Quarterly Update – September 30, 2015€¦ · 03/11/2015 · GMO Quarterly Update – September 30, 2015. ... Tax‐Managed Global Balanced 12 GMO Global Equities Page Global All

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GMO offers institutionally‐oriented investment strategies. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such.

GMO Quarterly Update – September 30, 2015

September 30, 2015

1

GMO Capabilities

GMO Multi‐Asset Class Page

Benchmark‐Free Allocation 4

Global Allocation Absolute Return 6

Global Asset Allocation 8

Real Return Global Balanced Asset Allocation 10

Tax‐Managed Global Balanced 12

GMO Global Equities Page

Global All Country Equity Allocation 14

Global Developed Equity Allocation 16

Global Focused Equity 18

Quality 20

Resources 22

GMO International Equities Page

International All Country Equity Allocation 24

International Developed Equity Allocation 26

Tax‐Managed International Equities*

International Equity 28

International Active EAFE 30

International Active Foreign Small Companies 32

International Small Companies*

GMO U.S. Equities Page

U.S. Equity Allocation 34

* Certain GMO capabilities are not available through separately managed accounts and therefore information on those capabilities is not included in this document. For information please contact GMO.

GMO Emerging Equities Page

Emerging Markets 36

Emerging Countries*

Emerging Domestic Opportunities 38

GMO Fixed Income Page

Global Bond 40

Currency Hedged International Bond 42

Core Plus Bond 44

Emerging Country Debt*

Emerging Country Local Debt*

Emerging Country Debt U.S. Rates Hedged*

Debt Opportunities 46

GMO Absolute Return Page

Fixed Income Hedge 48

Mean Reversion 50

Systematic Global Macro 52

Tactical Opportunities 54

Total Equities 56

Multi‐Strategy*

September 30, 2015

2

Performance of GMO Strategies and Benchmarks

Performance data quoted represents past performance and is not predictive of future performance. Returns are shown after the deduction of management fees, transactioncosts and other expenses, but before custody charges, withholding taxes, and other indirect expenses. The returns assume the reinvestment of dividends and other income.

Copyright © 2015 by GMO. All rights reserved. This document may not be reproduced, distributed or transmitted, in whole or in portion, by any means, without writtenpermission from GMO.

Total Return Net of Fees Average Annual Total Return

GMO Multi‐Asset Class Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Benchmark‐Free Allocation 7/31/01 ‐6.67 ‐5.70 ‐6.30 ‐6.40 4.51 5.62 9.52

CPI ‐0.09 0.60 ‐0.03 1.70 1.81 2.08

Global Allocation Absolute Return 7/31/01 ‐5.92 ‐5.67 ‐6.27 ‐6.24 4.16 5.16 8.30

CPI ‐0.09 0.60 ‐0.03 1.70 1.81 2.08

Global Asset Allocation 6/30/88 ‐6.94 ‐5.72 ‐1.61 ‐6.89 4.81 4.79 9.08

GMO Global Asset Allocation + ‐5.77 ‐4.11 ‐3.25 5.77 4.70 7.72

Real Return Global Balanced Asset Allocation 6/30/04 ‐6.59 ‐6.44 ‐3.14 ‐7.31 5.03 4.87 5.82

GMO Real Return Global Balanced AA Blended + ‐4.85 ‐3.30 ‐2.36 5.74 4.34 4.93

Tax‐Managed Global Balanced 12/31/02 ‐6.20 ‐4.83 ‐1.46 ‐5.49 4.34 4.33 6.67

GMO Tax‐Managed Global Balanced Index ‐5.08 ‐3.37 ‐2.80 5.81 4.71 6.41

GMO Global Equity Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Global All Country Equity Allocation 12/31/93 ‐11.31 ‐8.40 ‐1.36 ‐10.40 6.00 4.76 8.19

MSCI ACWI ++ ‐9.45 ‐7.04 ‐6.66 7.14 4.60 6.82

Global Developed Equity Allocation 3/31/87 ‐10.14 ‐6.78 ‐0.74 ‐8.52 7.44 4.77 8.81

MSCI World + ‐8.45 ‐6.04 ‐5.09 8.29 4.74 7.01

Global Focused Equity 12/31/11 ‐12.12 ‐11.06 ‐4.02 ‐13.15 8.39

MSCI ACWI ‐9.45 ‐7.04 ‐6.66 8.99

Quality 2/29/04 ‐4.21 ‐5.21 0.07 ‐0.32 12.22 6.85 6.04

S&P 500 ‐6.44 ‐5.29 ‐0.61 13.34 6.80 6.75

Resources 12/31/11 ‐20.61 ‐19.47 5.86 ‐34.42 ‐6.93

MSCI ACWI Commodity Producers ‐21.28 ‐25.33 ‐35.82 ‐10.10

GMO International Equity Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

International All Country Equity Allocation 2/28/94 ‐13.69 ‐9.52 ‐0.89 ‐14.43 1.94 2.98 6.51

MSCI ACWI ex USA + ‐12.17 ‐8.63 ‐12.16 1.87 2.97 4.90

International Developed Equity Allocation 11/30/91 ‐12.53 ‐7.73 ‐2.46 ‐12.84 4.11 3.16 7.43

MSCI EAFE ++ ‐10.23 ‐5.28 ‐8.66 3.98 3.11 5.75

International Equity 3/31/87 ‐12.07 ‐7.48 ‐2.20 ‐12.40 3.30 2.13 7.38

MSCI EAFE + ‐10.23 ‐5.28 ‐8.66 4.05 2.56 6.57

MSCI EAFE ‐10.23 ‐5.28 ‐8.66 3.98 2.97 4.89

International Active EAFE 5/31/81 ‐6.77 1.85 7.13 ‐3.46 3.77 2.67 11.30

MSCI EAFE ‐10.23 ‐5.28 ‐8.66 3.98 2.97 8.49

Int'l. Active Foreign Small Companies 1/31/95 ‐7.26 1.46 0.78 ‐2.29 6.29 6.59 10.46

S&P Developed ex‐U.S. Small Cap ‐7.85 0.68 ‐1.93 6.73 5.47 6.90

GMO U.S. Equity Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

U.S. Equity Allocation 2/28/89 ‐5.98 ‐6.13 ‐0.68 ‐2.76 11.78 5.68 10.20

Russell 3000 +++ ‐7.25 ‐5.45 ‐0.49 13.23 6.84 9.82

September 30, 2015

3

Performance of GMO Strategies and Benchmarks

* Returns for one of the accounts in the composite are based on estimated market values for the period from and including October 2008 through February 2009.


Total Return Net of Fees Average Annual Total Return

GMO Emerging Equity Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Emerging Markets 12/31/93 ‐17.49 ‐16.41 ‐1.93 ‐20.61 ‐5.13 2.43 6.15

S&P/IFCI Composite ‐17.79 ‐14.48 ‐18.38 ‐2.67 5.23 4.77

MSCI Emerging Markets ‐17.90 ‐15.48 ‐19.28 ‐3.58 4.27 4.13

Emerging Domestic Opportunities 3/31/11 ‐10.71 ‐8.52 6.95 ‐7.76 1.54

MSCI Emerging Markets ‐17.90 ‐15.48 ‐19.28 ‐5.89

GMO Fixed Income Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Global Bond* 12/31/95 1.77 ‐2.66 ‐1.18 ‐2.78 2.59 3.87 5.38

J.P. Morgan GBI Global 2.03 ‐1.47 ‐2.37 0.21 3.71 4.59

Currency Hedged International Bond 9/30/94 2.36 ‐0.11 ‐1.53 4.10 6.52 4.78 7.87

J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) + 2.77 1.42 4.99 5.10 5.02 6.88

Core Plus Bond 4/30/97 ‐0.05 ‐0.92 ‐2.05 1.25 5.27 4.45 5.81

Barclays U.S. Aggregate 1.23 1.13 2.94 3.10 4.64 5.58

Debt Opportunities 10/31/11 ‐0.11 1.10 0.78 1.36 5.87

J.P. Morgan U.S. 3 Month Cash 0.12 0.31 0.40 0.51

GMO Absolute Return Strategies Inception

3Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Fixed Income Hedge 8/31/05 ‐1.36 ‐14.08 ‐14.40 ‐7.64 5.64 ‐0.30 ‐0.38

J.P. Morgan U.S. 3 Month Cash 0.12 0.31 0.40 0.48 2.01 2.02

Mean Reversion 2/28/02 2.61 ‐0.96 ‐0.97 ‐4.28 0.70 2.22 6.03

Citigroup 3‐Mo. T‐Bill 0.01 0.02 0.02 0.06 1.26 1.35

Systematic Global Macro 3/31/02 ‐3.15 ‐1.51 ‐1.53 1.66 4.14 6.08 6.75


Tactical Opportunities 9/30/04 12.90 1.92 1.91 2.00 ‐3.41 ‐4.80 ‐5.81


Total Equities 9/30/00 ‐12.33 ‐9.80 ‐9.82 ‐11.28 2.76 1.39 4.85


September 30, 2015


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STRATEGY PROFILE

4GMO LLC © 2015

GMO Benchmark‐Free Allocation Strategy

PERFORMANCE NET OF FEES

Performance data quoted represents past performance and is not predictive of future performance. Returns are shown after the deduction of management fees, transaction costs and other expenses, but before custody charges, withholding taxes, and other indirect expenses. The returns assume the reinvestment of dividends and other income.

The chart above shows the past performance of the Benchmark‐Free Allocation Composite (the “Composite”). Prior to January 1, 2012, the accounts in the Composite served as the principal component of a broader real return strategy. Beginning January 1, 2012, accounts in the composite have been managed as a standalone investment.

The CPI (Consumer Price Index) for All Urban Consumers U.S. All Items is published monthly by the U.S. government as an indicator of changes in price levels (or inflation) paid by urban consumers for a representative basket of goods and services.

1 The groups indicated above represent exposures determined pursuant toproprietary methodologies and are subject to change over time.

2 Std. Deviation is a measure of the volatility of a portfolio’s return. Sharpe Ratio isthe return over the risk free rate per unit of risk. Drawdown is the largestnegative cumulative portfolio return from peak to trough. Risk profile data is net.

3 The credit ratings above may encompass emerging debt, developed rates, andasset‐backed exposure. Ratings for the emerging debt and developed ratesportions of the portfolio are derived by taking the Standard and Poor’s countryratings and applying these ratings to the country exposures of the portfolio. Forthe asset‐backed portion of the portfolio, credit ratings are derived by using thelowest rating among rating agencies at the issue level. Final credit ratings areexpressed based upon Standard and Poor’s ratings scale. Standard & Poor’s ratessecurities from AAA (highest quality) to C (lowest quality), and D to indicatesecurities in default; some securities are not rated (NR). BB and below areconsidered below investment grade securities.

The above information is based on a representative account in the Strategyselected because it has the fewest restrictions and best represents theimplementation of the Strategy.

Total Return (%)

Strategy Benchmark

3Q 2015 ‐6.67 ‐0.09

YTD 2015 ‐5.70 0.60

Annual Total Return (%)

2014 1.31 0.67

2013 11.24 1.56

2012 10.35 1.87

2011 3.60 2.95

2010 4.58 1.25

2009 19.86 2.86

2008 ‐12.07 0.16

2007 10.93 4.12

2006 12.75 2.58

2005 16.32 3.45

Annualized Return (%)

‐6.40

4.51 5.62

9.52

‐0.03

1.70 1.81 2.08

‐10

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark

Group Exposures (%)1

0

20

40

60

80

100 U.S. Quality, 5.6

Europe Value, 7.4

Emerging Markets, 17.2

Cash & Cash Equiv., 13.9

Japan, 2.7

U.S. Opportunistic Value, 5.4

Distressed Debt, 2.4Relative Value Interest Rates & FX, 6.6Systematic Global Macro, 5.0Special Opportunity, 3.0Merger Arbitrage, 5.2

Alpha Only, 4.0

Emerging Debt, 4.5ABS/Structured Products, 4.5

Other Int'l. Opportunistic Value, 3.1

U.S. TIPS, 10.3

U.S. Equity CashInt’l. Developed EquityEmerging Equity

Alternative StrategiesFixed IncomeAbsolute Return

Equity CharacteristicsStrategy

Price/Earnings ‐ Hist 1 Yr Wtd Med 15.4 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.4 x

Return on Equity ‐ Hist 1 Yr Med 11.2 %

Market Cap ‐ Weighted Median $Bil $30.8

Dividend Yield ‐ Hist 1 Yr Wtd Avg 3.1 %

5‐Year Risk Profile2

Strategy

Std. Deviation 5.98

Sharpe Ratio 0.75

Drawdown

(2/27/15‐9/30/15)‐9.32

Equity Regional Weights (%)

40.1

11.0

6.6

7.5

7.4

27.3

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Bond Portfolio3

Bond Portfolio Duration 2.8 years

Credit Ratings

AAA 7.2% BB 6.8%

AA 65.9% B 3.5%

A 2.0% <B 6.6%

BBB 7.0% NR 0.1%

SD 0.9%

QUARTERLY ATTRIBUTION


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September 30, 2015

5GMO LLC © 2015

GMO Benchmark‐Free Allocation Strategy


Performance (%)

Net of Fees, USD (Rep Account) ‐6.66

Gross of Fees, USD (Rep Account) ‐6.51

CPI Index (prelim through most recent month‐end) ‐0.06

Value Added ‐6.45

AltsEquity EquityCash BondsAlts CashBonds

September 30, 2015


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STRATEGY PROFILE

6GMO LLC © 2015

GMO Global Allocation Absolute Return Strategy



The CPI (Consumer Price Index) for All Urban Consumers US All Items is published monthly by the U.S. government as an indicator of changes in price levels (or inflation) paid by urban consumers for a representative basket of goods and services.







Total Return (%)

Strategy Benchmark

3Q 2015 ‐5.92 ‐0.09

YTD 2015 ‐5.67 0.60


2014 1.81 0.67

2013 10.04 1.56

2012 9.42 1.87

2011 4.22 2.95

2010 3.02 1.25

2009 14.92 2.86

2008 ‐7.19 0.16

2007 9.99 4.12

2006 11.01 2.58

2005 13.54 3.45


‐6.24

4.16 5.16

8.30

‐0.03

1.70 1.81 2.08

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80


Europe Value, 10.5


Cash & CashEquiv., 15.9

Systematic Global Macro, 3.7Special Opportunity, 3.4Put Selling, 2.9

Japan, 3.5


Emerging Debt, 4.4U.S. TIPS, 10.0

ABS/StructuredProducts, 3.4

Multi Strategy, 20.0



32.1

17.7

8.7

5.2

8.5

27.8

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Equity Characteristics

Strategy

Price/Earnings ‐ Hist 1 Yr Wtd Median 14.4 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.3 x

Return on Equity ‐ Hist 1 Yr Med 10.3 %

Market Cap ‐ Weighted Median $Bil $26.2

Dividend Yield ‐ Hist 1 Yr Wtd Avg 3.6 %


Strategy

Std. Deviation 5.45

Sharpe Ratio 0.75

Drawdown

(2/27/15‐9/30/15)‐9.44

Bond Portfolio3


Credit Ratings

AAA 6.7% BB 9.0%

AA 60.1% B 4.7%

A 2.4% <B 7.7%

BBB 8.0% NR 0.2%

SD 1.2%



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September 30, 2015

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GMO Global Allocation Absolute Return Strategy


Bonds

Performance (%)



CPI Index (prelim through most recent month‐end) +0.06

Value Added ‐5.74

BondsAltsEquity EquityCash Alts Cash

September 30, 2015


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STRATEGY PROFILE

8GMO LLC © 2015

GMO Global Asset Allocation Strategy



The GMO Global Asset Allocation Index + is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global Asset Allocation Composite through 06/30/2014 and (ii) The GMO Global Asset Allocation (Blend) Index thereafter. The GMO blended benchmark of Global Asset Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of S&P 500, MSCI ACWI (MSCI Standard Index Series, net of withholding tax) and Barclays Aggregate or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The GMO Global Asset Allocation (Blend) Index is an internally maintained benchmark computed by GMO, comprised of 65% MSCI ACWI Index (MSCI Standard Index Series, net of withholding tax) and 35% the Barclays U.S. Aggregate Index. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.


2 Alpha is a measure of risk‐adjusted return; Beta is a measure of a portfolio’ssensitivity to the market; R2 is a measure of how well a portfolio tracks themarket; Sharpe Ratio is the return over the risk free rate per unit of risk; Std.Deviation is a measure of the volatility of a portfolio. Risk profile data is net.





Total Return (%)

Strategy Benchmark

3Q 2015 ‐6.94 ‐5.77

YTD 2015 ‐5.72 ‐4.11


2014 1.23 4.87

2013 12.38 13.60

2012 11.11 12.13

2011 2.13 ‐1.80

2010 7.93 11.05

2009 24.15 24.14

2008 ‐20.83 ‐27.72

2007 7.94 9.26

2006 12.30 13.41

2005 9.06 5.99


‐6.89

4.81 4.79

9.08

‐3.25

5.774.70

7.72

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80


Europe Value, 16.4

Other Int'l. Opportunistic Value, 3.3Emerging Markets, 12.7


Japan, 5.5


ABS/StructuredProducts, 4.5Relative Value Interest Rates& FX, 5.0Systematic Global Macro,3.0Put Selling, 2.5

Alpha Only, 4.1

Emerging Debt, 4.4U.S. TIPS, 10.4


24.3

21.3

10.4

6.2

10.1

27.8

9.7

16.0

7.8

6.8

7.0

52.8

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy BenchmarkEquity Characteristics

Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Med 14.6 x 18.1 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.3 x 1.9 x

Return on Equity ‐ Hist 1 Yr Med 10.6 % 14.5 %

Market Cap ‐ Weighted Median $Bil $30.2 $36.8

Dividend Yield ‐ Hist 1 Yr Wtd Avg 3.6 % 2.7 %


Strategy Benchmark

Alpha ‐0.05 0.00

Beta 0.84 1.00

R2

0.91 1.00

Sharpe Ratio 0.65 0.68

Std. Deviation 7.35 8.35

Bond Portfolio3


Credit Ratings

AAA 5.7% BB 6.0%

AA 71.2% B 3.0%

A 1.8% <B 5.9%

BBB 5.6% NR 0.1%

SD 0.8%



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September 30, 2015

9GMO LLC © 2015

GMO Global Asset Allocation Strategy


Performance (%)



GMO Global Asset Allocation Index ‐5.77

Value Added ‐1.14

CashAlts Bonds EquityEquity CashAlts Bonds

September 30, 2015


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STRATEGY PROFILE

10GMO LLC © 2015

GMO Real Return Global Balanced Asset Allocation Strategy



The GMO Real Return Global Balanced Asset Allocation Blended Index + is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Real Return Global Balanced Asset Allocation Composite through 06/30/2014 and (ii) The GMO RRGBAL Blended Index thereafter. The GMO blended benchmark of Real Return Global Balanced Asset Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI World (MSCI Standard Index Series, net of withholding tax), Barclays Aggregate, and Citigroup 3‐Month T‐Bill or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The RRGBAL Blended Index is comprised of 60% MSCI World Index (MSCI Standard Index Series, net of withholding tax), 20% Barclays U.S. Aggregate Index and 20% Citigroup 3‐Month Treasury Bill Index. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





Total Return (%)

Strategy Benchmark

3Q 2015 ‐6.59 ‐4.85

YTD 2015 ‐6.44 ‐3.30


2014 2.00 4.22

2013 13.68 14.95

2012 10.65 10.42

2011 3.16 ‐1.76

2010 5.00 8.94

2009 13.02 19.17

2008 ‐11.36 ‐25.17

2007 7.63 7.87

2006 13.26 13.69

2005 8.09 6.82


‐7.31

5.03 4.87 5.82

‐2.36

5.744.34 4.93

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 0.30 0.00

Beta 0.82 1.00

R2

0.85 1.00




0

20

40

60

80

100U.S. Quality, 8.8

Europe Value, 14.1

Other Int'l. Opportunistic Value, 2.8Emerging Markets, 12.8

U.S. TIPS, 9.8

ABS/StructuredProducts, 2.8

Japan, 4.7


Multi Strategy, 29.0

Emerging Debt, 3.2



26.8

20.2

9.9

5.8

9.6

27.8

0.0

17.7

8.6

7.5

7.8

58.4

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy Benchmark


Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Median 14.5 x 18.5 x







Bond Portfolio3


Credit Ratings

AAA 5.6% BB 6.9%

AA 68.5% B 3.5%

A 1.9% <B 6.3%

BBB 6.2% NR 0.1%

SD 0.9%



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September 30, 2015

11GMO LLC © 2015

GMO Real Return Global Balanced Asset Allocation Strategy


Performance (%)

Net of Fees, USD ‐6.60


GMO Real Return Global Balanced Asset Allocation Blended Index ‐4.85

Value Added ‐1.51

Cash EquityEquity CashBonds Bonds

September 30, 2015


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STRATEGY PROFILE

12GMO LLC © 2015

GMO Tax‐Managed Global Balanced Strategy



The GMO Tax‐Managed Global Balanced Index is an internally computed benchmark comprised of (i) 60% MSCI ACWI (All Country World Index) (MSCI standard Index Series, net of withholding tax) and (ii) 40% Barclays Muni 7 Year (6‐8) Index. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.






Total Return (%)

Strategy Benchmark

3Q 2015 ‐6.20 ‐5.08

YTD 2015 ‐4.83 ‐3.37


2014 2.02 5.02

2013 10.86 12.78

2012 9.71 11.47

2011 1.34 ‐0.27

2010 6.88 9.99

2009 14.29 23.90

2008 ‐14.95 ‐25.89

2007 7.16 7.12

2006 12.08 12.95

2005 9.91 5.91


‐5.49

4.34 4.336.67

‐2.80

5.814.71

6.41

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80


Europe Value, 12.6



Municipal Bonds, 33.6

Emerging Debt, 2.2Put Selling, 2.4

Japan, 5.2


Multi‐Strategy, 13.4



Strategy Benchmark


Price/Cash Flow ‐ Hist 1 Yr Wtd Median 9.9 x 12.9 x






Strategy Benchmark

Alpha ‐0.68 0.00

Beta 0.86 1.00

R2 0.95 1.00




26.6

19.7

10.8

6.9

6.7

29.2

9.7

16.0

7.8

6.8

7.0

52.8

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy Benchmark



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GMO Tax‐Managed Global Balanced Strategy


Performance (%)



Tax‐Managed Global Balanced Index ‐5.08

Value Added ‐0.91

Alts CashBondsAltsEquity Cash BondsEquity

September 30, 2015


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STRATEGY PROFILE

14GMO LLC © 2015

GMO Global All Country Equity Allocation Strategy



The MSCI ACWI ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global All Country Equity Allocation Composite through 06/30/2014 and (ii) MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of Global All Country Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI ACWI (All Country World Index) (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.



3 Portfolio holdings are subject to change and should not be considered arecommendation to buy individual securities.


U.S. EquityInt’l. Developed Equity

Emerging EquityCash

Total Return (%)

Strategy Benchmark

3Q 2015 ‐11.31 ‐9.45

YTD 2015 ‐8.40 ‐7.04


2014 ‐0.69 4.17

2013 21.33 23.46

2012 14.74 16.34

2011 ‐1.29 ‐6.87

2010 10.12 12.94

2009 24.19 34.45

2008 ‐31.41 ‐41.82

2007 11.12 10.38

2006 18.87 20.34

2005 12.51 9.95


‐10.40

6.00 4.76

8.19

‐6.66

7.144.60

6.82

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Index

Alpha ‐0.43 0.00

Beta 0.90 1.00

R2 0.94 1.00




0

20

40

60

80

100

U.S. Quality, 21.8

Europe Value, 28.9




Japan, 9.6


Top Country Weights (%)

32.8

9.6

9.3

6.3

5.1

52.8

7.8

7.0

3.5

3.1

United States

Japan

United Kingdom

France

Germany

Strategy Benchmark

Characteristics

Strategy Index






Top Holdings3

Company Country Sector % of Equity

Valeant Pharma. Canada Health Care 1.8

Total S.A. France Energy 1.7

Royal Dutch Shell United Kingdom Energy 1.5

Johnson & Johnson United States Health Care 1.5

Apple Inc. United States Information Tech. 1.4

Total 7.9



(617) 330‐7500 | www.gmo.com

September 30, 2015

15GMO LLC © 2015

GMO Global All Country Equity Allocation Strategy


Performance (%)



MSCI ACWI ‐9.45

Value Added ‐1.67

U.S. Int’l EM EMU.S. Int’l

September 30, 2015


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STRATEGY PROFILE

16GMO LLC © 2015

GMO Global Developed Equity Allocation Strategy



The MSCI World + Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global Developed Equity Allocation Composite through 06/30/2014 and (ii) MSCI World Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of Global Developed Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI World (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





U.S. EquityInt’l. Developed Equity

Emerging EquityCash

Total Return (%)

Strategy Benchmark

3Q 2015 ‐10.14 ‐8.45

YTD 2015 ‐6.78 ‐6.04


2014 0.32 4.94

2013 25.82 26.68

2012 14.14 15.84

2011 ‐0.40 ‐5.52

2010 9.25 11.77

2009 20.55 29.97

2008 ‐33.19 ‐40.70

2007 9.69 9.02

2006 20.22 20.05

2005 12.26 9.42


‐8.52

7.44

4.77

8.81

‐5.09

8.29

4.747.01

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha ‐0.13 0.00

Beta 0.91 1.00

R2 0.95 1.00




0

20

40

60

80

100

U.S. Quality, 24.9

Europe Value, 33.7

Other Int'l. Opportunistic Value, 6.7Emerging Markets, 9.6Cash & Cash Equiv., 1.4

Japan, 11.3



37.4

11.3

10.8

7.4

5.9

58.4

8.6

7.8

3.8

3.4

United States

Japan

United Kingdom

France

Germany

Strategy Benchmark

Characteristics

Strategy Benchmark






Top Holdings3





Johnson & Johnson United States Health Care 1.7

AstraZeneca PLC United Kingdom Health Care 1.7

Total 9.2



(617) 330‐7500 | www.gmo.com

September 30, 2015

17GMO LLC © 2015

GMO Global Developed Equity Allocation Strategy


Performance (%)



MSCI World ‐8.45

Value Added ‐1.78

U.S. EMInt’l EMU.S. Int’l

September 30, 2015


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STRATEGY PROFILE

18GMO LLC © 2015

GMO Global Focused Equity Strategy



The Global Focused Equity Strategy does not have a benchmark. The Strategy has been compared to the MSCI All Country World Index in an effort to compare and contrast the Strategy versus a broad global equity index. The MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.




Risk Profile Since 12/31/111

Strategy Index

Alpha ‐2.55 0.00

Beta 1.22 1.00

R2 0.87 1.00



Characteristics

Strategy Index



Price/Book ‐ Hist 1 Yr Wtd Avg 1.4 % 1.9 %

Dividend Yield ‐ Hist 1 Yr Wtd Avg $2.2 $2.7

Top Ten Holdings2

Company % of EquityDelta Air Lines Inc. 2.9

Ardmore Shipping Corp. 2.9

EMC Corp. 2.8

Anthem Inc 2.7

Altran Technologies S.A. 2.7

Michael Kors Holdings Ltd. 2.7

Western Digital Corp. 2.7

LyondellBasell Industries N.V. Cl A 2.7

United Continental Holdings Inc. 2.6Pfizer Inc. 2.6

Total 27.3

GICS Sector Weights (%)

Under/Overweight vs. Index Strategy Index7.2 13.0

0.0 10.3

12.0 6.6

25.6 21.6

14.6 12.3

9.9 10.3

14.8 14.2

7.2 4.7

8.7 3.8

0.0 3.3

‐5.8

‐10.3

5.4

4.0

2.3

‐0.4

0.6

2.5

4.9

‐3.3

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Total Return (%)

Strategy Index

3Q 2015 ‐12.12 ‐9.45

YTD 2015 ‐11.06 ‐7.04


2014 ‐3.24 4.16

2013 31.29 22.80

2012 19.71 16.13


‐13.15

8.39

‐6.66

8.99

‐15

‐10

‐5

0

5

10

15

1YR ITD

Strategy Index

Region Weights (%)

2.03.3

8.714.3

10.20.0

11.547.0

3.1

2.33.1

9.716.0

7.81.5

7.052.8

0.0

Australia/New ZealandCanada

EmergingEurope ex UK

JapanSoutheast Asia

United KingdomUnited States

Cash + Unrealized G/L

Strategy Index



(617) 330‐7500 | www.gmo.com

September 30, 2015

19GMO LLC © 2015

GMO Global Focused Equity Strategy


The Global Focused Equity Strategy fell 12.1% net of fees for the quarter. The Strategy’s reference benchmark, MSCI All Country World index, lost 9.4%.

Negative contribution came from a selection of companies in the United Sates, particularly Tronox, Mallinckrodt, KapStone, and Methanex. The earnings power of chemical company Tronox has deteriorated significantly given both the weak demand for titanium dioxide (TiO2) and the negative pricing environment. The company has tried in earnest to seek a merger partner and effectively utilize its net operating losses, but the company’s high leverage has dampened the prospects of a merger in the near term. We believe that the company’s cash flow from the soda ash business provides some insulation from the difficulty in the TiO2 business and will allow it to continue to generate positive cash flow at the bottom of the TiO2 cycle. Biopharmaceutical company Mallinckrodt has traded off significantly after the announcement of second quarter earnings as the company showed slowing growth in the most important drug therapy. As well, there has been talk of more stringent legislation regarding drug pricing. We believe that this sell-off in no way is tied to fundamentals, as the company’s exceptional margins and cash flow will either be paid out to investors or will continue to be used to buy other pharmaceutical assets. For KapStone Paper and Packaging, the containerboard sector has fallen with other commodities, as investors anticipated that paperboard prices would deteriorate given the potential for a slowdown in global growth. But, we are attracted to the strong cash flow, the synergies offered from its recent acquisition of Victory Packaging, its position as the last “jewel” asset to potentially be acquired by one of the larger companies, and its opportunity to continue to consolidate the tail end of the industry. Finally, in the case of Methanex, because oil-linked methanol pricing has been negatively impacted given the downward pressure on fuel prices, this name has been sold out of the portfolio.

Positive contributions came from holdings in Delta Airlines in the U.S. and Asciano in Australia. Delta continues to operate what we believe is a superior network, is taking advantage of the low fuel environment to produce best-ever margins and continues to lead the industry in returning cash flow to shareholders. We have great conviction that Delta Airlines is significantly undervalued, and, despite the volatility we have seen in the airlines business because of weak PRASM, we think the positive inflection is already underway in the fourth quarter. Asciano, an Australian port and rail operator that we have held for many years, received a buyout offer in June. The stock jumped on the news, and has continued to add alpha in the following months, drifting upwards toward the bid price as the rest of the market weakened.

September 30, 2015


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STRATEGY PROFILE

20GMO LLC © 2015

GMO Quality Strategy



The S&P 500 Index is an independently maintained and widely published index comprised of U.S. large capitalization stocks. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors.


Strategy Benchmark

Alpha 1.45 0.00

Beta 0.81 1.00

R2 0.86 1.00



Region Weights (%)

15.3

82.7

2.1

0.0

100.0

0.0

Non US

US

Cash

Strategy Benchmark

Characteristics

Strategy Benchmark





Debt/Equity Wtd Med 0.6 x 1.0 x


Top Holdings2

Company Sector % of Equity

Google Inc. Information Technology 5.6

Microsoft Corp. Information Technology 5.1

Johnson & Johnson Health Care 5.1

Procter & Gamble Co. Consumer Staples 4.6

Oracle Corp. Information Technology 4.3

Total 24.7





4.7

27.6

0.0

0.0

23.7

8.1

34.0

0.8

1.0

0.0

13.1

9.9

6.9

16.5

14.7

10.1

20.4

2.8

2.4

3.1

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Telecommunication Services

Utilities

Strategy Benchmark

Total Return (%)

Strategy Benchmark

3Q 2015 ‐4.22 ‐6.44

YTD 2015 ‐5.23 ‐5.29


2014 12.54 13.69

2013 25.47 32.39

2012 11.81 16.00

2011 11.84 2.11

2010 5.48 15.06

2009 19.89 26.46

2008 ‐24.08 ‐37.00

2007 6.04 5.49

2006 12.69 15.80

2005 ‐0.79 4.91


‐0.33

12.22

6.85 6.04

‐0.61

13.34

6.80 6.75

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

21GMO LLC © 2015

GMO Quality Strategy


Performance (%)



S&P 500 ‐6.44

Value Added +2.38

September 30, 2015


(617) 330‐7500 | www.gmo.com

STRATEGY PROFILE

22GMO LLC © 2015

GMO Resources Strategy



The MSCI ACWI (All Country World) Commodity Producers Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of listed large and mid capitalization commodity producers within the global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





Strategy Benchmark

Alpha 4.05 0.00

Beta 1.09 1.00

R2 0.96 1.00

Sharpe Ratio ‐0.37 ‐0.59



18.7

14.6

12.0

11.6

8.4

18.0

3.6

2.1

41.7

1.2

United Kingdom

Russia

Japan

United States

Norway

Strategy Benchmark


0.0

4.3

49.7

0.0

0.0

10.5

0.0

30.7

0.0

4.8

0.0

2.2

69.9

0.0

0.0

0.0

0.0

27.9

0.0

0.0


Consumer Staples

Energy

Financials

Health Care

Industrials


Materials


Utilities

Strategy Benchmark

Characteristics

Strategy Benchmark





Top Holdings2


BG Group PLC United Kingdom Energy 5.6

Rio Tinto PLC United Kingdom Materials 5.0

LukOil OAO Russia Energy 3.7

BP PLC United Kingdom Energy 3.7

Gazprom OAO Russia Energy 2.4

Total 20.4

Total Return (%)

Strategy Benchmark

3Q 2015 ‐20.61 ‐21.28

YTD 2015 ‐19.47 ‐25.33


2014 ‐16.78 ‐14.69

2013 4.39 3.31

2012 9.23 1.96


‐34.42

‐6.93

‐35.82

‐10.10

‐40

‐30

‐20

‐10

0

1YR ITD

Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

23GMO LLC © 2015

GMO Resources Strategy


Performance (%)



MSCI ACWI Commodity Producers ‐21.28

Value Added +0.78

September 30, 2015


(617) 330‐7500 | www.gmo.com

STRATEGY PROFILE

24GMO LLC © 2015


0

20

40

60

80

100

Europe Value, 44.0




Japan, 14.7

GMO International All Country Equity Allocation Strategy



The MSCI ACWI ex USA + Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of International All Country Equity Allocation Composite through 6/30/2014 and (ii) MSCI ACWI ex USA Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of International All Country Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI ACWI (All Country World) ex‐U.S. Index (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





Int’l. Developed Equity Emerging Equity Cash

Total Return (%)

Strategy Benchmark

3Q 2015 ‐13.69 ‐12.17

YTD 2015 ‐9.52 ‐8.63


2014 ‐6.21 ‐3.88

2013 16.71 15.47

2012 16.82 16.90

2011 ‐11.31 ‐13.63

2010 12.74 10.82

2009 27.77 40.16

2008 ‐40.96 ‐45.26

2007 17.39 16.08

2006 25.91 26.94

2005 19.03 16.71


‐14.43

1.94 2.986.51

‐12.16

1.87 2.974.90

‐20

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


14.7

14.2

9.7

7.7

5.3

16.4

14.8

7.4

6.5

2.6

Japan

United Kingdom

France

Germany

Taiwan

Strategy Benchmark


Strategy Benchmark

Alpha 0.11 0.00

Beta 0.97 1.00

R2 0.96 1.00



Characteristics

Strategy Benchmark






Top Holdings3







Total 11.6



(617) 330‐7500 | www.gmo.com

September 30, 2015

25GMO LLC © 2015

GMO International All Country Equity Allocation Strategy


Performance (%)



MSCI ACWI ex USA ‐12.17

Value Added ‐1.58

Int’lEMInt’l EM

September 30, 2015


(617) 330‐7500 | www.gmo.com

STRATEGY PROFILE

26GMO LLC © 2015

GMO International Developed Equity Allocation Strategy



The MSCI EAFE ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of International Developed Equity Allocation Composite through 06/30/2014 and (ii) MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of International Developed Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI EAFE (Europe, Australasia, and Far East) (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





Int’l. Developed Equity Emerging Equity Cash

Total Return (%)

Strategy Benchmark

3Q 2015 ‐12.53 ‐10.23

YTD 2015 ‐7.73 ‐5.28


2014 ‐6.03 ‐4.90

2013 24.13 22.78

2012 17.09 17.32

2011 ‐9.45 ‐12.14

2010 10.58 7.93

2009 19.84 32.16

2008 ‐38.39 ‐43.33

2007 12.69 11.58

2006 25.50 26.62

2005 15.56 14.41


‐12.84

4.11 3.16

7.43

‐8.66

3.98 3.115.75

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80

100

Europe Value, 58.0

Other Int'l. Opportunistic Value, 11.5Emerging Markets, 9.8Cash & Cash Equiv., 1.2

Japan, 19.5


19.5

18.6

12.9

10.3

6.4

22.5

20.3

10.1

8.9

0.0

Japan

United Kingdom

France

Germany

Canada

Strategy Benchmark


Strategy Benchmark

Alpha 0.34 0.00

Beta 0.95 1.00

R2 0.96 1.00



Characteristics

Strategy Benchmark






Top Holdings3







Total 15.2



(617) 330‐7500 | www.gmo.com

September 30, 2015

27GMO LLC © 2015

GMO International Developed Equity Allocation Strategy


Performance (%)



MSCI EAFE ‐10.23

Value Added ‐2.30

EM Int’lInt’l EM

September 30, 2015


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STRATEGY PROFILE

28GMO LLC © 2015

GMO International Equity Strategy



The MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of international large and mid capitalization stocks. The MSCI EAFE + (Europe, Australasia, and Far East) Index is an internally maintained benchmark computed by GMO, comprised of (i) the MSCI EAFE (Europe, Australasia, and Far East) Value Index (MSCI Standard Index Series, net of withholding tax) through 06/30/2014 and (ii) the MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) thereafter. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.





Int’l. Developed Equity Cash

Total Return (%)

Strategy MSCI EAFE MSCI EAFE +

3Q 2015 ‐12.07 ‐10.23 ‐10.23

YTD 2015 ‐7.48 ‐5.28 ‐5.28


2014 ‐5.96 ‐4.90 ‐3.79

2013 25.62 22.78 22.95

2012 12.98 17.32 17.69

2011 ‐10.18 ‐12.14 ‐12.17

2010 7.53 7.75 3.25

2009 21.41 31.78 34.23

2008 ‐40.31 ‐43.38 ‐44.09

2007 10.21 11.17 5.96

2006 25.78 26.34 30.38

2005 13.98 13.54 13.80


‐12.40

3.30 2.13

7.38

‐8.66

3.98 2.974.89

‐8.66

4.052.56

6.57

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy MSCI EAFE MSCI EAFE +


0

20

40

60

80

100

Europe Value, 64.4

Other Int'l. Opportunistic Value, 12.7Cash & Cash Equiv., 1.2

Japan,21.7


21.6

20.6

14.3

11.4

7.1

22.5

20.3

10.1

8.9

0.0

Japan

United Kingdom

France

Germany

Canada

Strategy Benchmark


Strategy Benchmark

Alpha ‐0.57 0.00

Beta 0.96 1.00

R2 0.97 1.00



Characteristics

Strategy Benchmark







Top Holdings3







Total 16.9



(617) 330‐7500 | www.gmo.com

September 30, 2015

29GMO LLC © 2015

GMO International Equity Strategy


Performance (%)



MSCI EAFE ‐10.23

Value Added ‐1.72

September 30, 2015


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STRATEGY PROFILE

30GMO LLC © 2015

GMO International Active EAFE Strategy



The MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of international large and mid capitalization stocks. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.


2 Portfolio holdings are percent of equity. They are subject to change and shouldnot be considered a recommendation to buy individual securities.


Total Return (%)

Strategy Benchmark

3Q 2015 ‐6.77 ‐10.23

YTD 2015 1.85 ‐5.28


2014 ‐11.03 ‐4.90

2013 24.11 22.78

2012 14.92 17.32

2011 ‐11.65 ‐12.14

2010 5.01 7.75

2009 25.53 31.78

2008 ‐41.24 ‐43.38

2007 10.58 11.17

2006 27.52 26.34

2005 13.52 13.54


‐3.46

3.77 2.67

11.30

‐8.66

3.98 2.97

8.49

‐10

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha ‐0.17 0.00

Beta 0.99 1.00

R2 0.97 1.00



Top Overweight Holdings2

Company

AstraZeneca PLC 4.1

Sumitomo Mitsui Financial Group Inc. 3.3

Mitsubishi Tokyo Financial Group Inc. 3.1

Roche Holding AG 2.7

Nippon Telegraph & Telephone Corp. 2.6

Imperial Tobacco Group PLC 2.3

Melrose Industries Plc 1.7

Telecom Italia S.p.A. 1.6

Mediaset S.p.A. 1.6Zurich Financial Services AG 1.5

Characteristics

Strategy Benchmark






Under/Overweight vs. Benchmark Strategy Benchmark

11.9 13.1

6.9 12.0

3.2 4.7

31.2 25.8

9.1 11.8

9.8 12.5

8.9 4.8

1.7 6.6

12.1 4.9

5.1 3.8

‐1.2

‐5.1

‐1.5

5.4‐2.7

‐2.7

4.1

‐4.9

7.2

1.3

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Region Weights (%)

2.7

6.5

42.3

20.6

1.5

24.2

2.2

6.6

0.0

46.3

22.5

4.3

20.3

0.0

Australia/New Zealand

Emerging

Europe ex UK

Japan

Southeast Asia

United Kingdom


Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

31GMO LLC © 2015

GMO International Active EAFE Strategy


The International Active EAFE Strategy outperformed the MSCI EAFE index by 3.5 percentage points in the third quarter, falling 6.8% net of fees while the benchmark lost 10.2%.

Country and currency allocation was ahead of the benchmark. Our positioning in Europe added to performance, as did an underweight position in the Australian market. Our cash position also helped, and the hedge against the euro was positive.

Stock selection beat the benchmark in the third quarter. Holdings in Europe, Australia, Hong Kong, and the emerging markets outperformed.

In Europe, performance was led by AstraZeneca and Imperial Tobacco. Astra’s second quarter results positively surprised the market as revenues and costs were better than expected. As the Crestor patent expiry approaches, Astra is working to bring costs under control while, at the same time, deploy capital in its promising Oncology franchise. Astra remains the cheapest pharmaceutical name in our universe as the market is not ready to buy this strong pipeline story. Imperial Tobacco outperformed due to limited emerging markets exposure and takeover speculation.

Asciano, an Australian port and rail operator that we have held for many years, received a buyout offer in June. The stock jumped on the news, and has continued to add alpha in the following months, drifting upwards toward the bid price as the rest of the market weakened.

In Hong Kong, utility Power Assets Holdings is a very stable business with a balance sheet that is mostly cash from a past asset sale. It has served its purpose as a safe haven asset in the portfolio during this year’s volatility.

Stock selection in emerging markets also helped returns, particularly holdings in Korea. Hyundai Motors rebounded as the market reassessed the company’s competitiveness due to cheaper currency and a refreshed model line-up. Valuations remain amongst the cheapest in the sector globally.

September 30, 2015


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STRATEGY PROFILE

32GMO LLC © 2015

GMO International Active Foreign Small Companies Strategy



The S&P Developed ex‐U.S. Small Cap Index is an independently maintained and widely published index comprised of the small capitalization stock component of the S&P Broad Market Index (BMI). The BMI includes listed shares of companies from developed and emerging countries with a total available market capitalization (float) of at least the local equivalent of $100 million USD. The S&P Developed ex‐U.S. Small Cap Index represents the bottom 15% of available market capitalization (float) of the BMI in each country.

S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors.




Total Return (%)

Strategy Benchmark

3Q 2015 ‐7.26 ‐7.85

YTD 2015 1.46 0.68


2014 ‐9.53 ‐3.42

2013 28.92 26.06

2012 21.64 18.55

2011 ‐15.21 ‐14.49

2010 24.76 21.96

2009 47.63 45.07

2008 ‐45.91 ‐47.67

2007 8.00 7.32

2006 36.24 29.42

2005 18.91 22.10


‐2.29

6.29 6.59

10.46

‐1.93

6.735.47

6.90

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark

Top Overweight Holdings2

Company

Telefonica Deutschland Holding AG 1.7

Mediaset S.p.A. 1.6

Kaba Holding AG 1.5

Berkeley Group Holdings PLC 1.5

Grand City Properties SA 1.4

Nexity S.A. 1.4

Altran Technologies S.A. 1.4

Amplifon S.p.A. 1.4

Asciano Group 1.3Teleperformance 1.3

Characteristics

Strategy Benchmark







27.6 17.0

2.4 6.4

3.1 3.1

25.8 21.8

2.7 7.7

18.1 21.8

8.2 10.1

8.3 9.2

3.0 1.1

0.8 2.0

10.6

‐4.0

0.0

4.0

‐5.0

‐3.7

‐1.9

‐0.9

1.9

‐1.2

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities


Strategy Benchmark

Alpha ‐0.11 0.00

Beta 0.95 1.00

R2 0.97 1.00



Region Weights (%)

7.0

3.5

4.5

38.1

20.8

1.5

20.7

3.8

5.4

7.1

0.0

38.9

21.5

8.9

18.1

0.0

Australia/New Zealand

Canada

Emerging

Europe ex UK

Japan

Southeast Asia

United Kingdom


Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

33GMO LLC © 2015

GMO International Active Foreign Small Companies Strategy


The International Active Foreign Small Companies Strategy outperformed the S&P Developed ex-U.S. Small Cap index by 0.6 percentage points in the third quarter, falling 7.3% net of fees while the benchmark lost 7.8%.

Country and currency allocation was ahead of the benchmark. Underweight positions in Canada, Hong Kong, and Korea all added to returns. Our cash position also helped, and the hedge against the euro was positive in the quarter.

Stock selection lagged the benchmark in the third quarter. Holdings in Japan, Canada, and the emerging markets underperformed. In Japan, auto suppliers stumbled. Tsubakimoto and Sanden are top niche players in the auto supply chain, and their exposure to the Chinese auto market hurt their returns. Canadian names Capstone and Precision drilling hurt returns as they were negatively impacted by the copper and oil price, respectively. Emerging markets lagged in the quarter, and we were particularly impacted by our holdings in Brazil, including FPC Par Carretora de Seguros. After a successful secondary offering, Par Carretora has been a poor performer given negative sentiment in Brazil, currency depreciation, and continued fears of deteriorating macroeconomic data points. We continue to have conviction that Par Carretora’s long-term earnings prospects are being severely discounted by the market.

On the positive side, stock selection in Europe and Australia added to returns. Sopra Steria Group in France delivered strong first half results and increased its full-year margin guidance. For the newly merged Swiss company Dorma+Kaba investor sentiment was buoyed by the company reiterating mid-term sales growth guidance and its ambition to reach an EBITDA margin of 18% by 2018/19. Given the potential for synergies between the two businesses, the margin ambitions look readily achievable and could even be surpassed. Asciano, an Australian port and rail operator that we have held for many years, received a buyout offer in June. The stock jumped on the news, and has continued to add alpha in the following months, drifting upwards toward the bid price as the rest of the market weakened.

September 30, 2015


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STRATEGY PROFILE

34GMO LLC © 2015

GMO U.S. Equity Allocation Strategy



0

20

40

60

80

100

U.S. Quality, 65.8



U.S. Equity Cash


The Russell 3000 +++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of U.S. Equity Allocation Composite through 06/30/2014 and (ii) Russell 3000 thereafter. The GMO blended benchmark of U.S. Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of S&P 500, Russell 3000 or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.





Total Return (%)

Strategy Benchmark

3Q 2015 ‐5.98 ‐7.25

YTD 2015 ‐6.13 ‐5.45


2014 9.82 12.76

2013 27.95 32.85

2012 12.25 16.21

2011 9.91 1.58

2010 7.43 16.26

2009 20.54 27.46

2008 ‐27.87 ‐37.15

2007 2.25 5.39

2006 9.93 15.71

2005 3.68 5.53


‐2.76

11.78

5.68

10.20

‐0.49

13.23

6.84

9.82

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark


16.1

12.7

7.1

9.1

17.5

8.5

27.2

0.6

1.1

0.0

13.1

9.9

6.9

16.5

14.7

10.1

20.4

2.8

2.4

3.1


Consumer Staples

Energy

Financials

Health Care

Industrials


Materials


Utilities

Strategy Benchmark

Characteristics

Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Med 18.2 x 19.6 x





Top Holdings3

Company Sector % of Equity

Johnson & Johnson Health Care 4.4

Apple Inc. Information Technology 4.3

Cisco Systems Inc. Information Technology 4.1

Chevron Corp. Energy 4.0

Google Inc. Information Technology 3.9

Total 20.7


Strategy Benchmark

Alpha 1.11 0.00

Beta 0.81 1.00

R2 0.90 1.00





(617) 330‐7500 | www.gmo.com

September 30, 2015

35GMO LLC © 2015

GMO U.S. Equity Allocation Strategy


Performance (%)



S&P 500 ‐6.44

Value Added +0.66

September 30, 2015


(617) 330‐7500 | www.gmo.com

STRATEGY PROFILE

36GMO LLC © 2015

GMO Emerging Markets Strategy



The S&P/IFCI Composite Index is an independently maintained and widely published index comprised of emerging markets stocks. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors.

Total Return (%)

Strategy Benchmark

3Q 2015 ‐17.49 ‐17.79

YTD 2015 ‐16.41 ‐14.48


2014 ‐5.92 ‐1.12

2013 ‐5.19 ‐0.57

2012 15.19 18.89

2011 ‐16.95 ‐19.03

2010 20.20 20.64

2009 71.89 81.03

2008 ‐55.74 ‐53.74

2007 37.22 40.28

2006 29.51 35.11

2005 40.15 35.19


‐20.61

‐5.13

2.436.15

‐18.38

‐2.67

5.23 4.77

‐25‐20‐15‐10‐50510

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha ‐2.44 0.00

Beta 1.01 1.00

R2 0.97 1.00

Sharpe Ratio ‐0.29 ‐0.15


Top Ten Holdings2

Company % of Equity

HDFC Bank Ltd. 5.1

Samsung Electronics Co. Ltd. 4.8

Surgutneftegaz 3.8

Hyundai Motor Co. Ltd. 2.4

China Construction Bank Corp. 2.2

Kia Motors Corp. 2.1

Hon Hai Precision Industry Co. Ltd. 2.1

Industrial & Com B 2.0

China Mobile Ltd. 1.9

Hyundai Mobis Co. Ltd. 1.7

Total 28.1

Characteristics

Strategy Benchmark




Return on Equity ‐ Hist 1 Yr Avg 12.7 % 10.5 %


Number of Equity Holdings 443 2,383




13.4 11.0

2.7 8.0

10.8 6.4

27.3 27.2

1.6 3.4

3.5 8.5

20.6 19.3

3.0 7.0

9.9 6.0

7.2 3.2

2.4

‐5.3

4.4

0.1

‐1.8

‐5.0

1.3

‐4.0

3.9

4.0

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities





16.4

15.8

14.2

11.4

11.4

11.8

15.1

26.1

10.6

3.5

Taiwan

Korea

China

India

Russia

Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

37GMO LLC © 2015

GMO Emerging Markets Strategy


The Emerging Markets Strategy fell 17.5% net of fees in the third quarter, outperforming the 17.8% drop in the S&P/IFCI Composite by 0.3%. Overall, country-sector allocation lost 0.6% but stock selection added 1.1%.

Emerging markets posted one of their worst quarters in recent times, taking the asset class underwater for the year. Investor sentiment was hit by concerns over the efficacy of the Chinese government intervention in its equity markets, Brazil’s deteriorating economic outlook, weakening global growth, and higher U.S. interest rates. Country returns over the quarter varied, ranging from a 3.3% drop in Hungary to a 35.8% fall in Greece. Sector returns were more clustered, varying from a 9.5% drop in Health Care to a fall of 25.3% for Energy.

Stocks in Brazil fell as investors worried about the government’s ability to pass the legislation needed to bolster its finances. Government measures such as tax increases and spending cuts are being held hostage by the fallout from a massive corruption scandal. The economy contracted more than forecast in the second quarter and the central bank has stepped on the brakes as it tries to bring inflation down from 9% to 4.5% by the end of 2016. A ratings downgrade by Standard & Poor’s further depressed sentiment. Our overweight in Brazil Utilities and Telecommunications negatively impacted performance.

The stock market in China dropped as investors lost faith in the government’s willingness and/or ability to support current market price levels. Margin traders unwound positions with the outstanding margin debt on mainland bourses falling over 50% since June. Individuals account for more than 80% of stock trading in China. The economic slowdown has impacted corporate earnings growth, which has in turn led to multiple government policy initiatives. Investors are focused on anticipating and parsing policy actions. Our underweight in China IT helped performance.

Korea’s credit rating was raised by Standard & Poor’s citing the decline in the external debt of Korean banks and a reduced share of short-term borrowing in total liabilities. The administration announced record spending for next year as the government seeks to lift economic output. Exports have been impacted by weakness in China, a top destination for South Korean goods. Our overweight in Korea Consumer Discretionary contributed to performance.

Investor sentiment in Russia improved after the central bank announced it would back borrowers facing $61 billion of foreign currency repayments. Toward the end of the quarter, Russian stocks dropped on concerns that a shrinking economy, rising inflation, and a weakening ruble would keep consumer spending subdued. Wages have lagged the pace of inflation and Russia continues to struggle under the sanctions imposed in response to the Ukraine conflict. Our overweight in Russia Energy added to performance.

Stocks in Turkey dropped as talks to form a coalition were abandoned, putting the country on course for its second election in six months. Polls, however, do not suggest an outcome much different from that of the last election. Investor sentiment has also been hurt by a surge in fighting with Kurdish separatists. Investor sentiment was boosted, however, by the return of Babacan and Simsek – financial policymakers deeply trusted by the market. Our overweight in Turkey Financials and Telecommunications detracted from performance.

Stock selection was additive to performance. Segments such as Korea Consumer Discretionary, India Industrials, and India Consumer Discretionary saw especially strong selection.

September 30, 2015


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STRATEGY PROFILE

38GMO LLC © 2015

GMO Emerging Domestic Opportunities Strategy



The Emerging Domestic Opportunities Strategy does not have a benchmark. The Strategy has been compared to the MSCI Emerging Markets Index in an effort to compare and contrast the Strategy versus a broad emerging markets index. The MSCI Emerging Markets Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global emerging markets large and mid capitalization stocks. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.


Strategy Index

Alpha 5.70 0.00

Beta 0.71 1.00

R2 0.80 1.00

Sharpe Ratio 0.11 ‐0.33


Top Ten Holdings3

Company % of Equity

Colgate‐Palmolive Co. 5.2

Nestle S.A. 4.0

British American Tobacco PLC ADR 3.9

China Mobile Ltd. 3.8

Unilever PLC 3.8

Tencent Holdings Ltd. 3.6

Maruti Udyog Ltd. 3.2

HDFC Bank Ltd. 2.5

Vipshop Holdings Ltd. Sponsored ADR 2.1

TRUE Telecommunication Growth Infrastruc 2.0

Total 34.1

Characteristics

Strategy Index




Return on Equity ‐ Hist 1 Yr Avg 15.4 % 11.0 %


Number of Equity Holdings 106 837


1 Weights are based on exposure, which will include the impact from hedges held,if any.





Under/Overweight vs. Index Strategy Index

14.1 9.4

29.7 8.8

3.6 7.5

18.6 28.6

9.1 2.9

7.3 7.5

3.7 18.1

1.1 6.6

10.8 7.4

2.0 3.4

4.7

20.9

‐3.9

‐10.0

6.2

‐0.2

‐14.4

‐5.5

3.4

‐1.4

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Total Return (%)

Strategy Index

3Q 2015 ‐10.71 ‐17.90

YTD 2015 ‐8.52 ‐15.48


2014 ‐0.30 ‐2.19

2013 3.80 ‐2.60

2012 24.33 18.22

2011 ‐8.99 ‐20.06


‐7.76

1.54

‐19.28

‐5.89

25

20

15

10

‐5

0

5

1YR ITD

Strategy Index


19.6

18.8

7.2

6.9

6.8

23.4

8.9

0.0

1.5

2.2

China

India

United Kingdom

Philippines

Thailand

Strategy Benchmark



(617) 330‐7500 | www.gmo.com

September 30, 2015

39GMO LLC © 2015

GMO Emerging Domestic Opportunities Strategy


The Emerging Domestic Opportunities Strategy invests in companies whose prospects are linked to the internal growth of the world's non-developed markets. The Strategy uses fundamental analysis within a structured approach to select countries, sectors, and stocks that we believe are the most likely to benefit from the rising demand for goods and services in emerging markets.

The Emerging Domestic Opportunities Strategy fell 10.7% net of fees in the third quarter – a significant loss; the Strategy has held up better than the index, which dropped 17.9%.

Emerging markets posted one of their worst quarters in recent times, taking the asset class underwater for the year. Investor sentiment was hit by concerns over the efficacy of the Chinese government intervention in its equity markets, Brazil’s deteriorating economic outlook, weakening global growth, and higher U.S. interest rates. Country returns over the quarter varied, ranging from a 3.3% drop in Hungary to a 35.8% fall in Greece. Domestic demand driven sector returns were more clustered, varying from a 9.5% drop in Health Care to a fall of 21.4% for Financials.

Stocks in Brazil fell as investors worried about the government’s ability to pass the legislation needed to bolster its finances. Government measures such as tax increases and spending cuts are being held hostage by the fallout from a massive corruption scandal. The economy contracted more than forecast in the second quarter and the central bank has stepped on the brakes as it tries to bring inflation down from 9% to 4.5% by the end of 2016. A ratings downgrade by Standard & Poor’s further depressed sentiment. Our exposure to Brazil Financials and Consumer Staples negatively impacted performance.

The stock market in China dropped as investors lost faith in the government’s willingness and/or ability to support current market price levels. Margin traders unwound positions with the outstanding margin debt on mainland bourses falling over 50% since June. Individuals account for more than 80% of stock trading in China. The economic slowdown has impacted corporate earnings growth, which has in turn led to multiple government policy initiatives. Investors are focused on anticipating and parsing policy actions. Our positions in Chinese sectors such as Consumer Discretionary, Financials, and IT detracted from performance.

The Indian stock market was the most resilient major emerging market as investors appreciated its relatively low exports and exposure to the rest of the world. A further boost came from a government move to expand the size of an annual capital infusion into state-owned lenders. Sentiment was helped by the central bank chopping interest rates by more than estimated. The central bank cut its benchmark rate by 50 basis points and promised to work with the government to ensure that banks pass on the rate cuts to borrowers. Inflation slowed to 3.66% in August. Our investments in India Financials and Consumer Staples detracted from performance.

The Philippine gross domestic product increased 5.6% in the three months through June from a year earlier on the back of higher government and consumer spending. That along with steady inflows from sources such as expatriates has helped mitigate the effect of the global slowdown on the economy and on the stock market. The Philippines central bank expressed confidence in the country’s growth momentum and continued benign inflation. The Asian Development Bank forecast growth in 2016 to quicken to 6.3%, up from an estimated 6% this year. Our exposure to Philippines Financials and Consumer Staples hurt performance.

Stocks in Turkey dropped as talks to form a coalition were abandoned, putting the country on course for its second election in six months. Polls, however, do not suggest an outcome much different from that of the last election. Investor sentiment has also been hurt by a surge in fighting with Kurdish separatists. Investor sentiment was however boosted by the return of Babacan and Simsek – financial policymakers deeply trusted by the market. Our holdings in Turkey Consumer Discretionary and Financials detracted from performance.

September 30, 2015


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STRATEGY PROFILE

40GMO LLC © 2015

GMO Global Bond Strategy


Performance data quoted represents past performance and is not predictive of future performance. Returns are shown after the deduction of management fees, transaction costs and other expenses, but before custody charges, withholding taxes, and other indirect expenses. The returns assume the reinvestment of dividends and other income. Returns for one of the accounts in the composite are based on estimated market values for the period from and including October 2008 through February 2009.

The J.P. Morgan GBI Global Index is an independently maintained and widely published index comprised of government bonds of developed countries with maturities of one year or more.

Total Return (%)

Strategy Benchmark

3Q 2015 1.77 2.03

YTD 2015 ‐2.66 ‐1.47


2014 4.98 0.67

2013 ‐2.56 ‐4.50

2012 6.36 1.30

2011 8.30 7.22

2010 14.14 6.42

2009 20.30 1.91

2008 ‐14.93 12.00

2007 2.58 10.81

2006 7.94 5.94

2005 ‐5.84 ‐6.53


‐2.78

2.593.87

5.38

‐2.37

0.21

3.714.59

‐4

‐2

0

2

4

6

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 2.37 0.00

Beta 1.04 1.00

R2 0.83 1.00



Global Rates Contribution to Active Duration

0.6

0.5

0.3

‐0.1

‐0.2

‐1.0

‐1.4

Australia

Denmark

Mexico

United States

Switzerland

Eurozone

United Kingdom

Portfolio Overlay Currency Positions (%)1

0.40.20.10.10.0

‐0.2‐2.5

‐11.9

AUSDNKJPNSWECANGBRCHEEUR

Portfolio Rating Breakdown (%)2

19

64

1

8

6

0

3

AAA

AA

A

BBB

BB

B

Under B

1 All currency positions are versus USD2 The credit ratings above may encompass emerging debt, developed rates, andasset‐backed exposure. Ratings for the emerging debt and developed ratesportions of the portfolio are derived by taking the Standard and Poor’s countryratings and applying these ratings to the country exposures of the portfolio. Forthe asset‐backed portion of the portfolio, credit ratings are derived by using thelowest rating among rating agencies at the issue level. Final credit ratings areexpressed based upon Standard and Poor’s ratings scale. Standard & Poor’s ratessecurities from AAA (highest quality) to C (lowest quality), and D to indicatesecurities in default; some securities are not rated (NR). BB and below areconsidered below investment grade securities.



Characteristics

Strategy

Modified Duration 5.9

Maturity 7.0 Yrs.

Exposure to Emerging Country Debt 4.9%



(617) 330‐7500 | www.gmo.com

September 30, 2015

41GMO LLC © 2015

GMO Global Bond Strategy


The Global Bond Strategy returned +1.8% net of fees during the third quarter, underperforming the J.P. Morgan GBI Global index return of +2.0% by 0.3%. Falling yields delivered index gains as the 19-basis-point fall in the index yield accounted for all of the positive returns.

In a reversal of Q2 across-the-board losses, global government bond markets rallied in Q3; in 10-year-equivalent, interest-rate swap terms, gains were the highest in the U.S., +4.8%, and the lowest in Japan, +1.4%. China’s economic weakness, low inflation conditions, and accompanying policy decisions weighed heavily on global financial markets during the quarter. The world’s second largest economy had been showing signs of an economic slowdown since earlier in the year, and its equity market had been on a steady decline since June, but when the People’s Bank of China (PBOC) surprised markets by allowing its yuan to depreciate on August 11, global markets reacted strongly. In an attempt to stabilize its markets, the PBOC reacted to the volatility by cutting its lending rate by 25 bps to 4.6% and reducing reserve requirements by 50 bps to 18%.

In the United States, the 10-year U.S. Treasury rate fell by about 29 basis points in Q3, ending the quarter at 2.1%. While investors began the quarter divided on whether the Federal Reserve would raise rates in September, uncertain global economic growth, below target inflation, and risks in China supported the case for the Fed to keep rates steady at its September FOMC meeting despite broadly stronger U.S. economic activity. Australian rates also rallied in Q3, up 4.6%; in addition to reduced risk appetite, lower expected growth due to diminished demand from China for Australian exports put downward pressure on yields. In the U.K. (+3.5%), gilt yields also moved lower as investors speculated that it would be unlikely that the Bank of England would raise rates before the Federal Reserve does so in the U.S. In the Eurozone (+2.4%), the quarter began with Greece agreeing to a three-year, €86 billion ($95 billion) package allowing the cash-strapped nation to avoid bankruptcy and possible exit from the euro in return for the nation’s adherence to tough austerity measures. As the quarter continued, yields in the Eurozone consistently fell as the Chinese stock market tumbled and commodities sold off, increasing the demand for safer assets. Investors also sought safety in Swedish (+3.1%) and Swiss (+2.5%) rates markets, given the ubiquitous declines in global equity markets. The only emerging government bond market currently in the investment set, Mexico, returned +1.5%.

Global yield curves (measured by the difference between 30-year and 2-year swap rates) flattened across the board during the quarter.

In FX, the U.S. dollar strengthened in Q3, rising by 2.8% according to the Bloomberg Dollar Spot Index. Despite persistent inflation concerns, the dollar strengthened early on, surging on the release of a bullish Federal Reserve statement as well as news that GDP expanded by 2.3% in the previous quarter. As the quarter continued, global markets plunged along with expectations of a Fed rate hike, which put downward pressure on the dollar. However, by quarter-end, the greenback strengthened once again as upbeat consumer confidence data renewed expectations of a rate hike before year-end.

As funding currencies and safe havens, the yen and the euro benefited from the global market turmoil, gaining by 2.2% and 0.2%, respectively, against the U.S. dollar. Investors were particularly interested in those currencies as they unwound emerging market carry trades in the wake of China’s devaluation. China’s weakness weighed heavily on the ANZAC region, with the Australian dollar falling by 8.6% versus the U.S. dollar, and the New Zealand dollar sliding by 5.4%. Amid market turmoil, commodity currencies Norwegian krone (-7.8%) and Canadian dollars (-6.9%) suffered particularly from falling oil prices. Demand for traditionally safe-haven Swiss francs (-4.4%) dimmed in Q3 as 10-year Swiss yields fell to a low of-0.21%, weighing on currency performance. In the U.K., weaker economic data and low inflation reduced expectations of a near future Bank of England rate rise, putting downward pressure on the pound (-3.7%).

Interest-rate strategies and exposure to emerging market debt were responsible for losses during the quarter.

Interest-rate strategies detracted during the quarter, mostly given losses from the steepener positions in the Eurozone. Short active duration positions in Switzerland and the U.K. were also a drag on performance. Gains from long active duration positions in Australia, Denmark, and Mexico partly offset losses. Opportunistic positioning also detracted. Swap spread strategies detracted as long end swap spreads in the U.S. went more negative. Partly offsetting these losses, cross currency basis swap positions added value during the quarter as gains from negative euro basis widening more than offset losses from negative yen basis widening.

Exposure to emerging debt also detracted during the quarter given losses provided by country selection and security selection, as well as spread widening on the asset class.

September 30, 2015


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STRATEGY PROFILE

42GMO LLC © 2015

GMO Currency Hedged International Bond Strategy



The J.P. Morgan GBI Global ex Japan ex U.S. (Hedged)+ is an internally maintained benchmark computed by GMO, comprised of (i) the J.P. Morgan GBI Global ex U.S. (Hedged) through 12/31/2003 and (ii) the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) thereafter.

Total Return (%)

Strategy Benchmark

3Q 2015 2.36 2.77

YTD 2015 ‐0.11 1.42


2014 16.59 13.10

2013 0.14 0.65

2012 11.34 8.07

2011 7.97 6.10

2010 11.70 3.71

2009 18.81 2.90

2008 ‐13.56 9.22

2007 ‐4.00 3.42

2006 2.45 1.79

2005 7.25 6.54


4.10

6.52

4.78

7.87

4.99 5.10 5.02

6.88

0

2

4

6

8

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 1.07 0.00

Beta 1.07 1.00

R2 0.82 1.00




0.5

0.4

0.3

0.1

‐0.1

‐0.2

‐1.2

‐1.3

Australia

Denmark

Mexico

United States

Sweden

Switzerland

Eurozone

United Kingdom


0.2

‐2.6

‐11.7

AUS

CHE

EUR





36

32

0

23

6

0

3

AAA

AA

A

BBB

BB

B

Below B

Characteristics

Strategy


Maturity 8.0 Yrs.




(617) 330‐7500 | www.gmo.com

September 30, 2015

43GMO LLC © 2015

GMO Currency Hedged International Bond Strategy


The Currency Hedged International Bond Strategy returned +2.4% net of fees in the third quarter, underperforming the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index total return of +2.8% by 0.4%. The yield of the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index fell by 28 basis points during the quarter.







Interest-rate strategies detracted during the quarter, mostly given losses from the steepener positions in the Eurozone. Short active duration positions in Switzerland and the U.K. were also a drag on performance. Gains from long active duration positions in Australia, Denmark, and Mexico partly offset losses. Opportunistic positioning also detracted. Swap spread strategies detracted as long end swap spreads in the U.S. went more negative. Partly offsetting these losses, cross currency basis swap positions added value during the quarter as gains from negative euro basis widening more than offset losses from negative yen basis widening.


September 30, 2015


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STRATEGY PROFILE

44GMO LLC © 2015

GMO Core Plus Bond Strategy



The Barclays U.S. Aggregate Index is an independently maintained and widely published index comprised of U.S. fixed rate debt issues having a maturity of at least one year and rated investment grade or higher.

Total Return (%)

3Q 2015 ‐0.05 1.23

YTD 2015 ‐0.92 1.13


2014 9.31 5.97

2013 0.07 ‐2.03

2012 9.07 4.22

2011 9.89 7.84

2010 13.24 6.54

2009 20.90 5.93

2008 ‐18.00 5.24

2007 ‐1.01 6.97

2006 5.76 4.33

2005 3.95 2.43


1.25

5.274.45

5.81

2.94 3.10

4.645.58

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 1.35 0.00

Beta 1.27 1.00

R2 0.73 1.00






Contribution to Duration

5.8

5.3

7.1

4.2

4.4

U.S. Treasuries

Government Related

Corporate

Securitized

Emerging Debt


0.5

0.4

0.2

‐0.2

‐0.4

‐1.0

‐1.2

Australia

Denmark

Mexico

Switzerland

United States

Eurozone

United Kingdom


0.2

‐2.4

‐11.6

AUS

CHE

EUR


9

78

1

1

6

1

4

AAA

AA

A

BBB

BB

B

Below B

Characteristics

Strategy


Maturity 5.3 Yrs.




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September 30, 2015

45GMO LLC © 2015

GMO Core Plus Bond Strategy


The Core Plus Bond Strategy return was flat net of fees during the third quarter, underperforming the +1.2% return of its benchmark, the Barclays U.S. Aggregate index, by 1.2%. Index gains from falling U.S. Treasury yields more than offset losses from widening sector spreads.

Long-end U.S. interest rates fell and the U.S. Treasury yield curve flattened during the quarter: the 10-year U.S. Treasury yield fell by 29 basis points to end the quarter at 2.1%, and the 2 year yields ended the quarter unchanged at 0.6%.

The overall option-adjusted spread of the Barclays U.S. Aggregate index widened by 8 basis points during the quarter, with spreads widening by as much as 39 basis points (triple-B Credit) and by as little as 2 basis points (triple-A Credit). Only U.S. spreads tightened during the quarter, by 1 basis point.







Interest-rate strategies detracted during the quarter, mostly given losses from the steepener positions in the Eurozone. Short duration positions in Switzerland and the U.K. were also a drag on performance. Gains from long duration positions in Australia, Denmark, and Mexico partly offset losses. Opportunistic positioning also detracted. Swap spread strategies detracted as long end swap spreads in the U.S. went more negative. Multi-Asset equity options in Euro Stoxx also contributed to losses, as did positions in swaption volatility. Cross currency basis swap positions also detracted as gains from negative euro basis widening were offset by losses from negative yen basis widening.


September 30, 2015


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STRATEGY PROFILE

46GMO LLC © 2015

GMO Debt Opportunities Strategy



The J.P. Morgan U.S. 3 Month Cash Index is an independently maintained and widely published index comprised of three month U.S. dollar Euro‐deposits. The duration of the Index is generally 90 days.




Strategy

Std. Deviation 1.74

Sharpe Ratio 3.35

Drawdown

(5/31/13‐6/28/13)‐1.23

Total Return (%)

Strategy Benchmark

3Q 2015 ‐0.11 0.12

YTD 2015 1.10 0.31


2014 4.35 0.35

2013 5.76 0.40

2012 11.90 0.82

2011 0.16 0.12


1.36

5.87

0.40 0.51

0

2

4

6

8

1YR ITD

Strategy Benchmark



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September 30, 2015

47GMO LLC © 2015

GMO Debt Opportunities Strategy


The Debt Opportunities Strategy returned -0.1% net of fees, underperforming the return of the J.P. Morgan U.S. 3 Month Cash index by 0.2% for the third quarter.

Securitized products showed some spread weakness in Q3, while total returns were positive across the board in fixed rate securitized sectors. Generally, higher quality, long duration fixed rate assets held up well as rates fell during the quarter: base swap rates in the U.S. dropped by 40 basis points (5-year U.S. Swap) and 46 basis points (10-year U.S. Swap). Excess returns were negative across most structured products as spreads moved wider throughout the quarter. For example, CMBS AAA securities had one of the best performances, with 1.5% total return, while having a -0.6% excess return. CMBS AAA outperformed High Yield corporates by 640 basis points in excess terms. Additionally, shorter duration, delevering fixed rate securities, like Autos (AAA -0.1% excess return) and Credit Cards (-0.2% excess return), outperformed, while legacy non-agency residential securities remained relatively flat as they continue to operate in a low volatility environment. Credit fundamentals are improving as the percentage of delinquent borrowers continues to decline in the non-agency space. In CLOs, volumes tempered coming into the end of the quarter. As spread pressure has built in CLOs, tiering has become and will continue to be a theme as quality collateral managers and credits separate themselves from the market.

At quarter-end, 35% of the Strategy’s portfolio was rated AAA, although about 45% of the portfolio was rated single-A or better. (Ratings are lowest of Moody’s, Standard & Poor’s, Fitch, DBRS, and Kroll. No rating is used if none of the five listed provide a rating.) Approximately 66% of the Strategy is invested in asset-backed securities (ABS), 16% in commercial mortgage-backed securities (CMBS), and 18% in cash or cash equivalents.

September 30, 2015


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STRATEGY PROFILE

48GMO LLC © 2015

GMO Fixed Income Hedge Strategy



The J.P. Morgan U.S. 3 Month Cash Index is an independently maintained and widely published index comprised of three month U.S. dollar Euro‐deposits. The duration of the Index is generally 90 days.



Total Return (%)

Strategy Benchmark

3Q 2015 ‐1.36 0.12

YTD 2015 ‐14.08 0.31


2014 22.28 0.35

2013 ‐3.79 0.40

2012 10.07 0.82

2011 15.85 0.44

2010 11.03 0.45

2009 21.63 1.45

2008 ‐25.45 4.12

2007 ‐23.39 5.70

2006 ‐4.61 5.25

2005 1.45 1.32


‐7.64

5.64

‐0.30 ‐0.38

0.40 0.482.01 2.02

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 11.15

Sharpe Ratio 0.50

Drawdown

(2/27/15‐9/30/15)‐20.74

Currency Exposure (%)

Net Exposure

Country Exposure (%)

Net Exposure

Performance Attribution (%)Net Contribution

1.3

0.1

‐16.6

‐78.4

Australia

UK

Switzerland

Euro Area

37.8

31.9

17.6

4.4

‐8.6

‐73.7

‐86.5

Australia

Denmark

Mexico

U.S.

Switzerland

Euro

UK

2.6

0.2

0.0

‐0.1

‐1.1

‐3.0

Cross Market

Cash/ABS/Other

Currency Performance

Volatility

Opportunistic

Yield Curve



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September 30, 2015

49GMO LLC © 2015

GMO Fixed Income Hedge Strategy


The Fixed Income Hedge Strategy returned -1.4% net of fees in the third quarter of 2015, underperforming its benchmark, the J.P. Morgan U.S. 3 Month Cash index, by 1.5%. Opportunistic positions, currency selection, and interest-rate strategies each contributed to losses during the quarter.

In a reversal of the second quarter’s across-the-board losses, global government bond markets rallied in the third quarter; in 10-year-equivalent, interest-rate swap terms, gains were the highest in the U.S., +4.8%, and the lowest in Japan, +1.4%. China’s economic weakness, low inflation conditions, and accompanying policy decisions weighed heavily on global financial markets during the quarter. The world’s second largest economy had been showing signs of an economic slowdown since earlier in the year, and its equity market had been on a steady decline since June, but when the People’s Bank of China (PBOC) surprised markets by allowing its yuan to depreciate on August 11, global markets reacted strongly. In an attempt to stabilize its markets, the PBOC reacted to volatility by cutting its lending rate by 25 bps to 4.6% and reducing reserve requirements by 50 bps to 18%.

In the United States, the 10-year U.S. Treasury rate fell by about 31 basis points in the third quarter, ending the period at 2.0%. While investors began the quarter divided on whether the Federal Reserve would raise rates in September, uncertain global economic growth, below target inflation, and risks in China supported the case for the Fed to keep rates steady at its September FOMC meeting despite broadly stronger U.S. economic activity. Australian rates also rallied in the third quarter, up 4.6%; in addition to reduced risk appetite, lower expected growth due to diminished demand from China for Australian exports put downward pressure on yields. In the U.K. (+3.5%), gilt yields also moved lower as investors speculated that it would be unlikely that the Bank of England would raise rates before the Federal Reserve does so in the U.S. In the Eurozone (+2.4%), the quarter began with Greece agreeing to a three-year, €86 billion ($95 billion) package allowing the cash-strapped nation to avoid bankruptcy and possible exit from the euro in return for the nation’s adherence to tough austerity measures. As the quarter continued, yields in the Eurozone consistently fell as the Chinese stock market tumbled and commodities sold off, increasing the demand for safer assets. Investors also sought safety in Swedish (+3.1%) and Swiss (+2.5%) rates markets, given the ubiquitous declines in global equity markets. The only emerging government bond market currently in the investment set, Mexico, returned +1.5%.


In FX, the U.S. dollar strengthened in the quarter, rising by 2.8% according to the Bloomberg Dollar Spot Index. Despite persistent inflation concerns, the dollar strengthened early on, surging on the release of a bullish Federal Reserve statement as well as news that GDP expanded by 2.3% in the previous quarter. As the quarter continued, global markets plunged along with expectations of a Fed rate hike, which put downward pressure on the dollar. However, by quarter-end, the greenback strengthened once again as upbeat consumer confidence data renewed expectations of a rate hike before year-end.

As funding currencies and safe havens, the yen and the euro benefited from the global market turmoil, gaining by 2.2% and 0.2%, respectively, against the U.S. dollar. Investors were particularly interested in those currencies as they unwound emerging market carry trades in the wake of China’s devaluation. China’s weakness weighed heavily on the ANZAC region, with the Australian dollar falling by 8.6% versus the U.S. dollar, and the New Zealand dollar sliding by 5.4%. Amid market turmoil, commodity currencies Norwegian krone (-7.8%) and Canadian dollars (-6.9%) suffered particularly from falling oil prices. Demand for the traditionally safe-haven Swiss franc (-4.4%) dimmed in the quarter as 10-year Swiss yields fell to a low of 0.21%, weighing on currency performance. In the U.K., weaker economic data and low inflation reduced expectations of a near future Bank of England rate rise, putting downward pressure on the pound (-3.7%).

Interest-rate strategies detracted during the quarter, mostly given losses from the steepener positions in the Eurozone. Short duration positions in the Switzerland and the U.K. also put a drag on performance. Gains from long duration positions in Australia, Denmark, and Mexico partly offset losses.

The currency strategy also net detracted during the quarter. In addition to the short euro position, currency volatility positions also detracted in the third quarter. A short position in Swiss francs partly offset these losses.

Finally, opportunistic positioning also detracted. Swap spread strategies detracted as long end swap spreads in the U.S. went more negative. Multi-Asset equity options in Euro Stoxx also contributed to losses, as did positions in swaption volatility. Partly offsetting these losses, cross currency basis swap positions added value during the quarter as gains from negative euro basis widening more than offset losses from negative yen basis widening.

September 30, 2015


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STRATEGY PROFILE

50GMO LLC © 2015

GMO Mean Reversion Strategy



The Citigroup 3‐Month Treasury Bill Index is an independently maintained and widely published index comprised of short‐term U.S. Treasury bills.

1 Displayed in local 10‐year equivalents2 Std. Deviation is a measure of the volatility of a portfolio’s return. Sharpe Ratio isthe return over the risk free rate per unit of risk. Drawdown is the largestnegative cumulative portfolio return from peak to trough. Risk profile data is net.


Total Return (%)

Strategy Benchmark

3Q 2015 2.61 0.01

YTD 2015 ‐0.96 0.02


2014 ‐4.73 0.03

2013 ‐0.62 0.05

2012 5.98 0.07

2011 6.77 0.08

2010 ‐8.61 0.13

2009 ‐13.43 0.16

2008 18.43 1.80

2007 18.63 4.74

2006 5.63 4.76

2005 6.97 3.00


‐4.28

0.702.22

6.03

0.02 0.061.26 1.35

‐6‐4‐202468

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 5.39

Sharpe Ratio 0.12

Drawdown

(5/31/13‐6/30/15)‐13.28

Equity Exposure (%): Vol Balanced Quality

Position Absolute Weight

Equity Exposure (%): Global Relative Value


64.0

‐64.0

High Quality

S&P 500 ex. Fins

21.0

9.0

2.0

‐17.0

‐30.0

Int'l. Value

EM Value

EM Broad

Currency Hedge*

Russell 2000

Fixed Income & Inflation Exposure (%)1


31.0

19.0

10.0

10.0

‐14.0

‐29.0

Euro Rates <10 Yr.

Australian Rates <5 Yr.

New Zealand Rates 10 Yr.

Australian Rates 10 Yr.

Euro Rates >10 Yr.

Japan Rates 10 Yr.

Other Exposure (%)


5.0Credit Opportunies Fund

Currency Exposure (%)


18.0

8.0

‐10.0

‐12.0

‐12.0

‐19.0

Indian Rupee

Brazilian Real

Israeli Shekel

Euro

Commodity FX

USD/Asia



(617) 330‐7500 | www.gmo.com

September 30, 2015

51GMO LLC © 2015

GMO Mean Reversion Strategy


The Mean Reversion Strategy delivered a net return of +2.6% during the third quarter of 2015. Performance was positive across equities, fixed income, and currency positions.

The third quarter brought violent moves across a variety of assets as market participants digested weaker economic data, shifting central bank policy, and intense focus on China-related issues. Our thesis on Antipodean rates continued to play out with lower yields and a flatter curve resulting from weaker fundamentals across Australia and New Zealand. The position delivered +2.7% in the third quarter. The biggest detractor from third quarter Q3 fixed income performance was our pay position in Japanese rates, which lost 0.4%. While remaining the least volatile developed bond market in the world, Japanese yields continued to grind lower as the Bank of Japan seems to be missing on its inflation target and may be contemplating further unconventional measures. Performance in our U.S. and European rate strategies were largely offsetting and uneventful.

Currency positions contributed 0.2% to overall performance in the third quarter. Our short in the commodity currencies AUD and NZD delivered the strongest positive contribution, adding 1.7% as the market responded to the evolving weaker fundamentals. The portfolio also benefited from our long $/Asia and $/ILS positions, which together added 0.5%. On the other side of the ledger, the BRL was the biggest detractor in the currency portfolio, losing 1.2% for the quarter. The short EUR and long INR positions also detracted from performance, losing 0.8% for the quarter.

Equity positions added 0.8% to overall performance, led by the Quality vs. S&P 500 position, which contributed 1.7% during the quarter. EAFE and emerging markets value vs. U.S. small caps detracted 0.8% as emerging market equities continue to be under pressure on the back of China and commodity weakness.

The Credit Opportunities Strategy lost 1.5% during the quarter, detracting modestly from overall performance.

September 30, 2015


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STRATEGY PROFILE

52GMO LLC © 2015

GMO Systematic Global Macro Strategy






Total Return (%)

Strategy Benchmark

3Q 2015 ‐3.15 0.01

YTD 2015 ‐1.51 0.02


2014 4.44 0.03

2013 9.58 0.05

2012 0.73 0.07

2011 5.79 0.08

2010 10.37 0.13

2009 15.28 0.16

2008 ‐3.88 1.80

2007 15.06 4.74

2006 8.39 4.76

2005 4.63 3.00


1.66

4.14

6.086.75

0.02 0.06

1.26 1.34

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 6.62

Sharpe Ratio 0.62

Drawdown

(5/29/15‐9/30/15)‐7.56

* The U.S. Dollar exposure is a balancing item for foreign exchange positions. Itshould not be included in gross exposure calculations.

** The Cash exposure is a balancing item for all other positions (includingforeign exchange, but excluding U.S. Dollar). It should not be included in grossexposure calculations.

Commodity Market Selection (%)

Commodity Net Weight

2.5

‐2.5

‐2.5

‐2.5

‐5.0

‐10.0

Soybeans

Copper

Corn

Coffee

Gold

Net Commodity

Currency Selection (%)

Currency Net Weight

12.0

8.0

‐20.0

‐29.0

U.S. Dollar *

Euro

Australian Dollar

Net Cash **

Bond Market Selection (%)

Country Net Weight

50.0

‐50.0

0.0

U.S.

Japan

Net Bond

Equity Market Selection (%)

Country Net Weight

25.015.015.0

5.55.05.05.05.05.05.05.0

‐4.0‐4.0‐5.0‐5.0

‐8.5‐15.0‐15.0

39.0

UKEuro Stoxx 50

Hong KongVix

MSCI EmergingGermanyFranceItaly

NetherlandsSingapore

KoreaU.S.India

TaiwanSouth Africa

JapanCanada

AustraliaNet Equity



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September 30, 2015

53GMO LLC © 2015

GMO Systematic Global Macro Strategy


The Systematic Global Macro Strategy returned -3.2% net of fees over the September quarter as global equity markets (i.e., MSCI World Net Returns Index in USD) dropped 8.4%, commodity markets (i.e., Bloomberg Commodity Index) plunged 14.5%, and the JPM Global Bond Index rose 2.0%.

Gains from currency, bond, and commodity market positions partly offset losses from our equity markets positions. A large net long allocation to equity markets was the main source of portfolio loss, costing 4.1%. Equity market selection cost an additional 3.2%, with a long position in Hong Kong being the main culprit. The Hong Kong market plummeted 20.0% on concerns about an economic slowdown in China coupled with a local market panic.

Currency positions added 2.1% as the U.S. dollar and the euro, both held long, advanced against short positions in the Australian dollar and British pound. Most gains were made from the Australian dollar’s 8.6% fall against the U.S. dollar. An overall net short commodity markets position added 2.1% as commodities dropped in value for three consecutive months. Bond market positions added 0.7% with a long position in U.S. 10yr bond futures outperforming a short in JGB futures.

The strategy holds a reduced net long exposure to equity markets following recent weak sentiment. We are positioned to profit from European markets outperforming three commodity exporting countries (Canada, Australia, and South Africa) as well as Japan. We hold small spread positions among other Asian markets. The strategy maintains a net short exposure to commodity markets. Bond market positions are unchanged, with a large long position in the U.S. being offset by a short position in Japan. In currencies, we hold long positions in the U.S. dollar and the euro, against a short position in the Australian dollar.

September 30, 2015


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STRATEGY PROFILE

54GMO LLC © 2015

GMO Tactical Opportunities Strategy






Total Return (%)

Strategy Benchmark

3Q 2015 12.90 0.01

YTD 2015 1.92 0.02


2014 ‐2.47 0.03

2013 ‐9.65 0.05

2012 ‐18.36 0.07

2011 27.51 0.08

2010 ‐25.31 0.13

2009 ‐41.61 0.16

2008 36.52 1.80

2007 17.87 4.74

2006 ‐1.65 4.76

2005 ‐13.24 3.00


2.00

‐3.41

‐4.80‐5.81

0.02 0.061.26 1.37

‐8

‐6

‐4

‐2

0

2

4

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 15.46

Sharpe Ratio ‐0.22

Drawdown

(9/30/11‐6/30/15)‐38.83

Characteristics

Long Short

Price/Earnings ‐ Excl Neg Earnings Hist 1 Yr Wtd Med 19.5 x 17.5 x

% Negative Earnings 0.8 % 44.7 %

Price/Book ‐ Hist 1 Yr Wtd Avg 3.9 % 2.6 %



Debt/Equity Wtd Med 0.6 x 1.4 x

% Long/Short 127 % 127 %


Region Weights (%)

Net Weight

10.5

‐10.6

Non US

US


Net Weight Long Short

6.4 27.2

34.4 3.7

0.0 5.4

0.0 10.1

28.6 26.0

10.7 11.3

44.4 18.0

1.1 9.8

1.3 4.3

0.0 11.4

‐20.8

30.7

‐5.4

‐10.1

2.6

‐0.6

26.4

‐8.7

‐3.0

‐11.4

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities



(617) 330‐7500 | www.gmo.com

September 30, 2015

55GMO LLC © 2015

GMO Tactical Opportunities Strategy


The Tactical Opportunities Strategy gained +12.9% net of fees in the third quarter of 2015. High quality stocks in the long portfolio topped the U.S. market, but the largest contribution came from the short portfolio.

U.S. domiciled quality companies outperformed the broad U.S. market during the quarter as more defensive names in Consumer Staples and Information Technology generally outperformed more economically cyclical companies in Materials and Energy. Our positions in international domiciled quality companies had a positive impact. AstraZeneca and British American Tobacco were the top non-U.S. contributors.

Among sectors in the long portfolio, only Consumer Discretionary had an absolute positive contribution; other sectors detracted from total return. Top performing securities included Google, AstraZeneca, and Microsoft. Top detractors included Qualcomm and Abbott Laboratories.

Short exposure within Health Care and Information Technology drove the majority of the absolute positive returns from the portfolio. The only sector with a negative contribution was Utilities.

The Strategy’s average net exposure for the quarter remained neutral.

September 30, 2015


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STRATEGY PROFILE

56GMO LLC © 2015

GMO Total Equities Strategy




1 Total exposure to downside equity moves, excluding effect of hedges and shortpositions, as a percent of total net assets.


Total Return (%)1

Strategy Benchmark

3Q 2015 ‐12.33 0.01

YTD 2015 ‐9.80 0.02

Annual Total Return (%)2

2014 ‐2.71 0.03

2013 17.49 0.05

2012 8.64 0.07

2011 0.40 0.08

2010 3.51 0.13

2009 ‐7.47 0.16

2008 14.26 1.80

2007 ‐5.37 4.74

2006 ‐1.90 4.76

2005 3.56 3.00


‐11.28

2.761.39

4.85

0.02 0.06 1.26 1.62

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark

Strategy Exposure (%)1

86.0

13.0

1.0

100.0

Equities

Merger Arbitrage

Other

Total

Region Exposure (%)1

44.0

56.0

100.0

Non‐U.S.

U.S.

Total



(617) 330‐7500 | www.gmo.com

September 30, 2015

57GMO LLC © 2015

GMO Total Equities Strategy


Global equities generally posted strongly negative returns in U.S. dollar terms during the third quarter. Few markets were safe from the escalating concerns about a global growth slowdown. An unexpected currency devaluation and weak economic signs from China, weakening commodity prices, and guessing how and when the Fed would actually take action all helped to pull the bottom out from under the equity markets. MSCI ACWI fell by 9.4%. Regional performance was negative with the S&P 500 down 6.4%, MSCI Europe down 8.7%, and MSCI Japan down 11.8%. Emerging equities bore the brunt of the impact from heightened concerns about China and the extent of any contagion. MSCI Emerging Markets fell by 17.9%.

The Total Equities Strategy returned -12.3% net of fees for the period, with the majority of the return driven by Equities.

Equities were 85% of the Strategy during the quarter and were not immune from the sell-off. Exposure to U.S. quality and other U.S. stocks contributed to returns while exposure to emerging markets and European value detracted.

Merger arbitrage detracted 0.3% from the Strategy as deal spreads generally widened. Total Equities did not have exposure to the volatility strategy during the quarter.

September 30, 2015

58

Benchmarks and Indices

GMO measures each strategy’s performance against a specific benchmark or index (each, a “Benchmark”), although no strategy is managed as an “index strategy” or “index‐plus” strategy. Actual composition of a strategy’s portfolio may differ to varying degrees from that of its Benchmark. Indices are not managed and do not pay fees andexpenses. One cannot invest directly in an index. In some cases, a strategy’s Benchmark differs from the broad based index against which performance is shown in thestrategy’s prospectus. GMOmay change a strategy’s benchmark from time to time.

Full Name Description

Barclays U.S. Aggregate Index The Barclays U.S. Aggregate Index is an independently maintained and widely published index comprised of U.S. fixed rate debt issues having a maturity of at least one year and rated investment grade or higher.

Citigroup 3‐Month T‐Bill Index The Citigroup 3‐Month Treasury Bill Index is an independently maintained and widely published index comprised of short‐term U.S. Treasury bills.

CPI Index The CPI (Consumer Price Index) for All Urban Consumers US All Items is published monthly by the U.S. government as an indicator of changes in price levels (or inflation) paid by urban consumers for a representative basket of goods and services.

GMO Global Asset Allocation Index + The GMO Global Asset Allocation Index + is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global Asset Allocation Composite through 06/30/2014 and (ii) The GMO Global Asset Allocation (Blend) Index thereafter. The GMO blended benchmark of Global Asset Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of S&P 500, MSCI ACWI (MSCI Standard Index Series, net of withholding tax) and Barclays Aggregate or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The GMO Global Asset Allocation (Blend) Index is an internally maintained benchmark computed by GMO, comprised of 65% MSCI ACWI Index (MSCI Standard Index Series, net of withholding tax) and 35% the Barclays U.S. Aggregate Index. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

GMO Real Return Global Balanced Asset Allocation Blended Index +

The GMO Real Return Global Balanced Asset Allocation Blended Index + is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Real Return Global Balanced Asset Allocation Composite through 06/30/2014 and (ii) The GMO RRGBAL Blended Index thereafter. The GMO blended benchmark of Real Return Global Balanced Asset Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI World (MSCI Standard Index Series, net of withholding tax), Barclays Aggregate, and Citigroup 3‐Month T‐Bill or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The RRGBAL Blended Index is comprised of 60% MSCI World Index (MSCI Standard Index Series, net of withholding tax), 20% Barclays U.S. Aggregate Index and 20% Citigroup 3‐Month Treasury Bill Index. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

GMO Tax‐Managed Global Balanced Index The Tax‐Managed Global Balanced Index is an internally computed benchmark comprised of (i) 60% MSCI ACWI (All Country World Index) (MSCI standard Index Series, net of withholding tax) and (ii) 40% Barclays Muni 7 Year (6‐8) Index. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

J.P. Morgan GBI Global The J.P. Morgan GBI Global Index is an independently maintained and widely published index comprised of government bonds of developed countries with maturities of one year or more.

J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) +

The J.P. Morgan GBI Global ex‐Japan ex‐U.S. (Hedged)+ Index is an internally maintained benchmark computed by GMO, comprised of (i) the J.P. Morgan GBI Global ex U.S. (Hedged) through 12/31/2003 and (ii) the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) thereafter.

J.P. Morgan U.S. 3 Month Cash Index The J.P. Morgan U.S. 3 Month Cash Index is an independently maintained and widely published index comprised of three month U.S. dollar Euro‐deposits. The duration of the Index is generally 90 days.

MSCI ACWI The MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

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MSCI ACWI ++ The MSCI ACWI ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global All Country Equity Allocation Composite through 06/30/2014 and (ii) MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of Global All Country Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI ACWI (All Country World Index) (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. The MSCI ACWI (All Country World) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI ACWI Commodity Producers The MSCI ACWI (All Country World) Commodity Producers Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of listed large and mid capitalization commodity producers within the global developed and emerging markets. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI ACWI ex USA + Index The MSCI ACWI ex USA + Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of International All Country Equity Allocation Composite through 6/30/2014 and (ii) MSCI ACWI ex USA Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of International All Country Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI ACWI (All Country World) ex‐U.S. Index (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI EAFE Index The MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of international large and mid capitalization stocks. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI EAFE + Index The MSCI EAFE + (Europe, Australasia, and Far East) Index is an internally maintained benchmark computed by GMO, comprised of (i) the MSCI EAFE (Europe, Australasia, and Far East) Value Index (MSCI Standard Index Series, net of withholding tax) through 06/30/2014 and (ii) the MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) thereafter. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI EAFE ++ Index The MSCI EAFE ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of International Developed Equity Allocation Composite through 06/30/2014 and (ii) MSCI EAFE (Europe, Australasia, and Far East) Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of International Developed Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI EAFE (Europe, Australasia, and Far East) (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI Emerging Markets Index The MSCI Emerging Markets Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global emerging markets large and mid capitalization stocks. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

MSCI World + Index The MSCI World + Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of Global Developed Equity Allocation Composite through 06/30/2014 and (ii) MSCI World Index (MSCI Standard Index Series, net of withholding tax) thereafter. The GMO blended benchmark of Global Developed Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI World (MSCI Standard Index Series, net of withholding tax) or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.

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Russell 3000 +++ Index The Russell 3000 +++ Index is an internally maintained benchmark computed by GMO, comprised of (i) GMO blended benchmark of U.S. Equity Allocation Composite through 06/30/2014 and (ii) Russell 3000 thereafter. The GMO blended benchmark of U.S. Equity Allocation Composite is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of S&P 500, Russell 3000 or some like proxy for each market exposure they have. For each underlying account benchmark, the weighting of each market index will vary slightly. The index is internally blended by GMO and maintained on a monthly basis. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

S&P 500 Index The S&P 500 Index is an independently maintained and widely published index comprised of U.S. large capitalization stocks. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information inany form is prohibited except with the prior written permission of S&P or its third party licensors.

S&P Developed ex‐U.S. Small Cap Index The S&P Developed ex‐U.S. Small Cap Index is an independently maintained and widely published index comprised of the small capitalization stock component of the S&P Broad Market Index (BMI). The BMI includes listed shares of companies from developed and emerging countries with a total available market capitalization (float) of at least the local equivalent of $100 million USD. The S&P Developed ex‐U. S. Small Cap Index represents the bottom 15% of available market capitalization (float) of the BMI in each country.

S&P/IFCI Composite Index The S&P/IFCI Composite Index is an independently maintained and widely published index comprised of emerging markets stocks. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information inany form is prohibited except with the prior written permission of S&P or its third party licensors.

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Quarterly Update – September 30, 2015€¦ · 03/11/2015 · GMO Quarterly Update – September 30, 2015. ... Tax‐Managed Global Balanced 12 GMO Global Equities Page Global All