT § Research report is a communication between an analyst and a „reader“ § Analyst should deliver a reliable message (story) in an attractive form § Your message (opinion) then serves in most cases as a basis for investment decisions § Who are the „readers“? – portfolio managers, traders, auditors, regulators, retail clients…

STRUCTURE OF A TYPICAL RESEARCH REPORT 1. Summary 2. Country & Industry Overview and Outlook 3. Business Description and Outlook 4. Financial Analysis with Comments 5. Valuation & Recommendation

SUMMARY (THE FRONT PAGE) § Shows the reader reasons to read the full report § Summarizes the major investment ideas and risks § States the investment recommendation

COUNTRY, INDUSTRY AND BUSINESS OVERVIEW AND OUTLOOK § This part describes the general environment the company operates in § Focus on characteristics that are relevant for valuation § Describe the current situation and always focus on the outlook

FINANCIAL ANALYSIS § FA helps the analyst to understand the company from a financial point of view § The analyst then presents the results to the reader § Each parameter (ratio) has to be put into a context and commented § Give outlook for profitability, activity, indebtedness, liquidity etc. based on your knowledge of the industry

VALUATION I § Your task is to estimate the fair value of an asset (company) § You already know the asset very well, it was analyzed in preceding chapters of your report § Build a simple model, you can always make it more enhanced later § Briefly describe the valuation methods used § Every time you make an important assumption, make a note of it

VALUATION II § Each valuation method gives a different estimate of the fair value (like throwing darts on a target) § Averaging the outcomes is not always the best approach § Show your analytical skills and decide which method is the most relevant § State your investment recommendation

ANALYSIS AND SYNTHESIS I § From methodological point of view, each research report can be divided into two main sections: 1. 2. 3. 4. Summary Country & Industry overview and outlook Business description and outlook Financial analysis 5. Valuation 6. Appendix ANALYSIS SYNTHESIS

ANALYSIS AND SYNTHESIS II § Valuation synthesizes the analyst‘s general outlook of the industry and the company § The synthesis represents the greatest value added of the analyst § Quality of the valuation chapter helps to distinguish true analysts from the rest

THE APPENDIX MATTERS! § Judges look not only at the presentation itself, but also at the Appendix – it is an integral part of the final presentation. This is the opportunity to show your hard work. Present all your calculations and analysis in the Appendix (e. g. Excel snapshots) § In many cases, the Appendix was much bigger than the presentation (e. g. 10 slides of presentation + 20 slides of Appendix) § Hyperlinks will make your life easier: The first page of the Appendix should include „Contents“ with hyperlinks to individual slides. Individual slides should contain hyperlink to jump back to the first page of the Appendix § Think about the questions that may be raised (e. g. WACC assumptions)

TO SUM UP 1. 2. 3. 4. Describe only relevant facts Identify important trends (value drivers) State clearly your opinion and outlook Make sure that the analytical part is consistent with the final synthesis (valuation). 5. Choose the best valuation method(s) 6. State your investment recommendation 7. Include the Appendix (present all your calculations and thoughts)

APPENDIX: EDUCATIONAL RESOURCES For more information please refer to : https: //www. cfainstitute. org/community/challenge/Pages/index. aspx You can find there audio and video webcasts, articles and books that can help you with: § § Preparing for the project Researching the subject Developing your report Presenting your work Do not forget to read the CFA Research Challenge Official Rules 2016.

CONTACTS KAREL TREGLER, CFA Karel Tregler, Ph. D. , CFA Head of Financial Markets Division PPF banka a. s. Evropska 2690/17, Prague 6 ktregler@ppfbanka. cz

LESSONS FROM AMSTERDAM 2015 § § § Rehearse the presentation thoroughly and carefully plan every minute. The whole presentation should read like a convincing story Get feedback during rehearsals, also using videotaping. Body language, dress, and movement on the stage are important Take care to be respectful towards the judges and their questions Tanweer Ali, CFA Academic Adisor

LESSONS FROM AMSTERDAM 2015 § § Know the Rules! Structure research report and Final presentation according to best practice Pay attention to every single detail Spend enough time rehearsing the final presentation. It is important for the research challenge teams to practice (in addition to content) also speed, intentional pauses, points that should attract attention and need to be emphasized by voice and gestures Be a well-prepared confident actor which leaves the best impression Michal Mareš, CFA Industry Mentor

LESSONS FROM AMSTERDAM 2015 § § Be prepared for hard questions from judges in the Q&A Session However, questions from judges can be anticipated if you intentionally create logical gap in your Final presentation Back up slides in the Appendix serve valuable purpose as they help you to answer hard questions Team that can be easily remembered wins the competition Jan Hájek, CFA Presentation Judge

RECOMMENDATIONS JAKUB JURGA , RC COORDINATOR Tips & tricks for report writing § § § Guidelines in the Official Rules (Appdx A) Annual reports, other analysis, (various banks etc. ) publically available documents everything need to be disclosed Cover & back page available after registration at CFA Institute website (or I can send it via email) Old reports available at CFA Society Czech Republic website Equity analysis book available after the registration Current status: § 11 universities (2 from SVK) 11 teams 50+ students § sufficient number of mentors § §

KEY TAKEAWAYS JAKUB JURGA , RC COORDINATOR § § § Read the rules and register Teams assigned to Industry Mentors during the next week Company presentation at 4 November 1: 00 pm in EY, Na Florenci 2116/15, Praha, (Florentinum) Tomáš Hrbáček, Jakub Jurga CFA Institute Research Challenge Coordinators tomas. hrbacek@czechcfa. cz, jakub. jurga@czechcfa. cz +420 775 413 578, +420 734 863 852

CFA INSTITUTE RESEARCH CHALLENGE SUPPORTING COMPANIES Organizing the RC would not be possible without our corporate partners.

WE ARE LOOKING FORWARD TO SEE YOU IN FINAL Czech CFA Society c/o EY, Marek Jindra Na Florenci 2116/15 110 00 Praha 1 Czech Republic Mobile: +420 603 489 663 E-mail: info@czechcfa. cz www. czechcfa. cz