“GLOBAL INVESTMENT PERFORMANCE STANDARDS” (STUDY SESSION 17) D) FOR...

1. “Global Investment Performance Standards” (Study Session 17) d) formulate the requirements and recommendations of the GIPS standards with respect to input data, including accounting policies related to asset valuation and performance measurement; e) summarize and justify the requirements of the GIPS standards with respect to return calculations including the treatment of large external cash flows, and calculate a time-weighted total return consistent with those standards; f) formulate the requirements and recommendations of the GIPS standards with respect to composite return calculations, including methods for asset-weighting portfolio returns; i) formulate the requirements and recommendations of the GIPS standards with respect to composite construction, including switching portfolios among composites and the timing of the inclusion of new portfolios in composites and of the exclusion of terminated portfolios from composites; j) formulate the requirements and recommendations of the GIPS standards for: asset class segments carved out of multi-asset class portfolios; fees; the use of leverage and derivatives; conformity with local laws and regulations that conflict with the GIPS standards; and non-compliant performance records; k) formulate the requirements of the GIPS standards with respect to presentation and reporting, including the required timeframe of compliant performance records, annual returns, composite market values, and benchmarks; s) formulate the requirements for compliance with the GIPS Advertising Guidelines. 2006 Level III Guideline Answers Morning Session - Page 22

Question: 8 Topic: Portfolio Management – GIPS Minutes: 15 Guideline Answer: Template for Question 8 Determine whether each of the five Recommend, for each policy not in compliance policies, considered with GIPS, the appropriate change that must Policy independently, meets be made to bring First Trust Company into the requirements of compliance with GIPS GIPS (circle one) A time-weighted total return calculation that Yes adjusts for daily-weighted cash flows is required