GMO

GMO
Quarterly Update
Third Quarter 2010

Contents
GMO offers institutionally-oriented strategies investing in Global Market Review ................................................................. 6
equities and fixed income in the U.S., developed international, Asset Allocation............................................................................ 7
and emerging markets. For client inquiries, please contact
Performance Review and Outlook............................................. 9
your Client Relationship Manager. For new business inquiries,
please contact your Relationship Manager or Holly Carson at Strategy Performance Details.................................................... 19
(617) 346-7501 or holly.carson@gmo.com Table of Benchmarks ................................................................. 71
2 GMO Quarterly Update
2010 Performance of GMO Strategies and Benchmarks

Total Return Net of Fees Average Annual Total Return
GMO U.S. Equity Inception 3Q YTD YTD Value One Five Ten Since
Strategies/Benchmarks Date 2010 2010 Added Year Year Year Inception
U.S. Core 9/30/85 11.96 0.99 -2.90 9.74 -0.62 -0.28 10.62
S&P 500 11.29 3.89 10.16 0.64 -0.43 10.19
Intrinsic Value 5/31/99 12.93 2.39 -2.10 9.50 -2.28 2.21 2.37
Russell 1000 Value 10.13 4.49 8.90 -0.48 2.59 2.38
Quality 2/29/04 11.40 -0.80 -4.69 8.19 1.75 n/a 1.58
S&P 500 11.29 3.89 10.16 0.64 n/a 2.00
Growth 12/31/88 12.72 3.73 -0.63 12.15 0.19 -4.03 9.12
Russell 1000 Growth 13.00 4.36 12.65 2.06 -3.44 8.59
Small/Mid Cap Value 12/31/91 13.14 11.61 1.97 16.97 -1.81 5.98 10.30
Russell 2500 Value + 11.39 9.64 14.74 1.38 8.02 10.68
Small/Mid Cap Growth 12/31/96 15.13 14.18 3.09 19.44 -1.82 -0.53 4.12
Russell 2500 Growth 13.15 11.09 17.27 3.09 0.47 5.19
Real Estate 5/31/96 13.20 18.71 -0.92 28.56 2.33 9.65 9.00
MSCI U.S. REIT 13.17 19.63 30.54 1.88 10.20 10.06
Tax-Managed U.S. Equities 7/31/98 12.73 1.00 -3.78 9.60 -0.79 -0.66 2.30
Russell 3000 + 11.53 4.78 10.96 0.95 -0.28 2.06
GMO International Equity Inception 3Q YTD YTD Value One Five Ten Since
International Active EAFE 5/31/81 16.26 -0.37 -1.44 1.77 1.58 5.82 12.63
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 9.28
Int'l. Active Foreign Small Companies 1/31/95 17.75 12.24 2.80 14.64 6.89 12.51 11.82
S&P Developed ex-U.S. Small Cap 17.40 9.45 9.85 4.24 7.48 6.95
International Intrinsic Value 3/31/87 15.79 1.38 3.32 0.99 0.97 6.76 8.27
MSCI EAFE Value 16.36 -1.94 -1.67 1.09 3.87 7.12
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 5.08
International Growth 11/30/01 16.85 5.16 1.08 9.47 3.09 n/a 7.33
MSCI EAFE Growth 16.59 4.08 8.41 2.78 n/a 5.55
MSCI EAFE 16.48 1.07 3.27 1.97 n/a 6.15
International Core Equity 1/31/02 16.47 2.72 1.65 3.64 1.63 n/a 8.38
MSCI EAFE 16.48 1.07 3.27 1.97 n/a 6.87
Currency Hedged Int'l. Equity 6/30/95 7.75 2.21 2.32 4.91 0.78 3.99 7.42
MSCI EAFE (Hedged) 7.50 -0.12 2.81 0.40 -0.35 5.69
Japan Equity 12/31/05 3.10 5.70 2.12 -0.50 n/a n/a -4.33
MSCI Japan IMI++ 5.45 3.58 -0.17 n/a n/a -4.50
Int'l. Small Companies 10/31/91 17.64 6.79 -2.37 4.78 3.79 11.08 9.35
MSCI EAFE Small Cap + 17.51 9.16 8.04 4.71 7.73 6.57
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 5.21
Tax-Managed Int'l. Equities 8/31/98 16.11 2.05 0.99 3.19 2.18 7.32 7.74
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 4.42
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. A GIPS® compliant presentation is available at www.gmo.com.
Copyright © 2010 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.
GMO Quarterly Update 3

GMO Emerging Equity Inception 3Q YTD YTD Value One Five Ten Since
Emerging Markets 12/31/93 19.85 11.52 -0.25 18.93 10.59 16.12 9.77
S&P/IFCI Composite 18.34 11.78 21.49 13.76 15.07 7.10
Emerging Countries 9/30/97 19.83 10.92 -0.86 18.58 10.02 15.00 10.96
S&P/IFCI Composite 18.34 11.78 21.49 13.76 15.07 9.84
GMO Global Equity Inception 3Q YTD YTD Value One Five Ten Since
Global Active Equity 8/31/00 13.92 1.88 -0.70 5.11 1.69 7.78 7.98
MSCI World 13.78 2.58 6.76 1.30 0.79 0.24
Global Equity 7/31/96 14.33 2.90 0.32 6.82 0.62 3.84 6.68
MSCI World 13.78 2.58 6.76 1.30 0.79 4.93
Global Growth 7/31/04 15.70 4.39 0.38 10.31 2.24 n/a 5.42
MSCI World Growth 14.81 4.01 10.22 2.17 n/a 4.86
MSCI World 13.78 2.58 6.76 1.30 n/a 4.32
GMO Fixed Income Inception 3Q YTD YTD Value One Five Ten Since
Core Plus Bond 4/30/97 4.31 13.78 5.84 16.68 3.65 5.86 6.01
Barclays Capital U.S. Aggregate 2.48 7.94 8.16 6.20 6.41 6.53
Inflation Indexed Plus Bond 5/31/06 4.61 13.37 6.37 18.58 n/a n/a 4.03
Barclays Capital U.S. Treasury Inflation Notes 2.48 7.00 8.89 n/a n/a 6.84
U.S. Treasury 3/31/09 0.01 0.06 -0.03 0.13 n/a n/a 0.22
Citigroup 3 Mo. T-Bill 0.04 0.09 0.12 n/a n/a 0.14
International Bond 12/31/93 12.41 15.33 7.08 15.48 5.83 8.10 7.61
J.P. Morgan Non-U.S. Gov't. Bond 10.37 8.25 5.91 7.71 8.23 6.67
Currency Hedged Int'l. Bond 9/30/94 4.29 14.23 7.20 16.36 3.07 5.38 8.30
J.P. Morgan Non-U.S. Gov't. 2.66 7.03 6.97 4.94 5.62 7.44
Bond (Hedged) (ex-Japan) +
Global Bond* 12/31/95 9.90 15.22 6.87 16.46 5.18 7.22 6.35
J.P. Morgan Global Gov't. Bond 7.95 8.35 6.28 7.32 7.79 6.12
Emerging Country Debt* 4/30/94 12.31 23.06 8.91 28.39 8.70 14.33 16.97
J.P. Morgan EMBI Global + 8.33 14.14 15.88 9.17 10.70 12.28
Emerging Country Local Debt Investment** 2/29/08 13.61 16.62 2.66 23.10 n/a n/a 4.81
J.P. Morgan GBI-EM Diversified 12.45 13.96 17.26 n/a n/a 9.67
Asset Allocation Bond 3/31/09 1.83 4.48 4.38 7.16 n/a n/a 7.33
Citigroup 3 Mo. T-Bill 0.04 0.09 0.12 n/a n/a 0.14
* 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.
** Returns for the composite are based on estimated market values for the period from and including October 2008 through February 2009.

GMO Asset Allocation Inception 3Q YTD YTD Value One Five Ten Since
Global Balanced Asset Allocation 6/30/88 9.81 3.88 -1.65 8.54 4.78 7.77 10.07
Blended Benchmark 10.15 5.53 8.79 3.65 3.22 8.17
Real Return Global Balanced Asset Alloc. 6/30/04 8.47 1.70 -1.87 6.02 4.70 n/a 6.45
Blended Benchmark 8.95 3.57 6.16 2.76 n/a 4.13
Global Allocation Absolute Return 7/31/01 5.26 0.97 -3.16 5.51 5.95 n/a 10.51
CPI Plus 5% 1.90 4.12 6.25 7.01 n/a 7.40
Real Return Asset Allocation 12/31/09 4.73 -8.84 -9.22 n/a n/a n/a -8.84
CPI 0.67 0.38 n/a n/a n/a 0.38
Global All Country Equity Allocation 12/31/93 14.92 2.89 -0.75 8.22 3.54 7.19 8.86
Global Developed Equity Allocation 3/31/87 14.37 2.07 -0.51 7.23 2.16 6.43 9.10
International All Country Equity Alloc. 2/28/94 17.84 5.09 1.66 7.65 4.03 9.25 7.93
International Developed Equity Allocation 11/30/91 17.17 3.20 1.96 4.03 2.23 7.73 8.33
U.S. Equity Allocation 2/28/89 11.75 0.19 -4.25 8.99 -0.09 1.58 9.83
Blended Benchmark 11.47 4.43 10.66 0.81 -0.16 9.05
Flexible Equities 12/31/08 -4.57 -6.71 -9.29 -10.96 n/a n/a -8.95
MSCI World 13.78 2.58 6.76 n/a n/a 17.87
Special Situations 8/31/07 1.91 -0.51 -0.61 0.40 n/a n/a 9.50
Citigroup 3 Month T-Bill 0.04 0.09 0.12 n/a n/a 1.11
Alternative Asset Opportunity 4/30/05 6.94 3.11 2.20 8.94 0.58 n/a 2.62
Alternative Asset Opportunity Index 5.88 0.91 5.45 1.12 n/a 2.80
Alpha Only 7/31/94 -0.21 -2.21 -2.31 -1.01 2.49 5.60 4.39
Citigroup 3 Month T-Bill 0.04 0.09 0.12 2.48 2.41 3.49
Tax-Managed Global Balanced 12/31/02 9.19 3.41 -2.09 6.45 4.31 n/a 8.20
Tax-Managed Global Balanced Index 10.09 5.51 8.14 3.61 n/a 6.79

GMO Absolute Return Inception 3Q YTD YTD Value One Five Ten Since
Aggressive Long/Short 9/30/00 3.22 1.58 1.49 3.51 0.04 5.91 5.91
Citigroup 3 Month T-Bill 0.04 0.09 0.12 2.48 2.41 2.41
Tactical Opportunities 9/30/04 -4.60 -16.86 -16.96 -14.32 -6.15 n/a -7.76
Citigroup 3 Month T-Bill 0.04 0.09 0.12 2.48 n/a 2.48
Emerging Country Debt Long/Short 3/31/96 6.15 12.94 12.58 17.47 6.13 9.92 11.76
J.P. Morgan U.S. 3 Month Cash 0.20 0.36 0.46 3.56 3.17 4.02
Currency Hedge 7/31/03 4.01 2.09 1.73 9.70 -2.34 n/a 0.26
J.P. Morgan U.S. 3 Month Cash 0.20 0.36 0.46 3.56 n/a 3.09
Fixed Income Hedge 8/31/05 2.41 8.77 8.40 10.86 -5.90 n/a -5.97
J.P. Morgan U.S. 3 Month Cash 0.20 0.36 0.46 3.56 n/a 3.56
Emerging Currency Hedge 3/31/06 8.22 8.49 8.12 13.69 n/a n/a 4.43
J.P. Morgan U.S. 3 Month Cash 0.20 0.36 0.46 n/a n/a 3.47
Mean Reversion 2/28/02 -2.07 -6.37 -6.46 0.54 3.76 n/a 9.26
Systematic Global Macro 3/31/02 -0.50 8.21 8.12 8.20 8.04 n/a 8.31
Completion 8/31/07 -0.98 -1.50 -1.59 1.98 n/a n/a 17.00
Citigroup 3 Month T-Bill 0.04 0.09 0.12 n/a n/a 1.11
Multi-Strategy 10/31/02 0.59 -0.10 -0.19 3.58 2.51 n/a 3.23
Tax-Managed Absolute Return 3/31/01 1.73 -1.61 -1.71 1.07 -3.72 n/a -0.85
Global Market Review a reduction in the trade deficit. Hardly the signs of a
healthy recovery, normally driven by increases in the
First there were green shoots and, in short order, three Cs: construction, consumption, and confidence.
a fully blooming V-shaped recovery. It has been over a High and persistent unemployment was similarly
year since the chairman of the Federal Reserve employed dismissed in the face of ever-rising corporate profits. But
his horticultural metaphor and economists began to now that the fiscal stimulus has begun to fade and the
speculate about the shape of the recovery. In the interim, variety of programs designed to reach into the future and
asset prices have substantially recovered, the real pull demand into the present have ended, the underlying
economy has stabilized, and even the recession dating weaknesses are once again exposed. Without the artificial
committee at the NBER called June 2009 as the trough support, second quarter GDP was revised down from
of the recession. Given our belief that mean reversion 2.4% to 1.7%.
drives almost everything, we suppose it is only to be
expected that by the time the third quarter of 2010 rolled Investors responded to the renewed uncertainty with
around, the pendulum has swung all the way back to talk characteristic poise, as sentiment swung from hysteria to
of another recession. Just as night follows day, recovery apoplexy before settling on Panglossian exuberance. The
has been supplanted by relapse. The warning signs were one area where this was most apparent was the sovereign
there from the beginning. After all, GDP growth had bond market. Having pushed yields lower in the
been almost entirely made up of an inventory rebuild and previous quarter, investors continued to welcome
the warm embrace of what appears on the surface to be
Global Balanced Asset Allocation: One Example the one remaining safe asset. The move in yields even
Recommendations as of September 30, 2010 provoked suggestions that the bond market was entering
Benchmark: 65% MSCI AC World Index /
35% Barclays Capital Aggregate a bubble. While it is hard to see how an asset class with
an almost infallible cash flow stream such as a
Benchmark GMO Active
government bond can be subject to an irrational bubble,
U.S. Weighting Decisions
Equities it does seem almost certain that bond investors will have
Fixed
27.2%
Income to make do with very low real returns if they insist on
35.0%
paying such high prices. Other signs of stress included
U.S.
Equities
-2.2%
persistently high correlations and volatilities across most
Emerging
risky asset classes, together with low bond yields, all
International
Equities Equities traditional markers of a market meltdown. And yet,
8.9% 28.9%
Int'l. August notwithstanding, equities managed to reverse all
Equities
-3.4% of the second quarter losses and then some. In the
GMO Allocation twisted logic of the bulls, the worse things are, the more
Cash & monetary authorities stand ready to come to the rescue,
Special Equivalents
Situations
4.7%
2.8% Quality
25.0%
Emerging
offering greater and greater amounts of liquidity. Zero
interest rates not enough? Start increasing the central
Alpha Only
Equities
12.7%
Asset +3.2%
International
Allocation Bond
4.4%
Intrinsic Value
4.2%
bank’s balance sheet. Quantitative easing not having the
Emerging
Country Debt
International
Growth
desired effect? Simply increase asset purchases until it
0.5%
does. Although running the printing presses may well
4.3%
Inflation
International
Indexed Plus
1.1%
Strategic
Core Equity
15.7%
Fixed
Income
put a floor under the equity market for a while, it seems
Flexible
+2.4%
inconceivable that currency debasement and beggar-thy-
Fixed Income
Domestic Equities
7.5% Emerging
Bond 1.3%
Markets
neighbor trade policies will end up boosting final

3.7%
12.1%
-10% -5% 0% 5% 10% aggregate demand. A weakening dollar may well borrow
growth from the rest of the world in the short term, but
Note: Asset Allocation ranges are ±20% for U.S. and
international equities and ±15% for fixed income. it’s unlikely to solve the problem of too much debt of all
types.
After taking a serious tumble in August, equities came Faced with still lower interest rates, investors
roaring back in September as it became increasingly clear continued to look for yield wherever they could find it.
that the Federal Reserve had no intention of sitting by as Although the Barclays Capital U.S. Aggregate gained a
the economy drifted toward a double dip. The S&P 500 modest 2.5%, investors seemed to have just discovered
rocketed up 11.3% for the quarter, pushing the index the higher yields in emerging market bonds, and the J.P.
back into the green for the year. Interestingly, while Morgan EMBI Global raced ahead, returning +8.3% for
value, small cap, and junk equities have led in previous the quarter.
rallies, this time around the pattern was significantly
different. Growth stocks had a nearly three-point lead on Asset Allocation
value stocks as the Russell 1000 Value index was up only
10.1% versus the Russell Growth’s +13.0% return. Review
Unusually for such a strong move, small capitalization
stocks actually had the same return as the large caps, with Recoveries from financial recessions are never easy or
the Russell 2000 index gaining 11.3%. quick. The financial architecture that usually enables the
interest-rate-sensitive sectors of the economy to jump-
Developed markets outside the U.S. also rallied in start aggregate demand remains gummed up. Without a
sympathy, despite lingering concerns around sovereign well-functioning and healthy credit system, real estate and
debt levels in the European periphery. A crumbling capital investment along with consumer durables remain
dollar meant that the EAFE index was up an impressive anemic and the real economy struggles to grow. The
16.5% while in local terms the same index did not even acute phase of the financial crisis saw the full Keynesian
manage to return half that, rising only 7.1%. Both value apparatus wheeled out to combat a free-falling real
and growth indices were up similar amounts, with the economy. But while stimulus can support liquidity, it is
EAFE Value index gaining 16.4% and the EAFE Growth not much use in the face of insolvency. The real
index increasing 16.6%. Emerging market equities were economy cannot escape the pain generated by a hobbled
the stand-outs once again, with a total return for the banking sector trying to rebuild its balance sheet. On the
quarter for the S&P/IFCI Composite of +18.3%. The other hand, asset markets, at least in the short run,
performance of emerging equities will no doubt further invariably shear their fundamental moorings. Equities, in
solidify the idea that emerging countries will continue to particular, are especially prone to short-, medium-, and
outpace the developed world. long-term cycles of fear and greed. This time has been
no different and, while the secular outlook for the global
The yield on 10-year U.S. Treasuries had already fallen economy has remained broadly unchanged, equity
to below 3% by the end of the second quarter on flight to markets have swung between mild depression and
safety flows. During the third quarter, yields continued outright elation.
their precipitous drop and fell almost another 44 basis
points to 2.5%. The U.S. was certainly not alone, and all Rather than favor any particular macro theme, our
major sovereign bond markets saw their yields plunge. In portfolios have always relied on valuation to determine
Switzerland, the 10-year yield even traded below 1% how, where, and when we are positioned. Over the last
briefly. Falling sovereign yields in the U.S. meant that the few quarters this has been a humbling experience more
J.P. Morgan U.S. Government Bond index returned a often than not. While the market has chosen to favor
respectable +2.8%, while the J.P. Morgan non-US risky smaller companies with volatile profits and stock
Government Bond index managed an eye-popping prices, we have remained unwavering in our penchant for
+10.4%, helped in large part by the weak dollar. high quality. Although we did take advantage of the
second quarter European turmoil to tactically redeploy a
few points of our high quality exposure toward course, real headwinds for the markets. But they are, in
international developed and emerging market equities, the end, shorter term in nature. Longer term, the slower-
our broad portfolio positioning is remarkably the same. burn worries would include the moral hazard of a market
Unlike previous quarters, however, where every lurch that now anticipates, indeed, depends upon, intervention
higher in equity prices left quality in the dust, high quality and all of its nasty cousins. The huffing and puffing of
for once was able to hold its ground in a strong quarter central governments around the planet is certainly having
for equities overall. Could it be that the market is waking some short-term beneficial effects, but at what cost?
up to high quality’s fundamental cheapness? We won’t And at what point will their efforts appear winded?
know for some time, but for now we can at least take
some solace in the results for quality this quarter. Our broad strategies are:
Strategies 
Continue bias towards high quality stocks. While
historically, high quality stocks – those companies
“I’ll huff and I’ll puff, and I’ll blow your house … and
exhibiting high, consistent ROE and low debt – have
stock … and bond prices higher.” The expectation of
traded at a significant premium to the market,
further quantitative easing breathed life into the markets
valuations today are cheap. Quality stocks represent
this quarter, leading to the “reflation” of virtually all risky
one of the few areas within the U.S. equity market that
assets globally. September’s stock rally was the best
is trading below its fair value, and the portfolio’s U.S.
September since 1939 as the Fed all but signaled that
exposure will continue to tilt toward quality. While we
further intervention was a near certainty, with the
will admit frustration that the markets have not been
markets simply to debate what precisely would be on the
interested in discerning quality from junk, there are
shopping list. U.S. Treasuries continued their rally, with
increasing drumbeats among respected opinion
yields on the 2-year notes ending the quarter at 0.41%,
formers that quality companies may indeed be some
and corporations have been re-financing their debt at a
of the few bargains left in an otherwise inflated
furious pace with investors shockingly eager to buy up
market. And while we take no joy in our thesis not
paltry yields.
holding up over the last year or so, we welcome the
fact that other important voices have been joining the
In our opinion, all this huffing and puffing is simply
quality chorus of late.
making expensive assets even more so. U.S. stocks, we
believe, are still trading significantly above their fair value,
especially small caps. And bond yields are at 60-year 
Maintain exposure to emerging markets. We are
lows. Can yields go lower? Clearly, as we found out this overweight emerging markets within global equity
quarter. Yet to load up on bonds at this stage strikes us mandates as they represent a sub-asset class trading
as folly. We simply want to avoid that inevitable day of near or even below their fair value. Despite the more
reckoning when investors who are essentially being narrow concern about a possible “bubble” in an
prodded by the Fed to reach for yield (either through overheated Chinese real estate market, we remain
taking credit or duration risk) will be burned. While not positive on the asset class. Strangely, emerging
overtly, I guess you could say that we’ve been fighting the countries, long perceived as the more unstable and
Fed. profligate economies, are literally emerging from the
global financial crisis as beacons of growth, stability,
The wall of worry still stands tall – a fragile and tepid and prosperity. This, combined with the more secular
economic recovery, high and seemingly more entrenched phenomenon of a growing middle class, continues to
unemployment, moribund housing prices, prospects of bode well.
global currency debasement, the echo of widening credit
worries from the periphery of Europe – these are all, of

Inflation not a worry … for now. While there is a 11.3% for the period, clawing its way back into positive
powerful argument to be made that the extreme territory for the year in full. Statements and expectations
indebtedness of the U.S. government (and sovereign about future action by the Federal Reserve lifted investor
nations, more generally), the sheer volume of spirits during the period. The Fed’s promise to intervene
economic stimulus, and the growth of the money if economic conditions worsened was viewed by
supply and subsequent debasement of fiat currencies investors as a promising protection against the prospect
pose a potent (but latent) inflation threat, in the of a double-dip recession.
shorter term inflation will likely remain at bay. Still,
timing the eventual escape of the inflation genie is a U.S. Equity Markets
terrifically difficult game, so we don’t play it. Instead, Third Quarter 2010 Performance
15%
we will continue to position our bond portfolio 13.0% 13.1% 13.2%
defensively by simply buying the cheapest of an 11.7% 11.4%
11.3%
expensive opportunity set, albeit begrudgingly. This 10.1%
means continued emphasis on shorter- and 10%
intermediate-duration TIPS. In the interim, however,

we’ve been able to identify bonds in Australia and
New Zealand that have attractive yields, but could also 5%
act as a deflation hedge should that scenario play out.

Hold cash and cash “plus” as dry powder. It is 0%
S&P Dow Russell 1000 Russell 2500 MSCI
admittedly distasteful to be owning any cash or fixed 500 Jones Value Growth Value Growth U.S.
income at these levels. But if you believe, as we do, U.S. TSM REIT
that they offer some degree of “optionality” – that is,
they act as dry powder in the event we find more
favorable pricing of assets in the future – then one can While a palatable resolution to the European
make sense of it. sovereign debt crisis sent stocks higher during the
quarter, investment factor spreads were narrow. There
was little difference between the relative returns of high

Where possible, invest in conservative absolute
and low quality stocks, as both groups lagged a rising
return strategies, which can provide equity-like
market. High quality’s modest underperformance in a
returns while improving diversification through low
rising market is of particular note. The group
correlations with equity markets. Try to ensure that
experienced an unexpectedly poor second quarter, as
alternative strategies are providing true diversification
worries about U.S. high quality multinationals’ European
with low correlation to traditional asset classes.
exposure trumped their defensive business characteristics
in investors’ minds. With markets rising in the third
Performance Review and Outlook quarter, investors might have expected another poor
U.S. Equities performance – a “heads I win, tails you lose” scenario –
Market Review as buyers who avoided quality in the second quarter
market decline due to its “risky” exposure to Europe now
U.S. investors shook off their European sovereign found it insufficiently risky in a rising market. Notably,
debt hangover in the third quarter. After the favored this was not the case. While high quality stocks
recipe of government intervention quelled investor fear underperformed during the quarter, it was by a modest
that European troubles could spill into the global margin in comparison with past flights to risk. Quality’s
economy, U.S. stocks bounced back strongly from their second and third quarter experience highlights both the
second quarter losses. The S&P 500 posted a gain of folly of over-emphasizing short periods of relative return
U.S. Equities
Relative Performance of Selected Groups versus the S&P 500
Year-to-Date September 30, 2010
Largest 100 Russell 2500
1.0 8.0
0.5
6.0
0.0
4.0
Size
-0.5
-1.0 2.0
-1.5
0.0
-2.0
-2.5 -2.0
12/09 3/10 6/10 9/10 12/09 3/10 6/10 9/10
Investment Disciplines
Cheap on Price/Intrinsic Value High Price Momentum

3.0 6.0
2.0
1.0
3.0
0.0
-1.0
0.0
-2.0
-3.0
-4.0 -3.0
12/09 3/10 6/10 9/10 12/09 3/10 6/10 9/10
Consumer Discretionary Financials

12.0 10.0
10.0
8.0
5.0
6.0
4.0
0.0
2.0
0.0
Sectors
-2.0 -5.0
12/09 3/10 6/10 9/10 12/09 3/10 6/10 9/10
Information Technology MSCI U.S. REIT Index

0.0 24.0
20.0
-2.0 16.0
12.0
-4.0 8.0
4.0
-6.0 0.0
-4.0
-8.0 -8.0
12/09 3/10 6/10 9/10 12/09 3/10 6/10 9/10
and the importance of a value-based philosophy, where hand. In the long run, investment returns have three
short-term underperformance merely serves as an sources: dividends, fundamental growth, and changes in
opportunity to buy more of a good thing at an even price multiple. Simple does not mean easy. There are
better price. Keeping on the value theme, bottom-up innumerable factors that influence a company’s ability to
valuation metrics (i.e., models that seek undervalued pay dividends and grow, and the multiple the market is
individual stocks) also exhibited tight spreads during the willing to pay for it. But at the heart of a value
period, delivering mixed relative returns that, for most investment philosophy is an understanding of what is
metrics, were neither extremely bad nor extremely good. knowable, what is unknowable, the risks to both the
Simple measures of “value” like price/book and price/ known and the unknown, and where we derive an edge.
earnings were strong participants in the 2009 market rally, Doing simple things well is a big enough task without
owing to their heavy exposure to the more beaten-down, layering on an urge to parse the latest economic data to
cyclical areas of the market. But their 2010 performance fit a macro theory, distorting any edge we might have
has reflected a less extreme environment than the rapid obtained. Our focus remains on understanding the
rotations between greed and fear that marked the 2008- knowable, acknowledging the unknown, weighing the
09 period. Finally, momentum metrics posted similarly associated risks, and finding investments trading for less
modest relative returns for the period, though for the than they’re worth. We’ll leave prognostications to the
most part they outperformed. Momentum’s “calming- prognosticators. After all, it’s a crowded field.
down” is another notable comparison to the greed-fear
pendulum of 2008-09 where momentum metrics were
International Equities
alternately woeful (caught holding heavy commodities
Market Review
exposure as the market began to unwind in 2008), heroic
(rotating into defensive positioning in the depths of the
International Equity Markets
crisis), and even more woeful (getting heavily defensive Third Quarter 2010 Performance
just as the market turned in March of 2009). While 30%
momentum’s modest third quarter outperformance might 22.1%

19.4%
be a let-down for adrenaline addicts, its more modest 20% 18.3%
16.5%
outperformance harkens back to the days when
10.6%
momentum models tracked individual companies and 10%
9.1%
7.1%
5.8%
were not simply a beta pass-through … an interesting
-0.1%
trend to watch moving forward.
0%
In Local Terms
In Dollars
Outlook
-10%
MSCI S&P/IFCI
In these uncertain times, macroeconomic EAFE Europe Pacific Japan Composite
ex-Japan (Emerging)
prognostication seems to be the topic du jour. Inflation
vs. deflation. Gold vs. bonds. Government intervention
vs. free markets. Stock picking vs. factor selection. A
The third quarter was a period of solid returns for
vibrant economic recovery vs. a double-dip recession vs.
global equity markets thanks to the months of July and
Armageddon 2.0. A repentant urge drives investors and
September. July featured a relief rally on the back of
scholars to wade into areas complex and unknown in
stress tests on European banks and a sense that the crisis
hopes of finding that single idea that would have
phase of the Greek and other sovereign debt event had
prevented the 2008-09 calamity (or at least made money
passed. August featured concerns about anemic
when it occurred). Lost in this macro quagmire,
economic recovery in the U.S., and global markets
however, is the fundamental simplicity of the task at
generally retrenched. September featured more positive and low leverage), the highest quartile and lowest quartile
economic and corporate data, however, and performance returned +15.6% and +15.0%, respectively, while the
was strong. middle 50% outperformed.
For the entire quarter, the MSCI EAFE index The largest positive individual impact for the quarter
returned +16.5% in U.S. dollars terms. A good chunk of came from BP, as news flow was reasonably positive and
the return was due to foreign currency appreciation as the investors’ attention proved fairly short. Mining
index returned +7.1% measured in local currencies. The companies like Rio Tinto and Xstrata were also
dollar fell to its lowest level on a trade-weighted basis in contributors, and Europe banks like Lloyds, BNP
September on the back of Federal Reserve Bank Paribas, and Société Générale appeared high on the list.
comments about battling deflationary pressures. The
euro was one of the strongest currencies, but the yen Outlook
reached its highest level against the dollar since 1995,
prompting the Japanese government to intervene in A big story of the last few years has been high
September. correlations as stocks move together, up or down,
depending on investor sentiment to take on risk. This
The MSCI Europe index returned +19.4% for the should provide stock picking opportunities as
quarter, while MSCI Japan was up a more muted 5.8%. fundamentals are less correlated than market movement.
All EAFE markets appreciated with the exception of Measured in conventional ways, however, value spreads
Ireland, which was hurt by credit rating downgrades. are fairly tight, and the overall valuation of markets is not
Japan and Switzerland were the only two markets to post especially enticing. At this point, the best opportunities
gains of under 15% in dollar terms, while the best are likely found by picking out the good that has been
performers – Norway, Spain, and Austria – approached punished with the bad over the last few years, identifying
30% gains. stocks and countries where true value exists, and where
the quality of the business is strong enough to not force
Sector performance was similarly broad based. one to make a call on the macro economy for an
Energy, Materials, and Telecommunications posted the investment to turn out to be prudent.
highest performance. Technology was the only sector to
post merely single-digit returns within EAFE markets, Emerging Market Equities
while Health Care, Utilities, and Consumer Staples
Market Review
lagged, reflecting a preference for cyclicals over
defensives in general. Financials were nestled sedately in The third quarter began and ended on an upbeat note,
the middle of the pack for this quarter after several years August being the sole bearish month. Investors have
of being an extreme performer on one side or the other. gained greater confidence in the prospects of a global
Japanese and German financials underperformed, but economic recovery. In particular, they have been
elsewhere in Europe the sector held up well. attracted by the prospects of high growth in emerging
markets, which is a marked contrast to the outlook for
The quarter was not clearly a period of risky assets developed markets. The asset class jumped to its highest
outperforming, however. The EAFE Small Cap index level since the credit crisis, supported by a surge of
returned +17.5% to just barely edge out its large cap inflows.
cousin, and the Emerging Market index didn’t pull too far
away, registering an 18.0% gain. The EAFE Value and Chile’s economy grew 6.5% in the second quarter
Growth indices provided nearly identical returns of from a year ago, the biggest rise in five years. National
+16.4% and +16.6%, respectively. On GMO’s quality economic output is approaching levels before the
measure (blending high profitability, stable profitability, February earthquake, which caused an estimated $30
billion in damage. Consumption has jumped following focus on the brightening economic picture. Gross
the quake, with retail sales growing strongly. Chile’s domestic product rose 9.1% in the second quarter after
central bank has raised rates by 2 percentage points in having jumped 12% in the three months to March, the
four months. The rate increase, along with the strength best two quarters of growth since 1995. The central bank
of the domestic economy and continuing robust prices raised its benchmark interest rate and signaled further
for copper, the country’s main export, has sent the increases as the economy continues to grow faster than
Chilean peso on a bull run. expected. The central bank expects the economy to
expand as much as 7.5% this year, a pace that would be
Manufacturing accelerated in China for a second the highest in several years.
straight month in September, adding to signs that the
fastest-growing major global economy is stabilizing. Turkey’s ruling party won a referendum, widely
China’s growth has helped pull in imports from around viewed as an indicator of the general elections next year,
the world, assisting in the global recovery. In the face of by a larger than expected margin. Investors cheered the
rising pressure from property value appreciation in China, increased odds of a continuation of Prime Minister
the central bank has avoided raising interest rates and Erdogan’s policies, which have helped deliver
instead has attempted to micromanage the real estate record economic growth. The referendum included
issues. It has asked banks to dampen credit growth, amendments that bring Turkey’s military further under
raised their reserve ratios, and issued a series of guidelines civilian control. It will also restructure the judiciary,
that tighten requirements on mortgages, especially for giving the government more control over appointments
multiple home purchases. Economic growth fell to to various courts. The vote has been welcomed by both
10.3% last quarter from an annual pace of 11.9% in the the country’s leading business group and the European
prior three months. Union. Turkey’s economy grew at an annual rate of
more than 10% in the first two quarters.
The Indian stock market was hit by fears of tightening
monetary policy. The central bank raised a benchmark Outlook
rate and pledged to review borrowing costs at meetings
every six weeks, rather than once a quarter. Accelerating In this outlook we cover some notable country
growth is running against capacities in power, roads, and developments that we feel could be key drivers in the
ports. Foreign funds desirous of participating in the coming months.
strong pace of economic growth have pumped in a
cumulative 891.2 billion rupees ($19.8 billion) in 2010. Philippines President Benigno Aquino plans to boost
India’s gross domestic product expanded 8.8% last the country’s credit rating and lure foreign investors by
quarter from a year earlier, the highest among major shrinking its record budget deficit. The government,
economies in Asia after China. Investors have bid up which has pledged to avoid raising taxes, is instead
valuations on expectations that the growth will continue considering changes in cigarette and alcohol levies and
and on optimism that its domestic demand is relatively stepping up prosecution of tax evaders. Markets have
insulated from the issues impacting global economic been receptive to Aquino’s proposals to cut the deficit
growth. and boost the economy, including a plan to offer
investors $16.7 billion of infrastructure projects. In
Thailand’s stock market has been one of the best addition, the economy is currently benefiting from some
performers this quarter despite a political stand-off. The tailwinds. Boosted by exports and remittances, it grew
two sides disagree on how much authority appointed 7.9% last quarter, the fastest pace in three years. The
soldiers, judges, and royal advisers should wield over central bank has also kept rates at a record low of 4% as
elected politicians. Ignoring politics, investors chose to inflation continues to be mild. After several years of
lagging other emerging Asia markets, the Philippines Prime Minister Viktor Orban’s party swept the local
could enjoy a growth spurt if the reform plans actually elections held in early October in Hungary. The party
get implemented. already enjoyed a clear majority in parliament and now
does not have to face an election until 2014. Orban came
Mexico sold $1 billion of 100-year bonds, the longest- to power earlier this year after promising to end the
maturity debt issued by a Latin American country. The ongoing austerity programs and spur economic growth.
International Monetary Fund forecasts Mexico’s Hungary was one of the hardest-hit emerging markets
economy will expand 4.5% this year. Contrary to the during the crisis because of its foreign currency debt.
barrage of headlines on drug-related gang violence, the About 80% of Hungarian mortgage loans are
economy is doing well. The government has taken denominated in Swiss francs as households thought it
significant steps to introduce more competition in key was an easy way to circumvent the high interest rates in
sectors of the economy. The 16-year-old North their own currency. Orban has announced significant
American Free Trade Agreement continues to be a key taxes on banks and cutbacks in public services. But, the
driver. Gross domestic product expanded 7.6% in the party has also made news for battling the central bank
second quarter, boosted by U.S. demand for everything and for pushing back against the IMF on budget-deficit
from refrigerators to cars. Mexico’s exports to the U.S. targets. Rating agencies have not taken this well – S&P
have gained market share from China as companies took lowered the outlook on Hungary’s BBB- rating to
advantage of the lower shipping costs from a border negative in July. However, in September the Cabinet did
country. It is too soon to make firm pronouncements, commit to a deficit of no more than 3% of gross
but it would be interesting if the haze of drug violence is domestic product in 2011. And the market, which has
masking a genuine transformation in Mexico. generally been punishing Hungary during each bout of
risk aversion, has chosen to view the latest election
When Lula da Silva, the current Brazilian president, outcomes optimistically. They are betting that the
was campaigning in 2002, markets were hypersensitive to government will have the flexibility to make hard
candidate pronouncements and Lula’s eventual victory decisions on the next budget, due by the end of October.
depressed values significantly. After nearly eight years in Given the uncertainty in the market, clarity can certainly
office, Lula has record popularity ratings. The economy help prices. However, the events of the last few months
clocked a rate of more than 8.8% in the first half of the suggest a non-trivial possibility that investors might not
year, and unemployment fell to 6.7% in August. GDP per like the details that will emerge in the next few weeks.
capita has jumped to $8,217 in 2009 from $2,870 in 2002.
Dilma Rousseff, Lula’s designated successor, finished
Fixed Income
first in the initial round of elections and will face her
main rival, Jose Serra, in a run-off later in October. In Review
these elections, the bulls have barely broken their stride
to examine the differences between Rousseff and Serra. Global government bond markets were strong and
Rousseff has pledged continuity with her mentor’s the dollar weak in the third quarter. Bond yields began
policies that, in addition to generating a strong pace of their decline amidst the August equity market wobble,
economic growth, have also caused the federal and then accelerated lower in anticipation of “QE2” by
government’s spending to rise as a percent of the the U.S. Federal Reserve. The global hunt for yield
economy, resulting in a deficit of 3.4%. Serra, on the ensured that bond yields from emerging countries
other hand, has been more critical of government followed suit, and the gap between the two narrowed
spending growing faster than the pace of economic during the quarter.
growth. Time will tell whether the markets have
sharpened their foresight in the eight years since 2002.
J.P. Morgan Global The euro witnessed a fairly substantial reversal of

Government Bond Index Yield fortunes, rising by 11.5%. In the prior quarter, the euro
4.5%
Em erging
9.0% declined by 9.5% amidst worries over the health of
(Right Hand Scale) 8.5% weaker euro members. During the third quarter, the
4.0%
8.0% much anticipated release of the bank stress tests served to
7.5% calm market fears, even as many market participants
3.5%
Q3 7.0% flagged the flawed design of the tests themselves. In
3.0% what must be good news for the Swiss National Bank,
6.5%
which had earlier accumulated substantial euro holdings
6.0%
2.5% Developed in trying to drive the Swiss franc weaker, the euro rose by
(Lef t Hand Scale) 5.5%
1% relative to the Swiss franc.
2.0% 5.0%
1/05 1/06 1/07 1/08 1/09 1/10
In September, the Bank of Japan surprised the market
when it engaged in its first yen-weakening, unilateral
The prospect of “Quantitative Easing 2” or, more intervention since 2004. Although this limited
appropriately, “Quantitative Credit Easing 2” also took September’s rise to only 0.5%, the yen was still up 5.9%
its toll on the U.S. dollar, which declined rather uniformly for the quarter.
during the quarter. In aggressively pursuing the portfolio
balance channel transmission mechanism, the Federal Emerging currencies particularly benefited from the
Reserve hopes to buy up safe assets that investors are U.S. dollar’s demise; in spot terms, all but one of the
apparently hoarding, forcing them to buy risky assets. emerging currencies rose during the quarter, with the
Foreign currency assets apparently fit the bill. Among only laggard the Argentine peso (-0.8%). Including carry,
developed market currencies, Swedish krona and however, even the peso gained (+1.4% total return).
Australian dollar were the two biggest gainers, rising by Renewed confidence in the euro led to even larger gains
15.6% and 14.6% against the greenback, respectively. among the periphery. Czech crown rose by 16.5%,
Sweden was one of only three developed countries to Polish zloty by 16%, Hungarian forint by 14.9%, and
raise policy interest rates, increasing them by 50 basis Romanian leu by 14.0%. Such gains easily erased the
points to 0.75%. In Australia, surging commodity prices prior quarter’s losses.
added to the Australian dollar’s allure, where the 4.5%
policy rate offers a welcomed carry relative to In Asia, the Chinese renminbi rose by 1.3%, its first
commodities themselves. notable quarterly rise in two years. This led to strength
Third Quarter 2010 Currency Spot Returns

15.6 16.0 16.5
14.6 14.9
14.0
12.8
11.5
10.4 11.0
9.5 9.9
8.3 8.0
7.0 7.2
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across the region, with 2%+ gains in Korea, Thailand, In local emerging currency bond markets, higher-
Singapore, Philippines, Malaysia, India, and Taiwan. In yielding Brazil, Colombia, and South Africa led the
Latin America, the big winner was Chilean peso, +12.8%, markets, with returns of 10.1%, 8.6%, and 7.9%,
which followed the upward trajectory of copper prices. respectively. The index’s newest entrant, Chile, was the
only market to see a decline, falling 1%.
Government bond markets rallied in the third quarter,
particularly when most world equity markets declined EMBIG’s sovereign spread tightened by 54 basis
sharply mid-quarter. In local currency bond index terms, points to 305 basis points during the period, and the bid-
gains were the highest in the U.K., +3.7%, and the lowest offer spread on the index tightened as well. Among the
in Switzerland, +0.9%. The +1.9% index total return for biggest index gainers for the quarter were Argentina,
the euro area masked a wide range of outcomes among Belize, and the Philippines. Argentina reaped the
euro currency participants, only the largest of which benefits of its successful exchange of defaulted bonds,
(Germany, Italy, France, Spain, Netherlands, and the boom in soybeans, and global risk appetite. Tiny
Belgium) pertain. Core euro zone debt markets, Belize’s $550 million of restructured bonds have also
including France and Germany, rose during the quarter, gained from the strong market tone, returning +65% in
by 2% to 3%. Meanwhile, Spanish bonds rose by 4.3%, the first nine months of the year. In the Philippines, the
and Greek bonds rose by 4.0%, outperforming core euro new Aquino administration was able to convince the
zone debt markets. Irish bonds, however, provided the market that it would use its political capital to implement
euro zone’s worst returns, falling by 4.3% during the serious fiscal reform.
quarter. Ireland’s debt crisis is the latest to rattle Europe,
with officials attempting to stave off an emergency Among the lowest performers of the quarter were
bailout by promising to pump billions into its banks that Ecuador, Pakistan, and Tunisia. The lone Ecuadorean
were hardest-hit. Outside of the euro zone, U.S. 2015 bond dropped 11% on the last day of the quarter
(+2.8%), Canadian (+2.7%), Swedish (+1.3%), Japanese when disgruntled police officers took the president
(+1.1%), and Australian (+1.1%) bond markets reported hostage in a dispute over pay and benefits. Pakistan was
gains during the month. devastated by flooding that covered almost 20% of the
country’s territory, and the government’s weak response
disappointed foreigners and locals alike. Tunisian bonds
have a short duration and did not benefit as much from
falling rates as others.
Third Quarter 2010 Change in Interest Rates (10Y DM, 5Y EM)
0.2
0.0
0.0
-0.1 -0.1
-0.2 -0.1 -0.1 -0.1 -0.2 -0.1 -0.1
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Second Quarter 2010 J.P. Morgan EMBIG Returns by Country

22.1
17.9
11.3 11.9
9.8 10.3 10.7 10.9 10.9 11.1 11.1
6.9 7.0 7.0 7.2 7.3 7.3 7.3 8.2 8.3 8.3 8.7 8.8 9.1 9.5 9.6
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Though they continue to post welcomed gains, pools
Strategies once used for cash collateral were not the main
contributors for the quarter.
Currency positioning was a stand-out contributor
across fixed income strategies, both in developed and
especially emerging markets. In the latter, overweight Outlook
positions across Central Eastern Europe, the Middle
East, and Africa (CEEMEA) and much of Asia were With so many policy uncertainties lurking, it’s hard to
particularly helpful. In developed, overweights in the give a clear outlook these days. Perhaps the clearest, if
Australian dollar, yen, Norwegian krone, and New perhaps not the most original, observation is summed up
Zealand dollar were all positive contributors. in the chart below: emerging debt yields far exceed the
paltry returns to deposits, and look increasingly tempting
In emerging debt, external debt strategies had a relative to the ever-declining yields on developed
fantastic quarter thanks to asset class tightening as well as markets’ government bonds. Hence, the “wall of
positive contributions from both country selection and money” that fund-tracking firms report in detailing
security selection, the latter of which continued to be record inflows into emerging debt. Further evidence was
aided by the former collateral pool performances. In provided by the near record turnout for the emerging
emerging local debt, security selection drove strategy market investor program at this year’s IMF/World Bank
gains, followed by contributions from the former meetings.
collateral pool. The local strategy’s zero weight in
Thailand, whose bonds and currencies jumped despite Global Bond Yields
14%
lingering political issues, weighed heavily on
performance. Although other non-Japan Asia currency 12%
EMBIG (External Debt)
positions offset the loss due to the Thai baht 10%
underweight, other country positions failed to offset the GBI-EMD (Local Debt)
8%
loss on the bond side.
6%
Developed-markets bond positioning was also 4%

positive, particularly the net long duration position tilted 2% GBI Global (Developed Markets)
toward U.S., Canadian, and euro zone bond markets. USD 3-Month LIBOR
0%
1/04 1/05 1/06 1/07 1/08 1/09 1/10
On our valuation metrics, external debt spreads on emphasized repeatedly during the IMF meetings.
average (represented by the EMBIG index) still offer Investors remain unsure whether this coordination
value relative to fundamentals, although some countries breakdown is good (e.g., some countries can check
are already more than fully valued. Among emerging themselves out of the ER and possibly be an engine for
currencies, only a couple are overvalued. On average growth), or bad (large, interconnected, cross-border
(represented by the GBI-EMD) they are right in the financial institutions not to mention global trade have
middle of our valuation framework: not expensive, but been relying on, and may still require, such coordination).
not cheap, either. Local debt markets still offer value The so-called “currency wars” are one manifestation of
relative to their G3 alternatives, but in some cases offer the coordination breakdown.
pretty poor real yields when compared with domestic
inflation. Then there are the uncertainties related to other
“unorthodox” policy measures. One wonders if France
From there, the picture is murkier, and traditional will attempt to introduce some global approach to fx
valuation tools are less useful. QE2 itself adds policy when it takes over the G-20 on November 15.
tremendous uncertainty, as it telegraphs the worries of With the IMF floating research trial balloons on the
U.S. policymakers about the current environment. The topics of capital controls and 4%+ inflation targets, it’s
post-Lehman spirit of coordination among global possible we could see “experimental” policies like the
policymakers seems to be fraying at the edges, a theme rather unorthodox quantitative easing policies go global.
Disclaimer: The views expressed herein are through the period ending September 30, 2010, and are subject to change at any time based on market and
other conditions. This is not an offer or solicitation for the purchase or sale of any security, is not intended to be investment advice and should not
be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be
interpreted as, recommendations to purchase or sell such securities.
GMO U.S. Core Strategy As of September 30, 2010

Inception: 9/30/85; Benchmark: S&P 500 Index
Performance1 Top Ten Holdings2,5
Total Return Net of Fees (%) Average Annual Total Return (%) Pfizer Inc. 4.8%
3Q YTD One Five Ten Since Microsoft Corp. 4.5%
2010 2010 Year Year Year Inception Google Inc. (Cl A) 4.0%
Strategy 11.96 0.99 9.74 -0.62 -0.28 10.62 Wal-Mart Stores Inc. 3.8%
3
Benchmark 11.29 3.89 10.16 0.64 -0.43 10.19 Merck & Co Inc 3.3%
Oracle Corp. 3.2%
Annual Total Return Net of Fees (%)
Procter & Gamble Co. 2.8%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Apple Inc. 2.6%
Strategy 0.19 -7.87 -19.73 26.64 9.85 3.66 9.75 1.65 -30.17 21.41 Johnson & Johnson 2.3%
Benchmark -9.11 -11.88 -22.10 28.69 10.88 4.91 15.80 5.49 -37.00 26.46 Coca-Cola Co. 2.1%
Total 33.4%
Risk Profile Since 9/30/854 Sector Weights5

Strategy Benchmark Underweight/Overweight
Alpha 1.36 0.00 Sector Against Benchmark Strategy Benchmark
Beta 0.93 1.00 Consumer Discretionary 0.0 10.4 % 10.4 %
2 Consumer Staples 6.6 17.9 11.3
R 0.96 1.00
Sharpe Ratio 0.45 0.37 Energy -6.3 4.6 10.9
Financials -10.4 5.2 15.6
Health Care 14.8 26.4 11.6
Characteristics5
Industrials -3.3 7.5 10.8
Strategy Benchmark
Information Technology 6.2 25.0 18.8
Price/Earnings - Hist 1 Yr Wtd Med 15.8 x 16.0 x Materials -2.3 1.3 3.6
Price/Book - Hist 1 Yr Wtd Avg 2.5 x 2.1 x Telecom. Services -1.7 1.5 3.2
Dividend Yield - Hist 1 Yr Wtd Avg 2.1 % 2.0 % Utilities -3.3 0.3 3.6
Return on Equity - Hist 1 Yr Med 19.2 % 15.3 %
-20 -10 0 10 20
Market Cap - Weighted Median $Bil $61.8 $42.1 GICS Sectors
Quarterly Strategy Attribution


The U.S. Core Strategy returned +12.0% for the third quarter of 2010, topping the +11.3% return of the S&P 500 index.

Sector selection detracted from relative returns for the quarter. The strategy saw positive returns relative to the benchmark attributable
to underweight position in Financials. Underweight positions in Materials and Telecommunication Services and an overweight in
Health Care were among the detractors.

Stock selection added to relative returns. Selections in Information Technology, Health Care, and Financials added to returns versus
the benchmark while picks in Consumer Staples and Industrials detracted. Individual stocks adding to relative returns in the third
quarter included overweight positions in Pfizer, Oracle, and QUALCOMM. Stock selections detracting from returns versus the
benchmark included overweight positions in Procter & Gamble, Medtronic, and Microsoft.
1 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 a well-known, independently maintained and published U.S. large capitalization stock index.
4 Alpha is a measure of risk-adjusted return; Beta is a measure of a portfolio’s 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.
The performance information above is supplemental to the GIPS® compliant presentation that was made available on GMO’s website in April of 2010.
GIPS ® compliant presentation is available at www.gmo.com.
GMO © 2010
GMO Intrinsic Value Strategy As of September 30, 2010

Inception: 5/31/99; Benchmark: Russell 1000 Value Index
2010 2010 Year Year Year Inception UnitedHealth Group Inc. 3.4%
Strategy 12.93 2.39 9.50 -2.28 2.21 2.37 Oracle Corp. 3.3%
3
Benchmark 10.13 4.49 8.90 -0.48 2.59 2.38 ConocoPhillips 3.3%
Exxon Mobil Corp. 3.2%
Google Inc. (Cl A) 3.2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Apple Inc. 2.8%
Strategy 10.67 3.84 -15.63 30.42 12.12 5.57 13.61 -3.73 -34.51 19.42 General Electric Co. 2.5%
Benchmark 7.02 -5.59 -15.52 30.03 16.49 7.05 22.24 -0.17 -36.85 19.69 Johnson & Johnson 2.1%
Total 32.2%

Beta 0.93 1.00 Consumer Discretionary -0.6 6.9 % 7.5 %
2 Consumer Staples -0.2 10.2 10.4
R 0.94 1.00
Sharpe Ratio 0.01 -0.02 Energy 0.0 11.3 11.3
Financials -14.5 12.6 27.1
Health Care 12.2 25.6 13.4
Characteristics5
Industrials 0.7 9.6 8.9
Strategy Benchmark
-20 -10 0 10 20


The Intrinsic Value Strategy returned +12.9% for the third quarter of 2010, leading the +10.1% return of the Russell 1000 Value index.

Sector selection added to relative returns for the quarter. The strategy’s underweight in Financials and overweight positions in Energy
and Information Technology added to relative returns. Underweight positions in Utilities and Telecommunication Services detracted
from returns versus the benchmark.

Stock selection also added to relative returns. Selections in Information Technology, Financials, and Consumer Staples added to
returns versus the benchmark while picks in Energy detracted. Individual names adding to relative returns included overweight
positions in Oracle, UnitedHealth Group, and Pfizer. Stock selections detracting from relative returns included overweight positions
in McKesson and Medtronic and not owning Anadarko Petroleum.
other income.
3 The Russell 1000 Value Index is an independently maintained and published index which measures the performance of those stocks included in the Russell 1000 Index
with lower price-to-book ratios and lower forecasted growth values.
GMO © 2010
GMO Quality Strategy As of September 30, 2010

Inception: 2/29/04; Benchmark: S&P 500 Index
Total Return Net of Fees (%) Average Annual Total Return (%) Oracle Corp. 6.9%
2010 2010 Year Year Year Inception Johnson & Johnson 5.5%
Strategy 11.40 -0.80 8.19 1.75 n/a 1.58 Wal-Mart Stores Inc. 4.8%
3
Benchmark 11.29 3.89 10.16 0.64 n/a 2.00 Pfizer Inc. 4.7%
Coca-Cola Co. 4.2%
Exxon Mobil Corp. 3.6%
2004 2005 2006 2007 2008 2009 Google Inc. (Cl A) 3.5%
Strategy 3.54 -0.78 12.69 6.04 -24.08 19.90 PepsiCo Inc. 3.2%
Benchmark 7.39 4.91 15.80 5.49 -37.00 26.46 Procter & Gamble Co. 3.2%
Total 45.6%
Characteristics4 Risk Profile Since 2/29/045

Strategy Benchmark Strategy Benchmark
Price/Earnings - Hist 1 Yr Wtd Med 15.7 x 16.0 x Alpha -0.08 0.00
Price/Book - Hist 1 Yr Wtd Avg 3.1 x 2.1 x Beta 0.72 1.00
2
Dividend Yield - Hist 1 Yr Wtd Avg 2.3 % 2.0 % R 0.87 1.00
Return on Equity - Hist 1 Yr Med 25.7 % 15.3 % Sharpe Ratio -0.03 -0.02
Market Cap - Weighted Median $Bil $134.9 $42.1
Debt/Equity - Wtd Med 0.5 x 0.9 x
Regional Weights4 Sector Weights4
Cash Underweight/Overweight
Sector Against Benchmark Strategy Benchmark
3.8%
Consumer Discretionary -7.8 2.6 % 10.4 %
Int'l. Equities
Consumer Staples 17.4 28.7 11.3
12.8%
U.S. Equities Energy -2.0 8.9 10.9
83.4% Financials -15.6 0.0 15.6
Health Care 16.3 27.9 11.6
Materials -3.6 0.0 3.6
Telecom. Services -2.6 0.6 3.2
Utilities -3.6 0.0 3.6
-20 -10 0 10 20 GICS Sectors


The Quality Strategy gained 11.4% in the third quarter, reflecting strong global equity performance. By comparison, the S&P 500 and the
Russell 2000 each rose 11.3%, MSCI EAFE increased 16.5%, and S&P A-rated shares were up 10.5%. While over the long run it doesn’t
matter where a high quality company is domiciled, shares of non-U.S. high quality companies outperformed domestic quality for the
quarter after detracting during the previous quarter. Both remain negative on the year.

High quality technology stocks have had an inexplicably difficult time this year, but by and large they took a break in the third quarter.
Companies that have been battered in 2010 – for example, Google, QUALCOMM, and Oracle – all had absolute positive impacts on the
strategy for the period.

The portfolio’s heavy tilt toward mega cap stocks (the largest 100 stocks by market cap) has been the biggest detractor to performance
this year, but its impact abated in the third quarter.

There is a seeming disconnect between record low bond yields and the equity market. Low beta and low volatility stocks have benefited
from these low yields. Heavy users of leverage include Utilities, Industrials, and Materials and all three of these sectors outpaced the
broad markets.
other income.
3 The S&P 500 Index is a well-known, independently maintained and published U.S. large capitalization stock index.
GMO © 2010
GMO Growth Strategy As of September 30, 2010

Inception: 12/31/88; Benchmark: Russell 1000 Growth Index
Total Return Net of Fees (%) Average Annual Total Return (%) Apple Inc. 6.6%
3Q YTD One Five Ten Since Exxon Mobil Corp. 4.3%
2010 2010 Year Year Year Inception Google Inc. (Cl A) 3.4%
Strategy 12.72 3.73 12.15 0.19 -4.03 9.12 Microsoft Corp. 3.4%
3
Benchmark 13.00 4.36 12.65 2.06 -3.44 8.59 Int'l. Business Machines 3.3%
Oracle Corp. 3.2%
Cisco Systems Inc. 3.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Coca-Cola Co. 3.0%
Strategy -12.21 -21.51 -22.94 28.27 4.66 3.93 2.44 5.99 -30.42 24.64 QUALCOMM Inc. 2.9%
Benchmark -22.42 -20.42 -27.88 29.75 6.30 5.26 9.07 11.81 -38.44 37.21 Hewlett-Packard Co. 2.7%
Total 35.8%

R 0.94 1.00
Health Care 0.3 10.4 10.1
Characteristics5
Strategy Benchmark
Earnings/Share - F'cast LT Med Growth 12.6 x 13.6 x Telecom. Services -0.5 0.4 0.9
-20 -10 0 10 20


The Growth Strategy returned +12.7% in the third quarter of 2010, trailing the +13.0% return of its benchmark, the Russell 1000
Growth index.

Sector selection detracted from relative returns. An underweight in Energy added to relative returns while underweight positions in
Materials and Industrials and an overweight in Health Care were among the detractors.

Stock selection also detracted from relative returns for the quarter. Selections in Consumer Discretionary and Information Technology
added to returns versus the benchmark while picks in Consumer Staples, Industrials, and Health Care detracted. Individual stocks
adding to returns included overweight positions in QUALCOMM, Oracle, and Apollo Group. Selections detracting from relative
returns included overweight positions in Procter & Gamble, Johnson & Johnson, and Hewlett-Packard.
other income.
3 The Russell 1000 Growth Index is an independently maintained and published index which measures the performance of those stocks included in the Russell 1000 Index
with higher price-to-book ratios and higher forecasted growth values.
GMO © 2010
GMO Small/Mid Cap Value Strategy As of September 30, 2010

Inception: 12/31/91; Benchmark: Russell 2500 Value + Index
Total Return Net of Fees (%) Average Annual Total Return (%) Wyndham Worldwide Corp. 1.3%
3Q YTD One Five Ten Since Hasbro Inc. 1.2%
2010 2010 Year Year Year Inception Lubrizol Corp. 1.2%
Strategy 13.14 11.61 16.97 -1.81 5.98 10.30 Autoliv Inc. 1.2%
3
Benchmark 11.39 9.64 14.74 1.38 8.02 10.68 TRW Automotive Holdings 1.1%
PETsMART Inc. 1.1%
Stanley Black & Decker Inc. 1.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CenturyTel Inc. 1.1%
Strategy 18.95 9.75 -11.48 45.26 20.80 7.95 10.86 -12.37 -26.97 13.64 Torchmark Corp. 1.1%
Benchmark 20.79 9.73 -9.87 44.93 21.58 7.74 20.18 -7.27 -31.99 27.68 Herbalife Ltd. 1.1%
Total 11.5%

R 0.94 1.00
Financials -20.0 12.9 32.9
Health Care 11.5 17.5 6.0
Characteristics5
Strategy Benchmark
Information Technology -1.6 7.2 8.8
Price/Book - Hist 1 Yr Wtd Avg 1.5 x 1.3 x Telecom. Services 0.4 1.5 1.1
Return on Equity - Hist 5 Yr Avg 13.8 % 10.6 %
-30 -15 0 15 30


The Small/Mid Cap Value Strategy returned +13.1% in the third quarter, leading its benchmark, the Russell 2500 Value index, which
returned +11.4%.

Sector selection added to returns relative to the benchmark. An overweight in Consumer Discretionary and underweight positions in
Financials and Telecommunication Services added to relative returns while an overweight in Health Care and underweight positions in
Utilities and Energy detracted.

Stock selection also added to relative returns for the quarter. Selections in Information Technology, Consumer Discretionary, and
Industrials added to returns versus the benchmark while picks in Health Care detracted. Individual stocks adding to relative returns
included overweight positions in Fossil, TRW Automotive Holdings, and NBTY. Individual names detracting from relative
returns included overweight positions in Lincare Holdings, Amedisys, and Sketchers USA.
other income.
3 The Russell 2500 Value + Index is comprised of the Russell 2500 Index from 12/31/1991 to 12/31/1996 and the Russell 2500 Value Index thereafter. The Russell 2500
Value Index is an independently maintained and published index which measures the performance of those stocks included in the Russell 2500 Index with lower price-to-
book ratios and lower forecasted growth values.
GMO © 2010
GMO Small/Mid Cap Growth Strategy As of September 30, 2010

Inception: 12/31/96; Benchmark: Russell 2500 Growth Index
Total Return Net of Fees (%) Average Annual Total Return (%) United Continental Holdings 2.4%
3Q YTD One Five Ten Since Chipotle Mexican Grill Inc. 2.3%
2010 2010 Year Year Year Inception Mettler-Toledo Int'l. Inc. 1.7%
Strategy 15.13 14.18 19.44 -1.82 -0.53 4.12 Erie Indemnity Co. 1.6%
3
Benchmark 13.15 11.09 17.27 3.09 0.47 5.19 Cirrus Logic Inc. 1.5%
Lincare Holdings Inc. 1.5%
Acme Packet Inc. 1.4%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Valassis Communications 1.4%
Strategy -10.56 -13.03 -17.62 44.10 13.12 9.56 6.69 1.81 -41.40 22.79 Wabco Holdings Inc. 1.4%
Benchmark -16.09 -10.83 -29.09 46.32 14.59 8.17 12.26 9.69 -41.50 41.66 Herbalife Ltd. 1.3%
Total 16.5%

Alpha -0.38 0.00 Sector Against Benchmark Strategy Benchmark
R 0.95 1.00
Health Care -0.7 15.5 16.2
Characteristics5
Strategy Benchmark
Earnings/Share - F'cast LT Med Growth 15.0 x 16.3 x Telecom. Services -1.0 0.8 1.8
-6 -3 0 3 6


The Small/Mid Cap Growth Strategy returned +15.1% in the third quarter, topping the +13.1% return of its benchmark, the Russell
2500 Growth index.

Sector selection had little impact on returns versus the benchmark. An overweight in Consumer Discretionary added to relative
returns while an underweight in Information Technology and an overweight in Health Care detracted.

Stock selection added to relative returns for the quarter. Selections in Consumer Discretionary, Industrials, and Materials added to
relative returns while picks in Health Care detracted. Individual stocks adding to relative returns included overweight positions in F5
Networks, NBTY, and Wyndham Worldwide. Individual names detracting from relative performance included overweight positions in
Lincare Holdings, Cree, and Perrigo.
other income.
3 The Russell 2500 Growth Index is an independently maintained and published index which measures the performance of those stocks included in the Russell 2500 Index
with higher price-to-book ratios and higher forecasted growth values.
GMO © 2010
GMO Real Estate Strategy As of September 30, 2010

Inception: 5/31/96; Benchmark: MSCI U.S. REIT Index
Total Return Net of Fees (%) Average Annual Total Return (%) Simon Property Group Inc. 12.3%
3Q YTD One Five Ten Since Vornado Realty Trust 6.1%
2010 2010 Year Year Year Inception Boston Properties Inc. 5.2%
Strategy 13.20 18.71 28.56 2.33 9.65 9.00 Equity Residential 5.0%
3
Benchmark 13.17 19.63 30.54 1.88 10.20 10.06 Host Marriott Corp. 4.3%
HCP Inc. 4.1%
AvalonBay Communities Inc. 4.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Public Storage 4.0%
Strategy 29.21 9.53 1.86 34.03 30.64 11.27 35.39 -17.15 -33.17 24.54 Ventas Inc. 3.8%
Benchmark 26.81 12.83 3.64 36.74 31.49 12.13 35.92 -16.82 -37.97 28.61 Macerich Co. 2.4%
Total 51.3%

Alpha -0.20 0.00 Sector Against Benchmark Strategy Benchmark
Beta 0.97 1.00 Diversified -0.3 8.3 % 8.6 %
2 -0.5
R 0.99 1.00 Industrial 4.6 5.1
Sharpe Ratio 0.29 0.30 Mortgage 0.0 0.0 0.0
Office -0.3 16.7 17.0
Characteristics 5
Residential 0.1 16.9 16.8
Retail 0.4 25.6 25.2
Strategy Benchmark
Specialized 0.5 27.9 27.4
Dividend Yield - Hist 1 Yr Wtd Avg 3.6 % 3.7 %
Market Cap - Weighted Median $Bil $6.4 $5.6 -1.0 -0.5 0.0 0.5 1.0
Price/Earnings - Excl Neg Earnings GICS Sub-Industries
53.3 x 54.1 x
Hist 1 Yr Wtd Avg
Price/Cash Flow - Hist 1 Yr Wtd Med 16.6 x 16.5 x
Return on Assets - 5 Yr Avg 3.1 % 3.0 %


The Real Estate Strategy returned +13.2% for the third quarter of 2010, even with the +13.2% return of the MSCI U.S. REIT index.

Sector selection had no impact on returns relative to the MSCI U.S. REIT index. An overweight in the Retail GICS Sub-Industry was
the leading position adding to returns versus the benchmark while an underweight in the Industrial GICS Sub-Industry was the leading
detractor.

Stock selection was also flat. Selections in the GICS Office, Retail, and Diversified sub-industries added to relative returns while picks
in Specialized and Residential detracted. In terms of individual names, an overweight in Simon Property Group and underweight
positions in Duke Realty and Corporate Office Properties Trust added to relative returns. Overweight positions in Host Hotels &
Resorts, Winthrop Realty Trust, and Sunstone Hotel Investors were the leading detractors.
other income.
3 The MSCI U.S. REIT Index is a well-known, independently maintained and published index of equity securities issued by REITs.
GMO © 2010
GMO Tax-Managed U.S. Equities Strategy As of September 30, 2010

Inception: 7/31/98; Benchmark: Russell 3000 + Index
Total Return Net of Fees (%) Average Annual Total Return (%) Oracle Corp. 6.2%
3Q YTD One Five Ten Since Pfizer Inc. 6.0%
2010 2010 Year Year Year Inception Microsoft Corp. 5.8%
Before-Tax Exxon Mobil Corp. 5.5%
Strategy 3 12.73 1.00 9.60 -0.79 -0.66 2.30 Apple Inc. 4.9%
Benchmark 4 11.53 4.78 10.96 0.95 -0.28 2.06
Google Inc. (Cl A) 4.8%
After-Tax Johnson & Johnson 3.9%
Strategy 12.55 0.71 9.15 -1.11 -0.99 1.94
Wal-Mart Stores Inc. 3.8%
Benchmark 11.45 4.56 10.65 0.65 -0.58 1.71
Coca-Cola Co. 3.2%
Annual Total Return Net of Fees (%) Philip Morris Int'l. Inc. 2.5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total 46.6%
Strategy 3.21 -9.77 -19.69 25.18 9.17 4.54 10.04 2.61 -30.78 19.73
Benchmark -9.11 -11.88 -22.10 28.69 10.88 4.91 15.80 5.21 -37.31 28.34

R
2
0.90 1.00 Consumer Staples 9.6 19.3 9.7
Sharpe Ratio -0.01 -0.05 Energy -1.5 8.7 10.2
Health Care 13.4 25.3 11.9
Characteristics6 Industrials -5.3 6.1 11.4
Strategy Benchmark Information Technology 11.4 29.9 18.5
Return on Equity - Hist 1 Yr Med 20.6 % 14.6 % -20 -10 0 10 20


The Tax-Managed U.S. Equities portfolio advanced 12.7% over the third quarter, while the Russell 3000 added 11.5% and the S&P
500 gained 11.3%. Within the U.S., encouraging commitment to action by the Fed helped propel markets upwards. Banks and other
financials were notably absent from the upswing, only moderately overcoming their sharp decline in August. Telecommunications and
Materials stocks finished the quarter with the strongest returns, while Health Care joined Financials at the bottom of the quarterly
rankings.

Within the portfolio, the three stock selection strategies all realized moderate positive relative performance for the quarter. Both the
intrinsic value and high quality strategy benefited from common themes – underweight exposure to Financial Services stocks, and
positive performance within Information Technology. The momentum-based strategy found a more broad-based path to success,
across and within multiple sectors.

Looking at some of the portfolio’s largest active positions, overweight exposure to Google, Oracle, Pfizer and United Health all
contributed positively. Microsoft and Exxon Mobil, also overweight selections, detracted from performance.
other income.
3 Market conditions, tax legislation and government regulations may limit the Strategy’s ability to utilize tax efficient strategies. After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax
situation and may differ from those shown. After-tax returns are not relevant to investors who hold investment through a tax-deferred arrangement.
4 The Strategy’s benchmark is the Russell 3000 + Index (after tax), computed by the Manager by adjusting the return of the Russell 3000 + Index. The Manager estimates
the Russell 3000 + Index’s after-tax return by applying the maximum historical applicable individual federal tax rate to the Russell 3000 + Index’s dividend yield. The
Russell 3000 + Index is comprised of the S&P 500 Index from 7/23/98 to 10/15/07, and the Russell 3000 Index thereafter.
GMO © 2010
GMO International Active EAFE Strategy As of September 30, 2010

Inception: 5/31/81; Benchmark: MSCI EAFE Index
Total Return Net of Fees (%) Average Annual Total Return (%) Royal Dutch Shell PLC 2.2%
3Q YTD One Five Ten Since HSBC Holdings PLC 1.8%
2010 2010 Year Year Year Inception ENI S.p.A. 1.7%
Strategy 16.26 -0.37 1.77 1.58 5.82 12.63 Vodafone Group PLC 1.7%
3
Benchmark 16.48 1.07 3.27 1.97 2.56 9.28 Honda Motor Co. Ltd. 1.6%
BP PLC 1.6%
Novartis AG 1.5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total S.A. 1.4%
Strategy -6.49 -10.11 -6.11 41.37 22.33 13.52 27.52 10.58 -41.24 25.53 GlaxoSmithKline PLC 1.3%
Benchmark -14.17 -21.44 -15.94 38.59 20.25 13.54 26.34 11.17 -43.38 31.78 DaimlerChrysler AG 1.3%
Total 16.1%
Risk Profile Since 5/31/814 Characteristics5

Alpha 4.98 0.00 Price/Earnings - Hist 1 Yr Wtd Med 13.3 x 15.3 x
Beta 0.80 1.00 Price/Cash Flow - Hist 1 Yr Wtd Med 7.2 x 9.0 x
2
R 0.82 1.00
Price/Book - Hist 1 Yr Wtd Avg 1.3 x 1.4 x
Sharpe Ratio 0.52 0.23

Underweight/Overweight Underweight/Overweight
Region Against Benchmark (%) Sector Against Benchmark Strategy Benchmark
Europe ex-UK 2.1 Consumer Discretionary 1.8 12.2 % 10.4 %
2.0
Consumer Staples -0.4 10.0 10.4
United Kingdom Energy 4.3 11.7 7.4
Japan -2.2 Financials -5.2 19.6 24.8
Southeast Asia -2.8 Health Care -1.7 6.8 8.5
Australia/New Zealand -6.3
Emerging 6.0 Materials -2.8 7.6 10.4
Cash 1.2 Telecom. Services 0.7 6.5 5.8
Utilities 0.8 6.0 5.2
-10 -5 0 5 10
-10 -5 0 5 10
GICS Sectors


The International Active EAFE Strategy was 0.2 percentage points behind the MSCI EAFE index in the third quarter; the account
rose 16.3% and the benchmark gained 16.5%. The strategy lagged its benchmark by 1.4 percentage points for the first three quarters
of 2010.

Country selection was 0.8% behind the benchmark. An underweight position in Australia subtracted 0.4% from returns, and an
underweight position in Sweden subtracted another 0.2%. The largest positive impact from country selection came from an
underweight position in Japan, which added 0.3% to performance. The strategy’s currency hedge against the euro was closed in
August.

Stock selection beat the benchmark by 0.6% in the third quarter. Our holdings outperformed in Japan and the emerging markets.
other income.
3 The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently maintained and published large capitalization international stock index. MSCI
Standard Index Series, net of withholding tax.
GMO © 2010
GMO Int’l. Active Foreign Small Companies Strategy As of September 30, 2010
Inception: 1/31/95; Benchmark: S&P Developed ex-U.S. Small Cap Index

Total Return Net of Fees (%) Average Annual Total Return (%) Companhia Hering S/A 3.0%
3Q YTD One Five Ten Since Nabtesco Corp. 1.2%
2010 2010 Year Year Year Inception Nihon Kohden Corp. 1.2%
Strategy 17.75 12.24 14.64 6.89 12.51 11.82 Autogrill S.p.A. 1.0%
3
Benchmark 17.40 9.45 9.85 4.24 7.48 6.95 Gerresheimer AG 1.0%
Fuji Oil Co. Ltd. 1.0%
Obic Co Ltd. 1.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Yue Yuen Industrial 1.0%
Strategy -7.74 3.66 2.61 50.75 29.30 18.91 36.24 8.00 -45.91 47.63 Banco Popolare 0.9%
Benchmark -10.31 -15.70 -7.29 53.73 28.73 22.10 29.42 7.32 -47.67 45.07 NHK Spring Co. Ltd. 0.9%
Total 12.2%

2
R 0.93 1.00 Price/Book - Hist 1 Yr Wtd Avg 1.3 x 1.3 x
Sharpe Ratio 0.55 0.20 Dividend Yield - Hist 1 Yr Wtd Avg 2.3 % 2.4 %

Europe ex-UK -2.4 Consumer Discretionary 7.8 25.5 % 17.7 %
1.6 Consumer Staples 1.1 6.3 5.2
United Kingdom
Energy 0.4 6.1 5.7
Japan -0.2
Southeast Asia -0.7 Health Care 0.5 6.1 5.6
Canada -7.5 Industrials 5.3 27.0 21.7
-3.6 Information Technology -2.5 6.4 8.9
9.4 Materials 7.5 13.3
Emerging Telecom. Services -0.9 0.6 1.5
Cash 3.7 -1.5
Utilities 0.8 2.3
-10 -5 0 5 10 -10 -5 0 5 10
GICS Sectors


The International Active Foreign Small Companies Strategy outperformed the S&P Developed ex-U.S. Small Cap index by 0.4
percentage points in the third quarter, gaining 17.8% while the benchmark rose 17.4%. Fair value pricing added 0.9 percentage points
during the quarter.

The Foreign Small Companies Strategy outperformed its benchmark by 2.8 percentage points for the first three quarters of 2010 using
local close or 3.1 percentage points using fair value pricing.

Country selection was 1.8% behind the benchmark. An underweight position in the Australian market subtracted 0.4% from returns.
Underweight positions in France, Sweden, and Canada each subtracted another 0.2% from performance. The strategy’s currency
hedge against the euro was closed in August.

Stock selection drove returns, adding 2.2% to performance in the third quarter. Our holdings outperformed in Hong Kong, Belgium,
Korea, Germany, and the emerging markets. However, stock selection in Australia, Japan, and the United Kingdom hurt returns.
other income.
3 The S&P Developed ex-U.S. Small Cap is the small capitalization stock component of the S&P Broad Market Index (BMI). The BMI is a float-weighted index that spans
22 countries and includes the listed shares of all companies with an available market capitalization (float) of at least $100 million at the end of May each year. Companies
are deleted if their float falls below $75 million. Changes are effective before the open of the first business day of July. The Small Cap ex-U.S. is defined as those stocks
falling in the bottom 15% of the cumulative available capital in each country.
GMO © 2010
GMO International Intrinsic Value Strategy As of September 30, 2010

Inception: 3/31/87; Benchmark: MSCI EAFE Value Index and MSCI EAFE Index
Total Return Net of Fees (%) Average Annual Total Return (%) GlaxoSmithKline PLC 3.7%
3Q YTD One Five Ten Since Royal Dutch Shell PLC 3.1%
2010 2010 Year Year Year Inception AstraZeneca PLC 3.0%
Strategy 15.79 1.38 0.99 0.97 6.76 8.27 Sanofi-Aventis S.A. 2.7%
3
MSCI EAFE Value 16.36 -1.94 -1.67 1.09 3.87 7.12 Novartis AG 2.4%
3
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 5.08
ENI S.p.A. 2.4%
Annual Total Return Net of Fees (%) Total S.A. 2.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Takeda Pharmaceutical Co. 1.6%
Strategy -1.40 -12.10 -0.59 43.53 25.23 13.98 25.78 10.21 -40.31 21.41 Enel S.p.A. 1.5%
MSCI EAFE Value -3.14 -18.52 -15.91 45.30 24.33 13.80 30.38 5.96 -44.09 34.23 Nestle S.A. 1.5%
MSCI EAFE -14.17 -21.44 -15.94 38.59 20.25 13.54 26.34 11.17 -43.38 31.78 Total 23.9%

M SCI M SCI M SCI M SCI
Strategy EAFE Value EAFE Strategy EAFE Value EAFE
Alpha 2.46 0.00 0.00 Price/Earnings - Hist 1 Yr Wtd Med 12.9 x 12.6 x 15.3 x
Beta 0.81 1.00 1.00 Price/Cash Flow - Hist 1 Yr Wtd Med 8.0 x 5.7 x 9.0 x
2 Price/Book - Hist 1 Yr Wtd Avg 1.3 x 1.1 x 1.4 x
R 0.85 1.00 1.00
Sharpe Ratio 0.31 0.16 0.05 Return on Equity - Hist 1 Yr Med 10.5 % 8.7 % 9.9 %
Market Cap - Weighted Median $Bil $22.7 $32.0 $26.6
Dividend Yield - Hist 1 Yr Wtd Avg 3.5 % 4.2 % 3.2 %
5
Regional Weights 5
Sector Weights
Region Against M SCI EAFE Value (%) Sector Against M SCI EAFE Value Strategy Benchmark
United Kingdom
Energy 1.7 12.8 11.1
Japan 2.5
Financials -20.3 17.0 37.3
Southeast Asia 1.4 Health Care 10.7 17.1 6.4
Canada 0.5 Industrials 3.0 11.5 8.5
Australia/New Zealand -7.6 Information Technology 0.3 3.6 3.3
Materials 1.4 6.5 5.1
Cash 1.7
-10 -5 0 5 10 Utilities -3.7 4.6 8.3
-30 -15 0 15 30 GICS Sectors
 The International Intrinsic Value Strategy returned +15.8% during the third quarter of 2010, compared to the broad market MSCI EAFE index, which returned +16.5%
and the MSCI EAFE Value benchmark, which returned +16.4%.
 Underperformance relative to EAFE resulted primarily from country allocation. Stock selection was mixed, while currency allocation and sector exposures offset.
 Our overweight to Japan was the primary reason for the shortfall from country allocation. Underweights in Hong Kong, Spain, and the United Kingdom also detracted
somewhat.
 Stock selection was good within the Netherlands and Sweden, but weak in the United Kingdom and Hong Kong on a country basis. Our holdings did well within
Financials and Health Care, but not so well in Energy, Telecommunication Services, and Consumer Staples from a sector viewpoint.
 Sector exposures were helped by our overweights to Energy and Consumer Discretionary, and underweights to Consumer Staples and Information Technology, but hurt
somewhat by our overweight to Health Care.
 In currencies, our continued underweight to the Australian dollar hurt returns, while our overweight to the Swedish krone offset some of the negative impact.
 Compared to the value benchmark, relative performance was similar. Despite differences between EAFE Value and EAFE, there was little difference in their returns
this quarter. The EAFE Value index has more in Energy and less in Consumer Staples, more exposure to the euro, and holds different stocks. This resulted in slightly
better relative performance from stock selection versus EAFE Value, but a bit worse from sector exposures, country allocation, and currency allocation.
 GMO’s stock selection disciplines had mixed results in the quarter. Momentum outperformed while value trailed. Stocks selected for their strong momentum
characteristics outperformed significantly. Those ranked highly by our intrinsic value process underperformed as basic valuation worked well, but the quality component
lagged. Our quality adjusted value discipline selected stocks that had EAFE-like returns.
 Individual stock positions that added significant value included overweights in Dutch financial ING Groep and French financial BNP Paribas, and an underweight in
Japanese utility Tokyo Electric Power. Stock positions that were significant detractors included underweight positions in British oil company BP and Spanish telecom
company Telefonica as well as an overweight in Japanese financial Resona Holdings.
other income.
3 The MSCI EAFE (Europe, Australasia, and Far East) Value Index is a well-known, independently maintained and published large capitalization international stock index
comprised of large/mid capitalization stocks that have a value style. Large/mid cap stocks encompass approximately 85% of each market’s free float-adjusted market
capitalization. The style is determined using a multi-factor approach based on eight historical and forward-looking characteristics. MSCI Standard Index Series, net of
withholding tax. The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently maintained and published large capitalization international
stock index. MSCI Standard Index Series, net of withholding tax.
GMO © 2010
GMO International Growth Strategy As of September 30, 2010

Inception: 11/30/01; Benchmark: MSCI EAFE Growth Index and MSCI EAFE Index
3Q YTD One Five Ten Since Novo Nordisk A/S 3.5%
2010 2010 Year Year Year Inception Nestle S.A. 3.4%
Strategy 16.85 5.16 9.47 3.09 n/a 7.33 Rio Tinto PLC 2.8%
3
MSCI EAFE Growth 16.59 4.08 8.41 2.78 n/a 5.55 Novartis AG 2.6%
3
MSCI EAFE 16.48 1.07 3.27 1.97 n/a 6.15
Roche Holding AG 2.5%
Annual Total Return Net of Fees (%) British American Tobacco 1.6%
2001 2002 2003 2004 2005 2006 2007 2008 2009 Koninklijke Philips 1.6%
Strategy 2.20 -10.52 30.40 20.03 13.16 24.56 14.35 -38.29 24.81 SAP AG 1.4%
MSCI EAFE Growth 0.58 -16.02 31.99 16.12 13.28 22.33 16.45 -42.70 29.36 Fanuc Ltd. 1.4%
MSCI EAFE 0.59 -15.94 38.59 20.25 13.54 26.34 11.17 -43.38 31.78 Total 25.1%

Strategy EAFE Growth EAFE Strategy EAFE Growth EAFE
Beta 0.92 1.00 1.00 Earnings/Share - F'cast LT Med Growth Rate 11.8 x 12.4 x 10.6 x
R 0.97 1.00 1.00

Region Against M SCI EAFE Growth (%) Sector Against M SCI EAFE Growth Strategy Benchmark
United Kingdom 0.9
Energy 0.3 4.2 3.9
Japan -1.2
1.4 Materials -3.8 11.7 15.5
Cash
Telecom. Services 3.1 4.7 1.6
-10 -5 0 5 10 Utilities -1.0 1.3 2.3
-10 -5 0 5 10
GICS Sectors

 The International Growth Strategy returned +16.8% during the third quarter of 2010, compared to the MSCI EAFE Growth benchmark, which returned +16.6% and
the broad market MSCI EAFE index, which returned +16.5%.
 Outperformance relative to EAFE Growth resulted primarily from good country allocation and stock selection while sector exposures and currency allocation had small
negative impacts.
 Country allocation had a positive impact mainly from our overweight to Norway, but also from overweights in Singapore, Sweden, and the United Kingdom.
 Stock selection was especially good within Materials, Consumer Discretionary, Industrials, and Health Care from a sector perspective and within Canada and Denmark
on a country basis. Information Technology and Telecommunication Services holdings were somewhat weak as were selections in Hong Kong, Japan, and Switzerland.
 Sector exposures were hurt by our overweight to Health Care and underweight to Financials despite the positive impact from our overweight to Telecommunication
Services.
 Currency allocation was hurt by our underweight position to the Australian dollar despite the benefit from our overweight to the Swedish krone.
 GMO’s stock selection disciplines had mixed results in the quarter. Momentum outperformed while value and quality trailed. Stocks selected for their strong
momentum characteristics outperformed significantly. Stocks ranked highly by our intrinsic value process underperformed slightly as basic valuation worked well, but
the quality component lagged. Those selected based on their high quality (high, stable profitability and low debt) underperformed more significantly.
 Individual stock positions that added value included overweights in Australian materials company Rio Tinto, Canadian materials company Teck Resources, and Danish
pharmaceutical Novo Nordisk. Stock positions that were significant detractors included overweight positions in Japanese software company Nintendo and Dutch
industrial Philips Electronics, and an underweight in British financial Lloyds Banking Group.
other income.
3 The MSCI EAFE (Europe, Australasia, and Far East) Growth Index is a well-known, independently maintained and published large capitalization international stock index
comprised of large/mid capitalization stocks that have a growth style. Large/mid cap stocks encompass approximately 85% of each market’s free float-adjusted market
capitalization. The style is determined using a multi-factor approach based on eight historical and forward-looking characteristics. MSCI Standard Index Series, net of
withholding tax. The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently maintained and published large capitalization international
stock index. MSCI Standard Index Series, net of withholding tax.
GMO © 2010
GMO International Core Equity Strategy As of September 30, 2010

Inception: 1/31/02; Benchmark: MSCI EAFE Index
3Q YTD One Five Ten Since AstraZeneca PLC 2.5%
2010 2010 Year Year Year Inception Royal Dutch Shell PLC 2.5%
Strategy 16.47 2.72 3.64 1.63 n/a 8.38 Novartis AG 2.4%
3
Benchmark 16.48 1.07 3.27 1.97 n/a 6.87 Sanofi-Aventis S.A. 2.3%
ENI S.p.A. 2.0%
Nestle S.A. 1.8%
2002 2003 2004 2005 2006 2007 2008 2009 Total S.A. 1.4%
Strategy -2.43 37.67 23.28 15.58 25.56 12.13 -41.34 23.73 Takeda Pharmaceutical Co. 1.3%
Benchmark -11.22 38.59 20.25 13.54 26.34 11.17 -43.38 31.78 BNP Paribas S.A. 1.2%
Total 20.6%

Beta 0.95 1.00 Earnings/Share - F'cast LT Med Growth Rate 10.0 x 10.6 x
2 Price/Book - Hist 1 Yr Wtd Avg 1.4 x 1.4 x
R 0.98 1.00
Sharpe Ratio 0.38 0.26 Return on Equity - Hist 1 Yr Med 11.1 % 9.9 %

United Kingdom -0.4
Energy 3.1 10.5 7.4
Japan 1.9
Materials -2.4 8.0 10.4
Cash 1.6
-10 -5 0 5 10 Utilities -1.6 3.6 5.2
-10 -5 0 5 10 GICS Sectors


The International Core Equity Strategy returned +16.5% during the third quarter of 2010, compared to the MSCI EAFE index, which also returned
+16.5%.

Relative to EAFE, stock selection added value, but country allocation, currency allocation, and sector exposures all detracted.

Stock selection was good in particular within France and Sweden on a country basis and within Consumer Discretionary, Materials, and Financials
from a sector viewpoint. Energy and Telecommunication Services holdings were weak.

Country allocation had a negative impact from our overweights to Japan and Ireland and our underweights to Hong Kong and Spain.

Currency allocation was hurt by our underweight position to the Australian dollar despite the benefit from our overweight to the Swedish krone.

Sector exposures were hurt most by our overweight to Health Care.

GMO’s stock selection disciplines had mixed results in the quarter. Momentum outperformed while value trailed. Stocks selected for their strong
momentum characteristics outperformed significantly. Those ranked highly by our intrinsic value process underperformed as basic valuation worked
well, but the quality component lagged. Our quality adjusted value discipline selected stocks that had EAFE-like returns.

Individual stock positions that added significant value included overweights in Dutch financial ING Groep, Swedish financial Swedbank, and British
luxury goods retailer Burberry Group. Stock positions that were significant detractors included underweight positions in British oil company BP and
Spanish telecom company Telefonica as well as an overweight in British pharmaceutical AstraZeneca.
other income.
3 The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently maintained and published large capitalization international stock index. MSCI
GMO © 2010
GMO Currency Hedged International Equity Strategy As of September 30, 2010

Inception: 6/30/95; Benchmark: MSCI EAFE (Hedged) Index
3Q YTD One Five Ten Since Novartis AG 2.5%
2010 2010 Year Year Year Inception Nestle S.A. 2.5%
Strategy 7.75 2.21 4.91 0.78 3.99 7.42 Novo Nordisk A/S 2.3%
3
Benchmark 7.50 -0.12 2.81 0.40 -0.35 5.69 AstraZeneca PLC 2.2%
Rio Tinto PLC 1.8%
Sanofi-Aventis 1.7%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Roche Holding AG 1.7%
Strategy 9.92 -5.31 -14.26 20.96 14.77 27.32 19.31 5.88 -34.09 16.11 Eni S.p.A 1.2%
Benchmark -4.38 -15.87 -27.37 19.17 12.01 29.67 19.19 5.32 -39.77 25.67 Takeda Pharmaceutical Co. 1.2%
Total 21.1%

Beta 0.82 1.00 Price/Book - Hist 1 Yr Wtd Avg 1.7 x 1.4 x
2
R 0.88 1.00 Return on Equity - Hist 1 Yr Wtd Med 14.6 % 9.9 %
Sharpe Ratio 0.35 0.15 Market Cap - Weighted Median $Bil $24.4 $26.6

United Kingdom
Energy 1.0 8.4 7.4
Japan 0.4 Financials -13.8 11.0 24.8
Materials -1.3 9.1 10.4
Cash 2.8 Telecom. Services -0.3 5.5 5.8
-10 -5 0 5 10
-20 -10 0 10 20
GICS Sectors


The Currency Hedged International Equity Strategy returned +7.8% during the third quarter of 2010. This was ahead of the MSCI
EAFE (Hedged) index, which returned +7.5%.

Most currencies appreciated on average relative to the U.S. dollar in the quarter.

European currencies were particularly strong relative to the U.S. dollar. The unhedged EAFE index returned +16.5%.

The Currency Hedged International Equity Strategy invests in the International Intrinsic Value (50%) and International Growth (50%)
Strategies. Performance of the Currency Hedged International Equity Strategy was ahead of the MSCI EAFE Hedged index mainly as
a result of the outperformance of the International Growth Strategy.
other income.
3 The MSCI EAFE Index (Europe, Australasia, and Far East) (Hedged) is a well-known, independently maintained and published large capitalization international stock
index that is currency-hedged into U.S. dollars. MSCI Standard Index Series.
GMO © 2010
GMO Japan Equity Strategy As of September 30, 2010

Inception: 12/31/05; Benchmark: MSCI Japan IMI ++ Index
Total Return Net of Fees (%) Average Annual Total Return (%) Nippon T & T Corp. 4.3%
3Q YTD One Five Ten Since NTT DoCoMo Inc. 4.1%
2010 2010 Year Year Year Inception KDDI Corp. 3.6%
Strategy 3.10 5.70 -0.50 n/a n/a -4.33 Seven & I Holdings Co. Ltd. 2.6%
3
Benchmark 5.45 3.58 -0.17 n/a n/a -4.50 Daito Trust Construction 2.2%
Mizuho Financial Group 2.1%
Takeda Pharmaceutical Co. 2.0%
2006 2007 2008 2009 Orix Corp. 1.7%
Strategy 6.39 -2.39 -24.83 -1.78 JX Holdings Inc. 1.5%
Benchmark 6.24 -4.23 -28.16 6.12 Sumitomo Corp. 1.5%
Total 25.6%

Alpha 1.53 0.00 % Negative Earnings 10.5 % 7.0 %
Beta 1.11 1.00 Price/Earnings - Excl Neg Earn Hist 1 Yr Wtd Med 11.2 x 18.1 x
2 Price/Earnings - Hist 1 Yr Wtd Med 11.8 x 19.5 x
R 0.94 1.00
Sharpe Ratio -0.32 -0.42 Price/Book - Hist 1 Yr Wtd Avg 0.8 x 1.0 x
Sector Weights5
Underweight/Overweight
Sector Against Benchmark Strategy Benchmark
Consumer Discretionary -1.0 18.6 % 19.6 %
Energy 2.7 4.1 1.4
Financials 2.9 19.9 17.0
Health Care -0.8 5.0 5.8
-10 -5 0 5 10
GICS Sectors


The Japan Equity Strategy returned +3.1% during the third quarter of 2010. This was behind its benchmark, the MSCI Japan IMI
index, which returned +5.5%.

Within the portfolio, stock selection was the primary reason for the underperformance, although sector exposures added some value.

Our stocks underperformed, particularly within Consumer Discretionary, Industrials, Telecommunication Services, and Information
Technology.

Sector exposures had a small positive impact, mainly from our overweight to Telecommunication Services and underweight to Utilities.

Individual stock positions that were significant detractors included overweight positions in financial Resona Holdings and real estate
developer Leopalace21 Corp. and an underweight position in technology company Canon. Positions that were among the biggest
contributors to relative performance included underweights in software company Nintendo and utility Tokyo Electric Power and an
overweight in financial Advance Residence Investment Corp.
other income.
3 The MSCI Japan IMI ++ Index is comprised of the MSCI Japan (Standard Index Series) from 12/31/2005 to 6/30/2008 and the MSCI Japan (Investable Market Index
Series) thereafter.
GMO © 2010
GMO International Small Companies Strategy As of September 30, 2010
Inception: 10/31/91; Benchmarks: MSCI EAFE Small Cap + Index and MSCI EAFE Index
Total Return Net of Fees (%) Average Annual Total Return (%) Bekaert S.A. N.V. 1.4%
3Q YTD One Five Ten Since IMI PLC 1.4%
2010 2010 Year Year Year Inception Trelleborg AB 1.2%
Strategy 17.64 6.79 4.78 3.79 11.08 9.35 CSM N.V. 1.2%
3
MSCI EAFE SC + 17.51 9.16 8.04 4.71 7.73 6.57 Weir Group PLC 1.1%
3
MSCI EAFE 16.48 1.07 3.27 1.97 2.56 5.21
Inchcape PLC 1.1%
Annual Total Return Net of Fees (%) Lanxess AG 1.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 DCC PLC 0.9%
Strategy 2.78 -6.70 -1.25 67.44 27.02 24.33 27.78 8.06 -43.77 36.42 Melrose PLC 0.8%
MSCI EAFE SC + -10.31 -15.70 -7.29 53.73 28.73 22.10 29.42 7.32 -46.97 46.78 Advance Residence Invest. 0.8%
MSCI EAFE -14.17 -21.44 -15.94 38.59 20.25 13.54 26.34 11.17 -43.38 31.78 Total 10.9%

M SCI EAFE M SCI M SCI EAFE M SCI
Strategy Small Cap + EAFE Strategy Small Cap EAFE
Beta 0.98 1.00 1.00 Price/Cash Flow - Hist 1 Yr Wtd Med 8.0 x 10.5 x 9.0 x
R 0.91 1.00 1.00
5
Regional Weights5 Sector Weights
Region Against M SCI EAFE Small Cap (%) Sector Against M SCI EAFE Small Cap Strategy Benchmark
United Kingdom 0.7
Energy -1.6 3.8 5.4
Japan 1.7 Financials -5.2 13.7 18.9
Australia/New Zealand -8.4 Industrials 1.9 25.8 23.9
Cash 1.2
Materials 2.2 12.7 10.5
-10 -5 0 5 10 Telecom. Services -0.7 0.3 1.0
-10 -5 0 5 10
GICS Sectors

The International Small Companies Strategy returned +17.6% during the third quarter of 2010, compared to the MSCI EAFE Small Cap index, which returned

+17.5%.
The slight outperformance relative to the benchmark resulted primarily from good stock selection despite some the negative impacts from country allocation and

currency allocation.
Stock selection was especially good in Japan and the United Kingdom, but also good in Germany and Sweden. By sector, our holdings in Industrials and

Financials performed well. Consumer Discretionary, Energy, and Consumer Staples holdings were weak as were selections in the Netherlands and Hong Kong.
GMO’s stock selection disciplines had mixed results in the quarter. Momentum outperformed while valuation was mixed. Stocks selected for their strong

momentum characteristics outperformed significantly. Stocks ranked highly by momentum adjusted value also outperformed but by a smaller margin, while
those favored by quality adjusted value underperformed.
Country allocation had a negative impact from our underweight to Australia and overweights to Japan and Ireland.

Currency allocation was hurt by our underweight position to the Australian dollar despite the benefit from our overweight to the Swedish krone.

Individual stock holdings that were significant positive contributors to relative performance included Belgian electrical equipment maker Bekaert, Swedish

machinery company Trelleborg AB, and British industrial Cape PLC. Holdings that were significant detractors included Dutch food products company CSM,
Allied Irish Banks, and Japanese auto component maker Futaba Industrial Co.
other income.
3 The MSCI EAFE Small Cap + Index is comprised of the S&P Developed ex-U.S. Small Cap Index from 6/30/1989 to 5/30/2008 and the MSCI EAFE Small Cap Index
(MSCI Standard Index Series, net of withholding tax) thereafter. The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently maintained
and published large capitalization international stock index. MSCI Standard Index Series, net of withholding tax.
GMO © 2010
GMO Tax-Managed International Equities Strategy As of September 30, 2010
Inception: 8/31/98; Benchmark: MSCI EAFE Index (After Tax)

2010 2010 Year Year Year Inception AstraZeneca PLC 2.6%
Before-Tax Novartis AG 2.4%
Strategy 3 16.11 2.05 3.19 2.18 7.32 7.74 Sanofi-Aventis S.A. 2.4%
Benchmark 4 16.48 1.07 3.27 1.97 2.56 4.42
ENI S.p.A. 2.1%
After-Tax Nestle S.A. 1.7%
Strategy 16.11 2.05 2.97 1.38 6.63 7.11 Total S.A. 1.6%
Benchmark 16.24 0.34 2.38 1.05 1.93 3.71
Takeda Pharmaceutical Co. 1.4%
Annual Total Return Net of Fees (%) ING Groep N.V. 1.3%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total 21.6%
Strategy -4.29 -8.71 -2.33 41.05 24.36 16.55 25.90 13.75 -40.71 23.71
Benchmark -14.17 -21.44 -15.94 38.59 20.25 13.54 26.34 11.17 -43.38 31.78
R
2
0.91 1.00 Price/Book - Hist 1 Yr Wtd Avg 1.4 x 1.4 x
Sharpe Ratio 0.33 0.09 Dividend Yield - Hist 1 Yr Wtd Avg 3.2 % 3.2 %
Europe ex-UK -0.1 Consumer Discretionary 4.7 15.1 % 10.4 %
United Kingdom 0.2 Consumer Staples -2.3 8.1 10.4
Energy 4.0 11.4 7.4
Japan 1.9
Materials -3.2 7.2 10.4
Cash 1.4 -0.2
Telecom. Services 5.6 5.8
-10 -5 0 5 10


The Tax-Managed International Equities Strategy added 16.1% over the third quarter, while the MSCI EAFE index gained 16.5%. Global equity markets
recovered from their second quarter declines in July, receded in August, and rebounded in September. The shifting sands of market sentiment regarding
the economic outlook were reflected in many forms: sector performance, relative performance of cyclical versus defensive stocks, and the strength of the
U.S. dollar relative to other currencies. By the end of the quarter, Energy and Materials stocks posted the strongest returns, while Health Care, Utilities,
and Information Technology posted the weakest. The strengthening of major currencies versus the U.S. dollar added over 9% to the +7.1% return of
the index in local currency terms.

Within the portfolio, equity returns finished on par with the index, while moderate cash holdings kept the returns slightly below the market in a +16.5%
return quarter. Performance of the three stock selection strategies was mixed. The momentum-based stock selection strategy posted the strongest
relative returns, while the quality adjusted value strategy matched the market. The intrinsic value strategy posted the weakest results for the quarter, as its
exposure to more defensive, high quality stocks put it at odds with the market direction. While country selection in itself was a negative factor for the
quarter, this was more reflective of the underlying stock selections over the period.
other income.
3 Market conditions, tax legislation and government regulations may limit the Strategy’s ability to utilize tax efficient strategies. After-tax returns are calculated using the
historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax
situation and may differ from those shown. After-tax returns are not relevant to investors who hold investment through a tax-deferred arrangement.
4 The Strategy’ benchmark is the MSCI EAFE Index (after tax), computed by the Manager by adjusting the return of the MSCI EAFE Index by its tax cost. The Manager
estimates the MSCI EAFE Index’s after-tax return by applying the maximum historical applicable individual federal tax rate to the MSCI EAFE Index’s dividend yield and
to its estimated short-term and long-term realized capital gains (losses) (arising from changes in the constituents of the MSCI EAFE Index). The MSCI EAFE Index
(Europe, Australasia, and Far East), is a well-known, independently maintained and published large capitalization international stock index. MSCI Standard Index Series,
net of withholding tax.
GMO © 2010
GMO Emerging Markets Strategy As of September 30, 2010

Inception: 12/31/93; Benchmark: S&P/IFCI Composite Index
Total Return Net of Fees (%) Average Annual Total Return (%) Samsung Electronics Co. 4.0%
3Q YTD One Five Ten Since OAO Gazprom ADR 3.5%
2010 2010 Year Year Year Inception Vale S A ADR Repstg PFD 2.8%
Strategy 19.85 11.52 18.93 10.59 16.12 9.77 Petroleo Brasileiro S/A 2.2%
3
Benchmark 18.34 11.78 21.49 13.76 15.07 7.10 Lukoil Oil Company ADR 2.0%
Hyundai Heavy Industries 1.8%
Taiwan Semicond Manuf Co. 1.7%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Surgutneftegaz Prf 1.3%
Strategy -27.79 9.81 0.78 70.21 26.54 40.15 29.51 37.22 -55.74 71.89 China Mobile (Hong Kong) 1.3%
Benchmark -31.76 1.76 -3.93 57.15 28.11 35.19 35.11 40.28 -53.74 81.03 Turkiye Garanti Bankasi A.S. 1.3%
Total 21.9%
2
Sharpe Ratio 0.30 0.15 Return on Equity - Hist 1 Yr Avg 16.4 % 14.4 %
5
Regional Weights 5
Sector Weights
East Asia -7.0 Consumer Discretionary -0.7 7.3 % 8.0 %
16.0 Consumer Staples -2.5 4.4 6.9
Europe
Energy 4.6 17.0 12.4
Latin/South America -8.5 Financials 0.0 24.0 24.0
Mideast/Africa -3.3 Health Care -0.3 1.2 1.5
South Asia 0.9 Industrials -1.7 7.3 9.0
Cash 2.1
Materials -1.6 12.4 14.0
-20 -10 0 10 20 Telecom. Services 2.6 9.5 6.9

The Emerging Markets Strategy jumped 19.9% in the third quarter, outperforming the S&P/IFCI Composite, which rose 18.3%, by 1.5%. Overall this quarter, country
selection added 0.8%, while stock selection contributed 0.7%.

Investors gained greater confidence in the prospects of a global economic recovery and, in particular, in the growth in emerging markets. The asset class jumped to its
highest level since the credit crisis, supported by a surge of inflows.

Chile’s economy grew 6.5% in the second quarter from a year ago, approaching the output level reached before the February earthquake. Interest rate increases by the
central bank, along with the strength of the domestic economy and continuing robust prices for copper, the country’s main export, have sent the Chilean peso on a bull
run. Our underweight in Chile hurt performance.

Chinese economic growth fell to 10.3% in the second quarter from an annual pace of 11.9% in the prior three months in signs that the economy is stabilizing. In the face
of rising pressure from property value appreciation in China, the central bank has avoided raising interest rates and instead attempted to micromanage the real estate issues.
Our underweight in China helped performance.

The Indian stock market was hit by fears of tightening monetary policy. Accelerating growth – an 8.8% jump last quarter from a year earlier – is generating inflation as the
nation faces constraints in power, roads, and ports. Foreign funds desirous of participating in the strong pace of economic growth have pumped in a cumulative 891.2
billion rupees ($19.8 billion) thus far in 2010. Our underweight in India helped performance.

Thailand’s stock market has been one of the best performers this quarter despite a political stand-off. Gross domestic product rose 9.1% in the second quarter after having
jumped 12% in the three months to March, the best two quarters of growth since 1995. Our overweight in Thailand added to performance.

Turkey’s ruling party won a referendum, widely viewed as an indicator of the general elections next year, by a larger than expected margin. Investors cheered the increased
odds of a continuation of Prime Minister Erdogan’s policies, which have helped deliver record economic growth. Our overweight in Turkey contributed to performance.

Stock selection detracted from performance in Mexico and Brazil, but helped in India, Korea, Taiwan, and Turkey.
other income.
3 The S&P/IFCI Composite Index is an independently maintained and published emerging market stock index.
GMO © 2010
GMO Emerging Countries Strategy As of September 30, 2010

Inception: 9/30/97; Benchmark: S&P/IFCI Composite Index
Total Return Net of Fees (%) Average Annual Total Return (%) Samsung Electronics Co. 4.0%
3Q YTD One Five Ten Since OAO Gazprom ADR 3.6%
2010 2010 Year Year Year Inception Vale S.A. (ADS) 2.8%
Strategy 19.83 10.92 18.58 10.02 15.00 10.96 Petroleo Brasileiro S/A 2.2%
3
Benchmark 18.34 11.78 21.49 13.76 15.07 9.84 Lukoil Oil Company ADR 2.0%
Hyundai Heavy Industries 1.8%
Taiwan Semicond Manuf Co. 1.5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Surgutneftegaz Prf 1.4%
Strategy -28.51 6.03 -0.03 68.27 24.89 37.54 28.95 37.44 -55.81 69.96 China Mobile Ltd. (ADS) 1.3%
Benchmark -31.76 1.76 -3.93 57.15 28.11 35.19 35.11 40.28 -53.74 81.03 Turkiye Garanti Bankasi A.S. 1.3%
Total 21.9%

2
Sharpe Ratio 0.33 0.26 Return on Equity - Hist 1 Yr Avg 16.2 % 14.4 %
5
Regional Weights 5
Sector Weights
East Asia -7.1 Consumer Discretionary -1.1 6.9 % 8.0 %
16.2
Europe Energy 4.7 17.1 12.4
Latin/South America -8.2 Financials -0.1 23.9 24.0
-3.2 Health Care -0.5 1.0 1.5
Mideast/Africa
South Asia 0.7
Cash 1.7 -1.0
Materials 13.0 14.0
-20 -10 0 10 20

The Emerging Countries Strategy jumped 19.8% in the third quarter, outperforming the S&P/IFCI Composite, which rose 18.3%, by 1.5%. Overall this quarter, country
selection added 0.8%, while stock selection contributed 0.6%.

Investors gained greater confidence in the prospects of a global economic recovery and, in particular, in the growth in emerging markets. The asset class jumped to its
highest level since the credit crisis, supported by a surge of inflows.

Chile’s economy grew 6.5% in the second quarter from a year ago, approaching the output level reached before the February earthquake. Interest rate increases by the
central bank, along with the strength of the domestic economy and continuing robust prices for copper, the country’s main export, have sent the Chilean peso on a bull
run. Our underweight in Chile hurt performance.

Chinese economic growth fell to 10.3% in the second quarter from an annual pace of 11.9% in the prior three months in signs that the economy is stabilizing. In the face
of rising pressure from property value appreciation in China, the central bank has avoided raising interest rates and instead attempted to micromanage the real estate issues.
Our underweight in China helped performance.

The Indian stock market was hit by fears of tightening monetary policy. Accelerating growth – an 8.8% jump last quarter from a year earlier – is generating inflation as the
nation faces constraints in power, roads, and ports. Foreign funds desirous of participating in the strong pace of economic growth have pumped in a cumulative 891.2
billion rupees ($19.8 billion) thus far in 2010. Our underweight in India helped performance.

Thailand’s stock market has been one of the best performers this quarter despite a political stand-off. Gross domestic product rose 9.1% in the second quarter after having
jumped 12% in the three months to March, the best two quarters of growth since 1995. Our overweight in Thailand added to performance.

Turkey’s ruling party won a referendum, widely viewed as an indicator of the general elections next year, by a larger than expected margin. Investors cheered the increased
odds of a continuation of Prime Minister Erdogan’s policies, which have helped deliver record economic growth. Our overweight in Turkey contributed to performance.

Stock selection detracted from performance in Mexico and Brazil, but helped in India, Korea, Taiwan, and Turkey.
other income.
3 The S&P/IFCI Composite Index is an independently maintained and published emerging market stock index.
GMO © 2010
GMO Global Active Equity Strategy As of September 30, 2010

Inception: 8/31/00; Benchmark: MSCI World Index
3Q YTD One Five Ten Since British American Tobacco 1.8%
2010 2010 Year Year Year Inception Philip Morris Int'l. Inc. 1.7%
Strategy 13.92 1.88 5.11 1.69 7.78 7.98 Vodafone Group PLC 1.7%
3
Benchmark 13.78 2.58 6.76 1.30 0.79 0.24 HSBC Holdings PLC 1.7%
Banco do Brasil S.A. 1.6%
Royal Dutch Shell PLC 1.6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Microsoft Corp. 1.6%
Strategy 17.07 -4.87 -10.00 43.07 22.00 17.66 25.69 8.64 -40.89 28.16 DaimlerChrysler AG 1.6%
Benchmark -11.19 -16.82 -19.89 33.11 14.72 9.49 20.07 9.04 -40.71 29.99 Hitachi Ltd. 1.5%
Total 16.9%

2
Sharpe Ratio 0.37 -0.13 Dividend Yield - Hist 1 Yr Wtd Avg 2.5 % 2.6 %

United States -7.9 Consumer Discretionary 3.7 13.9 % 10.2 %
Europe ex-UK 0.7
Energy 3.7 13.9 10.2
United Kingdom 5.6 Financials -1.8 18.6 20.4
Japan -1.4 Health Care -0.3 9.5 9.8
Southeast Asia Industrials 1.0 12.1 11.1
-0.9
Canada Information Technology -4.1 7.5 11.6
-4.1 Materials 2.0 9.7 7.7
Australia/New Zealand
-2.8 Telecom. Services -1.0 3.4 4.4
Emerging Utilities -2.0 2.2 4.2
Cash 7.2
-6 -3 0 3 6


The Global Active Equity Strategy outperformed the MSCI World index by 0.1 percentage points in the third quarter, gaining 13.9%
while the benchmark rose 13.8%. The strategy lagged its benchmark by 0.7 percentage points for the first three quarters of 2010.

Country selection within the strategy was negative in the quarter. Underweight positions in Australia and Spain each subtracted 0.2%
from returns. On the positive side, an overweight position in the United Kingdom added 0.3% to performance. The strategy’s
currency hedge against the euro was closed in August.

Sector selection was neutral. Despite sector weights that were significantly different than those of the benchmark, there were no
sizeable impacts from sector selection in the quarter.

Stock selection was the reason the strategy outperformed. Positions in Japan, Germany, Canada, and the emerging markets all did well.
On the negative side, holdings in the United States and the United Kingdom hurt returns.
other income.
3 The MSCI World Index is a well-known, independently maintained and published global developed markets equity index. MSCI Standard Index Series, net of withholding tax.

GMO © 2010
GMO Global Equity Strategy As of September 30, 2010

Inception: 7/31/96; Benchmark: MSCI World Index
Total Return Net of Fees (%) Average Annual Total Return (%) Johnson & Johnson 3.8%
2010 2010 Year Year Year Inception Apple Inc. 2.9%
Strategy 14.33 2.90 6.82 0.62 3.84 6.68 Coca-Cola Co. 2.1%
3
Benchmark 13.78 2.58 6.76 1.30 0.79 4.93 Merck & Co Inc 1.9%
Wal-Mart Stores Inc. 1.8%
PepsiCo Inc. 1.7%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Google Inc. (Cl A) 1.7%
Strategy -0.81 -9.39 -10.70 36.36 17.95 11.08 21.19 6.16 -38.76 24.59 ENI S.p.A. 1.6%
Benchmark -13.18 -16.82 -19.89 33.11 14.72 9.49 20.07 9.04 -40.71 29.99 BNP Paribas S.A. 1.4%
Total 21.9%

2
Sharpe Ratio 0.26 0.10 Return on Equity - Hist 1 Yr Wtd Med 14.8 % 13.2 %

North America -7.7 Consumer Discretionary 1.6 11.8 % 10.2 %
2.8 Consumer Staples -0.6 9.7 10.3
Europe ex-UK
Energy 0.6 10.8 10.2
United Kingdom 3.1
Japan 1.6 Health Care 5.7 15.5 9.8
Pacific ex-Japan -1.0 Industrials 1.9 13.0 11.1
Cash 1.3
-10 -5 0 5 10 Telecom. Services -1.1 3.3 4.4


Global equity markets posted strong gains this quarter, with the MSCI World index up by 13.8% in U.S. dollar terms. In local terms most of the major indices made high
single-digit or low double-digit returns. Foreign exchange markets were volatile, however, and returns looked less cheery from the perspective of the rebounding euro or
the commodity-driven Australian dollar. Nevertheless, the Global Equity Strategy outperformed its benchmark by 0.6% for the period.

Events over the quarter were hardly the stuff of boom times. Leading economic indicators in the U.S. have slowed and there was enough concern in Japan to trigger
(unsuccessful) intervention to weaken the yen. Although fears over a generalized meltdown of European sovereign debt abated, Greek, Irish, and Portuguese bond
yields rose markedly. Revived optimism over the economy was therefore not stamped on market returns.

The stocks that are most sensitive to the economic cycle slightly underperformed the rally, and the strategy’s allocation to attractively priced U.S. high quality blue chips
kept pace over the quarter, even level-pegging with rising indices in September.

At the simplest level, the rally was a reverse of the second quarter’s losses, in that shares of less volatile, lower growth companies gave back this quarter what they gained
in a relative sense last quarter and almost every country that outperformed this quarter was making up ground lost in the last. Cutting through the noise, Ireland notably
underperformed this quarter and last, and Greece finished the quarter only slightly ahead despite a powerful bounce in July. Singapore and Hong Kong (growth engine
Asia) outperformed for another quarter.

Within the strategy, country allocation detracted from returns; gains from overweights in Italy, France, and the U.K. (all attractively priced) were not enough to
compensate for missing out on strength in Australian equities and the cost of overweighting Japan.

Stock selection was more successful with both our value-oriented and momentum-driven disciplines contributing over the quarter. In Europe, where sentiment has been
dampened by concerns over government finances, we maintain an overweight in stocks lower down the quality spectrum, while continuing to emphasize conservative,
high quality companies in the U.S.
other income.
3 The MSCI World Index is a well-known, independently maintained and published global developed markets equity index. MSCI Standard Index Series, net of withholding tax.
GMO © 2010
GMO Global Growth Strategy As of September 30, 2010

Inception: 7/31/04; Benchmarks: MSCI World Growth Index and MSCI World Index
Total Return Net of Fees (%) Average Annual Total Return (%) Apple Inc. 4.9%
3Q YTD One Five Ten Since Johnson & Johnson 4.1%
2010 2010 Year Year Year Inception PepsiCo Inc. 2.7%
Strategy 15.70 4.39 10.31 2.24 n/a 5.42 Royal Dutch Shell PLC 2.4%
3
MSCI World Growth 14.81 4.01 10.22 2.17 n/a 4.86 Google Inc. (Cl A) 2.1%
3
MSCI World 13.78 2.58 6.76 1.30 n/a 4.32
Coca-Cola Co. 1.8%
Annual Total Return Net of Fees (%) Abbott Laboratories 1.5%
2004 2005 2006 2007 2008 2009 3M Co. 1.4%
Strategy 14.02 10.63 17.83 12.44 -38.36 28.79 BNP Paribas S.A. 1.3%
MSCI World Growth 13.57 9.41 15.15 14.76 -41.13 33.27 Microsoft Corp. 1.3%
MSCI World 14.56 9.49 20.07 9.04 -40.71 29.99 Total 23.5%

Strategy World Growth World Strategy World Growth World
Beta 0.96 1.00 1.00 Earnings/Share - F'cast LT Med Growth Rate 12.0 x 12.0 x 10.5 x
R 0.98 1.00 1.00

Region Against M SCI World Growth (%) Sector Against M SCI World Growth Strategy Benchmark
North America 2.0 Consumer Discretionary -0.3 12.9 % 13.2 %
-0.8 Consumer Staples -3.9 10.4 14.3
Europe ex-UK Energy 3.2 10.7 7.5
United Kingdom 0.2 Financials 1.5 10.2 8.7
Japan -2.0 Health Care 2.2 12.3 10.1
Pacific ex-Japan -1.4
Cash 1.8 Materials -5.5 5.5 11.0
-4 -2 0 2 4 Utilities -0.8 0.3 1.1

Global equity markets posted strong gains this quarter, with the MSCI World Growth index up by 14.8% in U.S. dollar terms. In local terms, most of the major indices made high
single-digit or low double-digit returns. Foreign exchange markets were volatile, however, and returns looked less cheery from the perspective of the rebounding euro or the
commodity-driven Australian dollar. Nevertheless, the Global Growth Strategy outperformed its benchmark by 0.9% for the period.

Events over the quarter were hardly the stuff of boom times. Leading economic indicators in the U.S. have slowed and there was enough concern in Japan to trigger (unsuccessful)
intervention to weaken the yen. Although fears over a generalized meltdown of European sovereign debt abated, Greek, Irish, and Portuguese bond yields rose markedly. Revived
optimism over the economy was therefore not stamped on market returns.

The stocks that are most sensitive to the economic cycle slightly underperformed the rally, and the strategy’s allocation to attractively-priced U.S. high quality blue chips lagged by
less than would be expected given the headline returns.

At the simplest level, the rally was a reverse of the second quarter’s losses, in that shares of less volatile, lower growth companies gave back this quarter what they gained in a relative
sense last quarter and almost every country that outperformed this quarter was making up ground lost in the last. Cutting through the noise, Ireland notably underperformed this
quarter and last, and Greece finished the quarter only slightly ahead despite a powerful bounce in July. Singapore and Hong Kong (growth engine Asia) outperformed for another
quarter.

Within the strategy, country allocation added to returns; gains from overweights in Scandinavia and Singapore (backed by strong sentiment) and underweighting Japan were enough
to compensate for overweighting U.S. equities.

Stock selection was successful with both our GARP and momentum-driven disciplines contributing meaningfully over the quarter. Strength in the buoyant Materials sector was a
boon for the price momentum discipline. In Europe, where sentiment has been dampened by concerns over government finances, we maintain an overweight in stocks lower down
the quality spectrum from a GARP perspective, while continuing to emphasize conservative, high quality companies in the U.S.

The strategy’s FX overlay enhanced returns over and above the underlying equity exposures. The U.S. dollar, which we have hedged back toward neutral, weakened against all-
comers, with the euro bloc currencies and the Australian dollar winning most (or losing most, perhaps, in the global game of currency debasement).
other income.
3 The MSCI World Growth Index is a well-known, independently maintained and published global developed markets equity index comprised of large/mid capitalization
stocks that have a growth style. Large/mid cap stocks encompass approximately 85% of each market’s free float-adjusted market capitalization. The style is determined
using a multi-factor approach based on eight historical and forward-looking characteristics. MSCI Standard Index Series, net of withholding tax. The MSCI World Index
is a well-known, independently maintained and published large capitalization international stock index. MSCI Standard Index Series, net of withholding tax.
GMO © 2010
GMO Core Plus Bond Strategy As of September 30, 2010

Inception: 4/30/97; Benchmark: Barclays Capital U.S. Aggregate Index
Performance1
Total Return Net of Fees (%) Average Annual Total Return (%)
3Q YTD One Five Ten Since
2010 2010 Year Year Year Inception
Strategy 4.31 13.78 16.68 3.65 5.86 6.01
2
Benchmark 2.48 7.94 8.16 6.20 6.41 6.53

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 14.10 8.51 6.55 10.96 6.59 3.95 5.76 -1.01 -18.00 20.96
Benchmark 11.63 8.44 10.26 4.10 4.34 2.43 4.33 6.97 5.24 5.93
Risk Profile Since 4/30/973 Characteristics4,5

Strategy Benchmark Modified Duration 5.1
Alpha -0.47 0.00 Average Coupon 4.9 %
Beta 1.08 1.00 Average Maturity 7.2 Yrs.
2
R 0.47 1.00 Average Yield 6.3 %
Sharpe Ratio 0.56 0.94 Emerging Cntry Debt Exp. 3 %
Regional Weights4,6 Currency Weights4

Against Benchmark (%) Against Benchmark (%)
Europe -2.3 Europe -0.6
North America 4.7 North America -8.1
Pacific -5.0 Pacific 8.7
Emerging 3.6
-10 -5 0 5 10
-10 -5 0 5 10


The Core Plus Bond Strategy returned +4.3% in the third quarter, outperforming the return of its benchmark, the Barclays Capital U.S.
Aggregate index, by 1.8%. The Barclays Capital U.S. Aggregate index posted an eighth consecutive quarter of total return gains,
returning +2.5%. Falling U.S. Treasury yields drove gains, as 10-year yields fell by 44 bps to 2.5%, and U.S. Treasury 2-year yields fell
by 18 bps to 0.4%.

The overall option-adjusted spread of the Barclays Capital U.S. Aggregate index widened by 19 bps; while sector spreads widened by as
much as 75 bps, they also tightened by as much as 65 bps. CMBS spreads tightened the most during the quarter despite an increase in
delinquencies. MBS (+75 bps), triple-A credit (+29 bps), and U.S. Agency (+1 bp) spreads widened during the quarter.

Exposures to cash collateral held in the GMO Short Duration Collateral Fund (SDCF) and the GMO World Opportunity Overlay
Fund (WOOF), the assets of which were used for cash collateral, were the largest positive contributors for a sixth consecutive quarter.
Developed markets currency selection and exposure to emerging country debt via the GMO Emerging Country Debt Fund also
contributed positively during the quarter, followed by a small contribution from developed markets interest-rate positioning.
other income.
2 The Barclays Capital U.S. Aggregate Index is a well-known, independently maintained and published index comprised of U.S. fixed rate debt issues, having a maturity of at
least one year, rated investment grade or higher by Moody’s Investors Service, Standard & Poor’s Corporation or Fitch Investors Service.
5 Please note portfolio yield includes the yield on the portfolio’s cash assets, for example, via the Short Duration Collateral Fund.
6 Regional weights are duration adjusted.

GMO © 2010
GMO Inflation Indexed Plus Bond Strategy As of September 30, 2010

Inception: 5/31/06; Benchmark: Barclays Capital U.S. Treasury Inflation Notes Index
Performance1
Strategy 4.61 13.37 18.58 n/a n/a 4.03
2
Benchmark 2.48 7.00 8.89 n/a n/a 6.84

2006 2007 2008 2009
Strategy 3.58 3.06 -24.75 30.30
Benchmark 2.51 11.64 -2.35 11.41

Strategy Benchmark Modified Real Rate Duration 8.2
Alpha -2.67 0.00 Average Coupon 2.7 %
2

Emerging 4.0 -10 -5 0 5 10
-10 -5 0 5 10


The Inflation Indexed Plus Bond Strategy returned +4.6% in the third quarter, outperforming the Barclays Capital U.S. Treasury
Inflation Notes index by 2.1%. The real yield curve flattened in the third quarter, as real 2-year yields fell by 27 bps to -0.3%, and real
10-year yields fell by 39 bps to 0.7%, resulting in a seventh consecutive quarterly total return gain for the index, with +2.5%.

Exposures to cash collateral held in the GMO Short Duration Collateral Fund (SDCF) and the GMO World Opportunity Overlay
Fund (WOOF), the assets of which were used for cash collateral, were the largest positive contributors for a sixth consecutive quarter.
Developed markets currency selection and exposure to emerging country debt via the GMO Emerging Country Debt Fund also
contributed positively during the quarter.
other income.
2 The Barclays Capital U.S. Treasury Inflation Notes Index is an independently maintained and published index comprised of Inflation-Protection Securities issued by the
U.S. Treasury.

GMO © 2010
GMO International Bond Strategy As of September 30, 2010

Inception: 12/31/93; Benchmark: J.P. Morgan Non-U.S. Government Bond Index
Performance1
Strategy 12.41 15.33 15.48 5.83 8.10 7.61
2
Benchmark 10.37 8.25 5.91 7.71 8.23 6.67
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy -0.27 -2.55 17.15 26.95 14.88 -8.08 9.33 3.66 -13.95 20.59
Benchmark -2.47 -3.60 22.10 18.63 12.04 -9.24 6.84 11.30 11.39 3.94

Alpha 1.47 0.00 Average Coupon 3.6 %
2
R 0.75 1.00 Yield to Maturity 6.5 %
Emerging Cntry Debt Exp. 3 %

Emerging 3.7 -10 -5 0 5 10
-10 -5 0 5 10


The International Bond Strategy returned +12.4% in the third quarter, outperforming the J.P. Morgan Non-U.S. Government Bond index by 2.0%. The U.S. dollar’s fall
versus all developed countries accounted for the bulk of the +10.4% quarterly return for the J.P. Morgan Non-U.S. Global Government Bond index. The 19-bp fall in
the index yield resulted in a 2.1% rise when measured in local currency terms.

Government bond markets rallied in Q3, particularly when most world equity markets declined sharply mid-quarter. In local currency bond index terms, gains were the
highest in the U.K., +3.7%, and the lowest in Switzerland, +0.9%. The +1.9% index total return for the euro area masked a wide range of outcomes among EUR
currency participants, only the largest of which (Germany, Italy, France, Spain, Netherlands, and Belgium) pertain. Core euro zone debt markets, including France and
Germany, rose during the quarter, by 2-3%. Meanwhile, Spanish bonds rose by 4.3%, and Greek bonds rose by 4.0%, outperforming core euro zone debt markets. Irish
bonds, however, provided the euro zone’s worst returns, falling by 4.3% during the quarter. Ireland’s debt crisis is the latest to rattle Europe, with officials attempting to
stave off an emergency bailout by promising to pump billions into its banks that were hardest-hit. Outside of the euro zone, U.S. (+2.8%), Canadian (+2.7%), Swedish
(+1.3%), Japanese (+1.1%), and Australian (+1.1%) bond markets reported gains during the quarter. Further, global yield curves flattened across the board: yield curves
in Canada (-48 bps) and the euro zone (-42 bps) flattened the most, and the U.S. (-7 bps) flattened the least.

In currencies, the U.S. dollar declined broadly in the third quarter, with much of the fall coming subsequent to indications in September that the U.S. Federal Reserve
would re-engage its quantitative easing policy. Swedish krona and Australian dollar were the two biggest gainers, rising 15.6% and 14.6%, respectively. Sweden was one
of only three developed countries to raise policy interest rates, increasing them by 50 bps to 0.75%. In Australia, surging commodity prices added to the Australian
dollar’s allure, where the 4.5% policy rate offers a welcomed carry relative to commodities themselves.

The euro witnessed a fairly substantial reversal of fortunes, rising by 11.5%. In the prior quarter, the euro declined by 9.5% amidst worries over the health of weaker
euro members. During the third quarter, the much anticipated release of the bank stress tests served to calm market fears, even as many market participants flagged the
flawed design of the tests themselves. In what must be good news for the Swiss National Bank, which had earlier accumulated substantial euro holdings in trying to drive
the Swiss franc weaker, the euro rose by nearly 1% relative to the Swiss franc. In September, the Bank of Japan surprised the market when it engaged in its first yen-
weakening, unilateral intervention since 2004. Although this limited September’s rise to only 0.5%, the yen was still up 5.9% for the quarter.

Exposures to cash collateral held in the GMO Short Duration Collateral Fund (SDCF) and the GMO World Opportunity Overlay Fund (WOOF), the assets of which
were used for cash collateral, were the largest positive contributors for a sixth consecutive quarter. Developed markets currency selection and exposure to emerging
country debt via the GMO Emerging Country Debt Fund also contributed positively during the quarter, while developed markets interest-rate positioning detracted.
other income.
2 The J.P. Morgan Non-U.S. Government Bond Index is an independently maintained and published index composed of non-U.S. government bonds with maturities of one
year or more.

GMO © 2010
GMO Currency Hedged International Bond Strategy As of September 30, 2010
Inception: 9/30/94; Benchmark: J.P. Morgan Non-U.S. Government Bond Index (Hedged) (ex-Japan) +
Performance1
Strategy 4.29 14.23 16.36 3.07 5.38 8.30
2
Benchmark 2.66 7.03 6.97 4.94 5.62 7.44
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 12.52 6.35 3.01 8.77 8.91 7.25 2.45 -4.00 -13.56 18.81
Benchmark 9.46 6.03 7.01 1.99 6.73 6.54 1.79 3.42 9.22 2.90

2


Emerging 3.5 -10 -5 0 5 10
-10 -5 0 5 10


The Currency Hedged International Bond Strategy returned +4.3% in the third quarter, outperforming the J.P. Morgan Non-U.S. Government Bond ex-Japan Hedged
index total return of +2.7% by 1.6%. The yield of the J.P. Morgan non-U.S. Government ex-Japan Hedged Bond index fell by 25 bps during the quarter.

highest in the U.K., +3.7%, and the lowest in Switzerland, +0.9%. The +1.9% index total return for the euro area masked a wide range of outcomes among EUR



country debt via the GMO Emerging Country Debt Fund also contributed positively during the quarter, while developed markets interest-rate positioning detracted.
other income.
2 The J.P. Morgan Non-U.S. Government Bond Index (Hedged) (ex-Japan) + is comprised of the J.P. Morgan Non-U.S. Government Bond Index (Hedged) prior to
12/31/2003, and the J.P. Morgan Non-U.S. Government Bond Index (Hedged) (ex-Japan) thereafter. The J.P. Morgan Non-U.S. Government Bond Index (Hedged) (ex-
Japan) is an independently maintained and published index composed of non-U.S. government bonds with maturities of one year or more that are currency-hedged into
U.S. dollars.

GMO © 2010
GMO Global Bond Strategy As of September 30, 2010

Inception: 12/31/95; Benchmark: J.P. Morgan Global Government Bond Index
Performance1
Strategy 9.90 15.22 16.46 5.18 7.22 6.35
2
Benchmark 7.95 8.35 6.28 7.32 7.79 6.12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 4.44 -0.62 13.74 21.99 12.12 -5.84 7.94 2.58 -14.93 20.30
Benchmark 2.34 -0.80 19.38 14.51 10.10 -6.53 5.94 10.81 12.00 1.91

2

Emerging 3.4 -10 -5 0 5 10
-10 -5 0 5 10


The Global Bond Strategy returned +9.9% during the third quarter, outperforming the J.P. Morgan Global Government Bond index return by 2.0%. The U.S. dollar’s
fall versus all developed countries accounted for the bulk of the +7.9% quarterly return for the J.P. Morgan Global Government Bond index. The 24-bp fall in the index
yield resulted in a 2.3% rise when measured in local currency terms.

highest in the U.K., +3.7% and the lowest in Switzerland, +0.9%. The +1.9% index total return for the euro area masked a wide range of outcomes among EUR



country debt via the GMO Emerging Country Debt Fund also contributed positively during the quarter.
other income.
2 The J.P. Morgan Global Government Bond Index is an independently maintained and published index composed of government bonds of developed countries, including
the U.S., with maturities of one year or more.

GMO © 2010
GMO Emerging Country Debt Strategy As of September 30, 2010

Inception: 4/30/94; Benchmark: J.P. Morgan Emerging Markets Bond Index Global +
Performance1
Strategy 12.31 23.06 28.39 8.70 14.33 16.97
2
Benchmark 8.33 14.14 15.88 9.17 10.70 12.28

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 24.08 14.23 19.44 36.40 18.76 15.64 14.39 7.49 -33.46 47.92
Benchmark 14.41 1.36 13.11 25.66 11.73 10.73 9.88 6.28 -10.91 28.18
Risk Profile Since 4/30/943 Regional Weights4

Alpha 3.59 0.00 Against Benchmark (%)
Beta 1.20 1.00 Asia 0.9
2
R 0.89 1.00 CEEMEA* -6.4
Latin America -0.1
United States 2.2
Characteristics4 Developed 4.0
Yield to Maturity 5.3 %
-10 -5 0 5 10
Sovereign Spread 295 Bps.
Portfolio Maturity 20.5 Yrs. * Central Eastern Europe, Middle East, and Africa
Modified Duration 7.6
Average Credit Rating BB


The Emerging Country Debt Strategy returned +12.3% in the third quarter, ahead of the J.P. Morgan Emerging Market Bond Index Global return of
+8.3% by 4.0%. The index spread tightened by 54 basis points to 305 basis points during the period, while the yield on the 10-year U.S. Treasury
bond continued to contract, falling 44 basis points to 2.5%.

Concerns about sovereign debt sustainability eased for Greece and Spain, and their CDS spreads tightened by 120 and 24 basis points to 775 basis
points and 231 basis points, respectively. However, the Portuguese government was not able to reassure the markets, and its spread widened 106
basis points to 409. As the cost of bailing out Anglo Irish Bank and others became apparent, Ireland’s credit spread jumped 192 basis points to 458
basis points. Liquidity in the emerging cash bond market improved slightly and the average bid-offer spread tightened to 72 basis points at the end of
the quarter from 77 at the beginning. After a lull in the second quarter, the new issue market came roaring back in the third quarter with $88 billion in
new borrowing, the highest total for over five years.

The biggest index gainers were Argentina (+22.1%), Belize (+17.9%), and Jamaica (+11.9%). Argentina reaped the benefits of its successful exchange
of defaulted bonds, the boom in soybeans, and global risk appetite. Tiny Belize’s $550 million of restructured bonds have also gained from the strong
market tone, returning +65% in the first nine months of the year. Jamaica continued to perform reasonably well under its IMF program.

The worst performers of the quarter were Ecuador (-6.4%), Georgia (+0.8%), and Tunisia (+1.2%). The lone Ecuadorean 2015 bond dropped 11%
on the last day of the quarter when disgruntled policemen took the president hostage in a dispute over pay and benefits. Georgian and Tunisian
bonds have a short duration and did not benefit as much from falling rates as others.

Market selection accounted for 152 basis points of alpha. The overweights in Argentina and Venezuela contributed 99 basis points and 25 basis
points, respectively. The underweight in Mexico added 20 basis points more.

Security selection, including allocations outside the index, was positive by 214 basis points. Venezuela was the biggest contributor, since some of the
exposure was obtained by selling CDS, and these positions performed better than the cash bonds. Positive returns from asset-backed securities (7%
of the portfolio) added 32 basis points.
other income.
2 The J.P. Morgan Emerging Markets Bond Index Global + represents the J.P. Morgan EMBI prior to 8/95, J.P. Morgan EMBI+ through 12/31/99, and the J.P. Morgan
EMBI Global thereafter. The J.P. Morgan EMBI Global is an independently maintained and published index composed of debt securities of countries, which includes
Brady bonds, sovereign debt, local debt and Eurodollar debt, all of which are U.S. dollar denominated.
GMO © 2010
GMO Emerging Country Local Debt Investment Strategy As of September 30, 2010
Inception: 2/29/08; Benchmark: J.P. Morgan GBI-EM Diversified Index
Performance1
Strategy 13.61 16.62 23.10 n/a n/a 4.81
2
Benchmark 12.45 13.96 17.26 n/a n/a 9.67

2008 2009
Strategy -32.06 42.51
Benchmark -7.52 20.44

Strategy Benchmark Yield to Maturity 7.3 %
Alpha -3.74 0.00 Modified Duration 3.8
Beta 1.02 1.00
2
R 0.65 1.00

Asia -11.1 Asia -8.4
CEEMEA* -15.3 CEEMEA* 6.4
Latin America 3.4 Latin America -0.2
-20 -10 0 10 20 -10 -5 0 5 10

* Central Eastern Europe, Middle East, and Africa


The Emerging Country Local Debt Investment Strategy returned 13.6% in the third quarter, outperforming the GBI-EM Diversified (GBI-EMD) by
116 basis points. Instrument selection and returns from the pool once used for collateral were positive, while country positioning detracted.

The GBI-EM Diversified rose by 12.5% in the third quarter. Spot currencies added 8%, while local currency bonds returned 4.5%. While the
currency returns roughly matched those of developed markets (as measured by the J.P. Morgan GBI ex-U.S. index), the local currency bond returns
were more than twice that of their developed markets counterparts, given higher starting yields. Local debt funds witnessed record inflows, resulting
in a scramble to invest in these relatively illiquid markets.

In spot terms, all but one of the emerging currencies rose during the quarter, with the only laggard the Argentine peso at -0.8%. Including carry,
however, even the peso gained with a +1.4% total return. Renewed confidence in the euro subsequent to the bank stress tests led to a +11.5%
quarterly return for the single currency, and even larger gains among the periphery. Czech crown rose by 16.5%, Polish zloty by 16%, Hungarian
forint by 14.9%, and Romanian leu by 14.0%. Such gains easily erased the prior quarter’s losses.

In Asia, the Chinese renminbi rose by 1.3%, its first notable quarterly rise in two years. This led to strength across the region, with 2%+ gains in
Korea, Thailand, Singapore, Philippines, Malaysia, India, and Taiwan. In Latin America, the big winner was Chilean peso, +12.8%, which followed the
upward trajectory of copper prices.

In local currency bond markets, higher-yielding Brazil, Colombia, and South Africa led the markets, with returns of 10.1%, 8.6%, and 7.9%,
respectively. The index’s newest entrant, Chile, was the only market to see a decline, -1%.

Weighing most heavily on performance is the strategy’s zero weight in Thailand, which performed relatively well on both the bond and currency sides.
We viewed with skepticism the post-May political calm and noted that Thai local asset managers themselves prefer Korean bonds to local Thai ones.
Further, with the baht’s relative regional strength of late, we expected verbal intervention to follow. Although other currency positions offset the loss
due to the Thai baht underweight, other country positions failed to do so on the bond side. Instrument selection added 108 basis points, and the pool
once used for collateral (ALPO) 91 basis points.
other income.
2 The J.P. Morgan GBI-EM Diversified Index is the first comprehensive, global local emerging markets index, and consists of regularly traded, liquid fixed-rate, domestic
currency government bonds to which international investors can gain exposure.

GMO © 2010
GMO Asset Allocation Bond Strategy As of September 30, 2010

Inception: 3/31/09; Benchmark: Citigroup 3 Month T-Bill Index
Performance1
Strategy 1.83 4.48 7.16 n/a n/a 7.33
2
Benchmark 0.04 0.09 0.12 n/a n/a 0.14

2009
Strategy 6.44
Benchmark 0.12

Beta 0.00 1.00
2 Average Maturity 3.3 Yrs.
R 0.00 1.00
Average Yield 0.5 %


The Asset Allocation Bond Strategy returned +1.8% during the third quarter, outperforming the Citigroup 3-Month Treasury Bill
index return by 1.8%. Short-duration U.S. interest rates fell during the quarter, with the 3-month U.S. Treasury Bill falling by 4 bps to
end the quarter at 0.14%.
other income.
2 The Citigroup 3 Month T-Bill Index is an independently maintained and published short-term bill index.

GMO © 2010
GMO Global Balanced Asset Allocation Strategy As of September 30, 2010
Inception: 6/30/88; Benchmark: Blended Benchmark
Performance1
Strategy 9.81 3.88 8.54 4.78 7.77 10.07
2
Benchmark 10.15 5.53 8.79 3.65 3.22 8.17
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 8.23 3.88 0.84 28.47 13.55 9.06 12.30 7.94 -20.83 24.15
Benchmark -2.85 -6.03 -9.70 21.99 10.23 5.99 13.41 9.26 -27.72 24.14
Benchmark Composition
Strategy Composition3 (65% MSCI AC World / 35% Barclays U.S. Aggregate)
Special Cash & Cash

Situations Equivalents
2.8% U.S. Equities
Alpha Only 4.7%
12.7% Quality 27.2%
Asset 25.0% Fixed Income
Allocation Bond 35.0%
4.4%
Emerging
Country Debt
0.5%
International
Strategic Intrinsic Value
Fixed Income 4.2%
7.5%
International
Inflation
Growth
Indexed Plus
1.1%
4.3% Emerging International
Domestic Equities
Bond
International
Equities
3.7% Emerging
Core Equity 8.9%
Markets
Flexible
15.7% 28.9%
Equities
12.1%
1.3%
Strategy Weights Relative to Benchmark3 Risk Profile Since 6/30/884

10% Strategy Benchmark
5% +3.2% +2.4% Alpha 3.26 0.00
0% Beta 0.79 1.00
2
-5% -2.2% -3.4% R 0.86 1.00
-10% Sharpe Ratio 0.74 0.40
U.S. Equities Int'l. Equities Emerging Fixed Income
Equities


The Global Balanced Asset Allocation Strategy finished the third quarter up 9.8%, underperforming its benchmark by 0.3%. Asset allocation detracted 1.0% while
implementation added 0.6%.

Within asset allocation decisions, the modest underweight to equities hurt as these markets performed very well. In particular, global equity markets rose markedly in
September in response to a growing expectation that further central bank intervention will be necessary. The rally in stocks was global in nature, so the overall underweight
to equities and the general defensive posture of the strategy’s underlying investments translated to relative underperformance. The overweight to emerging markets
contributed, as emerging equities were up by over 18%. However, the portfolio’s low weight in traditional bonds and related high weight in other fixed income strategies
detracted in a period of falling yields. The Barclays Capital U.S. Aggregate index rallied almost 2.5% this quarter – a healthy move – but the shorter duration of our portfolios
meant that our strategies underperformed.

Within implementation, five out of six equity strategies beat their respective benchmarks. Our International Growth Equity Strategy and our International Core Equity
Strategy each bested their benchmarks by over 100 basis points. One of our largest positions, the Quality Strategy, holds companies exhibiting strong, consistent profitability
and low levels of debt. While we would have expected these defensive characteristics to have been a detractor this quarter, it too outperformed its benchmark. The
Emerging Markets Strategy, in particular, was a strong performer, as it outpaced its benchmark by over 240 basis points. This strategy continues to be significantly
underweight China, which was one of the worst performing countries in emerging markets space. The overweight positions in Thailand and Turkey also added to
performance.

We remain cautious when it comes to fixed income. With Treasury yields at or near 60-year lows, the pricing on bonds appears quite frothy. The prospect of continued
economic weakness, slow recovery, and further bond purchases by the Fed are already baked into prices, raising the question as to whether yields can drop much further.
Whether we want to characterize current pricing as a “bond bubble” or not is really just a semantic debate – “bubbles” are usually characterized by euphoric purchasing – as
no matter how one looks at it, bonds are expensive.
other income.
2 The blended Global Balanced Allocation Composite benchmark is comprised of a weighted average of account benchmarks; many of the account benchmarks consist of
S&P 500, MSCI ACWI and Barclays Capital 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.
GMO © 2010
GMO Real Return Global Balanced Asset Allocation Strategy As of September 30, 2010
Performance1
Strategy 8.47 1.70 6.02 4.70 n/a 6.45
2
Benchmark 8.95 3.57 6.16 2.76 n/a 4.13
2004 2005 2006 2007 2008 2009
Strategy 10.11 8.09 13.26 7.63 -11.36 13.02
Benchmark 7.45 5.80 13.69 7.87 -25.17 19.17
Strategy Composition3 (60% MSCI World / 20% Citigroup 3 Mo. T-Bill / 20% BC U.S. Agg.)
U.S. Core
Multi-Strategy
2.7%
27.0% Quality
Special
21.9% Absolute Return U.S. Equities
Situations
4.2% 20.0% 29.1%
Alpha Only
3.7%
Cash & Cash

Equivalents
1.2% International
Intrinsic Value
13.9%
Asset
Allocation Bond
Fixed Income
1.5% International 20.0%
Growth International
Emerging
Country Debt 14.0% Equities
0.4%
Strategic
Flexible 30.9%
Equities
Fixed Income
Emerging 1.5%
2.8% Inflation Domestic
Markets
Indexed Plus Bond
3.1%
1.2% 1.0%

20% +16.1% Strategy Benchmark
Alpha 4.14 0.00
10% +1.6%
Beta 0.58 1.00
0% 2
R 0.75 1.00
-10% -4.5%
-20% -13.1%
U.S. Equities Int'l. Equities Fixed Income Absolute Return


The Real Return Global Balanced Asset Allocation Strategy returned +8.5% for the third quarter, underperforming its benchmark by 0.5%. Asset allocation detracted
1.0% while implementation added 0.5%.

Within asset allocation decisions, our underweight to equities during the global rally was the biggest detractor. Within the global equity mix, our overweight to
international developed equities and emerging equities ultimately helped the portfolio slightly. Our underweight to traditional fixed income translated into negative
relative performance as the Barclays Capital U.S. Aggregate index chunked out a respectable +2.5% for the quarter, as yields continued to decline. Our overweight to the
cash and “other fixed income” category also hurt performance, as cash served to be a huge laggard during the quarter.

Within implementation, one of our largest positions, the Quality Strategy, holds companies exhibiting strong, consistent profitability and low levels of debt. While we
would have expected these defensive characteristics to lag during a strong risk rally, quality actually outperformed slightly. Other contributors to performance included
the International Growth Equity Strategy and the Emerging Markets Strategy, which beat their benchmarks by 1.3% and 2.4%, respectively. In addition, the absolute
return portfolio was able to add to performance, albeit slightly. Five of the nine underlying strategies held by Multi-Strategy recorded positive performance during the
quarter.

We remain cautious when it comes to fixed income. With Treasury yields at or near 60-year lows, the pricing on bonds appears quite frothy. The prospect of continued
economic weakness, slow recovery, and further bond purchases by the Fed are already baked into prices, raising the question as to whether yields can drop much further.
Whether we want to characterize current pricing as a “bond bubble” or not is really just a semantic debate – “bubbles” are usually characterized by euphoric purchasing –
as no matter how one looks at it, bonds are expensive.
other income.
2 The blended Real Return Global Balanced Allocation Composite benchmark is comprised of a weighted average of account benchmarks; many of the account benchmarks
consist of MSCI World, Barclays Capital 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.
GMO © 2010
GMO Global Allocation Absolute Return Strategy As of September 30, 2010
Inception: 7/31/01; Benchmark: CPI Plus 5% Index
Performance1
Strategy 5.26 0.97 5.51 5.95 n/a 10.51
2
Benchmark 1.90 4.12 6.25 7.01 n/a 7.40

2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 0.16 8.80 34.20 15.29 13.54 11.01 9.99 -6.61 13.41
Benchmark 1.94 7.60 6.90 8.51 8.61 7.70 9.31 5.16 7.99
Strategy Composition3 Absolute Strategy Weights3

Multi-Strategy Quality 60%
20.0% 21.1% +43.6%
40%
Special
+21.1% +20.1%
Situations
20% +15.2%
4.6%
Currency Hedged
Alpha Only
15.8%
Int'l. Equity 0%
9.4%
Alternative U.S. Equities Int'l. Equities Fixed Income Absolute Return
Asset Opportunity Flexible
0.9% Equities
2.0%
Cash & Cash
Emerging
Equivalents
Markets Risk Profile Since 7/31/014
2.3%
Asset 8.7%
Allocation Bond Emerging
Strategic Strategy
Fixed Income
3.6% Country Debt
1.7%
9.9% Std. Deviation 7.28
Sharpe Ratio 1.29
Drawdown
-10.33
(10/31/07-2/28/09)


The Global Allocation Absolute Return Strategy returned +5.3% in the third quarter.

Rising equity markets globally helped the long-only portion of the strategy as risky assets, generally, moved upward. All of the largest
equity strategies posted strong performance, and they each bested their respective benchmarks. The fixed income portion of the
strategy also delivered positive absolute results. The Multi-Strategy component rose, albeit modestly, as five of its nine underlying
strategies posted positive results.
other income.
2 The CPI Plus 5% Index is an internally maintained benchmark based on the Consumer Price Index (CPI). The CPI is published monthly by the U.S. Government as an
indicator of changes in price levels (or inflation). The CPI + 5% Index is calculated by adding 5% annualized to the return of the CPI Index. The index is internally
blended by GMO and maintained on a monthly basis.
4 Std. Deviation is a measure of the volatility of a portfolio’s 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.
GMO © 2010
GMO Real Return Asset Allocation Strategy As of September 30, 2010

Inception: 12/31/09; Benchmark: CPI Index
Performance1
Strategy 4.73 -8.84 n/a n/a n/a -8.84
2
Benchmark 0.67 0.38 n/a n/a n/a 0.38
Equities3 Fixed Income / Inflation Themes3

Exposure (%) Exposure (%)
Quality 37 Dividend Swaps 24
Emerging 16 Australian Gov't. Bonds 9
International (Hedged) 5 Japanese Inflation 4
S&P 500 -7 New Zealand Gov't. Bonds 2
U.S. Low Quality -8 UK IL Gov't. Bonds -8
S&P Mid-Cap -9 Japanese Gov't. Bonds -17
Russell 2000 -15
19 -30 -15 0 15 30
Net Position
-40 -20 0 20 40
Absolute Return & Currencies3

Exposure (%)
Multi-Strategy 20
Euro 5
U.S. Dollar 5
Korean Won 2
Japanese Yen -5
Australian Dollar -7
-30 -15 0 15 30


The GMO Real Return Asset Allocation Strategy returned +4.7% this quarter, outperforming its benchmark by 4.1%

There were three key drivers of performance for the quarter. First, the strategy had strong performance from its dividend swaps
position, which responded well to the global equity rally. The swaps trade relates to the future prospects for dividends from members
of the EuroStoxx 50 index. The apparent firming up of core economies in Europe this quarter translated into more confidence that
the dividend-paying ability of firms is strengthening. The second key driver of performance was the Quality vs. Junk trade, which
added over 250 basis points to performance. The third contributor was the long position in emerging market equities, which also
benefited from the global equity rally.
other income.
2 The Consumer Price Index (CPI) is published monthly by the U.S. Government as an indicator of changes in price levels (or inflation).
GMO © 2010
GMO Global All Country Equity Allocation Strategy As of September 30, 2010
Performance1
Strategy 14.92 2.89 8.22 3.54 7.19 8.86
2
Benchmark 14.23 3.64 8.46 2.12 1.70 6.72
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 2.90 -0.27 -5.69 38.75 17.62 12.51 18.87 11.12 -31.41 24.19
Benchmark -11.45 -13.50 -19.11 33.76 14.86 9.95 20.34 10.38 -41.82 34.45
Strategy Composition3 (MSCI AC World Index)
Alpha Only U.S. Core

Emerging 1.2% 4.1% Emerging Markets
Markets
16.8% 13.8%
U.S. Equities
Flexible 41.8%
Equities
1.2%
Quality
35.8%
International
Core Equity
23.8%
Developed
Int'l. Equities
International
International
44.4%
Intrinsic Value
Growth 8.5%
8.6%

2%
+1.2% Alpha 3.46 0.00
0% Beta 0.81 1.00
2
-2% R 0.90 1.00
-1.9% -2.3% Sharpe Ratio 0.45 0.20
-4%
U.S. Equities Developed Int'l. Emerging Absolute Return
Equities Equities


The Global All Country Equity Allocation Strategy returned +14.9% for the quarter, besting its benchmark by 0.7%. Asset allocation
decisions added 0.2%, while implementation added 0.5%.

The sole contributor to asset allocation outperformance was the overweight to emerging market equities. This asset class
outperformed global developed markets, and our strategy maintained a roughly 3% to 4% overweight during the quarter. Our rather
small allocation to the Alpha Only and Short Duration Collateral Bond Strategies as bond proxies would normally not have any effect,
but in rapidly rising equity markets this quarter, these holdings acted as a modest drag on performance.

Strong outperformance by many of the underlying strategies was the main driver of return this quarter as seven of the nine underlying
strategies beat their respective benchmarks. Of note, the Emerging Markets Strategy added 2.4% above its benchmark, as the
underweight to China was a net additive this quarter as China continues to lag other emerging markets. Another large holding, the
International Core Equity Strategy, added 1.1%. The largest weighting continues to be the Quality Strategy, and it posted positive,
albeit modest, outperformance.
other income.
2 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 AC World 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.
GMO © 2010
GMO Global Developed Equity Allocation Strategy As of September 30, 2010
Performance1
Strategy 14.37 2.07 7.23 2.16 6.43 9.10
2
Benchmark 13.77 2.59 6.77 1.29 0.75 6.74
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 0.73 -2.54 -4.23 38.64 17.36 12.26 20.22 9.69 -33.19 20.55
Benchmark -12.39 -16.17 -19.42 32.32 13.64 9.42 20.05 9.02 -40.70 29.97
Strategy Composition3 (MSCI World Index)
Emerging
Flexible Markets
Equities 3.2% U.S. Core
1.7% 12.2% U.S. Equities
48.5%
International
Growth
25.0%
Quality International
33.2% Equities
51.5%
International
Intrinsic Value
24.7%

Alpha 3.45 0.00
2%
Beta 0.84 1.00
0% R
2
0.88 1.00
-2% Sharpe Ratio 0.40 0.16
-4% -3.1%
U.S. Equities International Equities


The Global Developed Equity Allocation Strategy returned +14.4% for the quarter, outperforming its benchmark by 0.6%. Our asset
allocation decisions added 0.3% while implementation added 0.3%.

While global markets were up significantly, EAFE and emerging markets outperformed the U.S., so any tilt away from the U.S. would
have been additive. This is exactly what happened this quarter, as the strategy has maintained a longstanding underweight to the U.S.
It is interesting to note that the outperformance of EAFE vis-à-vis the U.S. was due primarily to the declining dollar, as local foreign
markets were up, but were aided significantly by currency moves. In addition, the modest out-of-benchmark allocation to emerging
equity markets was helpful this quarter, as those markets were quite strong.

The key to implementation alpha this quarter was the outperformance of the International Growth Equity Strategy and International
Intrinsic Value Strategy, both of which beat their respective benchmarks. Our largest holding, the Quality Strategy, also beat its
benchmark, albeit modestly.
other income.
2 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 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.
GMO © 2010
GMO International All Country Equity Allocation Strategy As of September 30, 2010
Performance1
Strategy 17.84 5.09 7.65 4.03 9.25 7.93
2
Benchmark 16.62 3.43 7.13 4.08 5.02 5.83
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy -8.89 -4.81 -1.69 48.86 24.06 19.03 25.91 17.39 -40.96 27.77
Benchmark -16.22 -16.47 -12.66 42.77 21.11 16.71 26.94 16.08 -45.26 40.16
Strategy Composition3 (MSCI AC World ex-U.S. Index)
Developed
Emerging Int'l.
Markets
26.6% Emerging Markets 76.4%
International 23.6%
Intrinsic Value
36.0%
Flexible
Equities
1.6%
International
Growth
35.8%

4.0% +3.0% Strategy Benchmark
Alpha 3.14 0.00
2.0%
Beta 0.92 1.00
0.0% 2
R 0.93 1.00
-2.0% Sharpe Ratio 0.32 0.13
-4.0% -3.0%
Developed Int'l. Equities Emerging Equities


The International All Country Equity Allocation Strategy returned +17.8% for the quarter, outperforming its benchmark by a healthy
1.2%. Asset allocation added 0.3% while implementation added 0.9%

It was the relatively large overweight to emerging market equities that drove most of the asset allocation alpha, as emerging markets
outperformed developed markets. The strategy maintained a relatively neutral balance between growth and value, and this had no
effect on asset allocation alpha, as EAFE Value and EAFE Growth indices were in line with each other.

Last quarter, it was the International Intrinsic Value Strategy that substantially beat its respective benchmark, and this quarter it was the
International Growth Equity Strategy and Emerging Markets Strategy that led the way, outperforming their benchmarks by 1.3% and
2.5%, respectively.
other income.
2 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 AC World ex-U.S. 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.
GMO © 2010
GMO International Developed Equity Allocation Strategy As of September 30, 2010
Performance1
Strategy 17.17 3.20 4.03 2.23 7.73 8.33
2
Benchmark 16.48 1.24 3.15 2.24 3.02 6.22

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy -2.93 -10.80 -0.93 46.65 24.89 15.56 25.50 12.69 -38.39 19.84
Benchmark -14.30 -21.64 -14.83 40.04 21.17 14.41 26.62 11.58 -43.33 32.16
Strategy Composition3 (MSCI EAFE Index)
Emerging
Flexible Markets
Equities 3.0%
1.4%
International
Intrinsic Value
47.6%
International
Growth
47.9%
Risk Profile Since 11/30/914

Strategy Benchmark
Alpha 3.21 0.00
Beta 0.87 1.00
2
R 0.89 1.00


The International Developed Equity Allocation Strategy returned 17.2% for the quarter, outperforming its benchmark by 0.7%. Asset
allocation’s contribution was minimal this quarter, as virtually all of the outperformance came from implementation.

The weightings between value and growth exposures in the underlying strategies were essentially neutral, and given the parity
performance of growth and value markets, the net effect was neutral. Our minor allocation to emerging equities contributed positively
to performance, albeit modestly.

Implementation was a brighter story. In particular, the International Growth Equity Strategy beat its benchmark by 1.3%, while the
International Intrinsic Value Strategy was also able to add value.
other income.
2 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 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.
GMO © 2010
GMO U.S. Equity Allocation Strategy As of September 30, 2010

Performance1
Strategy 11.75 0.19 8.99 -0.09 1.58 9.83
2
Benchmark 11.47 4.43 10.66 0.81 -0.16 9.05
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 4.74 -3.17 -15.61 29.99 10.74 3.68 9.93 2.25 -27.87 20.54
Benchmark -8.16 -11.62 -21.76 29.69 11.45 5.53 15.71 5.39 -37.15 27.46
Strategy Composition3 (Russell 3000 Index)
Small/Mid Small Growth

Small/Mid
Cap Value
Cap Growth
0.9%
8.5%
1.0%
Small Value
9.6%
U.S. Core
49.0%
Quality
49.2%
Large Cap
81.9%

+16.3% Strategy Benchmark
20%
Alpha 2.08 0.00
10%
Beta 0.85 1.00
0% R
2
0.92 1.00
-10% -8.6% -7.6% Sharpe Ratio 0.48 0.33
-20%
Large Cap Small Value Small Growth


The U.S. Equity Allocation Strategy finished the third quarter with a return of +11.8%, outperforming its benchmark by 0.3%. Asset
allocation had a negligible effect, while the performance of the underlying strategies was the main driver of the outperformance.

There was essentially no difference in performance between small and large cap stocks this quarter, as the S&P 500 and the Russell
2000 returns were largely identical. Therefore, our significant tilt toward large cap had no effect on relative performance.

Within implementation, it was the U.S. Core Equity Strategy that provided the lion’s share of outperformance, as it beat its benchmark
by close to 70 basis points. The other large holding, the Quality Strategy, also beat its benchmark, albeit modestly.
other income.
2 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.
GMO © 2010
GMO Alternative Asset Opportunity Strategy As of September 30, 2010
Inception: 4/30/05; Benchmark: Alternative Asset Opportunity Index
Performance1 Risk Profile Since 4/30/053
Total Return Net of Fees (%) Average Annual Total Return (%) Strategy
3Q YTD One Five Ten Since Std. Deviation 11.95
2010 2010 Year Year Year Inception Sharpe Ratio 0.06
Strategy 6.94 3.11 8.94 0.58 n/a 2.62 Drawdown
Benchmark 2
5.88 0.91 5.45 1.12 n/a 2.80 -37.06
(6/30/08-2/28/09)

2005 2006 2007 2008 2009
Strategy 9.48 2.69 8.58 -26.28 23.95
Benchmark 8.76 3.95 11.00 -16.77 10.18
Current Exposure4
Energy Futures Position Meats Position

Natural Gas Short Live Cattle Long
Crude Oil Short Lean Hogs Long
Heating Oil Short Grains Position
Metals Position Soybean Long
Silver Long Soybean Meal Long
Gold Long Soybean Oil Long
Softs Position Corn Long
Coffee Long Wheat Long
Cocoa Short
Cotton Long
Sugar Long


The Alternative Asset Opportunity Strategy returned +6.9% in the third quarter, outperforming its benchmark, the Alternative Asset
Opportunity index (50% Dow Jones-UBS Commodity index/50% J.P. Morgan U.S. 3 Month Cash index), by 1.1%.

The benchmark returned +5.9% in the third quarter: the Dow Jones-UBS Commodity index returned +11.6% and cash returned
+0.2%. Commodity prices mostly rose during the quarter, rising by as much as 49% (sugar) and by as little as 2% (crude oil). Wheat,
cotton, corn, and soy meal contract prices were also among those that rose during the quarter, by 17-34%. Only natural gas and cocoa
contract prices fell during the quarter, by 24% and 6%, respectively.

In performance attribution, overall commodity selection contribution was positive: the strategy benefited from positions in cotton, soy
meal, and natural gas contracts. While unable to offset gains, the strategy was incorrectly positioned in wheat, sugar, and corn
contracts. Exposure to the pool once used for collateral also contributed positively during the quarter.
other income.
2 The GMO Alternative Asset Opportunity index is comprised of 50% Dow Jones-UBS Commodity Index and 50% J.P. Morgan 3 Month Cash Index. The Dow Jones-
UBS Commodity index is a rolling commodities index composed of futures contracts on physical commodities traded on U.S. exchanges. The index serves as a liquid and
diversified benchmark for the commodities’ asset class.
GMO © 2010
GMO Alpha Only Strategy As of September 30, 2010

Performance1
Strategy -0.21 -2.21 -1.01 2.49 5.60 4.39
2
Benchmark 0.04 0.09 0.12 2.48 2.41 3.49

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 19.37 15.10 11.63 2.71 2.64 4.95 3.34 7.74 12.16 -7.93
Benchmark 5.96 4.09 1.70 1.07 1.24 3.00 4.76 4.74 1.80 0.16
Long Exposure3 Short Exposure3

Position Exposure % Position Exposure %
Quality 29.3 S&P 500 -42.2
Int'l. Growth 22.3 EAFE Baskets / Forwards -45.2
Int'l. Intrinsic Value 22.1 -60 -40 -20 0

U.S. Core 15.2
Cash Equivalents 9.5
Emerging Markets 2.0
0 10 20 30
Risk Profile Since 7/31/944

Strategy
Std. Deviation 4.57
Sharpe Ratio 0.38
Drawdown
-11.63
(2/28/09-4/30/10)


The Alpha Only Strategy was down 0.2% for the quarter, underperforming its cash benchmark return of essentially 0%.

Despite the outperformance of many of the underlying strategies, slight mismatches of the equity hedges resulted in a slip in
performance.
other income.
GMO © 2010
GMO Tax-Managed Global Balanced Strategy As of September 30, 2010

Inception: 12/31/02; Benchmark: GMO Tax-Managed Global Balanced Index
Performance1
Strategy 9.19 3.41 6.45 4.31 n/a 8.20
2
Benchmark 10.09 5.51 8.14 3.61 n/a 6.79
2003 2004 2005 2006 2007 2008 2009
Strategy 23.15 12.73 9.91 12.08 7.16 -14.95 14.29
Benchmark 21.82 10.02 5.91 12.95 7.12 -25.89 23.90
Strategy Composition3 (GMO Tax-Managed Global Balanced Index)
Multi-Strategy
9.1%
Tax-Managed U.S. Equities U.S. Equities
Absolute Return 23.5% 25.1%
6.0%
Fixed Income
40.0%
Municipal
Bonds
28.2%
International
Equities International
22.4%
Equities
Emerging Markets 26.7%
Emerging
Equities 8.3%
10.9%

+15.1% Strategy Benchmark
20%
10%
Alpha 3.99 0.00
+2.7%
0% Beta 0.69 1.00
2
-10% -1.6% R 0.86 1.00
-4.3%
-20% -11.8% Sharpe Ratio 0.93 0.45
U.S. Equities Int'l. Equities Emerging Fixed Absolute
Markets Income Return


The Tax-Managed Global Balanced Strategy added 9.2% over the third quarter, while the blended benchmark increased 10.1%. Global
equity markets recovered from their second quarter declines in July, receded in August, and rebounded in September. Encouraging
commitment to action by the Fed helped propel markets upwards, while the strengthening of other major currencies relative to the
U.S. dollar added positively to returns from international investments. Emerging equities posted the quarter’s strongest returns,
followed by international developed equities and U.S. equities. Municipal bonds posted a very moderate increase for the quarter.

Within the portfolio, asset allocation detracted from relative returns, while implementation contributed positively. The dominant
factor in the portfolio’s negative results from asset allocation was the portfolio’s allocation to alternative assets, which detracted sharply
from results during a double-digit quarter for equities. However the rationale behind the allocation remains solid as equity markets
continue to rise above fair value. Implementation added value moderately across global equities. The municipal bond portfolio
performed on par with the index.
other income.
2 The blended Tax-Managed Global Balanced Allocation Composite benchmark is comprised of two components (60% MSCI AC World and 40% Barclays Capital Muni 7
Year Index). The index is internally blended by GMO and maintained on a monthly basis using the two underlying indices which are calculated by each respective
provider MSCI and Barclays Capital.
GMO © 2010
GMO Aggressive Long/Short Strategy As of September 30, 2010

Strategy 3.22 1.58 3.51 0.04 5.91 5.91 Drawdown
Benchmark 2
0.04 0.09 0.12 2.48 2.41 2.41 -15.48
(9/30/01-11/30/01)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 22.20 17.15 25.92 -5.61 1.07 3.56 -1.90 -5.37 14.26 -7.47
Benchmark 1.57 4.09 1.70 1.07 1.24 3.00 4.76 4.74 1.80 0.16
Current Profiles4 Sector Exposure4

Long Short Sector Net Weight (%)
% Long/Short 105 % 78 % Consumer Discretionary 3.5
P/E - Excl Neg Earnings Hist 1 Yr Wtd Med 16.4 x 19.3 x Consumer Staples 5.4
% Negative Earnings 8.1 % 9.1 % Energy -1.9
Financials -4.7
Health Care 9.4
Industrials -0.4
Information Technology 9.1
Materials 4.8
Telecom. Services 1.3
Utilities -1.0
Unassigned 1.1
-10 -5 0 5 10


GMO’s Aggressive Long/Short Strategy returned +3.2% in the third quarter.

Positive returns were generated in each of our major investment categories: quantitative, special situations, fundamental value, and top
down quality allocation.

With equity markets up substantially for the quarter, we have started to sell down some of our fundamental value holdings, which have
become less attractive from a value perspective.

The pick-up in M&A activity has given us the opportunity to selectively add new positions in our special situations portfolio.

Additionally, during the quarter we launched a new strategy that sells volatility (by the writing of put and call options) on individual
equities where we believe the market is paying too much for protection. It, too, added value for the period, albeit off of a small but
growing capital base.
other income.
The performance information above is supplemental to the GIPS® compliant presentation that was made available on GMO’s website in April of 2010. Exposure
information is not normalized and shown as a percent of total net assets.
GMO © 2010
GMO Tactical Opportunities Strategy As of September 30, 2010

2010 2010 Year Year Year Inception Sharpe Ratio -0.45
Strategy -4.60 -16.86 -14.32 -6.15 n/a -7.76 Drawdown
Benchmark 2
0.04 0.09 0.12 2.48 n/a 2.48 -54.17
(11/30/08-4/30/10)
2004 2005 2006 2007 2008 2009
Strategy -7.57 -13.24 -1.65 17.87 36.52 -41.61
Benchmark 0.44 3.00 4.76 4.74 1.80 0.16

Long Short Sector Net Weight Long Short
P/E - Ex Neg Earn Hist 1 Yr Wtd Med 15.7 x 20.4 x Consumer Discretionary -12.0 3.6 % 15.6 %
% Negative Earnings 0.7 % 47.4 % Consumer Staples 37.1 37.8 0.7
Price/Book - Hist 1 Yr Wtd Avg 3.0 x 1.7 x Energy -1.4 12.2 13.6
Dividend Yield - Hist 1 Yr Wtd Avg 2.3 % 1.1 % Financials -42.1 0.0 42.1
Return on Equity - Hist 1 Yr Med 23.3 % 4.7 % Health Care 25.9 37.3 11.4
Market Cap - Weighted Median $Bil $134.9 $3.7 Industrials -17.8 2.5 20.3
Debt/Equity – Wtd Med 0.6 x 1.3 x Information Technology 23.7 38.1 14.4
% Long/Short 139 % 140 % Materials -11.4 0.0 11.4
Regional Weights4 Utilities -2.5 0.0 2.5
Region Net Weight Unassigned 6.5 6.6 0.1
United States -2.6 -60 -30 0 30 60
Non-United States 1.6
-4 -2 0 2 4


The Tactical Opportunities Strategy generated losses of 4.6% in the third quarter of 2010.

Positive absolute returns were generated in the high quality long portfolio, but these returns were not enough to offset the
performance in the short portfolio. Short positions in low beta and high volatility sectors – especially Industrials, Materials, and
Financials – were a drag on performance as the risk trade returned to the table.

The significant long bet in mega cap stocks and short bet in mid cap stocks were both disappointing for the quarter. Two of the three
largest industrial sector bets – Consumer Staples and Health Care – had a negative impact. The third leg of that stool, Information
Technology, was positive as several high quality technology names rebounded. This group, however, remains negative for the year.

The portfolio’s average net exposure for the quarter was 1% net long.
other income.
GMO © 2010
GMO Emerging Country Debt Long/Short Strategy As of September 30, 2010
Inception: 3/31/96; Benchmark: J.P. Morgan U.S. 3 Month Cash Index
Strategy 6.15 12.94 17.47 6.13 9.92 11.76 Drawdown
Benchmark 2
0.20 0.36 0.46 3.56 3.17 4.02 -51.97
(4/30/98-9/30/98)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy 37.28 17.37 18.09 13.13 11.46 8.13 12.23 5.51 -26.52 37.20
Benchmark 6.81 4.94 2.01 1.31 1.48 3.37 5.25 5.70 4.12 1.45
Characteristics4 Regional Weights4

EMBIG Beta 0.5 Underweight/Overweight
Modified Duration 2.3 Against Benchmark (%)
Spread Duration 3.8 Yrs. Asia 4.0
CEEMEA* 13.6
Latin America 17.9
United States 16.4
Developed -1.2
-20 -10 0 10 20
* Central Eastern Europe, Middle East, and Africa


The Emerging Country Debt Long/Short Strategy gained 6.2% in the third quarter of 2010, outperforming its benchmark, the J.P.
Morgan 3 Month Cash index, by 6.0%. The strategy invests in countries in the J.P. Morgan Emerging Markets Bond index (EMBIG),
which returned 8.3% for the quarter.

The portfolio has a beta of 0.4 to the credit spread risk of the J.P. Morgan EMBIG. Its interest rate duration was low, so it did not
benefit from the 44-basis-point drop in U.S. interest rates. On the other hand, the portfolio did benefit from the fall in spreads for the
asset class, from 359 basis points to 305 basis points.

The strategy targets absolute return by taking long and short positions in the same countries. Large holdings in Argentina, Colombia,
and Venezuela contributed positively to returns, as the wide spreads in those countries narrowed with improving fundamentals.
other income.
2 The J.P. Morgan U.S. 3 Month Cash Index is an independently published and maintained index. The index measures the total return performance of a constant-maturity
euro-currency deposit, the only short-term securities consistent across all markets in terms of liquidity, maturity, and credit quality. The J.P. Morgan U.S. 3 Month Cash
Index is calculated daily for three-month deposits in the United States. It is maintained and calculated by J.P. Morgan and is not actively managed.
GMO © 2010
GMO Currency Hedge Strategy As of September 30, 2010
Strategy 4.01 2.09 9.70 -2.34 n/a 0.26 Drawdown
Benchmark 2
0.20 0.36 0.46 3.56 n/a 3.09 -41.19
(6/30/07-12/31/08)

2003 2004 2005 2006 2007 2008 2009
Strategy 5.70 2.93 8.94 13.60 -15.57 -28.70 23.08
Benchmark 0.50 1.48 3.37 5.25 5.70 4.12 1.45
Performance Attribution4 Country Weights4

Net Contribution (%) Net Weight
North America -1.8 North America -77.7
Asia Pacific 11.1 Asia Pacific 82.0
Cash Mgmt/Fees/Other -0.8
-120 -80 -40 0 40 80 120
-20 -10 0 10 20


In the third quarter of 2010, the Currency Hedge Strategy returned +4.0%, compared to its benchmark, the J.P. Morgan 3 Month Cash
index, which gained 0.2%.

The U.S. dollar declined broadly in the third quarter, with much of the fall coming subsequent to indications in September that the
U.S. Federal Reserve would re-engage its quantitative easing policy. Swedish krona and Australian dollar were the two biggest gainers,
rising 15.6% and 14.6%, respectively. Sweden was one of only three developed countries to raise policy interest rates, increasing them
by 50 basis points to 0.75%. In Australia, surging commodity prices added to the Australian dollar’s allure, where the 4.5% policy rate
offers a welcomed carry relative to commodities themselves.

The euro witnessed a fairly substantial reversal of fortunes, rising by 11.5%. In the prior quarter, the euro declined by 9.5% amidst
worries over the health of weaker euro members. During the third quarter, the much anticipated release of the bank stress tests served
to calm market fears, even as many market participants flagged the flawed design of the tests themselves. In what must be good news
for the Swiss National Bank, which had earlier accumulated substantial euro holdings in trying to drive the Swiss franc weaker, the euro
rose by nearly 1% relative to the Swiss franc.

In September, the Bank of Japan surprised the market when it engaged in its first yen-weakening, unilateral intervention since 2004.
Although this limited September’s rise to only 0.5%, the yen was still up 5.9% for the quarter.

A long position in the Australian dollar was the strategy’s largest contributor, followed by longs in the yen, Norwegian krone, and the
New Zealand dollar. The shorts in Canadian dollars, Swiss francs, the euro, sterling, and Swedish krona detracted.
other income.
GMO © 2010
GMO Fixed Income Hedge Strategy As of September 30, 2010
Strategy 2.41 8.77 10.86 -5.90 n/a -5.97 Drawdown
Benchmark 2
0.20 0.36 0.46 3.56 n/a 3.56 -48.54
(5/31/06-1/31/09)

2005 2006 2007 2008 2009
Strategy 1.45 -4.61 -23.39 -25.45 21.63
Benchmark 1.32 5.25 5.70 4.12 1.45
Performance Attribution4 Country Weights4

Strategy Net Contribution (%) Net Weight (%)
Cross-Market 1.1 Europe -16.7
Rate Anticipation -0.3 North America 57.0
Yield Curve 0.0 Asia Pacific -26.4
Volatility 0.0
-100 -50 0 50 100
Opportunistic 0.1
Cash Mgmt./ABS/Fees/Other 1.3
-2 -1 0 1 2


The Fixed Income Hedge Strategy returned +2.4% in the third quarter, outperforming its benchmark, the J.P. Morgan U.S. 3 Month
Cash index, which returned +0.2%. Cross-market strategies led gains for a second consecutive quarter.

Government bond markets rallied in the third quarter, particularly when most world equity markets declined sharply mid-quarter. In
local currency bond index terms, gains were the highest in the U.K., +3.7% and the lowest in Switzerland, +0.9%. The +1.9% index
total return for the euro area masked a wide range of outcomes among EUR currency participants, only the largest of which (Germany,
Italy, France, Spain, Netherlands, and Belgium) pertain. Core euro zone debt markets, including France and Germany, rose during the
quarter, by 2% to 3%. Meanwhile, Spanish bonds rose by 4.3%, and Greek bonds rose by 4.0%, outperforming core euro zone debt
markets. Irish bonds, however, provided the euro zone’s worst returns, falling by 4.3% during the quarter. Ireland’s debt crisis is the
latest to rattle Europe, with officials attempting to stave off an emergency bailout by promising to pump billions into its banks that
were hardest-hit. Outside of the euro zone, U.S. (+2.8%), Canadian (+2.7%), Swedish (+1.3%), Japanese (+1.1%), and Australian
(+1.1%) bond markets reported gains during the month. Further, global yield curves flattened across the board: yield curves in Canada
(-48 basis points) and the euro zone (-42 basis points) flattened the most, and the U.S. (-7 basis points) flattened the least.

In central bank news, Sweden’s Riksbank had its first interest-rate increase since the “emergency” level was established in summer
2009, raising policy rates in two 25-basis-point increments to 0.75%. Further, the Bank of Canada also raised interest rates in two 25-
basis-point increments to end the quarter at 1.0%.

Cross-market strategies contributed positively to performance during the quarter, thanks to long positions in U.S., Canadian, and euro
zone bond markets. Losses on short Swiss, U.K., and Australian positions were unable to fully offset gains.

Having run its course, the strategy removed almost all exposure to the “long the front-end via options” strategy in July. As yield
curves flattened, the risk/return profile of this position became less attractive.

Where opportunistic screens perceived a dislocation, the strategy added a position in the U.S. yield curve early in the quarter; as the
relationship began to mean revert by mid-quarter, this position contributed positively to performance. The strategy’s concentrated
position in Treasury STRIPS vs. LIBOR detracted, as the spread between Treasuries and LIBOR widened.
other income.
GMO © 2010
GMO Emerging Currency Hedge Strategy As of September 30, 2010
Strategy 8.22 8.49 13.69 n/a n/a 4.43 Drawdown
Benchmark 2
0.20 0.36 0.46 n/a n/a 3.47 -31.61
(7/31/08-12/31/08)

2006 2007 2008 2009
Strategy 5.13 9.72 -28.32 35.51
Benchmark 4.07 5.70 4.12 1.45


In the third quarter of 2010, the Emerging Currency Hedge Strategy returned +8.2%, while its benchmark, the J.P. Morgan 3 Month
Cash index, gained 0.2%. Positive relative performance resulted both from currency positioning as well as gains from the pool once
used for collateral.

In spot terms, all but one of the emerging currencies rose during the quarter, with the only laggard the Argentine peso at -0.8%.
Including carry, however, even the peso gained with a +1.4% total return. Renewed confidence in the euro subsequent to the bank
stress tests led to a +11.5% quarterly return for the single currency, and even larger gains among the periphery. Czech crown rose by
16.5%, Polish zloty by 16%, Hungarian forint by 14.9%, and Romanian leu by 14.0%. Such gains easily erased the prior quarter’s
losses.

In Asia, the Chinese renminbi rose by 1.3%, its first notable quarterly rise in two years. This led to strength across the region, with 2%
+ gains in Korea, Thailand, Singapore, Philippines, Malaysia, India, and Taiwan. In Latin America, the big winner was Chilean peso,
+12.8%, which followed the upward trajectory of copper prices.

Currency positioning accounted for most of the positive attribution, particularly the long positions across CEEMEA and much of
Asia.
other income.
GMO © 2010
GMO Mean Reversion Strategy As of September 30, 2010

Strategy -2.07 -6.37 0.54 3.76 n/a 9.26 Drawdown
Benchmark 2
0.04 0.09 0.12 2.48 n/a 2.12 -24.40
(2/28/09-9/30/09)
2002 2003 2004 2005 2006 2007 2008 2009
Strategy 9.93 35.76 11.42 6.96 5.63 18.63 18.43 -13.43
Benchmark 1.41 1.07 1.24 3.00 4.76 4.74 1.80 0.16
Fixed Income Exposure4 Equity Exposure4
Position Absolute % Position Absolute %
Aussie 10 Yr. Bonds 10.5 Quality 5
Aussie Linkers 4.0 Emerging Equities 15.5
Opportunistic Debt 3.0 Euro Div Swaps 6.7
Kiwi 10 Yr. Bonds 2.3 Japanese REIT 4.3
Italian Bonds -1.9 Australian Banks -1.4
Spanish Bonds -2.6 Chinese Equities -3.0
U.S. Bonds -3.2 S&P 500 -10.0
Swiss Bonds -4.0 Russell 2000/S&P Midcap -21.7
Euro Sovereign CDS -5.7 Junk -32.4
China Sovereign / Banks -13.7
JPY IR Swap -19.0 -60 -30 0 30 60
50 Yr. GILTS -21.5
Euro Insurance CDS -30.0
-60 -30 0 30 60
Currency Exposure4 Inflation4

Position Absolute % Position Absolute %
Korean Won 9.0 JPY Inflation Swap 40.0
Singapore Dollars 5.0 Correlation 1.0
China Renminbi (Yuan) -4.0
S&P Volatility -4.0
Japanese Yen -10.0
Australian Dollars -12.0 -60 -30 0 30 60
-20 -10 0 10 20


The third quarter of 2010 was a negative one for the Mean Reversion Strategy, which had a return of -2.1%. It was an extremely strong quarter for
global equities, with the +11.3% return of the S&P 500 actually bringing up the rear as EAFE rose 16.5% and MSCI Emerging gained 18.0%. Under
the circumstances, our equity positions did reasonably well, adding 30 basis points in aggregate. Quality kept up with the S&P 500, and while junk
outperformed by a couple of points, this was countered by the performance of emerging equities and the euro equity divergence trade, which won as
investors differentiated between core and peripheral Europe.

Other winners included the dividend swaps, which added around 1% as that market came back from extremely depressed levels and our nominal
bond and front end positions, which benefited as Australian and New Zealand bonds outperformed and euro area peripherals widened. The bonds
added around 0.2% and front ends 0.3%. Performance was also helped by the correlation and volatility positions that were put on in the Spring,
adding 20 basis points.

The biggest loser was currency, which cost 2.2% as both of the strategy’s big shorts did very well. The Australian dollar rode renewed risk appetite
higher, while the yen rose given smaller expected differentials between Japan’s rock-bottom rates and other low rates around the world. The IL Gilt
position detracted around 1.3% as rates there tightened up to the 50-basis-point level, from the heady mid 60 levels earlier in the year. We also lost a
bit as we traded out of our STRIPS/swaps trade, subtracting 20 basis points. Other positions were close to a wash.

We made several shifts to the portfolio in the quarter. We traded out of our remaining position in STRIPS/swaps as spreads moved back to levels
that made it less compelling. We closed out the bulk of our euro equity divergence trade as investors woke up to the problems that we had been
looking at for a couple of years. Finally, we increased our bets against both Aussie dollars and yen as the markets moved farther from our ideas of fair
value.
other income.
GMO © 2010
GMO Systematic Global Macro Strategy As of September 30, 2010

Strategy -0.50 8.21 8.20 8.04 n/a 8.31 Drawdown
Benchmark 2
0.04 0.09 0.12 2.48 n/a 2.12 -15.44
(6/30/08-9/30/08)
2002 2003 2004 2005 2006 2007 2008 2009
Strategy 19.75 3.79 1.33 4.63 8.39 15.06 -3.88 15.28
Benchmark 1.26 1.07 1.24 3.00 4.76 4.74 1.80 0.16
Equity Market Selection4 Bond Market Selection4
Country Net Weight (%) Country Net Weight (%)
Netherlands 24.0 United States 20.0
Singapore 15.0 UK 20.0
Korea 15.0 Asset Backed 16.0
Taiwan 11.0 Japan -6.0
Sweden 9.0 Net Bond Markets
50.0
Hong Kong 5.0
UK 5.0 -60 -30 0 30 60
Germany 4.0
Canada -1.0
Italy -5.0 Commodity Markets4
South Africa -9.0 Commodity Net Weight (%)
Spain -10.0 Cattle 9.6
Australia -18.0 Soybeans 6.0
Japan -23.0 Coffee 3.2
Net Equity Markets 22.0 Silver 2.0
-40 -20 0 20 40 Cotton 1.6
Sugar 1.2
Currency Selection4 Hogs 0.4
Heating oil -0.4
Currency Net Weight (%) Crude Oil -0.4
Japanese Yen 26.0 Cocoa -2.8
United States 6.0 Natural Gas -4.0
Swedish Krona -4.0 Net Commodities 16.4
New Zealand Dollar -4.0
Euro -24.0 -40 -20 0 20 40
Net Cash -88.4
-100 -50 0 50 100


The Systematic Global Macro Strategy fell 0.5% over the third quarter. Positive performance in August (+2.9%) and September (+0.1%) almost recouped July’s negative
return (-3.4%). For the quarter, gains from asset allocation and commodity selection were more than offset by losses from currency selection, while positive performance
from bond market selection was offset by equity market selection.

As investors’ appetite for risk returned in July, global equity markets rose by 5.7%, according to the MSCI World index in local currency terms; the strategy returned -
3.4%. The portfolio was positioned for U.S. dollar strength, but lost value due to its weakness against the Swedish krona, euro, and Swiss franc, held short. Gains from
our net long equity allocation were offset by market selection, with short positions in Italy and Spain outperforming long positions in the Netherlands and Sweden.

In August, the strategy added 2.9% while global equity markets fell 3.4% as the Federal Reserve took a much more cautious view about the health of the U.S. economy.
Despite holding a meaningful net long equity allocation, the strategy gained value from successful market selection. As the strategy reduced its long U.S. dollar exposure,
the significant long Japanese yen/short euro position boosted returns. Gains from commodity selection were due to a small short position in natural gas, down 23%, and
long positions in cattle, gold, and silver. Equity market selection added value with long positions in Singapore and Korea outperforming short positions in Japan and
Italy, which were hit hardest in August. Falling bond yields meant our net long bond allocation contributed positive performance, as did bond market selection, with a
long position in U.K. gilt futures outperforming a short position in Japan.

In September the strategy’s 22% net long equity allocation added value as global equities rebounded 7.0%. Additional gains were made from commodity positions, with
long positions in soybeans, cotton, and sugar adding value as prices rose. However, these gains were mostly offset by negative performance from currency positions,
particularly the strategy’s long Japanese yen/short euro position. While the short euro position helps hedge the risk associated with the net long equity allocation, this
position had another factor work against it: the Japanese government intervened in the currency markets for the first time in six years to weaken the yen.
other income.
GMO © 2010
GMO Multi-Strategy As of September 30, 2010

Performance1
Strategy 0.59 -0.10 3.58 2.51 n/a 3.23
2
Benchmark 0.04 0.09 0.12 2.48 n/a 2.15

2002 2003 2004 2005 2006 2007 2008 2009
Strategy 0.82 5.07 4.53 2.30 4.11 4.43 10.67 -5.51
Benchmark 0.25 1.07 1.24 3.00 4.76 4.74 1.80 0.16
Risk Profile Since 10/31/023 Strategy Composition4

Strategy Emerging
Std. Deviation 5.75 Currency Hedge
Fixed 5.4% Mean Reversion
Sharpe Ratio 0.51 Income Hedge 15.4%
8.7%
Drawdown
-11.02
(2/28/09-9/30/09) Currency Hedge
5.5%
Completion
15.7%
Systematic
Global Macro
13.6%
Aggressive
Emerging Country
Long/Short
Debt L.P.
11.1%
9.9%
Tactical
Opportunities
14.7%


The Multi-Strategy portfolio rose 0.6% for the third quarter, ahead of its cash benchmark.

Strong performance by the Emerging Country Debt Long/Short Strategy helped immensely. Large holdings in Argentina, Colombia,
and Venezuela contributed positively to returns, as the wide spreads in those countries narrowed with improving fundamentals. The
Emerging Currency Hedge Strategy also did well. A long position in the Australian dollar was the strategy’s largest contributor,
followed by longs in the yen, Norwegian krone, and the New Zealand dollar.

The Tactical Opportunities Strategy, which has a long quality/short junk position, detracted from performance this quarter, as the
short position in junk was hurt by the strong risk rally in September. While the long quality positions participated in this rally as well,
they did so to a lesser degree.
other income.
GMO © 2010
GMO Tax-Managed Absolute Return Strategy As of September 30, 2010

Strategy 1.73 -1.61 1.07 -3.72 n/a -0.85 Drawdown
Benchmark 2
0.04 0.09 0.12 2.48 n/a 2.22 -24.18
(11/30/08-4/30/10)

2001 2002 2003 2004 2005 2006 2007 2008 2009
Strategy -3.64 16.99 -8.37 1.96 5.76 -1.28 -4.53 10.31 -19.06
Benchmark 2.66 1.70 1.07 1.24 3.00 4.76 4.74 1.80 0.16

Long Short Sector Net Weight (%)
Equity Exposure 109 % 108 % Consumer Discretionary 17.0
P/E - Excl Neg Earnings Hist 1 Yr Wtd Med 15.7 x 20.4 x Consumer Staples 7.5
% Negative Earnings 1.7 % 23.7 % Health Care 2.8
Market Cap - Weighted Median $Bil $9.9 $2.4 Industrials 2.0
Materials -1.2
Information Technology -2.3
Energy -3.1
Telecom. Services -5.0
Utilities -6.0
Financials -10.5
-20 -10 0 10 20


The Tax-Managed Absolute Return Strategy added 1.7% over the third quarter of 2010. The long portfolio, which invests in stocks
that are attractive based on either valuation, momentum, or a combination of these measures, advanced 13.3%. The short portfolio,
which invests in stocks that are unattractive using these same measures, advanced 11.6%.

Global equity markets recovered from their second quarter declines in July, receded in August, and rebounded in September. While
the stocks in the long and short portfolios performed comparably to each other in July and August, the long portfolio posted a
moderately stronger showing in September. The long portfolio favored Consumer Discretionary stocks, especially retailers, which
participated strongly in September’s advance. While the short portfolio’s Information Technology positions generally outpaced the
market, these advances were offset by selections within Materials and Health Care, which did not participate in the market rise.
other income.
GMO © 2010
Benchmarks and Indexes

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

3 Month LIBOR London Inter-Bank Offered Rate London Inter-Bank Offered Rate for a 3 month deposit in U.S. dollars during a given month
Barclays Capital U.S. Aggregate Barclays Capital Well-known, independently maintained and published index comprised of U.S. fixed rate debt issues,
Index having a maturity of at least one year, rated investment grade or higher by Moody’s Investors Service,
Standard & Poor’s Corporation or Fitch Investors Service.
Barclays Capital U.S. Treasury Barclays Capital Independently maintained and published index comprised of Inflation-Protection Securities issued by
Inflation Notes Index the U.S. Treasury.
Citigroup 3 Month T-Bill Index Citigroup Independently maintained and published short-term bill index.
Citigroup 3 Month T-Bill ++ Citigroup The Citigroup 3 Mo. TBill ++ Index is comprised of 3 Month LIBOR from 5/31/2003 to
Index 8/31/2009, and Citigroup 3 Mo. TBill Index thereafter.
CPI Index U.S. Government/GMO The CPI (Consumer Price Index) is published monthly by the U.S. Government as an indicator of
changes in price levels (or inflation).
CPI Plus 5% Index U.S. Government/GMO An internally maintained benchmark based on the Consumer Price Index (CPI). The CPI is
published monthly by the U.S. Government as an indicator of changes in price levels (or inflation).
The CPI Plus 5% Index is calculated by adding 5% annualized to the return of the CPI Index. The
index is internally blended by GMO and maintained on a monthly basis.
GMO Alternative Asset GMO The GMO Alternative Asset Opportunity index is comprised of 50% Dow Jones-UBS Commodity
Opportunity Index Index and 50% J.P. Morgan 3 Month Cash Index. The Dow Jones-UBS Commodity index is a
rolling commodities index composed of futures contracts on physical commodities traded on U.S.
exchanges. The index serves as a liquid and diversified benchmark for the commodities’ asset class.
GMO Blended Global All GMO The blended Global All Country Equity Allocation Composite benchmark is comprised of a weighted
Country Equity Allocation average of account benchmarks; many of the account benchmarks consist of MSCI AC World or
Index 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.
GMO Blended Global GMO The blended Global Balanced Asset Allocation Composite benchmark is comprised of a weighted
Balanced Asset Allocation average of account benchmarks; many of the account benchmarks consist of S&P 500, MSCI ACWI
Index and Barclays Capital 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.
GMO Blended Global GMO The blended Global Developed Equity Allocation Composite benchmark is comprised of a weighted
Developed Equity Allocation average of account benchmarks; many of the account benchmarks consist of MSCI World or some
Index like proxy for each market exposure they have. For each underlying account benchmark, the
GMO Blended International GMO The blended International All Country Equity Allocation Composite benchmark is comprised of a
All Country Equity Allocation weighted average of account benchmarks; many of the account benchmarks consist of MSCI AC
Index World ex-U.S. 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.
GMO Blended International GMO The blended International Developed Equity Allocation Composite benchmark is comprised of a
Developed Equity Allocation weighted average of account benchmarks; many of the account benchmarks consist of MSCI EAFE
Index or some like proxy for each market exposure they have. For each underlying account benchmark, the
GMO Blended Real Return GMO The blended Real Return Global Balanced Asset Allocation Composite benchmark is comprised of a
Global Balanced Asset weighted average of account benchmarks; many of the account benchmarks consist of MSCI World,
Allocation Index Barclays Capital 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.
GMO Blended Tax-Managed GMO The blended Tax-Managed Global Balanced Allocation Composite benchmark is comprised of two
Global Balanced Index components (60% MSCI AC World, 40% Barclays Capital Muni 7 Year (6-8) Index). The index is
internally blended by GMO and maintained on a monthly basis using the two underlying indices
which are calculated by each respective provider MSCI, and Barclays Capital.
GMO Blended U.S. Equity GMO The blended U.S. Equity Allocation Composite benchmark is comprised of a weighted average of
Allocation Index 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.
J.P. Morgan Emerging Markets J.P. Morgan Independently maintained and published index composed of debt securities of countries, which
Bond Index Global includes Brady bonds, sovereign debt, local debt and Eurodollar debt, all of which are U.S. dollar
denominated.
J.P. Morgan Emerging Markets GMO The J.P. Morgan Emerging Markets Bond Index Global + is comprised of the J.P. Morgan EMBI
Bond Index Global + prior to 8/31/1995, J.P. Morgan EMBI + through 12/31/1999, and the J.P. Morgan EMBI Global
thereafter.
Full Name Sponsor or Publisher Description

J.P. Morgan Global J.P. Morgan Independently maintained and published index composed of government bonds of developed
Government Bond Index countries, including the U.S., with maturities of one year or more.
J.P. Morgan Government Bond J.P. Morgan The J.P. Morgan GBI-EM Index is the first comprehensive, global local emerging markets index, and
Index-Emerging Markets GBI- consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which
EM Diversified Index international investors can gain exposure.
J.P. Morgan Non-U.S. J.P. Morgan Independently maintained and published index composed of non-U.S. government bonds with
Government Bond Index maturities of one year or more.
J.P. Morgan Non-U.S. J.P. Morgan The J.P. Morgan Non-U.S. Government Bond Index (hedged) (ex-Japan) + is comprised of the J.P.
Government Bond Index Morgan Non-U.S. Government Bond Index (hedged) prior to 12/31/2003, and the J.P. Morgan
(hedged) (ex-Japan) + Non-U.S. Government Bond Index (hedged) (ex-Japan) thereafter.
J.P. Morgan U.S. 3 Month Cash J.P. Morgan Independently maintained and published index that measures the total return performance of a
Index constant-maturity euro-currency deposit, the only short-term securities consistent across all markets
in terms of liquidity, maturity, and credit quality. The J.P. Morgan U.S. 3 Month Cash Index is
calculated daily for three-month deposits in the United States.
J.P. Morgan U.S. 3 Month Cash J.P. Morgan The J.P. Morgan U.S. 3 Month Cash + Index is comprised of the Barclays Capital U.S. Treasury 1-3
+ Index Year Index from 5/31/2006 to 9/29/2006 and the J.P. Morgan U.S. 3 Month Cash Index thereafter.
MSCI EAFE Growth Index MSCI The MSCI EAFE (Europe, Australasia, and Far East) Growth Index is a well-known, independently
maintained and published large capitalization international stock index comprised of large/mid
capitalization stocks that have a growth style. Large/mid cap stocks encompass approximately 85%
of each market’s free float-adjusted market capitalization. The style is determined using a multi-factor
approach based on eight historical and forward-looking characteristics. MSCI Standard Index Series,
MSCI EAFE Index MSCI The MSCI EAFE Index (Europe, Australasia, and Far East), is a well-known, independently
maintained and published large capitalization international stock index. MSCI Standard Index Series,
MSCI EAFE (Hedged) Index MSCI The MSCI EAFE Index (Europe, Australasia, and Far East) (Hedged) is a well-known, independently
maintained and published large capitalization international stock index that is currency-hedged into
U.S. dollars. MSCI Standard Index Series.
MSCI EAFE Small Cap + MSCI The MSCI EAFE Small Cap + Index is comprised of the S&P Developed ex-U.S. Small Cap Index
Index from 6/30/1989 to 5/30/2008 and the MSCI EAFE Small Cap Index (MSCI Standard Index Series,
net of withholding tax) thereafter.
MSCI EAFE Value Index MSCI The MSCI EAFE (Europe, Australasia, and Far East) Value Index is a well-known, independently
maintained and published large capitalization international stock index comprised of large/mid
capitalization stocks that have a value style. Large/mid cap stocks encompass approximately 85% of
each market’s free float-adjusted market capitalization. The style is determined using a multi-factor
approach based on eight historical and forward-looking characteristics. MSCI Standard Index Series,
MSCI Japan IMI ++ Index MSCI The MSCI Japan IMI ++ Index is comprised of the MSCI Japan (Standard Index Series) from
12/31/2005 to 6/30/2008 and the MSCI Japan (Investable Market Index Series) thereafter.
MSCI U.S. REIT Index Morgan Stanley & Co., Inc. Well-known, independently maintained and published index of equity securities issued by REITs.
MSCI World Growth Index MSCI Well-known, independently maintained and published global developed markets equity index
comprised of large/mid capitalization stocks that have a growth style. Large/mid cap stocks
encompass approximately 85% of each market’s free float-adjusted market capitalization. The style is
determined using a multi-factor approach based on eight historical and forward-looking
characteristics. MSCI Standard Index Series, net of withholding tax.
MSCI World Index MSCI Well-known, independently maintained and published global developed markets equity index. MSCI
Russell 1000 Growth Index Russell Investments Independently maintained and published index which measures the performance of those stocks
included in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000 Value Index Russell Investments Independently maintained and published index which measures the performance of those stocks
included in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth
values.
Russell 2500 Growth Index Russell Investments Independently maintained and published index which measures the performance of those stocks
included in the Russell 2500 Index with higher price-to-book ratios and higher forecasted growth
values.
Russell 2500 Value + Index GMO The Russell 2500 Value + Index is comprised of the Russell 2500 Index from 12/31/1991 to
12/31/1996 and the Russell 2500 Value Index thereafter.
Russell 3000 + Index GMO The Russell 3000 + Index is comprised of the S&P 500 Index from 7/23/1998 to 10/15/2007, and
the Russell 3000 Index thereafter.
S&P 500 Index Standard & Poor’s Corporation Well-known, independently maintained and published U.S. large capitalization stock index.
S&P Developed ex-U.S. Small Standard & Poor’s Corporation The S&P Developed ex-U.S. Small Cap is the small capitalization stock component of the S&P Broad
Cap Index Market Index (BMI). The BMI is a float-weighted index that spans 22 countries and includes the
listed shares of all companies with an available market capitalization (float) of at least $100 million at
the end of May each year. Companies are deleted if their float falls below $75 million. Changes are
effective before the open of the first business day of July. The Small Cap ex-U.S. is defined as those
stocks falling in the bottom 15% of the cumulative available capital in each country.
S&P/IFCI Composite Index Standard & Poor’s Corporation / Independently maintained and published emerging market stock index.
International Finance Corp.
GMO
40 Rowes Wharf ● Boston, Massachusetts 20110
(617) 330-7500
Visit our website at www.gmo.com

GMO - 3Q 2010 Quarterly Update

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GMO - 3Q 2010 Quarterly Update

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Third Quarter 2010

2010 Performance of GMO Strategies and Benchmarks

2010 Performance of GMO Strategies and Benchmarks

2010 Performance of GMO Strategies and Benchmarks

2010 Performance of GMO Strategies and Benchmarks

neighbor trade policies will end up boosting final

intermediate-duration TIPS. In the interim, however,

Cheap on Price/Intrinsic Value High Price Momentum

Consumer Discretionary Financials

Information Technology MSCI U.S. REIT Index

momentum’s modest third quarter outperformance might 22.1%

J.P. Morgan Global The euro witnessed a fairly substantial reversal of

Third Quarter 2010 Currency Spot Returns

Third Quarter 2010 Change in Interest Rates (10Y DM, 5Y EM)

Second Quarter 2010 J.P. Morgan EMBIG Returns by Country

Developed-markets bond positioning was also 4%

GMO U.S. Core Strategy As of September 30, 2010

Risk Profile Since 9/30/854 Sector Weights5

Quarterly Strategy Attribution

GMO Intrinsic Value Strategy As of September 30, 2010

Risk Profile Since 5/31/994 Sector Weights5

Quarterly Strategy Attribution

GMO Quality Strategy As of September 30, 2010

Characteristics4 Risk Profile Since 2/29/045

Quarterly Strategy Attribution

GMO Growth Strategy As of September 30, 2010

Risk Profile Since 12/31/884 Sector Weights5

Quarterly Strategy Attribution

GMO Small/Mid Cap Value Strategy As of September 30, 2010

Risk Profile Since 12/31/914 Sector Weights5

Quarterly Strategy Attribution

GMO Small/Mid Cap Growth Strategy As of September 30, 2010

Risk Profile Since 12/31/964 Sector Weights5

Quarterly Strategy Attribution

GMO Real Estate Strategy As of September 30, 2010

Risk Profile Since 5/31/964 Sector Weights5

Quarterly Strategy Attribution

GMO Tax-Managed U.S. Equities Strategy As of September 30, 2010

Risk Profile Since 7/31/985 Sector Weights6

Quarterly Strategy Attribution

GMO International Active EAFE Strategy As of September 30, 2010

Risk Profile Since 5/31/814 Characteristics5

Regional Weights5 Sector Weights5

Quarterly Strategy Attribution

Performance1 Top Ten Holdings2,5

Risk Profile Since 1/31/954 Characteristics5

Regional Weights5 Sector Weights5

Quarterly Strategy Attribution

GMO International Intrinsic Value Strategy As of September 30, 2010

Risk Profile Since 3/31/874 Characteristics5

GMO International Growth Strategy As of September 30, 2010

Risk Profile Since 11/30/014 Characteristics5

Regional Weights5 Sector Weights5

Quarterly Strategy Attribution

GMO International Core Equity Strategy As of September 30, 2010

Risk Profile Since 1/31/024 Characteristics5

Regional Weights5 Sector Weights5

Quarterly Strategy Attribution

GMO Currency Hedged International Equity Strategy As of September 30, 2010

Risk Profile Since 6/30/954 Characteristics5

Regional Weights5 Sector Weights5

Quarterly Strategy Attribution