-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AcqBKqMNPBuSubwb9vaE87g03rzutMd+O4dACJhVYfojUD6XNO24PBLZAU1fXc9S 6Yhn2GeVrU+RwIwNhEZ/DQ== 0000903893-96-000290.txt : 19960523 0000903893-96-000290.hdr.sgml : 19960523 ACCESSION NUMBER: 0000903893-96-000290 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960522 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GMO TRUST CENTRAL INDEX KEY: 0000772129 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 333-02399 FILM NUMBER: 96570969 BUSINESS ADDRESS: STREET 1: 40 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173307500 FORMER COMPANY: FORMER CONFORMED NAME: GMO CORE TRUST DATE OF NAME CHANGE: 19900927 497 1 DEFINITIVE PROSPECTUS/PROXY MATERIALS Rule 497(b) File No. 333-2399 GRANTHAM, MAYO, VAN OTTERLOO & CO. A MESSAGE FROM THE INVESTMENT MANAGER May 17, 1996 Dear Member: Enclosed you will find several documents relating to the Special Meeting of Members of The Common Fund for Nonprofit Organizations ("The Common Fund") that own units in The Common Fund's GMO International Equities Pool (the "GMO Pool") to be held May 29, 1996 at 450 Post Road East, Westport, Connecticut 06881 at 10:00 a.m. I hope you will give this material your immediate attention and that, if you cannot attend the meeting in person, you will vote your proxy promptly. Based on the recommendation of the International Equity Committee of the Board of Trustees of The Common Fund (the "Committee"), the Board of Trustees of The Common Fund has recommended that the member institutions that own units of the GMO Pool (the "Unitholders") vote to discontinue the GMO Pool. Discontinuance of the GMO Pool is part of a transaction proposed by Grantham, Mayo, Van Otterloo & Co. ("GMO"), the investment manager of the GMO Pool, scheduled to take place on June 28, 1996 which involves, in essence, the reorganization of the GMO Pool as GMO Foreign Fund (the "Mutual Fund"), a newly formed series of GMO Trust, a registered, open-end management investment company, through (i) the discontinuation of the GMO Pool and the distribution of all the assets and liabilities of the GMO Pool to Unitholders and (ii) the exchange, immediately thereafter, of the assets and liabilities distributed for shares of the Mutual Fund. After the distribution to Unitholders, the assets and liabilities formerly held in the GMO Pool will remain in the custody of The Common Fund's custodian, Mellon Bank, although title to such assets and liabilities will, at that time, be in the hands of the respective Unitholders. At the time of the exchange of such assets and liabilities for shares of the Mutual Fund, Mellon Bank will transfer custody of such assets and liabilities to Brown Brothers Harriman & Co., as custodian for the Mutual Fund. At the close of the transaction the assets and liabilities of the Mutual Fund will consist entirely of the assets and liabilities formerly held in the GMO Pool and the shareholders of the Mutual Fund will consist entirely of the former Unitholders of the GMO Pool. GMO will be the investment manager to the Mutual Fund, and will manage the Mutual Fund in a manner substantially identical to the manner in which it currently manages the GMO Pool. GMO has informed the Committee that it intends to resign as manager of the GMO Pool. GMO has, however, organized the Mutual Fund in order to conduct an investment program substantially similar to that conducted by the GMO Pool. GMO recommends that Unitholders wishing to continue their investment program with GMO vote to approve the transaction described in the accompanying proxy statement. The Board of Trustees of The Common Fund has decided that the GMO Pool should be discontinued because they would not be able to make GMO's services available after GMO resigns as the manager. The Common Fund will accept redemption requests of those Unitholders that do not wish to participate in the transaction. A Notice of Special Meeting of Unitholders, a Prospectus/Proxy Statement relating to the proposed reorganization, the current Prospectus of GMO Trust, an application form for the Mutual Fund, and a form of proxy are enclosed. Please read them carefully. Whether or not you plan to attend the meeting in person, we urge you to complete, sign, date and return both the proxy card and the application form for the Mutual Fund so that your units may be voted in accordance with your instructions. Your vote is important to us. We appreciate the time and consideration I am sure you will give this important matter. If you have questions about the proposal, please call 1-800- 447-3167. Sincerely yours, Eyk H.A. Van Otterloo THE COMMON FUND FOR NONPROFIT ORGANIZATIONS NOTICE OF SPECIAL MEETING OF UNITHOLDERS OF THE GMO INTERNATIONAL EQUITIES POOL To the Unitholders of the GMO International Equities Pool of The Common Fund for Nonprofit Organizations: NOTICE IS HEREBY GIVEN that a Special Meeting of Unitholders of the GMO International Equities Pool of The Common Fund for Non-Profit Organizations (the "GMO Pool") will be held on Wednesday, May 29, 1996 at 10:00 a.m. at 450 Post Road East, Westport, Connecticut 06881 to consider the following: 1. To vote upon the approval of a transaction involving, in essence, the reorganization of the GMO Pool as GMO Foreign Fund, a newly formed series of GMO Trust, a registered, open-end management investment company (the "Mutual Fund"), pursuant to an Agreement and Plan of Reorganization which provides that (i) the GMO Pool will be discontinued and its assets and liabilities will be distributed pro rata to the Unitholders as a liquidating distribution, and (ii) such assets and liabilities will immediately thereafter be transferred by the Unitholders to the Mutual Fund in exchange for shares of the Mutual Fund. 2. To transact such other business as may properly come before the meeting. The Board of Trustees of The Common Fund for Non-Profit Organizations has fixed the close of business on May 10, 1996 as the record date for determination of Unitholders entitled to notice of, and to vote at, the Special Meeting. By order of the Trustees Marita K. Wein Secretary WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED SO THAT YOU WILL BE REPRESENTED AT THE SPECIAL MEETING. May 17, 1996 PROSPECTUS/PROXY STATEMENT May 17, 1996 TABLE OF CONTENTS Synopsis......................................................................3 Expense Summary...............................................................4 Risk Factors..................................................................6 Approval or Disapproval of the Transaction....................................7 Additional Information about the Mutual Fund and the GMO Pool................10 Other........................................................................13 Agreement and Plan of Reorganization .................................Exhibit A This document will give you the information you need to vote on the proposed transaction involving the GMO International Equities Pool of The Common Fund for Nonprofit Organizations (the "GMO Pool"), located at 450 Post Road East, Westport, Connecticut 06881, having a phone number of 1-203-341-2000, and GMO Foreign Fund, a series of GMO Trust (the "Mutual Fund"), located at 40 Rowes Wharf, Boston, Massachusetts 02110, having a phone number of 1-800-447-3167. Much of the information is required under rules of the Securities and Exchange Commission (the "SEC"); some of it is technical. If there is anything you do not understand, please contact Grantham, Mayo, Van Otterloo & Co. ("GMO") at 1- 800-447-3167. This Prospectus/Proxy Statement is furnished in connection with the solicitation of proxies by and on behalf of the Board of Trustees of The Common Fund for Nonprofit Organizations ("The Common Fund") for use at the Special Meeting (the "Meeting") of the Members of The Common Fund that own units in the GMO Pool (the "Unitholders") to be held on May 29, 1996 at 10:00 a.m. at 450 Post Road East, Westport, Connecticut 06881, and at any adjournment or adjournments thereof. This Prospectus/Proxy Statement and the enclosed form of proxy are being mailed to Unitholders on or about May 17, 1996. At the Meeting, Unitholders will vote to approve or disapprove the reorganization of the GMO Pool as the Mutual Fund through the discontinuation of the GMO Pool and the distribution of all its assets and liabilities to the Unitholders, and the transfer immediately thereafter by Unitholders of the assets and liabilities distributed in exchange for shares of the Mutual Fund. Only Unitholders of record on May 10, 1996 (the "Record Date") will be entitled to notice of and to vote at the Meeting. As of the Record Date, there were outstanding 91,346 units of beneficial interest of the GMO Pool held by fifteen Unitholders. This Prospectus/Proxy Statement explains concisely what you should know before investing in the Mutual Fund. Please read it and keep it for future reference. This Prospectus/Proxy Statement is accompanied by the Prospectus of GMO Trust dated February 29, 1996 (the "GMO Prospectus"). The GMO Prospectus contains information about the Mutual Fund and is incorporated into this Prospectus/Proxy Statement by reference. -1- The following documents have been filed with the Securities and Exchange Commission and are also incorporated into this Prospectus/Proxy Statement by reference: (i) the Statement of Additional Information of GMO Trust dated February 29, 1996 (the "GMO Statement of Additional Information"), and (ii) a Statement of Additional Information dated May 17, 1996 relating to the transactions described in this Prospectus/Proxy Statement (the "Reorganization Statement of Additional Information"). For a free copy of the GMO Prospectus, the GMO Statement of Additional Information and/or the Reorganization Statement of Additional Information, please contact GMO at 1-800- 447-3167. The Trustees know of no matters other than those set forth herein to be brought before the Meeting. If, however, any other matters properly come before the Meeting, it is the Trustees' intention that proxies will be voted on such matters in accordance with the judgment of the persons named in the enclosed form of proxy. Proxy materials, reports and proxy and information statements and other information filed by GMO Trust can be inspected and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549 at prescribed rates. THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -2- I. SYNOPSIS PROPOSED TRANSACTION. The GMO Pool is a fund of The Common Fund, a nonprofit membership corporation operated by and for its member colleges, universities, and independent schools. The Mutual Fund is a newly formed series of GMO Trust, an open-end management investment company which is, unlike the GMO Pool, registered under the Investment Company Act of 1940. The GMO Pool is managed, and the Mutual Fund will be managed, by GMO. The Board of Trustees of The Common Fund, acting upon the recommendation of its International Equity Committee (the "Committee"), has decided that the GMO Pool should be discontinued under Rule 17.3 of the Rules of The Common Fund. This discontinuance is a step in a transaction (the "Transaction") involving, in essence, the reorganization of the GMO Pool as the Mutual Fund, whereby (i) the GMO Pool will be discontinued and its assets and liabilities will be distributed pro rata to the Unitholders as a liquidating distribution, and (ii) such assets and liabilities will immediately thereafter be transferred by the Unitholders to the Mutual Fund in exchange for shares of the Mutual Fund. At the completion of the Transaction the assets and liabilities of the Mutual Fund will consist entirely of the assets and liabilities held in the GMO Pool immediately prior to the Transaction, and the shareholders of the Mutual Fund will consist entirely of the Unitholders of the GMO Pool immediately prior to the Transaction, with identical respective ownership interests. GMO intends to manage the Mutual Fund in a manner substantially identical to the way in which it currently manages the GMO Pool. THE BOARD OF TRUSTEES OF THE COMMON FUND RECOMMENDS THAT UNITHOLDERS VOTE TO DISCONTINUE THE GMO POOL BECAUSE GMO HAS INFORMED THE COMMITTEE THAT IT INTENDS TO RESIGN AS INVESTMENT MANAGER OF THE GMO POOL. GMO RECOMMENDS THAT UNITHOLDERS APPROVE THE TRANSACTION BECAUSE IT OFFERS UNITHOLDERS THE OPPORTUNITY TO CONTINUE TO BENEFIT FROM GMO'S MANAGEMENT IN A SUBSTANTIALLY SIMILAR INVESTMENT PROGRAM. SEE "APPROVAL OR DISAPPROVAL OF THE TRANSACTION." CERTAIN TAX CONSEQUENCES OF THE REORGANIZATION. None of the Unitholders will incur any federal income tax liability in connection with the Transaction, provided that neither their investment in The Common Fund nor the assets received by the Unitholders in liquidation of the GMO Pool were debt-financed. See "Federal Income Tax Consequences." COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The investment objectives, policies and restrictions of the GMO Pool and the Mutual Fund are virtually identical. The GMO Pool invests, and the Mutual Fund will invest, largely in a portfolio of common stocks and securities convertible into stocks of companies domiciled outside the United States. The GMO Pool utilizes, and the Mutual Fund will utilize, a fundamental analysis of companies and countries to select securities in which to invest. See "Additional -3- Information about the Mutual Fund and the GMO Pool -- Comparison of Investment Objectives, Policies and Restrictions." COMPARISON OF DISTRIBUTION, PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES. Shares of the Mutual Fund may be purchased or redeemed on any day when the New York Stock Exchange is open for business (a "business day"), while units of the GMO Pool may only be purchased or redeemed one day per month. See "Additional Information about the Mutual Fund and the GMO Pool -- Comparison of Distribution, Purchase, Redemption and Exchange Procedures." II. EXPENSE SUMMARY The following tables summarize expenses (i) that the GMO Pool has incurred in its past fiscal year, and (ii) that the Mutual Fund expects to incur in its current fiscal year after giving effect to the Transaction on a pro forma combined basis as if the Transaction had occurred as of April 1, 1996. The Examples show the estimated cumulative expenses attributable to a hypothetical $1,000 investment over specified periods. -4-
Current Expenses Pro Forma Expenses GMO Pool Mutual Fund -------- ----------- UNITHOLDER/SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases None None Maximum Deferred Sales Charge None None ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management Fees (after fee waiver and expense reduction in the case of the Mutual Fund) .70% .57%1 Other Expenses .13% .18% Total Fund Operating Expenses .83% .75%1
The tables are provided to help you understand an investor's share of the operating expenses which each fund incurs. EXAMPLES An investment of $1,000 would incur the following expenses, assuming (1) 5% annual return and (2) no redemption at the end of each period: - -------- 1 GMO has voluntarily undertaken to reduce its management fees and to bear certain expenses with respect to the Mutual Fund until further notice to the extent that the Mutual Fund's total annual operating expenses (excluding brokerage commissions, extraordinary expenses (including taxes), securities lending fees and expenses and transfer taxes) would otherwise exceed .75% of the Mutual Fund's daily net assets. Therefore, so long as GMO agrees so to reduce its fee and bear certain expenses, total annual operating expenses (subject to such exclusions) of the Mutual Fund will not exceed .75% of the Mutual Fund's daily net assets. Absent the waiver of fees, pro forma Management Fees for the Mutual Fund would be .75% and pro forma Total Fund Operating Expenses for the Mutual Fund would be .93%. -5- 1 3 5 10 year years years years GMO POOL $8 $26 $46 $103 MUTUAL FUND $8 $24 (PRO FORMA COMBINED) The Examples do not represent past or future expense levels. Actual expenses may be greater or less than those shown. Federal regulations require the Examples to assume a 5% annual return, but actual annual return will vary. Federal regulations require that the Mutual Fund, as a newly formed fund, display examples of expenses for one and three years only. III. RISK FACTORS Because the GMO Pool and the Mutual Fund share similar investment objectives and policies, the risks of an investment in the Mutual Fund as described below are similar to the risks of an investment in the GMO Pool. A more detailed description of certain of the risks associated with an investment in the Mutual Fund is contained in the GMO Prospectus. FOREIGN INVESTMENTS--GENERAL. Investment in foreign issues or securities principally traded overseas involves certain special risks due to the economic, political and legal developments in foreign countries. These risks include unfavorable changes in currency exchange rates, lack of information about the issuer, and lack of liquidity of the securities of the issuer. Foreign brokerage commissions and other fees are also generally higher than in the United States. Investors should also be aware that, under certain circumstances, markets which are perceived to have similar characteristics to troubled markets may be adversely affected whether or not similarities actually exist. A complete description of the risks associated with foreign securities is included in the GMO Prospectus on page 31. FOREIGN INVESTMENTS--EMERGING MARKETS. The risks described above apply to an even greater extent to investments in emerging markets. The securities markets of emerging countries are generally smaller, less developed, less liquid, and more volatile than the securities markets of the United States and developed foreign markets. Many emerging markets have experienced substantial rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have very negative effects on the securities markets of certain emerging countries. The economies of emerging markets are particularly susceptible to downturns because of (i) the risk of trade barriers and other protectionist measures, (ii) their reliance on only a few industries or commodities, and (iii) their dependence on the economic conditions of the countries with which they trade. In addition, custodial services and other costs relating to investment in foreign markets may be more expensive in emerging markets than in many developed foreign markets. A complete -6- description of the risks associated with emerging markets is included in the GMO Prospectus on page 31. OPTIONS AND FUTURES TRANSACTIONS. The Mutual Fund's use of options and futures transactions involves certain risks, including the risks that the Mutual Fund will be unable at times to close out such positions, that such transactions may not accomplish their purpose because of imperfect market correlations, or that GMO may not forecast market movements correctly. A complete description of the risks associated with options and futures transactions is included in the GMO Prospectus on pages 32-36. OTHER INVESTMENT PRACTICES. To the extent that the Mutual Fund exercises its ability to engage in certain investment practices, such as repurchase agreements and securities lending, it may be delayed in recovering or unable to recover its collateral in the event of default by the other party. In the case of securities purchased for future delivery, the Mutual Fund runs the risk of a decline in the value of such securities before the settlement date and the risk that the other party should default on its obligation. A complete description of the risks associated with other investment practices is included in the GMO Prospectus on pages 31-42. IV. APPROVAL OR DISAPPROVAL OF THE TRANSACTION The Unitholders of the GMO Pool are being asked to approve or disapprove the Transaction, which involves, in essence, the reorganization of the GMO Pool as the Mutual Fund. The Transaction is proposed to be effected pursuant to an Agreement and Plan of Reorganization between The Common Fund, on behalf of the GMO Pool, and GMO Trust, on behalf of the Mutual Fund, dated as of May 15, 1996 (the "Agreement"), a copy of which is attached to this Prospectus/Proxy Statement as Exhibit A. A vote by Unitholders is required under Rule 17.3 of the Rules of The Common Fund, which authorizes the Board of Trustees of The Common Fund to discontinue a fund with the consent of two-thirds of the unitholders of the fund including unitholders representing two-thirds of the units of participation in the fund. AGREEMENT AND PLAN OF REORGANIZATION. The Agreement provides that the GMO Pool will be discontinued and its assets and liabilities will be distributed to Unitholders. Each Unitholder will receive a portion of such assets and liabilities proportional to such Unitholder's ownership share of the GMO Pool. Immediately following the distribution, each Unitholder will transfer the assets and liabilities distributed to it to the Mutual Fund for shares of the Mutual Fund representing an identical relative ownership interest in the Mutual Fund as was previously held in the GMO Pool. Prior to this exchange, the Mutual Fund will not hold any assets or liabilities. Following the exchange, therefore, the assets and liabilities of the Mutual Fund will consist entirely of those assets and liabilities formerly held by the GMO Pool. -7- The consummation of the Transaction is subject to the conditions set forth in the Agreement. The Agreement may be terminated and the Transaction abandoned at any time before its consummation, before or after approval by the Unitholders, by mutual consent of the GMO Pool and the Mutual Fund or, if any condition set forth in the Agreement has not been fulfilled and has not been waived by the party entitled to its benefits, by such party. All fees and expenses, including legal and accounting expenses, portfolio transfer taxes (if any) or other similar expenses incurred in connection with the consummation of the Transactions, will be borne by GMO. CUSTODY OF ASSETS AND LIABILITIES INVOLVED IN THE TRANSACTION. The Agreement provides that the Transaction will consists of two steps: (i) the distribution of the assets and liabilities of the GMO Pool to Unitholders, followed by (ii) the transfer of such assets and liabilities by the Unitholders to the Mutual Fund in exchange for shares of the Mutual Fund. At no point throughout the Transaction, however, will the assets and liabilities be physically delivered to the Unitholders. Instead, after the distribution to Unitholders, while title to the assets and liabilities will be in the hands of the respective Unitholders, the assets and liabilities themselves will remain in the custody of The Common Fund's custodian, Mellon Bank. At the time the Unitholders exchange the assets and liabilities for shares of the Mutual Fund, Mellon Bank will transfer custody of such assets and liabilities to Brown Brothers Harriman & Co., as custodian for the Mutual Fund, and title to such assets and liabilities will pass to the Mutual Fund. DESCRIPTION OF THE SHARES OF THE MUTUAL FUND. Full and fractional shares of the Mutual Fund will be issued to the Unitholders of the GMO Pool in accordance with the procedure under the Agreement as described above. Shares of the Mutual Fund are freely transferrable, are entitled to dividends as declared by the Trustees of GMO Trust, and, in liquidation of GMO Trust, are entitled to receive the net assets of the Mutual Fund, but not of any other series of GMO Trust. Unitholders receiving Mutual Fund shares in the Transaction will not pay a sales charge on such shares. Shares of the Mutual Fund are not subject to redemption fees or 12b-1 fees. GMO Trust was organized in 1985 as a Massachusetts business trust, pursuant to an Agreement and Declaration of Trust (the "Declaration of Trust"), and has an unlimited authorized number of shares of beneficial interest which GMO Trust's trustees may, without shareholder approval, divide into an unlimited number of series of such shares, and which are presently divided into twenty-four series of shares. Shares of the Mutual Fund represent one such series. The shares of GMO Trust are entitled to vote at any meetings of shareholders. GMO Trust does not generally hold annual meetings of shareholders and will do so only when required by law. Matters submitted to shareholder vote must be approved by each series separately except (i) when the Investment Company Act of 1940 requires that shares shall be voted together as a single class, and (ii) when the Trustees determine that only shareholders of the series affected shall be entitled to vote on the matter. Shareholders who hold a majority -8- of the outstanding shares may remove the Trustees of GMO Trust from office by votes cast in person or by proxy at a meeting of shareholders or by written consent. Under Massachusetts law, shareholders of the Mutual Fund could, under certain circumstances, be held personally liable for the obligations of GMO Trust. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of GMO Trust and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by GMO Trust. The Declaration of Trust provides for indemnification out of all the property of the relevant fund for all loss and expense of any shareholder of that fund held personally liable for the obligations of GMO Trust. Thus, the risk of a shareholder of the Mutual Fund incurring financial loss on account of shareholders' liability is considered remote since it may arise only in the very limited circumstances in which the disclaimer is inoperative and the Mutual Fund would be unable to meet its obligations. FEDERAL INCOME TAX CONSEQUENCES. Membership in The Common Fund is limited to organizations which are exempt from federal income tax under Section 501(a) or 115(a) of the Internal Revenue Code (the "Code"), and only Members of The Common Fund may invest in the various funds of The Common Fund, including the GMO Pool. Consequently, assuming that all of the Unitholders are so exempt, none of the Unitholders will incur any federal income tax liability in connection with the Transaction, provided that neither their investment in The Common Fund nor the assets received by the Unitholders in liquidation of the GMO Pool constitutes "debt-financed property" within the meaning of the Code. If a Unitholder's investment in The Common Fund or the assets to be received by such Unitholder in liquidation of the GMO Pool are debt-financed property, such Unitholder should consult a tax professional. TRUSTEES' RECOMMENDATION. GMO has informed the Board of Trustees of The Common Fund and the Committee that it intends to resign as manager of the GMO Pool. GMO recommends that Unitholders wishing to continue their investment program with GMO approve the Transaction. The Trustees, based on the recommendation of the Committee, concur in that recommendation because The Common Fund would not be able to offer the GMO Pool after GMO resigns as manager thereof. The Mutual Fund will allow Unitholders the opportunity to continue to benefit from GMO's management in a substantially similar investment program. REQUIRED VOTE. Approval of the proposal requires the affirmative vote of both (A) two-thirds of the Members that own units in the GMO Pool and (B) Members holding two-thirds of all the outstanding units in the GMO Pool, in each case as of the Record Date. Unless revoked, all valid proxies will be voted in accordance with the specification thereon or, in the absence of specifications, FOR approval of the Transaction. A Unitholder of the GMO Pool objecting to the proposed Transaction is not entitled under New York law or the Constitution, By-laws or Rules of The Common Fund to demand payment for and an appraisal of its GMO Pool units if the Transaction is consummated over -9- the objection of such Unitholder. The Common Fund, however, will accept redemption requests of those Unitholders that do not wish to participate in the Transaction. If the required vote is obtained, the GMO Pool will be discontinued as of June 28, 1996, and all Unitholders that have not redeemed their units will receive a pro rata distribution of the GMO Pool's assets and liabilities, whether or not such Unitholders have voted to approve the Transaction. In the event that this proposal is not approved by the Unitholders of the GMO Pool, the GMO Pool will continue to be managed as a separate fund of The Common Fund--by GMO initially--in accordance with its current investment objective and policies, and the Trustees and the Committee may consider such alternatives as may be in the best interests of the Unitholders. VI. ADDITIONAL INFORMATION ABOUT THE MUTUAL FUND AND THE GMO POOL INFORMATION ABOUT THE MUTUAL FUND. For information about the Mutual Fund, please consult the GMO Prospectus, particularly at pages 20-21. INFORMATION ABOUT THE COMMON FUND. The Common Fund is a non-profit organization that was organized in 1969 pursuant to a Special Act of the New York State Legislature in 1955 that authorized the creation of The Common Fund. The Common Fund began operations in 1971. The Common Fund is governed by a Board of Trustees who, except for the President, are elected for three-year staggered terms. Membership in The Common Fund is limited to educational institutions and educational support organizations. There were as of December 31, 1995 approximately 1,400 Members, of which approximately 920 were participating in the long term equity and bond investment funds of The Common Fund and more than 1,100 were participating in the intermediate and short term cash funds. The Common Fund offers a series of pooled investment funds, each of which has its own investment objectives, policies and strategies. For each investment fund, The Common Fund identifies investment strategies, allocates assets among those strategies, selects investment managers within each strategic category and allocates fund assets among them. The Common Fund then monitors manager performance, increasing and decreasing allocations and terminating and replacing managers as appropriate. Each Member selects the specific investment funds in which to invest its money. A Member may invest in more than one fund and may, if it chooses, have more than one account in any fund. Only after a Member chooses in which investment funds to invest does the Common Fund allocate the money within each investment fund as described above. -10- The GMO Pool is an investment fund that invests in international equities. The GMO Pool is distinct from other investment funds of The Common Fund in that the GMO Pool has only one investment manager, GMO. The Common Fund, therefore, does not perform its usual function of allocating money between investment managers for the GMO Pool. The effect of this difference is that each Member has the option of choosing one investment Manager, GMO, to manage its investment. CAPITALIZATION. The following tables show the capitalization of the Mutual Fund and the GMO Pool as of April 1, 1996 and on a pro forma basis as of that date, giving effect to the proposed Transaction: (UNAUDITED) Mutual GMO Fund Mutual Fund Pool (actual) (Pro Forma)* ---- -------- ------------ Net assets $542,706 $ 0 $542,706 (000's omitted) Shares or units 91,346 0 54,270,637 outstanding Net asset value $5,941 $ 0 $10 per share or unit * Pro Forma net assets reflect completion of the Transaction and legal and accounting costs related to the Transaction. COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Mutual Fund's investment objectives, policies and restrictions are virtually identical to those of the GMO Pool. The investment objective of the Mutual Fund is to maximize total return through investment primarily in equity securities of non-U.S. issuers. The GMO Pool has no stated investment objective; however, its stated investment program is to focus on equity investments outside the United States. The GMO Pool invests, and the Mutual Fund will invest, primarily in a diversified portfolio of common stocks, securities convertible into common stocks and warrants to acquire common stocks of companies domiciled outside the United States. There are no prescribed limits on geographic asset distribution for either the GMO Pool or the Mutual Fund, and both have the authority to invest in securities of foreign issuers traded on U.S. exchanges and securities traded abroad, American Depository Receipts, European Depository Receipts and other similar securities convertible into securities of foreign issuers. Neither the GMO Pool nor the Mutual Fund targets its performance against a particular benchmark. -11- Both funds base their investment strategy on a fundamental analysis of issuers and country economics. Both funds may emphasize capital appreciation or income depending on the views of the investment manager. In so doing, either fund may hold various amounts of growth stocks or value stocks. Both funds may hold cash, short-term obligations, and foreign government bonds (denominated in U.S. or foreign currencies). Both funds may also invest in corporate bonds of foreign issuers and in preferred stock of foreign issuers. The GMO Pool may invest in The Common Fund for Short Term Investments, a money market type instrument available only to investment funds in The Common Fund. Both funds may engage in foreign currency, stock index futures and options strategies for hedging the currency exposure of their portfolio securities. Neither fund is required to hedge its currency risk. The GMO Pool may engage in short sales and firm commitment agreements if it receives the consent of The Common Fund.2 The Mutual Fund may not engage in short sales and may only engage in firm commitment agreements with banks and broker-dealers if (i) GMO determines that the particular bank or broker-dealer presents a minimal credit risk, and (ii) the Mutual Fund maintains in a segregated account with its custodian cash, U.S. Government securities or other liquid high grade debt obligations in an amount equal to the Mutual Fund's obligations under all of its firm commitment agreements. Also, the Mutual Fund may not concentrate more than 25% of its total assets in any one industry, while the GMO Pool has no restrictions regarding industry concentration. COMPARISON OF DISTRIBUTION, PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES. The Mutual Fund will declare and pay the distributions of its dividends, interest and foreign currency gains semi-annually. The GMO Pool distributes all dividends, interest and other ordinary income of the fund quarterly, on an accrual basis. The Mutual Fund intends to distribute net short-term capital gains and net long-term gains at least annually. The GMO Pool does not distribute net short-term and long-term capital gains; instead, this appreciation or depreciation is reflected in the value of the units of the fund. For a further description of the distribution policies of the Mutual Fund, please consult the GMO Prospectus at page 44. Investments in the GMO Pool may only be made on the first day of each calendar month and the funds must be received by the GMO Pool not later than the last business day preceding the respective entry date (or as the Trustees may otherwise decide). At least six business days' advance notice must be given for an investment in the GMO Pool. Shares of the Mutual Fund - -------- 2 A firm commitment agreement is an agreement with a bank or broker-dealer for the purchase of securities at an agreed-upon price on a specified future date. -12- may be purchased directly from GMO Trust on any business day. For a further description of the procedures for purchasing shares of the Mutual Fund, please consult the GMO Prospectus at pages 42-43. A Unitholder in the GMO Pool may withdraw its investment in the fund by giving six business days' advance written notice of withdrawal to the GMO Pool or such shorter notice as The Common Fund may permit. Such withdrawal will only be effected on, or as of, a monthly valuation date (the last business day of the month). Shares of the Mutual Fund may be redeemed on any business day. The redemption price is the net asset value per share next determined after receipt of the redemption request. There is no separate redemption fee. For a further description of the procedures for redeeming shares of the Mutual Fund, please consult the GMO Prospectus at pages 43-44. A Unitholder may transfer the amount it has invested in the GMO Pool to any other fund of The Common Fund, by giving fourteen days' advance written notice to The Common Fund. A shareholder of the Mutual Fund wishing to exchange its shares for shares of another fund of GMO Trust must separately redeem its Mutual Fund shares and purchase the shares of the other fund. GMO Trust provides no special exchange procedures between its funds. A complete description of the distribution, purchase, redemption and exchange procedures of the Mutual Fund is included in the GMO Prospectus on pages 42-45. OTHER INFORMATION. Other information relating to the Mutual Fund, including information in respect of its investment objectives and policies and financial history, may be found in the enclosed GMO Prospectus and in the GMO Statement of Additional Information. VI. OTHER RECORD DATE, QUORUM AND METHOD OF TABULATION. Unitholders of record of the GMO Pool at the close of business on the Record Date will be entitled to vote at the Meeting or any adjournment thereof. The holders of a majority of the Units of the GMO Pool outstanding at the close of business on the Record Date present in person or represented by proxy will constitute a quorum for the Meeting; however, as noted earlier, the affirmative vote of (A) two-thirds of all Members owning units in the GMO Pool and (B) of Members owning two-thirds of all the units in the GMO Pool is necessary to approve the Transaction. Unitholders are entitled to one vote each, in the case of (A), and to one vote for each unit held, with fractional units voting proportionally, in the case of (B). Votes cast by proxy or in person at the meeting will be counted by persons appointed by The Common Fund as tellers for the Meeting. The tellers will count the total number of votes cast "for" approval of the Transaction for purposes of determining whether sufficient affirmative votes have been cast. The tellers will count units represented by proxies that reflect abstentions as units that are present and entitled to vote on the matter for purposes of determining the -13- presence of a quorum. Abstentions have the effect of a negative vote on the proposal. -14- OWNERSHIP OF THE GMO POOL AND THE MUTUAL FUND. The Common Fund permits only Members to own units in the various funds of The Common Fund. The officers and Trustees of -15- The Common Fund, therefore, did not, as of the Record Date, own beneficially any units of the GMO Pool. As of April 1, 1996, to the best of the knowledge of The Common Fund, the following institutions owned beneficially 5% or more of the outstanding units of the GMO Pool: % of the GMO Pool (%) ------------ Harvard University Presidents & Fellows 19.65 University of Pennsylvania 14.53 Wellesley College 10.82 University of Minnesota Foundation 9.82 Swarthmore College 8.65 University of Virginia 8.30 Princeton University 7.81 Amherst College Consolidated 5.58 As of May 17, 1996, there were no shares of the Mutual Fund issued or outstanding. SOLICITATION OF PROXIES. Solicitation of proxies by personal interview, mail, telephone, and telegraph may be made by employees and partners of GMO. REVOCATION OF PROXIES. Proxies may be revoked at any time before they are voted by a written revocation received by the Secretary of The Common Fund, by properly executing a later-dated proxy or by attending the Meeting and voting in person. ADJOURNMENT. If sufficient votes in favor of the proposal are not received by the time scheduled for the Meeting, the persons named as proxies may propose one or more adjournments of the Meeting for a period or periods of not more than 60 days in the aggregate to permit further solicitation of proxies. Any adjournment will require the affirmative vote of a majority of the units cast on the question in person or by proxy at the session of the Meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitled to vote in favor of the proposal. They will vote against any such adjournment those proxies required to be voted against the proposal. GMO will pay the costs of any additional solicitation and of any adjourned session. -16- THE GMO INTERNATIONAL EQUITIES POOL OF THE COMMON FUND FOR NONPROFIT ORGANIZATIONS PROXY SOLICITED BY THE TRUSTEES PROXY FOR SPECIAL MEETING OF UNITHOLDERS -- May 29, 1996 The undersigned hereby appoints Curt Tobey and Susan T. Reiley, and each of them, proxies, with power of substitution to each, and hereby authorizes them to represent and to vote, as designated below, at the Special Meeting of Unitholders of the GMO International Equities Pool of The Common Fund for Nonprofit Organizations (the "GMO Pool"), on Wednesday, May 29, 1996 at 450 Post Road East, Westport, Connecticut 06881 at 10:00 a.m. Eastern time, and at any adjournments thereof, all of the units of the GMO Pool which the undersigned would be entitled to vote if personally present. THIS PROXY PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED UNITHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL BELOW. 1. To approve a transaction involving, in essence, the reorganization of the GMO Pool as GMO Foreign Fund, a series of GMO Trust, pursuant to the Agreement and Plan of Reorganization attached as Exhibit A to the Prospectus/Proxy Statement of the GMO Pool and GMO Foreign Fund dated May 15, 1996, which provides that (i) the GMO Pool will be discontinued and its assets and liabilities will be distributed pro rata to the Members of The Common Fund holding units therein as a liquidating distribution, and (ii) such assets and liabilities will immediately thereafter be transferred by such Members to GMO Foreign Fund in exchange for shares thereof. |_| FOR |_| AGAINST |_| ABSTAIN NOTE: Please sign in full corporate name and indicate the signer's office. Name of Institution ___________________________________________________ Name of Signer ________________________________________________________ Signer's Office _______________________________________________________ Date___________________________________________________________________ -1- Exhibit A AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization (the "Agreement") is made as of May 15, 1996 by and between The Common Fund for Nonprofit Organizations, a New York non-profit corporation ("The Common Fund"), on behalf of its GMO International Equities Pool (the "GMO Pool"), and GMO Trust, a Massachusetts business trust, on behalf of its GMO Foreign Fund series (the "Mutual Fund"). The Common Fund and GMO Trust agree as follows: 1. Plan of Reorganization. (a) The GMO Pool will, in accordance with the Constitution, By-laws and Rules of The Common Fund, be discontinued and its assets and liabilities existing on the Exchange Date (as defined in Section 6 hereof) will be distributed pro rata to the Members of The Common Fund that own units in the GMO Pool (the "Unitholders") as of the Exchange Date (the "Distribution"). The discontinuance of the GMO Pool and the Distribution will occur pursuant to Rule 17.3 of the Rules of The Common Fund. It is intended that such Distribution shall be treated for federal income tax purposes as a sale or exchange pursuant to Section 302 of the Internal Revenue Code of 1986, as amended (the "Code"). (b) On and as of the Exchange Date, immediately following the consummation of the Distribution described in the foregoing paragraph (a), each Unitholder shall sell, assign, convey, transfer and deliver to the Mutual Fund all of the assets and liabilities received by such Unitholder in the Distribution. In consideration therefor, the Mutual Fund shall, on and as of the Exchange Date, deliver to each Unitholder a number of full and fractional shares of beneficial interest of the Mutual Fund having a net asset value equal to the fair market value of the assets and liabilities transferred by each Unitholder to the Mutual Fund on the Exchange Date (the "Exchange"). (c) The GMO Pool will pay or cause to be paid to the Mutual Fund any interest, cash or such dividends, rights and other payments received by it on or after the Exchange Date with respect to the assets of the GMO Pool contributed to the Mutual Fund as contemplated in Section 1(b) hereof, whether accrued or contingent, received by it on or after the Exchange Date. Any such distribution shall be deemed included in the assets transferred to the Mutual Fund at the Exchange Date and shall not be separately valued unless the securities in respect of which such distribution is made shall have gone "ex" such distribution prior to the Exchange Date, in which case any such distribution which remains unpaid at the Exchange Date shall be included in the determination of the value of the assets of the GMO Pool acquired by the Mutual Fund. (d) As promptly as practicable after the Exchange Date, the GMO Pool shall, to the extent not already done, be discontinued pursuant to the Constitution, By-laws and Rules of The Common Fund, and applicable law, and its legal existence terminated. -1- 2. Representations and Warranties of the Mutual Fund. GMO Trust, on behalf of the Mutual Fund, represents and warrants to and agrees with The Common Fund that: (a) The Mutual Fund is a series of shares of the GMO Trust, a Massachusetts business trust duly established and validly existing under the laws of The Commonwealth of Massachusetts, and has power to own all of its properties and assets and to carry out its obligations under this Agreement. GMO Trust is not required to qualify as a foreign association in any jurisdiction. Each of GMO Trust and the Mutual Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted and to carry out this Agreement. (b) GMO Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. (c) The prospectus and statement of additional information of GMO Trust, each dated February 29, 1996 (collectively the "GMO Prospectus"), did not as of such date and does not contain, with respect to GMO Trust or the Mutual Fund, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (d) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Mutual Fund of the transactions contemplated by this Agreement, except such as may be required under the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, or state securities or blue sky laws (which term as used herein shall include the laws of the District of Columbia and of Puerto Rico). (e) The registration statement (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") by GMO Trust on Form N-14 on behalf of the Mutual Fund and relating to the shares issuable thereunder, and the proxy statement of the GMO Pool included therein (the "Proxy Statement"), on the effective date of the Registration Statement, at the time of the Unitholders' meeting referred to in Section 7 and at the Exchange Date will not, with respect to GMO Trust or the Mutual Fund, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (f) There are no material contracts outstanding to which the Mutual Fund is a party, other than as are disclosed in the Registration Statement, the GMO Prospectus, or the Proxy Statement. (g) The issuance of shares of the Mutual Fund pursuant to the Exchange will be in compliance with all applicable federal and state securities laws. (h) The shares of the Mutual Fund to be transferred to the Unitholders of the GMO Pool have been duly authorized and, when issued and delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and nonassessable by the Mutual Fund, -2- and no shareholder of the Mutual Fund will have any preemptive right of subscription or purchase in respect thereof. 3. Representations and Warranties of the GMO Pool. The Common Fund, on behalf of the GMO Pool, represents and warrants to and agrees with the Mutual Fund that: (a) The GMO Pool is an investment fund of The Common Fund, a non-profit corporation duly established and validly existing under the laws of the State of New York, and has power to carry on its business as it is now being conducted and to carry out its obligations under this Agreement. Neither, The Common Fund nor the GMO Pool is required to qualify as a foreign association in any jurisdiction. Each of The Common Fund and the GMO Pool has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted and to carry out this Agreement. (b) There are no material contracts outstanding to the knowledge of the Common Fund to which the GMO Pool is a party, other than as is disclosed in the Registration Statement, The Common Fund Prospectus, or Proxy Statement. (c) The Registration Statement and the Proxy Statement, on the effective date of the Registration Statement, at the time of the Unitholders' meeting referred to in Section 7 and at the Exchange Date, insofar as they relate to The Common Fund and the GMO Pool will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 4. Exchange Date. The net asset value of the shares of the Mutual Fund to be delivered in exchange for assets and liabilities of the GMO Pool and the value of the assets and liabilities distributed by the GMO Pool and transferred to the Mutual Fund on the Exchange Date (the "GMO Pool Net Assets") shall in each case be determined as of the Exchange Date. (a) The net asset value of the shares of the Mutual Fund shall be computed in the manner set forth in the GMO Prospectus. The value of the assets and liabilities in the GMO Pool before this reorganization shall be determined by the Mutual Fund, in cooperation with the GMO Pool, pursuant to procedures which the Mutual Fund would use in determining the fair market value of the Mutual Fund's assets and liabilities. (b) As the transactions contemplated hereby are intended to result in a step-up (or stepdown) in the tax basis of the GMO Pool Net Assets, no adjustment shall be made in the net asset value of either the GMO Pool or the Mutual Fund to take into account differences in realized and unrealized gains and losses. 5. Expenses, Fees, etc. All fees and expenses, including legal and accounting expenses or other similar expenses incurred in connection with the consummation by the GMO Pool and the Mutual Fund of the transactions contemplated by this Agreement, will be paid by Grantham, Mayo, Van Otterloo and Co. ("GMO"). (a) Notwithstanding any other provisions of this Agreement, if for any reason the transactions contemplated by this Agreement are not consummated, no party shall be liable to -3- the other party for any damages resulting therefrom, including, without limitation, consequential damages. 6. Exchange Date. Delivery of the GMO Pool Net Assets and the delivery of the shares of the Mutual Fund to be issued shall be made at June 28, 1996, or at such other date agreed to by the Mutual Fund and the GMO Pool, the date upon which such delivery is to take place being referred to herein as the "Exchange Date." 7. Meeting of Unitholders; Discontinuance. The Common Fund agrees to call a meeting of the GMO Pool's Unitholders as soon as is practicable after the effective date of the Registration Statement for the purpose of considering authorizing the liquidation and discontinuance of the GMO Pool, the distribution of all of its assets and liabilities to the Unitholders as contemplated herein, the subsequent transfer of the GMO Pool Net Assets to the Mutual Fund, and the adoption of this Agreement. (a) The Common Fund, on behalf of the GMO Pool, agrees that the liquidation and discontinuance of the GMO Pool will be effected in the manner provided in the Rules of The Common Fund in accordance with applicable law, and that on and after the Exchange Date, the GMO Pool shall not conduct any business except in connection with its liquidation and discontinuance. (b) GMO Trust has filed the Registration Statement with the Commission on behalf of the Mutual Fund. Each of the GMO Pool and the Mutual Fund will cooperate with the other, and each will furnish to the other the information relating to itself required by the 1933 Act and the rules and regulations thereunder to be set forth in the Registration Statement. 8. Conditions to the GMO Pool's and the Mutual Fund's Obligations. The obligations of the GMO Pool and the Mutual Fund hereunder to consummate the Distribution and the Exchange shall be subject to the satisfaction of each of the following conditions: (a) That this Agreement shall have been adopted and the transactions contemplated hereby shall have been approved by the affirmative vote of (A) two-thirds of all Members owning units in the GMO Pool and (B) of Members owning two-thirds of all the units in the GMO Pool, in each case as of the record date set for such voting by the board of trustees of The Common Fund. (b) That the Registration Statement shall have become effective under the 1933 Act, and no stop order suspending such effectiveness shall have been instituted or, to the knowledge -4- of The Common Fund, the GMO Pool, GMO Trust or the Mutual Fund, threatened by the Commission. (c) That the GMO Pool and the Mutual Fund shall have received from the Commission, any relevant state securities administrator or any other governmental department or agency such order or orders as Ropes & Gray deems reasonably necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act, or any applicable state securities or blue sky laws in connection with the transactions contemplated hereby, and that all such orders shall be in full force and effect. 9. Conditions to the Mutual Fund's Obligations. The obligations of the Mutual Fund hereunder to consummate the Distribution and the Exchange shall be subject to the satisfaction of each of the following conditions: (a) That all representations and warranties in Section 3 hereof shall be true and correct in all material respects at the Exchange Date with the same effect as if made at that time. (b) That the GMO Pool shall have furnished to the Mutual Fund a statement, dated the Exchange Date, signed by The Common Fund's President (or any Vice President) certifying that as of the Exchange Date all representations and warranties of the GMO Pool made in this Agreement are true and correct in all material respects as if made at and as of the Exchange Date and the GMO Pool has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Exchange Date. (c) That there shall not be any material litigation pending against the GMO Pool with respect to the matters contemplated by this Agreement. (d) That the GMO Pool's custodian shall have delivered to the Mutual Fund a certificate identifying all of the GMO Pool Net Assets held by such custodian as of the Exchange Date. 10. Conditions to the GMO Pool's Obligations. The obligations of the GMO Pool hereunder to consummate the Distribution and the Exchange shall be subject to the satisfaction of each of the following conditions: (a) That all representations and warranties in Section 2 hereof shall be true and correct in all material respects at the Exchange Date with the same effect as if made at that time. (b) That the Mutual Fund shall have furnished to the GMO Pool a statement, dated the Exchange Date, signed by GMO Trust's President (or any Vice President) certifying that as of the Exchange Date all representations and warranties of the Mutual Fund made in this Agreement are true and correct in all material respects as if made at and as of the Exchange Date, and that the Mutual Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to the Exchange Date. (c) That there shall not be any material litigation pending against the Mutual Fund with respect to the matters contemplated by this Agreement. -5- 11. Indemnification. (a) The Common Fund agrees, on behalf of the GMO Pool, that the GMO Pool will indemnify and hold harmless, out of the assets of the GMO Pool but no other assets, the Mutual Fund and the GMO Trust (and its trustees and its officers) (for purposes of this subparagraph, the "Indemnified Parties") against any and all expenses, losses, claims, damages and liabilities (including reasonable attorneys' fees and expenses) at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to The Common Fund or the GMO Pool contained in the Registration Statement, or the Proxy Statement or any amendment or supplement to any of the foregoing, or arising out of or based upon the omission or alleged omission to state in any of the foregoing a material fact relating to The Common Fund or the GMO Pool required to be stated therein or necessary to make the statements relating to The Common Fund or the GMO Pool therein not misleading, including, without limitation, any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the consent of The Common Fund or the GMO Pool. The Indemnified Parties will notify The Common Fund and the GMO Pool in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 11(a). The Common Fund and the GMO Pool shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 11(a), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and if The Common Fund or the GMO Pool elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their expense. The GMO Pool's obligation under this Section 11(a) to indemnify and hold harmless the Indemnified Parties shall constitute a guarantee of payment, so that the GMO Pool will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by it under this Section 11(a) without the necessity of the Indemnified Parties' first paying the same. In no event will The Common Fund or any other investment fund of The Common Fund besides the GMO Pool be responsible for any indemnification under this Section 11(a). (b) The Mutual Fund will indemnify and hold harmless, out of the assets of the Mutual Fund but no other assets, the GMO Pool and The Common Fund (and its trustees and its officers) (for purposes of this subparagraph, the "Indemnified Parties") against any and all expenses, losses, claims, damages and liabilities (including reasonable attorneys' fees and expenses) at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to the Mutual Fund contained in the Registration Statement or the Proxy Statement, or any amendment or supplement to any of the foregoing, or arising out of or based upon the omission or alleged omission to state in any of the foregoing a material fact relating to GMO Trust or the Mutual Fund required to be -6- stated therein or necessary to make the statements relating to GMO Trust or the Mutual Fund therein not misleading, including without limitation any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the consent of GMO Trust or the Mutual Fund. The Indemnified Parties will notify GMO Trust and the Mutual Fund in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 11(b). GMO Trust and the Mutual Fund shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 11(b), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and, if the GMO Trust or the Mutual Fund elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their own expense. The Mutual Fund's obligation under this Section 11(b) to indemnify and hold harmless the Indemnified Parties shall constitute a guarantee of payment so that the Mutual Fund will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by it under this Section 11(b) without the necessity of the Indemnified Parties' first paying the same. 12. Termination. The Common Fund and GMO Trust may, by mutual consent of their respective trustees, terminate this Agreement, and The Common Fund or GMO Trust may waive any condition to the other party's obligations hereunder. 13. Covenants, etc. Deemed Material. All covenants, agreements, representations and warranties made under this Agreement and any certificates delivered pursuant to this Agreement shall be deemed to have been material and relied upon by each of the parties, notwithstanding any investigation made by them or on their behalf. 14. Sole Agreement; Amendments. This Agreement supersedes all previous correspondence and oral communications between the parties regarding the subject matter hereof, constitutes the only understanding with respect to such subject matter, may not be changed except by a letter of agreement signed by each party hereto, and shall be construed in accordance with and governed by the laws of The Commonwealth of Massachusetts. 15. Agreement and Declaration of Trust. A copy of the Agreement and Declaration of Trust of GMO Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the trustees of GMO Trust on behalf of the GMO Foreign Fund series, as trustees and not individually, and that the obligations of this instrument are not binding upon any of the trustees, officers or shareholders of GMO Trust individually but are binding only upon the assets and property of the GMO Foreign Fund. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original. -7- IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of Reorganization as of the date first above written. GMO Trust, on behalf of its GMO Foreign Fund By:___________________________ name: title: The Common Fund for Nonprofit Organizations, on behalf of its GMO International Equities Pool By:____________________________ name: title: -8- GMO TRUST APPLICATION PART I: INVESTOR INFORMATION Please complete and return to: Domestic Phone: 617-330-7500 Grantham, Mayo, Van Otterloo & Co. Domestic Fax: 617-261-0134 40 Rowes Wharf International Phone: 617-346-7610 Boston, Massachusetts 02110 International Fax: 617-439-0457 1. ACCOUNT REGISTRATION Please provide exact name in which shares are to be owned. Unless otherwise indicated, Co-Owners will be registered as joint tenants with right of survivorship. Owner: ---------------------------------------------------------------- Co-Owner (if applicable): --------------------------------------------- Joint Tenants? Yes No ------- -------- Mailing Address: ------------------------------------------------------ Street Address (if different): ---------------------------------------- City/State/Zip: ------------------------------------------------------- Main Phone: ----------------------------------------------------------- Fax: ------------------------------------------------------------------ 2. SOCIAL SECURITY OR TAXPAYER I.D. NUMBER If the account is registered in more than one name, please indicate the name of the individual whose social security number is being provided. For gift to minor or guardianship accounts, please provide the Social Security number and name of the minor or person under guardianship. Social Security or Taxpayer I.D. Number: ------------------------------------------------- Name: ----------------------------------------------------------------- Tax Status (check one): Taxable ---- Tax-Exempt Endowment ---- Tax-Exempt Foundation ---- Tax-Exempt ERISA ---- Tax-Exempt Other (please specify) ---- --------------------------------- Withholding Status (check one): Exempt from back-up withholding. ---- Subject to back-up withholding. ---- GMO Trust Application Investor Information (continued) 3. KEY CONTACT Please list the individual to whom policy questions regarding the Account should be directed: Name Title Phone ---------------------------- ------------------------ ----------------- 4. AUTHORIZED PERSONS Please list the individuals authorized to give the Trust orders, directions, and instructions with respect to the Account's investment in the Trust. IF YOUR CUSTODIAN IS AUTHORIZED TO ACT ON BEHALF OF THE ACCOUNT, PLEASE BE SURE TO INCLUDE SIGNATURE INFORMATION AS WELL, EITHER BELOW OR AS A SEPARATE ATTACHMENT. Name Title Phone ---------------------------- ------------------------ ----------------- ---------------------------- ------------------------ ----------------- ---------------------------- ------------------------ ----------------- 5. CERTIFICATION AND SIGNATURE PLEASE READ CAREFULLY BEFORE SIGNING Under penalties of perjury, the undersigned Owner(s) certifies that (1) the social security or taxpayer identification number shown on this form is the Owner's(s') correct number and (2) the undersigned Owner(s) is not subject to back-up withholding either because the Owner(s) has not been notified by the Internal Revenue Service that the Owner(s) is subject to back-up withholding as a result of failure to report all interest or dividends, or that Internal Revenue Service has notified the undersigned Owner(s) that the Owner(s) is no longer subject to back-up withholding. If you have been notified by the Internal Revenue Service that you are currently subject to back-up withholding, strike out phrase (2) above. IF YOU ARE ONE OF THE ENTITIES LISTED BELOW, YOU ARE EXEMPT FROM BACK-UP WITHHOLDING AND SHOULD CHECK THE SPACE PROVIDED: corporation, financial institution, 501 (a) exempt organization or an IRA, HR10, U.S. or foreign government or agency, state or political subdivision, international organization, U.S. registered securities or commodities dealer, real estate investment trust, entity registered under the Investment Company Act of 1940, middleman (e.g., nominee or custodian, common trust fund, or a trust). The undersigned Owner(s) has received a copy of the Trust's prospectus and has selected the investment(s) and options indicated in Part II of this application. The undersigned Owner(s) understands the investment objectives of the Trust and that the Owner's(s') account will be administered in accordance with the terms of the prospectus. GMO Trust Application Investor Information (continued) The undersigned Owner(s) understands that in order to add to the list of authorized persons or authorized accounts set forth in sections (4) and (5) of Part II of this application or to change either list, the Owner(s) must submit a written request. SIGN EXACTLY AS NAME(S) OF REGISTERED OWNER(S) APPEARS ABOVE IN PART I. (Include legal title if signing for corporation, trust, custodian account, etc.) Signed: -------------------- ------------------------ ------------- Owner Title Date Signed: -------------------- ------------------------ ------------- Co-Owner Title Date GMO TRUST APPLICATION PART II: GMO FOREIGN FUND SPECIAL ACCOUNT APPLICATION Please complete and return to: Domestic Phone: 617-330-7500 Grantham, Mayo, Van Otterloo & Co. Domestic Fax: 617-261-0134 40 Rowes Wharf International Phone: 617 346-7610 Boston, Massachusetts 02110 International Fax: 617-439-0457 Owner(s): 1. FUNDS TO BE INCLUDED Please INITIAL Fund(s) which are to be included in your account. Only those Funds for which you give express permission (by initialing after the Fund name) will be used for your account.
U.S. Equities International Equities Fixed Income US Core International Core Emerging Country Debt -------- -------- -------- Growth Allocation Curr Hedged Intl Core International Bond -------- -------- -------- Value Allocation Intl Small Companies Curr Hedged Intl Bond -------- -------- -------- Fundamental Value Emerging Markets Domestic Bond -------- -------- -------- Core II Secondaries Japan Short-Term Income -------- -------- -------- US Sector Allocation Foreign X Global Bond -------- -------- -------- Tobacco-Free Core -------- Global Hedged Equity --------
2. INITIAL INVESTMENT The undersigned Owner, being a unitholder of the GMO International Equities Pool of The Common Fund for Nonprofit Organizations ("The Common Fund"), acknowledges receipt of a copy of the Agreement and Plan of Reorganization dated May 15, 1996 (the "Plan") by and between The Common Fund and the Trust, and agrees, pursuant to and in accordance with the terms of the Plan, (i) to accept from the GMO Pool a pro rata share of the GMO Pool's assets and liabilities as a liquidating distribution upon the discontinuance of the GMO Pool in accordance with the Plan, and (ii) to immediately thereafter transfer all such assets and liabilities to GMO Foreign Fund as its initial investment in GMO Foreign Fund, in exchange for shares of GMO Foreign Fund representing a pro rata share of the assets and liabilities contributed by all unitholders to the Fund pursuant to the Plan. The undersigned Owner hereby appoints Investors Bank & Trust Company, the Trust's transfer agent, as its true and lawful attorney-in-fact, with full power to accept delivery and effect the transfer of the assets and liabilities of the GMO Pool, to execute such documents or certificates as may be necessary to effect such delivery or transfer, and generally to do all such things in such Owner's name and behalf to enable the Plan to be carried out in accordance with its terms, hereby ratifying and confirming all such actions as may be taken in such Owner's behalf in carrying out the Plan. For additional investments, funds should be wired to: Investors Bank & Trust Please call prior to wiring to confirm Boston, Massachusetts date and amount of wire. ABA# 011001438 Attn: Transfer Agent GMO Deposit Account # 55555-4444 Further Credit: GMO Fund Name, Shareholder Name GMO Trust Application GMO Fund Account Application 3. DISTRIBUTIONS All distributions will be reinvested if no item is checked. Please note below special distribution instructions for individual funds (e.g., For all funds, reinvest dividends and capital gains except for U.S. Core Fund, whose dividends should be paid in cash). Dividends: Reinvested ----- Paid in Cash ----- Capital Gains: Reinvested ----- Paid in Cash ----- Special instructions: ------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 4. WIRE INSTRUCTIONS Please list full wire instructions for the transfer of redemption proceeds and distributions: Bank: ----------------------------------------------- Location: ------------------------------------------- ABA #: ---------------------------------------------- Attention: ------------------------------------------ Account #: ------------------------------------------ Further Credit: ------------------------------------- 5. TRANSACTION CONFIRMATIONS A transaction confirmation (typically mailed by the Fund's custodian on the day following the activity) is sent to the Registration Address noted in Block 1 of Part I. Please indicate to whom this confirmation should be addressed. Attn.: ---------------------------------- If you would like an additional confirmation sent, please indicate the individual who should receive the confirmation below. Name: Phone: -------------------------------------- ------------------- Title: Fax: ------------------------------------- --------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- GMO Trust Application GMO Fund Account Application 6. MONTHLY STATEMENTS AND QUARTERLY QUANTITATIVE COMMENTARIES Please list the individuals who should receive monthly statements of shares held and Fund performance and/or quarterly GMO market and Fund commentaries (attach additional pages if necessary): Name: Phone: ----------------------------------- ----------------------- Title: Fax: ---------------------------------- ------------------------- Address: -------------------------------- Send Monthly Statements? -------------------------------- ----- -------------------------------- Send Quant Commentaries? ----- Name: Phone: ----------------------------------- ----------------------- Title: Fax: ---------------------------------- ------------------------- Address: -------------------------------- Send Monthly Statements? -------------------------------- ----- -------------------------------- Send Quant Commentaries? ----- Name: Phone: ----------------------------------- ----------------------- Title: Fax: ---------------------------------- ------------------------- Address: -------------------------------- Send Monthly Statements? -------------------------------- ----- -------------------------------- Send Quant Commentaries? ----- Name: Phone: ----------------------------------- ----------------------- Title: Fax: ---------------------------------- ------------------------- Address: -------------------------------- Send Monthly Statements? -------------------------------- ----- -------------------------------- Send Quant Commentaries? ----- Name: Phone: ----------------------------------- ----------------------- Title: Fax: ---------------------------------- ------------------------- Address: -------------------------------- Send Monthly Statements? -------------------------------- ----- -------------------------------- Send Quant Commentaries? ----- 7. AUTHORIZED SIGNATURE Please sign exactly as name of registered individual appears in (1) of Part I. Include legal title if signing for a corporation, trust, custodian account, etc. --------------------------------- ----------------------- ------------- Authorized Signature Title Date Rule 497(b) File No. 333-2399 GMO TRUST PART B. STATEMENT OF ADDITIONAL INFORMATION MAY 17, 1996 This Statement of Additional Information contains material which may be of interest to investors but which is not included in the Prospectus/Proxy Statement (the "Prospectus") of GMO Trust's GMO Foreign Fund and The Common Fund for Nonprofit Organization's GMO International Equities Pool dated May 17, 1996. The Statement of Additional Information of GMO Trust (the "Trust") dated February 29, 1996, has been filed with the Securities and Exchange Commission and is incorporated herein by reference (File No. 2-98772). This Statement of Additional Information is not a prospectus and is authorized for distribution only when it accompanies or follows delivery of a prospectus, and should be read in conjunction with the Prospectus. Investors may obtain a free copy of the Prospectus or the Statement of Additional Information by writing the Trust, 40 Rowes Wharf, Boston, MA 02110 or by calling 1-800-447-3167. -1- FINANCIAL STATEMENTS The financial statements and schedules of GMO Foreign Fund have been previously filed electronically with the Securities and Exchange Commission and are incorporated herein by reference to the registrant's registration statement on Form N-1A (File No. 2-98772). The financial statements and schedules of the GMO International Equities Pool of The Common Fund for Nonprofit Organizations are set forth below. -2- GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED
SHARES DESCRIPTION VALUE ($) ATS AUSTRIA - 0.4% 36142 BANK AUSTRIA AG AUSH100 PTG CERTS 1,370,693 3230 OST BRAU-BETEILIGU AUSH100 171,747 1096 UNIVERSALE-BAU AG AUSH100 (VAR) 50,662 2937 VA TECHNOLOGY AG AUSH100(BR) 362,218 2090 WIENERBERGER BAUST AUSH100 (VAR) 435,648 -------------- 2,390,968 ============== AUD AUSTRALIA - 4.3% 224756 ADELAIDE STEAMSHIP ORD $A0.50 4,040 426000 AUSTRALIAN & NEW ZEALAND BANK GROUP ORD A$1 2,037,334 524000 BORAL ORD STK A$0.50 1,371,757 345000 BURSWOOD PROPERTY TRUST UNITS A$0.50 461,016 69500 CALTEX AUSTRALIA ORD$1 260,692 88800 CSL LIMITED ORD A$1 324,758 418000 DOMINION MINING LIMITED ORD AUD 0.50 218,853 364934 EMAIL LIMITED ORD STK A $0.50 1,000,974 335000 FOODLAND ASSOCIATED LIMITED ORD A$0.50 1,230,393 1062248 GOODMAN FIELDER LTD A$0.50 SYDNEY LISTING 1,112,326 2220912 M.I.M. HOLDINGS ORD A$0.50 3,210,734 294000 OIL SEARCH LTD ORD PGK 0.10 291,778 1657335 PASMINCO LIMITED ORD A$1 2,279,419 426001 PIONEER INTERNATIONAL LIMITED ORD A$0.50 1,271,672 327996 ROTHMANS HOLDINGS LIMITED ORD A$0.50 1,530,185 1446000 SYDNEY HARBOR CASINO HLDGS LIMITED AUDI PREF STK 2,169,555 13200 TABCORP HLDGS LTD SPONSORED ADR 144A 535,828 452735 TNT 8% CUM CNV NON RED PREF SHS A$0.50 640,359 1228200 TNT ORD A$0.50 1,516,447 349000 WESTPAC BANKING CORP A$1 1,641,811 260206 WILLS (WD & HO) ORD A$1 449,377 -------------- 23,559,308 ============== BEF BELGIUM - 2.8% 1271 BEKAERT SA NPV 1,044,241 18578 CFE NPV 4,862,277 14729 ELECTRABEL COM NPV 3,282,012 12973 G.I.B.HLDGS NPV 584,132 1260 GENERALE BANQUE NPV 448,554 3145 KREDIETBANK NPV 868,730 1 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 1742 PETROFINA SA ORD NPV(BR)-BRU LISTING 490,373 5949 POWERFIN NPV 766,727 2287 SOLVAY NPV 1,309,819 2873 TRACTABEL INVESTMENT INTER BV CAP NPV 1,108,005 382 UCB CAP NPV 640,916 -------------- 15,405,786 ============== CAD CANADA - 1.2% 46981 ABITIBI PRICE INC COM STK NPV 633,341 205528 AIR CANADA COM NPV 731,309 29693 ALLIANCE FOREST PRODUCTS COM 465,638 62249 CAMBRIDGE SHOPPING CENTRES NPV 399,603 15831 CANADIAN OCCIDENTAL PETROLEUM COM NPV - TORONTO LISTING 534,262 22700 CANFOR CORP COM NPV 212,336 58711 ELAN ENERGY INC COM NPV 522,263 76000 IAM GOLD CORP COM NPV 320,605 155100 KAP RESOURCES COM STK NPV 341,367 77600 KAP RESOURCES SPC WTS 3-AUG-2000(1 COM & 1/2 PUR 74,010 307411 MARKBOROUGH PPTYS INC COM NPV 160,128 78100 SEMI-TECH CORP CLASS'A'SUB VTGNPV 415,410 27000 ST LAURENT PAPERBOARD INC COM NPV 354,077 61100 STONE CONSOLIDATED CORP COM NPV 694,802 43000 SUZY SHIER SUB VTG SHS NPV 130,920 42000 TRIZEC CORP COM NPV 273,468 -------------- 6,263,539 ============== CHF SWITZERLAND - 2.7% 2306 ADIA I SZF 10(BR) 492,474 406 ASCOM HOLDING AG SZF500 (BR) 454,013 660 BANQUE CANTONALE VAUDOISE CHF 125(BR) 204,212 2100 BELIMO AUTOMATION AGCHF20 (REGD) 418,464 5765 BIBER HLD65 AG SZF20(REGD) 75,131 310 BOBST AG SZF100 (BR) 510,867 2816 CIBA-GEIGY AG SZF20(REGD) 3,525,475 180 COMPAGNIE FINANCIERE RICH AG 'A'SZF100(BR)PAIRED W/PTG 260,310 25330 CS HLDG SZF20(REGD) 2,326,735 2670 ELEKTROWATT AG SZF50 1,050,624 265 FISCHER(GEORG)AG SZF500(BR) 322,853 1504 FORBO HLDGS AG CHF50 (REGD) 614,574 2 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 770 HERO AG SZF40(BR) 326,943 350 HOLDERBANK FINANCIERE GLARIS SZF50(BR) 264,262 520 HURLIMANN HLDG AG PTG CERTS SZF50 194,560 3145 JELMOLI HOLDING AG SZF10(REGD) 356,981 340 LIECHTENSTEIN GLOBAL TRUST AG PTG CERTS SZF100 187,531 260 LINDT & SPRUNGLI AG DTG CERT CHF50(RFD 1-JAN-95) 415,134 1048 MERKUR HLDG AG SZF25(REGD) 207,071 210 NESTLE SA SZF10(REGD)-ZUR LISTING 236,953 66 ROCHE HLDG AG GENUSCHEINE NPV1 548,266 3062 SCHWEIZERISCHER BANKSVEREIN SZF100(BR) 1,125,063 3931 SCHWEIZERISCHER BANKVEREIN SZF50(REGD) 720,526 -------------- 14,839,025 ============== CHI CHILE - 0.1% 17821 FIVE ARROWS CHILE INVESTMENT TR WTS TO SUB FOR PTG SHS 8,376 91751 FIVE ARROWS CHILE INVESTMENT TRUST LTD 266,078 -------------- 274,454 ============== DEM GERMANY - 5.3% 1085 AACHENER&MUNCH. VER DM50(REGD)VINKULIERT 277,112 303 ASKO DEUTSCHE KAUFHAUS AG DM50 189,260 1300 ASKO DEUTSCHE KAUFHAUS AG NON VTG PRF DM50 FRA LISTING 658,763 5000 BANKGESELLSCHAFT BERLIN AG DM50 1,155,071 3500 BASF AG DM50(VAR) 944,889 2979 BAYER AG DM50 1,014,931 26200 BAYERISCHE HYPOTH-UND WECHSEL-DEM 5 648,743 10300 COMMERZBANK AG DM50 2,372,468 89310 CONTINENTAL AG DEM5 1,576,130 2600 DAIMLER BENZ AG DM50(VAR) 1,414,403 66100 DRESDNER BANK DEM5 1,766,577 2650 DYCKERHOFF AG NON VTG PRF DM50 626,550 3800 HOLZMANN (PHILIPP)AG DM50 1,449,360 2500 KOELNISCHE RUCKVER PREF DEM50 1,473,477 7095 KOLNISCHE RUCKVERSICHERUNGS-G DM50 5,167,079 1200 RHEINMETALL BERLIN DM50 184,540 150160 RWE-AG NON VTG PREF DEM5 4,547,220 5100 THYSSEN AG DM50 924,917 4100 VILLEROY & BOCH AG DM50(NON VTG PRF) 583,294 1600 VOLKSWAGEN AG DM50 560,938 3 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 2600 VOLKSWAGEN AG NON VTG PRF DM50 662,286 3700 VOLKSWAGEN AG WTS 27-OCT-98(TOPURCH PRF) 358,445 -------------- 28,556,451 ============== ESP SPAIN - 4.6% 3391 ACERINOX SA SPPT1000(REGD) 382,593 26595 AGUAS DE BARCELONA SPPT500 855,172 68354 BANCO BILBAO VIZCAYA S.A SPPT600(REGD) 2,550,502 2767 BANCO CENTRL HISPANO AMERICANOSPPT500(REGD) 58,424 7820 BANCO INTERCONTINENTAL ESPANOLSPPT1500(REGD) 787,766 8400 BANCO POPULAR ESPANOL SPPT (R) 1,451,392 40000 BANCO SANTANDER SA SPPT750-REG 1,905,146 35476 EMPRESA NACIONAL DE ELEC (ENDESA)SPPT800 2,032,755 35600 HIDROEL CANTABRICO SPPT1000 1,151,904 391526 IBERDROLA SA ORD SPPT500 3,612,824 8103 INMOBILIARIA METROPOLITANA VASCO SA SPPT500 262,514 72200 REPSOL SA SPPT500 2,723,101 218000 SEVILLANA DE ELECTRICIDAD SPPT500 1,572,390 266500 TELEFONICA DE ESPANA ORD SPPT500 4,231,011 210684 UNION ELECTRICA FENOSA SPPT500 1,151,177 23719 VALLEHERMOSO S A SPPT500 426,267 -------------- 25,154,938 ============== FRF FRANCE - 6.4% 17034 ALCATEL ALSTHOM CG FF40 1,578,794 5685 ALCATEL CABLE FF10 511,340 25767 BANQUE NATIONALE DE PARIS FF25 1,007,662 16490 BIC FRF50 1,816,764 290 BONGRAIN SA FF50 154,283 7500 BOUYGUES FF50 763,772 4668 C.G.I.P. FF100 1,116,613 20624 C.S.F.(THOMPSON-CSF) FF20 517,903 7860 CASINO GUICH-PERR FF10 280,854 16073 CERUS(CIE EUROPENNE REUNIS FF100 275,355 2958 CHARGEURS FF100 756,896 6028 CHRISTIAN DIOR FF52 802,936 35403 CIE DE SUEZ FF75 1,373,953 8327 CLUB MEDITERRANEE FF25 809,971 3895 COMPAGNIE DE ST-GOBAIN FF100 505,673 4 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 13417 COMPAGNIE FINANCIERE DE PARIBAS 'A' SHS FF50(BR) 815,008 4936 CPR-CIE PAR REESCO N V FF50 426,235 4193 CREDIT LOCAL DE FRANCE FF100 328,282 11402 CREDIT LYON CRT D'INVST FF180 479,846 5208 DANONE (EX BSN) FF10 798,129 5479 DOLLFUS-MEIG & CIE FF75 294,642 1652 ELF GABON XAF5000 282,029 1928 ERIDANIA BEGHIN-SAY FF65 PAR LISTING 327,234 790 FIN IND GAZ & EAUX FF50 342,660 7649 GAN GRP FF10 235,354 2744 GROUPE ANDRE SA FF50 265,712 1035 GUYENNE & GASCOGNE FF100 353,390 3208 LABINAL FF100 459,787 2590 LAFARGE FF25(BR) 171,416 21475 LAGARDERE GROUPE FF40(REGD) 569,114 14876 LYONNAISE DES EAUX FF60 1,390,888 14686 MICHELIN(CIE GLE DES ETABL.) CLASS'B' FF12(REGD) 699,680 11300 PECHINEY ORD 'A' SHS FRF 100 472,189 4510 PERNOD-RICARD FF20 287,297 12645 PEUGEOT SA FF35 1,927,813 3065 PINAULT-PRINTEMPS REDOUTE 845,727 27684 RHONE-POULENC SA ORD 'A'SHS FF25 713,876 47958 SEITA ORD FRF50 1,989,721 5425 SLIGOS FF25 493,231 8810 SOCIETE GENERALE ORD FF30 979,375 67784 SOCIETE NATIONALE ELF EQUITAINE FF50 4,595,183 260 ST LOUIS FF100 72,981 3159 STRAFOR FACOM FRF 25 228,138 20035 TOTAL 'B' SHS FF50 1,352,238 2620 VALLOUREC FF100 (USIN A TUB DE LOR ESCAUT) 124,356 5305 WORMS & CIE FF12 (REGD) 283,179 -------------- 34,877,477 ============== FSR FORMER SOVIET REPUBLIC - 0.3% 73378 AAO MOSENERGO SPONORED ADR 144 531,991 117000 FIRST RUSSIAN FRONTIERS TRUST ORD US!1 1,169,680 25400 FIRST RUSSIAN FRONTIERS TRUST WTS TO SUB FOR ORD 91,105 -------------- 1,792,775 ============== 5 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) GBP UNITED KINGDOM - 15.2% 81552 ALLIED DOMECQ ORD 25P 611,162 391640 ALLIED IRISH BANKS ORD IL0.25 LON LISTING 1,990,541 231030 AMSTRAD ORD 25P 662,928 239936 ANGLIAN WATER I ORD $1 2,197,286 133244 ARGYLL GROUP ORD 25P 624,347 1760531 ASDA GROUP PLC 2,855,042 288469 BAA ORD L1 2,355,553 71614 BARCLAYS ORD STK 1 794,643 734651 BERKELEY GROUP ORD 25P 6,167,138 296953 BPB INDUSTRIES ORD 50P 1,405,042 373564 BRITISH AIRWAYS ORD 25P 3,056,115 391727 BRITISH GAS ORD 25P 1,366,185 770018 BRITISH PETROLEUM CO ORD 25P 6,740,222 760750 BRITISH STEEL ORD 50P 2,206,152 803230 BRITISH TELECOMMUNICATIONS ORD25P 4,529,959 562529 CAPITAL SHOPPING CENTERS ORD 50P 2,343,945 138895 COMMERCIAL UNION ORD 25P 1,206,254 1201990 CORDIANT ORD 25P 2,293,247 281517 COSTAIN GROUP ORD 10P 360,931 104826 DE BEERS CONS/CENTENARY UNITS (1 CONSD DFD & 1 CENT DEP 3,279,916 96964 ENTERPRISE OIL ORD 25P 648,223 74427 FLEXTECH ORD 10P 571,398 67613 GENERAL ACCIDENT ORD 25P 633,634 125267 GLAXO WELLCOME ORD 25P 1,569,711 320800 GRAND METROPOLITAN ORD 25P 2,066,268 129040 GREAT PORTLAND EST ORD 50P 328,913 174279 GREAT UNIVERSAL STORES ORD STK 25P 1,790,194 141515 GUARDIAN ROYAL EXCHANGE 5P 475,188 985933 HANSON ORD 25P 2,889,273 230801 HANSON PLC WT 1991 EXP 9/30/97 14,540 603430 HILLSDOWN HLDGS ORD 10P 1,703,878 63158 HSBC HLDGS ORD 75P 967,836 147539 HYDER CUM RED PRF #1 7.875% 31-JUL-2013 227,441 71601 HYDER ORD #1.20 824,006 107971 IMPERIAL CHEMICAL INDUSTRIES ORD #1 1,521,068 362488 LADBROKE GROUP ORD 10P 1,076,101 2047 LLOYDS TSB GROUP ORD 25P 9,764 6 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 427359 LUCAS INDUSTRIES ORD 25P 1,402,398 674411 MARLEY ORD 25P 1,266,105 338140 MIRROR GROUP NEWSPAPERS ORD 25P 1,125,105 166412 NATIONAL WESTMINSTER BANK ORD L1 (POST CAP) 1,615,406 168246 PENIN&ORIENT STEAM NAV DFD STK 1,376,415 2148935 RAGLAN PROPERTIES PLC ORD 25P 819,980 73378 ROYAL INSURANCE HLDGS 25P 396,469 830747 SEARS ORD 25P 1,261,629 189995 SEVERN TRENT ORD #1 1,722,537 147832 STANDARD CHARTERED 25P 1,374,123 289733 SUN ALLIANCE GROUP 25P 1,596,412 675666 T & N PLC ORD L1 1,784,095 188228 TAKARE ORD 25P 432,375 333598 TAYLOR WOODROW ORD 25P 779,031 150925 THAMES WATER I ORD $1 1,323,400 -------------- 82,639,524 ============== GRD GREECE - 0.0% 25760 GREEK PROGRESS FUND SA UNITS (COMPR 10 ORD GKDR2000) 230,621 -------------- 230,621 ============== HKD HONG KONG - 3.8% 953400 AMOY PROPERTIES HK $1 1,115,628 649277 CATHAY PACIFIC AIRWAYS HK$0.20 1,141,734 183400 CHEUNG KONG(HLDGS) HK$0.50 1,292,384 539000 DICKSON CONCEPTS INTL HK$0.10 592,384 245300 GREAT EAGLE HLDGS HK0.50 724,736 1056800 HANG LUNG DEVELOPMENT CO HK$1 2,015,490 46128 HANG LUNG DEVELOPMENT CO WTS 31-OCT-97(TO PURCHASE ORD) 12,078 517900 HYSAN DEVELOPMENT HK$5 1,670,753 209000 JARDINE INTL MOTOR HLDGS US$0.025 278,342 271000 LAI-SUN GARMET INTL HK$0.50 310,105 855266 LIU CHONG HING BANK HK$0.50 1,249,613 863000 NATIONAL MUTUAL ASIA LTD HK$0.05 786,676 4896728 REGAL HOTELS(HDS.)HK$1 1,209,303 1046000 SEMI TECH (GLOBAL) HK$1 1,575,627 650000 SINO LD LTD BD CONV 144A 5.000% 02/26/2001 DD 02/26 637,000 138000 SWIRE PACIFIC A HK $0.60 1,213,344 647000 SWIRE PACIFIC 'B'HK$0.12 886,760 7 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 564500 WHARF HOLDINGS HK$1 2,131,290 570000 WHEELOCK & CO LTD HK$.50 1,142,358 169912 WING ON CO HK$2 183,445 683486 WINSOR INDUSTRIAL CORP 640,713 -------------- 20,809,763 ============== HUF HUNGARY - 0.0% 133921 FOTEX HUFO100 (REDG) 149,322 -------------- 149,322 ============== IA INDIA - 0.2% 21000 ALLIANCE CAPITAL GROWTH INDIA LIBERALISATION'A' 149,100 52400 INDIA FUND 'A' SHARES 241,534 59008.907 MAHINDRA & MAHINDRA LTD GLOBALDEPOSITARY REPT 144A 445,281 11000 MORGAN STANLEY INDIA INVT FD INC 122,375 -------------- 958,290 ============== IDR INDONESIA - 0.1% 271485 BANK DAGANG NASNL INDONESIA ORD IDRH1000 (A.MKT) 235,140 190637 DHARMALA INTILAND IDRH1000 (ALIEN MARKET) 124,346 274000 DHARMALA SAKTI SEJAHTENA IDRH1000 (ALIEN MARKET) 146,493 -------------- 505,979 ============== ITL ITALY - 2.5% 19393 ASSICURAZIONI GENERALI ITL2000 433,527 307362 BANCA COMMERCIALE ITALIANA-SPAITL1000 642,014 26210 BANCA POPULARE DI BRESCIA ITL5 152,791 170080 BANCA TOSCANA ITL1000 340,074 547521 BCO AMBROS VENETO DI RISP ITL1000 (NON CNV) 796,194 419304 CIR-COMPAGNIE INDUST ITL1000 234,002 163791 COFIDE ITL1000 56,411 157240 COMAU FINANCIERE ITL500 210,603 820790 CREDITO ITALIANO SPA ITL 500 879,477 73064 DANIELI & C DI RISP ITL2000(- NON CV) 288,920 16772 ERICSSON SPA ITL1000 213,943 68711 FALCK,ACC FERR LOMB ITL2500" 201,589 154620 FIAT SPA ORD ITL1000 485,685 242610 FIAT SPA PRIV ITL1000 444,093 105159 FIDIS ORD ITL1000 291,085 93885 I.F.I.L.DI RISP ITL1000(NON CV 158,681 8 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 22660 IFI(ISTIT FIN IND)PRIV ITL1000 213,680 39570 IMI SPA ORD ITL5000 271,053 148330 ITALGAS (SOC ITAL) ITL1000 430,451 104830 MAGNETI MARELLI ITL1000 141,744 269800370 MEDIOBANCA SPA BDS ITL1000-RAS4.000% 31-DEC-97 157,882 594180 MONTEDISON S.P.A. ITL1000 367,598 419304 MONTEFIBRE ITL1000 294,174 465166 OLIVETTI C SPA ORD ITL1000 238,829 30957 R.A.S. WTS 31-DEC-97(TO PURCH DI RIP) 53,211 15669 R.A.S. WTS 31-DEC-97(TO PURCHASE ORD) 57,963 59385 RAS ITL1000 579,497 83770 S A I DI RISP ITL100 NON CNV 318,967 72445 SIRTI SPA ITL 1000 413,537 310368 STET ITL1000 862,081 490983 STET ITL1000 DI RISP(NON CNV) 977,022 1044364 TELECOM ITALIA MOBILE ITL50 DIRISP 1,151,009 85205 TELECOM ITALIA SPA DI RISP ITL1000 (NON CONV) 120,371 18870 TORO ASSICURAZION DI RISP ITL1000 101,999 28998 TORO ASSICURAZIONI SPA ITL1000 361,760 93295 UNICEM(UNION CEM) DI RISP ITL1000 (NON CNV) 268,360 35120 UNICHEM(UNION-CEM-MARCH EMIL) SPA ITL1000 221,755 -------------- 13,432,033 ============== JPY JAPAN - 25.8% 7200 ACOM CO Y50 278,036 10000 AIDA ENGINEERING Y50 84,806 39100 AJL PEPS TR PREMIUM EXCHANGEABLE PART SHS 869,975 29300 AKITA BANK Y50 213,689 18500 AMWAY JAPAN NPV 934,081 23000 AOYAMA TRADING Y50 703,226 149000 ASAHI BANK Y50 1,783,263 118000 ASAHI CHEMICAL INDUSTRY 873,829 1900 AUTOBACS SEVEN Y50 165,217 29000 BANYU PHARMACEUTICAL CO Y50 376,905 149000 BRIDGESTONE CO Y50 2,493,782 30000 CALSONIC CORP Y50 235,624 133000 CANON INC Y50 2,536,886 75000 CASIO COMPUTER CO Y50 715,288 59324 CHUBU ELECTRIC PWR Y500 1,364,535 9 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 4000 CHUDENKO CORP Y50 135,390 28858 CHUGOKU ELECTRIC POWER CO INC Y500 647,585 20400 CIRCLE K JAPAN CO JPY 50 816,382 87000 DAI NIPPON PRINTING CO Y50 1,586,255 45000 DAI-TOKYO FIRE & MARINE INS CO 332,398 26000 DAIICHI PHARMACEUTICAL CO Y50 408,415 68000 DAIWA HOUSE INDUSTRY CO Y50 1,068,163 529 EAST JAPAN RAILWAY CO Y50000 2,720,430 12800 EXEDY CORPORATION Y50 204,656 48000 FUJI PHOTO FILM LTD ORD Y50 1,373,352 52000 FUKUOKA BANK OF Y50 432,726 37000 GENERAL SEKIYU KK Y50 339,037 35000 GUMMA BANK Y50 366,526 22000 HIGO BANK Y50 176,905 33000 HITACHI CREDIT CORP Y50 610,940 697000 HITACHI LTD Y50 6,777,747 216000 HITACHI ZOSEN CORP Y50 1,163,310 29612 HOKKAIDO ELE POWER CO INC Y500 672,811 137000 HONDA MOTOR CO Y50 2,984,666 21000 HOUSE FOOD INDUSTRIAL CO 380,926 73000 HOYA CORP Y50 2,511,828 223000 ISUZU MOTORS LTD Y50 1,290,669 20000 ITO-YOKADO CO Y50 1,187,471 400 JGC CORP Y50 4,825 53000 JUSCO CO Y50 1,382,609 67750 KANSAI ELEC POWER Y500 1,571,015 148000 KAO CORP Y50 1,840,486 13000 KIRIN BEVERAGE CORP Y50 166,526 37400 KURITA WATER INDUSTRIES Y50 867,246 16000 KYUDENKO CORP Y50 209,444 52933 KYUSHU ELECTRIC POWER CO INC Y500 1,202,685 5800 MABUCHI MOTOR Y50 330,266 20000 MAEDA ROAD CONSTRUCTION Y50 364,656 43000 MAKINO MILLING MACHINE CO Y50 474,427 276000 MARUBENI CORP Y50 1,545,807 74000 MARUI CO Y50 1,612,155 35000 MARUICHI STEEL TUBE Y50 683,964 305000 MATSUSHITA ELECTRIC INDUSTRIALCO Y50 4,962,132 10 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 97000 MATSUSHITA ELECTRIC WORKS Y50 1,043,011 490000 MBL INTL FIN BER 3.000% 11/30/2002 DD 10/11 542,063 114000 MINEBEA CO Y50 975,316 452000 MITSUBISHI ELECTRIC CORP Y50 3,364,114 459000 MITSUBISHI HEAVY IND Y50 3,965,554 28000 MITSUBISHI OIL CO Y50 235,886 287000 MITSUI & CO Y50 2,600,309 63000 MITSUI PETROCHEMICAL INDS LTD 518,962 101000 MITSUI TRUST & BANKING Y50 1,133,240 12000 MURATA MANUFACTURING CO Y50 412,903 9700 NAMCO Y50 299,299 9000 NATIONAL HOUSE INDUSTRIAL CO Y50 153,156 12000 NICHICON CORP Y50 157,083 28350 NICHIDO FIRE Y50 213,387 17700 NINTENDO CO 1,132,006 37700 NIPPON ELECTRIC GLASS Y50 690,902 132000 NIPPON EXPRESS CO Y50 1,295,933 57000 NIPPON LIGHT METAL CO Y50 346,424 84000 NIPPON MEAT PACKERS Y50 1,240,954 17000 NIPPON SHARYO Y50 166,900 45000 NIPPON SHOKUBAI CO Y50 Y50 458,626 316000 NIPPON STEEL 1,087,312 112 NIPPON TEL & TEL CORP Y50000 818,925 40000 NISHIMATSU CONSTRUCTION CO Y50 456,288 277000 NISSAN MOTOR CO Y50 2,144,516 660000 NKK CORP Y50 1,906,872 137000 OBAYASHI CORP Y50 1,175,933 72000 OKUMURA CORP Y50 665,133 74000 OLYMPUS OPTICAL CO Y50 719,589 77000 OMRON CORP Y50 1,706,311 44000 ONWARD KASHIYAMA CO Y50 666,480 24100 ORIX CORP Y50 912,623 15800 PARIS MIKI INC JPY50 605,704 4900 PROMISE CO Y50 217,625 140000 RICOH Y50 1,505,376 28000 RINNAI CORP Y50 638,803 21000 ROHM CO Y50 1,197,756 159000 SAKURA BANK Y50 1,813,745 11 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 46900 SANKYO CO Y50 1,074,381 75000 SANWA BK Y50 1,507,714 93000 SANYO ELECTRIC CO Y50 556,522 5300 SANYO SHINPAN FINANCE CO Y50 391,491 132000 SEKISUI CHEMICAL Y50 1,727,910 106000 SEKISUI HOUSE Y50 1,328,097 8200 SHIKOKU ELECTRIC POWER CO,INC Y500" 185,545 12000 SHIMACHU CO Y50 384,853 78750 SHIN-ETSU CHEMICALS CO Y50 1,516,830 7875 SHINKAWA Y50 201,017 49000 SHISEIDO Y50 577,279 13900 SHO-BOND CONSTRUCTION CO Y50 505,573 45000 SHOWA CORP 382,889 25000 SMC Y50 1,769,519 38000 SONY CORP Y50 2,270,407 59000 SUMITOMO BAKELITE CO Y50 441,328 141000 SUMITOMO CORP Y50 1,489,762 108000 SUMITOMO MARINE & FIRE 927,013 87000 SUMITOMO TRUST & BANK 1,195,792 44000 TAISHO PHARMACEUTICAL CO Y50 905,096 115000 TAKEDA CHEMICAL INDUSTRIES Y50 1,795,699 29000 TDK CORP 1,494,063 103000 TEIJIN Y50 568,209 27450 TOAGOSEI CO LTD 148,864 54000 TODA CONSTRUCTION CO Y50 492,286 22414 TOHOKU ELEC PWR Y500 519,745 20000 TOKYO BROADCASTING SYS INC Y50 310,425 22860 TOKYO ELECTRIC PWR CO Y500 585,661 13000 TOKYO ELECTRON Y50 443,665 54000 TOPPAN PRINTING Y50 701,823 158000 TORAY INDUSTRIES INC Y50 1,022,310 22000 TOSTEM CORP Y50 687,050 324000 TOYOTA MOTOR CO Y50 7,149,509 9900 TRANS COSMOS INC Y50 520,224 58000 UNY CO Y50 1,057,504 35000 WACOAL CORP Y50 431,978 7300 XEBIO CO Y50 249,135 10000 YAHAGI CONSTRUCTION CO Y50 81,440 12 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 9000 YAKULT HONSHA Y50 122,020 29000 YAMAHA CORP Y50 528,752 85000 YAMANOUCHI PHARMACEUTICAL CO Y50 1,891,538 23000 YAMATAKE HONEYWELL Y50 400,000 20000 YAMAZAKI BAKING CO Y50 362,786 5000 YORK-BENIMARU Y50 179,991 16800 YOSHITOMI PHARM Y50 150,799 -------------- 139,455,486 ============== KRW KOREA - 1.2% 390 DAEHAN FLOUR MILL CO KSWN 5000 16,453 58000 DAEWOO CORP KSWN5000 641,355 22000 DAEWOO SECURITIES CO PREF KSWN5000 351,550 127523.33 HAN WHA KSWN5000 2,070,370 35180 HANSHIN SECURITIES CO PREF KSWN5000 385,867 59 KOREA 1990 TRUST IDR 324,500 69000 KOREA FIRST BANK KSWN5000 609,511 9280 KYUNG NAM BANK KSWN5000 118,632 16000 KYUNGKI BANK KSWN5000 156,472 30000 L G SECURITIES PREF KSWN5000 318,696 36050 PUSAN BANK KSWN5000 453,937 21000 SAMSUNG HEAVY KSWN5000 405,369 72000 SEOUL BANK KRW5000 589,070 6300 SSANGYONG INVESTMENT & SECURITIES PFD KSWN5000 65,235 -------------- 6,507,018 ============== MXN MEXICO - 0.3% 170000 CIFRA SA DE CV ORD SHS NPV'C' 222,004 2049 GPO FINANCIERO BANCOMER SER'L'NPV 674 10000 GRUPO FINANCIERO BANAMEX ACCIVL SER'B'NPV 21,340 485 GRUPO FINANCIERO BANAMEX ACCIVSER 'L' NPV 927 55562 GRUPO FINANCIERO BANCOMER SA SER'B'NPV 22,417 630000 GRUPO FINANCIERO INVERMEXICO 7.500% 16/JUN/2001 157,500 26000 GRUPO TELEVISA SA DE CV PTG CERTS REPR 1 'A',L,D, SHS" 315,250 52000 MEXICO FD INC 799,500 -------------- 1,539,612 ============== NLG NETHERLAND - 6.5% 36378 ABN AMRO HOLDINGS NTFL5 1,809,982 540013 ADVANCED SEMICONDUCTOR MATLS INTL NV 4,995,120 13 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 40647 AEGON NV NLG1 1,919,052 4429 AKZO NOBEL NV NTFL20 -AMS LISTING 492,469 1979284 ASMI NEW LN 12.500% 30-NOV-1999 1,198,041 10735 BAM GROEP NTFL4 597,147 33544 BOLS WESSANEN (KONINKLIJKE) CVA NTFL2 651,754 11531 DE BOER WINKELBEDRIJVEN CVA NTFL 2.50 579,307 11129 DORDTSCHE PETROLEUM INDUSTRIE MIJ NTFL2.5 1,658,471 5032 DSM NV ORD NTFL20 477,585 144660 ELSEVIER NV NLG0.10-AMS LISTING 2,215,301 22515 FUGRO NV 269,837 22998 GIST BROCADES NV 737,785 60733 HAL TRUST 100 CLASS'B'UNITS NPV 687,432 51655 HAL TRUST CERTS(1 UNITS) 581,553 14369 HUNTER DOUGLAS NV NTFL1 974,111 6924 ING GROEP NV CVA NLG2.50 GROEP NV CVA NTFL2.50 502,924 10326 INTERNATIONAL NEDERLANDEN GRP CVA PRF NTFL2.50 53,814 11793 KONDOR WESSELS GROEP NV NTFL5 371,186 15326 KONINKLIJKE NEDLLOYD NV NLG10 320,045 19014 KONINKLIJKE PTT NEDERLAND NLG10 748,084 11721 KONINKLIJKE VAN OMMEREN CETECOCVA (NON-EXCH) NTFL10 405,812 13100 KONINKLINKE KNP BT NTFL2.5-AMSLISTING 328,273 79 MOEARA ENIM PETROL 1-4 PROFIT SHS NPV 1,329,338 7542 NKF HLDGS NV NTFL1 1,451,701 26430 NORIT NV NTFL1 327,955 8858 NUTRICIA(VERINGDE BEDRIJVEN) NV CVA(PART-EXCH)NLG2.50 887,355 6290 OCE-VD GRINTEN NV NTFL4 586,320 17558 PHILIPS ELECTRONICS N.V 638,672 81479 PHILIPS ELECTRONICS NV NTFL10 (DUTCH SHARES) 2,964,038 26207 PIRELLI TYRE HLDGS NV NTFL10 234,770 19917 ROTO SMEETS DG BOER NTFL10 555,762 10273 ROYAL DUTCH PETROLEUM CO NTFL5(BR)-AMS LISTING 1,455,046 15200 VENDEX INTERNATIONAL N.V. BDR-EACH REPR1ORD CVA NLG0.05 435,179 8637 VOLKER STEVIN CVA NTFL20 584,478 21048 WERELDHAVE NV NTFL20 1,131,325 321264 WERELDHAVE NV STK DIV CPNS 171,123 -------------- 35,328,148 ============== NOK NORWAY - 1.0% 44500 AKER NORCEM NWKR20 822,397 14 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) 7907 BOLIG-OG NAERINGSBANKEN NWKR50 191,754 112700 DEN NORSKE BANK NWKR10 349,768 17700 DYNO INDUSTRY NWKR20 386,460 6400 ELKEM A/S NWKR20 82,844 17800 FOKUS BANK A/S NOK 11 (REGD) 97,716 7070 HAFSLUND NYCOMED AS 'B'NWKR5 192,957 4000 KVAERNER INDUSTRIER NWKR 12.50SER'A' 144,728 10895 LEIF HOEGH & CO NWKR10 156,321 30000 NORSK DATA A S ADR B 8,445 26000 NORSK HYDRO AS NWKR20 1,133,335 4700 NORSKE SKOGSINDUSTRIER NWKR20 'A' 142,934 3900 ORKLA A/S NWKR25 179,428 7900 ORKLA A/S NWKR25'B' 345,592 11200 SAGA PETROLEUM NWKR15 143,230 23700 SCHIBSTED A/S NWKR1 325,263 11500 STORLI NWKR100 186,524 126300 UNI STOREBRAND 'A' NWKR20 600,767 10000 UNITOR AS NWKR12.5 148,159 -------------- 5,638,621 ============== NZD NEW ZEALAND - 2.5% 324 AIR NEW ZEALAND LIMITED 'B'ORDNZ$1(NZ RESIDENTS) 1,070 155000 BD GROUP LIMITED 7.000% 30-JUN-96 92,909 1002000 BRIERLEY INVEST LTD ORD NZ .50 955,517 753000 BRIERLEY INVMT CNV UNS SUB NTS9.000% 30-JUN-1998 651,391 712651 CARTER HOLT HARVEY LIMITED ORDNZ$0.50 1,572,768 218000 FISHER & PAYKEL NZ$0.50 697,906 245800 FLETCHER CHALLANGE LIMITED BUILDING SHARES NZD0.40 585,992 245836 FLETCHER CHALLENGE LIMITED ENERGY SHARES NZD0.4 509,774 461672 FLETCHER CHALLENGE LIMITED PAPER SHARES NZD0.40 889,602 1008388 FLETCHER CHALLENGE LTD FORESTSDIV SHS NZ$0.40 (NZ REG) 1,346,252 268000 LION NATHAN LIMITED NZ$0.25 AUC LISTING 660,824 1335285 PROGRESSIVE ENTERPRISES LTD ORD NZ$0.500 973,196 1693000 SOVEREIGN ASSURANCE ORD NZD 1,729,780 4504000 TASMAN PROPERTIES 2,546,357 270051 WRIGHTSON LIMITED ORD NZ$0.07 198,661 -------------- 13,412,001 ============== 15 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED SHARES DESCRIPTION VALUE ($) SGD SINGAPORE - 1.5% 805979 DAIRY FARM INTERNATIONAL HLDGSUS$0.05 761,650 1607171 HONG KONG LAND HLDG ORD US$0.1SIN LISTING 3,857,210 277000 JARDINE STRATEGIC HLDGS IDR REPR 1, 7 1/2% CNV PREF SH 309,894 1039000 JARDINE STRATEGIC HLDGS ORD US$0.05 3,283,240 123000 JARDINE STRATEGIC HLDGS WTS TOSUB FOR ORD(SING REG) 2-MA 46,125 -------------- 8,258,119 ============== TWN TAIWAN - 0.4% 21638 BARING TAIWAN FUND REG ORD US$0.01 179,163 200000 FORMOSA FUND IDR(REGD) 1,460,000 15700 R O C TAIWAN FD SH BEN INT 162,888 16000 TUNTEX DISTINCT CORP GLOBAL DEPOSITARY RCPT 102,000 -------------- 1,904,050 ============== USD UNITED STATES - 0.1% 20500 STILLWATER MINING CO 435,625 -------------- 435,625 ============== ZAR SOUTH AFRICA - 0.6% 4562 ANGLO AMERICAN CORP OF S.AFRICORD R0.10 296,007 61000 BARLOW LIMITED R0.05 782,395 71755 MALBAK ORD NPV(144A) 430,889 106900 NSA INVESTMENT LTD OPTIONS 154,587 534200 NSA INVESTMENTS ORD R0.04 1,612,172 -------------- 3,276,050 ============== CASH EQUIVALENT - 8.4% 5058979 CGF CLIENT CASH INVT TR ACCOUNT 5,058,979 40341635.6 PHILADELPHIA NATIONAL BANK RESERVE FUND 40,341,636 -------------- 45,400,615 ============== TOTAL INVESTMENTS - 98.2% 532,995,599 ==============
16 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED TOTAL INVESTMENTS - CONTINUED - 98.2% $532,995,599 -------------------- Other Assets and Liabilities (Net) - 1.0% $9,710,768 -------------------- TOTAL NET ASSETS - 100% (COST $478,915,518) $542,706,367 ====================
17 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL SCHEDULE OF INVESTMENTS MARCH 31, 1996 UNAUDITED FORWARD CURRENCY CONTRACTS
NET UNREALIZED SETTLEMENT UNITS OF IN EXCHANGE FOR APPRECIATION DATE DELIVER CURRENCY (IN U.S. DOLLARS) (DEPRECIATION) SALES 1-Jul-96 DEM 22,100,000 15,052,763 $258,449 1-Jul-96 DEM 22,100,000 15,052,763 258,449 1-Jul-96 NLG 16,500,000 10,047,827 172,372 1-Jul-96 CHF 10,200,000 8,656,465 64,838 1-Jul-96 CHF 10,200,000 8,656,465 64,838 ------------------- $818,946 ===================
CURRENCY ABBREVIATIONS DEM German Deutsche Mark NLG Netherlands Guilder CHF Swiss Franc NOTES TO THE SCHEDULE OF INVESTMENTS ADR American Depositary Receipt GDR Global Depositary Receipt IDR International Depositary Receipt 18 See accompanying notes to the financial statements GMO COMMON FUND INTERNATIONAL POOL STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 1996 UNAUDITED ASSETS: Investments, at value (cost $478,915,158) $ 532,995,599 Foreign currency, at value (cost $5,880,852) 5,803,670 Cash 236,750 Receivable for investments sold 4,544,638 Dividends and interest receivable 4,000,790 Receivable for open forward foreign currency contracts 818,946 --------------- Total assets 548,400,393 --------------- LIABILITIES: Payable for investments purchased 5,694,026 --------------- Total liabilities 5,694,026 --------------- NET ASSETS $ 542,706,367 (equivalent to $5,941.21 per unit based on 91,346 units outstanding) ===============
19 See accompanying notes to the financial statements. GMO COMMON FUND INTERNATIONAL POOL STATEMENT OF OPERATIONS - PERIOD ENDED MARCH 31, 1996 UNAUDITED INVESTMENT INCOME: Dividends $ 12,663,932 Interest 3,521,146 -------------------- Total income 16,185,078 -------------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments 51,996,497 Foreign currency, forward contracts and foreign currency related transactions 10,125,323 -------------------- Net realized gain 62,121,820 -------------------- Change in net unrealized appreciation (depreciation) on: Investments 44,597,325 Foreign currency, forward contracts and foreign currency related transactions (27,692,293) -------------------- Net unrealized gain 16,905,033 -------------------- Net realized and unrealized gain 79,026,852 -------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 95,211,931 ====================
20 See accompanying notes to the financial statements. GMO COMMON FUND INTERNATIONAL POOL STATEMENT OF CHANGES IN NET ASSETS UNAUDITED
PERIOD ENDED YEAR ENDED MARCH 31, 1996 JUNE 30, 1995 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income $ 16,185,078 $ 19,038,727 Net realized gain 62,121,820 43,330,735 Change in net unrealized appreciation (depreciation) 16,905,033 (57,708,909) -------------------- -------------------- Net increase (decrease) in net assets resulting from operations 95,211,931 4,660,552 -------------------- -------------------- Distributions to shareholders from: Net investment income (18,715,335) (8,936,985) -------------------- -------------------- Fund share transactions: Proceeds from sale of shares 116,562,339 3,329,049 Cost of shares repurchased (475,443,209) (10,286,660) -------------------- -------------------- Net decrease in net assets resulting from principal transactions (358,880,870) (6,957,612) -------------------- -------------------- Total decrease in net assets (282,384,274) (11,234,044) NET ASSETS: Beginning of period 825,090,641 836,324,685 -------------------- -------------------- End of period $ 542,706,367 $ 825,090,641 ==================== ====================
21 See accompanying notes to the financial statements. GMO COMMON FUND INTERNATIONAL POOL FINANCIAL HIGHLIGHTS (FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD) UNAUDITED
PERIOD ENDED YEAR ENDED JUNE 30, ------------- -------------------------------------------------------------------- 3/31/96 1995 1994 1993 1992 1991 ------------- ------------ ------------- ------------ ------------- ------------- NET ASSET VALUE, BEGINNING OF PERIOD $5,362.04 $5,128.96 $4,145.16 $4,047.89 $3,575.10 $4,238.06 ------------- ------------ ------------- ------------ ------------- ------------- Income (loss) from investment operations: Net investment income (a) 105.62 161.11 87.70 140.35 126.74 177.96 Net realized and unrealized gain (loss) on investments 558.43 225.66 995.43 88.19 475.66 -657.60 ------------- ------------ ------------- ------------ ------------- ------------- Total from investment operations 664.05 386.77 1,083.13 228.54 602.40 -479.64 ------------- ------------ ------------- ------------ ------------- ------------- Less distributions to unitholders: From net investment income -84.88 -153.69 -99.33 -131.28 -129.60 -183.32 ------------- ------------ ------------- ------------ ------------- ------------- NET ASSET VALUE, END OF PERIOD $5,941.21 $5,362.04 $5,128.96 $4,145.16 $4,047.89 $3,575.10 ============= ============ ============= ============ ============= =============
22 See accompanying notes to the financial statements. GMO COMMON FUND INTERNATIONAL POOL NOTES TO FINANCIAL STATEMENTS UNAUDITED MARCH 31, 1996 SIGNIFICANT ACCOUNTING POLICIES The GMO Common Fund International Pool (the "Fund") is a sub-fund of the International Equity Fund (less hedged) of The Common Fund, which is a non-profit corporation created by Special Act of the Legislature of the State of New York. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. (the "Manager"). The Fund was established on September 1, 1984. The Fund seeks maximum total return through investment in a portfolio of common stocks of non-U.S. issuers. The Fund is valued monthly and income is distributed quarterly to participants. Each participant of the Fund is an endowment fund. The following is a summary of significant accounting policies which are in conformity with generally accepted accounting principles. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. PORTFOLIO VALUATION Equity securities traded on a national securities exchange are valued at a composite close price or, in the absence of a recorded trade, at a mean of the current bid and asked prices. Equity securities not listed on the National Association of Securities Dealers Automatic Quotation System are valued at the current bid price. If there is no current bid, the current asked price is used. Fixed income securities are valued at quoted market prices. Short term investments are valued at cost which approximates market. Securities listed or admitted to trading on an international securities exchange are valued at the last sale price at the close of the primary international exchange. Securities not readily marketable, including certain investments in limited partnerships, are valued at fair value deemed appropriate by management, with consideration given to the financial condition and operating results of the issuer, meaningful third-party transactions in the private market, and other factors deemed relevant. 23 GMO COMMON FUND INTERNATIONAL POOL NOTES TO FINANCIAL STATEMENTS - CONTINUED UNAUDITED MARCH 31, 1996 FOREIGN CURRENCY TRANSLATION The net assets of the Fund are maintained in U.S. Dollars. The net assets of the Fund are translated at prevailing foreign exchange rates in effect at each monthly valuation date. During the year, transactions in foreign securities are translated from foreign currencies into dollars at exchange rates in effect at the transaction date. Income on investments is translated at prevailing exchange rates in effect on the remittance dates. FORWARD CURRENCY CONTRACTS The Fund purchases and sells foreign currency and forward contracts. A forward contract obligates one party to purchase and the other party to sell a specific currency at a set price on a future date and entails the risk that the counterparty may not have the credit to perform. The contracts are valued daily at current future exchange rates and an unrealized gain or loss is recorded. The Fund realizes a gain or loss on settlement of the contracts. (See Schedule of Investments for open positions in forward foreign currency contracts at March 31, 1996). TAXES The Fund is exempt from Federal income tax under section 501(c)(3) of the Internal Revenue Service. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS TO SHAREHOLDERS Security transactions are accounted for on a trade date basis. Realized gains and losses on sales of securities are determined on an average cost basis. Long term capital gains distributions received on investments in mutual funds are reinvested. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Distributions of all net investment income to participants are made quarterly in arrears. Accrued net investment income on cross fund investments is included in other income. EXPENSES Expenses, including a management charge of 0.75% if average monthly net assets paid to The Common Fund, are paid outside of the Fund in the form of a reduction in the amount of income distributed to each participant or in the form of a quarterly invoice sent to participants. 24 GMO COMMON FUND INTERNATIONAL POOL NOTES TO FINANCIAL STATEMENTS - CONTINUED UNAUDITED MARCH 31, 1996 Investment risk There are certain additional risks involved in investing in foreign securities that are not inherent in investments of domestic securities. These risks may involve adverse political and economic development and the possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times more volatile than securities of comparable U.S. companies and U.S. securities markets. 25 GMO COMMON FUND INTERNATIONAL POOL NOTES TO FINANCIAL STATEMENTS - CONTINUED UNAUDITED MARCH 31, 1996 UNIT TRANSACTIONS
PERIOD ENDED YEAR ENDED MARCH 31, 1996 JUNE 30, 1995 ------------------- ----------------- Units sold 20,651 12,631 Units issued in reinvestment of distributions 112 165 Units repurchased (83,373) (8,955) ------- ------ Net increase (decrease) (62,610) 3,841 Unit shares: Beginning of period 153,956 150,115 ------- ------- End of period 91,346 153,956 ====== =======
26 -----END PRIVACY-ENHANCED MESSAGE-----