Lazard/Wilmington International Equity Portfolio Annual Report December 31, 2015

Transcription

1 Annual Report

2 Table of Contents Page Independent Auditor s Report 1 Portfolio of Investments 2-4 Statement of Assets and Liabilities 5 Statement of Operations 6 Statement of Changes in Net Assets 7 Financial Highlights 8-13 Notes to Financial Statements 14-20

3 Independent Auditor s Report To the Trustee of Lazard/Wilmington International Equity Portfolio: We have audited the accompanying financial statements of Lazard/Wilmington International Equity Portfolio ( the Portfolio ), which comprise the statement of assets and liabilities, including the portfolio of investments, as of, and the related statements of operations, of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are hereafter collectively referred to as "financial statements". Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Portfolio s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lazard/Wilmington International Equity Portfolio at, and the results of its operations, changes in its net assets and the financial highlights for the year then ended, in accordance with accounting principles generally accepted in the United States of America. April 13, 2016 PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA T: (617) , F: (617) , 1

4 Portfolio of Investments Description Shares Value Common Stocks 94.2% Australia 3.5% Ansell, Ltd. 235,032 $ 3,670,269 Caltex Australia, Ltd. 311,830 8,566,590 James Hardie Industries PLC 372,492 4,741,967 16,978,826 Austria 0.6% UNIQA Insurance Group AG 351,705 2,876,170 Belgium 4.1% Anheuser-Busch InBev SA/NV 119,533 14,860,842 KBC Groep NV 80,912 5,070,987 19,931,829 Brazil 0.6% BB Seguridade Participacoes SA 516,400 3,175,738 Canada 2.7% Encana Corp. 548,000 2,784,158 MacDonald Dettwiler & Associates, Ltd. 81,900 4,928,087 National Bank of Canada 179,100 5,217,548 12,929,793 Denmark 1.1% Carlsberg A/S, Class B 58,609 5,227,460 Finland 2.0% Sampo Oyj, A Shares 190,079 9,708,711 France 8.9% BNP Paribas SA 125,573 7,127,642 Cap Gemini SA 104,639 9,734,125 Iliad SA 18,431 4,406,575 Total SA 100,947 4,526,941 Valeo SA 62,271 9,646,785 Vinci SA 124,733 8,016,638 43,458,706 Germany 3.4% Bayer AG 102,138 12,853,621 RTL Group SA 41,413 3,467,679 16,321,300 Ireland 1.0% Ryanair Holdings PLC Sponsored ADR 54,951 4,751,064 Israel 2.6% Teva Pharmaceutical Industries, Ltd. Sponsored ADR 192,535 12,637,997 Italy 2.1% Atlantia SpA 178,396 4,749,859 Azimut Holding SpA 211,542 5,301,338 10,051,197 Description Shares Value Japan 19.4% ABC-Mart, Inc. 82,500 $ 4,564,458 Daiwa House Industry Co., Ltd. 539,400 15,720,439 Don Quijote Holdings Co., Ltd. 283,400 10,079,745 Isuzu Motors, Ltd. 379,300 4,146,597 Japan Tobacco, Inc. 184,200 6,851,851 KDDI Corp. 407,100 10,682,586 Makita Corp. 76,500 4,474,354 Seven & I Holdings Co., Ltd. 194,700 8,990,266 SoftBank Group Corp. 133,900 6,838,987 Sony Corp. 277,600 6,933,360 Sumitomo Mitsui Financial Group, Inc. 277,100 10,618,766 United Arrows, Ltd. 103,200 4,481,917 94,383,326 Netherlands 2.9% Koninklijke KPN NV 1,269,438 4,817,429 Wolters Kluwer NV 270,987 9,119,040 13,936,469 Norway 1.4% Telenor ASA 411,754 6,898,501 Philippines 0.8% Alliance Global Group, Inc. 10,909,100 3,732,579 Spain 1.0% Red Electrica Corporacion SA 57,367 4,807,313 Sweden 3.9% Assa Abloy AB, Class B 476,172 10,040,765 Swedbank AB, A Shares 407,261 9,026,711 19,067,476 Switzerland 5.3% Credit Suisse Group AG 251,792 5,452,644 Novartis AG 236,004 20,452,424 25,905,068 Taiwan 1.7% Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR 357,800 8,139,950 Thailand 0.5% Krung Thai Bank Public Co. Ltd. (a) 5,619,700 2,608,003 Turkey 1.0% Turkcell Iletisim Hizmetleri AS 1,468,131 4,983,712 United Kingdom 23.7% Aon PLC 73,580 6,784,812 BG Group PLC 348,191 5,056,036 BHP Billiton PLC 259,600 2,908,538 British American Tobacco PLC 226,487 12,590,884 Direct Line Insurance Group PLC 715,961 4,301,039 2

5 Portfolio of Investments (continued) Description Shares Value Informa PLC 646,005 $ 5,837,848 Lloyds Banking Group PLC 10,563,965 11,379,481 Provident Financial PLC 129,738 6,439,716 Prudential PLC 593,086 13,385,952 RELX PLC 476,607 8,410,290 Rexam PLC 867,863 7,733,995 Royal Dutch Shell PLC, A Shares 303,264 6,822,316 Shire PLC 145,580 10,082,568 Unilever PLC 146,745 6,330,941 Wolseley PLC 128,197 6,975, ,039,964 Total Common Stocks (Identified cost $474,357,705) 457,551,152 Short-Term Investment 4.3% SSGA U.S. Government Money Market Fund (Identified cost $20,648,325) 20,648,325 20,648,325 Total Investments 98.5% (Identified cost $495,006,030) $ 478,199,477 Cash and Other Assets in Excess of Liabilities 1.5% 7,174,523 Net Assets 100.0% $ 485,374,000 Notes to Portfolio of Investments: (a) Security valued using Level 2 inputs, based on reference to a similar security which was trading on an active market, under accounting principles generally accepted in the United States of America GAAP hierarchy see Note 10. Security Abbreviation: ADR American Depositary Receipt 3

6 Portfolio of Investments (concluded) Portfolio holdings by industry as a percentage of net assets (unaudited): Aerospace & Defense 1.0% Alcohol & Tobacco 8.1 Automotive 2.8 Banking 8.2 Building Products 2.1 Commercial Services 4.4 Computer Software & Services 0.9 Construction & Engineering 1.7 Diversified 0.8 Electric 1.0 Energy Exploration & Production 0.6 Energy Integrated 5.1 Financial Services 5.9 Forest & Paper Products 1.6 Household & Personal Products 2.7 Housing 1.0 Insurance 8.3 Leisure & Entertainment 2.9 Manufacturing 1.7 Media 2.6 Metals & Mining 0.6 Pharmaceutical & Biotechnology 11.5 Real Estate Management & Development 3.2 Retail 4.8 Semiconductors & Components 1.7 Technology 1.4 Telecommunications 5.6 Transportation 2.0 Subtotal 94.2 Short-Term Investment 4.3 Total Investments 98.5% 4

7 Statement of Assets and Liabilities Assets Investments in securities, at value (cost $495,006,030) $ 478,199,477 Foreign currency, at value (cost $44,970) 44,970 Receivables for: Units sold 6,530,084 Tax reclaims 1,137,234 Dividends 219,991 Investments sold 43,368 Total Assets 486,175,124 Liabilities Payables for: Investment advisory fees (Note 4) 617,027 Trustee fees (Note 4) 96,964 Custodian fees (Note 5) 47,393 Units redeemed 10,595 Unitholders' services fees (Note 5) 7,224 Other accrued expenses and payables 21,921 Total Liabilities 801,124 Net Assets $ 485,374,000 Class 1 Net Assets $ 27,208,609 Units Outstanding 2,874,442 Net Asset Value per Unit $ 9.47 Class 2 Net Assets $ 16,010,981 Units Outstanding 1,690,854 Net Asset Value per Unit $ 9.47 Class 3 Net Assets $ 140,722,307 Units Outstanding 14,837,056 Net Asset Value per Unit $ 9.48 Class 6 Net Assets $ 64,100,951 Units Outstanding 6,746,072 Net Asset Value per Unit $ 9.50 Class 7 Net Assets $ 213,511,066 Units Outstanding 22,500,000 Net Asset Value per Unit $ 9.49 Class 8 Net Assets $ 23,820,086 Units Outstanding 2,504,886 Net Asset Value per Unit $

8 Statement of Operations For the Period Ended * Investment Income Income Dividends (net of foreign withholding taxes of $529,474) $ 11,242,320 Total investment income 11,242,320 Expenses Investment advisory fees (Note 4): Class 1 189,045 Class 2 115,354 Class 3 580,045 Class 6 218,608 Class 7 1,163,047 Class 8 72,184 Trustee fees (Note 4) 343,362 Custodian fees (Note 5) 188,541 Unitholders' services fees (Note 5) 28,631 Professional fees 23,695 Other 832 Total gross expenses 2,923,344 Investment advisory fees waived (Note 4) (155,858) Total net expenses 2,767,486 Net investment income 8,474,834 Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions Net realized loss on: Investments (8,812,580) Foreign currency transactions (148,977) Total net realized loss on investments and foreign currency transactions (8,961,557) Net change in unrealized appreciation (depreciation) on: Investments (includes net change in unrealized appreciation of foreign capital gains taxes of $40,133) (2,162,980) Foreign currency translations (42,271) Total net change in unrealized appreciation (depreciation) on investments and foreign currency translations (2,205,251) Net realized and unrealized loss on investments and foreign currency transactions (11,166,808) Net decrease in net assets resulting from operations $ (2,691,974) * Class 3 and Class 8 commenced operations on April 9, 2015 and January 20, 2015, respectively. 6

9 Statement of Changes in Net Assets For the Year Ended Increase (Decrease) in Net Assets Operations: Net investment income $ 8,474,834 Net realized loss on investments and foreign currency transactions (8,961,557) Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (2,205,251) Net decrease in net assets resulting from operations (2,691,974) Unitholder Transactions (Note 7): Proceeds from units sold 205,728,082 Cost of units redeemed (15,295,613) Net increase in net assets from unitholder transactions 190,432,469 Total increase in net assets 187,740,495 Net assets at beginning of year 297,633,505 Net assets at end of year $ 485,374,000 Changes in Units (Note 7): Units outstanding at beginning of year 31,978,987 Units sold 20,747,772 Units redeemed (1,573,449) Net increase in units 19,174,323 Units outstanding at end of year 51,153,310 7

10 Financial Highlights - Class 1 Selected data per unit outstanding throughout the year ended Net asset value, beginning of year $ 9.30 Income (loss) from investment operations: Net investment income (a) 0.17 Net realized and unrealized loss - (b) Total from investment operations 0.17 Net asset value, end of year $ 9.47 Total Return (c) 1.83% Ratios and Supplemental Data: Net assets, end of year (in thousands) $ 27,209 Ratios to average net assets (d): Net expenses 0.85 % Gross expenses 0.89 % Net investment income 1.77 % (a) (b) (c) (d) Net investment income has been computed based on the average daily units outstanding. Amount rounds to greater than $(0.01) per unit. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning of the year and end of the year and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. 8

11 Financial Highlights - Class 2 Selected data per unit outstanding throughout the year ended Net asset value, beginning of year $ 9.30 Income (loss) from investment operations: Net investment income (a) 0.18 Net realized and unrealized loss (0.01) Total from investment operations 0.17 Net asset value, end of year $ 9.47 Total Return (b) 1.83 % Ratios and Supplemental Data: Net assets, end of year (in thousands) $ 16,011 Ratios to average net assets (c): Net expenses 0.80 % Gross expenses 0.84 % Net investment income 1.88 % (a) (b) (c) Net investment income has been computed based on the average daily units outstanding. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning of the year and end of the year and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. 9

12 Financial Highlights - Class 3 Selected data per unit outstanding throughout the period April 9, 2015 (Commencement of Operations) through Net asset value, beginning of period $ Income (loss) from investment operations: Net investment income (a) 0.12 Net realized and unrealized loss (0.72) Total from investment operations (0.60) Net asset value, end of period $ 9.48 Total Return (b) % Ratios and Supplemental Data: Net assets, end of period (in thousands) $ 140,722 Ratios to average net assets (c): Net expenses 0.75 % Gross expenses 0.79 % Net investment income 1.66 % (a) (b) (c) Net investment income has been computed based on the average daily units outstanding. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning of the period and end of the period and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Return for a period of less than one year is not annualized. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. Annualized for a period of less than one year. 10

13 Financial Highlights - Class 6 Selected data per unit outstanding throughout the year ended Net asset value, beginning of year $ 9.31 Income (loss) from investment operations: Net investment income (a) 0.21 Net realized and unrealized loss (0.02) Total from investment operations 0.19 Net asset value, end of year $ 9.50 Total Return (b) 2.04 % Ratios and Supplemental Data: Net assets, end of year (in thousands) $ 64,101 Ratios to average net assets (c): Net expenses 0.50 % Gross expenses 0.54 % Net investment income 2.13 % (a) (b) (c) Net investment income has been computed based on the average daily units outstanding. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning of the year and end of the year and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. 11

14 Financial Highlights - Class 7 Selected data per unit outstanding throughout the year ended Net asset value, beginning of year $ 9.31 Income (loss) from investment operations: Net investment income (a) 0.20 Net realized and unrealized loss (0.02) Total from investment operations 0.18 Net asset value, end of year $ 9.49 Total Return (b) 1.93 % Ratios and Supplemental Data: Net assets, end of year (in thousands) $ 213,511 Ratios to average net assets (c): Net expenses 0.63 % Gross expenses 0.67 % Net investment income 2.05 % (a) (b) (c) Net investment income has been computed based on the average daily units outstanding. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the year. It represents the percentage change in the net asset value per unit between the beginning of the year and end of the year and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. 12

15 Financial Highlights - Class 8 Selected data per unit outstanding throughout the period January 20, 2015 (Commencement of Operations) through Net asset value, beginning of period $ 9.14 Income from investment operations: Net investment income (a) 0.23 Net realized and unrealized gain 0.14 Total from investment operations 0.37 Net asset value, end of period $ 9.51 Total Return (b) 4.05 % Ratios and Supplemental Data: Net assets, end of period (in thousands) $ 23,820 Ratios to average net assets (c): Net expenses 0.40 % Gross expenses 0.44 % Net investment income 2.42 % (a) (b) (c) Net investment income has been computed based on the average daily units outstanding. Certain expenses of the Portfolio have been waived by the Sub-Advisor; without such waiver of expenses, the Portfolio s return would have been lower. Total return calculation is based on the value of a single unit of participation outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning of the period and end of the period and assumes reinvestment of all distributions, if any. The calculation includes only those expenses charged directly to the Portfolio. Individual unitholders may incur administration or other fees related to the management or maintenance of their individual unitholder accounts, which would have the effect of reducing a unitholder s net return on their investments in the Portfolio. An individual unitholder s return may also vary based on the timing of capital transactions and fees. Return for a period of less than one year is not annualized. Ratios to average net assets do not reflect expenses charged directly to the unitholders. An individual unitholder s ratios to average net assets may vary based on the timing of capital transactions and fees. Annualized for a period of less than one year. 13

16 Notes to Financial Statements (1) Organization Lazard/Wilmington International Equity Collective Trust (the "Trust") is a trust formed pursuant to a Declaration of Trust dated October 23, 2013, as amended and/or restated from time to time and governed by the laws of the State of Delaware. The Trust is currently comprised of one portfolio: Lazard/Wilmington International Equity Portfolio (the Portfolio ). The Portfolio's investment objective is to achieve long-term capital appreciation by investing, using a relative value approach, primarily in equity and equity-related securities of issuers that are located in, or that do significant business in, countries other than the United States, including emerging market countries. From January 1, 2015 through October 31, 2015, Wilmington Trust Retirement and Institutional Services Company (the Trustee ), a subsidiary of Wilmington Trust, National Association ( WTNA ), was the Trustee of the Trust and was responsible for maintaining and administering the Trust and the Portfolio. On November 1, 2015, the Trustee was merged with and into its parent and WTNA became the Trustee of the Trust. Lazard Asset Management LLC (the "Sub-Advisor"), a subsidiary of Lazard Frères & Co. LLC, provides sub-advisory services for the investment assets of the Portfolio. State Street Bank and Trust Company (the Custodian ) is the Custodian of the Portfolio and is responsible for custody of the Portfolio's assets and providing transfer agent, recordkeeping and accounting functions. According to the Offering Memorandum, the Portfolio is divided into seven classes, which shall be identical except as to expenses to be borne by a particular class. Additional classes may be added by the Trustee in its discretion. As of, the Portfolio had six funded classes, Class 1, Class 2, Class 3, Class 6, Class 7 and Class 8. Class 3 and Class 8 units were offered beginning on April 9, 2015 and January 20, 2015, respectively. (2) Significant Accounting Policies The accompanying financial statements are presented in conformity with GAAP. The Portfolio is an investment company and therefore applies specialized accounting guidance in accordance with Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Portfolio in the preparation of the financial statements: (a) Valuation of Investments Market values for securities listed on the New York Stock Exchange (the NYSE ), NASDAQ national market or other US or foreign exchanges or markets are generally based on the last reported sales price on the exchange or market on which the security is principally traded on each valuation date; securities not traded on the valuation date are valued at the most recent quoted bid price. The Portfolio values NASDAQ-traded securities at the NASDAQ Official Closing Price, which may not be the last reported sales price in certain instances. Investments in money market funds are valued at the fund s net asset value ( NAV ) per share. The Sub-Advisor may evaluate a variety of factors to determine the fair value of securities for which market quotations are determined not to be readily available or reliable. These factors include, but are not limited to, the type of security, the value of comparable securities, observations from financial institutions and relevant news events. Input from the Sub-Advisor s portfolio managers/analysts also will be considered. If a significant event materially affecting the value of securities occurs between the close of the exchange or market on which the security is principally traded and the time when the Portfolio s NAV is calculated, or when current market quotations otherwise are determined not to be readily available or reliable (including restricted or other illiquid securities such as certain derivative instruments), such securities will be valued at their fair value as determined by, or in accordance with procedures approved by, the 14

17 Notes to Financial Statements (continued) Sub-Advisor. Non-US securities may trade on days when the Portfolio is not open for business, thus affecting the value of the Portfolio s assets on days when Portfolio unitholders may not be able to buy or sell Portfolio units. (b) Portfolio Securities Transactions and Investment Income Portfolio securities transactions are accounted for on trade date. Realized gain (loss) on sales of investments are recorded on a specific identification basis. Dividend income is recorded on the ex-dividend date except for certain dividend from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Portfolio. Interest income, if any, is accrued daily. The Portfolio may be subject to taxes imposed by foreign countries in which it invests. Such taxes are generally based upon income earned or capital gains (realized or unrealized). The Portfolio accrues and applies such taxes to net investment income, net realized gains and net unrealized gains concurrent with the recognition of income earned or capital gains (realized and unrealized) from the applicable portfolio securities. (c) Foreign Currency Translation The accounting records of the Portfolio are maintained in US dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated daily into US dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into US dollars at the prevailing exchange rates on the respective transaction dates. The Portfolio does not isolate the portion of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in their market prices. Such fluctuations are included in net realized and unrealized gain (loss) on investments. Net realized gain (loss) on foreign currency transactions represents net foreign currency gain (loss) from disposition of foreign currencies, currency gain (loss) realized between the trade and settlement dates on securities transactions, and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the Portfolio s accounting records and the US dollar equivalent amounts actually received or paid. Net change in unrealized appreciation (depreciation) on foreign currency translations reflects the impact of changes in exchange rates on the value of assets and liabilities, other than investments in securities, during the period. (d) Tax Reclaims Receivable Tax reclaims receivable, if any, are recorded on the ex-dividend date based upon the interpretation of country-specific taxation of dividend income, which may be subject to change due to changes in country-specific tax regulations regarding amounts reclaimable or the interpretation of country-specific taxation of dividend income and related amounts reclaimable. (e) Income Taxes The Portfolio intends to continue to be exempt from taxation under section 501(a) of the Internal Revenue Code and qualify as a group trust under IRS Revenue Ruling and any amendments thereto, and other applicable IRS rules and regulations. The unitholders are required to report their respective portion of the Portfolio s US taxable income or loss in their own income tax returns and are liable for any related taxes thereon. Accordingly, no provision for federal income taxes is made in the financial statements of the Portfolio. Management has analyzed the Portfolio s tax positions in its major jurisdictions. Based on this review, the Portfolio has identified uncertain tax positions which may give rise to exposure in various non-us jurisdictions in which it trades, such exposure 15

18 Notes to Financial Statements (continued) principally arising from capital gains withholding taxes. In each case, the application of the tax law is uncertain. Management concluded that such uncertain tax positions are more-likely-than-not to be sustained upon examination. Therefore, management has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on tax returns filed for open tax year (2014), or expected to be taken in the Portfolio s 2015 tax returns. (f) Distributions to Unitholders Net investment income and net realized gains are retained by the Portfolio. (g) Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets resulting from operations during the reporting period. Actual results could differ from those estimates. (h) Net Asset Value NAV per unit for each class of the Portfolio is determined on each day the NYSE is open for business, generally as of the close of regular session trading on the NYSE (normally 4:00 p.m. Eastern time, the Regular Closing Time ). When trading on the NYSE is unexpectedly closed prior to the Regular Closing Time, or an earlier scheduled close (such as on certain days around holidays when the NYSE is scheduled to close before 4:00 p.m.), and remains closed through the time of the Regular Closing Time (or an earlier scheduled close), the NAV of the Portfolio may nonetheless be calculated as of the Regular Closing Time (or an earlier scheduled close) if, in the judgment of the Sub-Advisor, there is sufficient trading in other markets between the unexpected close and the Regular Closing Time (or an earlier scheduled close) for securities for which the NYSE is usually considered the primary market. NAV per unit is determined by dividing the value of the total assets of the Portfolio represented by such class, less all liabilities, by the total number of Portfolio units of such class outstanding. (3) Short Term Investment Cash is held by the Custodian which, as contracted on behalf of the Portfolio, sweeps on each business day into the SSGA U.S. Government Money Market Fund, a registered open-end management investment company under the Investment Company Act of 1940, which is included in the Portfolio of Investments. (4) Sub-Advisor Fees and Expenses Under the Sub-Advisor Agreement, the Sub-Advisor provides the Portfolio with investment research, advice and supervision and furnishes continuously an investment program consistent with the Portfolio s investment objectives and policies, including the purchase, retention and disposition of securities. The Portfolio pays the Sub-Advisor an investment advisory fee expressed as a percentage of the average daily net assets for each class, at the annual rate set forth below: 16

19 Notes to Financial Statements (continued) Class Annual Rate Class % Class % Class % Class % Class % on the first $50 million 0.50% on the next $50 million 0.45% on amounts in excess of $100 million Class % The investment advisory fees are accrued daily and paid quarterly. The Sub-Advisor has voluntarily agreed to reduce its fees and, if necessary, reimburse the Portfolio if annualized operating expenses (exclusive of investment advisory fees, taxes, brokerage, interest on borrowings, fees and expenses of Acquired Funds and extraordinary expenses, and excluding other transaction fees) exceed 0.10% of the average daily net assets for each class. For the period ended, the Sub-Advisor waived $9,136, $5,889, $33,989, $19,743, $78,478 and $8,623 of its fees for Class 1, Class 2, Class 3, Class 6, Class 7 and Class 8, respectively. The Trustee is responsible for certain administrative and financial reporting functions. For these services, the Portfolio pays the Trustee a per annum fee of 0.08% on the first $1 billion of net assets and 0.06% on net assets in excess of $1 billion. The trustee fees are accrued daily and paid quarterly. (5) Custody Agreement The Custodian is responsible for the custody of the Portfolio s assets and providing transfer agent, recordkeeping and accounting functions. For these services the Portfolio pays the Custodian a per annum fee of 0.03% on the first $50 million of net assets and 0.01% on net assets in excess of $50 million. The minimum annual fee for the Portfolio is $24,000. The Portfolio also pays the Custodian holding fees and transaction fees for its global custody services. In addition, the Custodian receives a monthly account services fee computed on the basis of the number of unitholder accounts it maintains for the Portfolio during the month, and is reimbursed for certain out-of-pocket expenses. The custodian and unitholders' services fees are accrued daily and paid monthly. (6) Investment Transactions The Portfolio may be subject to capital gains taxes levied by foreign governments on net realized gains on sales of securities. For the year ended, there were no such capital gains taxes. At, unrealized appreciation (depreciation) on investments did not include any deferred tax liability based on unrealized appreciation on applicable investments in securities held at year end. The net change in unrealized appreciation (depreciation) on investments for 2015 includes net change in unrealized appreciation of foreign capital gains taxes of $40,133. (7) Unitholders Transactions The Portfolio offers units for sale and redemption of its units at the NAV of each class as of the close of each business day. 17

20 Notes to Financial Statements (continued) For the period ended, the units transactions were as follows: Units Dollar Amounts Class 1 Units sold 855,708 $ 8,227,094 Units redeemed (505,014) (4,899,692) Net increase in units 350,694 $ 3,327,402 Class 2 Units sold $ Units redeemed Net increase (decrease) in units $ Class 3 Units sold 14,837,056 $ 150,000,000 Units redeemed Net increase in units 14,837,056 $ 150,000,000 Class 6 Units sold 2,303,710 $ 22,309,464 Units redeemed (822,023) (7,998,319) Net increase in units 1,481,687 $ 14,311,145 Class 7 Units sold $ Units redeemed Net increase (decrease) in units $ Class 8 Units sold 2,751,298 $ 25,191,524 Units redeemed (246,412) (2,397,602) Net increase in units 2,504,886 $ 22,793,922 Total increase in units 19,174,323 $ 190,432,469 (8) Investment Risks (a) Non-US Securities Risk The Portfolio invests in securities of foreign entities and in instruments denominated in foreign currencies which involve risks not typically associated with investments in US securities. The Portfolio s performance will be influenced by political, social and economic factors affecting the non-us countries and companies in which the Portfolio invests. Non-US securities carry special risks, such as less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and, potentially, less liquidity. In addition, investments denominated in currencies other than US dollars may experience a decline in value, in US dollar terms, due solely to fluctuations in currency exchange rates. The Portfolio s investments could be adversely affected by delays in, or a refusal to grant, repatriation of funds or conversion of emerging market currencies. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. The economies of countries with emerging markets 18

21 Notes to Financial Statements (continued) may be based predominately on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme debt burdens or volatile inflation rates. The securities markets of emerging market countries have historically been extremely volatile. These market conditions may continue or worsen. Significant devaluation of emerging market currencies against the US dollar may occur subsequent to acquisition of investments denominated in emerging market currencies. Investments in these countries may be subject to political, economic, legal, market and currency risks. The risks may include less protection of property rights and uncertain political and economic policies, the imposition of capital controls and/or foreign investment limitations by a country, nationalization of businesses and the imposition of sanctions by other countries, such as the US. (b) Unitholder Concentration Risk Units in excess of 10% of Class 1 units at were held by two of the Class' unitholders and aggregated to % of the total units outstanding of the Class. Units in excess of 10% of Class 2 units at were held by one of the Class' unitholders and aggregated to % of the total units outstanding of the Class. Units in excess of 10% of Class 3 units at were held by two of the Class' unitholders and aggregated to % of the total units outstanding of the Class. Units in excess of 10% of Class 6 units at were held by one of the Class' unitholders and aggregated to 99.82% of the total units outstanding of the Class. Units in excess of 10% of Class 7 units at December 31, 2015 were held by one of the Class' unitholders and aggregated to % of the total units outstanding of the Class. Units in excess of 10% of Class 8 units at were held by one of the Class' unitholders and aggregated to % of the total units outstanding of the Class. (c) Counterparty Default Risk Certain investment techniques the Portfolio may employ involve risk that the counterparty to such instruments will become insolvent or otherwise default on its obligation to perform as agreed. In the event of such default, the Portfolio may have limited recourse against the counterparty and may experience delays in the recovery (or loss) of collateral. (9) Contractual Obligations The Portfolio enters into contracts in the normal course of business that contain a variety of indemnifications. The Portfolio's maximum exposure under these arrangements is unknown. Management has reviewed the Portfolio's existing contracts and expects the risk of loss to be remote. (10) Fair Value Measurements Fair value is defined as the price that the Portfolio would receive to sell an asset, or would pay to transfer a liability, in an orderly transaction between market participants at the date of measurement. The Fair Value Measurements and Disclosures provisions of GAAP also establish a framework for measuring fair value, and a three-level hierarchy for fair value measurement that is based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer, broadly, to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio's own assumptions about the assumptions that market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. Each investment's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the overall fair value measurement. The three-level hierarchy of inputs is summarized below: 19

22 Notes to Financial Statements (concluded) Level 1 unadjusted quoted prices in active markets for identical investments Level 2 other significant observable inputs (including unadjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) Level 3 significant unobservable inputs (including the Portfolio s own assumptions in determining the fair value of investments) Changes in valuation technique may result in transfer into or out of the current assigned level within the hierarchy. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in these securities. The following table summarizes the valuation of the Portfolio s investments by each fair value hierarchy level as of December 31, 2015: Unadjusted Quoted Prices in Active Markets for Identical Investments (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of Description Common Stocks* $ 454,943,149 $ 2,608,003 $ $ 457,551,152 Short-Term Investment 20,648,325 20,648,325 Total $ 475,591,474 $ 2,608,003 $ $ 478,199,477 * Please refer to Portfolio of Investments (page 2 through 4) for portfolio holdings by country and industry. The Portfolio recognizes all transfers between levels as though they were transferred at the beginning of the reporting period. At, a security valued at $2,344,034 was transferred from Level 1 to Level 2. There were no other transfers into or out of Levels 1, 2 or 3 during the year ended. (11) Subsequent Events Management has evaluated subsequent events affecting the Portfolio through April 13, 2016, the date that these financial statements were available to be issued, and has determined that there were no subsequent events that required adjustment or disclosure. 20