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, developed international, and emerging markets. 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 holly.carson@gmo.com This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such.
GMO Capabilities
GMO U.S. Equities
U.S. Core Intrinsic Value Growth Small/Mid Cap Real Estate*
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Global Developed Equity Allocation International All Country Equity Alloc. International Developed Equity Allocation U.S. Equity Allocation Flexible Equities* Special Situations* Alternative Asset Opportunity* Alpha Only* Tax-Managed Global Balanced
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* Certain GMO capabilities are not available through separately managed accounts and therefore information on those capabilities are not included in this document. For information please contact GMO.
3Q 2013 2.58 5.25 3.76 3.94 5.48 8.11 9.37 9.08 3Q 2013 11.63 11.56 12.33 14.57 13.67 12.63 11.56 9.49 10.50 11.56 13.19 11.56 9.70 7.57 9.98 7.39 13.21 11.56
YTD 2013 18.36 19.79 20.53 20.47 19.44 20.87 29.33 25.89 YTD 2013 15.78 16.14 20.84 19.19 17.61 15.71 16.14 17.34 16.54 16.14 17.81 16.14 19.48 19.21 24.08 24.67 18.15 16.14
11/30/01
0.80
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. Copyright 2013 by GMO. All rights reserved. This document may not be reproduced, distributed or transmitted, in whole or in portion, by any means, without written permission from GMO.
3Q 2013 7.70 6.30 5.77 7.48 6.30 5.77 0.17 5.77 3Q 2013 8.69 8.18 16.07 7.90 1.62 5.25 8.64 8.18 3Q 2013 12.90 9.44 3Q 2013 1.23 0.57 4.64 4.20 0.49 0.79 2.81 2.68
YTD 2013 -5.50 -2.66 -4.35 -6.51 -2.66 -4.35 1.39 -4.35 YTD 2013 17.05 17.29 22.35 14.43 14.68 19.79 18.72 17.29 YTD 2013 2.08 -1.04 YTD 2013 0.62 -1.89 0.29 -3.68 -0.09 0.09 -1.33 -3.28
9/30/97
-3.85
3/31/11
5.75
12/31/95
1.95
* 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.
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.
Inception Date 6/30/88 6/30/04 7/31/01 7/31/01 12/31/09 12/31/93 3/31/87 2/28/94
3Q 2013 4.48 5.33 3.74 5.01 3.02 0.43 2.77 0.43 -0.88 0.43 6.74 7.93 7.10 8.18 11.43 10.12 12.22 11.56 2.00 5.58 -0.36 0.01 4.29 5.04 3Q 2013 7.85 0.01 -11.63 0.01 0.37 0.10 -1.82 0.10 -1.10 0.10 -5.32 0.01 2.26 0.01
YTD 2013 7.86 8.54 8.97 9.76 7.28 1.28 6.42 1.28 2.43 1.28 13.11 14.95 16.37 17.29 11.00 10.20 16.67 16.14 16.67 20.35 3.29 0.04 6.66 7.97 YTD 2013 12.17 0.04 -13.19 0.04 -6.86 0.31 -2.34 0.31 -4.50 0.31 -1.64 0.04 8.45 0.04
YTD Value Added -0.68 -0.79 6.00 5.14 1.15 -1.84 -0.93 0.80 0.53 -3.68 3.25 -1.31
International Developed Equity Allocation 11/30/91 Blended Benchmark U.S. Equity Allocation Blended Benchmark Alternative Asset Opportunity Citigroup 3-Mo. T-Bill Tax-Managed Global Balanced GMO Tax-Managed Global Balanced Index 2/28/89 10/31/11 12/31/02
YTD Value Added 12.13 -13.23 -7.18 -2.65 -4.81 -1.68 8.40
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.
Strategy Benchmark
2.58 5.25
18.36 19.79
15.19 19.34
Annual Total Return (%)
9.84 10.02
6.66 7.57
11.18 10.83
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
9.85 10.88
3.66 4.91
9.74 15.80
21.40 26.46
8.95 15.06
8.16 2.11
12.87 16.00
Sector Weights5
Sector Underweight/Overweight Against Benchmark Strategy Benchmark -3.8 7.0 -3.3 -5.1 12.8 -6.8 7.0 -3.2 -1.9 -2.6 -20 -10 0 10 20
GICS Sectors
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med 17.1 Price/Book - Hist 1 Yr Wtd Avg 2.5 Dividend Yield - Hist 1 Yr Wtd Avg 2.2 Return on Equity - Hist 1 Yr Med 19.7 Market Cap - Weighted Median $Bil $114.2
x x % %
x x % %
Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecom. Services Utilities
8.7 % 17.0 7.2 11.2 25.8 3.9 24.9 0.3 0.5 0.6
12.5 % 10.0 10.5 16.3 13.0 10.7 17.9 3.5 2.4 3.2
Quarterly Strategy Attribution The U.S. Core Strategy returned +2.6% net of fees for the third quarter of 2013, trailing the +5.2% return of the S&P 500 index. Sector selection had a negative impact on relative returns for the quarter. The strategy saw positive returns relative to the S&P 500 attributable to an overweight in Health Care and underweight positions in Utilities and Telecommunication Services. An overweight in Consumer Staples and underweight positions in Industrials and Materials detracted. Stock selection also detracted from relative returns for the quarter. Selections in Financials and Industrials added to relative returns while selections in Information Technology, Health Care, and Energy detracted. Individual stocks adding to relative returns in the third quarter included underweight positions in Exxon Mobil and Verizon Communications and an overweight in Sears Holdings Corp. Stock selections detracting from relative returns included overweight positions in Microsoft and Hewlett-Packard and an underweight in Apple.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
3.76 3.94
2007
2008
Johnson & Johnson Pfizer Inc. Microsoft Corp. JPMorgan Chase & Co. Wal-Mart Stores Inc. Int'l. Business Machines Merck & Co Inc Oracle Corp. Cisco Systems Inc. Bank of America Corp. Total
4.8% 4.5% 4.2% 3.8% 3.1% 2.7% 2.4% 2.2% 2.1% 2.1% 31.9%
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 1.5 Consumer Discretionary 8.0 % 6.5 % 10.6 Consumer Staples 16.4 5.8 -9.6 Energy 5.4 15.0 -13.5 Financials 15.5 29.0 14.8 27.8 Health Care 13.0 -5.6 Industrials 4.4 10.0 12.1 Information Technology 21.1 9.0 Sector
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Med Market Cap - Weighted Median $Bil
x x % %
x x % %
Quarterly Strategy Attribution The Intrinsic Value Strategy returned +3.8% net of fees for the third quarter of 2013, as compared to the +3.9% return of the Russell 1000 Value index. Sector selection added to relative returns for the quarter. The strategy saw positive returns relative to the Russell 1000 Value index attributable to an overweight in Information Technology and underweight positions in Financials and Utilities. Underweight positions in Industrials and Materials and an overweight in Consumer Staples detracted. Stock selection detracted from relative returns. Selections in Financials, Health Care, and Consumer Discretionary added to returns versus the Russell 1000 Value index while selections in Information Technology, Consumer Staples, and Energy detracted. Individual stocks adding to relative returns in the third quarter included overweight positions in Gilead Sciences and Amgen and an underweight in Exxon Mobil. Stock selections detracting from relative returns included overweight positions in International Business Machines and Microsoft and an underweight in Apple.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The Russell 1000 Value Index is an independently maintained and widely published index comprised of the stocks included in the Russell 1000 Index with lower price-tobook ratios and lower forecasted growth values. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
5.48 8.11
2007
2008
Google Inc. (Cl A) Apple Inc. Microsoft Corp. Int'l. Business Machines QUALCOMM Inc. Coca-Cola Co. Philip Morris Int'l. Inc. Oracle Corp. Visa Inc. Wal-Mart Stores Inc. Total
4.5% 4.5% 4.1% 3.0% 2.9% 2.7% 2.6% 2.4% 2.3% 2.3% 31.3%
Sector Weights5
Sector Underweight/Overweight Against Benchmark Strategy Benchmark
-1.8 Consumer Discretionary Consumer Staples -4.2 Energy -4.7 Financials -2.0 Health Care Characteristics5 -6.6 Industrials Strategy Benchmark Information Technology Price/Earnings - Hist 1 Yr Wtd Med 19.7 x 21.2 x -2.7 Materials Earnings/Share - F'cast LT Med Growth 13.0 x 13.0 x -0.1 Telecom. Services Dividend Yield - Hist 1 Yr Wtd Avg 1.8 % 1.7 % -0.2 Utilities Return on Equity - Hist 1 Yr Med 23.1 % 21.5 % -20 -10 0 Market Cap - Weighted Median $Bil $77.6 $50.8
18.2 %
16.3 28.6
6.0
20.0 % 12.3 4.8 5.3 12.1 12.2 26.5 4.5 2.0 0.2
GICS Sectors
10
Quarterly Strategy Attribution The Growth Strategy returned +5.5% net of fees in the third quarter of 2013, trailing the +8.1% return of the Russell 1000 Growth index. Sector selection detracted from relative returns for the quarter. An underweight position in Financials and an overweight position in Information Technology added to relative returns. An overweight position in Consumer Staples and underweight positions in Energy and Industrials were the leading detractors. Stock selection detracted from relative returns for the quarter. Selections in Consumer Staples and Industrials added to relative returns. Selections in Information Technology, Health Care, and Energy detracted. Individual stocks adding to relative returns in the third quarter included overweight positions in Herbalife, Nu Skin Enterprises, and Priceline.com. Stock selections detracting from returns included underweight positions in Facebook and Schlumberger and an overweight in Intuitive Surgical.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The Russell 1000 Growth Index is an independently maintained and widely published index comprised of the stocks included in the Russell 1000 Index with higher priceto-book ratios and higher forecasted growth values. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
9.37 9.08
2007
2008
Safeway Inc. GameStop Corp. Gannett Co. Inc. Torchmark Corp. Genworth Financial Inc. Manpower Inc. Harris Corp. Omnicare Inc. Tesoro Petroleum Corp. Energizer Holdings Inc. Total
1.0% 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 7.6%
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 4.7 Consumer Discretionary 19.7 % 15.0 % 3.7 Consumer Staples 6.5 2.8 -2.0 Energy 3.9 5.9 0.6 Financials 23.4 22.8 -3.0 Health Care 7.6 10.6 0.5 Industrials 15.9 15.4 Sector
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Med Market Cap - Weighted Median $Bil
x x % %
x x % %
Quarterly Strategy Attribution The Small/Mid Cap Strategy returned +9.4% net of fees in the third quarter of 2013, leading the +9.1% return of the Russell 2500 index. Sector selection added to relative returns. An overweight position in Consumer Staples and an underweight in Utilities added to relative returns during the period while underweight positions in Health Care and Energy detracted. Stock selection also added to relative returns for the quarter. Selections in Consumer Discretionary, Industrials, and Financials added to relative returns while selections in Health Care, Energy, and Information Technology detracted. Individual stocks adding to relative returns included overweight positions in Safeway, Rite Aid, and Penske Automotive Group. Individual names detracting from relative returns included overweight positions in Energizer Holdings, First Solar, and Community Health Systems.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The Russell 2500 + Index is an internally maintained benchmark computed by GMO, comprised of (i) the Russell 2500 Index from 12/31/1991 to 12/31/1996 and (ii) the Russell 2500 Value Index from 12/31/1996 to 1/16/2012 and (iii) the Russell 2500 Index thereafter. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
11.63 11.56
2007
2008
2010
2011
Sumitomo Mitsui Financial Mitsubishi Tokyo Financial Toyota Motor Corp. HSBC Holdings PLC Australia & NZ Banking Sanofi-Aventis S.A. GDF Suez S.A. Asciano Group Telstra Corp. Ltd. Honda Motor Co. Ltd. Total
2.9% 2.4% 2.0% 2.0% 2.0% 1.8% 1.8% 1.8% 1.6% 1.5% 19.8%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg
Regional Weights5
Region Underweight/Overweight Against Benchmark (%) 2.2 -3.6 1.5 -3.4 -2.1 2.0 3.5 -4 -2 0 2 4
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 6.0 Consumer Discretionary 17.8 % 11.8 % -2.3 Consumer Staples 8.9 11.2 -1.4 Energy 5.5 6.9 2.5 Financials 27.9 25.4 -4.5 Health Care 5.4 9.9 2.2 Industrials 15.2 13.0 -0.5 Information Technology 3.8 4.3 -0.9 Materials 7.3 8.2 -0.8 Telecom. Services 4.7 5.5 -0.1 Utilities 3.6 3.7 Sector -10 -5 0 5 10
GICS Sectors
Europe ex-UK United Kingdom Japan Southeast Asia Australia/New Zealand Emerging Cash
Quarterly Strategy Attribution The International Active EAFE Strategy returned +11.6% net of fees in the third quarter, even with the MSCI EAFE index, which also returned +11.6%. Country selection lagged the benchmark. An overweight position in Japan subtracted from returns. While still among the top performing countries for the year to date, the market did not keep pace in the quarter. Stock selection beat the benchmark in the third quarter. Holdings in Continental Europe and Australia outperformed. Stock selection in Japan and the emerging markets was negative.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
GMO Intl. Active Foreign Small Companies Strategy As of September 30, 2013
Inception: 1/31/95; Benchmark: S&P Developed ex-U.S. Small Cap Index Performance Net of Fees1
Total Return (%) Average Annual Total Return (%)
12.33 14.57
2007
2008
2010
2011
Asciano Group Euromoney Institutional Nihon Kohden Corp. Toll Holdings Ltd. Valeo S.A. Filtrona PLC Aryzta AG Sky City Entertainment Izumi Co. Ltd. Lupus Capital PLC Total
1.4% 1.4% 1.3% 1.3% 1.3% 1.2% 1.2% 1.2% 1.1% 1.1% 12.5%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg
x x x %
x x x %
Regional Weights5
Region Underweight/Overweight Against Benchmark (%) -0.2 0.2 1.4 Sector
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 11.2 Consumer Discretionary 28.2 % 17.0 % -1.7 Consumer Staples 4.0 5.7 1.6 Energy 6.2 4.6 -4.7 Financials 15.9 20.6 -1.9 Health Care 4.0 5.9 Industrials 24.1 23.3 0.8 Information Technology 8.3 8.9 -0.6 Materials 8.5 10.6 -2.1 Telecom. Services 0.8 1.1 -0.3 Utilities 0.0 2.2 -2.2 6 -20 -10 0 10 20
GICS Sectors
Europe ex-UK United Kingdom Japan -3.7 Southeast Asia -5.3 Canada Australia/New Zealand Emerging Cash
-6
Quarterly Strategy Attribution The Foreign Small Companies Strategy underperformed the S&P Developed ex-U.S. Small Cap index in the third quarter, gaining 12.3% net of fees while the benchmark rose 14.6%. Country selection was behind the benchmark. An overweight position in Japan subtracted from performance. While still among the top-performing countries for the year to date, the market did not keep pace in the quarter. Stock selection lagged the benchmark. Our holdings in Japan, Australia, and the emerging markets underperformed. Stock selection was positive in Continental Europe.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
10
2008
Total S.A. Royal Dutch Shell PLC BP PLC Banco Santander S.A. Vodafone Group PLC AstraZeneca PLC Telefonica S.A. E.ON AG Barclays PLC Rio Tinto PLC Total
4.8% 4.3% 3.3% 2.9% 2.9% 2.3% 2.2% 1.6% 1.6% 1.5% 27.4%
Characteristics5
M SCI Strategy EAFE Value M SCI EAFE
Price/Earnings - Hist 1 Yr Wtd Med 12.5 x Price/Cash Flow - Hist 1 Yr Wtd Med 5.7 x Price/Book - Hist 1 Yr Wtd Avg 1.1 x Return on Equity - Hist 1 Yr Med 9.9 % Market Cap - Weighted Median $Bil $29.4 Dividend Yield - Hist 1 Yr Wtd Avg 3.7 %
x x x % %
x x x % %
Regional Weights
Region
Sector Weights
Sector
Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Cash
Underweight/Overweight Against M SCI EAFE Value (%) 2.5 1.8 0.7 -1.8 0.5 -4.0 0.5 -6 -3 0 3 6
Underweight/Overweight Against M SCI EAFE Value Strategy Benchmark 3.6 Consumer Discretionary 10.6 % 7.0 % -0.6 Consumer Staples 2.8 3.4 6.3 Energy 16.8 10.5 -10.4 Financials 25.8 36.2 2.6 Health Care 8.6 6.0 -1.3 Industrials 9.3 10.6 -1.0 Information Technology 2.3 3.3 -2.7 Materials 5.8 8.5 2.1 Telecom. Services 10.6 8.5 1.5 Utilities 7.5 6.0 -20 -10 0 10 20
GICS Sectors
GMO 2013
11
20.25
13.54
26.34
11.17 -43.38
31.78
7.75 -12.14
17.32
Roche Holding AG GlaxoSmithKline PLC Nestle S.A. Toyota Motor Corp. British American Tobacco Diageo PLC Rio Tinto PLC Unilever N.V. Novo Nordisk A/S Hennes & Mauritz AB Total
3.6% 2.9% 2.7% 2.7% 2.6% 1.6% 1.6% 1.5% 1.5% 1.2% 21.9%
Characteristics5
M SCI Strategy EAFE Growth M SCI EAFE
Price/Earnings - Hist 1 Yr Wtd Med 18.0 x Earnings/Share - F'cast LT Med Growth Rate 9.6 x Price/Book - Hist 1 Yr Wtd Avg 2.4 x Return on Equity - Hist 1 Yr Med 18.0 % Market Cap - Weighted Median $Bil $24.6 Dividend Yield - Hist 1 Yr Wtd Avg 2.6 %
x x x % %
x x x % %
Regional Weights5
Region Underweight/Overweight Against M SCI EAFE Growth (%) 2.9 -1.0 0.4 2.9 -1.3 0.1 -1.0 -2 0 2 4
Sector
Sector Weights5
Underweight/Overweight Against M SCI EAFE Growth Strategy Benchmark Consumer Discretionary 17.6 % 16.7 % 0.9 Consumer Staples 16.2 19.1 -2.9 -0.1 Energy 3.1 3.2 2.5 Financials 17.0 14.5 2.5 Health Care 16.5 14.0 -3.2 Industrials 12.2 15.4 0.5 Information Technology 5.9 5.4 -1.6 Materials 6.3 7.9 1.4 Telecom. Services 3.7 2.3 0.4 Utilities 1.7 1.3 -4 -2 0 2 4
GICS Sectors
-3.0 Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Untied States Cash -4
13.19 11.56
2007
2008
2010
2011
Total S.A. Royal Dutch Shell PLC BP PLC Banco Santander S.A. Vodafone Group PLC AstraZeneca PLC Toyota Motor Corp. Telefonica S.A. Rio Tinto PLC E.ON AG Total
4.2% 3.6% 2.7% 2.6% 2.5% 2.4% 2.0% 1.9% 1.7% 1.7% 25.3%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Earnings/Share - F'cast LT Med Growth Rate Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Med Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x x % %
x x x % %
Regional Weights
Region
Sector Weights
Sector
Europe ex-UK United Kingdom -0.9 Japan -1.2 Southeast Asia Canada Australia/New Zealand -2.7 Cash
-4 -2
0.7 1.1 0 2 4
Underweight/Overweight Against Benchmark Strategy Benchmark 2.6 Consumer Discretionary 14.4 % 11.8 % -7.5 Consumer Staples 3.7 11.2 7.5 14.4 Energy 6.9 -4.2 Financials 21.2 25.4 -0.6 Health Care 9.3 9.9 -2.2 Industrials 10.8 13.0 -0.8 Information Technology 3.5 4.3 -1.9 Materials 6.3 8.2 3.9 Telecom. Services 9.4 5.5 3.3 Utilities 7.0 3.7 -10 -5 0 5 10
GICS Sectors
GMO 2013
13
9.70 7.57
2007
2008
2010
2011
Total S.A. Royal Dutch Shell PLC BP PLC Banco Santander S.A. Vodafone Group PLC AstraZeneca PLC Telefonica S.A. E.ON AG Barclays PLC Rio Tinto PLC Total
4.8% 4.3% 3.3% 2.9% 2.9% 2.3% 2.2% 1.6% 1.6% 1.5% 27.4%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Wtd Med Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x % %
x x % %
Regional Weights5
Region Underweight/Overweight Against Benchmark (%) 0.5 3.3 -0.1 -2.1 0.5 -4.1 2.1 -6 -3 0 3 6
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark -1.2 Consumer Discretionary 10.6 % 11.8 % -8.4 Consumer Staples 2.8 11.2 9.9 16.8 Energy 6.9 0.4 Financials 25.8 25.4 -1.3 Health Care 8.6 9.9 Industrials 9.3 13.0 -3.7 Information Technology 2.3 4.3 -2.0 -2.4 Materials 5.8 8.2 Telecom. Services 10.6 5.5 5.1 Utilities 7.5 3.7 3.8 Sector -10 -5 0 5 10
GICS Sectors
Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Cash
Quarterly Strategy Attribution The Currency Hedged International Equity Strategy returned +9.7% net of fees during the third quarter of 2013, compared to the MSCI EAFE (Hedged) index, which returned +7.6%. Hedging detracted from returns for U.S. dollar-based investors as most currencies appreciated relative to the U.S. dollar in the quarter. Among the major currencies, the British pound gained 7%, the Swiss franc 4.6%, the euro 4%, the Australian dollar 2%, and the Japanese yen 1%. The unhedged EAFE index returned +11.6%. The Currency Hedged International Equity Strategy was invested in the International Intrinsic Value Fund during the period. Performance of the Currency Hedged International Equity Strategy relative to the MSCI EAFE (Hedged) index was helped by the outperformance of the International Intrinsic Value Fund versus its style benchmark.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The MSCI EAFE (Europe, Australasia, and Far East) Index (Hedged) (net of withholding tax) is an independently maintained and widely published index comprised of international large and mid capitalization stocks currency hedged into U.S. dollars. 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
14
9.98 7.39
2007
2008
2010
2011
Mitsubishi Corp. 4.9% Honda Motor Co. Ltd. 4.7% Mitsui & Co. Ltd. 4.3% Nippon T & T Corp. 4.2% Sumitomo Corp. 2.7% Itochu Corp. 2.5% Japan Tobacco Inc. 2.3% Toyota Motor Corp. 2.2% Nissan Motor Co. Ltd. 1.3% Century Leasing System Inc. 1.2% Total 30.3%
Characteristics5
Strategy Benchmark
% Negative Earnings 7.9 % Price/Earnings - Excl Neg Earn Hist 1 Yr Wtd Med 11.1 x Price/Earnings - Hist 1 Yr Wtd Med 11.5 x Price/Book - Hist 1 Yr Wtd Avg 0.8 x Return on Equity - Hist 1 Yr Med 7.3 % Market Cap - Weighted Median $Bil $1.0 Dividend Yield - Hist 1 Yr Wtd Avg 2.1 %
% x x x % %
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 6.1 Consumer Discretionary 27.2 % 21.1 % 2.5 Consumer Staples 9.3 6.8 2.0 Energy 3.0 1.0 -10.5 Financials 10.5 21.0 -5.1 Health Care 0.7 5.8 15.1 35.3 Industrials 20.2 -8.3 Information Technology 1.6 9.9 -1.9 Materials 5.3 7.2 0.3 Telecom. Services 4.7 4.4 0.0 Utilities 2.5 2.5 Sector -20 -10 0 10 20
GICS Sectors
Quarterly Strategy Attribution The Japan Equity Strategy returned +10.0% net of fees during the third quarter of 2013, as compared to its benchmark, the MSCI Japan IMI index, which returned +7.4%. Within the Strategy, stock selection was mainly responsible for the outperformance. Stock selection was best within Industrials and Materials, but weak in Telecommunication Services. Individual stock positions that added significant value included overweights in construction and engineering companies Kumagai Gumi and Tekken Corp. and real estate developer Leopalace21 Corp. Stocks that were significant detractors included overweight positions in retailer Yamada Denki and telecom Nippon Telegraph and Telephone and an underweight in wireless telecom Softbank. Sector exposures (as a result of stock selection) also added some value. Our overweight to Industrials, which outperformed, and underweights to Health Care and Information Technology, which underperformed, had the biggest positive impacts.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The MSCI Japan IMI (Investable Market Index Series) ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) the MSCI Japan (MSCI Standard Index Series, net of withholding tax) from 12/31/2005 to 6/30/2008 and (ii) the MSCI Japan IMI (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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
15
3Q 2013 Before-Tax Strategy 3 Benchmark 4 After-Tax Strategy Benchmark 13.21 11.56 12.98 1.84
2003 Strategy 41.05 Benchmark 38.59 2004 24.36 20.25
2007
2008
Total S.A. Royal Dutch Shell PLC BP PLC AstraZeneca PLC Vodafone Group PLC Banco Santander S.A. Toyota Motor Corp. Telefonica S.A. Sanofi-Aventis S.A. Rio Tinto PLC Total
4.6% 3.8% 3.0% 2.7% 2.5% 2.4% 2.4% 2.0% 1.6% 1.6% 26.6%
13.37 17.32
Characteristics6
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Med Market Cap - Weighted Median $Bil
x x x % %
x x x % %
Regional Weights6
Region Underweight/Overweight Against Benchmark (%) -1.6 2.8 -1.5 -1.1 1.0 -3.6 4.0 -6 -3 0 3 6
Sector Weights6
Underweight/Overweight Against Benchmark Strategy Benchmark 2.0 Consumer Discretionary 13.8 % 11.8 % -7.6 Consumer Staples 3.6 11.2 8.5 15.4 Energy 6.9 -2.7 Financials 22.7 25.4 1.1 Health Care 11.0 9.9 -2.8 Industrials 10.2 13.0 -2.1 Information Technology 2.2 4.3 -2.7 Materials 5.5 8.2 3.8 Telecom. Services 9.3 5.5 2.6 Utilities 6.3 3.7 Sector -10 -5 0 5 10
GICS Sectors
Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Cash
7.70 6.30
2007
2008
2010
2011
Vale S.A. 4.3% OAO Gazprom 3.7% China Mobile Ltd. 3.3% Samsung Electronics Co. 3.1% Lukoil Oil Company 2.7% Ind. & Comm. Bank of China 2.3% Banco do Brasil S.A. 2.1% China Construction Bank 2.0% KGHM Polska Miedz S.A. 1.7% America Movil S.A. de C.V. 1.7% Total 26.9%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Avg Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x x % %
x x x % %
Regional Weights
Region
Sector Weights
Underweight/Overweight Against Benchmark (%) 0.8 -4.2 10.7 -0.6 -3.6 -3.9 0.8 -10 0 10 20
Developed East Asia Europe Latin/South America Mideast/Africa South Asia Cash
-20
Underweight/Overweight Sector Against Benchmark Strategy Benchmark Consumer Discretionary 9.6 % 10.0 % -0.4 Consumer Staples 1.9 8.8 -6.9 5.9 Energy 16.2 10.3 -1.1 Financials 24.3 25.4 -1.3 Health Care 0.9 2.2 -3.4 Industrials 4.1 7.5 -3.4 Information Technology 12.6 16.0 1.8 Materials 11.5 9.7 8.5 15.4 Telecom. Services 6.9 0.4 Utilities 3.5 3.1 -10 -5 0 5 10
GICS Sectors
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
17
7.48 6.30
2007
2008
2010
2011
Vale S.A. OAO Gazprom Samsung Electronics Co. China Mobile Ltd. Banco do Brasil S.A. KGHM Polska Miedz S.A. Transneft Companhia Brasileira de Meios Kia Motors Corp. Ind. & Comm. Bank of China Total
3.5% 3.3% 3.2% 3.0% 2.8% 2.5% 2.0% 2.0% 1.9% 1.9% 26.1%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Avg Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x x % %
x x x % %
Regional Weights5
Region Underweight/Overweight Against Benchmark (%) 1.0 -7.0 11.3 -0.8 -3.2 -2.2 1.0 -20 -10 0 10 20
Sector
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 0.3 Consumer Discretionary 10.3 % 10.0 % -6.7 Consumer Staples 2.1 8.8 4.6 Energy 14.9 10.3 -1.4 Financials 24.0 25.4 -1.4 Health Care 0.8 2.2 -5.2 Industrials 2.3 7.5 -1.9 Information Technology 14.1 16.0 2.6 Materials 12.3 9.7 9.4 16.3 Telecom. Services 6.9 -0.1 Utilities 3.0 3.1 -10 -5 0 5 10
GICS Sectors
Developed East Asia Europe Latin/South America Mideast/Africa South Asia Cash
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
18
0.17 5.77
Baidu.com Inc. Copa Holdings S.A. (Cl A) British American Tobacco HSBC Holdings PLC Adv Info Services Co (Alien) Mobile TeleSystems Groupe Danone Ind. & Comm. Bank of China China Mobile Ltd. Mail.ru Group Ltd. Total
5.4% 4.0% 3.9% 3.1% 2.7% 2.6% 2.5% 2.4% 2.2% 2.1% 30.9%
Characteristics6
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Avg Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x x % %
x x x % %
Regional Weights
Region
5,6
Sector Weights
Underweight/Overweight Against Benchmark (%) 20.1 -18.9 1.7 -7.1 -4.4 1.3 7.3 -30 -15 0 15 30
Developed East Asia Europe Latin/South America Mideast/Africa South Asia Cash
Underweight/Overweight Sector Against Benchmark Strategy Benchmark Consumer Discretionary 18.9 % 8.8 % 10.1 Consumer Staples 19.9 8.8 11.1 Energy 1.1 11.9 -10.8 -6.5 Financials 20.5 27.0 2.2 Health Care 3.7 1.5 6.4 Industrials 12.6 6.2 -5.5 Information Technology 9.6 15.1 -9.2 Materials 0.6 9.8 4.8 Telecom. Services 12.4 7.6 -2.5 Utilities 0.7 3.2
-20 -10 0 10 20
GICS Sectors
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 Weights are based on exposure, which will include the impact from hedges held, if any. 6 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 19 GMO 2013
1
8.69 8.18
2007
2008
Sumitomo Mitsui Financial 2.8% LyondellBasell Industries 2.5% Suncor Energy Inc. 2.4% Anheuser-Busch InBev 2.4% DaimlerChrysler AG 2.4% ITT Corp 2.3% CVS Corp. 2.3% EPL Oil & Gas Inc. 2.3% Deutsche Bank AG 2.3% WPP PLC 2.3% Total 24.0%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg
x x x %
x x x %
Regional Weights5
Region -9.7 United States Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Emerging Cash -10 Underweight/Overweight Against Benchmark (%) 4.7 -3.6 1.9 -1.9 -1.8 2.4 5.8 2.3 -5 0 5 10
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark Consumer Discretionary 12.0 % 12.3 % -0.3 Consumer Staples 8.6 10.1 -1.5 Energy 6.9 9.6 -2.7 Financials 24.4 20.9 3.5 Health Care 7.9 11.1 -3.2 Industrials 13.6 11.3 2.3 Information Technology 9.9 11.7 -1.8 Materials 16.7 5.8 10.9 Telecom. Services 0.0 3.7 -3.7 Utilities 0.0 3.3 -3.3 Sector -20 -10 0 10 20
GICS Sectors
Quarterly Strategy Attribution The Global Active Equity Strategy outperformed the MSCI World index in the third quarter, gaining 8.7% net of fees while the benchmark rose 8.2%. Country selection was ahead of the benchmark. An overweight position in Continental Europe added to performance, as did an underweight position in the United States. The European economy shows signs of improvement, and the U.S. market was unable to keep pace. Sector selection beat the index. An overweight position in Materials added to performance. Materials was the best performing sector in the quarter as the threat of strikes in Syria pushed the oil price higher and the price of gold rose. Stock selection was ahead of the benchmark in the quarter. Positions in the United States, Canada, and Continental Europe added to returns.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 The MSCI World Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 20 GMO 2013
1
16.07 7.90
Koninklijke Philips DaimlerChrysler AG ArcelorMittal SA Mdibnca Bnca di Crd Fnnzro Zumtobel AG Syngenta AG EPL Oil & Gas Inc. Valeo S.A. Rexel S.A. Akzo Nobel N.V. Total
5.2% 4.8% 4.0% 4.0% 3.9% 3.9% 3.9% 3.9% 3.8% 3.7% 41.1%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg
x x x %
x x x %
Regional Weights5
Region -34.1 United States Europe ex-UK United Kingdom Japan Southeast Asia Canada Australia/New Zealand Emerging Cash -40 Underweight/Overweight Against Benchmark (%) 35.7 -6.0 0.2 -1.7 -0.9 -1.9 -6.6 15.4 -20 0 20 40
Sector
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark Consumer Discretionary 23.3 % 11.9 % 11.4 Consumer Staples 2.8 10.0 -7.2 Energy 7.3 9.9 -2.6 Financials 26.5 21.6 4.9 Health Care 0.0 10.1 -10.1 Industrials 20.1 10.8 9.3 Information Technology 5.7 12.1 -6.4 Materials 14.4 6.3 8.1 Telecom. Services 0.0 4.2 -4.2 Utilities 0.0 3.3 -3.3 -20 -10 0 10 20
GICS Sectors
Quarterly Strategy Attribution The Global Focused Equity Strategy rose 16.1% net of fees for the quarter. The Strategys reference benchmark, MSCI All Country World index gained 7.9%. The largest contribution to performance came from a holding in Zumtobel in Austria. The company rebounded from its lows after the announcement of a change in management. The new CEO, ex-CEO of Infineon, will take over in October. Socit Gnrale and Daimler also added to performance as both hit margin targets and have cost-cutting programs that are ahead of schedule. The largest detractor from performance was Ks holdings in Japan. The stock price fell on concerns over internet penetration affecting the pricing power of the big box electronics retailer.
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. 2 Portfolio holdings are percent of equity. They are subject to change and should not be considered a recommendation to buy individual securities. 3 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. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 5 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 21 GMO 2013
1
1.62 5.25
2007
2008
Johnson & Johnson Google Inc. (Cl A) Microsoft Corp. Oracle Corp. Coca-Cola Co. Chevron Corp. Procter & Gamble Co. Philip Morris Int'l. Inc. Int'l. Business Machines Pfizer Inc. Total
5.3% 5.3% 5.2% 4.9% 4.6% 4.4% 4.2% 4.2% 4.1% 3.9% 46.1%
Characteristics4
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med 18.4 x Price/Book - Hist 1 Yr Wtd Avg 3.4 x Dividend Yield - Hist 1 Yr Wtd Avg 2.5 % Return on Equity - Hist 1 Yr Med 19.0 % Market Cap - Weighted Median $Bil $151.6 Debt/Equity - Wtd Med 0.6 x
x x % % x
Regional Weights4
Int'l. Equities 9.3% Cash 0.4% U.S. Equities 90.3%
Sector
Sector Weights4
Underweight/Overweight Against Benchmark Strategy Benchmark
-7.8 Consumer Discretionary Consumer Staples -3.6 Energy -16.3 Financials Health Care -8.3 Industrials Information Technology -3.5 Materials -2.1 Telecom. Services -3.2 Utilities -20 -10 0 10
4.7 %
18.3 28.3
6.9 0.0 15.7 28.7 2.4 10.7 28.6 0.0 0.3 0.0
20
12.5 % 10.0 10.5 16.3 13.0 10.7 17.9 3.5 2.4 3.2
GICS Sectors
GMO 2013
22
8.64 8.18
2007
2008
Total S.A. Microsoft Corp. BP PLC Royal Dutch Shell PLC Johnson & Johnson Chevron Corp. Google Inc. (Cl A) ENI S.p.A. Enel S.p.A. Pfizer Inc. Total
Strategy
1.9% 1.8% 1.5% 1.5% 1.4% 1.3% 1.2% 1.1% 1.1% 1.0% 13.8%
Characteristics5
Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Price/Cash Flow - Hist 1 Yr Wtd Med Price/Book - Hist 1 Yr Wtd Avg Return on Equity - Hist 1 Yr Wtd Med Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x x % %
x x x % %
Regional Weights
Region
Sector Weights
North America Europe ex-UK United Kingdom Japan Pacific ex-Japan Cash
Underweight/Overweight Against Benchmark (%) -3.4 5.1 0.1 0.9 -4.2 1.6 -6 -3 0 3 6
Underweight/Overweight Sector Against Benchmark Strategy Benchmark Consumer Discretionary 13.4 % 12.3 % 1.1 Consumer Staples 7.9 10.1 -2.2 Energy 11.6 9.6 2.0 -1.1 Financials 19.8 20.9 0.3 Health Care 11.4 11.1 -1.6 Industrials 9.7 11.3 0.0 Information Technology 11.7 11.7 -0.8 Materials 5.0 5.8 1.7 Telecom. Services 5.4 3.7 0.8 Utilities 4.1 3.3 -4 -2 0 2 4
GICS Sectors
GMO 2013
23
12.90 9.44
Vale S.A. Rio Tinto PLC Royal Dutch Shell PLC BP PLC Total S.A. OAO Gazprom Mitsubishi Corp. Mitsui & Co. Ltd. Itochu Corp. Yara International ASA Total
4.0% 3.9% 3.6% 3.4% 3.3% 2.6% 2.5% 2.3% 2.2% 2.1% 29.9%
Characteristics5
Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med Earnings/Share - F'cast LT Med Growth Rate Return on Equity - Hist 1 Yr Med Market Cap - Weighted Median $Bil Dividend Yield - Hist 1 Yr Wtd Avg
x x % %
x x % %
Country Weights5
Country Underweight/Overweight Against Benchmark (%) Strategy Benchmark Sector -3.2 11.2 3.2 5.4 2.5 -5.3 1.2 3.3 -0.5 -2.2 2.1 -10 0 10 20
Sector Weights5
Underweight/Overweight Against Benchmark Strategy Benchmark 0.0 Consumer Discretionary 0.0 % 0.0 % 2.2 Consumer Staples 3.8 1.6 -22.9 Energy 45.6 68.5 0.0 Financials 0.0 0.0 0.0 Health Care 0.0 0.0 16.4 Industrials 16.4 0.0 0.0 Information Technology 0.0 0.0 -1.8 Materials 28.1 29.9 0.0 Telecom. Services 0.0 0.0 6.1 Utilities 6.1 0.0 -30 -15 0 15 30
GICS Sectors
United States -17.7 United Kingdom Japan Russia Norway Brazil Canada France Spain China Other Cash
-20
19.8 14.8 13.3 7.1 6.4 5.9 5.5 5.0 3.9 2.6 13.7 2.1
37.5 % 18.0 2.1 3.9 1.0 3.4 10.8 3.8 0.6 3.1 15.9 0.0
1.23 0.57
Characteristics4,5
Modified Duration Coupon Maturity Yield to Maturity Emerging Cntry Debt Exp. 5.4 3.9 7.3 3.1 4 % Yrs. % %
Regional Weights4,6
Underweight/Overweight Against Benchmark (%)
Currency Weights4
Underweight/Overweight Against Benchmark (%)
3.3 18.7
4.3 15 30
Quarterly Strategy Attribution The Core Plus Bond Strategy returned +1.2% net of fees during the third quarter, outperforming the return of its benchmark, the Barclays U.S. Aggregate index, by 0.7%. After two consecutive quarters of total return losses, the Barclays U.S. Aggregate index reversed course, posting +0.6% for the quarter. Tightening spreads across most sectors were responsible for the gains. The overall option-adjusted spread of the Barclays U.S. Aggregate index tightened by seven basis points during the quarter, with spreads tightening by as much as 17 basis points (MBS) and by as little as 3 basis points (double-A Credit). Only ABS and U.S. Agency spreads widened during the quarter, by 6 basis points and 5 basis points, respectively. U.S. interest rates were mixed, and the U.S. Treasury yield curve steepened during the quarter: the 10-year U.S. Treasury yield rose by 14 basis points to end the quarter at 2.6%, while the 2 year yields fell by 3 basis points to end the quarter at 0.3%. Exposures to GMO Short-Duration Collateral Fund (SDCF) and GMO World Opportunity Overlay Fund (WOOF) contributed positively during the third quarter, leading gains. Developed markets currency selection and exposure to emerging country debt via the GMO Emerging Country Debt Fund also added value during the quarter, while developed markets interest-rate positioning detracted.
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. 2 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. 3 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 5 Please note portfolio yield includes the yield on the portfolios cash assets, for example, via the Short Duration Collateral Fund. 6 Regional weights are duration adjusted.
1
GMO 2013
25
YTD 2013 0.29 -3.68 2004 14.88 12.04 2005 -8.08 -9.24 2006 9.33 6.84 2007 3.66 11.30
Five Year 7.12 4.65 2009 20.59 3.94 2010 15.18 6.78
Characteristics4,5
Modified Duration Coupon Maturity Yield to Maturity Emerging Cntry Debt Exp. 7.6 3.5 9.6 2.8 4 % Yrs. % %
Regional Weights4,6
Underweight/Overweight Against Benchmark (%)
Currency Weights4
Underweight/Overweight Against Benchmark (%)
3.8 19.7
4.1 15 30
Quarterly Strategy Attribution The International Bond Strategy returned +4.6% net of fees in the third quarter, outperforming the J.P. Morgan GBI Global ex U.S. index return of +4.2% by 0.4%. The U.S. dollars fall versus developed currencies accounted for the bulk of positive index returns, with the 6-basis-point fall in the yield of the index also contributing to gains. Government bond markets were mixed in Q3 2013. In local currency J.P. Morgan Global Bond index terms, gains were the highest in Japan (+1.4%) and the lowest in Switzerland (+0.2%). Sweden (-0.5%) and Canada posted losses (-0.2%), while the U.S. and eurozone were unchanged for the quarter. In Japan, bonds rallied on news that the economy grew less than forecasted, prompting an offer by the Bank of Japan to buy JGBs during the summer. Swedish unemployment declined unexpectedly, prompting investors to speculate that the Riksbank would raise interest rates, which put upward pressure on bond yields. In other bond markets, Australia (+0.7%) and the United Kingdom (+0.5%) reported total return gains. Global yield curves (measured by the difference between 10-year and 2-year swap rates) mostly steepened in Q3, with Canada and the U.S. steepening the most. Only Japan flattened during the quarter. In currencies, foreign currencies were uniformly strong relative to the dollar, although with substantial volatility during the quarter. As the quarter began, the dollar rose sharply, tracing the illiquid jump higher in U.S. interest rates. By mid-July, the dollar was in retreat, getting a lift only in the waning days of summer. In September, U.S. rates leveled off, first with the announcement that perceived hawk Lawrence Summers was withdrawing as a candidate to chair the U.S. Federal Reserve, then reversed with the unanticipated announcement that the Fed would delay tapering its bond purchases. The U.S. dollar softened along with interest rates. Apart from the 25-basis-point cut in the Australian policy interest rate, there were no other policy rate adjustments during the quarter. Exposures to GMO Short-Duration Collateral Fund (SDCF) and GMO World Opportunity Overlay Fund (WOOF) contributed positively during the third quarter, leading gains. Exposure to emerging country debt via the GMO Emerging Country Debt Strategy and developed markets currency selection and also added value during the quarter, while developed markets interest-rate positioning detracted.
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. 2 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. 3 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 5 Please note portfolio yield includes the yield on the portfolios cash assets, for example, via the Short Duration Collateral Fund. 6 Regional weights are duration adjusted.
1
GMO 2013
26
0.49 0.79
2003
Strategy Benchmark
8.77 1.99
Characteristics4,5
Modified Duration Coupon Maturity Yield to Maturity Emerging Cntry Debt Exp. 6.9 4.7 9.5 3.6 4 % Yrs. % %
Regional Weights4,6
Underweight/Overweight Against Benchmark (%)
Currency Weights4
Underweight/Overweight Against Benchmark (%)
4.5 19.9
-1.3
4.3 -6 -3 0 3 6
4.4 15 30
Quarterly Strategy Attribution The Currency Hedged International Bond Strategy returned +0.5% net of fees in the third quarter, underperforming the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index total return of +0.8% by 0.3%. The yield of the J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) index was unchanged during the quarter. Government bond markets were mixed in Q3 2013. In local currency J.P. Morgan Global Bond index terms, gains were the highest in Japan (+1.4%) and the lowest in Switzerland (+0.2%). Sweden (-0.5%) and Canada posted losses (-0.2%), while the U.S. and eurozone were unchanged for the quarter. In Japan, bonds rallied on news that the economy grew less than forecasted, prompting an offer by the Bank of Japan to buy JGBs during the summer. Swedish unemployment declined unexpectedly, prompting investors to speculate that the Riksbank would raise interest rates, which put upward pressure on bond yields. In other bond markets, Australia (+0.7%) and the United Kingdom (+0.5%) reported total return gains. Global yield curves (measured by the difference between 10-year and 2-year swap rates) mostly steepened in Q3, with Canada and the U.S. steepening the most. Only Japan flattened during the quarter. In currencies, foreign currencies were uniformly strong relative to the dollar, although with substantial volatility during the quarter. As the quarter began, the dollar rose sharply, tracing the illiquid jump higher in U.S. interest rates. By mid-July, the dollar was in retreat, getting a lift only in the waning days of summer. In September, U.S. rates leveled off, first with the announcement that perceived hawk Lawrence Summers was withdrawing as a candidate to chair the U.S. Federal Reserve, then reversed with the unanticipated announcement that the Fed would delay tapering its bond purchases. The U.S. dollar softened along with interest rates. Apart from the 25-basis-point cut in the Australian policy interest rate, there were no other policy rate adjustments during the quarter. Issue selection and developed markets interest-rate positioning were responsible for losses during the third quarter. Exposures to GMO Short-Duration Collateral Fund (SDCF) and GMO World Opportunity Overlay Fund (WOOF) added back some value, followed by gains from exposure to emerging country debt via the GMO Emerging Country Debt Strategy and developed markets currency.
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. 2 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. 3 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 5 Please note portfolio yield includes the yield on the portfolios cash assets, for example, via the Short Duration Collateral Fund. 6 Regional weights are duration adjusted. 27 GMO 2013
1
YTD 2013 -1.33 -3.28 2004 12.12 10.10 2005 -5.84 -6.53 2006 7.94 5.94 2007 2.58 10.81
Five Year 6.62 4.57 2009 20.30 1.91 2010 14.14 6.42
Characteristics4,5
Modified Duration Coupon Maturity Yield to Maturity Emerging Cntry Debt Exp. 7.0 3.5 8.6 2.9 4 % Yrs. % %
Regional Weights4,6
Underweight/Overweight Against Benchmark (%)
Currency Weights4
Underweight/Overweight Against Benchmark (%)
3.4 19.7
4.2 15 30
Quarterly Strategy Attribution The Global Bond Strategy returned +2.8% net of fees during the third quarter, outperforming the J.P. Morgan GBI Global index return of +2.7% by 0.1%. The U.S. dollars fall versus developed currencies accounted for the bulk of positive index returns, with the 2-basis-point fall in the yield of the index also contributing to gains. Government bond markets were mixed in Q3 2013. In local currency J.P. Morgan Global Bond index terms, gains were the highest in Japan (+1.4%) and the lowest in Switzerland (+0.2%). Sweden (-0.5%) and Canada posted losses (-0.2%), while the U.S. and eurozone were unchanged for the quarter. In Japan, bonds rallied on news that the economy grew less than forecasted, prompting an offer by the Bank of Japan to buy JGBs during the summer. Swedish unemployment declined unexpectedly, prompting investors to speculate that the Riksbank would raise interest rates, which put upward pressure on bond yields. In other bond markets, Australia (+0.7%) and the United Kingdom (+0.5%) reported total return gains. Global yield curves (measured by the difference between 10-year and 2-year swap rates) mostly steepened in Q3, with Canada and the U.S. steepening the most. Only Japan flattened during the quarter. In currencies, foreign currencies were uniformly strong relative to the dollar, although with substantial volatility during the quarter. As the quarter began, the dollar rose sharply, tracing the illiquid jump higher in U.S. interest rates. By mid-July, the dollar was in retreat, getting a lift only in the waning days of summer. In September, U.S. rates leveled off, first with the announcement that perceived hawk Lawrence Summers was withdrawing as a candidate to chair the U.S. Federal Reserve, then reversed with the unanticipated announcement that the Fed would delay tapering its bond purchases. The U.S. dollar softened along with interest rates. Apart from the 25-basis-point cut in the Australian policy interest rate, there were no other policy rate adjustments during the quarter. Exposures to GMO Short-Duration Collateral Fund (SDCF) and GMO World Opportunity Overlay Fund (WOOF) contributed positively during the third quarter, leading gains. Exposure to emerging country debt via the GMO Emerging Country Debt Strategy and developed markets currency selection and also added value during the quarter, while developed markets interest-rate positioning detracted.
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. 2 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. 3 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 5 Please note portfolio yield includes the yield on the portfolios cash assets, for example, via the Short Duration Collateral Fund. 6 Regional weights are duration adjusted.
1
GMO 2013
28
4.48 5.33
2003
2008
Strategy Composition3
Special Alternativ e Situations Asset Opportunity 0.5% 6.9% Alpha Only 9.2% Cash & Cash Equiv alents 0.3% Debt Opportunities 2.5% Asset Allocation Bond 10.1% Emerging Country Debt International 3.5% Intrinsic Value Strategic 21.3% Fixed Income 4.9% International Domestic Growth Equity Bond 1.1% 0.8% Emerging Risk Currency Hedged Markets 9.0% Premium International Equity 2.4% 5.6%
Benchmark Composition
(65% MSCI ACWI / 35% Barclays U.S. Aggregate)
* As of 7/31/12, substantially all of the assets of U.S. Flexible Equities were invested in securities that GMO considers to be of high quality.
GMO Real Return Global Balanced Asset Allocation Strategy As of September 30, 2013
Inception: 6/30/04; Benchmark: Blended Benchmark Performance Net of Fees1
Total Return (%) Average Annual Total Return (%)
YTD 2013 8.97 9.76 2005 8.09 5.80 2006 13.26 13.69 2007 2008
Strategy Benchmark
10.11 7.45
10.65 10.42
Strategy Composition3
Multi-Strategy 30.0% U.S. Flexible Equities* 24.0%
Benchmark Composition
(60% MSCI World / 20% Citigroup 3-Mo. T-Bill / 20% Barclays U.S. Agg.)
Cash & Cash Equiv alents 0.1% Debt Opportunities 2.4% Asset Allocation Bond 6.1% International Emerging Intrinsic Value Country Debt 23.5% 3.1% Strategic Fixed Income 0.8% International Domestic Growth Equity Bond Emerging 0.3% Markets Risk Currency Hedged 1.1% International 1.5% Premium Equity 2.4% 4.6%
* As of 7/31/12, substantially all of the assets of U.S. Flexible Equities were invested in securities that GMO considers to be of high quality.
3.02 0.43
2003
Strategy Composition3
Alternativ e Asset Opportunity 13.0% Cash & Collateral 1.0% Global Quality 20.0%
0% Fixed Income
Emerging Country Debt 4.0% ABS & Credit 5.0% TIPS 11.0% Emerging Equities 9.0%
GMO 2013
31
2.77 0.43
Strategy Composition3
Multi-Strategy 20.0% Special Situations 0.5% Alpha Only 3.9% Alternativ e Asset Opportunity 4.8% Debt Opportunities 3.2% Asset Allocation Bond 9.9% Emerging Country Debt Strategic Emerging 3.5% Fixed Income Markets 1.7% 9.6% Currency Hedged International Equity 18.6% Quality 19.5%
Strategy
Quarterly Strategy Attribution The Global Allocation Absolute Return Strategy returned +2.8% net of fees in the quarter. Asset allocation was the primary driver of performance. Markets recovered this quarter as the Federal Reserve laid to rest any lingering fears about monetary policy. Lawrence Summers, facing resistance to his candidacy for Chairman of the Federal Reserve, withdrew his name in September, leaving Janet Yellen and her perceived dovish stance on monetary policy, to take the Fed nomination. The Fed, despite guidance last quarter that tapering was imminent, announced that they will maintain asset purchases without forward guidance as to when tapering may commence. This came as a pleasant surprise to global equity markets, which had braced themselves for tightening. S&P 500 hit an all-time high during the quarter, finishing up 5.2%; U.S. small cap stocks (Russell 2000) were up 10.2%. Global equity markets likewise cheered at the promise of easy monetary policy from the U.S. EAFE ended the quarter up 11.6%, Japan was up 6.7%, and the emerging markets, which had struggled so far this year, were up 5.8%. The U.S. dollar weakened relative to most global currencies including the Japanese yen, which appreciated for the first quarter since 2012. In contrast to the large moves in the equity markets, bond yields, though volatile throughout the quarter, were largely unchanged. The U.S. 10-year Treasury yield ended slightly up from the end of Q2 at 2.64% and the U.S. 10-year TIPS yield finished slightly down at 0.45%. The equity exposure of roughly 53% contributed positively to returns. Quality, Currency Hedged International, and Emerging Market equities all posted positive returns. Emerging country debt made a slight positive contribution to performance. Absolute return oriented strategies detracted from performance. Alpha Only and Alternative Asset Opportunity posted negative returns. The Multi-Strategy allocation also posted negative returns this quarter.
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. 2 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. 3 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 4 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross.
1
GMO 2013
32
-0.88 0.43
Strategy Composition4
Exposure (%)
Relative Value4
Exposure (%)
Global Quality International Value (Currency Hedged) Emerging Equities Risk Premium ABS & Credit Emerging Debt Credit Opportunities Multi-Strategy -22.0 S&P Short
-30 -15 0
Vol Balanced Quality S&P 500 ex-Financials Vol Balanced Emerging Vol Balanced Anti-China Antipodean 10-Yr. Bonds* Global 10-Yr. Bonds* Japanese 10-Yr. Bonds*
Currencies4
15 30
Exposure (%)
Euro Swiss Franc Asian Currency Basket U.S. Dollar Commodity Currency Basket Indian Rupee Asian Currency Basket
Quarterly Strategy Attribution The Real Return Asset Allocation Strategy returned -0.9% net of fees in the third quarter. Markets recovered this quarter as the Federal Reserve laid to rest any lingering fears about monetary policy. Lawrence Summers, facing resistance to his candidacy for Chairman of the Federal Reserve, withdrew his name in September, leaving Janet Yellen and her perceived dovish stance on monetary policy, to take the Fed nomination. The Fed, despite guidance last quarter that tapering was imminent, announced that they will maintain asset purchases without forward guidance as to when tapering may commence. This came as a pleasant surprise to global equity markets, which had braced themselves for tightening. S&P 500 hit an all-time high during the quarter, finishing up 5.2%; U.S. small cap stocks (Russell 2000) were up 10.2%. Global equity markets likewise cheered at the promise of easy monetary policy from the U.S. EAFE ended the quarter up 11.6%, Japan was up 6.7%, and the emerging markets, which had struggled so far this year, were up 5.8%. The U.S. dollar weakened relative to most global currencies including the Japanese yen, which appreciated for the first quarter since 2012. In contrast to the large moves in the equity markets, bond yields, though volatile throughout the quarter, were largely unchanged. The U.S. 10-year Treasury yield ended slightly up from the end of Q2 at 2.64% and the U.S. 10-year TIPS yield finished slightly down at 0.45%. Long equity positions across quality, international value, and emerging market equities ex-China were additive, but largely offset by a short position in S&P 500 ex-Financials. Currency positions, specifically the Aussie dollar short, were a drag on performance. MultiStrategy detracted slightly from performance this quarter.
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. 2 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. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 33 GMO 2013
1
GMO Global All Country Equity Allocation Strategy As of September 30, 2013
Inception: 12/31/93; Benchmark: Blended Benchmark Performance Net of Fees1
Total Return (%) Average Annual Total Return (%)
YTD 2013 13.11 14.95 2004 17.62 14.86 2005 12.51 9.95 2006 18.87 20.34 2007
Five Year 8.33 8.01 2009 24.19 34.45 2010 10.12 12.94
2008
Strategy Composition3
Emerging Markets 13.2% U.S. Core 3.4%
Benchmark Composition
(MSCI ACWI)
* As of 7/31/12, substantially all of the assets of U.S. Flexible Equities were invested in securities that GMO considers to be of high quality.
Emerging Equities
YTD 2013 16.37 17.29 2004 17.36 13.64 2005 12.26 9.42 2006 20.22 20.05 2007
Five Year 7.87 7.85 2009 20.55 29.97 2010 9.25 11.77
2008
Strategy Composition3
Emerging U.S. Core Currency Hedged Markets 4.9% International Equity 2.0% 8.0% International Growth Equity 5.1% U.S. Flexible Equities* 43.4%
Benchmark Composition
(MSCI World Index)
* As of 7/31/12, substantially all of the assets of U.S. Flexible Equities were invested in securities that GMO considers to be of high quality.
GMO 2013
35
GMO International All Country Equity Allocation Strategy As of September 30, 2013
Inception: 2/28/94; Benchmark: Blended Benchmark Performance Net of Fees1
Total Return (%) Average Annual Total Return (%)
11.43 10.12
2003
2008
Strategy Composition3
Emerging Markets 23.0% International Intrinsic Value 61.8%
Benchmark Composition
(MSCI ACWI ex USA Index)
GMO 2013
36
12.22 11.56
2007
2008
2010
2011
Strategy Composition3
Emerging Markets 1.9% International Growth Equity 21.0%
Benchmark Composition
(MSCI EAFE Index)
GMO 2013
37
YTD 2013 16.67 20.35 2004 10.74 11.45 2005 3.68 5.53 2006 9.93 15.71 2007
Five Year 9.64 10.34 2009 20.54 27.46 2010 7.43 16.26
2008
Strategy Composition3
Small/Mid Cap 2.7%
Benchmark Composition
(Russell 3000 Index)
Quarterly Strategy Attribution The U.S. Equity Allocation Strategy finished the quarter with a return of +2.0% net of fees, underperforming its benchmark by 3.6%. Implementation was the primary driver of underperformance. Quality significantly lagged the broader U.S. equity market, which is not unusual in the context of a strong equity market rally. The U.S. Core Strategy underperformed its benchmark by over 260 basis points; the top-down allocation to high quality stocks and bottom-up stock selection both detracted from performance. The Small/Mid Cap Strategy outperformed its benchmark by 30 basis points.
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. 2 The GMO blended U.S. Equity Allocation Composite benchmark 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. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. 3 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolios sensitivity to the market; R2 is a measure of how well a portfolio tracks the market; Sharpe Ratio is the return over the risk free rate per unit of risk. Risk profile data is gross.
1
GMO 2013
38
YTD 2013 6.66 7.97 2004 12.73 10.02 2005 9.91 5.91 2006 12.08 12.95 2007
Five Year 6.51 7.51 2009 14.29 23.90 2010 6.88 9.99
2008
Strategy Composition3
Multi-Strategy 13.3% U.S. Equities 19.9%
Benchmark Composition
(GMO Tax-Managed Global Balanced Index)
GMO 2013
39
7.85 0.01
Exposure3, 4
By Strategy (%)
By Region (%)
34.9 31.8
92.3
Quarterly Strategy Attribution Global equities posted strong absolute returns during the third quarter amid better-than-expected economic performance and continued central bank stimulus in economies around the globe. Non-U.S. equities delivered the strongest gains during the quarter, with European stocks particularly strong. The MSCI Europe index advanced 13.6% during the quarter, while the MSCI EAFE returned +11.6% and the S&P 500 returned +5.2%. The MSCI ACWI returned +7.9% for the quarter. The Total Equities Strategy returned +7.8% net of fees for the period, with the majority of the positive absolute result driven by exposure to equities. Our equities strategies posted a +14.4% return for the period, a result that led the MSCI ACWI index. Our volatility strategies posted a +2.9% return for the quarter while merger arbitrage delivered a +3.1% return for the period.
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. 2 The Citigroup 3-Month Treasury Bill Index is an independently maintained and widely published index comprised of short-term U.S. Treasury bills. 3 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 4 Total exposure to downside equity moves, excluding effect of hedges and short positions, as a percent of total net assets.
1
GMO 2013
40
-11.63 0.01
2004 2005 -13.24 3.00
Characteristics4
Long Short
Sector Exposure4
Sector
P/E - Ex Neg Earn Hist 1 Yr Wtd Med % Negative Earnings Price/Book - Hist 1 Yr Wtd Avg Dividend Yield - Hist 1 Yr Wtd Avg
x % x % % x %
x % x % %
x
%
Regional Weights4
Region Net Weight -13.0 11.8 -20 -10 0 10 20
Consumer Discretionary Consumer Staples -9.9 Energy -39.0 Financials Health Care -9.0 Industrials Information Technology -8.1 Materials -2.2 Telecom. Services -1.7 Utilities
-60 -30
Long
Short
22.3 22.7
6.2 % 36.6 8.9 0.0 37.2 3.3 37.1 0.1 0.3 0.0
18.6 % 0.6 18.8 39.0 14.9 12.3 14.4 8.2 2.5 1.7
30
60
GICS Sectors
Quarterly Strategy Attribution The Tactical Opportunities Strategy dropped 11.6% net of fees in the third quarter of 2013. The positive contribution from the long portfolio was more than offset by the strong negative impact of the short portfolio in the third quarter. During the quarter, U.S. stocks reached all-time highs before pulling back slightly toward the end of the quarter and international developed markets rallied strongly. The market was intently focused on the Federal Reserve during much of the quarter, and Septembers announcement that tapering would not begin immediately was viewed favorably. Overseas, the eurozone had a quarter of relative stability, and investors continued to find signs of a nascent recovery. Large cap stocks lost to the market, defined here as the S&P 500, both within quality and the larger universe. Each of the components of quality - low leverage, high profits, and stable profitability - lagged the overall market during the quarter. In the broader market (top 3,000 U.S. stocks by market capitalization), small cap stocks outperformed large caps, and growth stocks significantly outperformed value stocks. In the long portfolio all sectors contributed positive absolute returns with the largest contributing sectors being Health Care and Information Technology. Individual stocks adding to returns included Gilead Sciences and Oracle. The largest subtractions in the long portfolio came from Information Technology, including IBM, Hewlett-Packard, and Google. The opposite was seen in the short portfolio for the quarter with all sectors detracting from performance. Short exposure to Health Care and Energy stocks caused the majority of the negative returns.
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. 2 The Citigroup 3-Month Treasury Bill Index is an independently maintained and widely published index comprised of short-term U.S. Treasury bills. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. Exposure information is not normalized and shown as a percent of total net assets.
1
GMO 2013
41
0.37 0.10
2007
2008
Performance Attribution4
Net Contribution (%)
Currency Weights4
Net Weight
Quarterly Strategy Attribution In the third quarter of 2013, the Currency Hedge Strategy returned 0.4% net of fees, compared to its benchmark, the J.P. Morgan U.S. 3 Month Cash index, which gained 0.1%. Year to date, the Strategy is down 6.9%. Foreign currencies were uniformly strong relative to the dollar, although with substantial volatility during the quarter. As the quarter began, the dollar rose sharply, tracing the illiquid jump higher in U.S. interest rates. By mid-July, the dollar was in retreat, getting a lift only in the waning days of summer. In September, U.S. rates leveled off, first with the announcement that perceived hawk Lawrence Summers was withdrawing as a candidate to chair the U.S. Federal Reserve, then reversed with the unanticipated announcement that the Fed would delay tapering its bond purchases. The U.S. dollar softened along with interest rates. Apart from the 25-basis-point cut in the Australian policy interest rate, there were no other policy rate adjustments during the quarter. In performance attribution, cross-market positions detracted, with gains from the long in New Zealand more than offset by losses from shorts in Swiss francs and euros. Opportunistic positions, however, contributed positively.
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. 2 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. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
1
GMO 2013
42
-1.82 0.10
2006
2007
2008
Performance Attribution4
Strategy Net Contribution (%) -2.0 -0.2 0.4 0.0 0.2 0.2 -0.5 -4 -2 0 2 4
Country Weights4
Net Weight (%)
Cross-Market Tactical Duration Overlay Yield Curve Swaption Volatility STRIPS vs. LIBOR Other Opportunistic Cash Mgmt/ABS/Fees/Other
Quarterly Strategy Attribution The Fixed Income Hedge Strategy returned -1.8% net of fees in the third quarter of 2013, underperforming its benchmark, the J.P. Morgan U.S. 3 Month Cash index, by 1.9%. Cross-market strategies weighed on performance during the quarter followed by losses from tactical duration positions. Gains from opportunistic strategies and yield curve positioning partly offset losses. Government bond markets were mixed in Q3 2013. In local currency bond index terms, gains were the highest in Japan (+1.4%) and the lowest in Switzerland (+0.2%). Sweden (-0.5%) and Canada posted losses (-0.2%), while the U.S. and eurozone were unchanged for the quarter. In Japan, bonds rallied on news that the economy grew less than forecasted, prompting an offer by the Bank of Japan to buy JGBs during the summer. Swedish unemployment declined unexpectedly, prompting investors to speculate that the Riksbank would raise interest rates, which put upward pressure on bond yields. In other bond markets, Australia (+0.7%) and the U.K. (+0.5%) reported total return gains. Global yield curves (measured by the difference between 10-year and 2-year swap rates) mostly steepened in Q3, with Canada and the U.S. steepening the most. Only Japan flattened during the quarter. In policy actions, the Reserve Bank of Australia cut rates by 25 bps to 2.5%. The cross-market strategy posted losses during the quarter, given a short position in Japan, where yields fell, and a long position in Canada, where yields rose. Tactical Duration Overlay positions also detracted during the quarter; the Strategy was short U.S. duration while U.S. Treasuries were unchanged. Opportunistic strategies added back value as a cross-market, mean-reversion trade moved in favor of the Strategy. The integrated yield curve slope strategy also added value during the quarter, mostly given steepening yield curves in Canada and Sweden.
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. 2 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. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
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-1.10 0.10
2007
2008
Quarterly Strategy Attribution In the third quarter of 2013, the Emerging Currency Hedge Strategy returned -1.1% net of fees, while the Strategys benchmark, the J.P. Morgan U.S. 3 Month Cash index, returned +0.1%. Emerging currencies diverged in performance during the quarter, with many rebounding from hefty second quarter losses and others continuing with steep declines. Among the rebounding currencies were the CEE currencies, boosted by the 4.1% rise in the euro relative to the dollar. Polish zloty gained 6.8%; Czech crown rose 5.1%; Romanian leu increased 4.2%, outperforming the euro; and Hungarian forint gained 3.2%, trailing the euro. Elsewhere in CEEMEA, Turkish lira fell by 4.6% in spot terms, and South African rand by 1.4%. Asia witnessed the largest divergence, with Korean won (+6.3%) leading and Indonesian rupiah (-14.3%) lagging. Changes to the rupiah FX contract left the market confused, draining liquidity, just as Bank of Indonesia lifted restrictions on SOEs ability to hedge the currency. Elsewhere in Asia, Singapore (+1.1%) and Taiwan (+1.4%) led, while India (-5.1%), Malaysia (-3.1%), and Philippines (-0.8%) lagged. In Latin American floating currencies, spot returns were fairly muted, bracketed by Colombian peso, +1.3%, and Mexican peso, -1.1%. Argentine pesos managed crawl guided spot by 7% lower, in line with recent trends. The long in Indonesia dominated Strategy net losses, while performance among the other currencies was more balanced. The Strategy nearly doubled its net long FX position (to 66% from 37%) during the quarter as interest-rate differentials expanded and momentum began to turn. The Strategy added to longs and cut shorts fairly evenly. The exceptions were Korea and Philippines, where the Strategy flipped from short to long the former and long to short the latter.
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. 2 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. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
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YTD 2013 -1.64 0.04 2005 6.97 3.00 2006 5.63 4.76 2007 18.63 4.74 2008 18.43 1.80
Currency Exposure4
Position Absolute % 14.3 12.4
Australian 10 Yr. Bonds* Kiwi 10 Yr. Bonds* ABS/Credit U.S. 10 Yr. Bonds* German Bunds* UK 10 Yr. Bonds* Canadian Rates* China Sovereign / Banks CDS Japanese Interest Rates* -45.5
-80
Absolute % 22.2 11.6 2.2 -2.0 -2.0 -2.0 -2.0 -2.3 -40 0 40 80
Euro Indian Rupee Commodity Currency Basket -4.8 Chinese Yuan Renminbi -7.6 Asian Currency Basket -10.0 Swiss Franc -14.3
-20 -10 0 10
20
Quality Exposure4
Position Absolute % 84.6 -67.5 -100 -50 0 50 100
Other Exposure4
Position Absolute % 5.0 -6 -3 0 3 6
Quarterly Strategy Attribution The third quarter of 2013 was a painful one for the Mean Reversion Strategy, with a net return of -5.3%. It was a strong quarter for equities, with the S&P 500 up 5.2%, MSCI EAFE rising 11.6%, and MSCI Emerging gaining 5.8%. Our equity positions cost us 3% in the quarter. The biggest negative was our Quality position, which cost us 2.4% as it only rose 1.6% in the quarter. Emerging was also a significant negative, costing us about 60 basis points. Even though our emerging equity portfolio rose 8% in the quarter, our antiChina shorts rose a much faster 15%, as investors cheered the reacceleration of the credit-fueled real estate and investment boom in China. While we believe that this move by the Chinese government is exactly the opposite of what they will need to do in the medium term, the reason why this is not a bigger position is the risk of events such as this one. Our other major positions were significantly negative as well, with the exception of the Japanese CPI swaps, which added 20 basis points as breakevens continue to rise as we trade the position down, and Credit Opportunities, which at least did no harm in being flat for the quarter. Both of our basic bond positions cost us money in the quarter as government bond yields rose almost everywhere except Japan, where 10-year rates actually fell 16 basis points. The greatest rise was in New Zealand, where rates soared 43 basis points. Our anti-JGB bet cost us around 60 basis points and our Australian and New Zealand bond bet cost us 40 basis points. The other major loss in the quarter was our currency positions. Our short Swiss franc/long euro position cost us 10 basis points. Our short commodity currency long U.S. and Asian currencies cost us 55 basis points as the commodity currencies were quite strong and the Asian currencies were weak. And the long Indian rupee/short Asia currencies bet cost us 80 basis points as the rupee was particularly weak in the quarter. We made a number of smaller moves in the quarter, increasing our bond positions at the margin as those trades look more attractive, and we finished trading out of our Euro Stoxx dividend swap position and Japanese equity position. We also continued slowly selling down the Japanese CPI swap position as we have been for a few quarters.
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. 2 The Citigroup 3-Month Treasury Bill Index is an independently maintained and widely published index comprised of short-term U.S. Treasury bills. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy. 5 Displayed in local 10-year equivalents, except for ABS/Credit and China/Sovereign Banks CDS.
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YTD 2013 8.45 0.04 2005 4.63 3.00 2006 8.39 4.76 2007 15.06 4.74 2008 -3.88 1.80
Strategy Benchmark
3.79 1.07
United Kingdom Netherlands Italy U.S. Russell 2000 India Korea Japan Net Equity Markets
Commodity Markets4
Commodity Net Weight (%) 20.0 10.0 5.0 5.0 4.0 -3.0 -5.0 -5.0 -5.0 -5.0 -10.0 -10.0 -15.0 -14.0 -30 -15 0 15 30
Currency Selection4
Currency Net Weight (%) 50.0 -50.0 -44.2 -60 -30 0 30 60
Other4
Other Net Weight (%) 1.5 1.5 -2 -1 0 1 2
Soybeans Corn Crude Oil Cocoa Hogs Sugar Natural Gas Gold Soy Oil Coffee Copper Wheat Heating Oil Net Commodities
Quarterly Strategy Attribution The Systematic Global Macro Strategy added 2.3% net of fees over the third quarter of 2013. Our asset allocation added 2.9% of value, commodity market selection added 1.2% and VIX futures positions chipped in 0.5%. Our currency positions and equity market selection subtracted value. July was a good month for the Strategy, with a return of 4.2%. As global equity markets bounced 5.3% higher, our net long equity markets allocation added 3.1% to returns, while equity market selection added an additional 3.2% as our long positions in European markets outperformed a short position in Japan. A short position in the Australian dollar also added a 1.0% to performance. The positive performance continued in August with a return of 0.7% as global equity markets fell 2.1%. Although our net long equity allocation cost us 1.3% and our net short commodity allocation cost an additional 0.4%, market selection offset this. Commodity market selection added 3.0%, while our short position in the Australian dollar also helped performance. The Strategy lost 2.6% in September as gains from asset allocation were wiped out by negative market selection. Global equity markets advanced 5.0% in September, which meant our net long allocation added 3.2% to performance over the month, but market selection lost value. The single largest negative contributor to performance in the month of September was a large short position in the Australian dollar. The Australian dollars 5.0% appreciation against the U.S. dollar detracted 2.4% from performance. This is the Strategys sole currency position and reflects our poor outlook for the Australian dollar as well as offering hedging benefits for our net long equity markets exposure. Over the month, our VIX futures positions switched from a small short to a small long, adding 0.5% to performance. Equity market selection lost 3.2% in September as long positions in attractively priced European markets underperformed a short position in Japan.
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. 2 The Citigroup 3-Month Treasury Bill Index is an independently maintained and widely published index comprised of short-term U.S. Treasury bills. 3 Std. Deviation is a measure of the volatility of a portfolios return. Sharpe Ratio is the return over the risk free rate per unit of risk. Drawdown is the largest negative cumulative portfolio return from peak to trough. Risk profile data is gross. 4 The above information is based on a representative account selected because it has the least number of restrictions and best represents the implementation of the strategy.
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GMO measures each strategys 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 strategys portfolio may differ to varying degrees from that of its Benchmark. Indices are not managed and do not pay fees and expenses. One cannot invest directly in an index. In some cases, a strategys Benchmark differs from the broad based index against which performance is shown in the strategys prospectus. GMO may change a strategys benchmark from time to time.
Full Name Barclays U.S. Aggregate Index Description 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 GMO Blended Global All Country Equity Allocation 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. The blended Global All Country Equity Allocation Composite benchmark 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. 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. The blended Global Asset Allocation Composite benchmark 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. 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. The blended Global Developed Equity Allocation Composite benchmark 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. The blended International All Country Equity Allocation Composite benchmark 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. The blended International Developed Equity Allocation Composite benchmark is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of MSCI EAFE (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. The blended Real Return Global Balanced Asset Allocation Composite benchmark 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. 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. The blended U.S. Equity Allocation Composite benchmark 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. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. 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. 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. 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. 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 GBI Global J.P. Morgan GBI Global ex Japan ex U.S. (Hedged) + J.P. Morgan GBI Global exU.S. Index
J.P. Morgan U.S. 3 Month Cash The J.P. Morgan U.S. 3 Month Cash Index is an independently maintained and widely published index comprised of three month U.S. Index dollar Euro-deposits. The duration of the Index is generally 90 days.
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Description 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. 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. The MSCI ACWI ex USA (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of international (excluding U.S. and including emerging) 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. The MSCI EAFE (Europe, Australasia, and Far East) Growth 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 that have a growth style. Large and mid capitalization stocks encompass approximately 85% of each markets free float-adjusted market capitalization. Style is determined using a multi-factor approach based on historical and forward-looking characteristics. 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. The MSCI EAFE (Europe, Australasia, and Far East) Index (Hedged) (net of withholding tax) is an independently maintained and widely published index comprised of international large and mid capitalization stocks currency hedged into U.S. dollars. 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. 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. The MSCI EAFE (Europe, Australasia, and Far East) Value 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 that have a value style. Large and mid capitalization stocks encompass approximately 85% of each markets free float-adjusted market capitalization. Style is determined using a multi-factor approach based on historical and forward-looking characteristics. 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 Japan IMI ++ Index The MSCI Japan IMI (Investable Market Index Series) ++ Index is an internally maintained benchmark computed by GMO, comprised of (i) the MSCI Japan (MSCI Standard Index Series, net of withholding tax) from 12/31/2005 to 6/30/2008 and (ii) the MSCI Japan IMI (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. The MSCI World Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed 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. The Russell 1000 Growth Index is an independently maintained and widely published index comprised of the stocks included in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. The Russell 1000 Value Index is an independently maintained and widely published index comprised of the stocks included in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell Investments is the source and owner of the Russell index data contained or reflected in this material and all trademarks and copyrights related thereto. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is GMOs presentation of the data. FCR is not responsible for the formatting or configuration of this material or for any inaccuracy in GMOs presentation thereof. The Russell 2500 Index is an independently maintained and widely published index comprised of the stocks of the 2,500 smallest U.S. companies based on total market capitalization and current index membership. 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. Russell 2500 + Index is comprised of Russell 2500 Index from 12/31/1991 to 12/31/1996, Russell 2500 Value Index from 12/31/1996 to 1/13/2012, and the Russell 2500 Index thereafter. The Russell 3000 Index is an independently maintained and widely published index comprised of the stocks of the 3,000 largest U.S. companies based on total market capitalization. These companies represent approximately 98% of the total market capitalization of the U.S. equity market. 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. 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. 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. 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.
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