SINCE-INCEPTION PAID-IN CAPITAL TO CUMULATIVE COMMITTED CAPITAL, AN...

3) since-inception paid-in capital to cumulative committed capital, and 4) residual value to since-inception paid-in capital. Orion aggregates its various strategies in its composites. The composites are separated by vintage year. Lee advises Orion’s pricing and valuation committee to use the hierarchy of valuation methodologies presented in Exhibit 1 to establish fair values for its investments in private equity. Exhibit 1 Hierarchy of Private Equity Valuation Methodologies Methodology Order Description 1 Best Present value of risk adjusted cash flows 2 Next-Best Market transactions 3 Least Preferred Market-based multiples By accessing this mock exam, you agree to the following terms of use: This mock exam is provided to currently-registered CFA candidates. Candidates may view and print the exam for personal exam preparation only. The following activities are strictly prohibited and may result in disciplinary and/or legal action: accessing or permitting access by anyone other than currently-registered CFA candidates; copying, posting to any website, emailing, distributing and/or reprinting the mock exam for any purpose. Gardere Associates Gardere Associates is an investment fund that directly invests in commercial real estate. Gardere has asked Lee for advice on GIPS compliance. Lee indicates that an important disclosure requirement is presentation of total return, income return and capital return. Lee uses the information presented in Exhibit 2 to illustrate return calculations. Exhibit 2 Selected Financial Information for Gardere Associates Item Date Amount Beginning Capital March 31, 2010 $12,500,000 Capital Contribution (weight=0.51) May 15, 2010 $1,500,000 Portfolio Fair Value March 31, 2010 $11,700,000 Portfolio Fair Value June 30, 2010 $13,000,000 Capital Expenditures $2,700,000 Property Sales Proceeds $3,500,000 Earned Investment Income $120,000 Non-recoverable Expenses $312,000 Interest Expense on Debt $220,000 Property Taxes Paid $31,000 Prior to issuing his final reports to Orion and Gardere, Lee provides a statement with the following comments regarding the verification reports: Comment 1: “It is recommended that the verification report cover all periods for which the firm claims GIPS compliance.” Comment 2: “The verification report confirms that the firm’s processes and procedures are designed to calculate and present performance results in compliance with the GIPS standards.” Comment 3: “The verification report confirms that Stowe Partners has sole responsibility for maintaining the data and information necessary to perform the required calculations for the client.”