quarterly update –march 31, 2015 - valuewalk · 5/1/2015 · 1q 2015 ytd 2015 ytd value added...

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(617) 330‐7500 | www.gmo.comGMO LLC © 2015

GMO offers institutionally‐oriented global investment strategies. For client inquiries, please contact your Client Relationship Manager. For new business inquiries, please contact your Relationship Manager or Holly Carson at (617) 346‐7501 or [email protected]

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 – March 31, 2015

March 31, 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

GMO Emerging Equities Page

Emerging Markets 36

Emerging Countries*

Emerging Domestic Opportunities 38

GMO Fixed Income Page

Global Bond 40

International Bond 42

Currency Hedged International Bond 44

Core Plus Bond 46

Emerging Country Debt*

Emerging Country Local Debt*

Debt Opportunities 48

GMO Absolute Return Page

Emerging Country Debt Long/Short*

Fixed Income Hedge 50

Mean Reversion 52

Systematic Global Macro 54

Tactical Opportunities 56

Total Equities 58

Multi‐Strategy*

* 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.

March 31, 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

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Benchmark‐Free Allocation 7/31/01 1.35 1.35 1.52 1.44 6.10 7.51 10.47

CPI ‐0.17 ‐0.17 0.04 1.60 2.01 2.10

Global Allocation Absolute Return 7/31/01 0.92 0.92 1.09 1.56 5.59 6.79 9.16

CPI ‐0.17 ‐0.17 0.04 1.60 2.01 2.10

Global Asset Allocation 6/30/88 1.24 1.24 ‐0.89 0.76 6.71 6.25 9.55

GMO Global Asset Allocation + 2.13 2.13 5.61 7.67 5.90 8.13

Real Return Global Balanced Asset Allocation 6/30/04 0.98 0.98 ‐0.79 1.06 6.77 6.29 6.86

GMO Real Return Global Balanced AA Blended + 1.77 1.77 4.83 7.07 5.41 5.67

Tax‐Managed Global Balanced 12/31/02 2.02 2.02 0.13 2.40 6.24 5.74 7.56

GMO Tax‐Managed Global Balanced Index 1.89 1.89 5.40 7.57 5.81 7.14

GMO Global Equity Strategies Inception

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Global All Country Equity Allocation 12/31/93 2.93 2.93 0.62 0.17 8.68 6.94 8.99

MSCI ACWI ++ 2.31 2.31 5.42 9.30 6.41 7.47

Global Developed Equity Allocation 3/31/87 3.10 3.10 0.79 0.82 9.63 6.79 9.36

MSCI World + 2.31 2.31 6.03 10.01 6.39 7.47

Global Focused Equity 12/31/11 2.71 2.71 0.40 ‐1.34 14.72

MSCI ACWI 2.31 2.31 5.42 13.76

Quality 2/29/04 0.42 0.42 ‐0.53 10.78 13.03 7.52 6.87

S&P 500 0.95 0.95 12.73 14.47 8.01 7.68

Resources 12/31/11 ‐1.14 ‐1.14 3.25 ‐18.67 ‐1.95

MSCI ACWI Commodity Producers ‐4.39 ‐4.39 ‐18.52 ‐4.57

GMO International Equity Strategies Inception

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

International All Country Equity Allocation 2/28/94 3.54 3.54 0.05 ‐4.68 5.34 5.69 7.36

MSCI ACWI ex USA + 3.49 3.49 ‐1.04 4.84 5.40 5.64

International Developed Equity Allocation 11/30/91 4.40 4.40 ‐0.48 ‐4.95 7.03 5.55 8.17

MSCI EAFE ++ 4.88 4.88 ‐0.92 6.16 5.14 6.34

International Equity 3/31/87 4.36 4.36 ‐0.52 ‐5.02 5.89 4.37 7.98

MSCI EAFE + 4.88 4.88 ‐0.31 5.83 4.51 7.08

MSCI EAFE 4.88 4.88 ‐0.92 6.16 4.95 5.36

International Active EAFE 5/31/81 5.68 5.68 0.80 ‐5.00 4.55 3.99 11.60

MSCI EAFE 4.88 4.88 ‐0.92 6.16 4.95 8.95

Int'l. Active Foreign Small Companies 1/31/95 6.52 6.52 2.09 ‐6.49 8.91 8.04 11.00

S&P Developed ex‐U.S. Small Cap 4.43 4.43 ‐2.76 8.53 6.91 7.27

GMO U.S. Equity Strategies Inception

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

U.S. Equity Allocation 2/28/89 0.57 0.57 ‐1.23 8.15 12.86 6.77 10.69

Russell 3000 +++ 1.80 1.80 12.75 14.64 8.23 10.33

March 31, 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

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Emerging Markets 12/31/93 0.21 0.21 ‐1.94 ‐2.86 ‐0.06 6.47 7.21

S&P/IFCI Composite 2.15 2.15 1.65 2.58 9.41 5.77

MSCI Emerging Markets 2.24 2.24 0.44 1.75 8.48 5.16

Emerging Domestic Opportunities 3/31/11 3.74 3.74 1.50 6.10 4.98

MSCI Emerging Markets 2.24 2.24 0.44 ‐2.05

GMO Fixed Income Strategies Inception

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Global Bond* 12/31/95 ‐2.33 ‐2.33 ‐0.54 ‐1.54 5.19 3.69 5.55

J.P. Morgan GBI Global ‐1.79 ‐1.79 ‐3.73 1.98 3.43 4.70

International Bond 12/31/93 ‐4.70 ‐4.70 ‐0.62 ‐8.22 4.42 3.38 6.37

J.P. Morgan GBI Global ex U.S. ‐4.08 ‐4.08 ‐9.50 0.63 2.69 4.89

Currency Hedged International Bond 9/30/94 3.15 3.15 ‐0.68 14.66 8.92 5.65 8.24

J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) + 3.83 3.83 13.56 6.59 5.76 7.18

Core Plus Bond 4/30/97 1.17 1.17 ‐0.44 7.29 7.53 4.97 6.10

Barclays U.S. Aggregate 1.61 1.61 5.72 4.41 4.93 5.77

Debt Opportunities 10/31/11 0.62 0.62 0.53 3.49 6.62

J.P. Morgan U.S. 3 Month Cash 0.09 0.09 0.35 0.52

GMO Absolute Return Strategies Inception

1Q

2015

YTD

2015

YTD Value

Added

One

Year

Five

Year

Ten

Year

Since

Inception

Fixed Income Hedge 8/31/05 ‐5.95 ‐5.95 ‐6.04 10.03 8.33 0.54

J.P. Morgan U.S. 3 Month Cash 0.09 0.09 0.35 0.50 2.11

Mean Reversion 2/28/02 ‐2.69 ‐2.69 ‐2.70 ‐8.12 ‐0.58 2.22 6.13

Citigroup 3‐Mo. T‐Bill 0.01 0.01 0.03 0.07 1.41 1.40

Systematic Global Macro 3/31/02 6.26 6.26 6.25 8.70 6.50 7.48 7.64


Tactical Opportunities 9/30/04 ‐7.58 ‐7.58 ‐7.59 ‐7.42 ‐6.37 ‐7.02 ‐6.95


Total Equities 9/30/00 3.29 3.29 3.28 ‐0.63 5.75 2.36 6.01


March 31, 2015


(617) 330‐7500 | www.gmo.com

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

1Q 2015 1.35 ‐0.17

YTD 2015 1.35 ‐0.17

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 (%)

1.44

6.107.51

10.47

0.041.60 2.01 2.10

0

2

4

6

8

10

12

1YR 5YR 10YR ITD

Strategy Benchmark

Group Exposures (%)1

0

20

40

60

80

100 U.S. Quality, 6.9

Europe Value, 9.8

Emerging Markets, 17.8

Cash & Cash Equiv., 7.0

Japan, 2.4

U.S. Opportunistic Value, 2.7

Asset Backed Securities, 4.0Interest Rates & FX, 21.1Systematic Global Macro, 5.1Special Opportunity, 3.1Merger Arbitrage, 5.4

Alpha Only, 10.1Emerging Debt, 4.6

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

Alternative StrategiesFixed IncomeAbsolute Return

Equity CharacteristicsStrategy

Price/Earnings ‐ Hist 1 Yr Wtd Med 15.6 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.4 x

Return on Equity ‐ Hist 1 Yr Med 9.5 %

Market Cap ‐ Weighted Median $Bil $33.2

Dividend Yield ‐ Hist 1 Yr Wtd Avg 2.9 %

5‐Year Risk Profile2

Strategy

Std. Deviation 6.30

Sharpe Ratio 0.96

Drawdown

(3/31/10‐6/30/10)‐5.91

Bond Portfolio3

Bond Portfolio Duration 2.1 years

Credit Ratings

AAA 5.7% BB 6.0%

AA 71.5% B 2.7%

A 1.7% <B 4.2%

BBB 7.7% NR 0.6%

Equity Regional Weights (%)

44.4

14.5

6.0

1.0

10.1

24.0

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

QUARTERLY ATTRIBUTION


(617) 330‐7500 | www.gmo.com

March 31, 2015

5GMO LLC © 2015

GMO Benchmark‐Free Allocation Strategy


March 31, 2015


(617) 330‐7500 | www.gmo.com

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

1Q 2015 0.92 ‐0.17

YTD 2015 0.92 ‐0.17


2014 1.80 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


1.56

5.596.79

9.16

0.04

1.60 2.01 2.10

0

2

4

6

8

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80

100U.S. Quality, 10.6

Europe Value, 11.6

Other Int'l. Opportunistic Value, 1.1Emerging Markets, 12.0

Cash & CashEquiv., 1.5

Systematic Global Macro, 3.6Special Opportunity, 3.1Risk Premium, 2.1

Japan, 3.6


Emerging Debt, 4.6Asset Backed Securities, 3.4Interest Rates & FX, 19.8

Multi Strategy, 20.0Alpha Only, 1.4


29.6

20.4

8.9

2.1

9.0

30.1

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Equity Characteristics

Strategy

Price/Earnings ‐ Hist 1 Yr Wtd Median 16.6 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.6 x

Return on Equity ‐ Hist 1 Yr Med 10.7 %

Market Cap ‐ Weighted Median $Bil $30.1

Dividend Yield ‐ Hist 1 Yr Wtd Avg 3.1 %

Bond Portfolio3


Credit Ratings

AAA 5.2% BB 6.2%

AA 71.4% B 2.8%

A 1.6% <B 4.2%

BBB 8.0% NR 0.7%


Strategy

Std. Deviation 5.57

Sharpe Ratio 0.99

Drawdown

(3/31/10‐6/30/10)‐4.95



(617) 330‐7500 | www.gmo.com

March 31, 2015

7GMO LLC © 2015

GMO Global Allocation Absolute Return Strategy


Bonds

Performance (%)

Net of Fees, USD (Rep Account) +0.93

Gross of Fees, USD (Rep Account) +1.18

CPI Index (prelim through most recent month-end) -0.41

Value Added +1.59

Alts Equity CashEquity Bonds AltsCash

March 31, 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

1Q 2015 1.24 2.13

YTD 2015 1.24 2.13


2014 1.24 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


0.76

6.71 6.25

9.55

5.61

7.67

5.90

8.13

0

2

4

6

8

10

12

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80

100 U.S. Quality, 13.4

Europe Value, 17.7



Japan, 5.5


Asset Backed Securities, 4.5Interest Rates & FX, 20.2

Systematic Global Macro,3.1Risk Premium, 2.7

Alpha Only, 7.0Emerging Debt, 4.6


22.8

24.0

10.5

2.4

10.5

29.7

10.4

16.0

7.7

7.5

6.9

51.6

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy Benchmark


Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Med 16.7 x 19.7 x

Price/Book ‐ Hist 1 Yr Wtd Avg 1.6 x 2.2 x

Return on Equity ‐ Hist 1 Yr Med 10.9 % 14.9 %

Market Cap ‐ Weighted Median $Bil $34.9 $39.7

Dividend Yield ‐ Hist 1 Yr Wtd Avg 3.1 % 2.4 %


Strategy Benchmark

Alpha 0.12 0.00

Beta 0.86 1.00

R2

0.93 1.00

Sharpe Ratio 0.82 0.83

Std. Deviation 8.14 9.13

Bond Portfolio3


Credit Ratings

AAA 6.4% BB 6.3%

AA 69.0% B 2.7%

A 1.9% <B 4.7%

BBB 8.2% NR 0.7%



(617) 330‐7500 | www.gmo.com

March 31, 2015

9GMO LLC © 2015

GMO Global Asset Allocation Strategy


March 31, 2015


(617) 330‐7500 | www.gmo.com

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

1Q 2015 0.98 1.77

YTD 2015 0.98 1.77


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


1.06

6.776.29

6.86

4.83

7.07

5.41 5.67

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 0.88 0.00

Beta 0.83 1.00

R2

0.88 1.00




0

20

40

60

80


Europe Value, 15.5


Asset Backed Securities, 2.8Interest Rates & FX, 16.1

Japan, 4.8


Multi Strategy, 29.0

Emerging Debt, 3.3



24.9

22.8

10.0

2.3

10

30.1

0.0

17.8

8.6

8.4

7.7

57.6

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy Benchmark


Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Median 16.6 x 20.1 x





Bond Portfolio3


Credit Ratings

AAA 5.3% BB 5.8%

AA 72.7% B 2.6%

A 1.6% <B 4.0%

BBB 7.4% NR 0.6%





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March 31, 2015

11GMO LLC © 2015

GMO Real Return Global Balanced Asset Allocation Strategy


Performance (%)

Net of Fees, USD +0.98


GMO Real Return Global Balanced Asset Allocation Blended Ind +1.77

Value Added -0.54

CashCash BondsEquity Bonds Equity

March 31, 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

1Q 2015 2.02 1.89

YTD 2015 2.02 1.89


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


2.40

6.245.74

7.56

5.40

7.57

5.81

7.14

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80


Europe Value, 16.2



Municipal Bonds, 34.1

Emerging Country Debt, 2.0Risk Premium, 2.6

Japan, 4.1


Multi‐Strategy, 13.3


23.4

26.0

8.4

1.2

8.0

33.0

10.4

16.0

7.7

7.5

6.9

51.6

Emerging

Europe ex UK

Japan

Other International

United Kingdom

United States

Strategy Benchmark


Strategy Benchmark


Price/Cash Flow ‐ Hist 1 Yr Wtd Median 10.7 x 13.9 x






Strategy Benchmark

Alpha ‐0.24 0.00

Beta 0.85 1.00

R2 0.96 1.00





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March 31, 2015

13GMO LLC © 2015

GMO Tax‐Managed Global Balanced Strategy


Performance (%)



Tax‐Managed Global Balanced Index +1.89

Value Added +0.36

AltsCashBondsAltsEquity Equity Bonds Cash

March 31, 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

1Q 2015 2.93 2.31

YTD 2015 2.93 2.31


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


0.17

8.68

6.94

8.99

5.42

9.30

6.417.47

0

2

4

6

8

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 0.26 0.00

Beta 0.90 1.00

R2 0.96 1.00




0

20

40

60

80

100

U.S. Quality, 29.3

Europe Value, 31.8

Other Int'l. Opportunistic Value, 2.9Emerging Markets, 20.4Cash & Cash Equiv., 1.2

Japan, 9.9


Top Country Weights (%)

33.8

9.9

9.9

7

5.8

51.6

7.7

6.9

3.4

3.3

United States

Japan

United Kingdom

France

Germany

Strategy Benchmark

Characteristics

Strategy Benchmark






Top Holdings3

Company Country Sector % of Equity

Royal Dutch Shell United Kingdom Energy 2.0

Total S.A. France Energy 2.0

Express Scripts Hldg. United States Health Care 1.9

Amazon.com Inc. United States Consumer Discretiona 1.7

BP PLC United Kingdom Energy 1.7

Total 9.3



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15GMO LLC © 2015

GMO Global All Country Equity Allocation Strategy


March 31, 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

1Q 2015 3.10 2.31

YTD 2015 3.10 2.31


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


0.82

9.63

6.79

9.36

6.03

10.01

6.397.47

0

2

4

6

8

10

12

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 0.44 0.00

Beta 0.92 1.00

R2 0.96 1.00




0

20

40

60

80

100

U.S. Quality, 31.8

Europe Value, 37.5


Japan, 11.7



36.6

11.7

11.6

8.3

6.9

57.6

8.6

7.7

3.8

3.7

United States

Japan

United Kingdom

France

Germany

Strategy Benchmark

Characteristics

Strategy Benchmark






Top Holdings3




Express Scripts Hldg. United States Health Care 2.1


Nissan Motor Co. Ltd. Japan Consumer Discretiona 2.0

Total 10.7



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17GMO LLC © 2015

GMO Global Developed Equity Allocation Strategy


Performance (%)



MSCI World +2.31

Value Added +0.31

Int’lU.S. Int’lEM EMU.S.

March 31, 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 ‐2.36 0.00

Beta 1.24 1.00

R2 0.85 1.00



Characteristics

Strategy Index



Price/Book ‐ Hist 1 Yr Wtd Avg 1.6 % 2.2 %

Dividend Yield ‐ Hist 1 Yr Wtd Avg $2.0 $2.4

Top Ten Holdings2

Company % of EquityMallinckrodt PLC 2.6

Michael Kors Holdings Ltd. 2.5

Apple Inc. 2.5

Actavis PLC 2.5

General Motors Co. 2.5

Anthem Inc 2.5

ITT Corp 2.5

Capital Product Partners LP 2.5

Halliburton Co. 2.4LyondellBasell Industries N.V. Cl A 2.4

Total 24.9

GICS Sector Weights (%)

Under/Overweight vs. Index Strategy Index13.2 12.6

1.7 9.7

8.5 7.5

20.2 21.5

12.3 12.1

16.1 10.5

7.8 14.0

12.2 5.3

6.0 3.6

1.9 3.2

0.6

‐8.0

1.0

‐1.3

0.2

5.6

‐6.2

6.9

2.4

‐1.3

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Region Weights (%)

Underweight/Overweight Against Index

3.5

‐0.2

‐3.2

‐2.1

‐0.5

‐1.6

1.9

‐2.7

4.8

Australia/New Zealand

Canada

Emerging

Europe ex UK

Japan

Southeast Asia

United Kingdom

United States

Cash + Unrealized G/L

Total Return (%)

Strategy Index

1Q 2015 2.71 2.31

YTD 2015 2.71 2.31


2014 ‐3.24 4.16

2013 31.29 22.80

2012 19.71 16.13


‐1.34

14.72

5.42

13.76

‐5

0

5

10

15

20

1YR ITD

Strategy Index



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March 31, 2015

19GMO LLC © 2015

GMO Global Focused Equity Strategy


The Global Focused Equity Strategy climbed 2.7% net of fees for the quarter. The Strategy’s reference benchmark, MSCI All Country World index rose 2.3%.

Positive contributions came from holdings in Toll Holdings in Australia, Peugeot in France, and Anthem and Capital Product Partners in the United States. Australian logistics company Toll received a buyout offer from Japan Post at a 50% premium to its previous value, vindicating our long-held position in the company. Toll was slowly restructuring while waiting for a cyclical upswing in business volumes. In addition to investors becoming excited about European recovery, positive auto data, especially out of Spain, propelled the performance of auto makers. This was particularly true for Peugeot, which is geared to Europe. Anthem continues to perform well as regulatory uncertainty around managed care companies subsides, as well as strong demand for their services, and the company’s attractive capital return and reasonable valuation. Capital Product Partners’ exposure to improving volume and pricing power in the product tanker markets as well as its attractive 10% dividend yield helped the name outperform.

Negative contribution came from National Oilwell Varco (NOV) in the United Sates, Bluescope Steel in Australia, and Gran Tierra Energy in Canada. The continued uncertainty facing the oil markets negatively impacted our shares in NOV, an oil services firm, and Bluescope fell with the declining price of steel. Additionally, Gran Tierra, a Canadian based exploration and production company with Latin American assets, sold off on negative well results that prompted a write-down in 2P reserves (proven reserves + probable reserves).

March 31, 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 1.39 0.00

Beta 0.80 1.00

R2 0.88 1.00



Region Weights (%)

18.3

80.6

1.1

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

Express Scripts Holding Co Health Care 5.4

Oracle Corp. Information Technology 4.6

Johnson & Johnson Health Care 4.5

Google Inc. (Cl A) Information Technology 4.3

Coca‐Cola Co. Consumer Staples 4.3

Total 23.1





5.6

24.8

0.5

0.0

24.3

8.0

33.5

1.6

1.7

0.0

12.6

9.7

8.0

16.2

14.9

10.4

19.7

3.2

2.3

3.0

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Telecommunication Services

Utilities

Strategy Benchmark

Total Return (%)

Strategy Benchmark

1Q 2015 0.42 0.95

YTD 2015 0.42 0.95


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


10.7813.03

7.52 6.87

12.7314.47

8.01 7.68

0

5

10

15

20

1YR 5YR 10YR ITD

Strategy Benchmark



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21GMO LLC © 2015

GMO Quality Strategy


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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 3.00 0.00

Beta 1.08 1.00

R2 0.95 1.00

Sharpe Ratio ‐0.11 ‐0.29



16.9

12.4

10.5

6.3

6.2

17.9

3.3

2.2

3.3

41.1

United Kingdom

Russia

Japan

China

United States

Strategy Benchmark


0.0

1.5

63.8

0.0

0.0

10.6

0.0

18.4

0.0

5.8

0.0

2.0

68.2

0.0

0.0

0.0

0.0

29.7

0.0

0.0


Consumer Staples

Energy

Financials

Health Care

Industrials


Materials


Utilities

Strategy Benchmark

Characteristics

Strategy Benchmark


Earnings/Share ‐ F'cast LT Median Growth Rate 5.8 x 6.8 x




Top Holdings2


Gazprom OAO Russia Energy 5.1

CNOOC Ltd. China Energy 4.9

LukOil OAO Russia Energy 4.9



Total 24.5

Total Return (%)

Strategy Benchmark

1Q 2015 ‐1.14 ‐4.39

YTD 2015 ‐1.14 ‐4.39


2014 ‐16.78 ‐14.69

2013 4.39 3.31

2012 9.23 1.96


‐18.67

‐1.95

‐18.52

‐4.57

‐20

‐15

‐10

‐5

0

1YR ITD

Strategy Benchmark



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23GMO LLC © 2015

GMO Resources Strategy


March 31, 2015


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STRATEGY PROFILE

24GMO LLC © 2015


0

20

40

60

80

100

Europe Value, 49.4

Other Int'l. Opportunistic Value, 4.5



Japan, 15.4

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

1Q 2015 3.54 3.49

YTD 2015 3.54 3.49


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


‐4.68

5.34 5.697.36

‐1.04

4.84 5.40 5.64

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


15.3

15.3

10.9

9.0

5.3

15.9

14.2

7.0

6.8

5.0

Japan

United Kingdom

France

Germany

China

Strategy Benchmark


Strategy Benchmark

Alpha 0.56 0.00

Beta 0.99 1.00

R2 0.97 1.00



Characteristics

Strategy Benchmark






Top Holdings3





Nissan Motor Co. Ltd. Japan Consumer Disc. 2.6

AstraZeneca PLC United Kingdom Health Care 2.1

Total 13.5



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25GMO LLC © 2015

GMO International All Country Equity Allocation Strategy


March 31, 2015


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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

1Q 2015 4.40 4.88

YTD 2015 4.40 4.88


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


‐4.95

7.035.55

8.17

‐0.92

6.16 5.146.34

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


0

20

40

60

80

100

Europe Value, 63.4


Japan, 19.8


19.8

19.7

14

11.6

4.2

22.2

19.8

9.7

9.5

2.3

Japan

United Kingdom

France

Germany

Italy

Strategy Benchmark


Strategy Benchmark

Alpha 1.11 0.00

Beta 0.96 1.00

R2 0.97 1.00



Characteristics

Strategy Benchmark






Top Holdings3







Total 17.2



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27GMO LLC © 2015

GMO International Developed Equity Allocation Strategy


March 31, 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 +

1Q 2015 4.36 4.88 4.88

YTD 2015 4.36 4.88 4.88


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


‐5.02

5.894.37

7.98

‐0.92

6.164.95 5.36

‐0.31

5.834.51

7.08

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy MSCI EAFE MSCI EAFE +


0

20

40

60

80

100

Europe Value, 70.6

Other Int'l. Opportunistic Value, 6.1Cash & Cash Equiv., 1.3

Japan,22.0


22.0

21.9

15.7

13.0

4.7

22.2

19.8

9.7

9.5

2.3

Japan

United Kingdom

France

Germany

Italy

Strategy Benchmark


Strategy Benchmark

Alpha 0.36 0.00

Beta 0.95 1.00

R2 0.97 1.00



Characteristics

Strategy Benchmark







Top Holdings3







Total 19.2



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29GMO LLC © 2015

GMO International Equity Strategy


March 31, 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

1Q 2015 5.68 4.88

YTD 2015 5.68 4.88


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


‐5.00

4.55 3.99

11.60

‐0.92

6.16 4.95

8.95

‐10

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha ‐1.64 0.00

Beta 1.01 1.00

R2 0.98 1.00



Top Overweight Holdings2

Company

Mitsubishi Tokyo Financial Group Inc. 4.2

Sumitomo Mitsui Financial Group Inc. 4.2

Telecom Italia S.p.A. 2.1

Zurich Financial Services AG 2.1

AstraZeneca PLC 2.1

Mediaset S.p.A. 2.0

Allianz AG Holding 1.9

Assicurazioni Generali S.p.A. 1.8

Asciano Group 1.8Imperial Tobacco Group PLC 1.7

Characteristics

Strategy Benchmark






Under/Overweight vs. Benchmark Strategy Benchmark

14.0 13.1

6.3 11.0

3.8 5.1

36.3 26.0

2.8 11.4

8.0 12.7

9.4 4.9

2.9 7.5

11.0 4.7

5.5 3.6

0.9

‐4.7

‐1.3

10.3‐8.6

‐4.7

4.5

‐4.6

6.3

1.9

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Region Weights (%)

Underweight/Overweight Against Benchmark

‐3.2

7.1

‐1.5

‐1.1

‐2.7

‐2.9

4.2


Emerging

Europe ex UK

Japan

Southeast Asia

United Kingdom




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March 31, 2015

31GMO LLC © 2015

GMO International Active EAFE Strategy


The International Active EAFE Strategy gained 5.7% net of fees in the first quarter; the Strategy was 0.8 percentage points ahead of the MSCI EAFE index, which rose 4.9%.

Country and currency allocation was ahead of the benchmark. Our positioning in Europe added returns, particularly because we were less exposed to the United Kingdom than the benchmark. In addition, while our weight in Europe is slightly lower than that of the benchmark, we have an overweight position in the eurozone. In January we hedged the account such that the exposure of the portfolio to the euro was closer to that of the benchmark, andthe hedge against the euro was positive in the quarter.

Stock selection also beat the benchmark in the first quarter. Holdings in Europe, Australia, and Hong Kong outperformed.

In Europe, performance was led by Peugeot, Banca Popolare di Milano, and Deutsche Telekom. In addition to investors becoming excited about European recovery, positive auto data, especially out of Spain, propelled the performance of auto makers. This was particularly true for Peugeot, which is geared to Europe. Italian cooperative banks, including Milano, are now required to change their governance structure, which will likely trigger consolidation. The potential benefit to Banca Popolare di Milano drove up the share price. European telecom companies did well, especially Deutsche Telekom. There are several reasons we like these names, among them that that the consolidation of the industry within markets has started, and their regulatory environment has finally become a tailwind after many years of holding them back. These companies stand to benefit from a “market repair” scenario, where a data consumption boom drives a rebound in the ARPU.

Australian logistics company Toll received a buyout offer from Japan Post at a 50% premium to its previous value, vindicating our long-held position in the company. In Hong Kong, Cheung Kong Holdings, historically a holding company for the operating assets of famed investor Li Ka Shing, announced a reorganization that will consolidate all of the property assets into one listed company, and all non-property into a separate listing. This could mean a narrowing of the large discount to NAV at which the stock has traditionally traded.

On the negative side, stock selection in Japan hurt returns. Hitachi Ltd. fell on news that it would buy Italian company Finmeccanica's rail and signal assets. While the market had anticipated the transaction, the price was a negative surprise.

March 31, 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

1Q 2015 6.52 4.43

YTD 2015 6.52 4.43


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


‐6.49

8.91 8.0411.00

‐2.76

8.536.91 7.27

‐10

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark

Top Overweight Holdings2

Company

Mediaset S.p.A. 1.8

Asciano Group 1.6

Grand City Properties SA 1.5

Incitec Pivot Ltd. 1.5

Faurecia S.A. 1.5

Sopra Group 1.5

Kaba Holding AG 1.4

TAG Immobilien AG 1.4

Filtrona PLC 1.3Nexity S.A. 1.3

Characteristics

Strategy Benchmark







25.4 17.7

3.1 5.5

2.3 2.7

26.8 22.9

2.6 7.3

19.8 21.4

7.8 8.8

10.7 10.0

1.5 1.5

0.0 2.3

7.7

‐2.4

‐0.4

3.9

‐4.7

‐1.6

‐1.0

0.7

0.0

‐2.3

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities


Strategy Benchmark

Alpha 0.74 0.00

Beta 0.96 1.00

R2 0.98 1.00



Region Weights (%)


1.1

‐4.5

5.0

4.8

0.9

‐7.3

‐3.6

3.6


Canada

Emerging

Europe ex UK

Japan

Southeast Asia

United Kingdom




(617) 330‐7500 | www.gmo.com

March 31, 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 2.1 percentage points in the first quarter, gaining 6.5% net of fees while the benchmark rose 4.4%.

Country and currency allocation was ahead of the benchmark. Our positioning in Europe added returns, particularly because we were more exposed to Italy than the benchmark. Less exposure in Canada also helped performance. In addition, while our weight in Europe is slightly higher than that of benchmark, we have a larger overweight position in the eurozone. In January we hedged the Strategy such that the exposure of the portfolio to the euro was closer to that of the benchmark, and the hedge against the euro contributed positively in the quarter.

Stock selection also beat the benchmark in the first quarter. Holdings in Europe, Japan, and Australia outperformed. In Europe, performance was led by Peugeot and Banca Popolare di Milano. In addition to investors becoming excited about European recovery, positive auto data, especially out of Spain, propelled the performance of auto makers. This was particularly true for Peugeot, which is geared to Europe. Italian cooperative banks, including Milano, are now required to change their governance structure, which will likely trigger consolidation. The potential benefit to BancaPopolare di Milano drove up the share price. In Japan, Aoyama Trading used its stockpile of cash to initiate a share repurchase. Australian logistics company Toll outperformed because it received a buyout offer from Japan Post at a 50% premium to its previous value, vindicating our long-held position in the company.

On the negative side, stock selection in Canada hurt returns. Capstone Mining fell as copper prices have been weak due to faltering demand, particularly from emerging markets. Additionally, Gran Tierra Energy, a Canadian based exploration and production company with Latin American assets, sold off on negative well results that prompted a write-down in 2P reserves (proven reserves + probable reserves).

March 31, 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, 85.5

Cash & Cash Equiv., 1.5U.S. Opportunistic Value, 13.0

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

1Q 2015 0.57 1.80

YTD 2015 0.57 1.80


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


8.15

12.86

6.77

10.6912.75

14.64

8.2310.33

0

5

10

15

20

1YR 5YR 10YR ITD

Strategy Benchmark


9.9

18.7

9.9

2.2

21.3

8.6

28.0

1.4

0.0

0.0

12.6

9.7

8.0

16.2

14.9

10.4

19.7

3.2

2.3

3.0


Consumer Staples

Energy

Financials

Health Care

Industrials


Materials


Utilities

Strategy Benchmark

Characteristics

Strategy Benchmark

Price/Earnings ‐ Hist 1 Yr Wtd Med 20.9 x 20.1 x





Top Holdings3

Company Sector % of Equity

Express Scripts Holding Co Health Care 5.6

Amazon.com Inc. Consumer Discretionary 5.0

Johnson & Johnson Health Care 4.6

Apple Inc. Information Technology 4.4

Chevron Corp. Energy 4.3

Total 23.9


Strategy Benchmark

Alpha 0.85 0.00

Beta 0.82 1.00

R2 0.91 1.00





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March 31, 2015

35GMO LLC © 2015

GMO U.S. Equity Allocation Strategy


Performance (%)



S&P 500 +0.95

Value Added ‐0.22

March 31, 2015


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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

1Q 2015 0.21 2.15

YTD 2015 0.21 2.15


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


‐2.86

‐0.06

6.47 7.21

1.65 2.58

9.41

5.77

‐5

0

5

10

15

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha ‐2.71 0.00

Beta 1.02 1.00

R2 0.97 1.00

Sharpe Ratio ‐0.01 0.14


Top Ten Holdings2

Company % of Equity

Samsung Electronics Co. Ltd. 5.2

HDFC Bank Ltd. 4.0

Surgutneftegaz 3.6

China Construction Bank Corp. 2.9

Industrial & Commercial Bank of China Lt 2.8

Bank of China Ltd. 2.3

Hyundai Motor Co. Ltd. 1.8

China Mobile Ltd. 1.8

LukOil OAO 1.8

Gazprom OAO 1.8

Total 28.0

Characteristics

Strategy Benchmark




Return on Equity ‐ Hist 1 Yr Avg 11.7 % 10.9 %


Number of Equity Holdings 425 2,523


Region Weights (%)


0.7

‐5.8

14.7

0.0

‐6.8

‐3.1

0.3

Developed

East Asia

Europe

Latin/South America

Mideast/Africa

South Asia




8.1 10.5

1.8 7.8

14.9 6.9

30.2 27.3

1.2 2.9

2.7 8.2

17.9 19.4

6.8 7.4

9.1 6.3

7.2 3.3

‐2.4

‐6.0

8.0

2.9

‐1.7

‐5.5

‐1.5

‐0.6

2.8

3.9

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities






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March 31, 2015

37GMO LLC © 2015

GMO Emerging Markets Strategy


The Emerging Markets Strategy gained 0.2% net of fees in the first quarter, underperforming the 2.2% rise in the S&P/IFCI Composite by 1.9%. Overall, country-sector allocation detracted 1.2% and stock selection lost 0.6%.

Emerging market equities began the quarter celebrating the €1.1 trillion stimulus program unveiled by the European Central Bank (ECB). Positives including the continued growth in the U.S., a truce in Ukraine, and an improving outlook for China were countered by negative developments such as a major corruption scandal in Brazil and a potential debt crisis in Greece. Country returns varied over the quarter, ranging from an 18.6% jump in Russia to a 29.3% drop in Greece. Sector returns were more clustered, varying from an 8.5% rise in IT to a fall of 3.2% for Utilities.

Brazilian stocks have been pressured by stagnant growth, above-target inflation, high budget deficits, and weakness in iron ore prices, a key export. In addition, officials at state-owned Petrobras have been accused of corruption in their dealings with construction companies. The government has ambitious plans to improve the fiscal and monetary picture but a rapidly declining approval rating is hampering the administration’s ability to implement its measures. Our overweights in Brazil sectors such as Utilities, Materials, and Telecommunications detracted from performance.

Investor sentiment in China jumped with a report that showed the unexpected expansion of manufacturing. Investors are also speculating on a continuation of monetary easing. In addition, there has been a surge of retail involvement in the equity markets as more than 10 million stock accounts have been opened since the start of December, equivalent to the total number for all of 2012 and 2013 combined. Our underweight in China IT and Consumer Discretionary hurt performance.

The Russian stock market, the top stock market for the quarter, was boosted by stability in the price of crude oil, the country’s biggest export earner. Investor sentiment was also lifted by a truce in Ukraine. Our overweight in Russia Energy and Financials helped performance.

Stocks in Greece dropped on continuing worries over the tussle between Greece and its creditors to recraft its bailout package. The government had obtained an extension by backing away from election pledges to ease budget cuts and restructure debt. However, it has yet to produce a revised economic plan that satisfies creditors. Our underweight in Greece Financials added to performance.

Market sentiment in Turkey has suffered from a public hectoring of the central bank by the political leadership. Stocks also lost ground over rising political tensions and a deteriorating macroeconomic outlook. A plan to replace the parliamentary system with a presidential system is creating rifts within the ruling party. The government suggested that Turkey could miss its 4% growth target for 2015. Our overweight in Turkey Financials negatively impacted performance.

Stock selection detracted from performance. Segments such as Russia Energy and Turkey Materials had particularly strong selection while areas such as Korea Consumer Discretionary and India Financials saw especially weak selection.

March 31, 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 6.47 0.00

Beta 0.73 1.00

R2 0.81 1.00

Sharpe Ratio 0.35 ‐0.12


Top Ten Holdings3

Company % of Equity

Colgate‐Palmolive Co. 4.6

HDFC Bank Ltd. 3.9

Lupin Ltd. 3.5

Industrial & Commercial Bank of China Ltd. 3.4

Abbott Laboratories 2.6

Anheuser‐Busch InBev 2.4

Baidu.com Inc. 2.3

TRUE Telecommunication Growth Infrastruc 1.9

Brilliance Chna Autmtive Hldgs 1.8

BDO Unibank Inc 1.7

Total 28.1

Characteristics

Strategy Index




Return on Equity ‐ Hist 1 Yr Avg 15.7 % 11.6 %


Number of Equity Holdings 122 836


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




Region Weights (%)1

Underweight/Overweight Against Index

14.1‐16.8

‐2.9‐8.6

‐5.110.38.9

DevelopedEast AsiaEurope

Latin/South AmericaMideast/Africa

South AsiaCash + Unrealized G/L


Under/Overweight vs. Index Strategy Index

13.1 9.4

21.3 8.1

2.9 8.0

25.8 28.5

12 2.3

7.7 6.8

4.3 19.1

3.9 7.0

6.8 7.3

2.4 3.3

3.7

13.2

‐5.1

‐2.7

9.7

0.9

‐14.8

‐3.1

‐0.5

‐0.9

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities

Total Return (%)

Strategy Index

1Q 2015 3.74 2.24

YTD 2015 3.74 2.24


2014 ‐0.30 ‐2.19

2013 3.80 ‐2.60

2012 24.33 18.22

2011 ‐8.99 ‐20.06


6.104.98

0.44

‐2.05‐4

‐2

0

2

4

6

8

1YR ITD

Strategy Index



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March 31, 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.

Emerging market equities began the quarter celebrating the €1.1 trillion stimulus program unveiled by the European Central Bank (ECB). Positives including the continued growth in the U.S., a truce in Ukraine, and an improving outlook for China were countered by negative developments such as a major corruption scandal in Brazil and a potential debt crisis in Greece. Country returns varied over the quarter, ranging from an 18.6% jump in Russia to a 29.3% drop in Greece. Domestic demand driven sector returns were more clustered, varying from a 6.7% rise in Health Care to a fall of 3.2% for Utilities.

The Emerging Domestic Opportunities Strategy rose 3.7% net of fees in the first quarter.

Brazilian stocks have been pressured by stagnant growth, above-target inflation, high budget deficits, and weakness in iron ore prices, a key export. In addition, officials at state-owned Petrobras have been accused of corruption in their dealings with construction companies. The government has ambitious plans to improve the fiscal and monetary picture but a rapidly declining approval rate is hampering the administration’s ability to implement its measures. Our investments in Brazil Financials and Industrials negatively impacted performance.

Investor sentiment in China jumped with a report that showed the unexpected expansion of manufacturing. Investors are also speculating on a continuation of monetary easing. In addition, there has been a surge of retail involvement in the equity markets as more than 10 million stock accounts have been opened since the start of December, equivalent to the total number for all of 2012 and 2013 combined. Our positions in China Consumer Discretionary added to performance.

Stocks in India rallied over the quarter, especially at the onset (India was the best market performer in January). The central bank lowered its main interest rate in January, adding to the effect of the ECB stimulus. The IMF declared that India would be the world’s fastest growing major economy through 2017. Later in the quarter, the stock market dropped after Prime Minster Modi’s party suffered a defeat in local elections. The results were seen as portending stronger opposition to Modi’s economic reforms. Our exposure to Indian sectors such as Health Care, Industrials, Consumer Staples, and Financials boosted performance.

Philippines has benefited from a goldilocks scenario of fast economic growth but controlled inflation. The central bank held interest rates steady. It forecast that the economy might grow as much as 8% in 2015, with lower than expected inflation on the back of robust domestic demand and higher public spending. Our holdings in Philippine Financials and Consumer Staples contributed to performance.

The Russian stock market, the top stock market for the quarter, was boosted by stability in the price of crude oil, the country’s biggest export earner. Investor sentiment was also lifted by a truce in Ukraine. Our exposure to Russia Consumer Staples helped performance.

Market sentiment in Turkey has suffered from a public hectoring of the central bank by the political leadership. Stocks also lost ground over rising political tensions and a deteriorating macroeconomic outlook. A plan to replace the parliamentary system with a presidential system is creating rifts within the ruling party. The government suggested that Turkey could miss its 4% growth target for 2015. Our positions in Turkey Financials hurt performance.

March 31, 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.

1 Region weights are duration adjusted.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

1Q 2015 ‐2.33 ‐1.79

YTD 2015 ‐2.33 ‐1.79


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


‐1.54

5.193.69

5.55

‐3.73

1.983.43

4.70

‐6‐4‐202468

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 3.10 0.00

Beta 1.06 1.00

R2 0.85 1.00



Characteristics

Strategy

Modified Duration 8.7

Emerging Cntry Debt Exp. 5 %

Maturity 7.4 Yrs.

Region Weights (%)1


14.8

‐13.4

‐12.7

12.1

Emerging

Europe

North America

Pacific

Currency Weights (%)


3.8

‐25.3

21.4

0.0

Emerging

Europe

North America

Pacific



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March 31, 2015

41GMO LLC © 2015

GMO Global Bond Strategy


The Global Bond Strategy returned -2.3% net of fees during the first quarter, underperforming the J.P. Morgan GBI Global index return of -1.8% by 0.5%. The U.S. dollar’s advance versus almost all developed market currencies accounted for all of the negative index returns, as the 20-bp fall in the yield of the J.P. Morgan GBI Global index resulted in a +2.1% return in the index when measured in local currency terms.

The global bond rally of 2014 continued into 2015, accelerating in March. With the exception of the Japanese bond market (-0.3%), government markets rose during the quarter: in 10-year-equivalent, interest-rate swap terms, gains were the highest in Canada, +4.6%, and the lowest in the U.K., +2.5%. In the eurozone (+3.0%), rates continued their descent into historic lows (near zero!) as the European Central Bank began its unconventional 19-month, €1.1 trillion quantitative easing program in early March in an attempt to boost economic recovery while staving off deflation. In the U.K., gilts posted a fifth consecutive quarter of gains as falling inflation and speculation that the Bank of England would not be raising rates in the near future put downward pressure on yields. Investors seeking higher bond returns were also attracted to the relative yield premium offered by U.K. gilts.

Global yield curves (measured by the difference between 10-year and 2-year swap rates) were mixed during the quarter; U.S., eurozone, and U.K. curves flattened while the rest steepened.

The U.S. dollar continued its advance versus most developed currencies in Q1, despite dovish comments from the Fed in March. While officials removed “patience” from the FOMC statement, Federal Reserve Chair Janet Yellen acknowledged during her March 18 press conference that the Fed is in no rush to raise rates. The euro weakened to a 12-year low versus the dollar, plunging by 11.2% during the quarter as the ECB’s QE program and uncertainly in Greece drove down the euro. In an effort to combat trailing inflation, Sweden’s Riksbank unexpectedly cut its repo rate by 0.15% to -0.25%, an unprecedented move into negative territory, and expanded its QE program by 30 billion kronor; the krona plunged during the quarter, by-9.2%. The 25-bp cut by Australia’s central bank reduced the currency’s relative yield advantage, dragging the Australian dollar down by 6.6%. During the quarter, U.K. sterling fell 4.8% versus the U.S. dollar, and, among emerging currencies, Brazilian real fell by 17.1%.

In addition to cutting its main rate by 50 bps to -0.75% in January, the Swiss National Bank shocked markets by announcing the end of its currency’s cap against the euro, stating that the franc is no longer overvalued. While the franc strengthened relative to the U.S. dollar by 8.0% in January, it weakened in February and March, ending the quarter up only 2.3%.

Developed markets interest-rate positioning was responsible for losses during the quarter. Gains from developed markets currency selection partly offset losses, followed by a small contribution provided by exposure to asset-backed securities held indirectly through GMO Debt Opportunities (DOF) and GMO World Opportunity Overlay (WOOF).

Interest-rate strategies suffered during the quarter. A very strong bull flattening of the eurozone rates curve put immense pressure on the strategy’s long-dated forward positions in March. The collapse in long-dated rates in the eurozone, and to a much lesser extent in the U.K., drove poor interest-rate strategy performance during the quarter. We believe these long rates in the eurozone are nowhere close to reasonable levels. Coming into the month of March, we had assumed there was a floor for nominal rates, particularly at the long end of the curve. With the move lower during the month, it appears that the floor is no longer in place and that the zero-bound or lower is a possibility even at longer-dated parts of the curve. We have adjusted our positioning within eurozone rates to withstand a further bull flattening of the curve. We have done this by converting short positions in the 15Y15Y to steepener positions, which would benefit from rates rising at the longer end of the curve. A steepener also requires increasing duration at the shorter end of the curve. The overall effect is to lower the volatility of the portfolio but maintain a position that would benefit from higher rates at the long end of the curve. We continue to have a high degree of confidence in these positions and are acting accordingly to ensure that the portfolio is positioned to withstand further extreme market moves. Our thesis remains that, in time, long-dated rates will likely rise, but that view is now expressed in relation to shorter-dated rates. In other interest-rates, overweight duration positions in Australia, New Zealand, and Mexico added value, while the overweight duration position in Brazil detracted.

The currency strategy partly offset losses during the quarter. An underweight position in euros drove currency gains, followed by small contributions from underweight positions in Swedish krona and Swiss francs. An overweight position in Brazilian real detracted.

March 31, 2015


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42GMO LLC © 2015

GMO International Bond Strategy



The J.P. Morgan GBI Global ex U.S. Index is an independently maintained and widely published index comprised of non‐U.S. government bonds with maturities of one year or more.



Total Return (%)

Strategy Benchmark

1Q 2015 ‐4.70 ‐4.08

YTD 2015 ‐4.70 ‐4.08


2014 1.30 ‐2.53

2013 ‐0.57 ‐5.08

2012 6.21 0.85

2011 6.71 5.91

2010 15.18 6.78

2009 20.59 3.94

2008 ‐13.95 11.39

2007 3.66 11.30

2006 9.33 6.84

2005 ‐8.08 ‐9.24


‐8.22

4.42 3.386.37

‐9.50

0.632.69

4.89

‐15

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 3.76 0.00

Beta 1.05 1.00

R2 0.88 1.00



Characteristics

Strategy



Maturity 9.1 Yrs.

Region Weights (%)1


14.8

‐18.1

0.5

11.3

Emerging

Europe

North America

Pacific



3.9

‐25.4

21.3

0.1

Emerging

Europe

North America

Pacific



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March 31, 2015

43GMO LLC © 2015

GMO International Bond Strategy


The International Bond Strategy returned -4.7% net of fees in the first quarter, underperforming the -4.1% return of the J.P. Morgan GBI Global ex U.S. index by 0.6%. The U.S. dollar’s advance versus almost all developed market currencies accounted for all of the negative index returns, as the 22-bp fall in the yield of the J.P. Morgan non-U.S. Government Bond index resulted in a +2.4% return in the index when measured in local currency terms.



The U.S. dollar continued its advance versus most developed currencies in Q1, despite dovish comments from the Fed in March. While officials removed “patience” from the FOMC statement, Federal Reserve Chair Janet Yellen acknowledged during her March 18 press conference that the Fed is in no rush to raise rates. The euro weakened to a 12-year low versus the dollar, plunging by 11.2% during the quarter as the ECB’s QE program and uncertainly in Greece drove down the euro. In an effort to combat trailing inflation, Sweden’s Riksbank unexpectedly cut its repo rate by 0.15% to -0.25%, an unprecedented move into negative territory, and expanded its QE program by 30 billion kronor; the krona plunged during the quarter, by -9.2%. The 25-bp cut by Australia’s central bank reduced the currency’s relative yield advantage, dragging the Australian dollar down by 6.6%. During the quarter, U.K. sterling fell 4.8% versus the U.S. dollar, and, among emerging currencies, Brazilian real fell by 17.1%.



Interest-rate strategies suffered during the quarter. A very strong bull flattening of the eurozone rates curve put immense pressure on the strategy’s long-dated forward positions in March. The collapse in long-dated rates in the eurozone, and to a much lesser extent in the U.K., drove poor interest-rate strategy performance during the quarter. We believe these long rates in the eurozone are nowhere close to reasonable levels. Coming into the month of March, we had assumed there was a floor for nominal rates, particularly at the long end of the curve. With the move lower during the month, it appears that the floor is no longer in place and that the zero-bound or lower is a possibility even at longer-dated parts of the curve. We have adjusted our positioning within eurozone rates to withstand a further bull flattening of the curve. We have done this by converting short positions in the 15Y15Y to steepener positions, which would benefit from rates rising at the longer end of the curve. A steepener also requires increasing duration at the shorter end of the curve. The overall effect is to lower the volatility of the portfolio but maintain a position that would benefit from higher rates at the long end of the curve. We continue to have a high degree of confidence in these positions and are acting accordingly to ensure that the portfolio is positioned to withstand further extreme market moves. Our thesis remains that, in time, long-dated rates will likely rise, but that view is now expressed in relation to shorter-dated rates. In other interest-rates, long duration positions in Australia, New Zealand, and Mexico added value, while the long duration position in Brazil detracted.


March 31, 2015


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STRATEGY PROFILE

44GMO 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

1Q 2015 3.15 3.83

YTD 2015 3.15 3.83


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


14.66

8.92

5.658.24

13.56

6.59 5.767.18

0

5

10

15

20

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 1.91 0.00

Beta 1.07 1.00

R2 0.79 1.00



Characteristics

Strategy



Maturity 8.9 Yrs.

Region Weights (%)1


14.9

‐24.0

0.3

13.0

Emerging

Europe

North America

Pacific



3.8

‐24.9

20.8

0.3

Emerging

Europe

North America

Pacific



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March 31, 2015

45GMO LLC © 2015

GMO Currency Hedged International Bond Strategy


The Currency Hedged International Bond Strategy returned +3.2% net of fees in the first quarter, underperforming the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index total return of +3.8% by 0.7%. The yield of the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index fell by 42 basis points during the quarter.






Interest-rate strategies suffered during the quarter. A very strong bull flattening of the eurozone rates curve put immense pressure on the strategy’s long-dated forward positions in March. The collapse in long-dated rates in the eurozone, and to a much lesser extent in the U.K., drove poor interest-rate strategy performance during the quarter. We believe these long rates in the eurozone are nowhere close to reasonable levels. Coming into the month of March, we had assumed there was a floor for nominal rates, particularly at the long end of the curve. With the move lower during the month, it appears that the floor is no longer in place and that the zero-bound or lower is a possibility even at longer-dated parts of the curve. We have adjusted our positioning within eurozone rates to withstand a further bull flattening of the curve. We have done this by converting short positions in the 15Y15Y to steepener positions, which would benefit from rates rising at the longer end of the curve. A steepener also requires increasing duration at the shorter end of the curve. The overall effect is to lower the volatility of the portfolio but maintain a position that would benefit from higher rates at the long end of the curve. We continue to have a high degree of confidence in these positions and are acting accordingly to ensure that the portfolio is positioned to withstand further extreme market moves. Our thesis remains that, in time, long-dated rates will likely rise, but that view is now expressed in relation to shorter-dated rates. In other interest-rates, overweight duration positions in Australia, New Zealand, and Mexico added value, while the overweight duration position in Brazil detracted.


March 31, 2015


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STRATEGY PROFILE

46GMO 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 (%)

Strategy Benchmark

1Q 2015 1.17 1.61

YTD 2015 1.17 1.61


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


7.29 7.53

4.97

6.105.72

4.414.93

5.77

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy Benchmark

Alpha 1.92 0.00

Beta 1.28 1.00

R2 0.75 1.00



Contribution to Duration

2.1

0.5

1.7

1.1

0.1

U.S. Treasuries

Government Related

Corporate

Securitized

Emerging Debt

Global Rates Contribution to Duration

0.70.4

0.60.20.30.30.40.4

‐0.3‐1.3

0.1

AustraliaBrazil

DenmarkEmerging debt

EurozoneJapan

MexicoNew ZealandSwitzerland

United KingdomUnited States

Portfolio Overlay Currency Positions1

0.53%1.68%

‐3.94%‐20.26%

2.99%‐0.45%‐0.77%

0.14%‐1.30%

AUDBRLCHFEURINRJPY

KRWNZDSEK

Portfolio Rating Breakdown2

27%

61%

1%

2%

6%

0%

3%

AAA

AA

AA

BBB

BB

B

Below B

NR

Characteristics

Strategy


Maturity 4.3 Yrs.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.





(617) 330‐7500 | www.gmo.com

March 31, 2015

47GMO LLC © 2015

GMO Core Plus Bond Strategy


The Core Plus Bond Strategy returned +1.2% net of fees during the first quarter, underperforming the +1.6% return of its benchmark, the Barclays U.S. Aggregate index, by 0.4%. Falling U.S. Treasury yields contributed positively to index performance, followed by gains on tightening sector spreads.

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 24 basis points to end the quarter at 1.9%, and the 2 year yields fell by 12 basis points to end the quarter at 0.6%.

The overall option-adjusted spread of the Barclays U.S. Aggregate index tightened by 2 basis points during the quarter, with spreads tightening by as much as 8 basis points (MBS). Only ABS (+3 basis points) and U.S. Agency (+1 basis point) credit spreads widened during the quarter.





Developed markets interest-rate positioning was responsible for losses during the quarter. Gains from developed markets currency selection partly offset losses, followed by a small contribution provided by exposure to asset-backed securities held directly and indirectly through GMO Debt Opportunities (DOF) and GMO World Opportunity Overlay (WOOF).

Interest-rate strategies suffered during the quarter. A very strong bull flattening of the eurozone rates curve put immense pressure on the strategy’s long-dated forward positions in March. The collapse in long-dated rates in the eurozone, and to a much lesser extent in the U.K., drove poor interest-rate strategy performance during the quarter. We believe these long rates in the eurozone are nowhere close to reasonable levels. Coming into the month of March, we had assumed there was a floor for nominal rates, particularly at the long end of the curve. With the move lower during the month, it appears that the floor is no longer in place and that the zero-bound or lower is a possibility even at longer-dated parts of the curve. We have adjusted our positioning within eurozone rates to withstand a further bull flattening of the curve. We have done this by converting short positions in the 15Y15Y to steepener positions, which would benefit from rates rising at the longer end of the curve. A steepener also requires increasing duration at the shorter end of the curve. The overall effect is to lower the volatility of the portfolio but maintain a position that would benefit from higher rates at the long end of the curve. We continue to have a high degree of confidence in these positions and are acting accordingly to ensure that the portfolio is positioned to withstand further extreme market moves. Our thesis remains that, in time, long-dated rates will likely rise, but that view is now expressed in relation to shorter-dated rates. In other interest-rates, long duration positions in Australia, New Zealand, and Mexico added value, while the long duration position in Brazil detracted.

The currency strategy partly offset losses during the quarter. An active short position in euros drove currency gains, followed by small contributions from short positions in Swedish krona and Swiss francs. A long position in Brazilian real detracted.

March 31, 2015


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STRATEGY PROFILE

48GMO 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 1.77

Sharpe Ratio 3.72

Drawdown

(5/31/13‐6/30/13)‐1.23


0.5

0.3

0.9

98.3

Chile

Ireland

United Kingdom

United States

Total Return (%)

Strategy Benchmark

1Q 2015 0.62 0.09

YTD 2015 0.62 0.09


2014 4.35 0.35

2013 5.76 0.40

2012 11.90 0.82

2011 0.16 0.12


3.49

6.62

0.35 0.52

0

2

4

6

8

1YR ITD

Strategy Benchmark



(617) 330‐7500 | www.gmo.com

March 31, 2015

49GMO LLC © 2015

GMO Debt Opportunities Strategy


The Debt Opportunities Strategy returned +0.6% net of fees, outperforming the return of the J.P. Morgan U.S. 3 Month Cash index by 0.5% for the first quarter.

In the first quarter, securitized products were tighter across most asset classes, generally moving with the greater credit markets. Government bonds rallied to the tight end of their local ranges into the end of March. Securitized products were led by CLOs in both primary and secondary trading. The quarter ended with six new issue deals ($3.2 billion of paper), bringing a very brisk new issue pipeline to a year-to-date total of approximately $28 billion. According to Bank of America Global Research, secondary trading saw triple-A tighten by 12 basis points, while CLOs tightened by 40 basis points in double-A and single-A, and triple-B tightened by 55 basis points. The technical conditions for leveraged loans are very positive as supply in this asset class has trended down while demand for this paper (in the form of new CLOS) is at historically high levels.

Additionally, asset-backed securities outperformed during the quarter with triple-A Auto and Credit Card spreads tightening by 7 basis points each, to finish at 26 and 38 basis points, respectively. Benchmark CMBS cash was relatively flat in the senior part of the structure, while mezzanine bond (-5 bps) and legacy AJs (-60 bps) outperformed. Non-Agency Subprime was broadly flat as an asset class. The sector continues to exhibit a lower level of spread volatility than it has in the past.

At quarter-end, 36% of the strategy’s portfolio was rated AAA, although about 47% of the portfolio was rated single-A or better. Approximately 63% of the strategy is invested in asset-backed securities (ABS), 10% in commercial mortgage-backed securities (CMBS), and 27% in cash or cash equivalents.

March 31, 2015


(617) 330‐7500 | www.gmo.com

STRATEGY PROFILE

50GMO 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

1Q 2015 ‐5.95 0.09

YTD 2015 ‐5.95 0.09


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


10.03

8.33

0.540.35 0.50

2.11

0

2

4

6

8

10

12

1YR 5YR ITD

Strategy Benchmark


Strategy

Std. Deviation 10.54

Sharpe Ratio 0.78

Drawdown

(2/27/15‐3/31/15)‐13.23

Currency Exposure (%)

Net Contribution

Country Exposure (%)

Net Contribution

Performance Attribution (%)Net Contribution

191041

‐1‐3‐5‐8

‐25‐131

IndiaBrazil

AustraliaNew Zealand

U.K.Japan

South KoreaSweden

SwitzerlandEuro Area

493836

2825

14128

‐8‐21

‐80

AustraliaMexico

DenmarkNew Zealand

BrazilEuroU.S.

JapanCzech Republic

SwitzerlandUK

‐20.0

13.3

‐0.8

0.6

0.0

Cross Market

Currency Performance

Opportunistic

Volatility

Yield Curve



(617) 330‐7500 | www.gmo.com

March 31, 2015

51GMO LLC © 2015

GMO Fixed Income Hedge Strategy


The Fixed Income Hedge Strategy returned -6.0% net of fees in the first quarter of 2015, underperforming its benchmark, the J.P. Morgan U.S. 3 Month Cash index, by 6.0%. Cross-market interest-rate strategies were responsible for losses during the quarter, while contributions from currency performance partly offset these losses.

The global bond rally of 2014 continued into 2015, accelerating in March. With the exception of the Japanese bond market (-0.3%), government markets rose during the quarter: in 10-year-equivalent, interest-rate swap terms, gains were the highest in Canada, +4.6%, and the lowest in the U.K., +2.5%. In the eurozone (+3.0%), rates continued their descent into historic lows (near zero!) as the European Central Bank began its unconventional 19-month, €1.1 trillion quantitative easing program in early March in an attempt to boost economic recovery while staving off deflation. Further, the ECB’s purchases on the long end of the yield curve triggered a bull-flattening bias. In the U.K., gilts posted a fifth consecutive quarter of gains as falling inflation and speculation that the Bank of England would not be raising rates in the near future put downward pressure on yields. Investors seeking higher bond returns were also attracted to the relative yield premium offered by U.K. gilts.

The U.S. dollar continued its advance versus most developed currencies in Q1, despite dovish comments from the Fed in March. While officials removed “patience” from the FOMC statement, Federal Reserve Chair Janet Yellen acknowledged during her March 18 press conference that the Fed is in no rush to raise rates. The euro weakened to a 12-year low versus the dollar, plunging by 11.2% during the quarter as the ECB’s QE program and uncertainly in Greece drove down the euro. In an effort to combat trailing inflation, Sweden’s Riksbank unexpectedly cut its repo rate by 0.15% to-0.25%, an unprecedented move into negative territory, and expanded its QE program by 30 billion kronor; the krona plunged during the quarter, by -9.2%. The 25-bp cut by Australia’s central bank reduced the currency’s relative yield advantage, dragging the Australian dollar down by 6.6%. U.K. sterling also fell versus the U.S. dollar, by 4.8% during the quarter, and, among emerging currencies, Brazilian real fell by 17.1%.


Interest-rate strategies suffered during the quarter. A very strong bull flattening of the eurozone rates curve put immense pressure on the strategy’s short long-dated forward positions in March. The collapse in long-dated rates in the eurozone, and to a much lesser extent in the U.K., drove poor interest-rate strategy performance during the quarter. A long duration position in Brazil also detracted, while long duration positions in Australia, New Zealand, and Mexico added value. We believe these long rates in the eurozone are nowhere close to reasonable levels. Coming into the month of March, we had assumed there was a floor for nominal rates, particularly at the long end of the curve. With the move lower during the month, it appears that the floor is no longer in place and that the zero-bound or lower is a possibility even at the very long end of the curve. We have adjusted our positioning within eurozone rates to withstand a further bull flattening of the curve. We have done this by converting short positions in the 15Y15Y to steepener positions, which would benefit from rates rising at the longer end of the curve. A steepener also requires increasing duration at the shorter end of the curve. The overall effect is to lower the volatility of the portfolio but maintain a position that would benefit from higher rates at the long end of the curve. We continue to have a high degree of confidence in these positions and are acting accordingly to ensure that the portfolio is positioned to withstand further extreme market moves. During the month, the strategy re-structured many of the outright negative duration positions to more of a “steepener” play. Still the same thesis that long-dated rates will likely rise, but now structured less as an absolute shift, and more as a relative one.

The currency strategy partly offset losses during the quarter. A short position in euros drove currency gains, followed by small contributions from short positions in Swedish krona and Swiss francs. A long position in Brazilian real detracted.

March 31, 2015


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STRATEGY PROFILE

52GMO 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

1Q 2015 ‐2.69 0.01

YTD 2015 ‐2.69 0.01


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


‐8.12

‐0.58

2.22

6.13

0.03 0.071.41 1.40

‐10

‐5

0

5

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 5.45

Sharpe Ratio ‐0.12

Drawdown

(5/31/13‐3/31/15)‐12.57

Equity Exposure (%)

Position Absolute Weight

76.0

15.0

9.0

‐10.0

‐14.0

‐68.0

High Quality

EAFE Value

Emerging Value

U.S. Mid

U.S. Small

S&P 500 ex. Fins

Fixed Income & Inflation Exposure (%)1


48.0

48.0

‐43.0

‐76.0

Antipodean Rates

U.S. Rates

Eur Rates

Japan Rates

Currency Exposure (%)


17.0

5.0

‐4.0

‐5.0

‐5.0

‐10.0

Indian Rupee

Brazilian Real

Euro

Israeli Shekel

Swiss Franc

Commodity FX

Other Exposure (%)


5.0Credit Opportunies Fund



(617) 330‐7500 | www.gmo.com

March 31, 2015

53GMO LLC © 2015

GMO Mean Reversion Strategy


Mean Reversion Strategy delivered a net return of -2.7% during the first quarter of 2015. Poor performance was driven primarily by a short position in European rates.

In January of 2015, we incorporated a short position in eurozone rates (15-year rates 15 years out) as these rates hit new lows. Since adding the position, eurozone rates have pushed lower, impacted by the ECB’s quantitative easing program and a limited supply of long-dated eurozone bonds. This position detracted 3.4% during the quarter.

Equity positions detracted, led by the quality vs. S&P 500 position, which subtracted 0.7% during the quarter as quality failed to keep up with the broader market. International and emerging markets value vs. U.S. small and midcap detracted 0.1%. The tax inversion strategy, which finished in January when the remaining deal closed, had a negligible impact on performance.

Yield compression and circular easing by the central banks have caused rising correlations across the rates and currency markets. It is unreasonable for us to believe that we can construct a portfolio of uncorrelated spread trades. For that reason, today we are considering all fixed income positions as a single portfolio (as we are with currency positions). Our long position in Australia and New Zealand bonds added 1.1%. Given that we already hold short positions in eurozone and Japanese rates, the global rates short is not necessary. The Japanese rates short and U.S. 2s30s steepener each added about 0.1%; we took out the steepener in favor of the more attractive eurozone rates short. The U.S. Treasuries vs. Bunds positon was relatively flat for the quarter. We have eliminated the short Bunds position, as that view is currently well expressed by our existing eurozone rates short. We converted the U.S. Treasuries position into a long U.S. rates position; that contributed 0.5%.

Currency positions were also a drag on performance, led by the impact of the euro/Swiss franc trade, which suffered in January as the Swiss National Bank released the peg to the euro. Since then we have maintained the Swiss franc short relative to the U.S. dollar, which has recovered some of the loss. Overall, that position detracted 0.6%. The Indian rupee long and commodity currency contributed 0.5% and 0.2%, respectively. The Israel shekel short detracted 0.4%. The Brazilian real long and the euro short (which we added at the end of the quarter) each modestly contributed to performance. All currency positions are now expressed relative to the U.S. dollar.

March 31, 2015


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STRATEGY PROFILE

54GMO LLC © 2015

GMO Systematic Global Macro Strategy






Total Return (%)

Strategy Benchmark

1Q 2015 6.26 0.01

YTD 2015 6.26 0.01


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


8.70

6.507.48 7.64

0.03 0.07

1.41 1.40

0

2

4

6

8

10

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 6.70

Sharpe Ratio 0.96

Drawdown

(5/31/10‐7/31/10)‐5.61

Equity Market Selection (%)

Country Net Weight

26.510.010.05.05.05.05.02.0

‐1.0‐1.5‐5.0‐5.0

56.0

UKHong Kong

TaiwanGermany

ItalyNetherlandsSingapore

MSCI EmergingU.S.

AustraliaCanada

South AfricaNet Equity

Bond Market Selection (%)

Country Net Weight

50.00.9

‐43.07.9

U.S.Asset Backed

JapanNet Bond

Currency Selection (%)

Currency Net Weight

33.0

20.0

7.0

‐20.0

‐40.0

‐46.4

U.S. Dollar *

Euro

Japanese Yen

Australian Dollar

British Pound

Net Cash **

* 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 Weight2.5

‐2.5

‐2.5

‐5.0

‐5.0

‐5.0

‐17.5

Crude Oil

Copper

Wheat

Heating Oil

Gold

Corn

Net Commodity



(617) 330‐7500 | www.gmo.com

March 31, 2015

55GMO LLC © 2015

GMO Systematic Global Macro Strategy


The Systematic Global Macro Strategy returned +6.3% net of fees over the March quarter as currency, equity, bond, and commodity market positions added value.

Currency positions added 3.3% as the U.S. dollar, held long, strengthened against short positions in the Swedish krona, British pound, and Australian dollar.

Our net long allocation to equities contributed 1.6% as global markets (i.e., MSCI World Net Returns Index in USD) advanced 2.3% over the first quarter. Equity market selection added a further 1.5%, due mostly to the outperformance of European markets, held long. However, a long position in VIX futures, which cost 0.9%, subtracted the most value over the quarter.

Bond positions added 1.3% due to our large short position in 10-year JGB futures underperforming a long position in U.S. 10-year Treasury note futures.

Commodity market positions added 1.0% as we held a net short exposure and they weakened 5.9% according to the Bloomberg Commodity Index.

The Strategy maintains a large long exposure to equity markets, a net short allocation to commodity markets, and a small net long bond allocation. We removed a small long position in VIX futures and mostly removed long positions in U.S. and emerging markets, but other equity market allocations remain unchanged: long positions are concentrated in European markets and Asia ex-Japan. We also made adjustments to our currency positions. While sentiment continues to support a long position in the U.S. dollar, which we hold against short positions in the British pound and the Australian dollar, we have extended our short position in pounds and established a meaningful long position in the euro.

March 31, 2015


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STRATEGY PROFILE

56GMO LLC © 2015

GMO Tactical Opportunities Strategy






Total Return (%)

Strategy Benchmark

1Q 2015 ‐7.58 0.01

YTD 2015 ‐7.58 0.01


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


‐7.42

‐6.37‐7.02 ‐6.95

0.03 0.07

1.41 1.44

‐8

‐6

‐4

‐2

0

2

1YR 5YR 10YR ITD

Strategy Benchmark


Strategy

Std. Deviation 15.67

Sharpe Ratio ‐0.41

Drawdown

(9/30/11‐3/31/15)‐37.38

Characteristics

Long Short

Price/Earnings ‐ Excl Neg Earnings Hist 1 Yr Wtd Med 20.9 x 22.6 x

% Negative Earnings 0.4 % 48.0 %

Price/Book ‐ Hist 1 Yr Wtd Avg 4.1 % 3.2 %



Debt/Equity Wtd Med 0.6 x 1.4 x

% Long/Short 134 % 137 %


Region Weights (%)

Net Weight

23.5

‐26.5

Non US

US


Net Weight Long Short

6.7 28.4

33.1 3.8

0.2 12.9

0.0 2.1

33.6 24.5

11.2 15.3

44.5 21.7

2.2 11.7

2.3 4.7

0.0 11.8

‐21.7

29.3

‐12.7

‐2.1

9.1

‐4.1

22.8

‐9.5

‐2.4

‐11.8

Consumer Disc.

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Tech.

Materials

Telecom. Services

Utilities



(617) 330‐7500 | www.gmo.com

March 31, 2015

57GMO LLC © 2015

GMO Tactical Opportunities Strategy


The Tactical Opportunities Strategy lost 7.6% net of fees in the first quarter of 2015.

High quality stocks within the U.S. lagged the broader market in the first quarter with the three identifiers of quality all being mixed; high profitability won, low leverage was a push, and low profit volatility lagged.

Large cap stocks lagged small caps, both within the broader market and the quality universe. Our positions in international quality companies had a positive impact during the quarter.

The top contributors in the long portfolio were Health Care and Information Technology. UnitedHealth Group and Covidien were among the top contributors.

The largest absolute detractor in the long portfolio was Consumer Staples, with Procter & Gamble and Philip Morris International leading the way.

Short exposure within Health Care and Information Technology drove the majority of the absolute negative returns from the short portfolio while short exposure within Utilities had a positive contribution to return.

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

March 31, 2015


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STRATEGY PROFILE

58GMO 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

1Q 2015 3.29 0.01

YTD 2015 3.29 0.01

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


‐0.63

5.75

2.36

6.01

0.03 0.07

1.41 1.68

‐2

0

2

4

6

8

1YR 5YR 10YR ITD

Strategy Benchmark

Strategy Exposure (%)1

84.0

14.0

2.0

100.0

Equities

Merger Arbitrage

Other

Total

Region Exposure (%)1

75.0

25.0

100.0

Non‐U.S.

U.S.

Total



(617) 330‐7500 | www.gmo.com

March 31, 2015

59GMO LLC © 2015

GMO Total Equities Strategy


In dollar terms, global equities generally posted modest gains during the first quarter as central bankers took center stage and commodity prices continued to deflate. As international markets rose, the dollar strengthened considerably against most currencies with the exception of the yen. International developed markets produced strong returns in local terms, bolstered by the onset of quantitative easing in the eurozone and by the continuation of Abenomics in Japan. The U.S. market delivered barely positive returns as Fed watchers focused on if and when the rate tightening cyclemight begin, and the economy under-delivered on optimistic growth expectations. At quarter end, the MSCI All Country World index registered a gain of 2.3%. MSCI EAFE was up 4.9%. The strongest performing major developed market was Japan, with MSCI Japan up 10.2%. Among the major markets, the U.K. had the weakest dollar returns with MSCI U.K. down 1.0%. The S&P 500 returned +1.0% for the quarter, and MSCI Europe was up 3.5% in dollar terms. Emerging markets trailed developed international markets; MSCI Emerging returned +2.2% for the quarter.

The Total Equities Strategy returned +3.3% net of fees for the quarter, with the majority of the return driven by exposure to Equities.

Our equities strategy contributed 3.1% to the strategy’s total return. Exposure to Japan Value and U.S. opportunistic value helped the strategy top the MSCI ACWI index by 1.0%. Exposure to U.S. quality detracted for the quarter.

Merger arbitrage contributed 0.4% to the strategy as two major deals closed during the quarter; Allergan-Actavis and Covidien-Medtronic. Total Equities did not have exposure to the volatility strategy during the quarter.

March 31, 2015

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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 GBI Global ex‐U.S. Index The J.P. Morgan GBI Global ex‐U.S. Index is an independently maintained and widely published index comprised of non‐U.S. government bonds with maturities of one year or more.

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.

quarterly update –march 31, 2015 - valuewalk · 5/1/2015 · 1q 2015 ytd 2015 ytd value added...

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