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      A. Types of assets

      These asset classes would include, but would not be limited to, derivative securities, municipal bonds, private investments, commodities, and real estate.

      B. Treatment

      Nontraditional assets should generally be handled in accordance with GIPS.

      C. Disclosure

      Because many nontraditional asset classes involve complex investment strategies, complete disclosure of the nature and consequences of the investment strategies being used is essential.

      Section 3: Reporting Performance Results to Clients

      A. The data obtained for performance measurement purposes should consist of security market values and transactions.

      B. The sources of data used in monitoring the historical and ongoing investment performance of a client's investment managers should be independent of the investment manager being evaluated. The consultant should avoid using data obtained directly from the manager unless these data are the sole available source of information. In this case, the consultant should substantiate the data whenever possible and must disclose their use to the client.

      C. The preferred source of data is the custodian (bank, brokerage firm, insurance company, or others providing custodial services) that provides independent valuation of all security holdings and all portfolio transactions. Performance results, where possible, should be reconciled with the manager's reported performance.

      D. Whenever summary market valuations, cash flows, or returns obtained from another consultant, the custodian, or the client are used instead of the original data, the consultant should use “best efforts” to confirm the validity and accuracy of the aggregation process. Additionally, the consultant should obtain information regarding the basis of the aggregated data – for example, cash versus accrual, trade date versus settlement date, gross basis (before deduction of fees) versus net basis (after deduction of fees).

      E. The client should be informed regarding the source(s) of data used for performance reporting, particularly the use of noncustodial sources.

      F. For mutual funds, the consultant may use data obtained from a third-party provider. The source of the data must be disclosed to the client.

      G. There are special considerations regarding the collection of historical data for a new client or portfolio:

      1. For reasons such as lack of original statements or client cost constraints, historical data sometimes may have to be obtained in compiled form from a consultant, the custodian, or the client.

      2. If historical data are obtained from several different sources, the consultant should use best efforts to confirm that all data being used are consistent. The consultant should avoid mixing dissimilar data and should note the potential impact to the client when historical data are obtained from more than one source.

      3. If dissimilar data must be used, the consultant should ensure that adjustments are made as necessary to ensure that discrepancies or discontinuities are not introduced into the performance results.

      4. The amount of historical data obtained should be consistent with the reporting goal of providing the client an accurate assessment of past performance.

      H. Composite, model, or hypothetical returns should not be used for monitoring the historical and ongoing investment performance results of a client's existing investment managers.

      I. Frequency of data collection

      1. The interval of valuation data should be monthly; the minimum frequency should be quarterly.

      2. The interval for aggregation of transaction data should be daily; the minimum frequency should be monthly.

      J. Data obtained must always be checked for completeness and accuracy. The consultant should not assume that the custodial statements are complete and without error. Typical items that should be checked include missing or inaccurate pricing, transactions, or corporate actions, as well as posting in an incorrect period. When missing or incorrect information is discovered, it should be adjusted. In all cases, adjustments should be made in accordance with the goal of providing the client a performance report that is an accurate representation of portfolio results.

      A. Calculations

      1. The reporting start date should be the date that represents the appropriate starting point for monitoring the investment manager's results, which is generally the month following inception.

      2. When portfolio performance is segregated, cash and equivalents should be treated as a distinct asset class.

      3. Portfolio data should be calculated on the basis of trade date. When trade-date accounting is not possible, settlement-date accounting may be used.

      4. Switching between trade-date and settlement date calculations is not permitted unless required for reasons such as a change in the accounting basis of the underlying custodial reports.

      5. Interest income should be calculated on an accrual basis. The use of dividend receivables is strongly recommended.

      6. Estimates of accrued income are permissible and should be disclosed to the client when used in lieu of actual accrued income.

      7. Convertible securities should be treated as a separate asset class or equity asset.

      8. Total rate of return, including capital appreciation plus income, is strongly recommended for judging overall investment results.

      9. A time-weighted rate-of-return calculation that minimizes the impact of cash flows should be used for any comparisons of the investment manager with appropriate indices or other managers.

      10. A dollar-weighted (internal) rate-of-return calculation should be used for comparisons with “dollar-” or “value-based” investment objective(s) such as actuarial rates of return or inflation. Dollar-weighted returns should also be used for some alternative investments where the manager controls cash flows.

      11. When

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