1. How to Set Assumptions

In accordance with IAS 19, actuarial assumptions for defined benefit plans must be:

• Unbiased. Assumptions must be objective and avoid any pre-determined values or bias. They should reflect the Company's best estimate of the relevant variables, without any systematic tendency to overstate or understate the obligation.
• Mutually Compatible. Assumptions should be internally consistent and reflect the economic relationships between them. For example, the assumed salary growth rate should align with assumptions for inflation and discount rates.
• Based on Market Expectations. Financial actuarial assumptions should reflect prevailing market sentiment regarding the time value of money at the Reporting Date and throughout the entire payout period, over which the obligations are expected to be settled, not just a single point in time. In simpler terms, the chosen rate shouldn't be based on historical data or some predictions, but on current market expectations.

The Company is responsible for selecting and regularly reviewing these assumptions. Actuarial assumptions may be updated from one valuation to the next due to various factors, including:

• Changes in legislation or regulations. New laws or regulations may impact plan benefits or funding requirements.
• Scheme experience. Actual experience with mortality, employee turnover, or salary growth may differ from previous assumptions.
• Economic conditions. Changes in inflation, interest rates, or other economic factors can affect long-term projections.

it's important to emphasize that revising actuarial assumptions doesn't necessarily indicate that prior assumptions were unreasonable. Actuarial assumptions are inherently forward-looking and based on the best available information at a specific point in time. Changes in assumptions are a natural part of the process as new information emerges or economic conditions evolve.

However, given the long-term nature of defined benefit liabilities, assumptions should incorporate a long-term perspective. This means that short-term fluctuations or one-off events should generally not influence the assumptions unless there's a strong indication, they represent a persistent trend or will repeat in future. This long-term focus is particularly critical for demographic assumptions such as leaving service, retirement and mortality.

This long-term focus ensures that the actuarial assumptions provide a realistic basis and stable basis for measuring the defined benefit obligation and related costs over the extended period during which benefits will be paid. This approach avoids unnecessary volatility in financial reporting and contributes to a more accurate portrayal of the long-term cost of providing employee benefits.