) DOES THE FUND'S DISCLOSURE TO ITS CLIENTS REGARDING THE RENEWAL O...

6.) Does the Fund's disclosure to its clients regarding the renewal of the license most likely

comply with the Asset Manager Code of Professional Conduct?

A. Yes, the disclosure included the termination of the fund manager

B. No

C. Yes, the disclosure included the out-of-court settlement and payment of fine

Ptolemy

The Ptolemy Foundation was established to provide financial assistance for education in the

field of astronomy. Tom Fiske, the foundation’s chief investment officer, and his staff of three

analysts use a top-down process that begins with an economic forecast, assignment of asset

class weights, and selection of appropriate index funds. The team meets once a week to discuss

a variety of topics ranging from economic modeling, economic outlook, portfolio performance,

and investment opportunities, including those in emerging markets.

At the start of the meeting, Fiske asks the analysts, Len Tuoc, Kim Spenser, and Pier Poulsen, to

describe The Ptolemy Foundation was established to provide financial assistance for education

in the field of astronomy. Tom Fiske, the foundation’s chief investment officer, and his staff of

three analysts use a top-down process that begins with an economic forecast, assignment of

asset class weights, and selection of appropriate index funds. The team meets once a week to

discuss a variety of topics ranging from economic modeling, economic outlook, portfolio

performance, and investment opportunities, including those in emerging markets.

describe and justify their different approaches to economic forecasting. They reply as follows.

Tuoc: I prefer econometric modeling. Robust models built with detailed regression

analysis can help predict recessions well because the established relationships among

the variables seldom change.

Spenser: I like the economic indicators approach. For example, the composite of leading

economic indicators is based on an analysis of its forecasting usefulness in past cycles.

They are intuitive, simple to construct, require only a limited number of variables, and

third-party versions are also available.

Poulsen: The checklist approach is my choice. This straightforward approach considers

the widest range of data. Using simple statistical method, such as time-series analysis,

an analyst can quickly assess which measures are extreme. This approach relies less on

subjectivity and is less time-consuming.”

The team then discusses what the long-term growth path for US GDP should be in the aftermath

of exogenous shocks because of the financial crisis that began in 2008. They examine several

reports from outside sources and develop a forecast for aggregate trend growth using the

simple labor-based approach and appropriate data chosen from the items in Exhibit 1.

Exhibit 1: 10-Year Forecast of US Macroeconomic Data

Growth in real consumer spending 3.10% Yield on 10-year Treasury bonds 2.70%

Growth in potential labor force 1.90%

Growth in total factor productivity 0.50%

Growth in labor force participation –0.3%

Growth in labor productivity 1.40% Change in trade deficit –0.5%

Upon a review of the portfolio and his discussion with the investment team, Fiske determines a

need to increase US large-cap equities. He prefers to forecast the average annual return for US

large-cap equities over the next 10 years using the Grinold–Kroner model and the data in Exhibit