UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-04347
GMO Trust, on behalf of the following series:  (the “Covered Series”) — attached Schedule A
(Exact name of registrant as specified in charter)
40 Rowes Wharf, Boston, MA					02110
(Address of principal executive offices)					(Zip code)
Scott Eston, Chief Executive Officer, 40 Rowes Wharf, Boston, MA 02110
(Name and address of agent for service)
Registrant’s telephone number, including area code:				617-346-7646
Date of fiscal year end:	02/28/06
Date of reporting period:		02/28/06

Except as otherwise noted, the information included in this filing (including related certifications) relates solely to the Covered Series. GMO Trust has submitted a Form 12b-25 notification with respect to the other series of GMO Trust, and will supply information relating to such other series in a subsequent filing.

Schedule A - (the “Covered Series”)
	GMO Tax-Managed Small/Mid Cap Fund	GMO U.S. Sector Fund
	GMO Short-Duration Investment Fund	GMO International Small Companies Fund
	GMO Domestic Bond Fund	GMO World Opportunity Overlay Fund
	GMO Tax-Managed U.S. Equities Fund	GMO Currency Hedged International Equity Fund
	GMO Tax-Managed International Equities Fund	GMO International Bond Fund
	GMO U.S. Quality Equity Fund	GMO Emerging Country Debt Fund
	GMO Tobacco-Free Core Fund	GMO Emerging Markets Fund
	GMO Taiwan Fund	GMO Alternative Asset Opportunity Fund
	GMO Global Growth Fund	GMO Emerging Country Debt Share Fund
	GMO Inflation Indexed Bond Fund	GMO Special Purpose Holding Fund
	GMO Foreign Fund	GMO International Equity Allocation Fund
	GMO Currency Hedged International Bond Fund	GMO Global Balanced Asset Allocation Fund
	GMO Foreign Small Companies Fund	GMO Global (U.S.+) Equity Allocation Fund
	GMO Emerging Markets Quality Fund	GMO Benchmark-Free Allocation Fund
	GMO Short-Duration Collateral Fund	GMO World Opportunities Equity Allocation Fund
	GMO Core Plus Bond Fund	GMO Strategic Balanced Allocation Fund
	GMO Global Bond Fund	GMO Alpha Only Fund
	GMO International Intrinsic Value Fund	GMO Real Estate Fund
	GMO Developed World Stock Fund	GMO Emerging Countries Fund

Item 1. Reports to Stockholders.

The annual reports for each Covered Series of the registrant for the period from March 1, 2005 through February 28, 2006 are filed herewith.

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Tax-Managed Small/Mid Cap Fund

(Formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the U.S. Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Tax-Managed Small/Mid Cap Fund returned +13.3% for the fiscal year ended February 28, 2006, as compared to +17.0% for the Russell 2500 Index. On an after-tax basis, the Fund returned +13.1% compared to the benchmark's +16.8% for the same period. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in U.S. equity securities throughout the period.

The portfolio's underperformance of the benchmark is attributed to both sector selection and stock selection. By sector, an overweight in automotive stocks, which underperformed, was the primary detractor from positive returns. An underweight in technology stocks, which performed well during the period, also worked against the portfolio.

Within sectors, stock selection had mixed results. Overweights in home building stocks, including Toll Brothers and MDC Holdings, underperformed. Selection within healthcare and transportation stocks, however, was a strong positive factor for the fiscal year. The portfolio also benefited from positive selection within retail and oil and gas related stocks, however selection was weaker within the financial services and consumer discretionary sectors.

For the fiscal year, valuation-based stock selection strategies were the primary source of negative relative performance for the fund. The momentum-based stock selection strategy, however, also underperformed over the fiscal year period.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .50% on the purchase. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  Returns do not reflect the tax effect a shareholder would pay on Fund distributions or the redemption of Fund shares.

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		98.0	%
Short-Term Investment(s)		0.9
Other		1.1
		100.0	%
Industry Sector Summary	% of Equity Investments
Financial		17.1	%
Construction		14.1
Technology		13.1
Health Care		10.4
Services		8.7
Retail Stores		7.9
Utility		4.9
Consumer Goods		4.5
Oil & Gas		3.5
Automotive		3.3
Primary Process Industry		2.7
Manufacturing		2.6
Machinery		2.5
Transportation		2.0
Food & Beverage		1.9
Metals & Mining		0.8
		100.0	%

1

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 98.0%
		Automotive — 3.2%
	4,400	American Axle & Manufacturing Holdings, Inc.		71,368
	5,725	ArvinMeritor, Inc.		95,836
	1,800	BorgWarner, Inc.		100,386
	14,300	Goodyear Tire & Rubber Co. (The) *		204,919
	6,100	Lear Corp.		127,246
	2,300	Navistar International Corp. *		67,505
	1,700	Oshkosh Truck Corp.		96,441
	1,700	Superior Industries International, Inc.		36,635
	4,600	Tenneco Automotive, Inc. *		104,190
	2,200	TRW Automotive Holdings Corp. *		56,320
	13,700	Visteon Corp. *		63,842
				1,024,688
		Construction — 13.8%
	1,400	AMB Property Corp. REIT		75,110
	2,500	American Home Mortgage Acceptance Corp. REIT		71,250
	5,000	Anthracite Capital, Inc. REIT		53,600
	3,800	Anworth Mortgage Asset Corp. REIT		28,538
	1,300	Apartment Investment & Management Co.		57,603
	1,100	Arden Realty, Inc. REIT		49,896
	900	AvalonBay Communities, Inc. REIT		92,700
	2,700	Beazer Homes USA, Inc.		171,315
	600	BRE Properties, Inc.		32,622
	1,800	CBL & Associates Properties, Inc. REIT		76,680
	500	Centerpoint Properties Corp. REIT		24,925
	1,000	Drew Industries, Inc. *		32,450
	2,400	EMCOR Group, Inc. *		104,616
	900	Equity Lifestyle Properties, Inc. REIT		42,921
	2,300	FelCor Lodging Trust, Inc. REIT		45,655
	750	Florida Rock Industries, Inc.		43,207
	500	Fluor Corp.		43,150
	1,000	Forest City Enterprises, Inc.-Class A		40,510

See accompanying notes to the financial statements.

2

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Construction — continued
	1,900	Highwoods Properties, Inc. REIT		61,465
	3,100	Hovnanian Enterprises, Inc. *		142,941
	2,200	Jacobs Engineering Group, Inc. *		188,628
	4,000	KB Home		268,120
	1,500	Kilroy Realty Corp. REIT		112,230
	1,700	Lafarge North America, Inc.		140,879
	2,000	Lennox International, Inc.		64,300
	1,000	M/I Schottenstein Homes, Inc.		42,120
	1,900	Martin Marietta Materials, Inc.		185,250
	3,174	MDC Holdings, Inc.		194,534
	2,000	Meritage Homes Corp. *		117,060
	9,700	MFA Mortgage Investments, Inc. REIT		57,424
	1,600	Mission West Properties REIT		17,120
	2,900	National Health Investors, Inc. REIT		77,198
	3,250	New Century Financial Corp.		125,937
	200	NVR, Inc. *		150,600
	600	Pan Pacific Retail Properties, Inc. REIT		41,526
	3,600	Ryland Group, Inc.		251,100
	500	Simpson Manufacturing Co., Inc.		19,545
	4,600	Standard-Pacific Corp.		151,110
	2,100	Technical Olympic USA, Inc.		44,478
	7,800	Thornburg Mortgage, Inc. REIT		202,566
	3,900	Toll Brothers, Inc. *		126,204
	3,800	USG Corp. *		321,024
	300	Walter Industries, Inc.		19,749
	900	Washington Group International, Inc.		52,533
	1,100	Watsco, Inc.		76,582
	500	William Lyon Homes, Inc. *		42,550
				4,381,521
		Consumer Goods — 4.4%
	2,500	Columbia Sportswear Co. *		125,900
	1,600	Ethan Allen Interiors, Inc.		65,136
	3,400	Fossil, Inc. *		57,868

See accompanying notes to the financial statements.

3

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Consumer Goods — continued
	4,300	Furniture Brands International, Inc.		106,296
	1,300	Herman Miller, Inc.		39,247
	1,500	HNI Corp.		87,435
	900	Kellwood Co.		23,166
	1,700	K-Swiss, Inc.-Class A		49,606
	3,000	La-Z-Boy, Inc.		47,850
	5,800	Liz Claiborne, Inc.		208,974
	1,000	Matthews International Corp.-Class A		37,140
	3,000	Maytag Corp.		51,600
	1,100	Oakley, Inc.		16,742
	4,300	Playtex Products, Inc. *		45,150
	1,900	Russell Corp.		27,132
	700	Select Comfort Corp. *		25,585
	2,500	Steven Madden, Ltd.		80,125
	3,700	Timberland Co.-Class A *		129,685
	3,900	Tupperware Corp.		82,641
	1,800	Universal Corp.		73,206
	1,800	Vector Group, Ltd.		33,498
				1,413,982
		Financial — 16.8%
	800	AG Edwards, Inc.		35,760
	900	Amcore Financial, Inc.		26,919
	2,500	American Capital Strategies, Ltd.		89,250
	4,600	American Financial Group, Inc.		190,440
	3,800	AmeriCredit Corp. *		112,100
	3,000	AmerUs Group Co.		180,750
	1,300	Arthur J. Gallagher & Co.		38,337
	1,400	Associated Banc Corp.		48,258
	5,250	Astoria Financial Corp.		150,518
	1,600	Bancorpsouth, Inc.		38,432
	700	Camden National Corp.		23,366
	1,725	Chittenden Corp.		49,663
	900	City National Corp.		68,364

See accompanying notes to the financial statements.

4

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — continued
	1,340	Commerce Bancshares, Inc.		69,077
	1,900	Commerce Group, Inc.		102,619
	1,500	CompuCredit Corp. *		56,700
	1,804	Delphi Financial Group, Inc.-Class A		93,952
	800	Dollar Thrifty Automotive Group, Inc. *		32,304
	800	Downey Financial Corp.		50,840
	6,600	First American Corp.		278,256
	1,100	First Midwest Bancorp, Inc.		36,993
	600	FirstFed Financial Corp. *		36,006
	2,700	FirstMerit Corp.		66,798
	5,600	Flagstar Bancorp, Inc.		86,520
	4,900	Fremont General Corp.		116,228
	1,700	GATX Corp.		67,490
	500	Genworth Financial, Inc.-Class A		15,910
	1,000	Great Southern Bancorp, Inc.		28,170
	3,100	Greater Bay Bancorp		83,390
	1,300	Hanover Insurance Group (The), Inc.		62,985
	2,650	HCC Insurance Holdings, Inc.		85,304
	9,900	IMPAC Mortgage Holdings, Inc. REIT		82,269
	4,300	IndyMac Bancorp, Inc.		166,926
	1,500	Investors Financial Services Corp.		67,665
	900	Kansas City Life Insurance Co.		45,360
	1,900	LaBranche & Co., Inc. *		26,885
	1,300	Landamerica Financial Group, Inc.		86,710
	700	MAF Bancorp, Inc.		30,002
	1,000	Mercury General Corp.		55,900
	800	Nara Bancorp, Inc.		13,976
	2,100	Nasdaq Stock Market, Inc. *		85,071
	3,800	Nationwide Financial Services, Inc.-Class A		162,868
	1,600	Novastar Financial, Inc. REIT		49,040
	4,100	Old Republic International Corp.		87,289
	1,900	People's Bank		58,786
	4,900	PMI Group (The), Inc.		212,170
	1,100	Pre-Paid Legal Services, Inc.		39,721

See accompanying notes to the financial statements.

5

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — continued
	4,200	Protective Life Corp.		204,750
	1,800	Radian Group, Inc.		102,150
	900	Raymond James Financial, Inc.		38,682
	500	Redwood Trust, Inc. REIT		20,730
	3,000	Reinsurance Group of America, Inc.		138,690
	1,300	Ryder Systems, Inc.		57,642
	2,500	StanCorp Financial Group, Inc.		135,250
	1,200	Stewart Information Services Corp.		56,340
	600	Student Loan Corp.		131,694
	3,200	TCF Financial Corp.		81,152
	300	Transatlantic Holdings, Inc.		18,342
	3,400	Trustmark Corp.		102,510
	1,200	United Fire & Casualty Co.		42,948
	1,000	United Rentals, Inc. *		32,600
	2,506	Washington Federal, Inc.		59,292
	2,300	Webster Financial Corp.		108,445
	1,300	Westamerica Bancorporation		70,512
	200	Westcorp		14,370
	300	WFS Financial, Inc. *		24,699
	1,400	Wilmington Trust Corp.		59,934
	2,400	WR Berkley Corp.		138,936
				5,332,005
		Food & Beverage — 1.8%
	700	Brown-Forman Corp.-Class B		49,252
	1,900	Flowers Foods, Inc.		52,250
	1,000	Hansen Natural Corp. *		93,340
	1,600	Lancaster Colony Corp.		64,224
	1,300	Natures Sunshine Products, Inc.		22,061
	2,800	NBTY, Inc. *		61,320
	4,800	Smithfield Foods, Inc. *		126,864
	8,300	Tyson Foods, Inc.-Class A		112,299
				581,610

See accompanying notes to the financial statements.

6

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — 10.2%
	3,000	Apria Healthcare Group *		68,970
	3,700	Cerner Corp. *		154,031
	1,000	Community Health Systems, Inc. *		37,920
	300	Diagnostic Products Corp.		13,845
	800	Haemonetics Corp. *		41,440
	7,900	Health Net, Inc. *		378,805
	2,200	Henry Schein, Inc. *		102,630
	1,100	Hi-Tech Pharmacal Co., Inc. *		27,104
	1,700	Hologic, Inc. *		81,311
	2,900	Human Genome Sciences, Inc. *		36,308
	4,000	Humana, Inc. *		206,680
	500	ICU Medical, Inc. *		17,550
	2,000	Idexx Laboratories, Inc. *		157,160
	11,100	King Pharmaceuticals, Inc. *		180,375
	2,100	Kyphon, Inc. *		74,991
	600	LCA-Vision, Inc.		26,160
	5,800	Lincare Holdings, Inc. *		237,220
	1,500	Mentor Corp.		64,560
	1,500	Odyssey HealthCare, Inc. *		28,230
	2,800	Omnicare, Inc.		170,380
	2,700	OraSure Technologies, Inc. *		25,704
	2,200	Owens & Minor, Inc.		70,158
	1,900	Per-Se Technologies, Inc. *		47,994
	3,000	Pharmaceutical Product Development, Inc.		208,770
	1,300	PolyMedica Corp.		52,572
	2,400	Regeneron Pharmaceuticals, Inc. *		39,288
	800	Renal Care Group, Inc. *		38,168
	2,300	Res-Care, Inc. *		42,067
	1,200	ResMed, Inc. *		48,708
	2,400	Respironics, Inc. *		87,264
	2,800	Spectranetics Corp. *		32,088
	1,500	Sunrise Senior Living, Inc. *		53,190
	2,800	Techne Corp. *		166,516
	1,300	United Surgical Partners International, Inc. *		45,695

See accompanying notes to the financial statements.

7

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — continued
	2,600	Universal Health Services, Inc.-Class B		130,598
	1,600	VCA Antech, Inc. *		44,720
				3,239,170
		Machinery — 2.5%
	3,200	AGCO Corp. *		62,560
	900	Carbo Ceramics, Inc.		49,275
	1,000	Columbus McKinnon Corp. *		26,900
	200	Cummins, Inc.		21,656
	2,400	Flowserve Corp. *		123,360
	1,000	FMC Technologies, Inc. *		46,920
	1,000	Grant Prideco, Inc. *		40,470
	800	Lincoln Electric Holdings, Inc.		36,928
	600	Lufkin Industries, Inc.		31,056
	700	Maverick Tube Corp. *		32,571
	800	Oceaneering International, Inc. *		44,112
	2,600	Oil States International, Inc. *		89,778
	1,200	RPC, Inc.		25,428
	1,900	Superior Energy Services, Inc. *		49,400
	600	Terex Corp. *		47,490
	2,900	Transmontaigne, Inc. *		21,866
	900	W-H Energy Services, Inc. *		35,550
				785,320
		Manufacturing — 2.6%
	1,000	Barnes Group, Inc.		38,380
	800	Clarcor, Inc.		27,080
	800	Dynamic Materials Corp.		26,160
	800	Greif, Inc.-Class A		46,328
	700	Harsco Corp.		55,846
	1,900	Kaman Corp.-Class A		43,149
	800	Mobile Mini, Inc. *		43,584
	1,400	Myers Industries, Inc.		22,400
	3,600	Owens-IIlinois, Inc. *		67,464

See accompanying notes to the financial statements.

8

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Manufacturing — continued
	1,200	Shaw Group (The), Inc. *		40,020
	2,000	Sonoco Products Co.		65,440
	2,200	SPX Corp.		108,350
	1,500	Standex International Corp.		47,805
	1,700	Temple-Inland, Inc.		72,539
	1,200	Trinity Industries, Inc.		63,600
	1,700	Wabtec Corp.		56,151
				824,296
		Metals & Mining — 0.7%
	2,900	CONSOL Energy, Inc.		185,658
	1,100	Royal Gold, Inc.		34,573
	400	RTI International Metals, Inc. *		16,820
				237,051
		Oil & Gas — 3.5%
	600	Ashland, Inc.		39,162
	500	Crosstex Energy, Inc.		39,785
	2,600	Frontier Oil Corp.		120,250
	1,100	Giant Industries, Inc. *		64,020
	2,100	Helmerich & Payne, Inc.		138,117
	1,700	Holly Corp.		101,490
	6,900	Patterson-UTI Energy, Inc.		190,095
	700	Remington Oil & Gas Corp. *		29,330
	2,500	Stone Energy Corp. *		103,500
	4,600	Tesoro Corp.		277,886
				1,103,635
		Primary Process Industry — 2.7%
	700	Airgas, Inc.		25,473
	6,400	AK Steel Holding Corp. *		71,040
	600	Chaparral Steel Co. *		27,486
	4,800	Commercial Metals Co.		217,392
	1,200	FMC Corp. *		72,972

See accompanying notes to the financial statements.

9

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Primary Process Industry — continued
	2,000	Metal Management, Inc.		56,420
	1,500	Millipore Corp. *		103,995
	600	NS Group, Inc. *		24,474
	1,000	Olympic Steel, Inc.		26,360
	900	OM Group, Inc. *		19,089
	3,200	Ryerson Tull, Inc.		80,768
	1,100	Steel Technologies, Inc.		30,349
	400	United States Steel Corp.		21,800
	3,600	Worthington Industries, Inc.		70,560
				848,178
		Retail Stores — 7.7%
	800	Abercrombie & Fitch Co. -Class A		53,856
	2,200	Advance Auto Parts *		90,970
	2,400	American Eagle Outfitters, Inc.		61,056
	3,200	BJ's Wholesale Club, Inc. *		101,312
	900	Building Materials Holding Corp.		60,570
	1,500	Casey's General Stores, Inc.		39,345
	900	Cato Corp.-Class A		18,783
	1,700	Chico's FAS, Inc. *		79,985
	1,000	Conn's, Inc. *		37,250
	6,300	Dollar Tree Stores, Inc. *		172,746
	1,700	Fastenal Co.		74,647
	600	Gamestop Corp.-Class A *		24,018
	3,600	Great Atlantic & Pacific Tea Co. *		116,136
	1,500	Group 1 Automotive, Inc.		57,420
	1,950	Hibbett Sporting Goods, Inc. *		62,556
	1,700	Ingles Markets, Inc.-Class A		28,067
	2,500	Insight Enterprises, Inc. *		53,825
	750	Jos. A. Bank Clothiers, Inc. *		33,458
	1,000	Lithia Motors, Inc.-Class A		32,040
	1,000	Longs Drug Stores Corp.		38,370
	700	Men's Wearhouse, Inc. *		21,924
	1,100	NetFlix, Inc. *		29,491

See accompanying notes to the financial statements.

10

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Retail Stores — continued
	7,000	O'Reilly Automotive, Inc. *		229,040
	1,500	Pantry (The), Inc. *		88,755
	3,300	Payless Shoesource, Inc. *		78,210
	5,850	Rent-A-Center, Inc. *		136,539
	3,000	Ross Stores, Inc.		84,960
	600	Ruddick Corp.		14,508
	2,500	Sonic Automotive, Inc.		66,225
	3,600	Supervalu, Inc.		113,760
	1,800	Talbots, Inc.		47,988
	600	Too, Inc. *		18,258
	3,900	United Auto Group, Inc.		168,636
	3,000	Williams-Sonoma, Inc. *		121,470
				2,456,174
		Services — 8.5%
	5,650	Applebee's International, Inc.		130,741
	1,350	Applied Industrial Technologies, Inc.		57,753
	666	Aqua America, Inc.		19,141
	1,500	Banta Corp.		73,065
	6,800	BearingPoint, Inc. *		60,588
	1,600	Bob Evans Farms, Inc.		46,672
	1,400	Bright Horizons Family Solutions, Inc. *		46,914
	4,600	Brinker International, Inc.		191,590
	900	California Pizza Kitchen, Inc. *		27,054
	1,800	Career Education Corp. *		59,112
	800	CBRL Group, Inc.		35,544
	2,200	Cenveo, Inc. *		30,998
	2,500	Darden Restaurants, Inc.		104,850
	2,950	Factset Research Systems, Inc.		115,493
	3,100	Iron Mountain, Inc. *		135,470
	2,900	ITT Educational Services, Inc. *		179,800
	2,800	Jack in the Box, Inc. *		112,000
	3,600	Krispy Kreme Doughnuts Inc. *		24,300
	3,100	Manpower, Inc.		166,284

See accompanying notes to the financial statements.

11

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Services — continued
	4,800	Mediacom Communications Corp. *		27,072
	2,000	Nash Finch Co.		62,000
	1,000	O'Charley's, Inc. *		17,760
	3,700	Outback Steakhouse, Inc.		154,697
	700	Panera Bread Co.-Class A *		49,602
	3,000	Papa John's International, Inc. *		98,700
	2,400	Performance Food Group Co. *		70,488
	400	Portfolio Recovery Associates, Inc. *		19,564
	1,300	Rare Hospitality International, Inc. *		41,600
	800	Regis Corp.		30,624
	2,300	Ruby Tuesday, Inc.		65,665
	1,100	Ryan's Restaurant Group, Inc. *		14,531
	2,000	Sabre Holdings Corp.		48,260
	4,300	Service Corp. International		34,185
	3,400	Sinclair Broadcast Group-Class A		24,446
	2,150	Sonic Corp. *		67,962
	1,000	Stericycle, Inc. *		60,450
	3,800	Valassis Communications, Inc. *		104,690
	2,900	World Fuel Services Corp.		87,870
				2,697,535
		Technology — 12.8%
	2,100	AAR Corp. *		53,151
	1,100	Ade Corp./Mass *		36,388
	3,500	ADTRAN, Inc.		96,320
	2,500	Advanced Energy Industries, Inc. *		35,800
	700	Agilysys, Inc.		10,003
	1,000	Alliant Techsystems, Inc. *		76,420
	800	Amphenol Corp.-Class A		40,184
	900	Ansys, Inc. *		42,678
	1,600	Anteon International Corp. *		88,464
	1,000	AO Smith Corp.		46,300
	5,000	Arrow Electronics, Inc. *		173,950
	8,700	Avnet, Inc. *		218,631
	4,000	AVX Corp.		66,240

See accompanying notes to the financial statements.

12

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Technology — continued
	1,000	Bankrate, Inc. *		36,150
	3,900	BEA Systems, Inc. *		44,733
	5,000	Bell Microproducts, Inc. *		30,050
	800	Black Box Corp.		38,224
	5,005	Brightpoint, Inc. *		141,591
	6,800	CNET Networks, Inc. *		94,112
	900	Computer Programs & Systems, Inc.		41,364
	2,200	Concur Technologies, Inc. *		33,352
	4,600	Convergys Corp. *		79,902
	5,800	Cypress Semiconductor Corp. *		103,008
	2,500	Digital Insight Corp. *		82,625
	2,800	Distributed Energy Systems Corp. *		26,124
	1,900	Electronics for Imaging *		50,958
	2,000	Greatbatch, Inc. *		44,220
	3,600	Harris Corp.		164,448
	13,600	Ingram Micro, Inc.-Class A *		269,008
	2,500	Intersil Corp.-Class A		70,850
	2,300	JDA Software Group, Inc. *		31,579
	1,000	Komag, Inc. *		46,840
	6,400	Kopin Corp. *		27,840
	2,200	Lightbridge, Inc. *		21,582
	2,000	Mantech International Corp.-Class A *		56,200
	1,100	Maximus, Inc.		40,161
	1,300	Micrel, Inc. *		18,161
	500	Micros Systems, Inc. *		21,645
	3,400	Microsemi Corp. *		104,550
	300	MTS Systems Corp.		11,856
	1,400	Neoware Systems, Inc. *		34,342
	3,000	Plexus Corp. *		100,680
	1,600	Power Integrations, Inc. *		39,728
	3,000	QLogic Corp. *		123,420
	900	Quality Systems, Inc.		62,298
	3,600	Red Hat, Inc. *		96,732
	1,700	Silicon Laboratories, Inc. *		81,566

See accompanying notes to the financial statements.

13

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Technology — continued
	1,600	SYKES Enterprises, Inc. *		21,312
	1,300	Synopsys, Inc. *		28,431
	2,300	Syntel, Inc.		39,100
	3,900	Tech Data Corp. *		161,967
	3,000	Teradyne, Inc. *		50,370
	2,000	Transaction Systems Architects, Inc. *		66,720
	2,900	Unisys Corp. *		19,372
	1,900	United Stationers, Inc. *		94,050
	900	Varian Semiconductor Equipment Associates, Inc. *		42,444
	400	Websense, Inc. *		24,724
	1,600	WESCO International, Inc. *		91,712
	8,300	Western Digital Corp. *		184,675
				4,079,305
		Transportation — 2.0%
	11,700	AMR Corp. *		293,670
	7,700	Continental Airlines, Inc.-Class B *		179,410
	1,200	EGL, Inc. *		48,540
	6,100	ExpressJet Holdings, Inc. *		45,872
	450	Forward Air Corp.		15,966
	1,443	US Airways Group, Inc. *		47,749
				631,207
		Utility — 4.8%
	2,300	Allegheny Energy, Inc. *		82,248
	800	Alliant Energy Corp.		26,480
	22,400	Centerpoint Energy, Inc.		290,528
	2,000	Centurytel, Inc.		71,960
	6,800	CMS Energy Corp. *		95,744
	3,100	Duquesne Light Holdings, Inc.		53,785
	2,700	Great Plains Energy, Inc.		76,680
	500	j2 Global Communications, Inc. *		21,800
	1,300	MDU Resources Group, Inc.		45,825
	400	National Fuel Gas Co.		12,952

See accompanying notes to the financial statements.

14

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		Utility — continued
	2,500	NII Holdings, Inc.-Class B *		128,050
	2,400	NSTAR		70,464
	1,400	OGE Energy Corp.		40,250
	5,300	Pepco Holdings, Inc.		125,981
	600	Pinnacle West Capital Corp.		24,630
	2,500	Puget Energy, Inc.		53,900
	10,700	TECO Energy, Inc.		182,542
	3,900	Time Warner Telecom, Inc.-Class A *		49,257
	3,700	Ubiquitel, Inc. *		36,149
	1,100	Wisconsin Energy Corp.		44,956
				1,534,181
		TOTAL COMMON STOCKS (COST $23,685,777)		31,169,858
		SHORT-TERM INVESTMENT(S) — 0.9%
	274,567	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $274,590 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest of $280,058.		274,567
		TOTAL SHORT-TERM INVESTMENT(S) (COST $274,567)		274,567
		TOTAL INVESTMENTS — 98.9% (Cost $23,960,344)		31,444,425
		Other Assets and Liabilities (net) — 1.1%		345,472
		TOTAL NET ASSETS — 100.0%	$	31,789,897

Notes to Schedule of Investments:

REIT - Real Estate Investment Trust

*  Non-income producing security.

See accompanying notes to the financial statements.

15

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $23,960,344) (Note 2)	$	31,444,425
Receivable for investments sold		836,648
Dividends and interest receivable		29,277
Receivable for expenses reimbursed by Manager (Note 3)		6,619
Total assets		32,316,969
Liabilities:
Payable for Fund shares repurchased		468,887
Payable to affiliate for (Note 3):
Management fee		13,511
Shareholder service fee		3,685
Trustees and Chief Compliance Officer fees		47
Accrued expenses		40,942
Total liabilities		527,072
Net assets	$	31,789,897
Net assets consist of:
Paid-in capital	$	26,774,291
Accumulated undistributed net investment income		18,415
Accumulated net realized loss		(2,486,890	)
Net unrealized appreciation		7,484,081
	$	31,789,897
Net assets attributable to:
Class III shares	$	31,789,897
Shares outstanding:
Class III		1,666,850
Net asset value per share:
Class III	$	19.07

See accompanying notes to the financial statements.

16

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends	$	315,435
Interest		10,488
Total investment income		325,923
Expenses:
Management fee (Note 3)		136,089
Shareholder service fee – Class III (Note 3)		37,115
Custodian, fund accounting agent and transfer agent fees		22,592
Audit and tax fees		42,754
Legal fees		441
Trustees fees and related expenses (Note 3)		505
Registration fees		1,129
Miscellaneous		455
Total expenses		241,080
Fees and expenses reimbursed by Manager (Note 3)		(67,100	)
Net expenses		173,980
Net investment income (loss)		151,943
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		3,519,371
Closed futures contracts		(4,929	)
Net realized gain (loss)		3,514,442
Change in net unrealized appreciation (depreciation) on investments		(963,742	)
Net realized and unrealized gain (loss)		2,550,700
Net increase (decrease) in net assets resulting from operations	$	2,702,643

See accompanying notes to the financial statements.

17

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	151,943		$	140,011
Net realized gain (loss)		3,514,442			2,855,401
Change in net unrealized appreciation (depreciation)		(963,742	)		631,650
Net increase (decrease) in net assets from operations		2,702,643			3,627,062
Distributions to shareholders from:
Net investment income
Class III		(144,604	)		(114,932	)
Net share transactions (Note 7):
Class III		2,106,548			(960,466	)
Purchase premiums (Notes 2 and 7):
Class III		40,000			5,000
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums		2,146,548			(955,466	)
Total increase (decrease) in net assets		4,704,587			2,556,664
Net assets:
Beginning of period		27,085,310			24,528,646
End of period (including accumulated undistributed net investment income of $18,415 and $18,995, respectively)	$	31,789,897		$	27,085,310

See accompanying notes to the financial statements.

18

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	16.94		$	14.80		$	9.66		$	11.76		$	10.54
Income (loss) from investment operations:
Net investment income (loss)		0.11	†		0.08	†		0.08			0.11			0.15
Net realized and unrealized gain (loss)		2.13			2.13			5.14			(2.10	)		1.23
Total from investment operations		2.24			2.21			5.22			(1.99	)		1.38
Less distributions to shareholders:
From net investment income		(0.11	)		(0.07	)		(0.08	)		(0.11	)		(0.16	)
Total distributions		(0.11	)		(0.07	)		(0.08	)		(0.11	)		(0.16	)
Net asset value, end of period	$	19.07		$	16.94		$	14.80		$	9.66		$	11.76
Total Return(a)		13.25	%		14.99	%		54.21	%		(17.00	)%		13.25	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	31,790		$	27,085		$	24,529		$	20,723		$	37,544
Net expenses to average daily net assets		0.70	%		0.70	%		0.70	%		0.71	%		0.70	%
Net investment income to average daily net assets		0.61	%		0.56	%		0.62	%		0.90	%		1.30	%
Portfolio turnover rate		78	%		90	%		66	%		55	%		65	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.27	%		0.25	%		0.31	%		0.18	%		0.20	%
Purchase premiums consisted of the following per share amounts:†	$	0.03			—	(b)		—		$	0.01			—	(b)

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown. Calculation excludes purchase premiums which are borne by the shareholders.

(b)  Purchase premiums were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

19

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Tax-Managed Small/Mid Cap Fund (the "Fund") (formerly GMO Tax-Managed Small Companies Fund) is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks to maximize after-tax total return through investment in common stocks of small and mid-cap companies principally traded in the U.S. The Fund's benchmark is the Russell 2500 Index (after-tax), which is computed by the Manager by applying the maximum historical applicable individual federal income tax rate to the Russell 2500 Index's dividend yield.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains

20

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of

21

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in

22

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income — $144,604 and $114,932, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $18,415 of undistributed ordinary income.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $505,333, $1,587,943, and $393,614 expiring in 2009, 2010, and 2011, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	23,960,344	$	7,874,488	$	(390,407	)	$	7,484,081

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to redemption in-kind transactions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Loss			Paid-in Capital
$	(7,919	)	$	(1,437,362	)	$	1,445,281

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

23

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases of Fund shares was 0.50% of the amount invested. If the Manager determines that any portion of a cash purchase is offset by a corresponding cash redemption occurring on the same day, it will waive the purchase premium in an amount appropriately equal to the fee with respect to that portion. In addition, the purchase premium charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $40,000 and $5,000 in purchase premiums, respectively. There is no fee for redemptions, reinvested distributions or in-kind transactions.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.55% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.55% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $279 and $155, respectively. No remuneration was paid to any other officer of the Trust.

24

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $20,738,953 and $19,070,502, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 69.5% of the outstanding shares of the Fund were held by four shareholders, each holding in excess of 10% of the Fund's shares outstanding. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 1.0% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		413,504		$	7,960,000			67,779		$	995,000
Shares issued to shareholders in reinvestment of distributions		3,224			56,937			3,237			48,181
Shares repurchased		(348,898	)		(5,910,389	)		(129,455	)		(2,003,647	)
Purchase premiums and redemption fees		—			40,000			—			5,000
Net increase (decrease)		67,830		$	2,146,548			(58,439	)	$	(955,466	)

25

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Tax-Managed Small/Mid Cap Fund
(formerly GMO Tax-Managed Small Companies Fund)

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Tax-Managed Small/Mid Cap Fund (formerly GMO Tax-Managed Small Companies Fund) (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

26

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.70	%	$	1,000.00	$	1,055.30	$	3.57
2) Hypothetical		0.70	%	$	1,000.00	$	1,021.32	$	3.51

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

27

GMO Tax-Managed Small/Mid Cap Fund

(formerly GMO Tax-Managed Small Companies Fund)
(A Series of GMO Trust)

Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

For taxable, non-corporate shareholders, 92.22% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 100.00% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $1,037 or if determined to be different, the qualified interest income of such year.

28

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

29

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee3.
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

30

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

31

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003– present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

32

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Short-Duration Investment Fund returned +3.8% for the fiscal year ended February 28, 2006, as compared to +3.3% for the Citigroup 3-Month Treasury Bill Index.

The Fund outperformed the benchmark during the fiscal year by 0.5%. This outperformance was attributable to instrument selection. The Fund's duration at fiscal year-end was 0.3 years.

At fiscal year-end, approximately 68% of the Fund was invested in AAA asset-backed securities, 13% in U.S. Treasury notes and cash, 1% in corporate bonds, 10% in U.S. Government-backed bonds, 7% in collateralized bond obligations, and less than 1% in non-AAA asset-backed securities.

The asset-backed holdings included issues backed by consumer receivables such as residential mortgages, credit card, and auto loans as well as commercial/corporate mortgages and receivables. The Fund's exposure to its cash assets is achieved both directly and indirectly through its investment in the GMO Short-Duration Collateral Fund.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Short Duration Investment Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		96.7	%
Short-Term Investment(s)		2.2
Mutual Fund		0.5
Swaps		0.1
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Futures		0.0
Other		0.5
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Short-Duration Investment Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		DEBT OBLIGATION(S) — 19.5%
		U.S. Government — 10.8%
	3,001,300	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (a)		3,175,281
		U.S. Government Agency — 8.7%
	163,333	Agency for International Development Floater (Support of Botswana), Variable Rate, 6 mo. U.S. Treasury Bill + .40%, 5.15%, due 10/01/12		162,721
	1,051,200	Agency for International Development Floater (Support of C.A.B.E.I.), Variable Rate, 6 mo. U.S. Treasury Bill + .40%, 5.15%, due 10/01/12		1,047,258
	1,003,657	Agency for International Development Floater (Support of Honduras), Variable Rate, 3 mo. U.S. Treasury Bill x 117%, 4.49%, due 10/01/11		996,757
	50,993	Agency for International Development Floater (Support of Peru), Series A, Variable Rate, 6 mo. U.S. Treasury Bill + .35%, 5.10%, due 05/01/14		50,642
	301,030	Small Business Administration Pool #502320, Variable Rate, Prime - 2.18%, 5.06%, due 08/25/18		301,578
				2,558,956
		TOTAL DEBT OBLIGATION(S) (COST $5,793,608)		5,734,237
		MUTUAL FUNDS — 80.1%
		Affiliated Issuer(s) — 80.1%
	918,586	GMO Short-Duration Collateral Fund		23,515,802
	9,192	GMO Special Purpose Holding Fund		75,649
		TOTAL MUTUAL FUNDS (COST $23,395,363)		23,591,451
		TOTAL INVESTMENTS — 99.6% (Cost $29,188,971)		29,325,688
		Other Assets and Liabilities (net) — 0.4%		128,579
		TOTAL NET ASSETS — 100.0%	$	29,454,267

See accompanying notes to the financial statements.

2

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Notes to Schedule of Investments:

C.A.B.E.I. - Central American Bank of Economic Integration

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

(a)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

See accompanying notes to the financial statements.

3

GMO Short-Duration Investment Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $5,793,608) (Note 2)	$	5,734,237
Investments in affiliated issuers, at value (cost $23,395,363) (Notes 2 and 8)		23,591,451
Cash		98,937
Receivable for investments sold		2,943
Interest receivable		52,459
Receivable for expenses reimbursed by Manager (Note 3)		2,947
Total assets		29,482,974
Liabilities:
Payable to affiliate for (Note 3):
Management fee		1,128
Shareholder service fee		3,387
Trustees and Chief Compliance Officer fees		124
Accrued expenses		24,068
Total liabilities		28,707
Net assets	$	29,454,267
Net assets consist of:
Paid-in capital	$	34,475,086
Distributions in excess of net investment income		(3,009	)
Accumulated net realized loss		(5,154,527	)
Net unrealized appreciation		136,717
	$	29,454,267
Net assets attributable to:
Class III shares	$	29,454,267
Shares outstanding:
Class III		3,340,900
Net asset value per share:
Class III	$	8.82

See accompanying notes to the financial statements.

4

GMO Short-Duration Investment Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	627,527
Interest		314,637
Total investment income		942,164
Expenses:
Management fee (Note 3)		14,671
Shareholder service fee – Class III (Note 3)		44,012
Custodian, fund accounting agent and transfer agent fees		4,701
Audit and tax fees		28,711
Legal fees		591
Trustees fees and related expenses (Note 3)		610
Registration fees		3,901
Miscellaneous		1,753
Total expenses		98,950
Fees and expenses reimbursed by Manager (Note 3)		(39,321	)
Net expenses		59,629
Net investment income (loss)		882,535
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		34,529
Realized gains distributions from affiliated issuers (Note 8)		89,029
Net realized gain (loss)		123,558
Change in net unrealized appreciation (depreciation) on investments		86,398
Net realized and unrealized gain (loss)		209,956
Net increase (decrease) in net assets resulting from operations	$	1,092,491

See accompanying notes to the financial statements.

5

GMO Short-Duration Investment Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	882,535		$	980,024
Net realized gain (loss)		123,558			(275,265	)
Change in net unrealized appreciation (depreciation)		86,398			214,502
Net increase (decrease) in net assets from operations		1,092,491			919,261
Distributions to shareholders from:
Net investment income
Class III		(933,424	)		(979,106	)
Net share transactions (Note 7):
Class III		(311,728	)		(14,488,949	)
Total increase (decrease) in net assets		(152,661	)		(14,548,794	)
Net assets:
Beginning of period		29,606,928			44,155,722
End of period (including distributions in excess of net investment income of $3,009 and accumulated undistributed net investment income of $941, respectively)	$	29,454,267		$	29,606,928

See accompanying notes to the financial statements.

6

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	8.77		$	8.75		$	8.68		$	9.62		$	9.92
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.27			0.23			0.12			0.08			0.30
Net realized and unrealized gain (loss)		0.07			(0.01	)		0.07			(0.54	)		0.07
Total from investment operations		0.34			0.22			0.19			(0.46	)		0.37
Less distributions to shareholders:
From net investment income		(0.29	)		(0.20	)		(0.12	)		(0.33	)		(0.39	)
From net realized gains		—			—			—			(0.15	)		(0.28	)
Return of capital		—			—			(0.00	)(b)		—			—
Total distributions		(0.29	)		(0.20	)		(0.12	)		(0.48	)		(0.67	)
Net asset value, end of period	$	8.82		$	8.77		$	8.75		$	8.68		$	9.62
Total Return(c)		3.83	%		2.49	%		2.24	%		(4.91	)%		3.73	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	29,454		$	29,607		$	44,156		$	55,316		$	48,347
Net expenses to average daily net assets(d)		0.20	%		0.20	%		0.21	%		0.21	%		0.20	%
Net investment income to average daily net assets(a)		3.01	%		2.57	%		1.36	%		0.88	%		3.04	%
Portfolio turnover rate		17	%		101	%		4	%		43	%		91	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.13	%		0.10	%		0.10	%		0.08	%		0.12	%

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  Return of capital was less than $0.01.

(c)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

7

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Short-Duration Investment Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks to provide current income through direct and indirect investments in high-quality fixed income instruments and other funds of the Trust ("underlying fund(s)") primarily GMO Short-Duration Collateral Fund. The Fund's benchmark is the Citigroup 3-Month Treasury Bill Index.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect). Shares of the GMO Special Purpose Holding Fund and the GMO Short-Duration Collateral Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

8

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund or the underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 33.3% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $57,329 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $319,134 (approximately $0.09 per share as of April 18, 2006) in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

9

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $933,424 and $979,106, respectively.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $1,151,233, $708 and $7,530,888 expiring in 2012, 2013 and 2014, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

10

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	25,843,678	$	3,541,381	$	(59,371	)	$	3,482,010

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions In Excess Of Net Investment Income		Accumulated Net Realized Loss			Paid-in Capital
$	46,939	$	(930	)	$	(46,009	)

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

11

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.05% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of Class III of the Fund at the annual rate of 0.15%.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.05% of the average daily net assets.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net (excluding shareholder service fees and interest expense)			Expenses Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.007	%		0.000	%		0.010	%		0.017	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $316 and $268, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	—	$	—
Investments (non-U.S. Government securities)		4,927,527		5,215,957

12

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 49.2% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's outstanding shares. One of the shareholders is another fund of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 5.0% of the Fund's shares were held by twelve related parties comprised of certain GMO employee accounts, and 19.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		240,607		$	2,120,775			3,218,676		$	28,316,339
Shares issued to shareholders in reinvestment of distributions		104,071			920,420			110,887			968,904
Shares repurchased		(379,864	)		(3,352,923	)		(4,997,291	)		(43,774,192	)
Net increase (decrease)		(35,186	)	$	(311,728	)		(1,667,728	)	$	(14,488,949	)

13

GMO Short-Duration Investment Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Short-Duration Collateral Fund	$	22,935,783	$	4,927,527	$	4,600,000	$	627,527	$	—	$	23,515,802
GMO Special Purpose Holding Fund		142,566		—		—		—		89,029		75,649	*
Totals	$	23,078,349	$	4,927,527	$	4,600,000	$	627,527	$	89,029	$	23,591,451

*  After the effect of return of capital distributions of $50,673 and $5,302 on April 5, 2005 and February 21, 2006, respectively.

14

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Short-Duration Investment Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Short-Duration Investment Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

15

GMO Short Duration Investment Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		0.23	%	$	1,000.00	$	1,018.90	$	1.15
2) Hypothetical				0.23	%	$	1,000.00	$	1,023.65	$	1.15

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

16

GMO Short-Duration Investment Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Year Ended February 28, 2006

The Fund hereby designates as qualified interest income with respect to its taxable year ended February28,2006 of $589,410 or if determined to be different, the qualified interest income of such year.

17

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

18

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

19

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

21

GMO Domestic Bond Fund

(A Series of GMO Trust)
Annual Report
February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Domestic Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Domestic Bond Fund returned +3.0% for the fiscal year ended February 28, 2006, as compared to +2.7% for the Lehman Brothers U.S. Government Index.

The Fund outperformed the benchmark during the fiscal year by 0.3%. At fiscal year-end, in excess of 90% of the Benchmark's return was achieved through total return swaps. The Fund's cash was invested 78% in AAA asset-backed securities; 13% in securities of the U.S. Government, its agencies, and cash; 8% in collateralized debt obligations; and less than 1% in both corporate bonds and non-AAA asset backed securities.

The asset-backed holdings included issues backed by consumer receivables such as residential mortgages, credit card, and auto loans as well as commercial/corporate mortgages and receivables. The Fund's exposure to its cash assets is achieved both directly and indirectly through its investment in the GMO Short-Duration Collateral Fund.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class VI shares will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Domestic Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		96.2	%
Short-Term Investment(s)		2.5
Mutual Fund		0.9
Preferred Stocks		0.6
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Futures		0.0
Swaps		(0.2	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Domestic Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		DEBT OBLIGATION(S) — 8.6%
		Corporate Debt — 0.6%
	2,500,000	Bank Austria Creditanstalt AG, 144A, 7.25%, due 02/15/17		2,893,475
		U.S. Government — 2.4%
	2,339,780	U.S. Treasury Inflation Indexed Note, 4.25%, due 01/15/10 (a) (b)		2,547,070
	8,521,207	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (a) (b)		9,015,171
				11,562,241
		U.S. Government Agency — 5.6%
	10,000,000	Agency for International Development Floater (Support of India), Variable Rate, 3 mo. LIBOR + .10%, 4.79%, due 02/01/27		9,925,000
	4,500,000	Agency for International Development Floater (Support of Jamaica), Variable Rate, 6 mo. LIBOR + .30%, 5.24%, due 12/01/14		4,505,625
	4,244,853	Agency for International Development Floater (Support of Jamaica), Variable Rate, 6 mo. U.S. Treasury Bill + .75%, 5.50%, due 03/30/19		4,258,118
	4,517,500	Agency for International Development Floater (Support of Sri Lanka), Variable Rate, 6 mo. LIBOR + .20%, 5.14%, due 06/15/12		4,506,206
	4,400,004	Agency for International Development Floater (Support of Zimbabwe), Variable Rate, 3 mo. U.S. Treasury Bill x 115%, 4.82%, due 01/01/12		4,347,754
				27,542,703
		TOTAL DEBT OBLIGATION(S) (COST $41,703,539)		41,998,419
		PREFERRED STOCKS — 0.6%
		Banking — 0.6%
	10,000	Home Ownership Funding 2 Preferred 144A, 13.338%		2,791,760
		TOTAL PREFERRED STOCKS (COST $3,755,855)		2,791,760

See accompanying notes to the financial statements.

2

GMO Domestic Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		MUTUAL FUNDS — 91.0%
	17,191,238	GMO Short-Duration Collateral Fund (c)		440,095,699
	1,483	GMO Special Purpose Holding Fund (c)		12,202
	1,228,482	Merrimac Cash Series, Premium Class		1,228,482
		TOTAL MUTUAL FUNDS (COST $438,383,730)		441,336,383
		TOTAL INVESTMENTS — 100.2% (Cost $483,843,124)		486,126,562
		Other Assets and Liabilities (net) — (0.2%)		(980,450	)
		TOTAL NET ASSETS — 100.0%	$	485,146,112

See accompanying notes to the financial statements.

3

GMO Domestic Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	49	U.S. Long Bond	June 2006	$	5,541,594	$	(9,350	)
	120	U.S. Treasury Note 10 Yr.	June 2006		12,948,750		(14,483	)
						$	(23,833	)
Sales
	223	U.S. Treasury Note 5 Yr.	June 2006	$	23,456,813	$	(44,768	)

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Swap Agreements

Interest Rate Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	38,800,000	USD	2/28/2008	JP Morgan Chase Bank	(Pay)		4.01	%	3 Month LIBOR	$	864,666
	170,000,000	USD	2/28/2010	JP Morgan Chase Bank	Receive		4.23	%	3 Month LIBOR		(5,425,746	)
	114,000,000	USD	2/28/2013	JP Morgan Chase Bank	(Pay)		4.49	%	3 Month LIBOR		4,111,405
	8,500,000	USD	10/24/2013	JP Morgan Chase Bank	(Pay)		4.70	%	3 Month LIBOR		200,543
										$	(249,132	)

See accompanying notes to the financial statements.

4

GMO Domestic Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	25,000,000	USD	4/28/2006	Lehman Brothers	1 month LIBOR	Return on Lehman
					–0.05%	Brothers U.S.
						Government Index	$	(45,789	)
	177,000,000	USD	5/31/2006	Lehman Brothers	1 month LIBOR – 0.03%	Return on Lehman Brothers U.S. Government Index		(326,844	)
	75,000,000	USD	6/30/2006	Lehman Brothers	1 month LIBOR – 0.02%	Return on Lehman Brothers U.S. Government Index		(139,056	)
	175,000,000	USD	7/31/2006	Lehman Brothers	1 month LIBOR – 0.05%	Return on Lehman Brothers U.S. Government Index		(320,525	)
							$	(832,214	)

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

(a)  Index security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(b)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(c)  Affiliated issuer (Note 8).

See accompanying notes to the financial statements.

5

GMO Domestic Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $46,687,876) (Note 2)	$	46,018,661
Investments in affiliated issuers, at value (cost $437,155,248) (Notes 2 and 8)		440,107,901
Interest receivable		271,611
Receivable for variation margin on open futures contracts (Note 2)		22,365
Receivable for open swap contracts (Note 2)		5,176,614
Receivable for expenses reimbursed by Manager (Note 3)		7,734
Total assets		491,604,886
Liabilities:
Payable to affiliate for (Note 3):
Management fee		37,579
Shareholder service fee		30,202
Trustees and Chief Compliance Officer fees		633
Interest payable for open swap contracts (Note 2)		73,081
Payable for open swap contracts (Note 2)		6,257,960
Accrued expenses		59,319
Total liabilities		6,458,774
Net assets	$	485,146,112
Net assets consist of:
Paid-in capital	$	487,524,174
Distributions in excess of net investment income		(7,816	)
Distributions in excess of net realized gain		(3,503,737	)
Net unrealized appreciation		1,133,491
	$	485,146,112
Net assets attributable to:
Class III shares	$	125,187,861
Class VI shares	$	359,958,251
Shares outstanding:
Class III		12,764,579
Class VI		36,654,789
Net asset value per share:
Class III	$	9.81
Class VI	$	9.82

See accompanying notes to the financial statements.

6

GMO Domestic Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	12,078,216
Interest		1,872,663
Dividends		236,262
Total investment income		14,187,141
Expenses:
Management fee (Note 3)		559,462
Shareholder service fee – Class III (Note 3)		524,123
Shareholder service fee – Class VI (Note 3)		115,526
Custodian, fund accounting agent and transfer agent fees		74,349
Audit and tax fees		46,455
Legal fees		10,590
Trustees fees and related expenses (Note 3)		10,295
Registration fees		4,473
Miscellaneous		10,327
Total expenses		1,355,600
Fees and expenses reimbursed by Manager (Note 3)		(138,450	)
Net expenses		1,217,150
Net investment income (loss)		12,969,991
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		5,645,768
Realized gains distributions from affiliated issuers (Note 8)		12,900
Closed futures contracts		8,143,279
Closed swap contracts		(8,722,528	)
Net realized gain (loss)		5,079,419
Change in net unrealized appreciation (depreciation) on:
Investments		1,112,039
Open futures contracts		2,362,394
Open swap contracts		1,473,240
Net unrealized gain (loss)		4,947,673
Net realized and unrealized gain (loss)		10,027,092
Net increase (decrease) in net assets resulting from operations	$	22,997,083

See accompanying notes to the financial statements.

7

GMO Domestic Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	12,969,991		$	9,069,721
Net realized gain (loss)		5,079,419			12,152,915
Change in net unrealized appreciation (depreciation)		4,947,673			(7,068,364	)
Net increase (decrease) in net assets from operations		22,997,083			14,154,272
Distributions to shareholders from:
Net investment income
Class III		(5,417,082	)		(10,756,517	)
Class VI		(7,425,411	)		—
Total distributions from net investment income		(12,842,493	)		(10,756,517	)
Net realized gains
Class III		(6,661,020	)		(17,124,372	)
Return of capital
Class III		—			(294,354	)
		(19,503,513	)		(28,175,243	)
Net share transactions (Note 7):
Class III		(618,625,270	)		377,044,636
Class VI		363,977,331			—
Increase (decrease) in net assets resulting from net share transactions		(254,647,939	)		377,044,636
Total increase (decrease) in net assets		(251,154,369	)		363,023,665
Net assets:
Beginning of period		736,300,481			373,276,816
End of period (including distributions in excess of net investment income of $7,816 and $7,296, respectively)	$	485,146,112		$	736,300,481

See accompanying notes to the financial statements.

8

GMO Domestic Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	9.84		$	10.07		$	10.08		$	9.68		$	9.98
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.13			0.16			0.23			0.22			0.41
Net realized and unrealized gain (loss)		0.16			0.04			0.24			0.86			0.22
Total from investment operations		0.29			0.20			0.47			1.08			0.63
Less distributions to shareholders:
From net investment income		(0.16	)		(0.16	)		(0.20	)		(0.27	)		(0.50	)
From net realized gains		(0.16	)		(0.27	)		(0.28	)		(0.41	)		(0.43	)
Return of capital		—			(0.00	)(b)		—			—			—
Total distributions		(0.32	)		(0.43	)		(0.48	)		(0.68	)		(0.93	)
Net asset value, end of period	$	9.81		$	9.84		$	10.07		$	10.08		$	9.68
Total Return(c)		3.02	%		2.02	%		4.79	%		11.43	%		6.62	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	125,188		$	736,300		$	373,277		$	113,223		$	155,000
Net expenses to average daily net assets(d)		0.25	%		0.25	%		0.25	%		0.25	%		0.25	%
Net investment income to average daily net assets(a)		1.30	%		1.57	%		2.30	%		2.23	%		4.16	%
Portfolio turnover rate		24	%		11	%		15	%		71	%		19	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.03	%		0.06	%		0.05	%		0.05	%

(a)  Net investment income is affected by timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  Return of capital is less than $0.01.

(c)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

9

GMO Domestic Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class VI share outstanding throughout the period)

	Period from July 26, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	9.93
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.24
Net realized and unrealized gain (loss)(b)		(0.14	)
Total from investment operations		0.10
Less distributions to shareholders:
From net investment income		(0.21	)
Total distributions		(0.21	)
Net asset value, end of period	$	9.82
Total Return(c)		0.97	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	359,958
Net expenses to average daily net assets(d)		0.16	%*
Net investment income to average daily net assets(a)		2.38	%(e)
Portfolio turnover rate		24	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%*

(a)  Net investment income is affected by timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The amount shown for a share outstanding does not correspond with the aggregate net realized and unrealized gain (loss) on investments due to the timing of purchases and redemptions of Fund shares in relation to fluctuating market values of the investments of the Fund.

(c)  The total return would have been lower had certain expenses not been reimbursed during the period shown.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(e)  The ratio for the period ended February 28, 2006 has not been annualized since the Fund believes it would not be appropriate because the Fund's net income is not earned ratably throughout the fiscal year.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2006.

See accompanying notes to the financial statements.

10

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Domestic Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investment in U.S. investment grade securities and by investing in other fund(s) of the Trust ("underlying fund(s)"), primarily GMO Short-Duration Collateral Fund. The Fund's benchmark is the Lehman Brothers U.S. Government Bond Index.

As of February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class VI. Class VI commenced operations on July 26, 2005. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect). Shares of the GMO Short-Duration Collateral Fund and the GMO Special Purpose Holding Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's

11

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund or the underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 34.0% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $9,247 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $51,475 in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the

12

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures or securities. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future or security transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future or security may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future or security underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Loan agreements

The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the "lender") that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation,

13

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. As of February 28, 2006, the Fund did not enter into any loan agreements.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return and forward swap spread lock swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of

14

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

15

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $12,842,493 and $19,993,585, respectively, long-term capital gains – $6,661,020 and $7,887,304, respectively and returns of capital – $0 and $294,534, respectively.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital losses of $3,814,789.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	483,608,489	$	3,732,196	$	(1,214,123	)	$	2,518,073

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income			Distributions in Excess of Net Realized Gains			Paid-in Capital
$	(128,018	)	$	(107,836	)	$	235,854

16

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.10% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares and 0.055% for Class VI shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.10% of the average daily net assets.

17

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund incurs fees and expenses indirectly as a shareholder of the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.003	%		0.000	%		0.012	%		0.015	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $5,434 and $3,065, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	1,279,702	$	2,242,765
Investments (non-U.S. Government securities)		131,178,216		387,730,000

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 72.7% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's shares outstanding. One of the shareholders is another fund of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

18

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, less than 0.1% of the Fund's shares were held by four related parties comprised of certain GMO employee accounts, and 88.5% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		6,195,721		$	61,645,760			35,887,871		$	358,929,046
Shares issued to shareholders in reinvestment of distributions		1,168,276			11,658,232			2,835,823			27,861,769
Shares repurchased		(69,417,895	)		(691,929,262	)		(979,771	)		(9,746,179	)
Net increase (decrease)		(62,053,898	)	$	(618,625,270	)		37,743,923		$	377,044,636
	Period from July 26, 2005 (commencement of operations) through February 28, 2006
Class VI:	Shares			Amount
Shares sold		35,958,245		$	357,126,330
Shares issued to shareholders in reinvestment of distributions		755,089			7,425,412
Shares repurchased		(58,545	)		(574,411	)
Net increase (decrease)		36,654,789		$	363,977,331

19

GMO Domestic Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Short-Duration Collateral Fund	$	689,586,013	$	131,178,216	$	387,730,000	$	12,078,216	$	—	$	440,095,699
GMO Special Purpose Holding Fund		22,996		—		—		—	$	12,900		12,202	*
Totals	$	689,609,009	$	131,178,216	$	387,730,000	$	12,078,216	$	12,900	$	440,107,901

*  After the effect of return of capital distributions of $8,173 and $2,311 on April 5, 2005 and February 21, 2006, respectively.

20

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Domestic Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Domestic Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

21

GMO Domestic Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.27	%	$	1,000.00	$	997.20	$	1.34
2) Hypothetical		0.27	%	$	1,000.00	$	1,023.46	$	1.35
Class VI
1) Actual		0.18	%	$	1,000.00	$	997.60	$	0.89
2) Hypothetical		0.18	%	$	1,000.00	$	1,023.90	$	0.90

*  Expenses are calculated using each Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

22

GMO Domestic Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $6,661,020 from long-term capital gains.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $4,324,894 and $2,997,775, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

23

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

24

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

25

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004– present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

26

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

27

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the U.S. Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Tax-Managed U.S. Equities Fund returned +7.5% for the fiscal year ended February 28, 2006, as compared to +8.4% for the S&P 500. On an after-tax basis, the Fund returned +7.2% compared to the benchmark's +8.2% for the same period. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in U.S. equity securities throughout the period.

The Fund's underperformance for the fiscal year is primarily attributed to sector selection. An overweight in automotive stocks was the primary detractor, as these companies faltered during the latter half of the year. The Fund benefited from an overweight in utilities, and underweights in services, food and beverage, and manufacturing. Underweights in technology and machinery, which outpaced the market, detracted from returns.

Stock selection had mixed results for the fiscal year. Selection within healthcare stocks was quite strong, with selections including UnitedHealth Group and McKesson adding to returns. Selections within technology, including Dell and Intel, were disappointments. Gains from positive selections within retail and oil and gas stocks were balanced by losses from weaker selections within financial services and construction.

For the fiscal year, valuation-based stock selection strategies underperformed, as the strategies' explicit credit to companies with strong financial quality (high, stable profitability and low debt) put the portfolio at odds with a market environment in which low quality stocks once again posted the highest returns. The momentum-based strategy finished the period on par with the benchmark.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  Returns do not reflect the tax effect a shareholder would pay on Fund distributions or the redemption of Fund shares.

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		98.1	%
Short-Term Investment(s)		1.8
Other		0.1
		100.0	%
Industry Sector Summary	% of Equity Investments
Health Care		22.5	%
Financial		15.9
Retail Stores		14.7
Technology		14.3
Utility		10.0
Oil & Gas		6.4
Consumer Goods		5.8
Food & Beverage		2.4
Services		2.4
Construction		1.6
Automotive		1.2
Transportation		1.1
Machinery		1.0
Primary Process Industry		0.4
Manufacturing		0.3
		100.0	%

1

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 98.1%
		Automotive — 1.2%
	43,469	Ford Motor Co.		346,448
	100	Genuine Parts Co.		4,452
	10,200	Harley-Davidson, Inc.		535,602
	3,400	Johnson Controls, Inc.		242,318
	4,800	Paccar, Inc.		335,376
				1,464,196
		Construction — 1.6%
	5,700	Centex Corp.		385,377
	14,033	D.R. Horton, Inc.		478,666
	1,000	Fluor Corp.		86,300
	6,300	KB Home		422,289
	3,100	Lennar Corp.-Class A		185,566
	100	NVR, Inc. *		75,300
	5,400	Pulte Homes, Inc.		207,414
	1,700	Ryland Group, Inc.		118,575
				1,959,487
		Consumer Goods — 5.7%
	64,200	Altria Group, Inc.		4,615,980
	1,700	Black & Decker Corp.		145,486
	4,000	Colgate-Palmolive Co.		217,920
	16,200	Eastman Kodak Co.		454,410
	5,500	Jones Apparel Group, Inc.		159,060
	8,400	Liz Claiborne, Inc.		302,652
	9,100	Mattel Co.		153,335
	4,600	Mohawk Industries, Inc. *		397,946
	5,500	Whirlpool Corp.		493,845
				6,940,634

See accompanying notes to the financial statements.

2

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — 15.6%
	21,900	Aflac, Inc.		1,012,875
	400	Allstate Corp. (The)		21,912
	4,950	AMBAC Financial Group, Inc.		371,993
	18,600	American International Group, Inc.		1,234,296
	7,200	AON Corp.		285,192
	27,108	Bank of America Corp.		1,242,902
	7,900	BB&T Corp.		312,287
	1,600	Capital One Financial Corp.		140,160
	36,400	Charles Schwab Corp. (The)		590,044
	2,100	Chubb Corp.		201,075
	20,700	Citigroup, Inc.		959,859
	2,700	Comerica, Inc.		154,764
	3,100	E*Trade Financial Corp. *		79,298
	3,900	Equifax, Inc.		142,896
	900	Erie Indemnity Co.-Class A		47,763
	40,000	Fannie Mae		2,187,200
	8,057	Fidelity National Financial, Inc.		304,232
	1,812	Fidelity National Title Group, Inc.-Class A		42,944
	1,400	First American Corp.		59,024
	4,700	Franklin Resources, Inc.		482,596
	6,800	Freddie Mac		458,252
	1,600	Goldman Sachs Group, Inc.		226,064
	1,700	Hartford Financial Services Group, Inc.		140,046
	1,300	Jefferson Pilot Corp.		78,325
	10	JPMorgan Chase & Co.		411
	2,400	Legg Mason, Inc.		313,416
	3,900	Lehman Brothers Holdings, Inc.		569,205
	6,000	Lincoln National Corp.		340,620
	4,700	Loews Corp.		433,622
	9,400	Marsh & McLennan Cos., Inc.		290,554
	3,500	MBIA, Inc.		205,590
	3,200	Metlife, Inc.		160,384
	6,300	MGIC Investment Corp.		401,625
	12,900	National City Corp.		448,920

See accompanying notes to the financial statements.

3

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — continued
	11,187	Old Republic International Corp.		238,171
	6,600	PMI Group (The), Inc.		285,780
	5,300	PNC Financial Services Group, Inc.		372,855
	1,200	Principal Financial Group		58,464
	6,100	Progressive Corp. (The)		655,445
	5,400	Prudential Financial, Inc.		416,016
	3,000	Radian Group, Inc.		170,250
	11,600	St. Paul Travelers Cos. (The), Inc.		498,568
	4,500	State Street Corp.		281,160
	4,200	TD Ameritrade Holding Corp.		91,392
	4,800	Torchmark Corp.		262,416
	13,000	UnumProvident Corp.		268,970
	31,245	Washington Mutual, Inc.		1,334,162
				18,873,995
		Food & Beverage — 2.3%
	7,900	Archer-Daniels-Midland Co.		250,588
	36,800	Coca-Cola Co. (The)		1,544,496
	5,700	Dean Foods Co. *		213,579
	1,700	General Mills Co.		83,725
	4,500	PepsiCo, Inc.		265,995
	15,600	Sara Lee Corp.		275,652
	14,200	Tyson Foods, Inc.-Class A		192,126
				2,826,161
		Health Care — 22.0%
	15,700	Abbott Laboratories		693,626
	17,800	Aetna, Inc.		907,800
	2,400	Allergan, Inc.		259,824
	23,200	AmerisourceBergen Corp.		1,066,968
	33,200	Bristol-Myers Squibb Co.		766,920
	14,300	Cardinal Health, Inc.		1,038,180
	8,500	Cigna Corp.		1,043,375
	9,700	Express Scripts, Inc. *		846,519

See accompanying notes to the financial statements.

4

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — continued
	13,700	Forest Laboratories, Inc. *		628,830
	7,400	Genentech, Inc. *		634,106
	6,300	HCA, Inc.		301,770
	4,200	Health Net, Inc. *		201,390
	4,100	Humana, Inc. *		211,847
	53,200	Johnson & Johnson		3,066,980
	4,800	Lincare Holdings, Inc. *		196,320
	25,800	McKesson Corp.		1,396,554
	5,500	Medco Health Solutions, Inc. *		306,460
	4,200	Medtronic, Inc.		226,590
	74,500	Merck & Co., Inc.		2,597,070
	192,730	Pfizer, Inc.		5,047,599
	1,000	St. Jude Medical, Inc. *		45,600
	56,100	UnitedHealth Group, Inc.		3,266,703
	6,478	WellPoint, Inc. *		497,446
	30,100	Wyeth		1,498,980
				26,747,457
		Machinery — 1.0%
	1,900	Baker Hughes, Inc.		129,143
	14,400	Caterpillar, Inc.		1,052,352
				1,181,495
		Manufacturing — 0.3%
	1,300	American Standard Cos., Inc.		51,454
	2,000	ITT Industries, Inc.		105,000
	3,100	United Technologies Corp.		181,350
				337,804
		Oil & Gas — 6.3%
	600	Amerada Hess Corp.		82,986
	7,600	Anadarko Petroleum Corp.		753,616
	3,100	Apache Corp.		207,452
	10,500	Burlington Resources, Inc.		946,890

See accompanying notes to the financial statements.

5

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Oil & Gas — continued
	26,500	ConocoPhillips		1,615,440
	11,000	Devon Energy Corp.		644,930
	1,900	EOG Resources, Inc.		128,060
	22,600	Exxon Mobil Corp.		1,341,762
	5,600	Marathon Oil Corp.		395,360
	300	Murphy Oil Corp.		14,061
	10,900	Occidental Petroleum Corp.		997,786
	3,400	Patterson-UTI Energy, Inc.		93,670
	4,800	Sunoco, Inc.		355,680
	1,800	Valero Energy Corp.		96,822
				7,674,515
		Primary Process Industry — 0.4%
	1,800	Air Products & Chemicals, Inc.		115,488
	1,900	Dow Chemical Co.		81,757
	2,100	Nucor Corp.		180,705
	1,400	PPG Industries, Inc.		84,882
				462,832
		Retail Stores — 14.4%
	4,400	Advance Auto Parts *		181,940
	17,900	Albertson's, Inc.		455,376
	14,400	Autonation, Inc. *		301,104
	4,500	Autozone, Inc. *		435,060
	17,200	Bed Bath & Beyond, Inc. *		619,888
	2,800	Best Buy, Inc.		150,808
	6,300	Chico's FAS, Inc. *		296,415
	4,000	Costco Wholesale Corp.		205,120
	7,500	CVS Corp.		212,475
	13,900	Dollar General Corp.		242,138
	5,100	Federated Department Stores, Inc.		362,304
	108,600	Home Depot, Inc.		4,577,490
	36,500	Kroger Co. (The) *		731,460
	46,200	Lowe's Cos., Inc.		3,149,916

See accompanying notes to the financial statements.

6

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Retail Stores — continued
	9,700	Nordstrom, Inc.		368,600
	14,100	Office Depot, Inc. *		503,088
	7,100	Ross Stores, Inc.		201,072
	29,700	Safeway, Inc.		722,007
	4,900	Staples, Inc.		120,246
	9,700	Supervalu, Inc.		306,520
	3,000	Target Corp.		163,200
	2,200	Tiffany & Co.		81,686
	10,900	TJX Cos., Inc.		266,941
	37,000	Walgreen Co.		1,659,820
	26,000	Wal-Mart Stores, Inc.		1,179,360
	600	Whole Foods Market, Inc.		38,328
				17,532,362
		Services — 2.4%
	6,100	Brinker International, Inc.		254,065
	12,000	Darden Restaurants, Inc.		503,280
	2,700	Gannett Co., Inc.		167,832
	8,500	Interpublic Group of Cos., Inc. *		88,060
	5,500	Marriott International, Inc.-Class A		376,200
	1,000	McDonald's Corp.		34,910
	3,200	MGM Mirage *		118,304
	2,200	Moody's Corp.		147,400
	2,300	Omnicom Group		183,586
	4,600	Starbucks Corp. *		167,072
	12,600	Sysco Corp.		379,134
	5,200	Wendy's International, Inc.		301,080
	3,100	Yum! Brands, Inc.		147,870
				2,868,793
		Technology — 14.0%
	13,300	Adobe Systems, Inc.		513,646
	6,300	Affiliated Computer Services, Inc.-Class A *		396,396
	4,300	Agilent Technologies, Inc. *		154,800

See accompanying notes to the financial statements.

7

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Technology — continued
	9,700	American Power Conversion Corp.		198,171
	1,700	Applera Corp.-Applied Biosystems Group		48,059
	8,200	Autodesk, Inc.		308,730
	2,200	Avnet, Inc. *		55,286
	2,700	Boeing Co.		196,263
	22,300	Corning, Inc. *		544,343
	52,700	Dell, Inc. *		1,528,300
	3,100	Diebold, Inc.		124,000
	11,400	EMC Corp. *		159,828
	23,100	First Data Corp.		1,042,503
	4,600	Fiserv, Inc. *		190,900
	1,700	General Dynamics Corp.		209,559
	2,800	Goodrich Corp.		117,152
	1,200	Google, Inc.-Class A *		435,144
	2,300	Harris Corp.		105,064
	100,900	Hewlett-Packard Co.		3,310,529
	121,500	Intel Corp.		2,502,900
	5,600	Intuit, Inc. *		272,048
	2,300	Jabil Circuit, Inc. *		87,055
	9,000	Lockheed Martin Corp.		655,830
	1,000	Microchip Technology, Inc.		35,200
	32,600	Motorola, Inc.		697,640
	5,000	National Semiconductor Corp.		140,250
	1,900	NCR Corp. *		76,171
	3,400	Nvidia Corp. *		160,242
	26,400	Oracle Corp. *		327,888
	400	Pitney Bowes, Inc.		17,096
	5,400	Qualcomm, Inc.		254,934
	4,100	Rockwell Automation, Inc.		279,497
	4,400	Rockwell Collins, Inc.		233,860
	4,100	SanDisk Corp. *		247,394
	41,600	Texas Instruments, Inc.		1,241,760
	2,300	W.W. Grainger, Inc.		170,292
				17,038,730

See accompanying notes to the financial statements.

8

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Transportation — 1.1%
	9,500	Burlington Northern Santa Fe Corp.		747,080
	4,000	C.H. Robinson Worldwide, Inc.		179,280
	500	FedEx Corp.		53,620
	1,700	JB Hunt Transport Services, Inc.		40,222
	3,100	Union Pacific Corp.		274,505
				1,294,707
		Utility — 9.8%
	17,800	AES Corp. (The) *		307,940
	9,700	Alltel Corp.		612,555
	9,500	American Electric Power Co., Inc.		346,750
	116,763	AT&T, Inc.		3,221,491
	22,900	BellSouth Corp.		723,182
	9,700	Centerpoint Energy, Inc.		125,809
	1,400	Centurytel, Inc.		50,372
	2,700	Constellation Energy Group, Inc.		158,598
	7,900	Duke Energy Corp.		224,360
	4,300	Edison International		190,748
	12,000	El Paso Corp.		156,960
	9,400	Exelon Corp.		536,834
	4,400	FirstEnergy Corp.		224,752
	5,600	FPL Group, Inc.		234,808
	5,400	Kinder Morgan, Inc.		501,012
	6,100	Nextel Partners, Inc.-Class A *		171,166
	2,400	NII Holdings, Inc.-Class B *		122,928
	300	Progress Energy, Inc.		13,314
	1,800	Public Service Enterprise Group, Inc.		124,902
	1,600	Questar Corp.		117,200
	3,300	TXU Corp.		172,887
	105,442	Verizon Communications, Inc.		3,553,395
	800	Xcel Energy, Inc.		14,848
				11,906,811
		TOTAL COMMON STOCKS (COST $108,411,405)		119,109,979

See accompanying notes to the financial statements.

9

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — 1.8%
	2,151,882	Citigroup Global Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $2,152,062 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $2,194,920.		2,151,882
		TOTAL SHORT-TERM INVESTMENT(S) (COST $2,151,882)		2,151,882
		TOTAL INVESTMENTS — 99.9% (Cost $110,563,287)		121,261,861
		Other Assets and Liabilities (net) — 0.1%		77,493
		TOTAL NET ASSETS — 100.0%	$	121,339,354

Notes to Schedule of Investments:

*  Non-income producing security.

See accompanying notes to the financial statements.

10

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $110,563,287) (Note 2)	$	121,261,861
Dividends and interest receivable		158,025
Receivable for expenses reimbursed by Manager (Note 3)		6,103
Total assets		121,425,989
Liabilities:
Payable to affiliate for (Note 3):
Management fee		30,624
Shareholder service fee		13,920
Trustees and Chief Compliance Officer fees		141
Accrued expenses		41,950
Total liabilities		86,635
Net assets	$	121,339,354
Net assets consist of:
Paid-in capital	$	114,889,089
Accumulated undistributed net investment income		215,608
Accumulated net realized loss		(4,463,917	)
Net unrealized appreciation		10,698,574
	$	121,339,354
Net assets attributable to:
Class III shares	$	121,339,354
Shares outstanding:
Class III		9,458,131
Net asset value per share:
Class III	$	12.83

See accompanying notes to the financial statements.

11

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends	$	1,902,988
Interest		41,429
Total investment income		1,944,417
Expenses:
Management fee (Note 3)		301,431
Shareholder service fee – Class III (Note 3)		137,014
Custodian, fund accounting agent and transfer agent fees		25,755
Audit and tax fees		43,626
Legal fees		1,410
Trustees fees and related expenses (Note 3)		1,688
Registration fees		1,398
Miscellaneous		1,578
Total expenses		513,900
Fees and expenses reimbursed by Manager (Note 3)		(72,985	)
Net expenses		440,915
Net investment income (loss)		1,503,502
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		2,538,684
Closed futures contracts		1,989
Net realized gain (loss)		2,540,673
Change in net unrealized appreciation (depreciation) on investments		2,939,967
Net realized and unrealized gain (loss)		5,480,640
Net increase (decrease) in net assets resulting from operations	$	6,984,142

See accompanying notes to the financial statements.

12

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	1,503,502		$	1,308,839
Net realized gain (loss)		2,540,673			7,043,189
Change in net unrealized appreciation (depreciation)		2,939,967			(1,829,315	)
Net increase (decrease) in net assets from operations		6,984,142			6,522,713
Distributions to shareholders from:
Net investment income
Class III		(1,452,459	)		(1,236,900	)
Net share transactions (Note 7):
Class III		34,433,458			14,061,792
Total increase (decrease) in net assets		39,965,141			19,347,605
Net assets:
Beginning of period		81,374,213			62,026,608
End of period (including accumulated undistributed net investment income of $215,608 and $168,428, respectively)	$	121,339,354		$	81,374,213

See accompanying notes to the financial statements.

13

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	12.14		$	11.58		$	8.62		$	11.24		$	12.08
Income (loss) from investment operations:
Net investment income (loss)†		0.20			0.16			0.14			0.14			0.16
Net realized and unrealized gain (loss)		0.69			0.54			2.96			(2.64	)		(0.86	)
Total from investment operations		0.89			0.70			3.10			(2.50	)		(0.70	)
Less distributions to shareholders:
From net investment income		(0.20	)		(0.14	)		(0.14	)		(0.12	)		(0.14	)
Total distributions		(0.20	)		(0.14	)		(0.14	)		(0.12	)		(0.14	)
Net asset value, end of period	$	12.83		$	12.14		$	11.58		$	8.62		$	11.24
Total Return(a)		7.46	%		6.12	%(b)		36.21	%		(22.33	)%		(5.78	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	121,339		$	81,374		$	62,027		$	40,347		$	27,495
Net expenses to average daily net assets		0.48	%		0.48	%		0.48	%		0.49	%		0.48	%
Net investment income to average daily net assets		1.65	%		1.39	%		1.34	%		1.41	%		1.36	%
Portfolio turnover rate		62	%		87	%		70	%		63	%		45	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.08	%		0.08	%		0.13	%		0.16	%		0.36	%

†  Calculated using average shares outstanding throughout the period.

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(b)  The effect of losses in the amount of $15,989 resulting from compliance violations and the Manager's reimbursement of such losses had no effect on total return.

See accompanying notes to the financial statements.

14

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Tax-Managed U.S. Equities Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high after-tax total return primarily through investment in U.S. equity securities. The Fund's benchmark is the S&P 500 Index (after-tax), which is computed by the Manager by applying the maximum historical applicable individual federal tax rate to the S&P 500 Index's dividend yield and to its estimated short-term and long-term realized capital gains (losses) (arising from changes in the constituents of the S&P 500 Index).

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets

15

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these

16

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

17

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $1,452,459 and $1,236,900, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $215,608 of undistributed ordinary income.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $2,626,902 and $1,837,015 expiring in 2011 and 2012, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	110,563,287	$	13,140,092	$	(2,441,518	)	$	10,698,574

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to redemption in-kind transactions. Net gains resulting from in-kind transactions were $850,888. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Loss			Paid-in Capital
$	(3,863	)	$	(847,025	)	$	850,888

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities

18

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.33% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.33% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $939 and $552, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $88,392,150 and $56,239,384, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be

19

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related party

As of February 28, 2006, 70.9% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by one related party comprised of a certain GMO employee account, and 2.4% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		3,129,868		$	39,103,839			3,788,864		$	43,065,447
Shares issued to shareholders in reinvestment of distributions		72,670			886,419			48,491			557,513
Shares repurchased		(447,033	)		(5,556,800	)		(2,488,925	)		(29,561,168	)
Net increase (decrease)		2,755,505		$	34,433,458			1,348,430		$	14,061,792

20

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Tax-Managed U.S. Equities Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Tax-Managed U.S. Equities Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

21

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.48	%	$	1,000.00	$	1,054.80	$	2.45
2) Hypothetical		0.48	%	$	1,000.00	$	1,022.41	$	2.41

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

22

GMO Tax-Managed U.S. Equities Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

For taxable, non-corporate shareholders, 97.94% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 100.00% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $8,960 or if determined to be different, the qualified interest income of such year.

23

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

24

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

25

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

26

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003– present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

27

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Tax-Managed International Equities Fund returned +20.0% for the fiscal year ended February 28, 2006, as compared to +17.4% for the MSCI EAFE Index. On an after-tax basis, the Fund returned +19.6% compared to the benchmark's +16.3% for the same period. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in international equity securities throughout the period.

Country selection was a moderate positive factor for the year. The portfolio's allocation to emerging equities continued to add to relative performance, as emerging equities outpaced developed international equities for yet another year. The portfolio also benefited from overweights in resource-heavy Norway and Canada. An underweight in Switzerland, which posted strong returns for the fiscal year, worked against the portfolio.

Sector selection was also a positive factor for the fiscal year. An underweight in telecommunication services was the primary positive factor, as these stocks suffered during the year. An underweight in financial services stocks was a moderate detractor for the period.

Stock selection was the primary contributor to performance for the year, as the portfolio benefited from strong selection within both the developed and emerging markets. The momentum-based stock selection strategy posted the year's strongest results. The quality-adjusted value strategy posted negative relative returns, but was balanced by positive relative returns by the intrinsic value stock selection strategy.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  Returns do not reflect the tax effect a shareholder would pay on Fund distributions or the redemption of Fund shares.

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		96.1	%
Preferred Stocks		1.1
Debt Obligation(s)		0.1
Futures		0.0
Swaps		0.0
Short-Term Investment(s)		0.6
Other		2.1
		100.0	%
Industry Sector Summary	% of Investments*
Financials		25.8	%
Consumer Discretionary		14.2
Energy		11.7
Health Care		11.4
Industrials		8.9
Materials		8.9
Consumer Staples		6.4
Utilities		6.0
Information Technology		3.9
Telecommunication Services		2.8
		100.0	%

*  The table excludes short-term investment(s).

1

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary	% of Investments*
Japan		25.9	%
United Kingdom		21.1
Germany		8.6
France		8.0
Netherlands		6.1
Switzerland		4.5
Italy		3.1
Finland		2.8
Australia		2.3
Norway		1.6
Canada		1.6
South Korea		1.5
Belgium		1.5
Spain		1.4
Sweden		1.3
Taiwan		1.1
Austria		1.1
Brazil		1.1
Singapore		0.9
Hong Kong		0.8
Ireland		0.8
China		0.6
Russia		0.5
Mexico		0.5
South Africa		0.4
Denmark		0.2
Greece		0.2
Israel		0.2
United States		0.1
Thailand		0.1
Turkey		0.1
Malaysia		0.0
India		0.0
Poland		0.0
Philippines		0.0
		100.0	%

*  The table excludes short-term investment(s).

2

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares Description Value ($)

	COMMON STOCKS — 96.1%
	Australia — 2.2%
84,857	Australia and New Zealand Banking Group Ltd	1,613,913
127,516	BHP Billiton Ltd	2,294,557
104,004	Boral Ltd	675,029
45,208	Commonwealth Bank of Australia	1,500,734
156,685	General Property Trust Units	481,549
30,192	Macquarie Bank Ltd	1,428,090
135,109	National Australia Bank Ltd	3,667,110
85,756	Rinker Group Ltd	1,126,626
130,965	Santos Ltd	1,100,774
437,095	Telstra Corp Ltd	1,243,779
49,785	Woodside Petroleum Ltd	1,494,462
141,450	Woolworths Ltd	1,926,440
		18,553,063
	Austria — 1.1%
5,938	Boehler Uddeholm (Bearer)	1,113,981
5,929	Flughafen Wien AG	478,181
444	Lenzing AG	97,956
87,050	OMV AG	5,398,775
14,945	Voestalpine AG	1,741,846
		8,830,739
	Belgium — 1.5%
6,470	Colruyt SA	932,065
18,354	Delhaize Group	1,224,420
115,924	Dexia	2,879,099
147,719	Fortis	5,261,937
40,452	UCB SA	1,916,071
		12,213,592

See accompanying notes to the financial statements.

3

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Brazil — 0.4%
	8,719	Banco do Brasil SA		225,787
	40,800	Companhia de Concessoes Rodoviarias		385,232
	8,000	Compania Vale do Rio Doce		393,501
	7,992,200	Electrobras (Centro)		169,328
	35,400	Petroleo Brasileiro SA (Petrobras)		810,191
	3,200	Petroleo Brasileiro SA (Petrobras) ADR		280,128
	7,600	Unibanco-Uniao de Bancos Brasileiros SA GDR		668,420
				2,932,587
		Canada — 1.5%
	86,664	Canadian Natural Resources		4,734,892
	41,864	EnCana Corp		1,731,363
	15,700	National Bank of Canada		895,209
	71,200	Petro - Canada		3,261,623
	24,500	Royal Bank of Canada		2,047,182
				12,670,269
		China — 0.6%
	114,000	Aluminum Corp of China Ltd		116,172
	340,000	Bank of Communications Co Ltd 144A *		203,928
	888,000	China Construction Bank Class H 144A *		414,932
	168,000	China Life Insurance Co Ltd *		190,550
	234,000	China Mobile Ltd		1,130,604
	1,310,000	China Petroleum & Chemical Corp Class H		779,374
	6,300	China Telecom Corp Ltd ADR		231,147
	288,300	China Telecom Corp Ltd Class H		105,351
	526,000	CNOOC Ltd		435,905
	1,108,000	PetroChina Co Ltd Class H		1,077,536
				4,685,499
		Denmark — 0.2%
	210	AP Moller - Maersk A/S Class B		1,924,749

See accompanying notes to the financial statements.

4

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Finland — 2.8%
	86,600	Fortum Oyj		2,095,120
	23,000	Kemira Oyj		398,053
	60,900	Metso Oyj		2,244,104
	523,550	Nokia Oyj		9,742,200
	25,300	Orion-Yhtymae Oyj		544,918
	70,750	Rautaruukki Oyj		2,384,229
	208,062	Sampo Oyj Class A		4,170,140
	28,500	Yit Yhtymae Oyj		1,446,024
				23,024,788
		France — 7.8%
	110,301	Arcelor		4,030,544
	55,125	Axa		1,949,125
	116,949	BNP Paribas		10,823,267
	4,173	Bongrain SA		264,693
	33,351	Business Objects SA *		1,237,825
	24,046	Carrefour SA		1,193,689
	5,024	Chargeurs International SA		120,519
	36,812	Cie de Saint-Gobain		2,455,875
	693	Elf Gabon		534,739
	2,228	Esso S.A.F.		473,713
	21,176	L'Oreal SA		1,872,321
	21,643	LVMH Moet Hennessy Louis Vuitton SA		1,966,012
	86,816	Peugeot SA		5,061,146
	46,569	Renault SA		4,474,957
	57,493	Sanofi-Aventis		4,894,105
	20,533	Schneider Electric SA		2,098,121
	21,654	Societe Generale		3,066,506
	16,784	Suez Lyon des Eaux VVPR Strip *		200
	16,784	Suez SA Class B		615,338
	70,941	Total SA		17,841,574
				64,974,269

See accompanying notes to the financial statements.

5

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — 8.0%
	10,784	Adidas-Salomon AG		2,107,494
	22,500	Allianz AG (Registered)		3,633,865
	33,857	Altana AG		1,818,357
	22,888	Bayer AG		923,183
	93,052	Bayerische Motoren Werke AG		4,473,431
	67,000	Commerzbank AG		2,448,069
	78,072	DaimlerChrysler AG (Registered)		4,338,273
	36,500	Deutsche Bank AG (Registered)		4,038,060
	24,100	Deutsche Boerse AG		3,027,561
	71,870	E. On AG		7,970,973
	12,000	IWKA AG		323,090
	36,900	MAN AG		2,328,399
	30,200	Merck KGaA		3,024,299
	35,800	Muenchener Rueckversicherungs AG (Registered)		4,860,022
	30,800	RWE AG		2,648,459
	28,028	Salzgitter AG		1,904,544
	40,800	Schering AG		2,926,359
	51,761	Suedzucker AG		1,367,546
	197,886	ThyssenKrupp AG		5,012,590
	124,500	TUI AG		2,458,890
	71,671	Volkswagen AG		5,019,242
				66,652,706
		Greece — 0.2%
	31,935	National Bank of Greece SA		1,640,542
		Hong Kong — 0.8%
	168,000	Cheung Kong Holdings Ltd		1,761,002
	320,400	CLP Holdings Ltd		1,831,829
	320,000	Hang Lung Group Co Ltd		704,723
	425,500	Hong Kong Electric Holdings Ltd		1,959,300
				6,256,854

See accompanying notes to the financial statements.

6

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		India — 0.0%
	10,400	Reliance Industries Ltd GDR 144A		331,760
		Ireland — 0.7%
	84,208	Anglo Irish Bank Corp		1,380,696
	88,246	Bank of Ireland		1,569,913
	89,154	CRH Plc		2,924,403
	79,446	Greencore Group		325,633
				6,200,645
		Israel — 0.2%
	71,000	Bank Hapoalim B.M.		324,935
	11,000	Check Point Software Technologies Ltd *		233,860
	24,100	Teva Pharmaceutical Industries ADR		1,011,959
				1,570,754
		Italy — 2.9%
	222,250	Banca Intesa SPA - Di RISP		1,222,002
	333,754	Banca Monte dei Paschi di Siena SPA		1,726,310
	83,500	Banca Popolare di Milano		1,055,426
	222,000	Capitalia SPA		1,676,798
	482,760	ENI SPA		13,801,195
	166,303	Fiat SPA *		1,800,287
	58,812	Mediobanca SPA		1,229,992
	69,931	Sanpaolo IMI SPA		1,234,073
				23,746,083
		Japan — 25.2%
	16,270	Acom Co Ltd		997,264
	92,400	Aeon Co Ltd		2,204,375
	153,000	AIOI Insurance Co Ltd		1,129,091
	52,000	Chiyoda Corp		1,253,736
	131,900	Chubu Electric Power Co Inc		3,496,280
	25,200	Chugoku Electric Power Co Inc		545,828
	182,000	Cosmo Oil Co Ltd		925,327

See accompanying notes to the financial statements.

7

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	62,350	Daiei Inc *		1,720,113
	127,941	Daiichi Sankyo Co Ltd *		2,641,605
	181,000	Daikyo Inc *		952,741
	28,400	Daito Trust Construction Co Ltd		1,329,925
	72,000	Daiwa Securities Co Ltd		854,795
	72,800	Eisai Co Ltd		3,366,807
	28,300	Fanuc Ltd		2,386,397
	322,000	Fuji Heavy Industries Ltd		1,744,816
	268,000	Furukawa Electric Co Ltd *		2,091,341
	713,000	Haseko Corp *		2,484,391
	212,500	Honda Motor Co Ltd		12,412,187
	57,000	Hoya Corp		2,261,427
	47,000	Ibiden Co Ltd		2,202,395
	675,000	Ishikawajima-Harima Heavy Industries Co Ltd *		2,046,903
	426,000	Isuzu Motors Ltd		1,466,910
	595,000	Itochu Corp		4,945,354
	66,000	JACCS Co Ltd		652,090
	158,000	Japan Steel Works Ltd		977,547
	187	Japan Tobacco Inc		3,212,715
	58,000	Kamigumi Co Ltd		442,627
	34,000	Kandenko Co		244,860
	93,700	Kansai Electric Power Co Inc		2,180,382
	100,000	Kao Corp		2,716,246
	658,000	Kobe Steel Ltd		2,500,583
	193,000	Komatsu Ltd		3,422,774
	36,000	Kyudenko Corp		227,294
	74,300	Kyushu Electric Power Co Inc		1,792,244
	566,000	Marubeni Corp		2,807,176
	93,000	Matsushita Electric Industrial Co Ltd		1,955,736
	473,000	Mazda Motor Corp		2,690,077
	312,400	Mitsubishi Corp		7,248,037
	100,000	Mitsubishi Estate Co Ltd		2,108,880
	173,000	Mitsubishi Heavy Industries		812,540
	1,219,000	Mitsubishi Motors Corp *		2,520,726

See accompanying notes to the financial statements.

8

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	288	Mitsubishi Tokyo Financial Group Inc		4,276,037
	162,000	Mitsui & Co		2,216,398
	158,000	Mitsui OSK Lines Ltd		1,152,050
	308,284	Mitsui Trust Holding Inc		4,519,980
	670	Mizuho Financial Group Inc		5,340,716
	47,000	Nagase & Co		600,540
	76,000	Nikon Corp		1,292,482
	43,000	Nippon Corp		339,225
	146,000	Nippon Shinpan Co Ltd		1,401,332
	499,000	Nippon Steel Corp		1,988,675
	904	Nippon Telegraph & Telephone Corp		3,903,399
	228,000	Nippon Yusen KK		1,483,190
	107,000	Nissan Chemical Industries Ltd		1,760,687
	710,700	Nissan Motor Co		8,158,649
	78,100	Nisshin Seifun Group Inc		792,704
	37,400	Nitto Denko Corp		3,209,500
	381	NTT Data Corp		1,761,562
	845	NTT Docomo Inc		1,250,227
	21,000	Ono Pharmaceutical Co Ltd		939,256
	13,100	ORIX Corp		3,448,845
	22,700	Promise Co Ltd		1,369,865
	1,663	Resona Holdings Inc *		5,864,086
	78,000	Ricoh Company Ltd		1,444,197
	13,800	Ryosan Co		376,456
	22,500	Secom Co		1,116,379
	192,000	Shimizu Corp		1,347,788
	24,700	Shin-Etsu Chemical Co Ltd		1,315,100
	11,600	Shinko Electric Industries		849,622
	9,400	SMC Corp		1,327,865
	49,300	Softbank Corp.		1,507,548
	213,000	Sumitomo Heavy Industries Ltd		1,904,901
	886,000	Sumitomo Metal Industries Ltd		3,933,366
	259,000	Taiheiyo Cement Co Ltd		1,114,452
	63,000	Taisho Pharmaceutical Co Ltd		1,333,568

See accompanying notes to the financial statements.

9

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	313,900	Takeda Pharmaceutical Co Ltd		17,485,631
	79,800	Tohoku Electric Power Co Inc		1,805,671
	87,000	Tokuyama Corp		1,297,992
	68,400	Tokyo Electric Power Co Inc		1,846,412
	127,000	Tokyu Land Corp		1,107,740
	108,000	TonenGeneral Sekiyu KK		1,079,433
	174,300	Toyota Motor Corp		9,291,488
	451,000	Ube Industries Ltd		1,330,770
	150,000	Urban Corp		2,197,880
	23,900	Yamada Denki Co Ltd		2,560,521
	73,000	Yaskawa Electric Corp *		795,063
				209,411,790
		Malaysia — 0.0%
	49,000	Malakoff Berhad		115,908
	54,700	Maxis Communications Berhad		128,033
	55,120	MISC Berhad		143,790
				387,731
		Mexico — 0.5%
	19,000	America Movil SA de CV Class L ADR		659,870
	195,320	Cemex SA de CV CPO		1,209,026
	51,000	Fomento Economico Mexicano SA de CV		440,621
	86,000	Grupo Financiero Banorte SA de CV		209,848
	120,000	Grupo Mexico SA Class B		307,589
	44,000	Grupo Televisa SA (Participating Certificates)		174,782
	30,500	Telefonos de Mexico SA de CV Class L ADR		682,895
	70,000	Wal-Mart de Mexico SA de CV Class V		199,943
				3,884,574
		Netherlands — 5.9%
	491,287	ABN Amro Holdings NV		14,316,479
	370,837	Aegon NV		6,115,265
	43,981	Akzo Nobel NV		2,232,721

See accompanying notes to the financial statements.

10

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Netherlands — continued
	5,579	Boskalis Westminster NV		353,382
	45,860	DSM NV		1,907,262
	2,671	Gamma Holdings NV		119,370
	60,607	Heineken NV		2,282,112
	532,822	ING Groep NV		20,026,626
	2,252	Koninklijke Ten Cate		253,312
	19,535	Koninklijke Wessanen NV		307,302
	19,206	Van Ommeren Vopak NV		611,112
	7,608	Wereldhave NV		811,066
				49,336,009
		Norway — 1.6%
	40,860	DnB NOR ASA		495,761
	21,304	Frontline Ltd		819,737
	45,861	Norsk Hydro ASA		5,371,837
	61,600	Orkla ASA		2,685,012
	138,865	Statoil ASA		3,556,162
				12,928,509
		Philippines — 0.0%
	4,240	Philippine Long Distance Telephone		145,548
		Poland — 0.0%
	9,300	Polski Koncern Naftowy Orlen SA		171,029
		Russia — 0.5%
	6,400	JSC Mining & Smelting Co ADR		569,600
	26,700	Lukoil ADR		2,136,000
	5,000	Mobile Telesystems ADR		180,350
	5,300	OAO Gazprom ADR		448,380
	5,600	Polyus Gold Co ZAO ADR *		201,600
	6,900	Unified Energy Systems GDR		475,755
				4,011,685

See accompanying notes to the financial statements.

11

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Singapore — 0.9%
	529,000	Capitaland Ltd		1,362,750
	304,000	DBS Group Holdings Ltd		3,057,612
	53,500	Fraser & Neave Ltd		627,126
	130,000	Keppel Corp Ltd		1,117,231
	610,380	Singapore Telecommunications		978,489
				7,143,208
		South Africa — 0.4%
	43,900	AVI Ltd		118,964
	119,696	FirstRand Ltd		360,840
	3,000	Impala Platinum Holdings Ltd		509,369
	6,492	Imperial Holdings Ltd *		162,414
	9,219	Nedcor Ltd		177,946
	13,600	Remgro Ltd		285,243
	99,300	Sanlam Ltd		257,058
	12,100	Sasol Ltd		414,362
	29,995	Standard Bank Group Ltd		382,940
	60,300	Steinhoff International Holdings		197,358
	10,300	Telkom SA Ltd		270,997
	9,480	Tiger Brands Ltd		234,994
				3,372,485
		South Korea — 1.5%
	24	Dong-A Pharm		1,692
	7,500	Dongkuk Steel Mill		145,518
	2,660	GS Engineering & Construction Corp		144,452
	14,428	Hana Financial Group Inc		616,645
	8,400	Hanjin Shipping		196,629
	2,200	Honam Petrochemical Co		129,152
	12,200	Hynix Semiconductor Inc *		411,541
	6,150	Hyundai Development Co		279,104
	4,800	Hyundai Mobis		403,569
	9,600	Hyundai Motor Co		815,901
	700	KCC Corporation		139,437
	13,500	KIA Motors Corp		289,826

See accompanying notes to the financial statements.

12

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		South Korea — continued
	12,200	Kookmin Bank		924,726
	17,200	Korea Electric Power Corp		733,958
	600	Korea Express Co Ltd *		49,814
	13,800	KT Corp ADR		281,796
	7,900	KT Freetel Co Ltd		210,169
	7,300	KT&G Corp		432,749
	4,600	LG Chemicals Ltd		230,808
	23,800	LG Corp		826,770
	3,200	LG Electronics Inc		262,773
	3,490	Samsung Electronics Co Ltd		2,446,748
	2,700	Samsung SDI Co Ltd		238,572
	14,000	Shinhan Financial Group Co Ltd		546,956
	600	Shinsegae Co Ltd		284,345
	8,300	SK Corp		511,430
	700	SK Telecom Co Ltd		145,465
	13,900	SK Telecom Co Ltd ADR		335,685
	10,200	Woori Finance Holdings Co Ltd		200,363
				12,236,593
		Spain — 1.4%
	37,706	ACS Actividades de Construccion y Servicios SA		1,406,181
	64,911	Endesa SA		2,173,561
	148,722	Iberdrola SA		4,690,707
	114,883	Repsol YPF SA		3,211,155
				11,481,604
		Sweden — 1.2%
	67,900	Electrolux AB		1,877,944
	53,150	Hennes & Mauritz AB Class B		1,936,638
	21,200	Holmen AB Class B		822,422
	58,800	Nordea AB		664,651
	130,100	Skanska AB Class B		2,094,574
	87,000	Swedish Match AB		1,164,998
	156,300	Tele2 AB Class B		1,686,954
				10,248,181

See accompanying notes to the financial statements.

13

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Switzerland — 4.3%
	227,028	ABB Ltd *		2,720,166
	6,497	Bobst Group AG (Registered)		277,408
	57,600	Credit Suisse Group		3,190,187
	257	Movenpick Holdings (Bearer) *		63,671
	22,360	Nestle SA (Registered)		6,573,922
	80,668	Roche Holding AG (Non Voting)		11,918,450
	2,548	Swisscom AG (Registered)		765,192
	1,603	Valora Holding AG *		325,739
	43,238	Zurich Financial Services AG *		10,210,384
				36,045,119
		Taiwan — 1.1%
	135,940	Acer Inc		300,796
	173,800	Asustek Computer Inc		489,814
	363,580	AU Optronics Corp		580,900
	249,000	Chi Mei Optoelectronics Corp		376,589
	307,000	China Bills Finance Corp		100,061
	632,000	China Development Financial Holding Corp *		241,989
	492,000	Chunghwa Picture Tubes Ltd		127,768
	177,000	Chunghwa Telecom Co Ltd		322,238
	264,259	Compal Electronics Inc		245,803
	83,547	Delta Electronics Inc		198,881
	266,760	Far Eastern Textile Co Ltd		196,338
	119,000	Far Eastone Telecommunications Co Ltd		145,610
	231,000	Formosa Chemicals & Fibre Co		363,158
	85,452	Formosa Petrochemical Corp		152,500
	288,850	Formosa Plastics Corp		457,077
	18,640	High Tech Computer Corp		399,278
	136,334	Hon Hai Precision Industry Co Ltd		862,076
	220,604	Lite-On Technology Corp		297,300
	585,000	Mega Financial Holdings Co Ltd		443,737
	261,000	Powerchip Semiconductor Corp		158,687
	151,200	Quanta Computer Inc		230,320
	93,400	Realtek Semiconductor Corp		102,413

See accompanying notes to the financial statements.

14

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Taiwan — continued
	206,099	Shin Kong Financial Holdings		178,155
	156,000	Siliconware Precision Industries Co		197,729
	396,390	Taishin Financial Holdings Co Ltd		240,824
	287,000	Taiwan Cellular Corp		264,840
	687,545	Taiwan Semiconductor Manufacturing Co Ltd		1,273,992
	5,432	Taiwan Semiconductor Manufacturing Co Ltd ADR		52,853
	167,159	Wan Hai Lines Ltd		102,702
				9,104,428
		Thailand — 0.1%
	22,000	Bangkok Dusit Medical Service Pcl (Foreign Registered) (a)		13,294
	107,950	Kasikornbank Pcl NVDR (a)		183,840
	51,000	Ptt Pcl (Foreign Registered) (a)		324,886
				522,020
		Turkey — 0.1%
	40,928	Akbank TAS		414,310
		United Kingdom — 20.5%
	54,716	Alliance & Leicester Plc		1,025,719
	77,806	Anglo American Plc		2,898,483
	309,600	AstraZeneca Plc		14,298,202
	316,479	Aviva Plc		4,378,800
	274,355	BAE Systems Plc		2,019,549
	74,552	Barclays Plc		873,228
	210,891	Barratt Developments Plc		3,820,463
	226,977	BBA Group Plc		1,065,742
	68,876	Berkeley Group Holdings Plc *		1,345,509
	91,471	BG Group Plc		1,071,384
	138,731	BHP Billiton Plc		2,331,469
	128,174	Boots Group Plc		1,593,887
	432,894	BP Plc		4,788,698
	152,830	British American Tobacco Plc		3,641,184
	2,022,113	BT Group Plc		7,293,318

See accompanying notes to the financial statements.

15

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	271,490	Cadbury Schweppes Plc		2,757,936
	940,196	Centrica Plc		4,789,270
	654,853	DSG International Plc		1,974,692
	100,042	Gallaher Group Plc		1,550,188
	938,431	GlaxoSmithKline Plc		23,835,225
	131,350	GUS Plc		2,417,137
	149,232	Hanson Plc		1,821,800
	503,763	HBOS Plc		9,381,631
	164,980	Imperial Tobacco Group Plc		4,961,761
	26,429	Inchcape Plc		1,115,771
	323,002	J Sainsbury Plc		1,813,616
	87,537	Kelda Group Plc		1,222,462
	402,607	Kingfisher Plc		1,610,307
	552,310	Lloyds TSB Group Plc		5,365,253
	92,250	Next Plc		2,668,179
	312,802	Northern Foods Plc		755,376
	236,740	Rio Tinto Plc		11,141,494
	1,126,088	Royal & Sun Alliance Insurance Group		2,567,655
	213,654	Royal Bank of Scotland Group		7,146,498
	327,792	Royal Dutch Shell Group Class A		9,882,107
	97,023	Royal Dutch Shell Plc B Shares		3,050,451
	153,945	Scottish & Southern Energy Plc		3,100,622
	206,775	Scottish Power Plc		2,115,145
	145,230	Tate & Lyle Plc		1,522,858
	440,156	Taylor Woodrow Plc		3,207,983
	30,187	Whitbread Plc		560,487
	347,714	Wimpey (George) Plc		3,371,178
	81,137	Wolseley Plc		2,012,809
				170,165,526
		TOTAL COMMON STOCKS (COST $600,004,261)		797,219,248

See accompanying notes to the financial statements.

16

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		PREFERRED STOCKS — 1.1%
		Brazil — 0.7%
	21,700	Banco Bradesco SA 3.66%		895,182
	18,950	Banco Itau Holding Financeira SA 2.79%		613,075
	6,477,900	Companhia Energetica de Minas Gerais 4.11%		332,513
	17,919,400	Companhia Paranaense de Energia 2.89%		196,620
	9,000	Companhia Vale do Rio Doce Class A 0.36%		383,141
	9,364,000	Electrobras (Centro) SA Class B 8.09%		205,713
	4,800	Empresa Brasileira de Aeronautica (Embraer) SA ADR 2.72%		190,800
	9,900	Gerdau Metalurgica SA 4.62		277,256
	120,754	Investimentos Itau SA 4.28%		526,006
	859,307	Net Servicos de Comunicacoa SA *		457,272
	70,224	Petroleo Brasileiro SA (Petrobras) 0.44%		1,479,879
				5,557,457
		Germany — 0.3%
	7,491	RWE AG 2.70%		589,793
	20,411	Villeroy & Boch AG (Non Voting) 5.64%		318,569
	40,841	Volkswagen AG 2.82%		2,104,530
				3,012,892
		Italy — 0.1%
	348,897	Compagnia Assicuratrice Unipol 5.02%		913,527
		TOTAL PREFERRED STOCKS (COST $4,623,638)		9,483,876
		DEBT OBLIGATION(S) — 0.1%
		United States — 0.1%
	798,113	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (b)		844,410
		TOTAL DEBT OBLIGATION(S) (COST $844,138)		844,410

See accompanying notes to the financial statements.

17

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — 0.6%
	4,400,000	Bank of Montreal Time Deposit, 4.64%, due 03/01/06		4,400,000
	300,000	U.S. Treasury Bill, 4.64%, due 08/24/06 (c) (d)		293,404
		TOTAL SHORT-TERM INVESTMENT(S) (COST $4,693,371)		4,693,404
		TOTAL INVESTMENTS — 97.9% (Cost $610,165,408)		812,240,938
		Other Assets and Liabilities (net) — 2.1%		17,341,934
		TOTAL NET ASSETS — 100.0%	$	829,582,872

See accompanying notes to the financial statements.

18

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	8	CAC 40	March 2006	$	477,173	$	3,888
	3	DAX	March 2006		518,921		32,401
	13	FTSE 100	March 2006		1,314,496		19,907
	2	IBEX 35	March 2006		280,609		7,723
	9	OMXS 30	March 2006		113,058		(279	)
	1	S&P/MIB	March 2006		224,788		8,387
	4	SPI 200	March 2006		365,607		10,678
	3	TOPIX	March 2006		429,701		21,122
						$	103,827

As of February 28, 2006, the Fund has sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Swap Agreements

Total Return Swaps
Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	451,825	USD	2/2/2007	Deutsche Bank	1 month LIBOR + 0.55%	Gazprom	$	2,423
	372,775	USD	2/2/2007	Deutsche Bank	1 month LIBOR + 0.55%	Gazprom		2,000
							$	4,423

See accompanying notes to the financial statements.

19

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

GDR - Global Depository Receipt

*  Non-income producing security.

(a)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(b)  Indexed security in which price and/or coupon is linked to prices of other securities, securities indices, or other financial indicators (Note 2).

(c)  Rate shown represents yield-to-maturity.

(d)  All or a portion of this security has been segregated to cover collateral requirements on financial futures contracts and open swap contracts (Note 2).

As of February 28, 2006, 92.8% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

USD - United States Dollar

See accompanying notes to the financial statements.

20

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $610,165,408) (Note 2)	$	812,240,938
Cash		80,587
Foreign currency, at value (cost $16,094,133) (Note 2)		16,062,807
Receivable for investments sold		74,657
Receivable for Fund shares sold		28,754
Dividends and interest receivable		1,463,629
Foreign taxes receivable		247,999
Receivable for open swap contracts (Note 2)		4,423
Receivable for expenses reimbursed by Manager (Note 3)		59,868
Total assets		830,263,662
Liabilities:
Payable for investments purchased		22,582
Payable for Fund shares repurchased		10,255
Payable to affiliate for (Note 3):
Management fee		342,327
Shareholder service fee		95,091
Trustees and Chief Compliance Officer fees		1,123
Payable for variation margin on open futures contracts (Note 2)		47,455
Accrued expenses		161,957
Total liabilities		680,790
Net assets	$	829,582,872
Net assets consist of:
Paid-in capital	$	607,556,736
Distributions in excess of net investment income		(343,423	)
Accumulated net realized gain		20,213,424
Net unrealized appreciation		202,156,135
	$	829,582,872
Net assets attributable to:
Class III shares	$	829,582,872
Shares outstanding:
Class III		45,311,704
Net asset value per share:
Class III	$	18.31

See accompanying notes to the financial statements.

21

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $1,595,758)	$	17,620,965
Interest		606,777
Total investment income		18,227,742
Expenses:
Management fee (Note 3)		3,524,660
Shareholder service fee – Class III (Note 3)		979,072
Custodian and fund accounting agent fees		554,775
Transfer agent fees		29,119
Audit and tax fees		55,921
Legal fees		10,041
Trustees fees and related expenses (Note 3)		11,973
Registration fees		18,798
Miscellaneous		16,728
Total expenses		5,201,087
Fees and expenses reimbursed by Manager (Note 3)		(677,234	)
Net expenses		4,523,853
Net investment income (loss)		13,703,889
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of CPMF tax of $1,261) (Note 2)		36,102,975
Closed futures contracts		1,715,877
Foreign currency, forward contracts and foreign currency related transactions		(1,620,809	)
Net realized gain (loss)		36,198,043
Change in net unrealized appreciation (depreciation) on:
Investments		80,252,435
Open futures contracts		99,642
Open swap contracts		4,423
Foreign currency, forward contracts and foreign currency related transactions		(188,252	)
Net unrealized gain (loss)		80,168,248
Net realized and unrealized gain (loss)		116,366,291
Net increase (decrease) in net assets resulting from operations	$	130,070,180

See accompanying notes to the financial statements.

22

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	13,703,889		$	7,528,584
Net realized gain (loss)		36,198,043			7,597,234
Change in net unrealized appreciation (depreciation)		80,168,248			78,977,448
Net increase (decrease) in net assets from operations		130,070,180			94,103,266
Distributions to shareholders from:
Net investment income
Class III		(12,608,317	)		(8,725,523	)
Net realized gains
Class III		(11,477,247	)		—
		(24,085,564	)		(8,725,523	)
Net share transactions (Note 7):
Class III		163,686,368			183,173,856
Total increase (decrease) in net assets		269,670,984			268,551,599
Net assets:
Beginning of period		559,911,888			291,360,289
End of period (including distributions in excess of net investment income of $343,423 and $809,833, respectively)	$	829,582,872		$	559,911,888

See accompanying notes to the financial statements.

23

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.78		$	13.19		$	8.73		$	9.70		$	10.79
Income (loss) from investment operations:
Net investment income (loss)†		0.35			0.26			0.21			0.19			0.25
Net realized and unrealized gain (loss)		2.77			2.61			4.55			(0.90	)		(1.03	)
Total from investment operations		3.12			2.87			4.76			(0.71	)		(0.78	)
Less distributions to shareholders:
From net investment income		(0.31	)		(0.28	)		(0.30	)		(0.26	)		(0.31	)
From net realized gains		(0.28	)		—			—			—			—
Total distributions		(0.59	)		(0.28	)		(0.30	)		(0.26	)		(0.31	)
Net asset value, end of period	$	18.31		$	15.78		$	13.19		$	8.73		$	9.70
Total Return(a)		20.04	%		21.94	%		54.99	%		(7.47	)%		(7.16	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	829,583		$	559,912		$	291,360		$	94,709		$	75,287
Net expenses to average daily net assets		0.69	%		0.69	%		0.69	%		0.70	%		0.69	%
Net investment income to average daily net assets		2.10	%		1.91	%		1.87	%		1.98	%		2.49	%
Portfolio turnover rate		39	%		44	%		36	%		48	%		50	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.10	%		0.16	%		0.26	%		0.45	%		0.41	%

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

24

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Tax-Managed International Equities Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high after-tax total return primarily through investment in non-U.S. equity securities. The Fund's benchmark is the MSCI EAFE Index (after-tax). The Fund's benchmark is computed by the Manager by applying the maximum historical applicable individual federal tax rate to the MSCI EAFE Index's dividend yield and to its estimated short-term and long-term realized capital gains and losses (arising from changes in the constituents of the MSCI EAFE Index).

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held

25

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the

26

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

27

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed Securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the

28

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

price of the security or index underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to the Brazilian market. During the year ended February 28, 2006, the Fund incurred $1,261 in CPMF tax which is included in the net realized gain (loss) on investments in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005,

29

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the tax basis of distributions paid were as follows: ordinary income – $12,608,317 and $8,725,523, respectively and long-term capital gains – $11,477,247 and $0, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $5,020,105 and $17,808,612 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	613,122,335	$	202,405,916	$	(3,287,313	)	$	199,118,603

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to passive foreign investment company and foreign currency transactions. The financial highlights exclude these adjustments.

Distributions In Excess of Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(629,162	)	$	629,162	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

30

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities 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 U.S. and developed foreign markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.54% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and the independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.54% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $7,218 and $4,324, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $425,610,594 and $246,833,352, respectively.

31

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 21.3% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's shares outstanding. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 2.8% of the Fund's shares were held by five related parties comprised of certain GMO employee accounts, and 0.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		11,270,432		$	188,430,360			14,350,468		$	197,448,337
Shares issued to shareholders in reinvestment of distributions		924,678			15,871,319			229,800			3,400,258
Shares repurchased		(2,369,116	)		(40,615,311	)		(1,191,283	)		(17,674,739	)
Net increase		9,825,994		$	163,686,368			13,388,985		$	183,173,856

32

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Tax-Managed International Equities Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Tax-Managed International Equities Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

33

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		0.69	%	$	1,000.00	$	1,151.20	$	3.68
2) Hypothetical				0.69	%	$	1,000.00	$	1,021.37	$	3.46

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

34

GMO Tax-Managed International Equities Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year ended February 28, 2006

The Fund's distributions to shareholders include $11,477,247 from long-term capital gains.

During the year ended February 28, 2006, the Fund paid foreign taxes of $1,595,758 and recognized foreign source income of $19,214,414.

For taxable, non-corporate shareholders, 96.77% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $123,069 or if determined to be different, the qualified interest income of such year.

35

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

36

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

37

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

38

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

39

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the U.S. Quantitative Team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO U.S. Quality Equity Fund returned +5.3% for the fiscal year ended February 28, 2006, as compared to +8.4% for the S&P 500 Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in U.S. equity securities throughout the period.

The portfolio's underformance for the fiscal year is primarily due to the fact that high quality stocks lagged their low quality stock brethren by a substantial margin. For example, the return of GMO's 200-stock High Quality Universe, from which we make selections for this fund, gained 3.6%, while the universe of very low quality, or 'junk' stocks, returned over 18% for the twelve month period.

At the broad sector level, performance was hindered for the fiscal year. While there were some modest gains made from GMO's underweighting in oil & gas and manufacturing, these gains were negated by the overweighting in retail and autos, along with underweighting financials.

Versus the S&P 500, stock selection was disappointing for the period as well. While selections in health care and retail were very strong, selections in technology wiped out these gains.

The Fund uses one investment tool – price to intrinsic value – to make selections from the quality-only large cap universe.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class IV shares may vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		94.2	%
Short-Term Investment(s)		5.0
Futures		0.0
Other		0.8
		100.0	%
Industry Sector Summary	% of Equity Investments
Health Care		32.6	%
Retail Stores		24.7
Utility		15.1
Food & Beverage		10.1
Technology		4.2
Consumer Goods		4.1
Oil & Gas		4.1
Automotive		2.1
Financial		1.8
Services		1.2
		100.0	%

1

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares	Description	Value ($)
	COMMON STOCKS — 94.2%

	Automotive — 1.9%
28,200	Genuine Parts Co.	1,255,464
1,129,600	Harley-Davidson, Inc.	59,315,296
		60,570,760
	Consumer Goods — 3.9%
573,100	Colgate-Palmolive Co.	31,222,488
193,400	Kimberly Clark Corp.	11,445,412
258,700	Liz Claiborne, Inc.	9,320,961
1,006,800	Procter & Gamble Co.	60,337,524
160,100	VF Corp.	8,773,480
		121,099,865
	Financial — 1.7%
346,100	Brown & Brown, Inc.	10,822,547
69,500	Chubb Corp.	6,654,625
189,800	First American Corp.	8,001,968
34,000	Jefferson Pilot Corp.	2,048,500
245,900	Progressive Corp. (The)	26,421,955
		53,949,595
	Food & Beverage — 9.6%
184,100	Anheuser Busch Cos., Inc.	7,647,514
43,700	Brown-Forman Corp.-Class B	3,074,732
4,638,500	Coca-Cola Co. (The)	194,677,845
153,900	HJ Heinz Co.	5,828,193
1,081,000	PepsiCo, Inc.	63,897,910
1,258,000	Sara Lee Corp.	22,228,860
		297,355,054
	Health Care — 30.7%
13,100	Cigna Corp.	1,608,025
908,800	Forest Laboratories, Inc. *	41,713,920

See accompanying notes to the financial statements.

2

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — continued
	2,632,300	Johnson & Johnson		151,752,095
	6,000	Lincare Holdings, Inc. *		245,400
	222,000	McKesson Corp.		12,016,860
	5,550,100	Merck & Co., Inc.		193,476,486
	7,773,100	Pfizer, Inc.		203,577,489
	3,435,000	UnitedHealth Group, Inc.		200,020,050
	3,022,400	Wyeth		150,515,520
				954,925,845
		Oil & Gas — 3.8%
	2,016,900	Exxon Mobil Corp.		119,743,353
		Retail Stores — 23.3%
	9,100	Abercrombie & Fitch Co.-Class A		612,612
	203,300	Bed Bath & Beyond, Inc. *		7,326,932
	525,000	Best Buy, Inc.		28,276,500
	5,040,900	Home Depot, Inc.		212,473,935
	1,481,000	Kroger Co. *		29,679,240
	3,125,400	Lowe's Cos., Inc.		213,089,772
	634,000	Supervalu, Inc.		20,034,400
	3,354,500	Walgreen Co.		150,482,870
	1,399,700	Wal-Mart Stores, Inc.		63,490,392
				725,466,653
		Services — 1.1%
	131,000	Darden Restaurants, Inc.		5,494,140
	580,400	McDonald's Corp.		20,261,764
	88,700	Moody's Corp.		5,942,900
	106,100	Starbucks Corp. *		3,853,552
				35,552,356
		Technology — 4.0%
	308,800	Affiliated Computer Services, Inc.-Class A *		19,429,696
	424,400	Dell, Inc. *		12,307,600

See accompanying notes to the financial statements.

3

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		Technology — continued
	190,600	First Data Corp.		8,601,778
	201,100	Fiserv, Inc. *		8,345,650
	20,300	Intuit, Inc. *		986,174
	1,609,200	Microsoft Corp.		43,287,480
	708,300	Pitney Bowes, Inc.		30,272,742
				123,231,120
		Utility — 14.2%
	1,224,400	Alltel Corp.		77,320,860
	6,602,700	AT&T Inc.		182,168,493
	1,451,000	BellSouth Corp.		45,822,580
	4,079,800	Verizon Communications, Inc.		137,489,260
				442,801,193
		TOTAL COMMON STOCKS (COST $2,800,225,653)		2,934,695,794
		SHORT-TERM INVESTMENT(S) — 5.0%
	148,513,341	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $148,525,758 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $151,483,608.		148,513,341
	6,300,000	U.S. Treasury Bill, 3.81%, due 03/23/06 (a) (b)		6,285,658
		TOTAL SHORT-TERM INVESTMENT(S) (COST $154,798,999)		154,798,999
		TOTAL INVESTMENTS — 99.2% (Cost $2,955,024,652)		3,089,494,793
		Other Assets and Liabilities (net) — 0.8%		24,010,094
		TOTAL NET ASSETS — 100.0%	$	3,113,504,887

See accompanying notes to the financial statements.

4

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	65	S&P 500	March 2006	$	20,839,000	$	239,401

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  Rate shown represents yield-to-maturity.

(b)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

See accompanying notes to the financial statements.

5

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $2,955,024,652) (Note 2)	$	3,089,494,793
Receivable for investments sold		11,186,589
Receivable for Fund shares sold		9,000,000
Dividends and interest receivable		5,736,255
Receivable for expenses reimbursed by Manager (Note 3)		113,722
Total assets		3,115,531,359
Liabilities:
Payable for Fund shares repurchased		495,902
Payable to affiliate for (Note 3):
Management fee		775,057
Shareholder service fee		285,951
Trustees and Chief Compliance Officer fees		6,955
Payable for variation margin on open futures contracts (Note 2)		188,500
Accrued expenses		274,107
Total liabilities		2,026,472
Net assets	$	3,113,504,887
Net assets consist of:
Paid-in capital	$	2,967,837,222
Accumulated undistributed net investment income		11,716,758
Distributions in excess of net realized gain		(758,635	)
Net unrealized appreciation		134,709,542
	$	3,113,504,887
Net assets attributable to:
Class III shares	$	1,108,087,674
Class IV shares	$	2,005,417,213
Shares outstanding:
Class III		53,245,835
Class IV		96,312,160
Net asset value per share:
Class III	$	20.81
Class IV	$	20.82

See accompanying notes to the financial statements.

6

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends	$	40,539,090
Interest		3,368,517
Total investment income		43,907,607
Expenses:
Management fee (Note 3)		7,026,992
Shareholder service fee – Class III (Note 3)		1,160,240
Shareholder service fee – Class IV (Note 3)		1,423,693
Custodian, fund accounting agent and transfer agent fees		253,325
Audit and tax fees		29,962
Legal fees		35,365
Trustees fees and related expenses (Note 3)		36,147
Registration fees		169,968
Miscellaneous		37,874
Total expenses		10,173,566
Fees and expenses reimbursed by Manager (Note 3)		(504,337	)
Net expenses		9,669,229
Net investment income (loss)		34,238,378
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		(1,009,468	)
Closed futures contracts		3,221,891
Net realized gain (loss)		2,212,423
Change in net unrealized appreciation (depreciation) on:
Investments		119,913,386
Open futures contracts		182,468
Net unrealized gain (loss)		120,095,854
Net realized and unrealized gain (loss)		122,308,277
Net increase (decrease) in net assets resulting from operations	$	156,546,655

See accompanying notes to the financial statements.

7

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	34,238,378		$	14,725,475
Net realized gain (loss)		2,212,423			762,866
Change in net unrealized appreciation (depreciation)		120,095,854			15,109,205
Net increase (decrease) in net assets from operations		156,546,655			30,597,546
Distributions to shareholders from:
Net investment income
Class III		(8,981,477	)		(3,766,730	)
Class IV		(15,500,649	)		(9,021,810	)
Total distributions from net investment income		(24,482,126	)		(12,788,540	)
Net realized gains
Class III		(1,546,552	)		—
Class IV		(2,159,897	)		—
Total distributions from net realized gains		(3,706,449	)		—
		(28,188,575	)		(12,788,540	)
Net share transactions (Note 7):
Class III		593,814,070			437,911,989
Class IV		988,898,698			789,912,468
Increase (decrease) in net assets resulting from net share transactions		1,582,712,768			1,227,824,457
Total increase (decrease) in net assets		1,711,070,848			1,245,633,463
Net assets:
Beginning of period		1,402,434,039			156,800,576
End of period (including accumulated undistributed net investment income of $11,716,758 and $1,960,506, respectively)	$	3,113,504,887		$	1,402,434,039

See accompanying notes to the financial statements.

8

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004(a)
Net asset value, beginning of period	$	20.03		$	19.93		$	20.00
Income (loss) from investment operations:
Net investment income (loss)†		0.32			0.39			0.01
Net realized and unrealized gain (loss)		0.72			(0.05	)		(0.08	)
Total from investment operations		1.04			0.34			(0.07	)
Less distributions to shareholders:
From net investment income		(0.22	)		(0.24	)		—
From net realized gains		(0.04	)		—			—
Total distributions		(0.26	)		(0.24	)		—
Net asset value, end of period	$	20.81		$	20.03		$	19.93
Total Return(b)		5.28	%		1.72	%		(0.35	)%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,108,088		$	463,848		$	18,966
Net expenses to average daily net assets		0.48	%		0.48	%		0.47	%*
Net investment income to average daily net assets		1.58	%		1.98	%		1.22	%*
Portfolio turnover rate		52	%		66	%		2	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.04	%		1.59	%*

(a)  Period from February 6, 2004 (commencement of operations) through February 29, 2004.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

9

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004(a)
Net asset value, beginning of period	$	20.03		$	19.93		$	20.00
Income (loss) from investment operations:
Net investment income (loss)†		0.32			0.38			0.01
Net realized and unrealized gain (loss)		0.74			(0.03	)		(0.08	)
Total from investment operations		1.06			0.35			(0.07	)
Less distributions to shareholders:
From net investment income		(0.23	)		(0.25	)		—
From net realized gains		(0.04	)		—			—
Total distributions		(0.27	)		(0.25	)		—
Net asset value, end of period	$	20.82		$	20.03		$	19.93
Total Return(b)		5.37	%		1.75	%		(0.35	)%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	2,005,417		$	938,586		$	137,835
Net expenses to average daily net assets		0.44	%		0.44	%		0.44	%*
Net investment income to average daily net assets		1.62	%		1.92	%		0.99	%*
Portfolio turnover rate		52	%		66	%		2	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.04	%		1.59	%*

(a)  Period from February 6, 2004 (commencement of operations) through February 29, 2004.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

10

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO U.S. Quality Equity Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return primarily through investment in U.S. equity securities. The Fund's benchmark is the S&P 500 Index.

Throughout the year ended February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class IV. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the classes of shares is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Fund's prospectus.

2.  Significant Accounting Policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument

11

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements

12

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in

13

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $27,076,640 and $12,788,540, respectively and long-term capital gains – $1,111,935 and $0, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $14,340,831 and $848,051 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
$	2,959,016,011	$	160,662,594	$	(30,183,812	)	$	130,478,782

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

14

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.33% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on average daily net assets of each class at the annual rate of 0.15% for Class III shares and 0.105% for Class IV shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.33% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $22,759 and $16,542, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $2,494,902,630 and $1,042,253,328, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 22.4% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

15

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 0.2% of the Fund's shares were held by nine related parties, comprised of certain GMO employee accounts, and 56.2% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		43,846,709		$	874,138,746			23,897,887		$	471,705,564
Shares issued to shareholders in reinvestment of distributions		457,932			9,093,758			140,086			2,814,184
Shares repurchased		(14,220,768	)		(289,418,434	)		(1,827,592	)		(36,607,759	)
Net increase (decrease)		30,083,873		$	593,814,070			22,210,381		$	437,911,989
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		49,970,954		$	999,519,390			39,507,112		$	781,349,114
Shares issued to shareholders in reinvestment of distributions		843,645			16,747,719			449,463			9,021,810
Shares repurchased		(1,350,936	)		(27,368,411	)		(23,078	)		(458,456	)
Net increase (decrease)		49,463,663		$	988,898,698			39,933,497		$	789,912,468

16

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO U.S. Quality Equity Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO U.S. Quality Equity Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

17

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.48	%	$	1,000.00	$	1,053.00	$	2.44
2) Hypothetical		0.48	%	$	1,000.00	$	1,022.41	$	2.41
Class IV
1) Actual		0.44	%	$	1,000.00	$	1,053.20	$	2.24
2) Hypothetical		0.44	%	$	1,000.00	$	1,022.61	$	2.21

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

18

GMO U.S. Quality Equity Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $1,111,935 from long-term capital gains.

For taxable, non-corporate shareholders, 94.27% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 99.69% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $1,512,156 or if determined to be different, the qualified interest income of such year.

19

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

20

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

21

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

22

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the U.S. Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Tobacco-Free Core Fund returned +5.4% for the fiscal year ended February 28, 2006, as compared to +8.4% for the S&P 500. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in U.S. equity securities throughout the period.

Sector selection detracted from the portfolio's relative performance for the fiscal year. Underweight positions in manufacturing and services, and an overweight position in utility provided the bulk of positive performance. Meanwhile, an overweight position in automotive proved costly.

The portfolio's underperformance for the period is primarily attributed to stock selection, and, more specifically, picks made among technology issues. Some positive performance came from selections made in health care and retail store securities.

For the year, the portfolio's valuation stock selection strategies detracted from overall performance, while price momentum provided a positive impact for the period.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class IV shares will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		97.0	%
Short-Term Investment(s)		11.6
Futures		0.0
Other		(8.6	)
		100.0	%
Industry Sector Summary	% of Equity Investments
Health Care		23.0	%
Financial		16.7
Technology		15.4
Retail Stores		14.0
Utility		9.6
Oil & Gas		5.7
Services		3.1
Food & Beverage		2.7
Construction		2.5
Consumer Goods		2.3
Automotive		2.0
Machinery		1.3
Transportation		1.1
Manufacturing		0.4
Primary Process Industry		0.2
		100.0	%

1

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 97.0%
		Automotive — 2.0%
	225,093	Ford Motor Co. (a)		1,793,991
	10,313	General Motors Corp. (a)		209,457
	3,500	Genuine Parts Co.		155,820
	50,400	Harley-Davidson, Inc. (a)		2,646,504
	22,800	Johnson Controls, Inc.		1,624,956
	12,800	Paccar, Inc.		894,336
				7,325,064
		Construction — 2.4%
	26,000	Centex Corp.		1,757,860
	45,000	D.R. Horton, Inc.		1,534,950
	5,200	Fluor Corp.		448,760
	24,400	KB Home		1,635,532
	23,200	Lennar Corp.-Class A		1,388,752
	300	NVR, Inc. *(a)		225,900
	39,200	Pulte Homes, Inc.		1,505,672
	3,300	Ryland Group, Inc.		230,175
	2,100	Vulcan Materials Co.		165,900
				8,893,501
		Consumer Goods — 2.3%
	3,000	Black & Decker Corp.		256,740
	12,900	Colgate-Palmolive Co.		702,792
	70,300	Eastman Kodak Co. (a)		1,971,915
	25,700	Jones Apparel Group, Inc.		743,244
	30,000	Liz Claiborne, Inc. (a)		1,080,900
	15,700	Mattel Co.		264,545
	19,500	Mohawk Industries, Inc. *		1,686,945
	6,200	Newell Rubbermaid, Inc.		154,194
	17,400	Whirlpool Corp.		1,562,346
				8,423,621

See accompanying notes to the financial statements.

2

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — 16.2%
	89,100	Aflac, Inc.		4,120,875
	10,000	Allstate Corp. (The)		547,800
	25,100	AMBAC Financial Group, Inc.		1,886,265
	66,800	American International Group, Inc.		4,432,848
	18,800	AON Corp.		744,668
	70,188	Bank of America Corp.		3,218,120
	4,500	BB&T Corp.		177,885
	138,600	Charles Schwab Corp. (The)		2,246,706
	9,600	Chubb Corp.		919,200
	58,700	Citigroup, Inc.		2,721,919
	11,900	Comerica, Inc. (a)		682,108
	8,000	E*Trade Financial Corp. *		204,640
	10,800	Equifax, Inc.		395,712
	131,000	Fannie Mae		7,163,080
	45,655	Fidelity National Financial, Inc.		1,723,933
	3,100	First American Corp.		130,696
	4,800	First Horizon National Corp.		187,728
	19,200	Franklin Resources, Inc.		1,971,456
	25,700	Freddie Mac		1,731,923
	6,700	Goldman Sachs Group, Inc.		946,643
	9,200	Hartford Financial Services Group, Inc.		757,896
	8,700	Legg Mason, Inc.		1,136,133
	15,300	Lehman Brothers Holdings, Inc.		2,233,035
	22,400	Lincoln National Corp.		1,271,648
	24,100	Marsh & McLennan Cos., Inc.		744,931
	2,400	MBIA, Inc. (a)		140,976
	17,700	Metlife, Inc. (a)		887,124
	25,100	MGIC Investment Corp.		1,600,125
	38,600	National City Corp. (a)		1,343,280
	37,125	Old Republic International Corp.		790,391
	8,500	PMI Group (The), Inc. (a)		368,050
	6,200	PNC Financial Services Group, Inc.		436,170
	4,300	Principal Financial Group		209,496
	14,200	Progressive Corp. (The)		1,525,790

See accompanying notes to the financial statements.

3

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Financial — continued
	14,500	Prudential Financial, Inc.		1,117,080
	10,100	Radian Group, Inc.		573,175
	31,100	St. Paul Travelers Cos. (The), Inc. (a)		1,336,678
	13,000	State Street Corp.		812,240
	22,600	TD Ameritrade Holding Corp.		491,776
	19,800	Torchmark Corp.		1,082,466
	62,600	UnumProvident Corp. (a)		1,295,194
	4,100	Wachovia Corp.		229,887
	97,166	Washington Mutual, Inc.		4,148,988
				60,686,734
		Food & Beverage — 2.6%
	22,700	Archer-Daniels-Midland Co.		720,044
	116,400	Coca-Cola Co. (The)		4,885,308
	12,100	Dean Foods Co. *		453,387
	2,900	General Mills Co.		142,825
	23,500	PepsiCo, Inc.		1,389,085
	88,100	Sara Lee Corp.		1,556,727
	56,300	Tyson Foods, Inc.-Class A		761,739
				9,909,115
		Health Care — 22.3%
	63,000	Abbott Laboratories		2,783,340
	53,000	Aetna, Inc.		2,703,000
	3,600	Allergan, Inc.		389,736
	44,800	AmerisourceBergen Corp.		2,060,352
	2,000	Amgen, Inc. *		150,980
	4,800	Barr Pharmaceuticals, Inc. *		322,464
	67,200	Bristol-Myers Squibb Co.		1,552,320
	24,600	Cardinal Health, Inc. (a)		1,785,960
	25,400	Cigna Corp.		3,117,850
	600	DENTSPLY International, Inc.		34,194
	23,000	Express Scripts, Inc. *		2,007,210
	40,600	Forest Laboratories, Inc. * (a)		1,863,540

See accompanying notes to the financial statements.

4

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — continued
	24,800	Genentech, Inc. *		2,125,112
	30,100	HCA, Inc.		1,441,790
	8,800	Health Net, Inc. *		421,960
	12,900	Humana, Inc. *		666,543
	180,420	Johnson & Johnson		10,401,213
	32,200	Lincare Holdings, Inc. *		1,316,980
	88,000	McKesson Corp.		4,763,440
	17,400	Medco Health Solutions, Inc. *		969,528
	25,000	Medtronic, Inc.		1,348,750
	239,600	Merck & Co., Inc.		8,352,456
	577,390	Pfizer, Inc.		15,121,844
	13,100	Stryker Corp.		605,482
	8,800	Tenet Healthcare Corp. *		69,432
	216,224	UnitedHealth Group, Inc.		12,590,724
	22,362	WellPoint, Inc. *		1,717,178
	53,300	Wyeth		2,654,340
				83,337,718
		Machinery — 1.2%
	7,200	Baker Hughes, Inc.		489,384
	3,500	BJ Services Co.		109,585
	50,300	Caterpillar, Inc.		3,675,924
	3,600	Halliburton Co.		244,800
				4,519,693
		Manufacturing — 0.3%
	6,000	ITT Industries, Inc.		315,000
	3,500	Textron, Inc.		308,385
	11,900	United Technologies Corp.		696,150
				1,319,535
		Oil & Gas — 5.5%
	1,400	Amerada Hess Corp. (a)		193,634
	13,300	Anadarko Petroleum Corp.		1,318,828

See accompanying notes to the financial statements.

5

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Oil & Gas — continued
	7,000	Apache Corp.		468,440
	24,100	Burlington Resources, Inc.		2,173,338
	74,266	ConocoPhillips		4,527,255
	22,900	Devon Energy Corp.		1,342,627
	87,200	Exxon Mobil Corp.		5,177,064
	14,000	Marathon Oil Corp.		988,400
	35,600	Occidental Petroleum Corp.		3,258,824
	12,700	Patterson-UTI Energy, Inc.		349,885
	10,200	Sunoco, Inc. (a)		755,820
				20,554,115
		Primary Process Industry — 0.2%
	12,600	Air Products & Chemicals, Inc.		808,416
		Retail Stores — 13.6%
	5,000	Abercrombie & Fitch Co.-Class A		336,600
	10,800	Advance Auto Parts *		446,580
	36,076	Albertson's, Inc.		917,774
	35,900	Autonation, Inc. * (a)		750,669
	4,600	Autozone, Inc. *		444,728
	56,100	Bed Bath & Beyond, Inc. *		2,021,844
	2,900	Best Buy, Inc.		156,194
	20,400	Chico's FAS, Inc. *		959,820
	13,100	CVS Corp.		371,123
	10,600	Dollar General Corp.		184,652
	19,500	Federated Department Stores, Inc.		1,385,280
	324,600	Home Depot, Inc.		13,681,890
	111,500	Kroger Co. *		2,234,460
	137,900	Lowe's Cos., Inc. (a)		9,402,022
	20,700	Nordstrom, Inc.		786,600
	28,400	Office Depot, Inc. *		1,013,312
	13,200	Ross Stores, Inc.		373,824
	102,000	Safeway, Inc. (a)		2,479,620
	27,700	Supervalu, Inc.		875,320

See accompanying notes to the financial statements.

6

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Retail Stores — continued
	6,600	Target Corp.		359,040
	8,800	Tiffany & Co.		326,744
	40,700	TJX Cos., Inc.		996,743
	113,000	Walgreen Co.		5,069,180
	114,100	Wal-Mart Stores, Inc.		5,175,576
	2,000	Whole Foods Market, Inc.		127,760
				50,877,355
		Services — 3.0%
	33,000	Darden Restaurants, Inc.		1,384,020
	9,000	Gannett Co., Inc. (a)		559,440
	33,500	Marriott International, Inc.-Class A		2,291,400
	16,500	McDonald's Corp.		576,015
	24,100	MGM Mirage *		890,977
	6,300	Moody's Corp.		422,100
	19,000	Omnicom Group		1,516,580
	1,900	Outback Steakhouse, Inc.		79,439
	25,100	Sysco Corp.		755,259
	2,900	Weight Watchers International, Inc. * (a)		152,163
	20,900	Wendy's International, Inc.		1,210,110
	25,800	Yum! Brands, Inc. (a)		1,230,660
				11,068,163
		Technology — 15.0%
	62,500	Adobe Systems, Inc.		2,413,750
	5,400	Affiliated Computer Services, Inc.-Class A * (a)		339,768
	10,500	Agilent Technologies, Inc. *		378,000
	24,900	American Power Conversion Corp.		508,707
	7,000	Applera Corp.-Applied Biosystems Group		197,890
	7,100	Autodesk, Inc.		267,315
	6,400	BMC Software, Inc. *		139,968
	11,500	Boeing Co.		835,935
	8,700	Broadcom Corp.-Class A *		392,283
	73,300	Corning, Inc. *		1,789,253

See accompanying notes to the financial statements.

7

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Technology — continued
	226,200	Dell, Inc. *		6,559,800
	4,300	Diebold, Inc.		172,000
	2,600	DST Systems, Inc. *		146,198
	72,200	EMC Corp. *		1,012,244
	4,600	Emerson Electric Co.		376,326
	66,400	First Data Corp.		2,996,632
	3,400	General Dynamics Corp.		419,118
	11,200	Goodrich Corp.		468,608
	3,800	Google, Inc.-Class A *		1,377,956
	309,300	Hewlett-Packard Co.		10,148,133
	440,000	Intel Corp.		9,064,000
	12,100	Intuit, Inc. *		587,818
	4,900	Jabil Circuit, Inc. *		185,465
	16,600	Lexmark International, Inc. *		781,694
	35,100	Lockheed Martin Corp.		2,557,737
	3,900	Microchip Technology, Inc.		137,280
	83,700	Motorola, Inc.		1,791,180
	5,300	National Semiconductor Corp.		148,665
	2,300	Northrop Grumman Corp.		147,430
	12,400	Nvidia Corp. * (a)		584,412
	123,500	Oracle Corp. *		1,533,870
	3,900	Paychex, Inc.		156,195
	20,100	Qualcomm, Inc.		948,921
	22,200	Rockwell Automation, Inc.		1,513,374
	7,700	Rockwell Collins, Inc.		409,255
	134,800	Texas Instruments, Inc.		4,023,780
	5,900	W.W. Grainger, Inc.		436,836
				55,947,796
		Transportation — 1.1%
	31,400	Burlington Northern Santa Fe Corp.		2,469,296
	6,200	C.H. Robinson Worldwide, Inc.		277,884
	13,600	JB Hunt Transport Services, Inc. (a)		321,776
	10,400	Union Pacific Corp.		920,920
				3,989,876

See accompanying notes to the financial statements.

8

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares/ Par Value ($)		Description	Value ($)
		Utility — 9.3%
	28,800	AES Corp. (The) *		498,240
	14,500	Alltel Corp.		915,675
	21,200	American Electric Power Co., Inc.		773,800
	361,187	AT&T, Inc.		9,965,149
	107,300	BellSouth Corp.		3,388,534
	19,500	Centerpoint Energy, Inc.		252,915
	13,800	Constellation Energy Group, Inc.		810,612
	12,600	Duke Energy Corp.		357,840
	19,000	Edison International		842,840
	36,600	El Paso Corp.		478,728
	4,700	Entergy Corp.		340,797
	39,400	Exelon Corp.		2,250,134
	11,700	FirstEnergy Corp.		597,636
	7,800	FPL Group, Inc.		327,054
	16,400	Kinder Morgan, Inc.		1,521,592
	18,100	Nextel Partners, Inc.-Class A *		507,886
	7,900	Public Service Enterprise Group, Inc.		548,181
	6,800	Questar Corp.		498,100
	11,400	TXU Corp.		597,246
	275,284	Verizon Communications, Inc.		9,277,071
				34,750,030
		TOTAL COMMON STOCKS (COST $335,683,565)		362,410,732
		SHORT-TERM INVESTMENT(S) — 11.6%
	1,103,345	American Beacon Money Market Select Fund (b)		1,103,345
	3,585,870	BGI Institutional Money Market Fund (b)		3,585,870
	9,393,827	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $9,394,613 and an effective yield of 3.01%, collateralized by U.S. Treasury Bonds with a rate of 4.50%, maturity date of 02/15/36 and a market value, with accrued interest, of $9,581,704.		9,393,827

See accompanying notes to the financial statements.

9

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares/ Par Value ($)		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — continued
	1,655,017	Fortis Bank Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.53%, due 03/23/06 (b)		1,655,017
	5,516,724	Goldman Sachs Group Inc. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $5,517,429 and an effective yield of 4.60%, collateralized by various corporate debt obligations with an aggregate market value of $5,627,058. (b)		5,516,724
	4,965,051	Merrill Lynch & Co. Tri Party Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $4,965,679 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $5,093,460. (b)		4,965,051
	1,103,345	Merrimac Cash Series - Premium Class (b)		1,103,345
	4,023,028	Morgan Stanley & Co. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $4,023,537 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $4,103,513. (b)		4,023,028
	3,310,034	National Australia Bank Eurodollar Overnight Time Deposit, 4.56%, due 03/01/06 (b)		3,310,034
	2,206,689	Rabobank Nederland Eurodollar Overnight Time Deposit, 4.52%, due 03/01/06 (b)		2,206,689
	1,655,017	Royal Bank of Scotland Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.55%, due 03/31/06 (b)		1,655,017
	3,391,617	Svenska Handlesbanken Eurodollar Overnight Time Deposit, 4.57%, due 03/01/06 (b)		3,391,617
	1,500,000	U.S. Treasury Bill, 3.81%, due 03/23/06 (c) (d)		1,496,622
		TOTAL SHORT-TERM INVESTMENT(S) (COST $43,406,186)		43,406,186
		TOTAL INVESTMENTS — 108.6% (Cost $379,089,751)		405,816,918
		Other Assets and Liabilities (net) — (8.6%)		(32,095,458	)
		TOTAL NET ASSETS — 100.0%	$	373,721,460

See accompanying notes to the financial statements.

10

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	17	S&P 500	March 2006	$	5,450,200	$	38,215

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  All or a portion of this security represents investment of security lending collateral (Note 2).

(c)  Rate shown represents yield-to-maturity.

(d)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

See accompanying notes to the financial statements.

11

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $31,027,326 (cost $379,089,751) (Note 2)	$	405,816,918
Cash		125,515
Dividends and interest receivable		527,180
Receivable for expenses reimbursed by Manager (Note 3)		11,142
Total assets		406,480,755
Liabilities:
Collateral on securities loaned (Note 2)		32,515,737
Payable for Fund shares repurchased		11,630
Payable to affiliate for (Note 3):
Management fee		94,494
Shareholder service fee		37,814
Trustees and Chief Compliance Officer fees		456
Payable for variation margin on open futures contracts (Note 2)		49,300
Accrued expenses		49,864
Total liabilities		32,759,295
Net assets	$	373,721,460
Net assets consist of:
Paid-in capital	$	359,826,006
Accumulated undistributed net investment income		2,430,916
Accumulated net realized loss		(15,300,844	)
Net unrealized appreciation		26,765,382
	$	373,721,460
Net assets attributable to:
Class III shares	$	224,097,066
Class IV shares	$	149,624,394
Shares outstanding:
Class III		18,001,266
Class IV		12,012,033
Net asset value per share:
Class III	$	12.45
Class IV	$	12.46

See accompanying notes to the financial statements.

12

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends	$	7,541,438
Interest (including securities lending income of $44,585)		289,428
Total investment income		7,830,866
Expenses:
Management fee (Note 3)		1,193,570
Shareholder service fee – Class III (Note 3)		328,535
Shareholder service fee – Class IV (Note 3)		149,797
Custodian, fund accounting agent and transfer agent fees		83,836
Audit and tax fees		47,801
Legal fees		7,826
Trustees fees and related expenses (Note 3)		7,413
Registration fees		3,896
Miscellaneous		9,306
Total expenses		1,831,980
Fees and expenses reimbursed by Manager (Note 3)		(149,075	)
Net expenses		1,682,905
Net investment income (loss)		6,147,961
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		20,095,010
Closed futures contracts		109,830
Net realized gain (loss)		20,204,840
Change in net unrealized appreciation (depreciation) on:
Investments		(7,011,960	)
Open futures contracts		(26,757	)
Net unrealized gain (loss)		(7,038,717	)
Net realized and unrealized gain (loss)		13,166,123
Net increase (decrease) in net assets resulting from operations	$	19,314,084

See accompanying notes to the financial statements.

13

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	6,147,961		$	5,723,625
Net realized gain (loss)		20,204,840			37,458,622
Change in net unrealized appreciation (depreciation)		(7,038,717	)		(26,591,641	)
Net increase (decrease) in net assets from operations		19,314,084			16,590,606
Distributions to shareholders from:
Net investment income
Class III		(2,769,665	)		(3,121,454	)
Class IV		(1,840,585	)		(2,764,012	)
Total distributions from net investment income		(4,610,250	)		(5,885,466	)
Net realized gains
Class III		(4,972,971	)		(961,765	)
Class IV		(3,238,317	)		(620,323	)
Total distributions from net realized gains		(8,211,288	)		(1,582,088	)
		(12,821,538	)		(7,467,554	)
Net share transactions (Note 7):
Class III		(1,410,664	)		24,518,394
Class IV		5,078,901			(252,904,685	)
Increase (decrease) in net assets resulting from net share transactions		3,668,237			(228,386,291	)
Total increase (decrease) in net assets		10,160,783			(219,263,239	)
Net assets:
Beginning of period		363,560,677			582,823,916
End of period (including accumulated undistributed net investment income of $2,430,916 and $918,893, respectively)	$	373,721,460		$	363,560,677

See accompanying notes to the financial statements.

14

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	12.24		$	11.76		$	8.69		$	11.23		$	12.29
Income (loss) from investment operations:
Net investment income (loss)†		0.20			0.17			0.13			0.12			0.15
Net realized and unrealized gain (loss)		0.44			0.54			3.07			(2.55	)		(1.07	)
Total from investment operations		0.64			0.71			3.20			(2.43	)		(0.92	)
Less distributions to shareholders:
From net investment income		(0.15	)		(0.18	)		(0.13	)		(0.11	)		(0.14	)
From net realized gains		(0.28	)		(0.05	)		—			—			—
Total distributions		(0.43	)		(0.23	)		(0.13	)		(0.11	)		(0.14	)
Net asset value, end of period	$	12.45		$	12.24		$	11.76		$	8.69		$	11.23
Total Return(a)		5.40	%		6.16	%		37.06	%		(21.69	)%		(7.53	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	224,097		$	221,661		$	188,370		$	163,025		$	133,203
Net expenses to average daily net assets		0.48	%		0.48	%		0.48	%		0.48	%		0.48	%
Net investment income to average daily net assets		1.68	%		1.43	%		1.26	%		1.26	%		1.24	%
Portfolio turnover rate		63	%		68	%		63	%		62	%		85	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.04	%		0.04	%		0.04	%		0.04	%		0.03	%

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

15

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002(a)
Net asset value, beginning of period	$	12.25		$	11.76		$	8.69		$	11.23		$	12.32
Income (loss) from investment operations:
Net investment income (loss)†		0.21			0.16			0.13			0.13			0.10
Net realized and unrealized gain (loss)		0.44			0.56			3.07			(2.55	)		(1.08	)
Total from investment operations		0.65			0.72			3.20			(2.42	)		(0.98	)
Less distributions to shareholders:
From net investment income		(0.16	)		(0.18	)		(0.13	)		(0.12	)		(0.11	)
From net realized gains		(0.28	)		(0.05	)		—			—			—
Total distributions		(0.44	)		(0.23	)		(0.13	)		(0.12	)		(0.11	)
Net asset value, end of period	$	12.46		$	12.25		$	11.76		$	8.69		$	11.23
Total Return(b)		5.44	%		6.25	%		37.12	%		(21.65	)%		(8.00	)%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	149,624		$	141,900		$	394,454		$	308,001		$	248,095
Net expenses to average daily net assets		0.44	%		0.44	%		0.44	%		0.44	%		0.44	%*
Net investment income to average daily net assets		1.72	%		1.37	%		1.31	%		1.35	%		1.37	%*
Portfolio turnover rate		63	%		68	%		63	%		62	%		85	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.04	%		0.04	%		0.04	%		0.04	%		0.04	%*

(a)  Period from July 2, 2001 (commencement of operations) through February 28, 2002.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2002.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

16

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Tobacco-Free Core Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return. The Fund seeks to achieve this objective primarily through investment in U.S. equity securities, excluding those companies that are tobacco-producing issuers (as listed within the Tobacco Producing Issuer industry classification maintained by Ford Investor Services). The Fund's benchmark is the S&P 500 Index.

Throughout the year ended February 28, 2006, the Fund offered two classes of shares: Class III and Class IV. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the various classes of shares is generally based on the total amount of assets invested in the Fund and with GMO, as more fully outlined in the Fund's prospectus.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

17

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based

18

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $31,027,326, collateralized by cash in the amount of $32,515,737, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

19

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund's policy is to declare and pay distributions from net investment income, if any, quarterly, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $11,064,022 and $5,885,466, respectively and long-term capital gains – $1,757,516 and $1,582,088, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $2,430,917 of undistributed ordinary income.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $11,651,632 expiring in 2011. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital losses of $706,692.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	381,994,056	$	37,718,678	$	(13,895,816	)	$	23,822,862

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Loss		Paid-in Capital
$	(25,688	)	$	25,688	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

20

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.33% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.15% for Class III shares and 0.105% for Class IV shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.33% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $3,945 and $2,250, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $221,986,745 and $225,897,347, respectively.

21

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 53.8% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 0.9% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		777,388		$	9,327,972			2,042,934		$	23,836,926
Shares issued to shareholders in reinvestment of distributions		583,997			6,995,119			291,187			3,423,015
Shares repurchased		(1,470,266	)		(17,733,755	)		(237,049	)		(2,741,547	)
Net increase (decrease)		(108,881	)	$	(1,410,664	)		2,097,072		$	24,518,394

22

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Year Ended February 28, 2006				Year Ended February 28, 2005
Class IV:	Shares		Amount		Shares			Amount
Shares sold		—	$	—		—		$	—
Shares issued to shareholders in reinvestment of distributions		423,945		5,078,901		288,504			3,384,335
Shares repurchased		—		—		(22,237,483	)		(256,289,020	)
Net increase (decrease)		423,945	$	5,078,901		(21,948,979	)	$	(252,904,685	)

23

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Tobacco-Free Core Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Tobacco-Free Core Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

24

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.48	%	$	1,000.00	$	1,051.60	$	2.44
2) Hypothetical		0.48	%	$	1,000.00	$	1,022.41	$	2.41
Class IV
1) Actual		0.44	%	$	1,000.00	$	1,051.60	$	2.24
2) Hypothetical		0.44	%	$	1,000.00	$	1,022.61	$	2.21

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

25

GMO Tobacco-Free Core Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $1,757,516 from long-term capital gains.

For taxable, non-corporate shareholders, 43.88% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 73.92% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term captial gains with respect to its taxable year ended February 28, 2006, $540,479 and $0, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

26

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

27

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

28

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

29

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003– present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

30

GMO Taiwan Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Taiwan Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Emerging Markets Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Taiwan Fund returned +9.1% for the fiscal year ended February 28, 2006, as compared to +6.2% for the MSCI Taiwan Index. Consistent with the Fund's investment objectives and policies, throughout the period the Fund was invested substantially in emerging market equities tied economically to Taiwan.

Good stock selection in the information technology sector accounted for the outperformance. Stock selection in the financial and industrial sectors detracted from performance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .15% on the purchase and .45% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted.

GMO Taiwan Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		98.3	%
Rights and Warrants		0.0
Short-Term Investment(s)		1.5
Other		0.2
		100.0	%
Industry Sector Summary	% of Equity Investments
Information Technology		62.7	%
Materials		11.5
Financials		10.4
Telecommunication Services		5.7
Industrials		5.0
Consumer Discretionary		3.1
Energy		1.4
Consumer Staples		0.2
		100.0	%

1

GMO Taiwan Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 98.3%
		Taiwan — 98.3%
	1,010,000	Accton Technology Corp *		529,867
	4,518,746	Acer Inc		9,998,668
	2,358,000	Arima Computer Corp *		539,294
	3,055,761	Asia Cement Corp		2,015,255
	67,385	Asia Optical Co Inc		300,377
	10,016,490	Asustek Computer Inc		28,229,121
	3,000,450	AU Optronics Corp		4,793,887
	61,000	Catcher Technology Co		477,579
	2,846,180	Cheng Loong Corp		887,538
	7,702,000	China Bills Finance Corp		2,510,315
	16,858,037	China Development Financial Holding Corp *		6,454,840
	969,000	China Manmade Fibers *		239,042
	2,246,677	Chinatrust Financial Holding Co		1,884,452
	1,850,770	Chung Hung Steel Corp		597,188
	1,389,200	Chung HWA Pulp Corp		515,687
	1,223,000	Chunghwa Picture Tubes Ltd		317,602
	4,581,000	Chunghwa Telecom Co Ltd		8,339,946
	5,300	Chunghwa Telecom Co Ltd ADR		100,170
	1,981,122	Compal Electronics Inc		1,842,757
	1,264,000	Compeq Manufacturing Co Ltd *		569,099
	890,000	Continental Engineering Corp		375,094
	378,000	Coretronic Corp		696,581
	2,965,203	Delta Electronics Inc		7,058,555
	634,000	Elitegroup Computer Systems *		402,055
	3,000,500	Evergreen Marine Corp		1,942,519
	3,570,772	Far Eastern International Bank		1,558,813
	4,108,573	Far Eastern Textile Co Ltd		3,023,952
	1,053,000	Far Eastone Telecommunications Co Ltd		1,288,469
	4,782,750	Federal Corp		2,031,348
	4,576,592	Formosa Chemicals & Fibre Co		7,194,926
	2,238,755	Formosa Petrochemical Corp		3,995,354
	6,113,917	Formosa Plastics Corp		9,674,687

See accompanying notes to the financial statements.

2

GMO Taiwan Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
	3,213,000	Formosa Taffeta Co Ltd		1,654,348
	147,000	Foxconn Technology Co Ltd		712,375
	2,328,000	Fubon Financial Holding Co Ltd		2,079,622
	108,000	Giant Manufacturing Inc		201,951
	1,777,862	Gigabyte Technology Co Ltd		1,497,693
	4,962,080	Goldsun Development & Construction Co Ltd *		1,278,377
	2,593,000	Grand Pacific Petrochem *		596,053
	536,760	High Tech Computer Corp		11,497,672
	4,113,396	Hon Hai Precision Industry Co Ltd		26,010,104
	123,000	Hotai Motor Company Ltd		298,674
	1,271,395	Hua Nan Financial Holdings Co Ltd		897,368
	7,092,453	Inventec Co Ltd		4,323,707
	6,553,920	KGI Securities Co Ltd		2,021,565
	2,727,702	Kinpo Electronics		1,046,009
	86,000	Largan Precision Co Ltd		1,600,134
	496,000	Lee Chang Yung Chem Industries		349,212
	165,665	Les Enphants Co Ltd		102,173
	2,462,040	Lite-On Technology Corp		3,317,997
	4,725,000	Macronix International *		611,343
	510,325	MediaTek Inc		5,223,281
	7,251,000	Mega Financial Holdings Co Ltd		5,500,061
	1,802,500	Micro-Star International Co Ltd		1,019,966
	2,322,252	Mitac International Corp		3,264,635
	297,000	Nien Hsing Textile Co Ltd		192,106
	193,000	Nien Made Enterprise		245,065
	677,587	Novatek Microelectronics		4,670,818
	1,396,690	Oriental Union Chemical		901,056
	342,000	Phoenix Precision Technology Corp		688,110
	104,000	Powertech Technology Inc		333,754
	607,520	Premier Image Technology Corp		755,043
	1,615,555	Quanta Computer Inc		2,460,943
	1,959,300	Realtek Semiconductor Corp		2,148,368
	5,562,000	Sampo Corp *		684,998
	1,078,588	Shin Kong Financial Holdings		932,348
	1,705,200	Silicon Integrated Systems *		877,426

See accompanying notes to the financial statements.

3

GMO Taiwan Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
	1,173,831	Siliconware Precision Industries Co		1,487,820
	3,897,473	Sinopac Holdings Co		2,061,798
	2,570,516	Systex Corp		705,911
	1,003,000	Taichung Commercial Bank *		206,349
	3,911,634	Taishin Financial Holdings Co Ltd		2,376,489
	7,200,000	Taiwan Cellular Corp		6,644,067
	8,035,205	Taiwan Cement Corp		6,055,356
	159,000	Taiwan FU Hsing Ind Co Ltd		172,252
	24,744,891	Taiwan Semiconductor Manufacturing Co Ltd		45,851,233
	235,409	Taiwan Semiconductor Manufacturing Co Ltd ADR		2,290,530
	3,235,000	Taiwan TEA Corp *		484,924
	3,104,000	Tatung Co *		763,811
	285,720	Tsann Kuen Enterprises Co Ltd		498,706
	1,060,000	TSRC Corp		643,640
	704,000	Tung Ho Steel Enterprise		466,000
	1,313,000	U-Ming Marine Transport Co		1,321,606
	143,000	Waffer Technology Co Ltd		137,928
	9,356,578	Walsin Lihwa Corp		3,042,903
	2,447,463	Wan Hai Lines Ltd		1,503,707
	4,167,000	Waterland Financial Holdings		1,356,315
	1,364,090	Wintek Corp		1,918,453
	1,276,330	WUS Printed Circuit Co Ltd		523,279
	877,296	Ya Hsin Industrial Co Ltd		806,835
	4,118,252	Yang Ming Marine Transport		2,520,243
	3,780,000	Yieh Phui Enterprise		1,541,692
	299,475	Yulon Motor Co Ltd		307,655
	168,720	Zyxel Communications Corp		267,456
				286,336,350
		TOTAL COMMON STOCKS (COST $246,788,895)		286,336,350

See accompanying notes to the financial statements.

4

GMO Taiwan Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		RIGHTS AND WARRANTS — 0.0%
		Taiwan — 0.0%
	7,621	Waffer Technology Corp Rights, Expires 03/22/06 *		387
		TOTAL RIGHTS AND WARRANTS (COST $1,397)		387
		SHORT-TERM INVESTMENT(S) — 1.5%
	4,200,000	Dresdner Bank AG Time Deposit, 4.55%, due 03/01/06		4,200,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $4,200,000)		4,200,000
		TOTAL INVESTMENTS — 99.8% (Cost $250,990,292)		290,536,737
		Other Assets and Liabilities (net) — 0.2%		713,736
		TOTAL NET ASSETS — 100.0%	$	291,250,473

Notes to Schedule of Investments:

ADR - American Depositary Receipt

*  Non-income producing security.

As of February 28, 2006, 97.3% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

5

GMO Taiwan Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $250,990,292) (Note 2)	$	290,536,737
Cash		29,896
Foreign currency, at value (cost $1,078,584) (Note 2)		1,075,981
Interest receivable		531
Total assets		291,643,145
Liabilities:
Payable for investments purchased		2,486
Payable to affiliate for (Note 3):
Management fee		186,602
Shareholder service fee		34,557
Trustees and Chief Compliance Officer fees		665
Accrued expenses		168,362
Total liabilities		392,672
Net assets	$	291,250,473
Net assets consist of:
Paid-in capital	$	245,933,613
Distributions in excess of net investment income		(241,192	)
Accumulated net realized gain		6,014,210
Net unrealized appreciation		39,543,842
	$	291,250,473
Net assets attributable to:
Class III shares	$	291,250,473
Shares outstanding:
Class III		10,276,489
Net asset value per share:
Class III	$	28.34

See accompanying notes to the financial statements.

6

GMO Taiwan Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $2,019,057)	$	8,262,902
Interest		92,602
Total investment income		8,355,504
Expenses:
Management fee (Note 3)		2,098,026
Shareholder service fee – Class III (Note 3)		388,523
Custodian and fund accounting agent fees		719,736
Transfer agent fees		27,798
Audit and tax fees		56,503
Legal fees		6,741
Trustees fees and related expenses (Note 3)		4,845
Miscellaneous		8,310
Total expenses		3,310,482
Net investment income (loss)		5,045,022
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		11,198,207
Foreign currency, forward contracts and foreign currency related transactions		(346,710	)
Net realized gain (loss)		10,851,497
Change in net unrealized appreciation (depreciation) on:
Investments		8,763,713
Foreign currency, forward contracts and foreign currency related transactions		(2,689	)
Net unrealized gain (loss)		8,761,024
Net realized and unrealized gain (loss)		19,612,521
Net increase (decrease) in net assets resulting from operations	$	24,657,543

See accompanying notes to the financial statements.

7

GMO Taiwan Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	5,045,022		$	828,376
Net realized gain (loss)		10,851,497			(1,500,671	)
Change in net unrealized appreciation (depreciation)		8,761,024			(4,257,920	)
Net increase (decrease) in net assets from operations		24,657,543			(4,930,215	)
Distributions to shareholders from:
Net investment income
Class III		(5,967,696	)		—
Net realized gains
Class III		(2,977,161	)		(9,930,750	)
		(8,944,857	)		(9,930,750	)
Net share transactions (Note 7):
Class III		50,702,181			57,688,207
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		369,510			325,785
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and   redemption fees		51,071,691			58,013,992
Total increase (decrease) in net assets		66,784,377			43,153,027
Net assets:
Beginning of period		224,466,096			181,313,069
End of period (including distributions in excess of net investment income of $241,192 and accumulated undistributed net investment income of $205,510, respectively)	$	291,250,473		$	224,466,096

See accompanying notes to the financial statements.

8

GMO Taiwan Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003(a)
Net asset value, beginning of period	$	26.79		$	29.67		$	20.28		$	20.00
Income (loss) from investment operations:
Net investment income (loss)†		0.52			0.13			(0.10	)		(0.12	)
Net realized and unrealized gain (loss)		1.91			(1.45	)		10.03			0.40
Total from investment operations		2.43			(1.32	)		9.93			0.28
Less distributions to shareholders:
From net investment income		(0.59	)		—			(0.02	)		—
From net realized gains		(0.29	)		(1.56	)		(0.52	)		—
Total distributions		(0.88	)		(1.56	)		(0.54	)		—
Net asset value, end of period	$	28.34		$	26.79		$	29.67		$	20.28
Total Return(b)		9.13	%		(3.82	)%		49.53	%		1.40	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	291,250		$	224,466		$	181,313		$	41,167
Net expenses to average daily net assets		1.28	%		1.34	%		1.36	%		1.76	%*
Net investment income to average daily net assets		1.95	%		0.53	%		(0.40	)%		(1.43	)%*
Portfolio turnover rate		31	%		88	%		86	%		50	%**
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.04		$	0.05		$	0.04		$	0.01

(a)  Period from October 4, 2002 (commencement of operations) through February 28, 2003.

(b)  Calculation excludes purchase premiums and redemption fees which are borne by the shareholders.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

9

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Taiwan Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in equity securities traded in the Taiwan securities markets. The Fund's benchmark is the MSCI Taiwan Index.

Shares of the Fund are not publicly offered and principally available to other GMO funds and certain accredited investors.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a results, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

10

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the

11

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

12

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. As of February 28, 2006, the Fund did not hold any indexed securities.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

13

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryover for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund is currently subject to Taiwan security sale transaction tax of 0.3% on equities and 0.1% on mutual fund shares of the transaction amount.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income - $5,967,696 and $6,098,201, respectively and long-term capital gains - $2,977,161 and $3,832,549, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $945,027 and $5,510,824 of undistributed ordinary income and undistributed long-term capital gains, respectively.

14

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	251,673,124	$	54,173,878	$	(15,310,265	)	$	38,863,613

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	475,972	$	(475,972	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Taiwanese companies typically declare dividends in the Fund's third fiscal quarter of each year. As a result, the Fund receives substantially less dividend income in the first half of its year.

Dividend and interest income generated in Taiwan is subject to a 20% withholding tax. Stock dividends received (except those which have resulted from capitalization of capital surplus) are taxable at 20% of the par value of the stock dividends received.

15

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases of Fund shares were 0.15% of the amount invested. In the case of cash redemptions, the fee is currently 0.45% of the amount redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $139,679 and $136,441 in purchase premiums and $229,831 and $189,344 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

Investments in emerging countries, such as Taiwan, present certain risks that are not inherent in many other securities. Many emerging countries present elements of political and/or economic instability. The securities markets of emerging countries are generally smaller and less developed than the securities markets of the U.S. and developed foreign markets. Further, countries may impose various types of foreign currency regulations or controls which may impede the Fund's ability to repatriate amounts it receives. The Fund may acquire interests in securities in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The Taiwanese markets are relatively illiquid. Accordingly, the Fund may not be able to realize in an actual sale amounts approximating those used to value its holdings. The Fund may concentrate investments in the securities of a small number of issuers. As a result, the value of the Fund's shares can be expected to change in light of factors affecting those issuers and may fluctuate more widely than the value of shares of a portfolio that invests in a broader range of securities.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.81% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for class III shares.

The Fund's portion of the fees paid by the Trust to the independent Trustees and the Chief Compliance Officer ("CCO") during the year ended February 28, 2006 was $2,921 and $1,819, respectively. No remuneration was paid to any other officer of the Trust.

16

GMO Taiwan Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchase and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $119,031,367 and $77,513,341, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 98.9% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 100.0% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		3,548,047		$	94,235,742			4,079,726		$	101,952,796
Shares issued to shareholders in reinvestment of distributions		321,086			8,944,857			412,923			9,885,373
Shares repurchased		(1,970,363	)		(52,478,418	)		(2,226,255	)		(54,149,962	)
Purchase premiums and redemption fees		—			369,510			—			325,785
Net increase (decrease)		1,898,770		$	51,071,691			2,266,394		$	58,013,992

17

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Taiwan Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Taiwan Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

18

GMO Taiwan Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		1.30	%	$	1,000.00	$	1,126.60	$	6.85
2) Hypothetical				1.30	%	$	1,000.00	$	1,018.35	$	6.51

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

19

GMO Taiwan Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Year Ended February 28, 2006

The Fund's distributions to shareholders include $2,977,161 from long-term capital gains.

During the year ended February 28, 2006, the Fund paid foreign taxes of $2,019,057 and recognized foreign source income of $10,281,959.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $0 or if determined to be different, the qualified interest income of such year.

20

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

21

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

22

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

24

GMO Global Growth Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Global Growth Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Global Growth Fund returned +13.6% for the fiscal year ended February 28, 2006, as compared to +11.7% for the S&P/Citigroup PMI World Growth Style Index. Consistent with the Fund's investment objectives and policies, the Fund was substantially invested throughout the period in equity securities with higher than average expected growth drawn from the world's developed markets.

Stock selection had a positive impact on performance relative to the benchmark. Among the Fund's holdings with the largest contribution to relative returns were Apple Computer Inc., Mitsubishi Corp of Japan, and two oil companies – Canadian Natural Resources and OMV of Austria. Less successful holdings included Toyota Motor, Pfizer, and Dell.

The Fund benefited from country selection. Overweighting Canada and Norway and underweighting the U.S. made the largest contributions.

Industry weightings contributed to relative returns in most sectors, particularly overweights in energy and utility stocks and underweights in consumer staples and information technology stocks.

Currency forwards had a negative impact. The Fund's underweight position in the U.S. dollar and overweight in the Japanese yen both detracted from returns, partly mitigated by underweighting in the British pound and the euro.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .30% on the purchase and .30% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Global Growth Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		98.1	%
Preferred Stocks		0.3
Forward Currency Contracts		0.1
Futures		0.0
Short-Term Investment(s)		2.1
Other		(0.6	)
		100.0	%
Country Summary	% of Equity Investments
United States		43.8	%
Japan		14.3
United Kingdom		7.5
Canada		5.9
Switzerland		3.9
Australia		2.8
France		2.6
Belgium		2.2
Sweden		2.0
Netherlands		2.0
Italy		1.9
Spain		1.8
Singapore		1.5
Austria		1.5
Norway		1.4
Hong Kong		1.3
Germany		1.2
Ireland		1.2
Finland		1.0
Greece		0.2
		100.0	%

1

GMO Global Growth Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Financials		19.6	%
Health Care		17.5
Energy		16.6
Information Technology		10.5
Consumer Discretionary		9.2
Industrials		9.2
Consumer Staples		5.8
Utilities		5.3
Materials		3.6
Telecommunication Services		2.7
		100.0	%

2

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares Description Value ($)

	COMMON STOCKS — 98.1%
	Australia — 2.8%
5,119	Australia and New Zealand Banking Group Ltd	97,359
13,680	BHP Billiton Ltd	246,162
3,176	Commonwealth Bank of Australia	105,431
2,610	CSL Ltd	101,740
2,798	Macquarie Bank Ltd	132,346
3,586	QBE Insurance Group Ltd	54,854
12,276	Rinker Group Ltd	161,277
1,482	Rio Tinto Ltd	77,642
5,845	Suncorp-Metway Ltd	88,493
31,229	Telstra Corp Ltd	88,864
5,372	Westpac Banking Corp	93,811
6,749	Woodside Petroleum Ltd	202,594
		1,450,573
	Austria — 1.5%
888	Erste Bank Der Oesterreichischen Sparkassen AG	53,979
254	Oesterreichische Elektrizitaetswirtschafts AG Class A	118,136
6,688	OMV AG	414,785
8,257	Telekom Austria AG	188,865
		775,765
	Belgium — 2.2%
539	Colruyt SA	77,648
7,228	Dexia	179,515
12,442	Fortis	443,200
1,226	Inbev	56,676
1,394	KBC Groep NV	145,529
5,054	UCB SA	239,391
		1,141,959

See accompanying notes to the financial statements.

3

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Canada — 5.8%
	900	Bank of Montreal		54,620
	6,800	Bombardier Inc *		17,472
	2,200	Cameco Corp		81,790
	5,200	Canadian National Railway Co		243,425
	10,800	Canadian Natural Resources		590,059
	600	Canadian Pacific Railway Ltd		30,727
	4,200	EnCana Corp		173,699
	2,400	Husky Energy Inc		146,900
	3,800	Imperial Oil Ltd		366,475
	3,400	Nexen Inc		177,771
	6,000	Petro - Canada		274,856
	800	Potash Corporation of Saskatchewan Inc		76,723
	2,500	Rogers Communications Inc		100,092
	2,900	Royal Bank of Canada		242,319
	1,500	Suncor Energy Inc		112,191
	3,300	Talisman Energy Inc		173,385
	1,900	Teck Corp Class B		118,787
	1,800	Telus Corp		70,815
				3,052,106
		Finland — 1.0%
	8,600	Fortum Oyj		208,060
	13,150	Nokia Oyj		244,695
	2,800	Sampo Oyj Class A		56,120
				508,875
		France — 2.6%
	1,371	BNP Paribas		126,882
	2,692	Peugeot SA		156,937
	6,270	Sanofi-Aventis		533,735
	2,574	Suez SA		94,538
	1,531	Total SA		385,045
	566	Vinci SA		52,245
				1,349,382

See accompanying notes to the financial statements.

4

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — 0.9%
	1,563	Altana AG		83,944
	603	RWE AG		51,851
	2,419	Schering AG		173,502
	2,044	Volkswagen AG		143,145
				452,442
		Greece — 0.2%
	1,805	National Bank of Greece SA		92,725
		Hong Kong — 1.2%
	29,000	CLP Holdings Ltd		165,802
	10,000	Esprit Holdings Ltd		76,479
	90,000	Hong Kong & China Gas		215,078
	34,500	Hong Kong Electric Holdings Ltd		158,862
	20,000	Li & Fung Ltd		40,280
				656,501
		Ireland — 1.1%
	5,452	Allied Irish Banks Plc		130,244
	6,896	Anglo Irish Bank Corp		113,069
	15,676	Bank of Ireland		278,879
	1,984	CRH Plc		65,079
				587,271
		Italy — 1.9%
	28,999	Enel SPA		241,283
	26,473	ENI SPA		756,813
				998,096
		Japan — 14.1%
	1,900	Aeon Co Ltd		45,328
	2,100	Astellas Pharma Inc		81,071
	7,000	Bank of Yokohama		56,448
	1,100	Benesse Corp		37,723

See accompanying notes to the financial statements.

5

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	1,800	Canon Inc		112,385
	6,000	Chiba Bank		50,538
	8,800	Chubu Electric Power Co Inc		233,262
	2,400	Daito Trust Construction Co Ltd		112,388
	8,000	Daiwa Securities Co Ltd		94,977
	2,500	Denso Corp		91,201
	10	East Japan Railway Co		71,139
	4,200	Eisai Co Ltd		194,239
	17,000	Fuji Heavy Industries Ltd		92,118
	2,300	Hitachi Chemical Co Ltd		63,798
	17,000	Hokuhoku Financial Group Inc		73,177
	2,600	Hoya Corp		103,153
	22,000	Itochu Corp		182,853
	12	Japan Tobacco Inc		206,164
	2,000	Kaneka Corp		26,322
	2,000	Kao Corp		54,325
	200	Keyence Corp		54,635
	4,000	Komatsu Ltd		70,938
	39,000	Marubeni Corp		193,427
	5,000	Matsushita Electric Industrial Co Ltd		105,147
	28,000	Mazda Motor Corp		159,243
	26,100	Mitsubishi Corp		605,550
	24	Mitsubishi Tokyo Financial Group Inc		356,336
	19,000	Mitsui & Co		259,948
	3,000	Mitsui Fudosan Co Ltd		62,317
	13,000	Mitsui OSK Lines Ltd		94,789
	700	Nidec Corp		55,524
	3,000	Nikko Cordial Corp		47,227
	35,000	Nippon Steel Corp		139,486
	24	Nippon Telegraph & Telephone Corp		103,630
	3,200	Nissin Food Products Co Ltd		97,619
	3,900	Nomura Securities Co Ltd		74,424
	3,000	Olympus Optical Co Ltd		86,375
	1,000	ORIX Corp		263,271

See accompanying notes to the financial statements.

6

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	39,000	Osaka Gas Co Ltd		149,318
	51	Rakuten Inc		43,989
	2,000	Seven & I Holdings Co Ltd		81,810
	1,000	Shimano Inc		28,836
	3,200	Shin-Etsu Chemical Co Ltd		170,377
	4,700	Softbank Corp.		143,722
	19,000	Sumitomo Corp		256,683
	35,000	Sumitomo Metal Industries Ltd		155,381
	13	Sumitomo Mitsui Financial Group Inc		141,978
	3,000	Sumitomo Realty & Development Co Ltd		69,721
	10,200	Takeda Pharmaceutical Co Ltd		568,186
	10,000	Teijin Ltd		67,477
	1,400	Terumo Corp		42,741
	7,000	Tokyu Land Corp		61,057
	9,000	TonenGeneral Sekiyu KK		89,953
	6,200	Toyota Motor Corp		330,506
	4,000	Yakult Honsha Co Ltd		92,486
	400	Yamada Denki Co Ltd		42,854
				7,349,570
		Netherlands — 2.0%
	10,074	ABN Amro Holdings NV		293,564
	2,540	Heineken NV		95,642
	16,915	ING Groep NV		635,766
				1,024,972
		Norway — 1.4%
	5,700	DnB NOR ASA		69,159
	1,760	Norsk Hydro ASA		206,154
	1,750	Orkla ASA		76,279
	14,400	Statoil ASA		368,766
				720,358

See accompanying notes to the financial statements.

7

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Singapore — 1.5%
	3,000	Keppel Corp Ltd		25,782
	129,000	Singapore Technologies Engineering Ltd		241,081
	320,860	Singapore Telecommunications		514,365
				781,228
		Spain — 1.7%
	726	Acciona SA		101,208
	3,716	Acesa Infraestructuras SA		96,218
	2,406	ACS Actividades de Construccion y Servicios SA		89,728
	1,608	Antena 3 de Television		42,654
	1,310	Grupo Ferrovial SA		98,072
	8,238	Iberdrola SA		259,827
	3,270	Indra Sistemas SA		65,072
	3,013	Sacyr Vallehermoso SA		84,713
	2,017	Union Fenosa SA		75,690
				913,182
		Sweden — 2.0%
	3,400	Atlas Copco AB Class A		83,739
	8,150	Hennes & Mauritz AB Class B		296,963
	16,500	Nordea AB		186,509
	2,200	Sandvik AB		118,434
	10,100	Swedish Match AB		135,247
	9,700	Tele2 AB Class B		104,693
	30,000	Telefonaktiebolaget LM Ericsson		102,225
				1,027,810
		Switzerland — 3.8%
	19,776	ABB Ltd *		236,949
	2,400	Alcon Inc		276,384
	2,871	Compagnie Financiere Richemont AG		125,021
	1,196	Credit Suisse Group		66,241
	3,458	Roche Holding AG (Non Voting)		510,909
	247	Serono SA		175,260

See accompanying notes to the financial statements.

8

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Switzerland — continued
	32	Societe Generale de Surveillance Holding SA (Registered)		29,536
	365	Swisscom AG (Registered)		109,614
	813	UBS AG (Registered)		86,377
	1,659	Zurich Financial Services AG *		391,762
				2,008,053
		United Kingdom — 7.4%
	3,197	AstraZeneca Plc		147,646
	13,356	Barclays Plc		156,439
	7,722	BG Group Plc		90,446
	9,879	BHP Billiton Plc		166,023
	12,019	British American Tobacco Plc		286,353
	14,187	Cadbury Schweppes Plc		144,119
	40,966	Centrica Plc		208,677
	19,909	DSG International Plc		60,035
	13,344	GlaxoSmithKline Plc		338,924
	8,232	HBOS Plc		153,305
	8,548	Imperial Tobacco Group Plc		257,080
	13,889	National Grid Plc		146,032
	4,003	Next Plc		115,780
	3,467	Rio Tinto Plc		163,164
	20,855	Royal Bank of Scotland Group		697,577
	19,567	Royal Dutch Shell Group Class A		589,896
	6,111	Scottish & Southern Energy Plc		123,082
				3,844,578
		United States — 43.0%
	2,200	Adobe Systems, Inc		84,964
	5,000	Aetna, Inc		255,000
	3,700	Allstate Corp (The)		202,686
	1,300	AMBAC Financial Group, Inc		97,695
	2,000	American International Group, Inc		132,720
	2,000	American Tower Corp-Class A *		63,660
	5,100	AmerisourceBergen Corp		234,549

See accompanying notes to the financial statements.

9

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	1,300	Amgen, Inc *		98,137
	3,600	Apple Computer, Inc *		246,744
	4,500	Archer-Daniels-Midland Co		142,740
	1,700	Autodesk, Inc		64,005
	1,200	Baker Hughes, Inc		81,564
	600	Bear Stearns Cos (The), Inc		80,664
	4,200	Bed Bath & Beyond, Inc *		151,368
	2,250	Broadcom Corp-Class A *		101,452
	3,800	Burlington Northern Santa Fe Corp		298,832
	2,000	Burlington Resources, Inc		180,360
	3,700	Capital One Financial Corp		324,120
	2,300	Cardinal Health, Inc		166,980
	3,900	Caremark Rx, Inc *		194,025
	3,600	Caterpillar, Inc		263,088
	800	Centex Corp		54,088
	3,100	Chevron Corp		175,088
	12,400	Cisco Systems, Inc *		250,976
	3,100	Coach, Inc *		110,732
	12,200	ConocoPhillips		743,712
	12,700	Corning, Inc *		310,007
	5,600	CVS Corp		158,648
	3,000	D.R. Horton, Inc		102,330
	19,400	Dell, Inc *		562,600
	2,000	Devon Energy Corp		117,260
	1,600	EOG Resources, Inc		107,840
	800	Everest RE Group Ltd		79,232
	2,300	Exelon Corp		131,353
	1,400	Express Scripts, Inc *		122,178
	10,700	Exxon Mobil Corp		635,259
	8,700	Fannie Mae		475,716
	1,200	FedEx Corp		128,688
	3,900	Fidelity National Financial, Inc		147,264
	2,500	Franklin Resources, Inc		256,700
	6,300	Freddie Mac		424,557
	5,900	Genentech, Inc *		505,571

See accompanying notes to the financial statements.

10

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	1,000	General Dynamics Corp		123,270
	700	Genzyme Corp		48,538
	2,100	Gilead Sciences, Inc *		130,767
	900	Goldman Sachs Group, Inc		127,161
	800	Google, Inc-Class A *		290,096
	1,900	Halliburton Co		129,200
	4,600	Harley-Davidson, Inc		241,546
	600	Hartford Financial Services Group, Inc		49,428
	1,100	HCA, Inc		52,690
	700	Hershey Co (The)		35,805
	17,600	Hewlett-Packard Co		577,456
	22,200	Home Depot, Inc		935,730
	18,800	Intel Corp		387,280
	3,800	International Business Machines Corp		304,912
	3,000	JC Penney Corp		175,920
	11,200	Johnson & Johnson		645,680
	1,300	Johnson Controls, Inc		92,651
	2,700	Juniper Networks, Inc *		49,653
	5,300	King Pharmaceuticals, Inc *		86,125
	1,500	Lehman Brothers Holdings, Inc		218,925
	2,600	Lockheed Martin Corp		189,462
	3,600	Lowe's Cos, Inc		245,448
	1,300	Marathon Oil Corp		91,780
	1,700	McGraw-Hill, Inc		90,253
	2,200	McKesson Corp		119,086
	1,200	Medco Health Solutions, Inc *		66,864
	2,300	Medtronic, Inc		124,085
	1,500	Merrill Lynch & Co, Inc		115,815
	3,400	Metlife, Inc		170,408
	1,600	MGIC Investment Corp		102,000
	700	Monsanto Co		58,716
	1,800	Moody's Corp		120,600
	19,200	Motorola, Inc		410,880
	1,900	National Semiconductor Corp		53,295

See accompanying notes to the financial statements.

11

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	1,200	Newmont Mining Corp		63,504
	1,200	NII Holdings, Inc-Class B *		61,464
	500	Nike, Inc. Class B		43,390
	2,500	Nordstrom, Inc		95,000
	1,000	Norfolk Southern Corp		51,180
	2,600	Occidental Petroleum Corp		238,004
	5,400	Oracle Corp *		67,068
	1,400	Peabody Energy Corp		67,578
	4,300	PepsiCo, Inc		254,173
	62,900	Pfizer, Inc		1,647,351
	6,465	Procter & Gamble Co		387,447
	3,100	Prudential Financial, Inc		238,824
	3,600	Qualcomm, Inc		169,956
	1,700	Radian Group, Inc		96,475
	800	Rockwell Automation, Inc.		54,536
	1,000	SanDisk Corp *		60,340
	3,700	Schlumberger Ltd		425,500
	1,600	SPX Corp		78,800
	2,600	Target Corp		141,440
	13,000	Texas Instuments, Inc		388,050
	900	Transocean, Inc *		66,762
	2,800	TXU Corp		146,692
	2,600	United Technologies Corp		152,100
	8,300	UnitedHealth Group, Inc		483,309
	1,500	United Parcel Service-Class B		112,065
	4,200	Valero Energy Corp		225,918
	3,800	Walgreen Co		170,468
	1,168	Weatherford International Ltd *		50,364
	3,500	WellPoint, Inc *		268,765
	2,200	Whole Foods Market, Inc		140,536
	3,700	Wyeth		184,260
	3,600	Yahoo! Inc *		115,416
				22,473,412
		TOTAL COMMON STOCKS (COST $42,924,987)		51,208,858

See accompanying notes to the financial statements.

12

GMO Global Growth Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares /
Par Value ($) Description Value ($)

	PREFERRED STOCKS — 0.3%
	Germany — 0.3%
3,215	Volkswagen AG 2.82%		165,668
	TOTAL PREFERRED STOCKS (COST $89,428)		165,668
	SHORT-TERM INVESTMENT(S) — 2.1%
1,100,000	Dresdner Bank AG - Time Deposit 4.55% due 3/01/06		1,100,000
	TOTAL SHORT-TERM INVESTMENT(S) (COST $1,100,000)		1,100,000
	TOTAL INVESTMENTS — 100.5% (Cost $44,114,415)		52,474,526
	Other Assets and Liabilities (net) — (0.5%)		(279,103	)
	TOTAL NET ASSETS — 100.0%	$	52,195,423

See accompanying notes to the financial statements.

13

GMO Global Growth Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward Currency Contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
	5/26/06	CAD	315,296	$	278,080	$	3,670
	5/26/06	CHF	1,176,080		904,335		(5,337	)
	5/26/06	HKD	1,241,488		160,242		(72	)
	5/26/06	JPY	351,061,200		3,067,294		59,779
	5/26/06	NOK	8,057,928		1,200,640		6,831
	5/26/06	NZD	493,006		324,470		(1,592	)
	5/26/06	SEK	9,227,259		1,173,695		(2,896	)
	5/26/06	SGD	2,305,560		1,425,392		9,201
						$	69,584
Sales
	5/26/06	AUD	1,662,141	$	1,231,987	$	(9,316	)
	5/26/06	EUR	1,967,683		2,357,740		(8,043	)
	5/26/06	GBP	872,301		1,531,299		(15,516	)
	5/26/06	HKD	5,307,592		685,064		(46	)
	5/26/06	JPY	99,178,440		866,543		(11,888	)
						$	(44,809	)

See accompanying notes to the financial statements.

14

GMO Global Growth Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
		Buys
	1	S&P 500	March 2006	$	320,600	$	2,896
	2	TOPIX	March 2006		286,467		6,503
						$	9,399
		Sales
	1	DAX	March 2006	$	172,974	$	(14,339	)
	5	FTSE	March 2006		505,575		(779	)
						$	(15,118	)

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

As February 28, 2006, 49.0% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

CHF - Swiss Franc

EUR - Euro

GBP - British Pound

HKD - Hong Kong Dollar

JPY - Japanese Yen

NOK - Norwegian Krone

NZD - New Zealand Dollar

SEK - Swedish Krona

SGD - Singapore Dollar

See accompanying notes to the financial statements.

15

GMO Global Growth Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $44,114,415) (Note 2)	$	52,474,526
Foreign currency, at value (cost $31,127) (Note 2)		31,302
Dividends and interest receivable		74,766
Foreign taxes receivable		8,398
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		79,481
Receivable for variation margin on open futures contracts (Note 2)		9,939
Receivable for expenses reimbursed by Manager (Note 3)		14,598
Total assets		52,693,010
Liabilities:
Due to custodian		345,131
Payable to affiliate for (Note 3):
Management fee		18,688
Shareholder service fee		5,964
Trustees and Chief Compliance Officer fees		77
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		54,706
Accrued expenses		73,021
Total liabilities		497,587
Net assets	$	52,195,423
Net assets consist of:
Paid-in capital	$	38,514,753
Distributions in excess of net investment income		(106,243	)
Accumulated net realized gain		5,407,808
Net unrealized appreciation		8,379,105
	$	52,195,423
Net assets attributable to:
Class III shares	$	52,195,423
Shares outstanding:
Class III		2,076,927
Net asset value per share:
Class III	$	25.13

See accompanying notes to the financial statements.

16

GMO Global Growth Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $94,067)	$	1,255,996
Interest (including securities lending income of $18,043)		63,518
Total investment income		1,319,514
Expenses:
Management fee (Note 3)		306,328
Shareholder service fee – Class III (Note 3)		97,764
Custodian and fund accounting agent fees		123,716
Transfer agent fees		27,550
Audit and tax fees		53,655
Legal fees		1,056
Trustees fees and related expenses (Note 3)		1,571
Registration fees		7,426
Miscellaneous		7,071
Total expenses		626,137
Fees and expenses reimbursed by Manager (Note 3)		(219,840	)
Net expenses		406,297
Net investment income (loss)		913,217
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		6,819,150
Closed futures contracts		(134,576	)
Foreign currency, forward contracts and foreign currency related transactions		(688,883	)
Net realized gain (loss)		5,995,691
Change in net unrealized appreciation (depreciation) on:
Investments		1,796,355
Open futures contracts		(25,993	)
Foreign currency, forward contracts and foreign currency related transactions		(53,872	)
Net unrealized gain (loss)		1,716,490
Net realized and unrealized gain (loss)		7,712,181
Net increase (decrease) in net assets resulting from operations	$	8,625,398

See accompanying notes to the financial statements.

17

GMO Global Growth Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Period from July 20, 2004 (commencement of operations) through February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	913,217		$	379,276
Net realized gain (loss)		5,995,691			398,821
Change in net unrealized appreciation (depreciation)		1,716,490			6,662,615
Net increase (decrease) in net assets from operations		8,625,398			7,440,712
Distributions to shareholders from:
Net investment income
Class III		(295,069	)		(678,209	)
Net realized gains
Class III		(1,412,162	)		—
		(1,707,231	)		(678,209	)
Net share transactions (Note 7):
Class III		(12,748,277	)		51,197,188
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		65,842			—
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		(12,682,435	)		51,197,188
Total increase (decrease) in net assets		(5,764,268	)		57,959,691
Net assets:
Beginning of period		57,959,691			—
End of period (including distributions in excess of net investment income of $106,243 and $62,457, respectively)	$	52,195,423		$	57,959,691

See accompanying notes to the financial statements.

18

GMO Global Growth Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28,
	2006			2005(a)
Net asset value, beginning of period	$	22.67		$	20.00
Income (loss) from investment operations:
Net investment income (loss)†		0.33			0.15
Net realized and unrealized gain (loss)		2.72			2.79
Total from investment operations		3.05			2.94
Less distributions to shareholders:
From net investment income		(0.10	)		(0.27	)
From net realized gains		(0.49	)		—
Total distributions		(0.59	)		(0.27	)
Net asset value, end of period	$	25.13		$	22.67
Total Return(b)		13.61	%		14.72	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	52,195		$	57,960
Net expenses to average daily net assets		0.62	%		0.62	%*
Net investment income to average daily net assets		1.40	%		1.17	%*
Portfolio turnover rate		53	%		40	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.34	%		0.51	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02			—	(c)

(a)  Period from July 20, 2004 (commencement of operations) through February 28, 2005.

(b)  The total return would have been lower had certain expenses not been reimbursed during the period shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(c)  For the period ended February 28, 2005, the Fund received no purchase premiums or redemption fees.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

19

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Global Growth Fund (the "Fund"), which commenced operations on July 20, 2004, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks a high total return through investing primarily in equity securities of both U.S. and non-U.S. issuers. The Fund's benchmark is the S&P/Citigroup (f/k/a Salomon Smith Barney) Primary Market Index ("PMI") World Growth Style Index.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

20

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures Contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the

21

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

22

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

23

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had no securities on loan.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States. The foreign withholding tax rates applicable to a Fund's investments in certain foreign jurisdictions may be higher if a significant portion of the Fund is held by non-U.S. shareholders. As of February 28, 2006, 99.9% of the Fund was held by a non-U.S. shareholder.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $1,128,306 and $678,209, respectively and long-term capital gains – $578,925 and $0, respectively.

24

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $682,710 and $4,787,628 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	44,264,278	$	9,474,506	$	(1,264,258	)	$	8,210,248

The following reclassification represents the amount necessary to report the stated components of net assets on atax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Distributions In Excess Of Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(661,934	)	$	661,934	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

25

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Purchase and redemption of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.30% of the amount invested or redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transactions costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in-capital. For the periods ended February 28, 2006 and February 28, 2005, the Fund received $280 and $0 in purchase premiums and $65,562 and $0 in redemption fees, respectively.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.47% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.47% of average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $1,167 and $431, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $33,149,136 and $47,414,234, respectively.

26

GMO Global Growth Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related party

As of February 28, 2006, 99.9% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by one related party comprised of a certain GMO employee account, and 99.9% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Period from July 20, 2004 (commencement of operations) through February 28, 2005
Class III:	Shares			Amount			Shares		Amount
Shares sold		332,529		$	7,529,187			2,530,994	$	50,620,710
Shares issued to shareholders in reinvestment of distributions		69,037			1,642,031			26,085		576,478
Shares repurchased		(881,718	)		(21,919,495	)		—		—
Purchase premiums and redemption fees		—			65,842			—		—
Net increase (decrease)		(480,152	)	$	(12,682,435	)		2,557,079	$	51,197,188

27

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Global Growth Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Global Growth Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

28

GMO Global Growth Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred *
Class III
	1	) Actual		0.62	%	$	1,000.00	$	1,089.20	$	3.21
2) Hypothetical				0.62	%	$	1,000.00	$	1,021.72	$	3.11

*  Expenses are calculated using the Class's annualized expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

29

GMO Global Growth Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $94,067 and recognized foreign source income of $959,398.

The Fund's distributions to shareholders include $578,925 from long-term capital gains.

For taxable, non-corporate shareholders, 75.98% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 37.85% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $16,169 and $677,407, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

30

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

31

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005) , Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present) ; Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

32

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 –June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

33

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

34

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Inflation Indexed Bond Fund returned +2.6% for the fiscal year ended February 28, 2006, as compared to +3.2% for the Lehman Brothers U.S. Treasury TIPS Index.

The Fund underperformed the benchmark by 0.6% during the fiscal year. Curve positioning was attributable for much of the underperformance during the time period.

Real (inflation-adjusted) yields on Treasury Inflation-Protected Securities (TIPS) as of February 28, 2006 are around 2%. In addition to inflation-indexed bonds issued by the U.S. Treasury Department, the Fund holds inflation-indexed bonds issued by various U.S. Government agencies. While the Fund is permitted to own securities of foreign countries that are not in the benchmark, as of February 28, 2006, the portfolio is entirely invested in the United States. In addition, the Fund maintained an interest rate exposure quite similar to that of its benchmark. At fiscal year end, approximately 98% of the debt obligations held are AAA-rated and the remaining 2% are A-rated.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		113.0	%
Short-Term Investment(s)		0.5
Mutual Fund		0.1
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Swaps		0.0
Futures		0.0
Reverse Repurchase Agreements		(14.0	)
Other		0.4
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value		Description	Value ($)
		DEBT OBLIGATION(S) — 96.5%
		United States — 96.5%
		Corporate Debt — 1.9%
	13,850,000	JP Morgan & Co. Series MTN, Variable Rate, CPI + 4.00%, 6.80%, due 02/15/12		14,424,775
		U.S. Government — 94.6%
	21,433,400	U.S. Treasury Inflation Indexed Bond, 1.88%, due 07/15/13 (a)		21,282,696
	41,155,135	U.S. Treasury Inflation Indexed Bond, 2.00%, due 01/15/16 (a)		41,148,705
	31,734,080	U.S. Treasury Inflation Indexed Bond, 2.00%, due 01/15/26 (a)		31,922,501
	34,682,790	U.S. Treasury Inflation Indexed Bond, 3.63%, due 04/15/28 (a)		45,309,814
	19,755,450	U.S. Treasury Inflation Indexed Bond, 3.88%, due 04/15/29 (a)		26,978,536
	17,178,594	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (a)		17,785,213
	11,401,615	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (a)		12,062,552
	1,754,835	U.S. Treasury Inflation Indexed Note, 4.25%, due 01/15/10 (a)		1,910,302
	113,247,730	U.S. Treasury Inflation Indexed Note, 0.88%, due 04/15/10 (a)		108,558,566
	237,362,103	U.S. Treasury Inflation Indexed Note, 2.00%, due 01/15/14 (a) (b)		237,399,191
	21,406,100	U.S. Treasury Inflation Indexed Note, 2.00%, due 07/15/14 (a)		21,422,824
	63,910,220	U.S. Treasury Inflation Indexed Note, 1.63%, due 01/15/15 (a)		61,972,942
	28,333,760	U.S. Treasury Inflation Indexed Note, 1.88%, due 07/15/15 (a)		28,059,277
	63,591,780	U.S. Treasury Inflation Indexed Note, 2.38%, due 01/15/25 (a)		67,566,266
				723,379,385
		Total United States		737,804,160
		TOTAL DEBT OBLIGATION(S) (COST $744,872,329)		737,804,160

See accompanying notes to the financial statements.

2

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		MUTUAL FUNDS — 17.1%
		Affiliated Issuer(s) — 17.1%
	5,104,995	GMO Short-Duration Collateral Fund		130,687,876
	28,918	GMO Special Purpose Holding Fund		237,997
		TOTAL MUTUAL FUNDS (COST $130,675,192)		130,925,873
		TOTAL INVESTMENTS — 113.6% (Cost $875,547,521)		868,730,033
		Other Assets and Liabilities (net) — (13.6%)		(104,249,732	)
		TOTAL NET ASSETS — 100.0%	$	764,480,301

See accompanying notes to the financial statements.

3

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Reverse Repurchase Agreement

Face Value		Description	Market Value
$	106,687,670	Barclays Bank, 4.44%*, dated 2/3/06, to be repurchased on demand by Barclays Bank, at face value, plus accrued interest.	$	107,029,781
Average balance outstanding			$	102,260,979
Average interest rate				3.37	%
Maximum balance outstanding			$	174,978,515
Average shares outstanding				45,820,319
Average balance per share outstanding				2.23

Average balance outstanding was calculated based on daily balances outstanding during the period that the Fund had entered into reverse repurchase agreements.

* Represents the current interest rate for a variable rate security.

Swap Agreements

Total Return Swaps

Notional Amount

Expiration Date

Counterparty

Pay

Receive

Net Unrealized Appreciation (Depreciation)

8,000,000

USD

8/31/2006

JP Morgan Chase Bank

1 month LIBOR–

Lehman TIPS

0.08

%

1

Y-10Y

$

0

Notes to Schedule of Investments:

CPI - Consumer Price Index

LIBOR - London Interbank Offered Rate

MTN - Medium Term Note

TIPS - Treasury Inflation Protected Securities

(a)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(b)  All or a portion of this security has been segregated to cover collateral requirements on reverse repurchase agreements (Note 2).

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

See accompanying notes to the financial statements.

4

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $744,872,329) (Note 2)	$	737,804,160
Investments in affiliated issuers, at value (cost $130,675,192) (Notes 2 and 8)		130,925,873
Cash		188,032
Receivable for Fund shares sold		12,220,500
Interest receivable		2,557,771
Receivable for expenses reimbursed by Manager (Note 3)		26,290
Total assets		883,722,626
Liabilities:
Payable for investments purchased		12,000,000
Payable to affiliate for (Note 3):
Management fee		53,146
Shareholder service fee		79,719
Trustees and Chief Compliance Officer fees		1,410
Payable for reverse repurchase agreements (Note 2)		107,029,781
Accrued expenses		78,269
Total liabilities		119,242,325
Net assets	$	764,480,301
Net assets consist of:
Paid-in capital	$	773,062,508
Distributions in excess of net investment income		(6,635,659	)
Accumulated net realized gain		4,870,940
Net unrealized depreciation		(6,817,488	)
	$	764,480,301
Net assets attributable to:
Class III shares	$	764,480,301
Shares outstanding:
Class III		68,849,501
Net asset value per share:
Class III	$	11.10

See accompanying notes to the financial statements.

5

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest	$	24,411,624
Dividends from affiliated issuers (Note 8)		2,237,995
Total investment income		26,649,619
Expenses:
Management fee (Note 3)		524,634
Shareholder service fee – Class III (Note 3)		786,951
Custodian, fund accounting agent and transfer agent fees		189,688
Audit and tax fees		37,279
Legal fees		7,492
Trustees fees and related expenses (Note 3)		9,848
Registration fees		4,202
Interest expense (Note 2)		3,613,441
Miscellaneous		10,182
Total expenses		5,183,717
Fees and expenses reimbursed by Manager (Note 3)		(242,709	)
Net expenses		4,941,008
Net investment income (loss)		21,708,611
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		7,544,550
Investments in affiliated issuers		453,690
Realized gains distributions from affiliated issuers (Note 8)		256,478
Closed futures contracts		878,777
Closed swap contracts		(239,500	)
Net realized gain (loss)		8,893,995
Change in net unrealized appreciation (depreciation) on:
Investments		(12,504,947	)
Open futures contracts		(376,470	)
Net unrealized gain (loss)		(12,881,417	)
Net realized and unrealized gain (loss)		(3,987,422	)
Net increase (decrease) in net assets resulting from operations	$	17,721,189

See accompanying notes to the financial statements.

6

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	21,708,611		$	25,845,054
Net realized gain (loss)		8,893,995			26,250,795
Change in net unrealized appreciation (depreciation)		(12,881,417	)		(21,893,210	)
Net increase (decrease) in net assets from operations		17,721,189			30,202,639
Distributions to shareholders from:
Net investment income
Class III		(28,441,726	)		(26,930,343	)
Net realized gains
Class III		(8,798,710	)		(27,466,011	)
Return of capital
Class III		(685,212	)		—
		(37,925,648	)		(54,396,354	)
Net share transactions (Note 7):
Class III		76,459,831			316,804,831
Total increase (decrease) in net assets		56,255,372			292,611,116
Net assets:
Beginning of period		708,224,929			415,613,813
End of period (including distributions in excess of net investment income of $6,635,659 and $11,331, respectively)	$	764,480,301		$	708,224,929

See accompanying notes to the financial statements.

7

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)


Statement of Cash Flows For the Year Ended February 28, 2006

Cash flows from operating activities:
Net investment income	$	21,708,611
Net accretion of investments		(11,058,255	)
		10,650,356
Investments purchased		(765,649,885	)
Investments sold		781,966,208
Short-term investments, net		2,380,535
		18,696,858
Realized gain distributions from affiliated issuers		256,478
Changes in assets and liabilities:
(Increase) decrease in interest receivable		199,650
(Increase) decrease in receivable for fund shares sold		(11,935,500	)
(Increase) decrease in receivable for variation margin on open futures contracts		187,875
(Increase) decrease in receivable for expenses reimbursed by Manager		9,942
Increase (decrease) in payable for Fund shares repurchased		(330,000	)
Increase (decrease) in payable for securities purchased		12,000,000
Increase (decrease) in payable to affiliate for:
Management Fee		(1,603	)
Trustees and Chief Compliance Officer fees		128
Shareholder service fee		(2,405	)
Increase (decrease) in accrued expenses		(48,546	)
Net realized and unrealized gain on swaps and futures contracts		262,807
Net cash provided (used in) operating activities		29,946,040
Cash flows from financing activities*
Proceeds from shares sold		432,094,002
Shares redeemed		(391,388,123	)
Cash distributions paid		(2,171,696	)
Increase (decrease) in payable for reverse repurchase agreements		(68,292,191	)
Net cash provided (used in) financing activities		(29,758,008	)
Net increase in cash		188,032
Cash and cash equivalents, beginning of period		—
Cash and cash equivalents, end of period	$	188,032
*Supplemental disclosure of cash flow information:
Reinvestment of dividends and distributions	$	35,753,952

See accompanying notes to the financial statements.

8

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	11.53		$	12.02		$	11.72		$	10.81		$	10.64
Income (loss) from investment operations:
Net investment income (loss)		0.47	†		0.50	†		0.30			0.51			0.30
Net realized and unrealized gain (loss)		(0.16	)		(0.05	)		0.56			1.25			0.29
Total from investment operations		0.31			0.45			0.86			1.76			0.59
Less distributions to shareholders:
From net investment income		(0.56	)		(0.45	)		(0.33	)		(0.56	)		(0.37	)
From net realized gains		(0.17	)		(0.49	)		(0.23	)		(0.29	)		(0.05	)
From return of capital		(0.01	)		—			—			—			—
Total distributions		(0.74	)		(0.94	)		(0.56	)		(0.85	)		(0.42	)
Net asset value, end of period	$	11.10		$	11.53		$	12.02		$	11.72		$	10.81
Total Return(a)		2.64	%		3.83	%		7.54	%		16.67	%		5.66	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	764,480		$	708,225		$	415,614		$	278,088		$	149,274
Net operating expenses to average daily net assets		0.25	%		0.25	%		0.25	%		0.25	%		0.25	%
Interest expense to average daily net assets(b)		0.69	%		0.26	%		0.13	%		0.15	%		0.17	%
Total net expenses to average daily net assets(c)		0.94	%		0.51	%		0.38	%		0.40	%		0.42	%
Net investment income to average daily net assets		4.14	%		4.17	%		3.49	%		4.55	%		4.15	%
Portfolio turnover rate		118	%		161	%		57	%		75	%		40	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.05	%		0.05	%		0.06	%		0.06	%		0.09	%

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(b)  Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expenses. Income earned on investing proceeds from reverse repurchase agreements is included in interest income.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

9

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Inflation Indexed Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investments in securities that are indexed or otherwise "linked" to general measures of inflation in the country of issue ("inflation indexed bonds") and other funds of the Trust ("underlying fund(s)") primarily GMO Short-Duration Collateral Fund. The Fund's benchmark is the Lehman Brothers U.S. Treasury TIPS Index.

Inflation indexed bonds issued by the U.S. Treasury are fixed income securities whose principal value is periodically adjusted according to the rate of U.S. inflation. Inflation indexed bonds issued by a foreign government are generally adjusted to reflect a comparable local inflation index.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect). Shares of the GMO Special Purpose Holding Fund and the GMO Short-Duration Collateral Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued

10

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 7.1% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $180,361 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $1,004,016 in conjunction with that settlement. Those settlement proceeds received in April 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future

11

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

12

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return and forward swap spread lock swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

13

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expense. As of February 28, 2006, the Fund had entered into reverse repurchase agreements having a market value plus accrued interest of $107,029,781, collateralized by securities with a market value of $108,935,590. See the Schedule of Investments for open reverse repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Statement of cash flows

The cash amounts shown in the Statement of Cash Flows are the amounts reported as cash in the Fund's Statement of Assets and Liabilities and represent cash on hand at its custodian as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund is seeking consent from the Internal Revenue Service to change its tax year-end from February 28/29, to December 31, effective December 31, 2005. The Fund is making this request, in consideration of both the nature of its investments and its above-noted intentions with regard to distributions,

14

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

as well as coordinating its distributions for excise and income tax purposes. Accordingly the financial statements and related disclosures consider an expected change to the Fund's tax year-end.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended December 31, 2005 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $28,441,726 and $30,834,668, respectively, long-term capital gains – $0 and $23,561,686, respectively, and return of capital – $685,212 and $0, respectively.

The Fund's net investment income distributed to shareholders exceeded net investment income (loss), as disclosed in the Statement of Operations. The Fund made such distributions based on its estimated undistributed taxable ordinary income through December 31, 2005 (of which certain amounts were reversed, due to an absolute decline in the related inflation index), in accordance with the excise tax rules.

As of December 31, 2005, the Fund elected to defer to January 1, 2006 post-October capital losses of $410,720.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	870,124,238	$	7,292,087	$	(8,686,292	)	$	(1,394,205	)

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of December 31, 2005. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	108,787	$	(4,924,406	)	$	4,815,619

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

15

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.10% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.10% of the average daily net assets.

The Fund incurs fees and expenses indirectly as a shareholder in underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.001	%		0.000	%		0.002	%		0.003	%

16

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $5,219 and $3,556, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	610,786,890	$	649,566,208
Investments (non-U.S. Government securities)		154,862,995		132,400,000

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 49.2% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

As of February 28, 2006, 0.1% of the Fund's shares were held by nineteen related parties comprised of certain GMO employee accounts, and 88.8% of the Fund's shares were held by accounts for which the Manager has investment discretion.

17

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		38,161,008		$	432,094,002			29,549,567		$	349,328,487
Shares issued to shareholders in reinvestment of distributions		3,172,282			35,753,952			4,444,888			51,765,262
Shares repurchased		(33,933,240	)		(391,388,123	)		(7,123,847	)		(84,288,918	)
Net increase (decrease)		7,400,050		$	76,459,831			26,870,608		$	316,804,831

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the securities of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gain Distributions		Value, end of period
GMO Short-Duration Collateral Fund	$	107,322,039	$	154,862,995	$	132,400,000	$	2,237,995	$	—	$	130,687,876
GMO Special Purpose Holding Fund		448,523		—		—		—		256,478		237,997	*
Totals	$	107,770,562	$	154,862,995	$	132,400,000	$	2,237,995	$	256,478	$	130,925,873

* After the effect of return of capital distributions of $159,419 on April 5, 2005 and $40,293 on February 21, 2006, respectively.

18

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Inflation Indexed Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of GMO Inflation Indexed Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and cash flows and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

19

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		1.01	%	$	1,000.00	$	993.60	$	4.99
2) Hypothetical		1.01	%	$	1,000.00	$	1,019.79	$	5.06

*  Expenses are calculated using the Class's annualized expense ratio (including interest expense and indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

20

GMO Inflation Indexed Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended December 31, 2005

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended December 31, 2005, $23,445,461 and $3,254,781, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

Note Concerning Prior Distribution:

Because adjustments on inflation indexed securities affect, for accounting purposes, the amount of income generated by such securities, subsequent changes in relevant inflation indices may result in adjustments of the Fund's income calculated for a given period. This occurred for the Fund when various inflation indices decreased subsequent to when distributions were made for the calendar year 2005. Of the $.434 net dividend income per share distributed on December 27, 2005, subsequent absolute declines in inflation indices now suggest that for accounting purposes $685,212, of such distribution (3.10%) was not derived from net investment income or net profits.

21

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

22

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

23

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

24

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

25

GMO Foreign Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Foreign Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Active Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Foreign Fund returned +19.1% for the fiscal year ended February 28, 2006, as compared to +17.4% for the MSCI EAFE Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in international equity securities throughout the fiscal year.

Fair value pricing of the Fund subtracted 0.1% from returns versus the benchmark, which utilizes local close prices. Using the local close, which we do for attribution, the Fund returned +19.2% for the fiscal year.

Stock selection added 1.6% to returns for the fiscal year. Stock selection was positive in Japan and the United Kingdom.

Country selection outperformed the MSCI EAFE Index by 0.1%. The largest positive contribution to country selection came from an overweight position in Japan, which added 0.2%.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. The Fund commenced operations on June 28, 1996 subsequent to a transaction involving, in essence, the reorganization of the GMO International Equities Pool of the Common Fund for Non-Profit Organizations (the "GMO Pool") as the Foreign Fund. All information relating to the time periods prior to June 28, 1996 relates to the GMO Pool. Performance for Classes II, IV and M will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Foreign Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		94.1	%
Preferred Stocks		0.8
Rights and Warrants		0.0
Short-Term Investment(s)		4.1
Other		1.0
		100.0	%
Country Summary	% of Equity Investments
Japan		28.9	%
United Kingdom		23.8
Germany		10.5
France		5.4
Netherlands		4.4
Italy		3.7
Switzerland		3.4
Spain		3.2
Hong Kong		1.9
Australia		1.9
Ireland		1.4
Norway		1.3
Taiwan		1.3
Belgium		1.2
Finland		1.1
Singapore		1.1
South Korea		1.1
Sweden		0.8
Brazil		0.8
Austria		0.7
Denmark		0.5
New Zealand		0.3
India		0.3
Chile		0.2
Malaysia		0.2
Thailand		0.2
Indonesia		0.2
Canada		0.1
Philippines		0.1
Mexico		0.0
		100.0	%

1

GMO Foreign Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Financials		29.4	%
Consumer Discretionary		15.9
Industrials		15.8
Consumer Staples		6.9
Energy		6.7
Telecommunication Services		6.5
Materials		5.5
Utilities		5.3
Health Care		4.4
Information Technology		3.6
		100.0	%

2

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 94.1%
		Australia — 1.8%
	1,080,000	Amcor Ltd		5,930,050
	287,000	Commonwealth Bank of Australia		9,527,312
	5,236,600	Foster's Group Ltd		21,079,355
	1,054,125	Multiplex Group		2,470,632
	1,186,650	National Australia Bank Ltd		32,207,894
	16,477,000	SP AusNet *		16,210,279
	656,551	TABCORP Holdings Ltd		7,380,926
	4,005,586	Telstra Corp Ltd		11,398,123
	514,027	Westpac Banking Corp		8,976,418
	945,341	Woolworths Ltd		12,874,818
				128,055,807
		Austria — 0.7%
	183,900	Erste Bank Der Oesterreichischen Sparkassen AG		11,178,701
	29,330	Flughafen Wien AG		2,365,502
	344,400	OMV AG		21,359,427
	385,500	Telekom Austria AG		8,817,657
	131,530	Wienerberger AG		6,098,271
				49,819,558
		Belgium — 1.1%
	192,990	Belgacom SA		5,801,140
	24,087	CIE Francois d' Enterprises		22,965,519
	281,495	Fortis		10,027,206
	52,985	Groupe Bruxelles Lambert SA		5,816,107
	214,565	KBC Groep NV		22,399,833
	72,092	Solvay SA		7,976,078
	103,459	UCB SA		4,900,495
				79,886,378

See accompanying notes to the financial statements.

3

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Brazil — 0.7%
	90,800	All America Latina Logistica		4,981,493
	1,709,500	Companhia de Concessoes Rodoviarias		16,141,029
	47,700	Gafisa SA GDR 144A *		1,105,209
	482,300	Tam SA		10,890,645
	349,500	Tractebel Energia SA		2,872,039
	116,900	Unibanco-Uniao de Bancos Brasileiros SA GDR		10,281,355
	71,600	Universo Online SA *		529,371
				46,801,141
		Canada — 0.1%
	220,100	KAP Resources Ltd * (a)		1,937
	1,209,500	QLT Inc * (b)		8,620,661
				8,622,598
		Chile — 0.2%
	728,000	Inversiones Aguas Metropolitanas SA ADR 144A *		14,123,200
		Denmark — 0.5%
	999,200	Danske Bank A/S		35,628,502
		Finland — 1.1%
	330,800	Jaakko Poyry Group Oyj		13,784,585
	1,141,250	Nokian Renkaat Oyj (b)		18,161,103
	327,900	Ramirent Oyj		10,018,657
	491,900	UPM-Kymmene Oyj		10,436,112
	844,300	Uponor Oyj		22,094,972
				74,495,429
		France — 5.1%
	48,260	Accor SA		2,900,367
	163,400	Arcelor		5,970,852
	113,340	Assurances Generales de France		11,773,632
	467,440	Axa		16,527,875
	107,905	BIC SA		6,582,037
	382,371	BNP Paribas		35,387,249

See accompanying notes to the financial statements.

4

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		France — continued
	142,996	Cie de Saint-Gobain		9,539,831
	189,717	Credit Agricole SA		6,929,570
	29,410	Etablissements Economiques du Casino Guichard-Perrachon SA (b)		1,833,214
	596,192	France Telecom SA		13,024,806
	107,676	Groupe Danone		12,384,227
	17,475	Guyenne et Gascogne SA (b)		1,779,773
	94,492	Imerys SA (b)		8,071,038
	76,278	Lafarge SA		7,979,841
	128,166	Lagardere S.C.A.		9,907,896
	118,800	L'Oreal SA		10,503,952
	83,100	M6-Metropole Television		2,499,204
	163,104	Michelin SA Class B		9,949,693
	30,083	Pernod-Ricard		5,148,291
	265,272	Peugeot SA		15,464,664
	80,300	Publicis Groupe		3,063,708
	216,733	Sanofi-Aventis		18,449,448
	101,964	Schneider Electric SA		10,418,975
	24,831	Sequana Capital		698,280
	55,400	Societe Generale		7,845,407
	137,852	Suez Lyon des Eaux VVPR Strip *		1,643
	1,355,072	Suez SA		49,768,930
	102,440	Technip SA		6,155,687
	108,114	Thales SA		4,925,832
	197,500	Total SA		49,671,007
	115,031	Wendel Investissement		13,165,607
				358,322,536
		Germany — 9.3%
	284,895	Adidas-Salomon AG		55,676,422
	485,791	Allianz AG (Registered)		78,457,730
	212,900	Bayerische Motoren Werke AG		10,235,068
	605,510	Commerzbank AG		22,124,331
	110,820	Continental AG		11,392,748
	1,254,481	DaimlerChrysler AG (Registered)		69,708,493
	758,600	Depfa Bank Plc		12,648,551

See accompanying notes to the financial statements.

5

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — continued
	151,100	Deutsche Bank AG (Registered)		16,716,460
	2,353,923	Deutsche Lufthansa AG (Registered)		38,784,391
	915,900	Deutsche Post AG (Registered)		23,831,906
	3,851,838	Deutsche Telekom (Registered)		60,866,747
	170,170	Fraport AG (b)		13,002,939
	311,818	Heidelberger Druckmaschinen (b)		13,388,027
	525,900	Metro AG		28,013,095
	476,474	Muenchener Rueckversicherungs AG (Registered)		64,683,632
	1,024,837	Siemens AG (Registered)		94,252,588
	594,300	TUI AG (b)		11,737,494
	348,350	Volkswagen AG (b)		24,395,544
				649,916,166
		Hong Kong — 1.8%
	2,296,600	Bank of East Asia Ltd		7,853,597
	5,200,500	China Netcom Group		9,233,721
	7,750,000	China Resources Power Holdings Co		5,164,635
	7,991,000	Hang Lung Properties Ltd		14,301,788
	2,585,000	Henderson Land Development Co Ltd		13,765,819
	6,746,000	Hopewell Highway Infrastructure Ltd		5,341,826
	2,702,500	Jardine Strategic Holdings Ltd		31,038,483
	2,385,507	Kerry Properties Ltd		7,596,914
	812,000	Swire Pacific Ltd Class A		7,752,921
	7,737,500	Swire Pacific Ltd Class B		14,068,010
	553,500	Wing Hang Bank Ltd		4,262,718
	2,488,000	Yue Yuen Industrial Holdings		7,682,048
				128,062,480
		India — 0.3%
	3,066,205	Arvind Mills Ltd		6,825,313
	2,690,400	India Cements Ltd *		8,524,281
	1,428,000	Jain Irrigation Systems Ltd *		7,221,197
	1,897,489	Mirc Electronics Ltd		834,351
				23,405,142

See accompanying notes to the financial statements.

6

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Indonesia — 0.1%
	15,605,000	Telekomunikasi Indonesia Tbk PT		10,325,307
		Ireland — 1.4%
	1,849,840	Allied Irish Banks Plc		44,191,211
	1,892,770	Bank of Ireland		33,672,729
	266,927	CRH Plc		8,755,661
	425,300	Grafton Group Plc *		5,223,470
	224,000	Irish Life & Permanent Plc		4,936,377
				96,779,448
		Italy — 3.4%
	675,200	Alleanza Assicurazioni SPA (b)		8,357,580
	264,531	Assicurazioni Generali SPA		9,489,371
	1,500,528	Banca Intesa SPA		8,865,727
	969,623	Banca Intesa SPA - Di RISP		5,331,300
	941,124	Banca Monte dei Paschi di Siena SPA (b)		4,867,872
	267,554	Buzzi Unicem SPA		5,535,779
	3,380,935	Enel SPA		28,130,668
	2,260,121	ENI SPA		64,612,583
	833,510	Fiat SPA * (b)		9,023,030
	460,020	Finmeccanica SPA		10,066,025
	221,146	Grouppo Editoriale L'Espresso (b)		1,134,893
	512,470	Italcementi SPA - Di RISP		7,304,167
	58,000	Pagnossin SPA * (b)		60,160
	829,300	Snam Rete Gas SPA		3,641,540
	9,299,276	Telecom Italia Di RISP		21,366,514
	11,311,498	Telecom Italia SPA		30,383,133
	3,116,382	UniCredito Italiano SPA		22,666,567
				240,836,909
		Japan — 27.4%
	313,700	Aisin Seiki Co Ltd		11,132,866
	850,000	Asahi Breweries		11,488,903
	1,009,600	Astellas Pharma Inc		38,975,895

See accompanying notes to the financial statements.

7

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	956,000	Bridgestone Corp		18,642,916
	928,000	Canon Inc		57,940,659
	891	Central Japan Railway Co		8,725,535
	1,283,700	Chubu Electric Power Co Inc		34,027,105
	1,079,000	Daikin Industries Ltd		35,903,727
	1,678,000	Daimaru Inc		22,565,568
	815,000	Daiwa House Industry Co Ltd		13,043,859
	3,676,000	Daiwa Securities Co Ltd		43,642,045
	1,550,600	Denso Corp		56,566,510
	5,928	East Japan Railway Co		42,171,217
	719,100	Eisai Co Ltd		33,256,471
	254,700	Fanuc Ltd		21,477,572
	3,179,000	Fujitsu Ltd		25,330,532
	803,900	Honda Motor Co Ltd		46,956,032
	505,800	Hoya Corp		20,067,189
	807,700	Isetan Co Ltd (b)		14,616,017
	2,928,000	Isuzu Motors Ltd (b)		10,082,423
	5,548,000	Itochu Corp		46,112,308
	488,200	Japan Synthetic Rubber Co Ltd		14,377,395
	512	Japan Tobacco Inc		8,796,311
	1,055,200	JFE Holdings Inc		38,893,564
	1,037,020	JTEKT Corp		19,643,699
	616,000	Kaneka Corp		8,107,195
	1,038,000	Kao Corp		28,194,633
	7,527	KDDI Corp		38,660,962
	1,726,000	Komatsu Ltd		30,609,883
	103,718	Kose Corp		4,251,069
	3,653,000	Kubota Corp		35,725,731
	227,200	Lawson Inc		8,483,154
	4,077,000	Matsushita Electric Industrial Co Ltd		85,736,931
	2,112,200	Mitsubishi Corp		49,005,454
	7,980,000	Mitsubishi Electric Corp		63,545,901
	2,690,000	Mitsubishi Rayon Co Ltd		21,615,188
	3,712	Mitsubishi Tokyo Financial Group Inc		55,113,365

See accompanying notes to the financial statements.

8

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	1,375,000	Mitsui Fudosan Co Ltd		28,562,167
	2,881,000	Mitsui Mining & Smelting Co Ltd		19,469,358
	1,234,000	Mitsui OSK Lines Ltd		8,997,659
	8,641	Mizuho Financial Group Inc		68,879,294
	299,000	Mori Seiki Co (b)		5,503,261
	312,000	Nikko Cordial Corp		4,911,581
	3,121,500	Nippon Mining Holdings Inc		23,310,830
	995,000	Nishi Nippon City Bank Ltd		5,099,735
	4,099,200	Nissan Motor Co		47,057,739
	331	Nomura Real Estate Office Fund (REIT)		2,686,348
	1,367,000	NTN Corp		10,134,790
	245,200	Omron Corp		6,804,642
	167,100	ORIX Corp		43,992,524
	506	Sapporo Hokuyo Holdings Inc		5,459,125
	416,500	Sega Sammy Holdings Inc		16,987,046
	492,800	Seven & I Holdings Co Ltd		20,158,071
	675,000	Sharp Corp		11,907,298
	567,000	Shionogi and Co Ltd		7,818,511
	2,598,000	Sumitomo Electric Industries Ltd		39,040,202
	3,604,000	Sumitomo Heavy Industries Ltd		32,231,286
	11,911	Sumitomo Mitsui Financial Group Inc		130,084,723
	438,000	Sumitomo Realty & Development Co Ltd		10,179,290
	534,300	Takeda Pharmaceutical Co Ltd		29,762,895
	290,000	TDK Corp		20,088,791
	1,721	The Tokyo Star Bank Ltd * (b)		5,902,440
	74,900	Tokyo Electron Ltd		4,988,167
	3,699,000	Tokyo Gas Co Ltd		16,841,598
	100,600	Tokyo Seimitsu Co Ltd		5,861,275
	1,230,000	Tokyo Tatemono Co Ltd		11,896,739
	2,315,000	Toray Industries Inc		17,836,969
	2,600,000	Tosoh Corp		13,658,471
	2,224,000	Toyota Motor Corp		118,555,767
	282,500	Ushio Inc		6,903,563
				1,925,057,939

See accompanying notes to the financial statements.

9

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Malaysia — 0.2%
	1,282,000	IOI Corp Berhad		4,764,140
	3,000,000	MISC Berhad		7,826,003
				12,590,143
		Mexico — 0.0%
	65,400	Ternium SA ADR * (b)		1,540,170
		Netherlands — 4.2%
	969,285	ABN Amro Holdings NV		28,245,707
	1,089,409	Aegon NV		17,964,832
	481,202	Akzo Nobel NV		24,428,498
	626,650	Fortis NV		22,403,339
	134,832	Fugro NV		5,042,426
	1,244,454	Hagemeyer NV * (b)		5,008,342
	139,274	Hal Trust (Participating Units) (b)		9,635,948
	1,504,367	ING Groep NV		56,543,077
	333,213	Koninklijke Ahold NV *		2,719,668
	1,100,500	Koninklijke KPN NV		11,393,117
	253,397	Koninklijke Wessanen NV		3,986,146
	1,318,532	Philips Electronics NV		42,909,483
	92,391	Philips Electronics NV ADR		3,004,555
	359,307	TNT NV		11,687,752
	102,523	Unilever NV		7,116,918
	42,734	Univar NV		2,244,104
	143,310	Van Ommeren Vopak NV		4,559,955
	388,714	VNU NV		12,595,108
	72,087	Wereldhave NV		7,684,979
	648,219	Wolters Kluwer NV		14,221,078
				293,395,032
		New Zealand — 0.3%
	394,477	Air New Zealand		336,454
	1,073,119	Asian Growth Properties Ltd *		724,708
	5,540,643	Telecom Corp of New Zealand		19,484,668
				20,545,830

See accompanying notes to the financial statements.

10

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Norway — 1.3%
	978,398	Ekornes ASA		19,154,530
	1,531,000	Norske Skogindustrier AS Class A		22,908,268
	303,700	Orkla ASA		13,237,633
	521,720	Prosafe ASA		25,883,101
	252,700	Statoil ASA		6,471,336
				87,654,868
		Philippines — 0.1%
	6,797,100	First General Corp *		5,916,238
		Singapore — 1.1%
	4,390,000	ComfortDelgro Corp Ltd		4,447,361
	2,248,880	DBS Group Holdings Ltd		22,619,089
	1,106,000	Keppel Corp Ltd		9,505,056
	15,664,000	People's Food Holdings Ltd		11,068,583
	907,000	Singapore Airlines Ltd		8,231,982
	4,756,220	Singapore Telecommunications		7,624,609
	6,923,000	Unisteel Technology Ltd		10,680,408
				74,177,088
		South Korea — 1.0%
	19,865	Hansol Paper Co		274,136
	1,459,100	KT Corp ADR		29,794,822
	297,000	Samsung Electro Mechanics Co Ltd *		12,213,931
	221,510	Samsung SDI Co Ltd		19,572,661
	30,620	SK Telecom Co Ltd		6,363,062
	147,700	SK Telecom Co Ltd ADR		3,566,955
				71,785,567
		Spain — 3.0%
	446,340	ACS Actividades de Construccion y Servicios SA		16,645,491
	220,603	Altadis SA		9,250,193
	1,756,392	Banco Bilbao Vizcaya Argentaria SA		35,719,094
	684,315	Banco Popular Espanol SA		9,178,413

See accompanying notes to the financial statements.

11

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Spain — continued
	1,552,932	Banco Santander Central Hispano SA		22,687,627
	727,527	Endesa SA		24,361,427
	154,600	Gas Natural SDG SA		4,702,730
	516,593	Iberdrola SA		16,293,397
	132,100	Inditex SA		4,741,914
	124,750	Red Electrica de Espana		4,172,155
	940,929	Repsol YPF SA		26,300,402
	2,410,161	Telefonica SA		37,162,509
				211,215,352
		Sweden — 0.7%
	606,090	Autoliv Inc SDR (b)		32,489,794
	1,044,450	Lundin Mining Corp SDR *		19,199,612
				51,689,406
		Switzerland — 3.2%
	66,900	Adecco SA		3,670,716
	43,170	Baloise Holding Ltd		2,734,920
	1,620	Bank Sarasin & Cie AG Class B (Registered)		3,765,472
	2,822	Banque Cantonale Vaudoise		903,444
	2,666	Belimo Holding AG (Registered)		1,787,382
	20,560	Bobst Group AG (Registered)		877,869
	90,460	Converium Holding AG *		996,636
	441,250	Credit Suisse Group		24,438,715
	9,335	Energiedienst Holding AG (Registered)		3,477,433
	6,697	Forbo Holdings AG (Registered) *		1,692,276
	8,262	Geberit AG (Registered)		7,495,952
	141,905	Holcim Ltd		11,175,618
	880	Jelmoli Holding AG (Bearer)		1,421,952
	4,836	Jelmoli Holding AG (Registered)		1,569,144
	102,120	Nestle SA (Registered)		30,023,654
	408,284	Novartis AG (Registered)		21,970,998
	93,700	Swatch Group AG		15,202,012
	19,900	Swiss Life Holding		3,689,237

See accompanying notes to the financial statements.

12

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Switzerland — continued
	504	Swiss National Insurance Co (Registered)		261,701
	427,926	Swiss Reinsurance Co (Registered)		30,483,453
	31,330	Swisscom AG (Registered) (b)		9,408,743
	344,440	UBS AG (Registered)		36,595,126
	18,941	Valora Holding AG *		3,848,922
	42,841	Zurich Financial Services AG *		10,116,635
				227,608,010
		Taiwan — 1.2%
	3,528,000	Benq Corp		3,461,127
	13,272,000	Chinatrust Financial Holding Co		11,132,194
	675,000	Chunghwa Telecom Co Ltd ADR		12,757,500
	689,860	Compal Electronics GDR 144A		3,318,227
	4,223,465	Compal Electronics Inc		3,928,491
	7,770,000	E.Sun Financial Holdings Co Ltd		5,206,275
	3,127,000	Fubon Financial Holding Co Ltd		2,793,375
	147,300	Fubon Financial Holding Co Ltd GDR (Registered)		1,318,335
	21,079,000	Sinopac Holdings Co		11,150,976
	646,070	Standard Foods Corp		267,961
	645,300	Taiwan Semiconductor Manufacturing Co Ltd ADR		6,278,769
	41,380,091	United Microelectronics Corp		24,131,936
				85,745,166
		Thailand — 0.2%
	32,380,000	Charoen Pokphand Foods Pcl (Foreign Registered) (a)		4,470,775
	16,559,000	Sino Thai Engineering & Construction Pcl (Foreign Registered) (a)		4,569,920
	3,117,000	Thai Airways International Pcl (Foreign Registered) (a)		3,380,554
				12,421,249
		United Kingdom — 22.6%
	860,900	Amvescap Plc		8,132,216
	513,200	Anglo American Plc		19,118,085
	767,408	Associated British Foods Plc		11,772,408
	764,800	AstraZeneca Plc		35,320,622

See accompanying notes to the financial statements.

13

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	2,216,616	Aviva Plc		30,669,077
	209,372	AWG Plc		4,063,689
	1,421,628	BAA Plc		19,945,432
	7,388,910	BAE Systems Plc		54,390,362
	5,772,417	Barclays Plc		67,612,336
	896,942	BBA Group Plc		4,211,479
	2,436,846	BG Group Plc		28,542,356
	579,847	BHP Billiton Plc		9,744,724
	253,500	BOC Group		6,704,916
	437,062	Boots Group Plc		5,435,015
	8,445,151	BP Plc		93,420,735
	224,100	Brambles Industries Plc		1,619,311
	501,600	British Energy Plc (Deferred Shares) * (a) (c)		—
	804,676	British Sky Broadcasting Plc		7,132,361
	8,501,501	BT Group Plc		30,663,047
	414,370	Bunzl Plc		4,643,386
	229,783	Burberry Group Plc		1,845,139
	2,765,801	Cable & Wireless Plc		5,166,838
	718,800	Cadbury Schweppes Plc		7,301,944
	976,047	Cattle's Plc		5,937,336
	5,022,457	Centrica Plc		25,583,926
	3,297,000	Cobham Group Plc		9,820,567
	2,245,100	Compass Group Plc		8,546,136
	2,036,297	Diageo Plc		31,250,992
	1,981,282	DSG International Plc		5,974,503
	55,095	DX Services Plc		293,676
	260,981	Filtrona Plc		1,373,040
	526,698	FKI Plc		1,121,776
	1,857,345	Gallaher Group Plc		28,780,245
	3,214,499	GlaxoSmithKline Plc		81,645,115
	647,914	GUS Plc		11,923,084
	741,658	Hanson Plc		9,054,038
	1,132,961	Hays Plc		2,938,064
	3,510,547	HBOS Plc		65,377,283

See accompanying notes to the financial statements.

14

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	4,292,773	HSBC Holdings Plc		73,463,729
	1,005,670	ICAP Plc		7,835,362
	755,120	Imperial Chemical Industries Plc		4,453,422
	1,104,418	Imperial Tobacco Group Plc		33,215,285
	177,057	Intercontinental Hotels Group Plc		2,721,419
	1,577,300	International Power Plc *		7,903,198
	3,918,000	ITV Plc		7,451,921
	1,483,269	J Sainsbury Plc		8,328,369
	343,370	Johnson Matthey Plc		8,606,883
	283,803	Kesa Electricals Plc		1,321,759
	1,698,210	Kingfisher Plc		6,792,329
	1,717,091	Ladbrokes Group		11,083,974
	8,637,744	Legal & General Group Plc		19,724,179
	4,319,420	Lloyds TSB Group Plc		41,959,735
	49,738	Lonmin Plc		1,978,508
	1,255,000	Matalan Plc		4,029,434
	1,936,500	Misys Plc		7,967,908
	402,128	Mitchells & Butlers Plc		2,791,724
	1,781,554	National Grid Plc		18,731,706
	180,132	Next Plc		5,210,022
	633,700	Northern Rock Plc		12,519,426
	1,133,000	Old Mutual Plc		3,730,142
	1,205,500	Pearson Plc		14,972,618
	617,017	Peninsular & Oriental Steam Navigation Co		5,583,960
	1,471,606	Photo-Me International Plc		2,535,138
	2,440,417	Prudential Plc		25,818,400
	446,590	Reed Elsevier Plc		4,031,659
	2,581,620	Rentokil Initial Plc		7,109,619
	66,311	Resolution Plc		774,433
	621,169	Reuters Group Plc		4,136,965
	625,836	Rexam Plc		5,565,080
	2,239,511	Royal & Sun Alliance Insurance Group		5,106,431
	3,229,884	Royal Bank of Scotland Group		108,036,173
	525,440	Royal Dutch Shell Group Class A		15,840,699

See accompanying notes to the financial statements.

15

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	489,000	Royal Dutch Shell Plc A Shares		14,701,747
	1,812,597	Royal Dutch Shell Plc B Shares		56,988,935
	1,283,000	Sage Group Plc		6,235,714
	1,534,421	Scottish & Newcastle Plc		13,778,739
	912,260	Scottish & Southern Energy Plc		18,373,922
	1,549,700	Scottish Power Plc		15,852,206
	773,363	Severn Trent Plc		15,637,971
	665,100	Shire Pharmaceuticals Plc		10,389,035
	635,595	Slough Estates Plc		6,786,714
	597,432	Smith (David S.) Holdings Plc		1,862,426
	1,097,400	South African Breweries Plc		21,812,178
	100,000	SSL International Plc		572,749
	282,734	Standard Chartered Plc		7,383,511
	431,000	Stolt-Nielsen SA		13,367,346
	1,154,549	Tesco Plc		6,841,917
	226,228	TI Automotive Ltd Class A * (a)		—
	948,246	Tomkins Plc		5,535,856
	216,525	Travis Perkins Plc		5,634,391
	340,847	Trinity Mirror Plc		3,448,809
	1,182,332	Unilever Plc		12,164,835
	901,112	United Utilities Plc		10,789,769
	377,082	Viridian Group Plc		6,665,194
	27,125,890	Vodafone Group Plc		51,973,298
	280,066	Whitbread Plc		5,200,027
	1,201,036	William Morrison Supermarkets		4,490,510
	652,021	Wolseley Plc		16,175,034
	2,291,250	Wood Group (John) Plc		9,537,683
	746,400	WPP Group Plc		8,668,219
				1,589,275,603
		TOTAL COMMON STOCKS (COST $4,583,105,289)		6,615,698,262

See accompanying notes to the financial statements.

16

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		PREFERRED STOCKS — 0.8%
		Brazil — 0.1%
	602,400	Suzano Bahia Sul Papel e Celulose SA 0.64%		4,102,050
		France — 0.0%
	21,058	Casino Guichard Perrachon SA 4.55%		1,134,059
		Germany — 0.7%
	166,290	Henkel KGaA 1.46%		18,347,002
	579,099	Volkswagen AG 2.82%		29,840,875
				48,187,877
		Italy — 0.0%
	165,933	Fiat SPA *		1,432,432
	76,871	IFI Istituto Finanziario Industries *		1,442,711
				2,875,143
		TOTAL PREFERRED STOCKS (COST $37,377,645)		56,299,129
		RIGHTS AND WARRANTS — 0.0%
		Thailand — 0.0%
	2,759,833	Sino Thai Engineering & Construction Pcl Warrants, Expires 04/18/08 * (a)		92,914
		TOTAL RIGHTS AND WARRANTS (COST $215,949)		92,914

See accompanying notes to the financial statements.

17

GMO Foreign Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — 4.1%
	155,184,995	Boston Global Investment Trust (d)		155,184,995
	131,400,000	Dresdner Bank AG Time Deposit, 4.55%, due 03/01/06		131,400,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $286,584,995)		286,584,995
		TOTAL INVESTMENTS — 99.0% (Cost $4,907,283,878)		6,958,675,300
		Other Assets and Liabilities (net) — 1.0%		67,808,419
		TOTAL NET ASSETS — 100.0%	$	7,026,483,719

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

GDR - Global Depository Receipt

REIT - Real Estate Investment Trust

SDR - Swedish Depository Receipt

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

*  Non-income producing security.

(a)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(b)  All or a portion of this security is out on loan (Note 2).

(c)  Bankrupt issuer.

(d)  All or a portion of this security represents investment of security lending collateral (Note 2).

As of February 28, 2006, 92.2% of the Net Assets of the Fund was valued using fair valued prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

18

GMO Foreign Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $131,918,988 (cost $4,907,283,878) (Note 2)	$	6,958,675,300
Foreign currency, at value (cost $186,443,890) (Note 2)		185,843,992
Receivable for investments sold		64,590,267
Receivable for Fund shares sold		172,759
Dividends and interest receivable		8,824,036
Foreign taxes receivable		1,079,567
Receivable for expenses reimbursed by Manager (Note 3)		286,025
Total assets		7,219,471,946
Liabilities:
Payable for investments purchased		25,631,174
Collateral on securities loaned (Note 2)		155,184,995
Payable for Fund shares repurchased		6,951,204
Due to custodian		227,563
Accrued capital gain and repatriation taxes payable (Note 2)		363,771
Payable to affiliate for (Note 3):
Management fee		3,200,716
Shareholder service fee		788,902
Administration fee – Class M		849
Trustees and Chief Compliance Officer fees		9,465
Payable for 12b-1 fee – Class M		2,184
Accrued expenses		627,404
Total liabilities		192,988,227
Net assets	$	7,026,483,719

See accompanying notes to the financial statements.

19

GMO Foreign Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006 — (Continued)

Net assets consist of:
Paid-in capital	$	4,816,531,795
Distributions in excess of net investment income		(32,007,207	)
Accumulated net realized gain		191,804,969
Net unrealized appreciation		2,050,154,162
	$	7,026,483,719
Net assets attributable to:
Class II shares	$	1,213,447,282
Class III shares	$	3,800,326,348
Class IV shares	$	2,007,037,250
Class M shares	$	5,672,839
Shares outstanding:
Class II		72,668,355
Class III		226,736,663
Class IV		119,704,047
Class M		338,579
Net asset value per share:
Class II	$	16.70
Class III	$	16.76
Class IV	$	16.77
Class M	$	16.75

See accompanying notes to the financial statements.

20

GMO Foreign Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $12,350,000)	$	154,756,056
Interest (including securities lending income of $4,471,442)		9,875,723
Total investment income		164,631,779
Expenses:
Management fee (Note 3)		36,583,320
Shareholder service fee – Class II (Note 3)		2,141,583
Shareholder service fee – Class III (Note 3)		5,887,748
Shareholder service fee – Class IV (Note 3)		1,074,908
12b-1 fee – Class M (Note 3)		10,662
Administration fee – Class M (Note 3)		8,530
Custodian and fund accounting agent fees		2,705,594
Transfer agent fees		77,115
Audit and tax fees		75,389
Legal fees		101,830
Trustees fees and related expenses (Note 3)		114,983
Registration fees		99,815
Miscellaneous		170,352
Total expenses		49,051,829
Fees and expenses reimbursed by Manager (Note 3)		(3,158,864	)
Net expenses		45,892,965
Net investment income (loss)		118,738,814
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of foreign capital gains tax and CPMF tax of $655,984 and $63,864, respectively) (Note 2)		406,930,496
Foreign currency, forward contracts and foreign currency related transactions		(12,335,748	)
Net realized gain (loss)		394,594,748
Change in net unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax accrual of $363,771) (Note 2)		628,142,477
Foreign currency, forward contracts and foreign currency related transactions		(3,093,818	)
Net unrealized gain (loss)		625,048,659
Net realized and unrealized gain (loss)		1,019,643,407
Net increase (decrease) in net assets resulting from operations	$	1,138,382,221

See accompanying notes to the financial statements.

21

GMO Foreign Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	118,738,814		$	90,861,700
Net realized gain (loss)		394,594,748			273,901,994
Change in net unrealized appreciation (depreciation)		625,048,659			548,944,432
Net increase (decrease) in net assets from operations		1,138,382,221			913,708,126
Distributions to shareholders from:
Net investment income
Class II		(21,424,856	)		(20,351,355	)
Class III		(83,505,010	)		(77,653,151	)
Class IV		(28,114,634	)		(27,096,262	)
Class M		(87,274	)		(91,041	)
Total distributions from net investment income		(133,131,774	)		(125,191,809	)
Net realized gains
Class II		(54,410,141	)		(21,380,268	)
Class III		(212,547,994	)		(80,817,446	)
Class IV		(65,893,966	)		(27,299,080	)
Class M		(237,365	)		(75,925	)
Total distributions from net realized gains		(333,089,466	)		(129,572,719	)
		(466,221,240	)		(254,764,528	)
Net share transactions (Note 7):
Class II		293,352,728			(79,831,540	)
Class III		(282,786,170	)		993,325,125
Class IV		697,266,022			104,840,700
Class M		1,658,096			(10,038,565	)
Increase (decrease) in net assets resulting from net share transactions		709,490,676			1,008,295,720
Total increase (decrease) in net assets		1,381,651,657			1,667,239,318
Net assets:
Beginning of period		5,644,832,062			3,977,592,744
End of period (including distributions in excess of net investment income of $32,007,207 and $5,020,274, respectively)	$	7,026,483,719		$	5,644,832,062

See accompanying notes to the financial statements.

22

GMO Foreign Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class II share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.13		$	13.29		$	8.88		$	9.94		$	11.21
Income (loss) from investment operations:
Net investment income (loss)(a)		0.28			0.26			0.17			0.15			0.16
Net realized and unrealized gain (loss)		2.46			2.28			4.46			(1.03	)		(1.20	)
Total from investment operations		2.74			2.54			4.63			(0.88	)		(1.04	)
Less distributions to shareholders:
From net investment income		(0.33	)		(0.34	)		(0.22	)		(0.18	)		(0.11	)
From net realized gains		(0.84	)		(0.36	)		—			—			(0.12	)
Total distributions		(1.17	)		(0.70	)		(0.22	)		(0.18	)		(0.23	)
Net asset value, end of period	$	16.70		$	15.13		$	13.29		$	8.88		$	9.94
Total Return(b)		19.01	%		19.40	%		52.49	%		(9.00	)%		(9.37	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,213,447		$	808,149		$	781,448		$	305,423		$	100,127
Net expenses to average daily net assets		0.82	%		0.82	%		0.82	%		0.82	%		0.82	%
Net investment income to average daily net assets		1.82	%		1.92	%		1.47	%		1.54	%		1.56	%
Portfolio turnover rate		25	%		23	%		25	%		22	%		22	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.05	%		0.06	%		0.08	%		0.09	%		0.09	%

(a)  Calculated using average shares outstanding throughout the period.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

23

GMO Foreign Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.18		$	13.34		$	8.90		$	9.95		$	11.22
Income (loss) from investment operations:
Net investment income (loss)(a)		0.30			0.26			0.19			0.17			0.19
Net realized and unrealized gain (loss)		2.45			2.30			4.47			(1.04	)		(1.23	)
Total from investment operations		2.75			2.56			4.66			(0.87	)		(1.04	)
Less distributions to shareholders:
From net investment income		(0.33	)		(0.36	)		(0.22	)		(0.18	)		(0.11	)
From net realized gains		(0.84	)		(0.36	)		—			—			(0.12	)
Total distributions		(1.17	)		(0.72	)		(0.22	)		(0.18	)		(0.23	)
Net asset value, end of period	$	16.76		$	15.18		$	13.34		$	8.90		$	9.95
Total Return(b)		19.07	%		19.41	%		52.76	%		(8.89	)%		(9.33	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	3,800,326		$	3,663,370		$	2,260,046		$	1,241,562		$	1,049,456
Net expenses to average daily net assets		0.75	%		0.75	%		0.75	%		0.75	%		0.75	%
Net investment income to average daily net assets		1.97	%		1.87	%		1.67	%		1.77	%		1.88	%
Portfolio turnover rate		25	%		23	%		25	%		22	%		22	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.05	%		0.06	%		0.08	%		0.09	%		0.09	%

(a)  Calculated using average shares outstanding throughout the period.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

24

GMO Foreign Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.18		$	13.34		$	8.90		$	9.96		$	11.22
Income (loss) from investment operations:
Net investment income (loss)(a)		0.31			0.28			0.19			0.18			0.20
Net realized and unrealized gain (loss)		2.47			2.28			4.48			(1.05	)		(1.22	)
Total from investment operations		2.78			2.56			4.67			(0.87	)		(1.02	)
Less distributions to shareholders:
From net investment income		(0.35	)		(0.36	)		(0.23	)		(0.19	)		(0.12	)
From net realized gains		(0.84	)		(0.36	)		—			—			(0.12	)
Total distributions		(1.19	)		(0.72	)		(0.23	)		(0.19	)		(0.24	)
Net asset value, end of period	$	16.77		$	15.18		$	13.34		$	8.90		$	9.96
Total Return(b)		19.22	%		19.47	%		52.84	%		(8.92	)%		(9.19	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	2,007,037		$	1,169,805		$	923,221		$	207,858		$	134,357
Net expenses to average daily net assets		0.69	%		0.69	%		0.70	%		0.69	%		0.69	%
Net investment income to average daily net assets		1.98	%		2.00	%		1.65	%		1.79	%		1.97	%
Portfolio turnover rate		25	%		23	%		25	%		22	%		22	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.05	%		0.06	%		0.09	%		0.09	%		0.09	%

(a)  Calculated using average shares outstanding throughout the period.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

25

GMO Foreign Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class M share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002†
Net asset value, beginning of period	$	15.19		$	13.25		$	8.86		$	9.93		$	9.85
Income (loss) from investment operations:
Net investment income (loss)(a)		0.24			0.30			0.14			0.05			0.00	(b)
Net realized and unrealized gain (loss)		2.46			2.21			4.45			(0.93	)		0.08
Total from investment operations		2.70			2.51			4.59			(0.88	)		0.08
Less distributions to shareholders:
From net investment income		(0.30	)		(0.21	)		(0.20	)		(0.19	)		—
From net realized gains		(0.84	)		(0.36	)		—			—			—
Total distributions		(1.14	)		(0.57	)		(0.20	)		(0.19	)		—
Net asset value, end of period	$	16.75		$	15.19		$	13.25		$	8.86		$	9.93
Total Return(c)		18.66	%		19.18	%		52.10	%		(9.09	)%		0.81	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	5,673		$	3,508		$	12,878		$	4,449		$	1
Net expenses to average daily net assets		1.05	%		1.05	%		1.05	%		1.06	%		1.05	%*
Net investment income to average daily net assets		1.56	%		2.24	%		1.23	%		0.55	%		0.35	%*
Portfolio turnover rate		25	%		23	%		25	%		22	%		22	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.05	%		0.06	%		0.08	%		0.10	%		0.09	%*

(a)  Calculated using average shares outstanding throughout the period.

(b)  Net investment income earned was less than $.01 per share.

(c)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Period from January 25, 2002 (commencement of operations) to February 28, 2002.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2002.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

26

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Foreign Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in equity securities of non-U.S. issuers. The Fund's benchmark is the MSCI EAFE Index (Europe, Australasia, and Far East).

Throughout the year ended February 28, 2006, the Fund had four classes of shares outstanding: Class II, Class III, Class IV, and Class M. Class M shares bear an administration fee and a 12b-1 fee while classes II, III, and IV bear a shareholder service fee (See Note 3). The principal economic difference among the classes of shares is the type and level of fees borne by the classes. Eligibility for and automatic conversion among the various classes of shares, except Class M, is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Trust's prospectus.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many

27

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after the close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or

28

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts. Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for

29

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $131,918,988, collateralized by cash in the amount of $155,184,995, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund has recorded a deferred tax liability in respect of unrealized appreciation (depreciation) on foreign securities of $363,771 for potential capital gains and repatriation taxes as of February 28, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized gain (loss) in the Statement of Operations. For the year ended February 28, 2006, the Fund incurred $655,984 in capital gain taxes which is included in net realized gain (loss) in the Statement of Operations.

The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to/from the Brazilian

30

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

market. The CPMF tax has been included in the net realized gain (loss) on investments throughout the period. For the year ended February 28, 2006, the Fund incurred $63,864 in CPMF tax which is included in net realized gain in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $156,919,958 and $125,191,809, respectively and long-term capital gains – $309,301,282 and $129,572,719, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $46,993,835 and $169,059,485 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	4,963,445,145	$	2,048,520,459	$	(53,290,304	)	$	1,995,230,155

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Distributions In Excess of Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(12,593,973	)	$	12,593,973	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities

31

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata among the classes of shares of the Fund based on the relative net assets of each class. Shareholder service, 12b-1, and administration fees, which are directly attributable to a class of shares, are charged to that class's operations.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.60% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.22% for Class II shares, 0.15% for Class III shares, and 0.09% for Class IV shares.

Class M shares of the Fund pay GMO an administration fee monthly at the annual rate of 0.20% of average daily Class M net assets for support services provided to Class M shareholders.

Fund Distributors, Inc. (the "Distributor") serves as the Fund's distributor. Pursuant to a Rule 12b-1 distribution and service plan adopted by the Fund, Class M shares of the Fund may pay a fee, at the annual rate of 1.00% of average daily Class M net assets for any activities or expenses primarily intended to result in the sale of Class M shares of the Fund and/or the provision of certain other services incidental thereto. The Trustees currently limit payments on Class M shares to 0.25% of the Fund's average daily net asset value attributable to its Class M shares. This fee may be spent by the Distributor on personal services rendered to Class M shareholders of the Fund and/or maintenance of Class M shareholder accounts.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees (Class II, Class III

32

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

and Class IV only), administration fees (Class M only), 12b-1 fees (Class M only), fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.60% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $66,881 and $39,271, respectively. No remuneration is paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $1,659,162,169 and $1,470,822,316, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Related parties

As of February 28, 2006, less than 0.1% of the Fund's shares were held by fourteen related parties comprised of certain GMO employee accounts, and 0.6% of the Fund's shares were held by accounts for which the Manager has investment discretion.

33

GMO Foreign Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class II:	Shares			Amount			Shares			Amount
Shares sold		20,435,753		$	315,944,888			9,864,921		$	135,159,548
Shares issued to shareholders in reinvestment of distributions		4,621,131			70,186,396			2,677,947			39,124,025
Shares repurchased		(5,804,846	)		(92,778,556	)		(17,908,586	)		(254,115,113	)
Net increase (decrease)		19,252,038		$	293,352,728			(5,365,718	)	$	(79,831,540	)
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		54,877,217		$	816,011,668			73,613,892		$	1,012,049,726
Shares issued to shareholders in reinvestment of distributions		16,054,197			244,024,637			8,609,335			126,389,249
Shares repurchased		(85,541,651	)		(1,342,822,475	)		(10,356,779	)		(145,113,850	)
Net increase (decrease)		(14,610,237	)	$	(282,786,170	)		71,866,448		$	993,325,125
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		49,623,322		$	800,078,517			6,486,623		$	85,105,954
Shares issued to shareholders in reinvestment of distributions		5,715,726			87,337,578			3,345,917			49,084,746
Shares repurchased		(12,672,320	)		(190,150,073	)		(2,003,741	)		(29,350,000	)
Net increase (decrease)		42,666,728		$	697,266,022			7,828,799		$	104,840,700
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class M:	Shares			Amount			Shares			Amount
Shares sold		129,243		$	1,984,452			304,303		$	4,053,057
Shares issued to shareholders in reinvestment of distributions		21,242			324,639			11,731			166,966
Shares repurchased		(42,894	)		(650,995	)		(1,056,646	)		(14,258,588	)
Net increase (decrease)		107,591		$	1,658,096			(740,612	)	$	(10,038,565	)

34

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Foreign Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Foreign Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

35

GMO Foreign Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, shareholder service fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

36

GMO Foreign Fund

(A Series of GMO Trust)

Fund Expenses — (Continued)
February 28, 2006 (Unaudited)

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class II
1) Actual		0.82	%	$	1,000.00	$	1,151.60	$	4.37
2) Hypothetical		0.82	%	$	1,000.00	$	1,020.73	$	4.11
Class III
1) Actual		0.75	%	$	1,000.00	$	1,152.20	$	4.00
2) Hypothetical		0.75	%	$	1,000.00	$	1,021.08	$	3.76
Class IV
1) Actual		0.69	%	$	1,000.00	$	1,152.80	$	3.68
2) Hypothetical		0.69	%	$	1,000.00	$	1,021.37	$	3.46
Class M
1) Actual		1.05	%	$	1,000.00	$	1,150.10	$	5.60
2) Hypothetical		1.05	%	$	1,000.00	$	1,019.59	$	5.26

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

37

GMO Foreign Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $309,301,282 from long-term capital gains.

During the year ended February 28, 2006, the Fund paid foreign taxes of $13,005,984 and recognized foreign source income of $167,104,702.

For taxable, non-corporate shareholders, 75.57% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $4,268,861 and $17,541,463, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

38

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

39

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

40

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager(2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

41

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

42

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Currency Hedged International Bond Fund returned +6.0% for the fiscal year ended February 28, 2006, as compared to +6.0% for the JPMorgan Non-U.S. Government Ex-Japan Bond Index (Hedged). The Fund's exposure to various issues is achieved directly and indirectly through its investment in certain underlying GMO mutual funds, including the GMO Emerging Country Debt Fund, the GMO World Opportunity Overlay Fund, and the GMO Short-Duration Collateral Fund.

The Fund was even with the benchmark during the fiscal year. Interest rate strategy underperformance offset value added from currency selection, emerging debt exposure, and cash management.

Global bond yields fell across the board during the first half of 2005, although they began heading higher in the third quarter of 2005 and carrying into the New Year. Major, sustained bond market positions included overweights in Sweden and Canada and underweights in the U.K. and Switzerland. The Fund had been overweight Australia early in 2005 and moved to an underweight position later in the year. U.S., Canada, Australia, and Euro-area positions were the largest positive contributors. Underweights in the U.K. and Switzerland and a recent overweight in Japan detracted from performance.

The U.S. dollar gained versus most currencies in 2005, began weakening in December, then stabilized in February. For much of 2005 the Fund had been overweight relatively higher yielding currencies like Australian dollars, New Zealand dollars, and British sterling and underweight lower yielding currencies such as Japanese yen and euro. In general, the underweights added value, while the overweights did not.

Emerging country debt exposure added value as did cash management strategies.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  JPMorgan Non-U.S. ex-Japan Government Bond Index (Hedged) + represents the JPMorgan Non-U.S. Government Bond Index (Hedged) prior to 12/31/03 and the JPMorgan Non-U.S. ex-Japan Government Bond Index (Hedged) thereafter.

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		95.7	%
Short-Term Investment(s)		2.5
Mutual Funds		0.9
Put Options Purchased		0.2
Forward Currency Contracts		0.2
Call Options Purchased		0.2
Loan Assignments		0.2
Loan Participations		0.2
Swaps		0.1
Forward Start Options		0.0
Promissory Notes		0.0
Rights and Warrants		0.0
Written Options		(0.1	)
Futures		(0.5	)
Reverse Repurchase Agreements		(0.5	)
Other		0.9
		100.0	%
Country Summary**	% of Investments
Euro Region***		89.5	%
Canada		20.7
Sweden		20.1
Japan		3.3
United Kingdom		(2.7	)
Switzerland		(7.7	)
United States		(10.4	)
Australia		(12.8	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate country exposure. The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes the value of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, Netherlands and Spain.

1

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value / Principal Amount		Description	Value ($)
		DEBT OBLIGATION(S) — 2.5%
		United States — 2.5%
		U.S. Government
	18,007,800	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (a) (b)		19,051,690
	5,000,000	U.S. Treasury Note, 3.75%, due 03/31/07 (a)		4,946,875
		Total United States		23,998,565
		TOTAL DEBT OBLIGATION(S) (COST $24,257,432)		23,998,565
		CALL OPTIONS PURCHASED — 0.1%
		Currency Options — 0.1%
	49,200,000	AUD Call/USD Put, Expires 06/07/06, Strike 0.744		572,550
		TOTAL CALL OPTIONS PURCHASED (COST $909,771)		572,550
		PUT OPTIONS PURCHASED — 0.2%
		Currency Options — 0.2%
	5,500,000,000	USD Put/JPY Call, Expires 04/04/06, Strike 116.30		750,695
	5,600,000,000	USD Put/JPY Call, Expires 04/18/06, Strike 118.50		1,509,200
				2,259,895
		TOTAL PUT OPTIONS PURCHASED (COST $1,840,797)		2,259,895
		FORWARD START OPTIONS — 0.0%
		Currency Options — 0.0%
	6,740,000,000	JPY Put/USD Call, Expires 09/18/06, Strike TBD		26,016
		TOTAL FORWARD START OPTIONS (COST $0)		26,016

See accompanying notes to the financial statements.

2

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		MUTUAL FUNDS — 96.7%
		Affiliated Issuer(s) — 96.7%
	2,568,071	GMO Emerging Country Debt Fund, Class III		29,019,205
	27,410,352	GMO Short-Duration Collateral Fund		701,705,018
	5,496	GMO Special Purpose Holding Fund		45,229
	7,590,061	GMO World Opportunity Overlay Fund		191,497,233
		TOTAL MUTUAL FUNDS (COST $916,970,380)		922,266,685
		TOTAL INVESTMENTS — 99.5% (Cost $943,978,380)		949,123,711
		Other Assets and Liabilities (net) — 0.5%		4,770,734
		TOTAL NET ASSETS — 100.0%	$	953,894,445

See accompanying notes to the financial statements.

3

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward Currency Contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
3/21/06	AUD		172,000,000	$	127,650,751	$	(561,127	)
4/18/06	CHF		48,700,000		37,295,736		(368,611	)
4/11/06	GBP		31,900,000		55,967,670		273,344
3/07/06	JPY		11,790,000,000		101,917,614		133,414
5/02/06	NZD		79,800,000		52,613,736		176,796
						$	(346,184	)
Sales
3/21/06	AUD		137,000,000	$	101,675,308	$	1,121,654
3/28/06	CAD		41,900,000		36,892,574		(575,250	)
4/18/06	CHF		68,500,000		52,459,095		182,576
4/25/06	EUR		95,700,000		114,435,260		(75,775	)
4/11/06	GBP		21,000,000		36,843,920		449,980
3/07/06	JPY		33,920,000,000		293,218,445		2,297,113
						$	3,400,298

Forward Cross Currency Contracts

Settlement Date	Deliver/Units of Currency		Receive/In Exchange For		Net Unrealized Appreciation (Depreciation)
3/14/06	EUR	59,900,000	NOK	475,324,470	$	(962,787	)
4/04/06	EUR	47,100,000	SEK	435,296,316		(1,111,431	)
4/04/06	SEK	655,048,643	EUR	70,100,000		743,719
3/14/06	NOK	253,343,575	EUR	31,500,000		4,798
					$	(1,325,701	)

See accompanying notes to the financial statements.

4

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	1,940	Canadian Government Bond 10 Yr.	June 2006	$	192,506,313	$	(270,594	)
	1,821	EURO BOBL	March 2006		243,413,384		(1,852,556	)
	3,794	EURO Bund	March 2006		544,503,191		(2,890,382	)
	21	Japanese Government Bond 10 Yr. (TSE)	March 2006		24,670,985		(17,938	)
						$	(5,031,470	)
	Sales
	537	Australian Government Bond 10 Yr.	March 2006	$	42,033,080	$	216,769
	1,059	Australian Government Bond 3 Yr.	March 2006		80,226,306		141,459
	1,500	Federal Fund 30 day	March 2006		596,610,225		(36,414	)
	334	U.S. Long Bond	June 2006		37,773,312		46,237
	184	U.S. Treasury Note 10 Yr.	June 2006		19,854,750		15,794
	1,029	U.S. Treasury Note 5 Yr.	June 2006		108,237,938		(199,756	)
	146	UK Gilt Long Bond	June 2006		29,044,142		122,489
						$	306,578

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

See accompanying notes to the financial statements.

5

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements

Interest Rate Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	50,000,000	SEK	3/17/2008	Deutsche Bank AG	Receive		2.90	%	3 Month SEK STIBOR	$	4,554
	188,000,000	SEK	3/17/2008	JP Morgan Chase Bank	Receive		2.90	%	3 Month SEK STIBOR		17,218
	179,000,000	SEK	3/15/2011	Citigroup	Receive		3.40	%	3 Month SEK STIBOR		4,971
	83,000,000	SEK	3/15/2011	Deutsche Bank AG	Receive		3.40	%	3 Month SEK STIBOR		2,305
	48,000,000	SEK	3/15/2011	JP Morgan Chase Bank	Receive		3.40	%	3 Month SEK STIBOR		1,333
	54,000,000	CHF	3/15/2011	Deutsche Bank AG	(Pay)		2.25	%	6 Month CHF LIBOR		32,501
	226,000,000	SEK	3/15/2013	Deutsche Bank AG	Receive		3.50	%	3 Month SEK STIBOR		(63,034	)
	161,000,000	SEK	3/15/2013	JP Morgan Chase Bank	Receive		3.50	%	3 Month SEK STIBOR		(44,905	)
	22,500,000	CHF	3/15/2013	JP Morgan Chase Bank	(Pay)		2.40	%	6 Month CHF LIBOR		(945	)
	133,000,000	SEK	3/15/2016	Deutsche Bank AG	Receive		3.75	%	3 Month SEK STIBOR		129,074
	162,000,000	SEK	3/15/2016	JP Morgan Chase Bank	Receive		3.75	%	3 Month SEK STIBOR		157,217
	26,600,000	CHF	3/15/2016	Deutsche Bank AG	(Pay)		2.50	%	6 Month CHF LIBOR		66,196
										$	306,485

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	3,000,000	USD	7/21/2006	JP Morgan Chase Bank	1 month	Return on JP Morgan
					LIBOR	Non - U.S. Hedged Traded
						Total Return Government
						Bond Index	$	(8,172	)

Notes to Schedule of Investments:

(a)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

(b)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

Currency Abbreviations:

AUD - Australian Dollar	JPY - Japanese Yen
CAD - Canadian Dollar	NOK - Norwegian Krone
CHF - Swiss Franc	NZD - New Zealand Dollar
EUR - Euro	SEK - Swedish Krona
GBP - British Pound	USD - United States Dollar

See accompanying notes to the financial statements.

6

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $27,008,000) (Note 2)	$	26,857,026
Investments in affiliated issuers, at value (cost $916,970,380) (Notes 2 and 8)		922,266,685
Cash		951,928
Interest receivable		170,971
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		5,383,394
Receivable for variation margin on open futures contracts (Note 2)		2,045,424
Receivable for open swap contracts (Note 2)		415,369
Receivable for expenses reimbursed by Manager (Note 3)		43,053
Total assets		958,133,850
Liabilities:
Foreign cash due to custodian		41,516
Payable to affiliate for (Note 3):
Management fee		183,194
Shareholder service fee		109,916
Trustees and Chief Compliance Officer fees		1,256
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		3,654,981
Payable for open swap contracts (Note 2)		117,056
Accrued expenses		131,486
Total liabilities		4,239,405
Net assets	$	953,894,445
Net assets consist of:
Paid-in capital	$	967,417,699
Distributions in excess of net investment income		(21,395,014	)
Accumulated net realized gain		4,635,968
Net unrealized appreciation		3,235,792
	$	953,894,445
Net assets attributable to:
Class III shares	$	953,894,445
Shares outstanding:
Class III		105,561,416
Net asset value per share:
Class III	$	9.04

See accompanying notes to the financial statements.

7

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	23,599,347
Interest (including securities lending income of $5)		1,048,196
Total investment income		24,647,543
Expenses:
Management fee (Note 3)		2,683,031
Shareholder service fee – Class III (Note 3)		1,609,819
Custodian, fund accounting agent and transfer agent fees		379,015
Audit and tax fees		66,303
Legal fees		19,625
Trustees fees and related expenses (Note 3)		19,822
Registration fees		15,511
Miscellaneous		20,050
Total expenses		4,813,176
Fees and expenses reimbursed by Manager (Note 3)		(489,312	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(132,831	)
Shareholder service fee waived – Class III (Note 3)		(48,507	)
Net expenses		4,142,526
Net investment income (loss)		20,505,017
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		(9,122,372	)
Investments in affiliated issuers		7,695,673
Realized gains distributions from affiliated issuers (Note 8)		1,531,793
Closed futures contracts		37,987,936
Closed swap contracts		(3,496,846	)
Foreign currency, forward contracts and foreign currency related transactions		11,770,959
Net realized gain (loss)		46,367,143
Change in net unrealized appreciation (depreciation) on:
Investments		(5,873,634	)
Open futures contracts		(2,386,718	)
Open swap contracts		(983,721	)
Foreign currency, forward contracts and foreign currency related transactions		5,658,890
Net unrealized gain (loss)		(3,585,183	)
Net realized and unrealized gain (loss)		42,781,960
Net increase (decrease) in net assets resulting from operations	$	63,286,977

See accompanying notes to the financial statements.

8

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	20,505,017		$	9,829,598
Net realized gain (loss)		46,367,143			42,243,920
Change in net unrealized appreciation (depreciation)		(3,585,183	)		1,697,459
Net increase (decrease) in net assets from operations		63,286,977			53,770,977
Distributions to shareholders from:
Net investment income
Class III		(105,683,069	)		(14,187,423	)
Net realized gains
Class III		(12,456,548	)		—
		(118,139,617	)		(14,187,423	)
Net share transactions (Note 7):
Class III		(6,261,661	)		752,552,732
Total increase (decrease) in net assets		(61,114,301	)		792,136,286
Net assets:
Beginning of period		1,015,008,746			222,872,460
End of period (including distributions in excess of net investment income of $21,395,014 and accumulated undistributed net investment income of $33,215,127, respectively)	$	953,894,445		$	1,015,008,746

See accompanying notes to the financial statements.

9

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)


Financial Highlights

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	9.59		$	9.16		$	8.85		$	9.04		$	9.72
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.18			0.14			0.06			0.09			0.50
Net realized and unrealized gain (loss)		0.39			0.44			0.76			0.32			(0.13	)
Total from investment operations		0.57			0.58			0.82			0.41			0.37
Less distributions to shareholders:
From net investment income		(1.00	)(d)		(0.15	)		(0.51	)		(0.60	)		(1.05	)
From net realized gains		(0.12	)		—			—			—			—
Total distributions		(1.12	)		(0.15	)		(0.51	)		(0.60	)		(1.05	)
Net asset value, end of period	$	9.04		$	9.59		$	9.16		$	8.85		$	9.04
Total Return(b)		6.01	%		6.35	%		9.53	%		4.81	%		4.21	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	953,894		$	1,015,009		$	222,872		$	20,219		$	17,932
Net expenses to average daily net assets(c)		0.39	%		0.39	%		0.38	%		0.40	%		0.38	%
Net investment income to average daily net assets(a)		1.91	%		1.51	%		0.68	%		0.97	%		5.45	%
Portfolio turnover rate		49	%		44	%		36	%		66	%		44	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.09	%		0.24	%		0.51	%		0.54	%

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(d)  Distributions from net investment income include amounts (approximately $0.49 per share) from foreign currency transactions which are treated as realized capital gain for book purposes.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

10

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Currency Hedged International Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investments in foreign bond and currency markets (excluding Japan), primarily by investing in other funds of the Trust ("underlying fund(s)", primarily GMO Short-Duration Collateral Fund, GMO World Opportunity Overlay Fund, and GMO Emerging Country Debt Fund, and "synthetic" bonds (created by the Manager by combining a futures contract, swap contract, or option, on a fixed income security with cash, a cash equivalent, or another fixed income security). The Fund's benchmark is the J.P. Morgan Non-U.S. Government Bond Index (Hedged) (ex-Japan).

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request by calling (617) 346-7646 (collect). Shares of GMO Special Purpose Holding Fund, GMO World Opportunity Overlay Fund and GMO Short-Duration Collateral Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

11

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source). Securities held by the underlying fund(s) may be valued by independent pricing services which use prices provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics.

Certain investments in securities held by the Fund or the underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 29.6% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $34,276 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $190,801 in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market

12

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to

13

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Loan agreements

The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the "lender") that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. As of February 28, 2006, the Fund did not enter into any loan agreements.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease

14

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

15

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had no securities on loan.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

16

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $110,053,914 and $14,187,423, respectively and long-term capital gains – $8,085,703 and $0, respectively.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $1,788,009 expiring in 2009. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital and currency losses of $3,695,106 and $7,358,833, respectively.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	945,812,615	$	4,063,720	$	(752,624	)	$	3,311,096

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions and derivative contract transactions. The financial highlights exclude these adjustments.

Distributions In Excess Of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	30,567,911	$	(31,526,860	)	$	958,949

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

17

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities 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 U.S. and developed foreign markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.25% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. The Fund may invest in GMO Emerging Country Debt Fund ("ECDF"). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in ECDF. The Fund does not incur any indirect shareholder service fees as a result of the Fund's investment in GMO Short-Duration Collateral Fund ("SDCF"), GMO Special Purpose Holding Fund ("SPHF") and GMO World Opportunity Overlay Fund ("Overlay Fund").

18

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total direct annual operating expenses plus the amount of indirect fees and operating expenses incurred through its investment in underlying fund(s) exceed 0.25% of the average daily net assets, with such indirect expenses subject to a maximum total reimbursement to the Fund equal to 0.25% of the Fund's average daily net assets. For purposes of this calculation, the Fund's total direct annual operating expenses excludes shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees) ("Trustees fees"), and the following investment-related costs: brokerage commissions, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes. Additionally, the indirect fees and operating expenses incurred through investment in underlying fund(s) exclude investment-related expenses and Trustees fees. Through June 29, 2004, the indirect Trustees fees incurred by the Fund through its investment in ECDF were not excluded.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.016	%		0.005	%		0.016	%		0.037	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $12,084 and $6,589, respectively. No remuneration is paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 were as follows:

	Purchases		Sales
U.S. Government securities	$	5,000,000	$	—
Investments (non-U.S. Government securities)		511,855,019		576,621,810

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's

19

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related party

As of February 28, 2006, 48.6% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. One of the shareholders is another fund of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by one related party comprised of a certain GMO employee account, and 98.7% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		28,576,178		$	279,566,401			84,283,097		$	778,377,613
Shares issued to shareholders in reinvestment of distributions		11,745,209			108,299,908			1,290,356			12,276,816
Shares repurchased		(40,553,773	)		(394,127,970	)		(4,122,081	)		(38,101,697	)
Net increase (decrease)		(232,386	)	$	(6,261,661	)		81,451,372		$	752,552,732

20

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Country Debt Fund, Class III	$	30,230,210	$	9,569,887	$	12,000,000	$	3,089,677	$	1,480,212	$	29,019,205
GMO Short-Duration Collateral Fund		746,800,324		420,159,670		474,650,000		20,509,670		—		701,705,018
GMO Special Purpose Holding Fund		85,237		—		—		—		51,581		45,229	*
GMO World Opportunity Overlay Fund		201,962,112		69,650,000		80,050,000		—		—		191,497,233
Totals	$	979,077,883	$	499,379,557	$	566,700,000	$	23,599,347	$	1,531,793	$	922,266,685

*  After the effect of return of capital distributions of $30,296 and $4,817 on April 5, 2005 and February 21, 2006, respectively.

21

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Currency Hedged International Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Currency Hedged International Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

22

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetic al account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.43	%	$	1,000.00	$	1,012.20	$	2.15
2) Hypothetical		0.43	%	$	1,000.00	$	1,022.66	$	2.16

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

23

GMO Currency Hedged International Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $8,085,703 from long-term capital gains.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $13,539,452 and $1,591,907, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

24

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

25

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee3.
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

26

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, VanOtterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

27

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003– present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

28

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Active Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Foreign Small Companies Fund returned +22.3% for the fiscal year ended February 28, 2006, as compared to +23.8% for the S&P/Citigroup EMI World ex-U.S. Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in equity securities of small companies in countries outside of the U.S. throughout the fiscal year.

Fair value pricing of the Fund added 0.1% to returns versus the benchmark, which utilizes local close prices. Using the local close, which we do for attribution, the Fund returned +22.2% for the fiscal year.

Stock selection subtracted 1.2% from returns for the fiscal year. Stock selection underperformed in Canada and France.

Country selection subtracted 0.4% from performance for the fiscal year. The largest negative impacts came from an overweight position in Ireland and an underweight position in Japan, each of which subtracted 0.3% from returns. On the positive side, an overweight position in Norway added 0.5% to returns.

The GMO Foreign Small Companies Fund is currently closed to new investment.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund commenced operations on June 30, 2000 subsequent to a transaction involving, in essence, the reorganization of the GMO Small Cap Active Pool of the Common Fund for Non-Profit Organizations (the "GMO Pool") as the GMO Foreign Small Companies Fund. All information relating to the time periods prior to June 30, 2000 relates to the GMO Pool. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class IV will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		92.3	%
Short-Term Investment(s)		8.0
Preferred Stocks		1.3
Rights and Warrants		0.0
Other		(1.6	)
		100.0	%
Country Summary	% of Equity Investments
United Kingdom		21.0	%
Japan		18.6
Germany		11.0
France		5.6
Finland		5.0
Switzerland		4.7
Italy		4.2
South Korea		4.2
Brazil		3.7
Hong Kong		2.5
Norway		2.3
Ireland		2.3
Spain		2.2
Sweden		2.0
Taiwan		1.9
Austria		1.2
Canada		1.2
Netherlands		1.2
India		1.1
Singapore		0.9
Belgium		0.8
Mexico		0.6
Australia		0.5
Thailand		0.4
Chile		0.4
Croatia		0.2
Egypt		0.1
Malaysia		0.1
Philippines		0.1
New Zealand		0.0
		100.0	%

1

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Industrials		24.0	%
Consumer Discretionary		22.0
Financials		20.1
Information Technology		8.7
Materials		8.1
Consumer Staples		7.6
Utilities		3.1
Energy		2.7
Health Care		2.7
Telecommunication Services		1.0
		100.0	%

2

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 92.3%
		Australia — 0.5%
	491,866	Brazin Ltd		644,706
	160,827	Colorado Group Ltd		440,244
	421,897	Consolidated Rutile Ltd		242,180
	658,100	Gunns Ltd		1,412,558
	732,869	McGuigan Simeon Wines Ltd		1,676,053
	95,000	Multiplex Group		222,659
	438,800	PMP Ltd *		528,625
				5,167,025
		Austria — 1.2%
	23,000	Boehler Uddeholm (Bearer)		4,314,848
	20,677	Flughafen Wien AG		1,667,627
	64,800	OMV AG		4,018,847
	35,000	Wienerberger AG		1,622,744
				11,624,066
		Belgium — 0.8%
	102,000	AGFA-Gevaert NV		2,029,334
	33,278	Bekaert NV		3,418,131
	26,964	Omega Pharma SA		1,460,273
	5,006	Unibra SA *		643,800
				7,551,538
		Brazil — 3.3%
	81,600	All America Latina Logistica		4,476,760
	420,000	Companhia de Concessoes Rodoviarias		3,965,623
	1,080,000	Iochpe Maxion SA		8,620,673
	300,000	Localiza Rent A Car		5,222,981
	300,000	Porto Seguro SA		4,409,230
	273,800	Tam SA		6,182,581
	20,000	Universo Online SA *		147,869
				33,025,717

See accompanying notes to the financial statements.

3

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Canada — 1.1%
	222,000	Canfor Corp *		2,637,160
	90,600	KAP Resources Ltd * (a)		797
	319,800	Linamar Corp		3,728,585
	681,200	QLT Inc *		4,855,225
				11,221,767
		Chile — 0.4%
	77,300	Compania Cervecerias Unidas ADR		2,102,560
	74,000	Inversiones Aguas Metropolitanas SA ADR 144A *		1,435,600
				3,538,160
		Croatia — 0.2%
	160,000	Pliva D.D.		2,264,000
		Egypt — 0.1%
	30,000	Lecico Egypt SAE GDR		318,900
	95,000	Lecico Egypt SAE GDR 144A		1,009,850
				1,328,750
		Finland — 4.6%
	302,150	Jaakko Poyry Group Oyj		12,590,727
	430,200	Marimekko Oyj (b)		9,028,419
	331,000	Ramirent Oyj		10,113,374
	1,145,418	Rapala VMC Oyj (b)		8,931,154
	222,800	Uponor Oyj		5,830,581
				46,494,255
		France — 5.2%
	3,700	Casino Guichard-Perrachon SA		230,632
	23,271	Christian Dalloz		2,532,004
	51,420	Clarins (b)		3,074,133
	9,407	Credit National		1,991,394
	7,250	Damart SA		1,725,843
	6,450	Damartex SA		246,043

See accompanying notes to the financial statements.

4

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		France — continued
	38,600	Essilor International SA		3,325,872
	39,877	Eurazeo		4,315,747
	142,100	Fimatex *(b)		1,543,617
	6,300	Gaumont SA		357,138
	48,200	GFI Industries SA		3,198,479
	31,108	Groupe Partouche *		556,080
	9,000	Guyenne et Gascogne SA		916,621
	17,700	Klepierre		2,042,458
	75,000	M6-Metropole Television		2,255,599
	53,500	Michelin SA Class B		3,263,615
	51,900	Peugeot SA		3,025,634
	1,351	SAGA		69,253
	30,400	Schneider Electric SA		3,106,360
	1,242,600	SCOR SA (b)		2,986,160
	20,350	Seb SA		2,192,678
	30,001	Sequana Capital		843,667
	21,000	Thales SA		956,791
	45,472	Virbac SA		2,266,001
	87,141	Zodiac SA		5,469,864
				52,491,683
		Germany — 9.4%
	156,780	Aareal Bank AG * (b)		6,942,249
	35,666	Adidas-Salomon AG		6,970,130
	18,600	Beiersdorf AG (Bearer)		2,531,966
	130,900	Commerzbank AG		4,782,869
	15,900	Continental AG		1,634,585
	197,400	Depfa Bank Plc		3,291,358
	300,200	Deutsche Lufthansa AG (Registered)		4,946,243
	219,400	Eurocastle Investment		8,419,190
	19,517	Fraport AG		1,491,323
	85,747	Hannover Rueckversicherungs AG (Registered) (b)		3,255,062
	102,220	Heidelberger Druckmaschinen		4,388,855
	118,903	Medion AG (b)		1,738,097

See accompanying notes to the financial statements.

5

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — continued
	263,300	Metallgesellschaft *		4,308,724
	55,100	Metro AG		2,935,010
	83,400	Mobilcom AG		2,196,352
	289,780	MTU Aero Engines Holding *		9,843,470
	200,000	Praktiker Bau-Und Heim *		5,757,843
	197,400	Techem AG (b)		8,604,166
	193,100	Thielert AG *		4,339,167
	74,900	TUI AG (b)		1,479,284
	67,600	Vossloh AG (b)		3,512,734
				93,368,677
		Hong Kong — 2.3%
	315,000	ASM Pacific Technology		1,754,314
	2,400,000	Chinese Estates Holdings Ltd		2,642,633
	4,200,000	CITIC International Financial		1,901,339
	1,527,000	Hang Lung Properties Ltd		2,732,928
	1,929,000	Hopewell Highway Infrastructure Ltd		1,527,480
	798,643	Kerry Properties Ltd		2,543,368
	3,020,000	Nine Dragons Paper Holdings *		1,323,554
	2,278,000	Pacific Basin Shipping Ltd		1,124,421
	6,000,000	Samson Holding Ltd *		3,480,323
	1,099,500	Techtronic Industries Co		1,904,294
	250,000	Wing Lung Bank		2,207,721
				23,142,375
		India — 1.0%
	641,984	Arvind Mills Ltd		1,429,044
	451,600	India Cements Ltd *		1,430,852
	313,117	Jain Irrigation Systems Ltd *		1,583,389
	557,450	Mirc Electronics Ltd		245,118
	95,000	Rajesh Exports Ltd		406,025
	132,806	Raymond Ltd		1,308,048
	563,756	Sakthi Sugars Ltd *		2,153,362
	900,000	Welspun Gujarat Stahl Ltd *		1,858,622
				10,414,460

See accompanying notes to the financial statements.

6

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Ireland — 2.1%
	196,346	Anglo Irish Bank Corp Plc		3,220,745
	124,210	CRH Plc		4,074,300
	55,000	FBD Holdings Plc		2,667,788
	248,000	Grafton Group Plc *		3,045,898
	222,113	Greencore Group		910,396
	379,440	IFG Group Plc		850,562
	124,000	Irish Continental Group Plc		1,699,669
	212,000	Irish Life & Permanent Plc		4,671,929
				21,141,287
		Italy — 3.9%
	255,000	Arnoldo Mondadori Editore SPA (b)		2,410,939
	621,425	Banca Intesa SPA		3,671,631
	187,500	Banche Popolari Unite Scrl		4,709,428
	157,000	Brembo Filatura del Brembo SPA		1,400,404
	179,200	Buzzi Unicem SPA		3,707,706
	436,100	Campari		3,492,779
	232,700	Finmeccanica SPA		5,091,874
	307,716	Grouppo Editoriale L'Espresso (b)		1,579,159
	978,700	IFIL SPA		5,015,912
	300,300	Indesit Company SPA (b)		3,757,259
	30,000	Pagnossin SPA * (b)		31,117
	600,000	Snam Rete Gas SPA		2,634,660
	909,364	Telecom Italia Di RISP		2,089,403
				39,592,271
		Japan — 17.4%
	138,000	Akebono Brake Industry Co (b)		1,416,369
	72	Arisawa Manufacturing Co Ltd		1,450
	274,500	Asahi Soft Drinks Co Ltd		3,285,330
	80,000	Bank of Iwate Ltd (The)		5,218,881
	385,000	Bank of Yokohama		3,104,666
	255,000	Brother Industries Ltd		2,736,334
	115,000	Daikin Industries Ltd		3,826,625

See accompanying notes to the financial statements.

7

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	210,000	Daimaru Inc		2,824,058
	106,000	Dainippon Screen Manufacturing Co Ltd (b)		983,072
	335,000	Daito Trust Construction Co Ltd		15,687,495
	43,000	Diamond Lease Co Ltd		1,956,521
	180,000	Heiwado Co Ltd		3,574,240
	360,000	Hitachi High Technologies Corp		9,404,809
	130,000	Hitachi Kokusai Electric		1,578,369
	390,000	Isuzu Motors Ltd (b)		1,342,946
	600,000	J Oil Mills Inc (b)		3,397,059
	703,000	JACCS Co Ltd		6,945,745
	600	Japan Retail Fund Investment Corp		4,716,639
	1,350,000	Kawasaki Heavy Industries Ltd (b)		4,624,409
	950,000	Kobe Steel Ltd		3,610,264
	1,080,000	Marubeni Corp		5,356,449
	500,000	NHK Spring Co Ltd		5,931,953
	450,000	Nippon Electric Glass Co Ltd		10,832,776
	679,500	Nippon Mining Holdings Inc		5,074,390
	106,000	Okasan Securities Co Ltd		1,107,209
	300	Orix JREIT Inc (b)		1,991,335
	200,000	Sanwa Shutter Corp (b)		1,330,850
	95,000	Seiren Co Ltd		1,524,692
	625,000	Shimadzu Corp		3,862,999
	2,450,000	Showa Denko		10,483,041
	530,000	Sumitomo Rubber Industries		6,398,635
	162	The Tokyo Star Bank Ltd * (b)		555,605
	2,200,000	Tokyu Land Corp (b)		19,189,200
	180,000	Tosoh Corp		945,586
	365,000	Toyo Suisan Kaisha Ltd		5,321,865
	2,500,000	Ube Industries Ltd		7,376,772
	300,000	Yamaha Motor Co Ltd		6,841,916
				174,360,554
		Malaysia — 0.1%
	7,750,000	E & O Property Development *		1,074,569

See accompanying notes to the financial statements.

8

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Mexico — 0.5%
	611,000	Controladora Comercial Mexicana SA de CV		1,102,425
	821,500	Grupo Imsa SA		2,846,821
	1,100,000	Sare Holding SA de CV *		1,352,554
				5,301,800
		Netherlands — 1.1%
	136,097	Buhrmann NV		2,280,301
	96,300	Fortis NV		3,442,817
	52,365	Hagemeyer NV * (b)		213,860
	410,774	Hagemeyer (b) (d)		1,650,057
	43,700	Imtech NV		1,825,265
	49,267	VNU NV		1,596,349
				11,008,649
		New Zealand — 0.0%
	40,400	Air New Zealand		34,458
	241,495	Evergreen Forests Ltd *		36,912
				71,370
		Norway — 2.1%
	250,000	Consafe Offshore AB *		3,861,932
	450,490	Ekornes ASA (b)		8,819,442
	614,200	Geo ASA *		3,371,144
	106,550	Prosafe ASA (b)		5,286,062
				21,338,580
		Philippines — 0.1%
	1,147,500	First General Corp *		998,791
		Singapore — 0.9%
	17,296,000	Anwell Technologies Ltd		1,115,046
	2,194,000	GES International Ltd		1,326,271
	614,000	Gold Peak Batteries International		669,705
	2,018,000	Huan Hsin Holdings Ltd		661,183

See accompanying notes to the financial statements.

9

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Singapore — continued
	2,962,000	LMA International NV *		1,398,758
	1,587,000	People's Food Holdings Ltd		1,121,415
	2,000,000	Petra Foods Ltd		1,451,710
	635,000	Unisteel Technology Ltd		979,642
				8,723,730
		South Korea — 3.9%
	91,980	Asia Cement Co Ltd		3,689,186
	475,560	Handsome Corp		9,057,016
	144,000	Kooksoondang Co Ltd		2,292,756
	81,100	Korea Electric Terminal Co		1,443,062
	320,963	Kortek Corp		1,930,250
	76,810	LG Household & Health Care		4,940,520
	61,000	Pulmuone Co Ltd		2,487,579
	160,000	Samsung Electro Mechanics Co Ltd *		6,579,895
	49,800	Samsung SDI Co Ltd		4,400,336
	43,900	Samsung SDI Co Ltd GDR 144A		983,360
	96,644	You Eal Electronics Co		1,252,007
				39,055,967
		Spain — 2.0%
	117,000	ACS Actividades de Construccion y Servicios SA		4,363,316
	118,060	Aguas de Barcelona SA Class A		3,265,617
	14,400	Altadis SA		603,812
	10,649	Bankinter SA		672,857
	38,296	Cia de Distribucion Integral Logista SA		2,055,173
	60,000	Fomento de Construcciones y Contratas SA		4,079,292
	15,597	Gas Natural SDG SA		474,440
	55,000	Red Electrica de Espana		1,839,427
	628,157	Uralita SA		3,181,537
				20,535,471

See accompanying notes to the financial statements.

10

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Sweden — 1.9%
	106,500	Autoliv Inc SDR		5,708,992
	375,670	Lundin Mining Corp SDR *		6,905,757
	202,950	Munters AB		6,039,660
				18,654,409
		Switzerland — 4.4%
	2,131	Bank Sarasin & Cie AG Class B (Registered)		4,953,223
	2,190	Belimo Holding AG (Registered)		1,468,255
	14,450	Bobst Group AG (Registered)		616,985
	86,286	Charles Voegele Holding AG		7,890,287
	700	Eichhof Holding AG		852,678
	2,389	Forbo Holdings AG (Registered) *		603,681
	2,894	Geberit AG (Registered)		2,625,670
	17,510	Helvetia Patria Holding (Registered)		3,939,649
	1,000	Jelmoli Holding AG (Bearer)		1,615,854
	3,250	Jelmoli Holding AG (Registered)		1,054,532
	200,309	Kardex AG *		9,609,656
	29,700	Swatch Group AG		4,818,567
	17,908	Valiant Holding - Registered *		1,777,902
	9,350	Valora Holding AG *		1,899,975
				43,726,914
		Taiwan — 1.8%
	4,319,000	Arima Computer Corp *		987,791
	2,975,500	Benq Corp		2,919,099
	3,128,000	China Life Insurance Co Ltd *		1,114,380
	2,000,000	China Motor Corp Ltd		2,246,240
	2,287,450	Compal Electronics Inc		2,127,690
	453,000	Fubon Financial Holding Co Ltd		404,669
	29,000	Fubon Financial Holding Co Ltd GDR (Registered)		259,550
	1,641,000	Phoenixtec Power Co Ltd		1,587,503
	1,995,000	Sunplus Technology Co Ltd		2,407,396
	2,394,000	Tsann Kuen Enterprises Co Ltd		4,178,576
				18,232,894

See accompanying notes to the financial statements.

11

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Thailand — 0.4%
	13,500,000	Asian Property Development plc (Foreign Registered) (a)		1,470,278
	1,798,000	Glow Energy Pcl (Foreign Registered) (a)		1,206,789
	3,787,000	Sino Thai Engineering & Construction Pcl (Foreign Registered) (a)		1,045,129
				3,722,196
		United Kingdom — 19.6%
	145,000	Alliance & Leicester Plc		2,718,205
	140,828	Alliance Unichem Plc		2,163,704
	582,342	Balfour Beatty Plc		3,819,234
	425,000	BBA Group Plc		1,995,534
	687,250	Bodycote International Plc		3,137,930
	385,000	Brambles Industries Plc		2,781,948
	1,600,000	Brit Insurance Holdings Plc		3,002,458
	438,800	British Airways Plc *		2,525,152
	450,000	Brown (N) Group Plc		1,553,826
	725,000	Cable & Wireless Plc		1,354,384
	514,100	Carphone Warehouse Group Plc		2,440,044
	549,176	Cattle's Plc		3,340,661
	500,000	Centrica Plc		2,546,953
	239,888	Chemring Group		4,707,939
	550,000	Cobham Group Plc		1,638,250
	742,000	Compass Group Plc		2,824,477
	128,342	Computacenter Plc		638,409
	200,000	Davis Service Group (Ordinary)		1,727,192
	3,300,000	Dimension Data Holdings Plc *		2,785,441
	9,750	DX Services Plc		51,971
	696,493	FKI Plc		1,483,410
	507,600	Fyffes Plc		1,254,013
	189,952	Gallaher Group Plc		2,943,376
	50,000	Go-Ahead Group Plc		1,539,670
	615,000	Group 4 Securicor Plc		1,917,516
	315,000	Hanson Plc		3,845,468
	171,747	Hays Plc		445,385

See accompanying notes to the financial statements.

12

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	386,049	ICAP Plc		3,007,780
	102,400	Imperial Tobacco Group Plc		3,079,672
	600,000	Inmarsat Plc		4,163,637
	300,000	ISOFT Group Plc		977,788
	1,750,000	ITV Plc		3,328,449
	425,000	JJB Sports Plc		1,294,175
	115,000	Johnson Matthey Plc		2,882,580
	104,929	Kazakhmys Plc *		1,608,649
	385,000	Kelda Group Plc		5,376,560
	360,000	Kesa Electricals Plc		1,676,632
	312,344	Kier Group Plc		7,885,674
	362,200	Matalan Plc		1,162,917
	800,000	Misys Plc		3,291,674
	250,000	Mitie Group Plc		893,933
	100,000	Next Plc		2,892,335
	250,300	Northern Rock Plc		4,944,946
	260,000	Peninsular & Oriental Steam Navigation Co		2,352,981
	199,119	Pennon Group (Ordinary)		4,880,205
	1,284,614	Photo-Me International Plc		2,213,007
	425,000	Premier Foods Plc		2,328,248
	115,000	Provident Financial Plc		1,213,072
	50,000	Punch Taverns Plc		749,395
	600,000	Qinetiq Plc *		2,086,502
	148,311	Resolution Plc		1,732,094
	375,736	Rexam Plc		3,341,133
	750,000	RM Plc		2,451,311
	2,021,893	Royal & Sun Alliance Insurance Group		4,610,229
	1,000,000	Sage Group Plc		4,860,260
	275,000	Shire Pharmaceuticals Plc		4,295,572
	432,000	Slough Estates Plc		4,612,781
	755,160	Smith (David S.) Holdings Plc		2,354,126
	165,600	Smith WH Plc		1,184,922
	425,000	SSL International Plc		2,434,182
	58,600	Tate & Lyle Plc		614,470

See accompanying notes to the financial statements.

13

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	400,300	Tomkins Plc		2,336,950
	110,000	Travis Perkins Plc		2,862,409
	220,000	Trinity Mirror Plc		2,226,037
	1,080,000	TT Group Plc		3,345,939
	180,700	Ultra Electronics Holdings		3,195,238
	248,500	Viridian Group Plc		4,392,415
	265,100	William Hill Plc		2,700,371
	1,536,882	William Morrison Supermarkets		5,746,193
	137,800	Wolseley Plc		3,418,478
	850,000	Wood Group (John) Plc		3,538,257
	91,282	Xstrata Plc		2,664,904
	275,000	Yell Group Plc		2,676,906
				197,068,538
		TOTAL COMMON STOCKS (COST $604,516,475)		926,240,463
		PREFERRED STOCKS — 1.3%
		Brazil — 0.2%
	280,000	Suzano Bahia Sul Papel e Celulose SA 0.64%		1,906,663
		France — 0.1%
	6,800	Casino Guichard Perrachon SA 4.55%		366,208
		Germany — 1.0%
	31,500	Henkel KGaA 1.46%		3,475,438
	128,900	Volkswagen AG 2.82%		6,642,196
				10,117,634
		Italy — 0.0%
	10,000	IFI Istituto Finanziario Industries *		187,679

See accompanying notes to the financial statements.

14

GMO Foreign Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		South Korea — 0.0%
	5,600	Samsung SDI Co Ltd 3.36%		304,450
		TOTAL PREFERRED STOCKS (COST $8,420,464)		12,882,634
		RIGHTS AND WARRANTS — 0.0%
		Thailand — 0.0%
	631,167	Sino Thai Engineering & Construction Pcl Warrants, Expires 04/18/08 * (a)		21,248
		TOTAL RIGHTS AND WARRANTS (COST $49,386)		21,248
		SHORT-TERM INVESTMENT(S) — 8.0%
	13,000,000	Bank of Montreal Time Deposit, 4.64%, due 03/01/06		13,000,000
	67,561,684	The Boston Global Investment Trust (c)		67,561,684
		TOTAL SHORT-TERM INVESTMENT(S) (COST $80,561,684)		80,561,684
		TOTAL INVESTMENTS — 101.6% (Cost $693,548,009)		1,019,706,029
		Other Assets and Liabilities (net) — (1.6%)		(16,521,404	)
		TOTAL NET ASSETS — 100.0%	$	1,003,184,625

See accompanying notes to the financial statements.

15

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

GDR - Global Depository Receipt

SDR - Swedish Depository Receipt

*  Non-income producing security.

(a)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(b)  All or a portion of this security is out on loan (Note 2).

(c)  All or a portion of this security represents investment of security lending collateral (Note 2).

(d)  Direct placement securities are restricted as to resale.

As of February 28, 2006, 84.7% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

16

GMO Foreign Small Companies Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $50,723,797 (cost $693,548,009) (Note 2)	$	1,019,706,029
Cash		63,105
Foreign currency, at value (cost $30,201,760) (Note 2)		30,263,454
Receivable for investments sold		134,912,680
Dividends and interest receivable		1,633,403
Foreign taxes receivable		177,129
Receivable for expenses reimbursed by Manager (Note 3)		80,621
Total assets		1,186,836,421
Liabilities:
Payable for investments purchased		3,566,351
Collateral on securities loaned (Note 2)		67,561,684
Payable for Fund shares repurchased		111,448,746
Accrued capital gain and repatriation taxes payable (Note 2)		164,078
Payable to affiliate for (Note 3):
Management fee		608,508
Shareholder service fee		105,317
Trustees and Chief Compliance Officer fees		1,774
Accrued expenses		195,338
Total liabilities		183,651,796
Net assets	$	1,003,184,625
Net assets consist of:
Paid-in capital	$	585,190,428
Distributions in excess of net investment income		(7,156,747	)
Accumulated net realized gain		99,090,228
Net unrealized appreciation		326,060,716
	$	1,003,184,625
Net assets attributable to:
Class III shares	$	364,550,549
Class IV shares	$	638,634,076
Shares outstanding:
Class III		20,279,742
Class IV		35,506,001
Net asset value per share:
Class III	$	17.98
Class IV	$	17.99

See accompanying notes to the financial statements.

17

GMO Foreign Small Companies Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $1,908,887)	$	22,396,177
Interest (including securities lending income of $837,991)		1,776,068
Total investment income		24,172,245
Expenses:
Management fee (Note 3)		7,153,575
Shareholder service fee – Class III (Note 3)		648,286
Shareholder service fee – Class IV (Note 3)		589,749
Custodian and fund accounting agent fees		748,336
Transfer agent fees		42,628
Audit and tax fees		64,993
Legal fees		15,664
Trustees fees and related expenses (Note 3)		19,652
Registration fees		12,356
Miscellaneous		27,234
Total expenses		9,322,473
Fees and expenses reimbursed by Manager (Note 3)		(887,211	)
Net expenses		8,435,262
Net investment income (loss)		15,736,983
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of foreign capital gains tax and CPMF tax of $140,227 and $94,029, respectively) (Note 2)		238,508,786
Foreign currency, forward contracts and foreign currency related transactions		(2,988,727	)
Net realized gain (loss)		235,520,059
Change in net unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax accrual of $33,900) (Note 2)		(34,590,903	)
Foreign currency, forward contracts and foreign currency related transactions		(193,956	)
Net unrealized gain (loss)		(34,784,859	)
Net realized and unrealized gain (loss)		200,735,200
Net increase (decrease) in net assets resulting from operations	$	216,472,183

See accompanying notes to the financial statements.

18

GMO Foreign Small Companies Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	15,736,983		$	14,743,431
Net realized gain (loss)		235,520,059			98,592,316
Change in net unrealized appreciation (depreciation)		(34,784,859	)		113,649,493
Net increase (decrease) in net assets from operations		216,472,183			226,985,240
Distributions to shareholders from:
Net investment income
Class III		(7,882,142	)		(12,236,026	)
Class IV		(11,233,463	)		(8,819,758	)
Total distributions from net investment income		(19,115,605	)		(21,055,784	)
Net realized gains
Class III		(57,805,430	)		(40,519,991	)
Class IV		(80,047,426	)		(28,580,789	)
Total distributions from net realized gains		(137,852,856	)		(69,100,780	)
		(156,968,461	)		(90,156,564	)
Net share transactions (Note 7):
Class III		(87,014,942	)		(129,870,091	)
Class IV		36,890,176			172,149,959
Increase (decrease) in net assets resulting from net share transactions		(50,124,766	)		42,279,868
Total increase (decrease) in net assets		9,378,956			179,108,544
Net assets:
Beginning of period		993,805,669			814,697,125
End of period (including distributions in excess of net investment income of $7,156,747 and $3,051,291, respectively)	$	1,003,184,625		$	993,805,669

See accompanying notes to the financial statements.

19

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	17.19		$	14.79		$	9.13		$	9.59		$	9.68
Income (loss) from investment operations:
Net investment income (loss)		0.26	†		0.26	†		0.20	†		0.16	†		0.15
Net realized and unrealized gain (loss)		3.19			3.76			5.77			(0.51	)(a)		0.00	(a)(b)
Total from investment operations		3.45			4.02			5.97			(0.35	)		0.15
Less distributions to shareholders:
From net investment income		(0.32	)		(0.38	)		(0.31	)		(0.11	)		(0.24	)
From net realized gains		(2.34	)		(1.24	)		—			—			—
Total distributions		(2.66	)		(1.62	)		(0.31	)		(0.11	)		(0.24	)
Net asset value, end of period	$	17.98		$	17.19		$	14.79		$	9.13		$	9.59
Total Return(c)		22.32	%		28.40	%		65.76	%		(3.64	)%		1.59	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	364,551		$	426,758		$	480,966		$	275,739		$	149,566
Net expenses to average daily net assets		0.85	%		0.85	%		0.85	%		0.85	%		0.86	%(d)
Net investment income to average daily net assets		1.52	%		1.71	%		1.71	%		1.59	%		1.48	%
Portfolio turnover rate		40	%		25	%		31	%		24	%		17	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.09	%		0.09	%		0.11	%		0.15	%		0.26	%

(a)  The amount shown for a share outstanding does not correspond with the aggregate net realized and unrealized gain (loss) on investments due to the timing of purchases and redemptions of Fund shares in relation to fluctuating market values of the investments of the Fund.

(b)  Net realized and unrealized loss was less than $0.01 per share.

(c)  Total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(d)  Includes transfer taxes not reimbursed by the Manager, which approximate 0.01% of average daily net assets.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

20

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003(a)
Net asset value, beginning of period	$	17.20		$	14.80		$	9.13		$	10.60
Income (loss) from investment operations:
Net investment income (loss)†		0.26			0.26			0.21			0.08
Net realized and unrealized gain (loss)		3.20			3.76			5.77			(1.43	)
Total from investment operations		3.46			4.02			5.98			(1.35	)
Less distributions to shareholders:
From net investment income		(0.33	)		(0.38	)		(0.31	)		(0.12	)
From net realized gains		(2.34	)		(1.24	)		—			—
Total distributions		(2.67	)		(1.62	)		(0.31	)		(0.12	)
Net asset value, end of period	$	17.99		$	17.20		$	14.80		$	9.13
Total Return(b)		22.37	%		28.44	%		65.92	%		(12.76	)%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	638,634		$	567,048		$	333,731		$	202,319
Net expenses to average daily net assets		0.80	%		0.81	%		0.80	%		0.80	%*
Net investment income to average daily net assets		1.55	%		1.69	%		1.78	%		1.13	%*
Portfolio turnover rate		40	%		25	%		31	%		24	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.09	%		0.09	%		0.11	%		0.14	%*

(a)  Period from June 14, 2002 (commencement of operations) through February 28, 2003.

(b)  Total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2003.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

21

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Foreign Small Companies Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in a diversified portfolio of equity securities of non-U.S. issuers. The Fund's benchmark is the S&P/Citigroup Extended Market Index ("EMI") World ex-U.S. Index.

Throughout the year ended February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class IV. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the classes of shares is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Fund's prospectus.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange

22

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is

23

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

24

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing,

25

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $50,723,797, collateralized by cash in the amount of $67,561,684, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests.

The Fund has recorded a deferred tax liability in respect of unrealized appreciation on foreign securities of $164,078 for potential capital gains and repatriation taxes as of February 28, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized gain (loss) in the Statement of Operations. For the year ended February 28, 2006, the Fund incurred $140,227 in capital gains taxes which is included in net realized gain (loss) in the Statement of Operations.

The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to the Brazilian market. For the year ended February 28, 2006, the Fund incurred $94,029 in CPMF tax which is included in the net realized gain (loss) on investments in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $33,336,181 and $25,245,856, respectively and long-term capital gains – $123,632,280 and $64,910,708, respectively.

26

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $18,661,249 and $82,200,619 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	702,433,711	$	335,053,317	$	(17,780,999	)	$	317,272,318

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to redemption in-kind transactions. Net gains resulting from in-kind transactions were $44,137,540. The financial highlights exclude these adjustments.

Distributions In Excess Of Net Investment Income			Accumulated Net Realized Gain			Paid-in Capital
$	(726,834	)	$	(42,237,291	)	$	42,964,125

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature

27

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.70% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.15% for Class III shares and 0.10% for Class IV shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.70% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $11,341 and $6,590, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $384,376,491 and $611,954,804, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's

28

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 54.5% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by nine related parties comprised of certain GMO employee accounts, and less than 0.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		2,105,870		$	36,900,000			2,003,413		$	31,586,841
Shares issued to shareholders in reinvestment of distributions		3,919,744			63,826,169			3,225,981			50,882,694
Shares repurchased		(10,575,215	)		(187,741,111	)		(12,913,661	)		(212,339,626	)
Net increase (decrease)		(4,549,601	)	$	(87,014,942	)		(7,684,267	)	$	(129,870,091	)
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		—		$	—			8,179,317		$	136,758,180
Shares issued to shareholders in reinvestment of distributions		5,485,547			89,390,176			2,242,284			35,391,779
Shares repurchased		(2,953,972	)		(52,500,000	)		—			—
Net increase (decrease)		2,531,575		$	36,890,176			10,421,601		$	172,149,959

29

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Foreign Small Companies Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Foreign Small Companies Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

30

GMO Foreign Small Companies Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.85	%	$	1,000.00	$	1,174.30	$	4.58
2) Hypothetical		0.85	%	$	1,000.00	$	1,020.58	$	4.26
Class IV
1) Actual		0.81	%	$	1,000.00	$	1,174.00	$	4.37
2) Hypothetical		0.81	%	$	1,000.00	$	1,020.78	$	4.06

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

31

GMO Foreign Small Companies Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $2,049,114 and recognized foreign source income of $24,304,996.

The Fund's distributions to shareholders include $123,632,280 from long-term capital gains.

For taxable, non-corporate shareholders, 47.78% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $759,533 and $11,997,045, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

32

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

33

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

34

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

35

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

36

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Emerging Markets Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Emerging Markets Quality Fund returned +36.9% for the fiscal year ended February 28, 2006, as compared to +37.9% for the S&P/IFC Investable Composite Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in emerging market equities.

Country selection detracted 1.4% from performance during the period. The Fund underweighted Hungary and Turkey due to their expensive and vulnerable currencies. Hungary underperformed and Turkey outperformed the benchmark during the period. The Fund also does not invest in the smallest countries like Czech Republic, Egypt, Morocco, and Peru. Consequently, the Fund slightly overweighted the largest countries in the index. Egypt was among the best performing countries during the period. Overweights in Brazil, Russia, and Korea helped performance, while an overweight in Taiwan detracted from performance.

Stock selection added 0.4% to performance. Quality is the only driver of stock selection. Stock selection added to performance in Argentina, China, and Taiwan where quality fared well. Stock selection detracted from performance in Korea and Russia where quality performed the worst.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .50% on the purchase and .50% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Performance for Class VI will vary due to different fees. Past performance is not indicative of future results. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  The S&P/IFC Investable Composite Index + represents the GMO Asia 7 Index prior to 9/22/04 and the S&P/IFC Investable Composite Index thereafter.

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		89.0	%
Preferred Stocks		7.3
Short-Term Investment(s)		2.7
Debt Obligation(s)		1.0
Rights and Warrants		0.0
Swaps		0.0
Other		0.0
		100.0	%
Country Summary	% of Investments*
South Korea		19.5	%
Taiwan		14.6
Brazil		11.2
South Africa		10.4
China		8.0
Russia		7.5
India		7.1
Mexico		6.0
Malaysia		3.1
Israel		3.0
Thailand		1.9
Chile		1.6
Poland		1.5
Indonesia		1.3
Turkey		1.1
United States		1.0
Argentina		0.7
Philippines		0.4
Czech Republic		0.1
		100.0	%

*  The table excludes short-term investment(s).

1

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Investments*
Information Technology		26.7	%
Energy		19.3
Telecommunication Services		15.9
Materials		10.3
Consumer Staples		8.2
Consumer Discretionary		5.9
Industrials		4.9
Financials		4.4
Health Care		2.4
U.S. Government		1.0
Utilities		1.0
		100.0	%

*  The table excludes short-term investment(s).

2

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 89.0%
		Argentina — 0.7%
	25,000	Tenaris SA ADR		4,003,750
		Brazil — 4.1%
	46,600	Companhia Siderurgica Nacional SA		1,403,157
	133,900	Compania Vale do Rio Doce		6,586,228
	661,400	Petroleo Brasileiro SA (Petrobras)		15,137,292
	72,705	Tele Centro Oeste Celular Participacoes SA		1,112,744
				24,239,421
		Chile — 1.6%
	27,200	Banco De Chile ADR		1,192,992
	40,300	Banco Santander Chile SA ADR		1,913,847
	82,300	Compania Cervecerias Unidas ADR		2,238,560
	84,900	Distribucion y Servicio ADR (a)		1,744,695
	55,200	Lan Airlines SA		2,254,920
				9,345,014
		China — 7.8%
	862,000	China Life Insurance Co Ltd *		977,701
	758,116	China Merchants Holdings International Co Ltd		2,142,560
	4,893,000	China Mobile Ltd		23,641,227
	2,708,000	China Petroleum & Chemical Corp Class H		1,611,103
	342,000	China Resources Enterprise Ltd		747,948
	2,474,000	CNOOC Ltd		2,050,245
	1,154,000	Cosco Pacific Ltd		2,429,515
	816,000	Datang International Power Generation Co Ltd		585,660
	3,614,592	Denway Motors Ltd		1,429,222
	2,544,000	Huaneng Power International Inc Class H		1,703,072
	2,576,000	Lenovo Group Ltd		1,055,251
	6,072,842	PetroChina Co Ltd Class H		5,905,872
	44,000	Sina.com *		984,280
	1,033,600	Yanzhou Coal Mining Co Ltd		842,146
				46,105,802

See accompanying notes to the financial statements.

3

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Czech Republic — 0.1%
	22,300	CEZ AS		775,682
		India — 6.9%
	105,000	GAIL India Ltd		644,063
	64,700	Hero Honda Motors Ltd		1,295,810
	882,500	Hindustan Lever		4,848,291
	224,500	Infosys Technologies Inc		14,273,223
	911,100	ITC Ltd		3,541,314
	47,100	Oil & Natural Gas Corp Ltd		1,207,091
	75,500	Ranbaxy Laborators		729,374
	164,200	Reliance Capital Ventures		90,120
	164,200	Reliance Communication Venture * (b)		1,330,326
	164,200	Reliance Energy Ventures *		159,471
	164,200	Reliance Industries		2,617,864
	164,200	Reliance Natural Resources Ltd * (b)		24,069
	237,200	Satyam Computer Services Ltd		4,117,822
	46,300	Tata Consultancy Services Ltd		1,773,312
	345,300	Wipro Ltd		4,044,441
				40,696,591
		Indonesia — 1.2%
	829,585	Astra International Tbk PT		878,520
	644,000	Gudang Garam Tbk PT		766,018
	7,312,000	Telekomunikasi Indonesia Tbk PT		4,838,106
	25,200	Telekomunikasi Indonesia Tbk PT ADR		656,460
				7,139,104
		Israel — 2.9%
	190,100	Check Point Software Technologies Ltd *		4,041,526
	56,900	Teva Pharmaceutical Industries		2,393,358
	258,900	Teva Pharmaceutical Industries ADR		10,871,211
				17,306,095

See accompanying notes to the financial statements.

4

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Malaysia — 3.0%
	103,000	British American Tobacco Berhad		1,185,426
	383,000	Genting Berhad		2,461,046
	409,000	IOI Corp Berhad		1,519,917
	524,000	Malakoff Berhad		1,239,503
	1,491,800	Maxis Communications Berhad		3,491,776
	1,198,200	MISC Berhad		3,125,705
	379,000	Resorts World Berhad		1,325,398
	525,000	Sime Darby Berhad		875,627
	152,000	Tanjong Plc		581,033
	409,837	Telekom Malaysia Berhad		1,090,310
	1,293,640	YTL Power Internationl Berhad		776,010
				17,671,751
		Mexico — 5.8%
	191,400	America Movil SA de CV Class L ADR		6,647,322
	348,000	America Telecom SA de CV *		2,009,928
	352,608	Cemex SA de CV CPO		2,182,635
	182,000	Fomento Economico Mexicano SA de CV		1,572,411
	356,000	Grupo Modelo SA de CV Class C		1,231,981
	215,000	Grupo Televisa SA (Participating Certificates)		854,048
	195,000	Kimberly Clark (Series A)		670,167
	484,300	Telefonos de Mexico SA de CV Class L ADR		10,843,477
	2,965,732	Wal-Mart de Mexico SA de CV Class V		8,471,093
				34,483,062
		Philippines — 0.4%
	40,000	Philippine Long Distance Telephone		1,373,097
	508,101	San Miguel Corp Class B		815,739
				2,188,836
		Poland — 1.5%
	236,000	Polski Koncern Naftowy Orlen SA		4,340,079
	15,900	Prokom Software SA		752,253
	512,700	Telekomunikacja Polska SA		3,569,305
				8,661,637

See accompanying notes to the financial statements.

5

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Russia — 7.3%
	19,500	JSC Mining & Smelting Co ADR		1,735,500
	274,500	Lukoil ADR		21,960,000
	177,700	Mobile Telesystems ADR		6,409,639
	33,600	OAO Gazprom ADR (a)		2,842,560
	19,500	Polyus Gold Co ZAO ADR *		702,000
	40,200	Sibneft ADR		924,600
	84,000	Surgutneftegaz ADR (a)		6,111,000
	51,400	Vimpel-Communications ADR *		2,261,600
				42,946,899
		South Africa — 10.1%
	289,000	African Bank Investments Ltd		1,350,463
	28,000	Anglo American Platinum Corp		2,222,442
	99,800	Barlow Ltd		1,924,778
	192,100	Bidvest Group Ltd		3,230,473
	315,600	Edgars Consolidated Stores Ltd		1,720,809
	1,238,104	FirstRand Ltd		3,732,435
	86,500	Gold Fields Limited		1,904,305
	46,000	Impala Platinum Holdings Ltd		7,810,320
	116,367	Imperial Holdings Ltd *		2,911,212
	54,000	JD Group Ltd		802,339
	395,400	MTN Group Ltd		3,827,127
	214,740	Nampak Ltd		572,545
	48,751	Nedcor Ltd		940,994
	306,600	Old Mutual Plc		963,545
	113,900	Remgro Ltd		2,388,910
	320,600	RMB Holdings Ltd		1,451,799
	373,400	Sasol Ltd		12,787,010
	308,014	Standard Bank Group Ltd		3,932,349
	754,500	Steinhoff International Holdings		2,469,433
	102,176	Tiger Brands Ltd		2,532,776
				59,476,064

See accompanying notes to the financial statements.

6

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		South Korea — 18.4%
	50,700	Daewoo Shipbuilding & Marine Engineering Co Ltd		1,363,793
	59,900	Doosan Infracore Co Ltd		1,006,063
	29,200	GS Engineering & Construction Corp		1,585,708
	27,300	Hyundai Engineering & Construction *		1,313,821
	74,800	Hyundai Mobis		6,288,947
	72,230	Hyundai Motor Co		6,138,802
	36,900	Kangwon Land Inc		731,364
	86,940	KIA Motors Corp		1,866,478
	87,500	KT Corp ADR		1,786,750
	48,200	KT Freetel Co Ltd		1,282,295
	106,400	KT&G Corp		6,307,463
	47,300	LG Chemicals Ltd		2,373,305
	19,500	LG Electronics Inc		1,601,270
	22,100	LG Philips LCD Co Ltd *		989,552
	19,000	NCSoft Corp *		1,270,115
	14,300	NHN Corp *		4,031,172
	42,200	POSCO		9,945,493
	56,700	Samsung Electronics Co Ltd		39,750,893
	37,000	Samsung SDI Co Ltd		3,269,326
	45,600	Samsung Techwin Co Ltd		1,247,804
	9,900	Shinsegae Co Ltd		4,691,699
	10,900	SK Telecom Co Ltd		2,265,100
	313,700	SK Telecom Co Ltd ADR		7,575,855
				108,683,068
		Taiwan — 14.2%
	1,141,420	Acer Inc		2,525,630
	2,207,690	Asustek Computer Inc		6,221,855
	509,270	AU Optronics Corp		813,672
	647,115	Benq Corp		634,849
	597,510	China Motor Corp Ltd		671,075
	1,622,250	China Steel Corp		1,467,831
	1,968,000	Chunghwa Telecom Co Ltd		3,582,845
	5,500	Chunghwa Telecom Co Ltd ADR		103,950

See accompanying notes to the financial statements.

7

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Taiwan — continued
	2,018,791	Compal Electronics Inc		1,877,795
	326,002	Delta Electronics Inc		776,036
	1,608,900	Formosa Chemicals & Fibre Co		2,529,375
	489,886	Formosa Petrochemical Corp		874,266
	1,206,669	Formosa Plastics Corp		1,909,438
	31,000	High Tech Computer Corp		664,036
	2,539,949	Hon Hai Precision Industry Co Ltd		16,060,778
	662,120	Lite-On Technology Corp		892,314
	790,600	MediaTek Inc		8,091,953
	2,776,140	Nan Ya Plastic Corp		3,926,941
	179,328	Novatek Microelectronics		1,236,164
	1,577,429	Quanta Computer Inc		2,402,866
	509,250	Realtek Semiconductor Corp		558,391
	625,432	Sunplus Technology Co Ltd		754,718
	12,869,095	Taiwan Semiconductor Manufacturing Co Ltd		23,845,887
	1,777,916	United Microelectronics Corp		1,036,841
				83,459,506
		Thailand — 1.9%
	405,000	Advanced Info Service Pcl NVDR (b)		975,131
	554,000	Advanced Info Service Pcl (Foreign Registered) (b)		1,333,884
	167,000	PTT Exploration & Production Pcl (Foreign Registered) (b)		2,222,033
	530,611	Ptt Pcl (Foreign Registered) (b)		3,380,155
	157,000	PTT Pcl NVDR (b)		1,000,138
	588,000	Shin Corporation Pcl (Foreign Registered) (b)		726,881
	65,000	Siam Cement Pcl (Foreign Registered) NVDR (b)		401,847
	48,000	Siam Cement Pcl (Foreign Registered) (b)		326,179
	2,439,000	Tanayong Co Ltd (Foreign Registered) (b) (c)		624
	397,000	Thai Oil Pcl (Foreign Registered) (b)		613,921
				10,980,793
		Turkey — 1.1%
	230,276	Akbank TAS		2,331,067
	100,930	Arcelik AS		940,907

See accompanying notes to the financial statements.

8

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		Turkey — continued
	173,400	KOC Holding AS		1,053,373
	66,575	Tupras-Turkiye Petrol Rafineriler AS		1,269,379
	221,435	Vestel Elektronik Sanayi *		962,096
				6,556,822
		TOTAL COMMON STOCKS (COST $394,788,011)		524,719,897
		PREFERRED STOCKS — 7.3%
		Brazil — 6.8%
	222,900	Aracruz Class B (Registered) 1.65%		1,102,166
	43,800	Banco Bradesco SA 3.66%		1,806,866
	64,200	Banco Itau Holding Financeira SA 2.79%		2,077,014
	951,100	Caemi Mineracao e Metalurgica SA 1.35%		1,639,287
	11,577,900	Companhia de Bebidas das Americas 3.03%		4,912,497
	102,700	Companhia Vale do Rio Doce Class A 0.36%		4,372,065
	68,500	Empresa Brasileira de Aeronautica SA ADR 2.72%		2,722,875
	121,200	Gerdau SA 4.84%		2,796,704
	821,700	Petroleo Brasileiro SA (Petrobras) 0.44%		17,316,259
	29,200	Usinas Siderrurgicas de Minas Gerais SA 4.20%		962,562
				39,708,295
		South Korea — 0.5%
	5,900	Samsung Electronics Co Ltd (Non Voting) 1.18% *		3,121,961
		TOTAL PREFERRED STOCKS (COST $24,623,275)		42,830,256
		DEBT OBLIGATION(S) — 1.0%
		United States — 1.0%
	5,502,779	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (d) (e)		5,821,985
		TOTAL DEBT OBLIGATION(S) (COST $5,820,109)		5,821,985

See accompanying notes to the financial statements.

9

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		RIGHTS AND WARRANTS — 0.0%
		Thailand — 0.0%
	480,663	True Corp Pcl Warrants, Expires 04/03/08 * (b)		—
		TOTAL RIGHTS AND WARRANTS (COST $0)		—
		SHORT-TERM INVESTMENT(S) — 2.7%
	2,000,000	Barclays Time Deposit, 4.56%, due 03/01/06		2,000,000
	1,300,000	Branch Bank & Trust Time Deposit, 4.52%, due 03/01/06		1,300,000
	2,000,000	Dresdner Bank AG Time Deposit, 4.55%, due 03/01/06		2,000,000
	2,000,000	ING Bank Time Deposit, 4.57%, due 03/01/06		2,000,000
	8,710,875	The Boston Global Investment Trust (f)		8,710,875
		TOTAL SHORT-TERM INVESTMENT(S) (COST $16,010,875)		16,010,875
		TOTAL INVESTMENTS — 100.0% (Cost $441,242,270)		589,383,013
		Other Assets and Liabilities (net) — 0.0%		13,113
		TOTAL NET ASSETS — 100.0%	$	589,396,126

See accompanying notes to the financial statements.

10

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay			Receive	Net Unrealized Appreciation (Depreciation)
	3,186,025	USD	1/31/2007	Deutsche Bank	1 Month LIBOR			Return on
						+ 0.55	%	Gazprom	$	17,090
	2,628,025	USD	1/31/2007	Deutsche Bank	1 Month LIBOR			Return on
						+ 0.55	%	Gazprom		14,097
									$	31,187

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

NVDR - Non-Voting Depository Receipt

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(c)  Bankrupt issuer.

(d)  Index security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(e)  All or a portion of this security has been segregated to cover open margin requirements on open swap contracts (Note 2).

(f)  All or a portion of this security represents investment of security lending collateral (Note 2).

  As of February 28, 2006, 64.9% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

USD - United States Dollar

See accompanying notes to the financial statements.

11

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $8,121,335 (cost $441,242,270) (Note 2)	$	589,383,013
Cash		40,722
Foreign currency, at value (cost $3,385,445) (Note 2)		3,373,994
Receivable for Fund shares sold		5,000,000
Dividends and interest receivable		1,450,341
Receivable for open swap contracts (Note 2)		31,187
Receivable for expenses reimbursed by Manager (Note 3)		23,771
Total assets		599,303,028
Liabilities:
Collateral on securities loaned (Note 2)		8,710,875
Accrued capital gain and repatriation taxes payable (Note 2)		736,895
Payable to affiliate for (Note 3):
Management fee		180,973
Shareholder service fee		39,639
Trustees and Chief Compliance Officer fees		1,407
Accrued expenses		237,113
Total liabilities		9,906,902
Net assets	$	589,396,126
Net assets consist of:
Paid-in capital	$	424,319,798
Accumulated undistributed net investment income		636,474
Accumulated net realized gain		16,956,393
Net unrealized appreciation		147,483,461
	$	589,396,126
Net assets attributable to:
Class III shares	$	197,026,440
Class VI shares	$	392,369,686
Shares outstanding:
Class III		18,990,406
Class VI		37,749,505
Net asset value per share:
Class III	$	10.38
Class VI	$	10.39

See accompanying notes to the financial statements.

12

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $1,031,155)	$	8,701,831
Interest (including securities lending income of $74,596)		535,674
Total investment income		9,237,505
Expenses:
Management fee (Note 3)		1,565,690
Shareholder service fee – Class III (Note 3)		234,648
Shareholder service fee – Class VI (Note 3)		129,245
Custodian and fund accounting agent fees		704,905
Transfer agent fees		43,310
Audit and tax fees		65,907
Legal fees		11,347
Trustees fees and related expenses (Note 3)		6,752
Registration fees		35,284
Miscellaneous		13,709
Total expenses		2,810,797
Fees and expenses reimbursed by Manager (Note 3)		(159,490	)
Net expenses		2,651,307
Net investment income (loss)		6,586,198
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of foreign capital gains tax and CPMF tax of $17,865 and $4,903, respectively) (Note 2)		18,135,636
Foreign currency, forward contracts and foreign currency related transactions		(183,348	)
Net realized gain (loss)		17,952,288
Change in net unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax accrual of $736,895) (Note 2)		122,775,972
Open swap contracts		31,187
Foreign currency, forward contracts and foreign currency related transactions		(645,415	)
Net unrealized gain (loss)		122,161,744
Net realized and unrealized gain (loss)		140,114,032
Net increase (decrease) in net assets resulting from operations	$	146,700,230

See accompanying notes to the financial statements.

13

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	6,586,198		$	1,656,390
Net realized gain (loss)		17,952,288			42,887,386
Change in net unrealized appreciation (depreciation)		122,161,744			(26,890,800	)
Net increase (decrease) in net assets from operations		146,700,230			17,652,976
Distributions to shareholders from:
Net investment income
Class III		(2,359,713	)		(3,327,581	)
Class VI		(3,821,368	)		(98,389	)
Total distributions from net investment income		(6,181,081	)		(3,425,970	)
Net realized gains
Class III		(823,974	)		(34,630,395	)
Class VI		(1,152,023	)		(2,361,326	)
Total distributions from net realized gains		(1,975,997	)		(36,991,721	)
		(8,157,078	)		(40,417,691	)
Net share transactions (Note 7):
Class III		59,430,146			(26,189,561	)
Class VI		204,518,388			91,844,257
Increase (decrease) in net assets resulting from net share transactions		263,948,534			65,654,696
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		703,183			457,595
Class VI		895,785			343,428
Increase in net assets resulting from net purchase premiums and redemption fees		1,598,968			801,023
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		265,547,502			66,455,719
Total increase (decrease) in net assets		404,090,654			43,691,004
Net assets:
Beginning of period		185,305,472			141,614,468
End of period (including accumulated undistributed net investment income of $636,474 and $437,476, respectively)	$	589,396,126		$	185,305,472

See accompanying notes to the financial statements.

14

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	7.71		$	13.77		$	7.25		$	8.09		$	7.87
Income (loss) from investment operations:
Net investment income (loss)		0.15	†		0.17	†		0.23			0.06			0.07
Net realized and unrealized gain (loss)		2.67			0.19			6.35			(0.85	)		0.26
Total from investment operations		2.82			0.36			6.58			(0.79	)		0.33
Less distributions to shareholders:
From net investment income		(0.11	)		(0.52	)		(0.06	)		(0.05	)		(0.11	)
From net realized gains		(0.04	)		(5.90	)		—			—			—
Total distributions		(0.15	)		(6.42	)		(0.06	)		(0.05	)		(0.11	)
Net asset value, end of period	$	10.38		$	7.71		$	13.77		$	7.25		$	8.09
Total Return(a)		36.86	%		16.19	%		91.04	%		(9.82	)%		4.41	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	197,026		$	82,153		$	141,614		$	105,354		$	117,878
Net expenses to average daily net assets		0.73	%		1.22	%		1.25	%		1.35	%		1.28	%
Net investment income to average daily net assets		1.71	%		1.84	%		1.76	%		0.80	%		1.01	%
Portfolio turnover rate		18	%		141	%		39	%		72	%		68	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.04	%		0.11	%		0.07	%		0.06	%		0.09	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.04		$	0.06		$	0.02		$	0.00	(b)	$	0.00	(b)

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(b)  Purchase premiums and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

15

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class VI share outstanding throughout each period)

	Year Ended February 28,
	2006			2005(a)
Net asset value, beginning of period	$	7.72		$	6.52
Income (loss) from investment operations:†
Net investment income (loss)		0.15			0.03
Net realized and unrealized gain (loss)		2.67			1.44
Total from investment operations		2.82			1.47
Less distributions to shareholders:
From net investment income		(0.11	)		(0.01	)
From net realized gains		(0.04	)		(0.26	)
Total distributions		(0.15	)		(0.27	)
Net asset value, end of period	$	10.39		$	7.72
Total Return(b)		36.92	%		23.05	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	392,370		$	103,152
Net expenses to average daily net assets		0.64	%		0.71	%*
Net investment income to average daily net assets		1.66	%		0.99	%*
Portfolio turnover rate		18	%		141	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.04	%		0.16	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.03		$	0.04

(a)  Period from September 23, 2004 (commencement of operations) through February 28, 2005.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

*  Annualized.

**  Not annualized.

†  Calculated using average shares outstanding throughout the period.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2005.

See accompanying notes to the financial statements.

16

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Emerging Markets Quality Fund, (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks broad exposure to the high-quality companies of its benchmark typically through investment in equity securities traded in the securities markets of emerging countries in Asia, Latin America, the Middle East, Africa, and Europe ("Emerging Markets"). The Fund's benchmark is the S&P/IFCI (Investable) Composite Index. Prior to September 23, 2004, the Fund's benchmark was the Asia 7 Index, an index maintained by the Manager and composed of the S&P/IFCI (Investable) Country Indices of seven Asian countries (China, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand), all of which are equally weighted.

For the year ended February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class VI. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's

17

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close, but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with

18

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as

19

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements

20

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $8,121,335, collateralized by cash in the amount of $8,710,875, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund has recorded a deferred tax liability in respect of unrealized appreciation on foreign securities of $736,895 for potential capital gains and repatriation taxes as of February 28, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized gain (loss) in the Statement of

21

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Operations. For the year ended February 28, 2006, the Fund incurred $17,865 in capital gain taxes which is included in net realized gain (loss) in the Statement of Operations.

The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to/from the Brazilian market. For the year ended February 28, 2006, the Fund incurred $4,903 in CPMF tax which is included in the net realized gain (loss) on investments in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $7,106,894 and $3,425,970 respectively and long-term capital gains – $1,050,184 and $36,991,721, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $2,318,466 and $16,039,197 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions and passive foreign investment company transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	442,007,069	$	150,150,722	$	(2,774,778	)	$	147,375,944

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(206,119	)	$	206,119	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

22

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.50% of the amount invested or redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. These fees are allocated relative to each class's net assets on the share transaction date. For the years ended February 28, 2006 and February 28, 2005, the Fund received $1,444,193 and $503,084 in purchase premiums and $154,775 and $297,939 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

Investments in emerging countries present certain risks that are not inherent in many other securities. Many emerging countries present elements of political and/or economic instability. The securities markets of emerging countries are generally smaller and less developed than the securities markets of the U.S. and developed foreign markets. Further, countries may impose various types of foreign currency regulations or controls which may impede the Fund's ability to repatriate amounts it receives. The Fund may acquire interests in securities in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The markets for emerging countries are relatively illiquid. Accordingly, the Fund may not be able to realize in an actual sale amounts approximating those used to value its holdings.

23

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.40% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.15% for Class III shares and 0.055% for Class VI shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, custody fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.40% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $4,306 and $3,255, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $315,038,569 and $68,874,228, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 55.1% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

24

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 0.1% of the Fund's shares were held by seven related parties comprised of certain GMO employee accounts, and 98.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		14,333,276		$	116,063,878			8,481,852		$	57,280,306
Shares issued to shareholders in reinvestment of distributions		329,743			2,997,691			4,364,286			28,188,546
Shares repurchased		(6,332,605	)		(59,631,423	)		(12,472,068	)		(111,658,413	)
Purchase premiums and redemption fees		—			703,183			—			457,595
Net increase (decrease)		8,330,414		$	60,133,329			374,070		$	(25,731,966	)
	Year Ended February 28, 2006						Period from September 23, 2004 (commencement of operations) through February 28, 2005
Class VI:	Shares			Amount			Shares			Amount
Shares sold		24,022,660		$	201,253,447			13,013,063		$	89,384,542
Shares issued to shareholders in reinvestment of distributions		541,077			4,973,390			350,886			2,459,715
Shares repurchased		(178,181	)		(1,708,449	)		—			—
Purchase premiums and redemption fees		—			895,785			—			343,428
Net increase (decrease)		24,385,556		$	205,414,173			13,363,949		$	92,187,685

25

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Emerging Markets Quality Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Emerging Markets Quality Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

26

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.75	%	$	1,000.00	$	1,253.20	$	4.19
2) Hypothetical		0.75	%	$	1,000.00	$	1,021.08	$	3.76
Class VI
1) Actual		0.65	%	$	1,000.00	$	1,252.20	$	3.63
2) Hypothetical		0.65	%	$	1,000.00	$	1,021.57	$	3.26

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

27

GMO Emerging Markets Quality Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $1,049,020 and recognized foreign source income of $9,732,986.

The Fund's distributions to shareholders include $1,050,184 from long-term capital gains.

For taxable, non-corporate shareholders, 54.96% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $0 and $806,162, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

28

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

29

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

30

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

31

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

32

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Short-Duration Collateral Fund returned +3.9% for the fiscal year ended February 28, 2006, as compared to +3.7% for the JPMorgan U.S. 3-Month Cash Index.

The Fund outperformed the benchmark during the fiscal year by 0.2%. This outperformance was attributable to contributions from cash management strategies as well as from instrument selection. At fiscal year-end, approximately 99.4% of the portfolio was AAA-rated. At fiscal year-end, approximately 85% of the Fund was invested in highly-rated, floating rate, asset-backed securities, 3% in U.S. Treasury notes and cash, less than 1% in corporate bonds, 2% in U.S. Government-backed bonds, 9% in collateralized bonds, and less than 1% in non-AAA asset-backed securities.

The asset-backed holdings included issues backed by consumer receivables such as residential mortgages, credit card, and auto loans as well as commercial/corporate mortgages and receivables.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Debt Obligation(s)		96.5	%
Short-Term Investment(s)		2.8
Mutual Funds		0.7
Swaps		0.1
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Futures		0.0
Other		(0.1	)
		100.0	%
Industry Sector Summary	% of Debt Obligations
Residential Asset-Backed Securities (United States)		22.6	%
Credit Cards		18.6
Auto Financing		8.6
Student Loans		6.9
Business Loans		6.0
Residential Mortgage-Backed Securities (European)		4.8
Residential Mortgage-Backed Securities (Australian)		4.7
Investment Grade Corporate Collateralized Debt Obligations		3.5
Insured Auto Financing		3.0
Insured Residential Mortgage-Backed Securities (United States)		2.3
CMBS		2.2
Rate Reduction Bonds		1.7
U.S. Government Agency		1.7
Insured High Yield Collateralized Debt Obligations		1.6
Insurance Premiums		1.2
CMBS Collateralized Debt Obligations		1.1
Insured Credit Cards		1.1
Corporate Debt		1.0
Equipment Leases		0.9
Other		0.8
Insured Residential Asset-Backed Securities (European)		0.7
Airlines		0.6
Insured Insurance Premiums		0.6
Insured Business Loans		0.5
Insured Residential Asset-Backed Securities (United States)		0.5
Insured Time Share		0.5
Emerging Markets Collateralized Debt Obligations		0.4

1

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary — (Continued)	% of Debt Obligations
Residential Mortgage-Backed Securities (United States)		0.4	%
ABS Collateralized Debt Obligations		0.3
Insured Transportation		0.3
Trade Receivable		0.3
High Yield Collateralized Debt Obligations		0.2
U.S. Government		0.2
Collateralized Loan Obligations		0.1
Insured Collateralized Loan Obligations		0.1
		100.0	%

2

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		DEBT OBLIGATION(S) — 96.5%
		Asset-Backed Securities — 93.7%
		ABS Collateralized Debt Obligations — 0.3%
	15,000,000	Paragon CDO Ltd., Series 04-1A, Class A, 144A, Variable Rate, 3 mo. LIBOR + .65%, 5.25%, due 10/20/44		15,000,000
		Airlines — 0.6%
	23,000,000	Aircraft Finance Trust, Series 99-1A, Class A1, Variable Rate, 1 mo. LIBOR + .48%, 5.05%, due 05/15/24		14,605,000
	12,043,272	Continental Airlines Inc., Series 99-1A,, 6.55%, due 02/02/19		11,832,515
				26,437,515
		Auto Financing — 8.3%
	30,000,000	ARG Funding Corp., Series 05-2A, Class A3, 144A, Variable Rate, 1 mo. LIBOR + .14%, 4.71%, due 05/20/10		30,103,140
	4,685,285	Capital Auto Receivables Asset Trust (GMAC), Series 03-1, Class A3A, 2.75%, due 04/16/07		4,658,930
	13,000,000	Chesapeake Funding Llc, Series 04-1A, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .16%, 4.73%, due 07/07/16		12,997,920
	24,000,000	Daimler Chrysler Auto Trust, Series 06-A, Class A1, 144A, 4.79%, due 03/08/07		24,000,000
	28,000,000	Daimler Chrysler Master Owner Trust, Series 04-A, Class A, Variable Rate, 1 mo. LIBOR + .03%, 4.60%, due 01/15/09		27,977,600
	9,293,552	Ford Credit Auto Owner Trust, Series 03-A, Class A4A, 2.70%, due 06/15/07		9,250,337
	29,000,000	Ford Credit Auto Owner Trust, Series 06-A, Class A2B, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 09/15/08		28,900,312
	40,000,000	Ford Credit Floorplan Master Owner Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 05/15/10		39,957,607
	13,931,801	Franklin Auto Trust, Series 05-1, Class A1, 4.50%, due 12/20/06		13,922,049
	343,683	Honda Auto Receivables Owner Trust, Series 05-3, Class A1, 3.42%, due 06/19/06		343,167
	5,271,767	Honda Auto Receivables Owner Trust, Series 05-6, Class A1, 4.51%, due 12/18/06		5,267,813
	15,000,000	Nissan Auto Receivables Owner Trust, Series 04-C, Class A4, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 03/15/10		15,004,687

See accompanying notes to the financial statements.

3

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Auto Financing — continued
	33,370,000	Nissan Master Owner Trust Receivables, Series 03-A, Class A1, Variable Rate, 1 mo. LIBOR + .06%, 4.63%, due 09/15/08		33,349,978
	12,000,000	Nissan Master Owner Trust Receivables, Series 05-A, Class A, Variable Rate, 1 mo. LIBOR + .03%, 4.60%, due 07/15/10		12,000,000
	38,000,000	Superior Wholesale Inventory Financing Trust, Series 05, Class A, Variable Rate, 1 mo. LIBOR +.18%, 4.75%, due 06/15/10		37,901,200
	32,000,000	Truck Retail Installment Paper Corp., Series 05-1A, Class A, 144A, Variable Rate, 1 mo. LIBOR +.27%, 4.84%, due 12/15/16		31,975,040
	16,000,000	Volkswagen Auto Lease Trust, Series 04-A, Class A4B, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 08/20/10		16,009,280
	10,000,000	Volkswagen Credit Auto Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .02%, 4.59%, due 07/20/10		9,996,880
	3,404,655	World Omni Auto Receivables Trust, Series 05-B, Class A1, 3.83%, due 08/21/06		3,403,299
	14,000,000	World Omni Auto Receivables Trust, Series 06-A, Class A1, 4.85%, due 03/15/07		14,000,000
				371,019,239
		Business Loans — 5.8%
	10,919,159	Bayview Commercial Asset Trust, Series 04-1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .36%, 4.94%, due 04/25/34		10,946,457
	8,775,691	Bayview Commercial Asset Trust, Series 04-3, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .37%, 4.95%, due 01/25/35		8,779,201
	23,846,782	Bayview Commercial Asset Trust, Series 05-4A, Class A2, Variable Rate, 1 mo. LIBOR + .39%, 4.97%, due 01/25/36		23,832,474
	7,239,312	Capitalsource Commercial Loan Trust, Series 04-1A, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .33%, 4.90%, due 04/20/13		7,245,828
	10,000,000	Capitalsource Commercial Loan Trust, Series 04-2A, Class A2, Variable Rate, 1 mo. LIBOR + .25%, 4.82%, due 08/20/13		10,007,000
	6,646,076	Capitalsource Commercial Loan Trust, Series 05-1A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .09%, 4.66%, due 03/22/10		6,640,759
	6,881,198	COLTS Trust, Series 04-1A, Class A, 144A, Variable Rate, 3 mo. LIBOR + .34%, 4.83%, due 09/15/14		6,887,391
	8,626,183	GE Business Loan Trust, Series 04-1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .29%, 4.86%, due 05/15/32		8,643,781

See accompanying notes to the financial statements.

4

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Business Loans — continued
	10,941,467	GE Business Loan Trust, Series 05-2A, Class A, 144A, Variable Rate, 1 mo. LIBOR + .24%, 4.81%, due 11/15/33		10,955,143
	25,000,000	GE Commercial Equipment Financing Llc, Series 05-1, Class A3B, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 03/20/09		25,003,000
	21,971,043	Lehman Brothers Small Balance Commercial, Series 05-1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 02/25/30		21,971,043
	18,631,512	Lehman Brothers Small Balance Commercial, Series 05-2, Class 1A, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 09/25/30		18,637,334
	1,527,229	Marlin Leasing Receivables Llc, Series 04-1A, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .22%, 4.79%, due 01/15/07		1,527,351
	7,673,058	Marlin Leasing Receivables Llc, Series 05-1A, Class A1, 144A, 4.05%, due 08/15/06		7,664,080
	13,000,000	Navistar Financial Dealer Note Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 02/25/13		12,989,600
	20,000,000	Navistar Financial Dealer Note Master Trust, Series 98-1, Class A, Variable Rate, 1 mo. LIBOR + .16%, 4.82%, due 07/25/11		20,022,600
	53,000,000	Textron Financial Floorplan Master Note, Series 05-1A, Class A, 144A, Variable Rate, 1 mo. LIBOR +.12%, 4.69%, due 05/13/10		53,000,000
	4,193,980	The Money Store Business Loan Backed Trust, Series 99-1, Class AN, Variable Rate, 1 mo. LIBOR +.50%, 5.07%, due 09/15/17		4,172,800
				258,925,842
		CMBS — 2.1%
	15,728,754	Bear Stearns Commercial Mortgage Securities, Inc., Series 05-PW10, Class A1, 5.09%, due 12/11/40		15,694,347
	10,000,000	Citigroup/Deutsche Bank Commercial Mortgage, Series 05-CD1, Class A2FL, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 07/15/44		9,992,000
	32,000,000	GE Capital Commercial Mortgage Corp., Series 05-C4, Class A2, 5.31%, due 11/10/45		32,025,000
	18,144,006	Greenwich Capital Commercial Funding Corp., Series 05-FL3A, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .20%, 4.86%, due 10/05/20		18,149,676
	6,390,240	J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 04-FL1A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .17%, 4.74%, due 04/16/19		6,390,943
	14,251,500	Morgan Stanley Dean Witter Capital I, Series 03-TOP9, Class A1, 3.98%, due 11/13/36		13,694,244
				95,946,210

See accompanying notes to the financial statements.

5

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		CMBS Collateralized Debt Obligations — 1.1%
	19,108,692	Crest Exeter Street Solar, Series 04-1A, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .35%, 4.87%, due 06/28/19		19,119,966
	30,000,000	Guggenheim Structured Real Estate Funding, Series 05-2A, Class A, 144A, Variable Rate, 1 mo. LIBOR + .32%, 4.90%, due 08/26/30		30,000,000
				49,119,966
		Collateralized Loan Obligations — 0.1%
	6,000,000	Archimedes Funding IV (Cayman) Ltd., 4A A1, 144A, Variable Rate, 1 mo. LIBOR + .48%, 5.28%, due 02/25/13		6,018,000
		Credit Cards — 18.0%
	40,000,000	Advanta Business Card Master Trust, Series 03-B, Class A, Variable Rate, 1 mo. LIBOR + .35%,, 4.92%, due 12/22/08		40,042,000
	13,500,000	Advanta Business Card Master Trust, Series 05-A1, Class A1, Variable Rate, 1 mo. LIBOR + .07%, 4.64%, due 04/20/11		13,504,320
	20,000,000	Advanta Business Card Master Trust, Series 05-A2, Class A2, Variable Rate, 1 mo. LIBOR + .13%, 4.70%, due 05/20/13		20,062,500
	7,000,000	Advanta Business Card Master Trust, Series 05-A5, Class A5, Variable Rate, 1 mo. LIBOR + .06%, 4.63%, due 04/20/12		6,997,900
	27,000,000	American Express Credit Account Master Trust, Series 01-7, Class A, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 02/16/09		27,014,045
	5,000,000	American Express Credit Account Master Trust, Series 03-1, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 09/15/10		5,009,450
	9,800,000	American Express Credit Account Master Trust, Series 05-3, Class A, Variable Rate, 1 mo. LIBOR, 4.57%, due 06/16/08		9,791,180
	35,000,000	American Express Credit Account Master Trust, Series 05-5, Class A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 02/15/13		35,005,600
	15,000,000	American Express Credit Account Master Trust, Series 2001-6, Class A, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 12/15/06		15,004,183
	15,000,000	American Express Credit Account Master Trust, Series 2002-6, Class A, Variable Rate, 1 mo. LIBOR + .14%, 4.71%, due 03/15/10		15,031,916
	25,000,000	Arran, Series 2005-A, Class A, Variable Rate, 1 mo. LIBOR + .02%, 4.59%, due 12/15/10		24,997,500
	20,000,000	Bank One Issuance Trust, Series 02-A5, Class A5, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 06/15/10		20,034,600
	5,000,000	Bank One Issuance Trust, Series 03-1A, Class A1, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 09/15/10		5,009,950

See accompanying notes to the financial statements.

6

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Credit Cards — continued
	7,670,000	Bank One Issuance Trust, Series 03-A10, Class A10, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 06/15/11		7,680,738
	27,715,000	Bank One Issuance Trust, Series 03-A3, Class A3, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 12/15/10		27,753,801
	12,000,000	Capital One Master Trust, Series 01-2, Class A, Variable Rate, 1 mo. LIBOR + .14%, 4.71%, due 01/15/09		12,000,480
	15,000,000	Capital One Multi-Asset Execution Trust, Series 04-A3, Class A3, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 02/15/12		15,035,156
	26,275,000	Capital One Multi-Asset Execution Trust, Series 04-A7, Class A7, Variable Rate, 3 mo. LIBOR + .15%, 4.90%, due 06/16/14		26,394,026
	25,000,000	Chase Credit Card Master Trust, Series 01-6, Class A, Variable Rate, 1 mo. LIBOR + .13%, 4.70%, due 03/16/09		25,026,207
	15,650,000	Chase Credit Card Master Trust, Series 02-1, Class A, Variable Rate, 1 mo. LIBOR +.10%, 4.67%, due 06/15/09		15,666,241
	22,000,000	Citibank Credit Card Issuance Trust, Series 01-A1, Class A1, Variable Rate, 3 mo. LIBOR + .17%, 4.88%, due 02/07/10		22,060,362
	7,500,000	Citibank Credit Card Issuance Trust, Series 03-A4, Class A4, Variable Rate, 3 mo. LIBOR + .07%, 4.57%, due 03/20/09		7,506,445
	20,000,000	Citibank Credit Card Issuance Trust, Series 04-A3, Class A3, Variable Rate, 3 mo. LIBOR + .07%, 4.69%, due 07/25/11		20,018,719
	10,000,000	Citibank Credit Card Issuance Trust, Series 05-A3, Class A3, Variable Rate, 1 mo. LIBOR + .07%, 4.64%, due 04/24/14		9,999,976
	28,000,000	Discover Card Master Trust I, Series 01-3, Class A, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 09/15/08		28,001,309
	10,000,000	Discover Card Master Trust I, Series 02-3, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 11/17/09		10,008,232
	45,000,000	Discover Card Master Trust I, Series 03-2, Class A, Variable Rate, 1 mo. LIBOR + .13%, 4.70%, due 08/15/10		45,112,500
	12,000,000	Discover Card Master Trust I, Series 03-4, Class A1, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 05/15/11		12,027,655
	7,000,000	Discover Card Master Trust I, Series 05-4, Class A1, Variable Rate, 1 mo. LIBOR + .06%, 4.63%, due 06/18/13		7,008,750
GBP	10,000,000	Earls Five Ltd., Series E, MTN, Variable Rate, 3 mo. GBP LIBOR + .14%, 4.72%, due 02/27/08		17,618,180
	25,000,000	GE Capital Credit Card Master Note Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 03/15/13		25,015,625

See accompanying notes to the financial statements.

7

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Credit Cards — continued
	5,400,000	GE Capital Credit Card Master Note Trust, Series 2004-2, Class A, Floating Rate, 1 mo. LIBOR + .04%, 4.61%, due 09/15/10		5,403,375
	20,000,000	Gracechurch Card Funding Plc, Series 2, Class A, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 10/15/09		20,034,647
	28,000,000	Gracechurch Card Funding Plc, Series 4, Class A, Variable Rate, 1 mo. LIBOR + .05%, 4.62%, due 06/15/08		28,003,920
	3,000,000	MBNA Credit Card Master Note Trust, Series 01-A5, Class A5, Variable Rate, 1 mo. LIBOR + .21%, 4.78%, due 03/15/11		3,014,220
	6,220,000	MBNA Credit Card Master Note Trust, Series 02-A9, Class A9, Variable Rate, 3 mo. LIBOR + .09%, 4.69%, due 12/15/09		6,225,540
	31,976,000	MBNA Credit Card Master Note Trust, Series 03-A3, Class A3, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 08/16/10		32,038,993
	14,000,000	MBNA Credit Card Master Note Trust, Series 04-A7, Class A7, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 12/15/11		14,039,375
	15,000,000	MBNA Credit Card Master Note Trust, Series 04-A8, Class A8, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 01/15/14		15,058,289
	19,000,000	MBNA Credit Card Master Note Trust, Series 05-A5, Class A5, Variable Rate, 1 mo. LIBOR, 4.57%, due 12/15/10		19,000,000
	9,100,000	Nordstrom Credit Card Master Note Trust, Series 02-1A, Class A, 144A, Variable Rate, 1 mo. LIBOR + .27%, 4.84%, due 10/13/10		9,124,092
	25,000,000	Pillar Funding Plc, Series 04-2, Class A, 144A, Variable Rate, 3 mo. LIBOR + .14%, 4.63%, due 09/15/11		25,037,732
	18,000,000	World Financial Network Credit Card Master Trust, Series 02-A, Class A, Variable Rate, 1 mo. LIBOR + .43%, 5.00%, due 08/15/11		18,079,200
	31,100,000	World Financial Network Credit Card Master Trust, Series 04-A, Class A, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 03/15/13		31,165,295
	7,000,000	World Financial Network Credit Card Master Trust, Series 04-A, Class B, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 07/15/10		6,998,460
				804,662,684
		Emerging Markets Collateralized Debt Obligations — 0.4%
	362,406	Oasis CBO Ltd., 144A, Variable Rate, 6 mo. LIBOR + 0.38%, 4.96%, due 05/30/11		362,406
	16,000,000	Santiago CDO Ltd., Series 05-1A, Class A, 144A, Variable Rate, 6 mo. LIBOR + .40%, 4.75%, due 04/18/17		16,025,600
				16,388,006

See accompanying notes to the financial statements.

8

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Equipment Leases — 0.9%
	7,500,000	CNH Equipment Trust, Series 04-A, Class A4A, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 09/15/11		7,507,031
	23,000,000	CNH Equipment Trust, Series 05-A, Class A4A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 06/15/12		23,003,450
	8,148,214	GE Equipment Small Ticket Llc, Series 05-2A, Class A1, 144A, 4.56%, due 12/22/06		8,142,510
				38,652,991
		High Yield Collateralized Debt Obligations — 0.1%
	572,023	Nomura CBO Ltd., Series 97-2, Class A2, 144A, Step Up, 6.26%, due 10/30/09		573,453
	3,906,367	Rhyno CBO Delaware Corp., Series 97-1, Class A-2, 144A, Step Up, 6.33%, due 09/15/09		3,914,531
	2,504,594	SHYPPCO Finance Co., Series II, Class A-2B, 144A, 6.64%, due 06/15/10		2,379,364
				6,867,348
		Insurance Premiums — 1.2%
	25,000,000	AICCO Premium Finance Master Trust, Series 04-1A, Class A, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 11/17/08		25,032,227
	16,000,000	AICCO Premium Finance Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .08%, 4.65%, due 04/15/10		15,990,400
	11,000,000	Mellon Bank Premium Finance Loan Master Trust, Series 04-1, Class A, Variable Rate, 3 mo. LIBOR + .16%, 4.65%, due 06/15/09		10,993,400
				52,016,027
		Insured Auto Financing — 2.9%
	20,000,000	Aesop Funding II Llc, Series 03-2A, Class A1, 144A, MBIA, 2.74%, due 06/20/07		19,920,200
	17,500,000	Aesop Funding II Llc, Series 03-5A, Class A2, 144A, XL Capital Assurance, Variable Rate, 1 mo. LIBOR + .38%, 4.95%, due 12/20/09		17,608,675
	9,000,000	Aesop Funding II Llc, Series 04-2A, Class A2, 144A, FGIC, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 04/20/08		9,002,812
	10,000,000	Aesop Funding II Llc, Series 05-1A, Class A3, 144A, MBIA, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 04/20/10		9,935,000
	19,550,000	AmeriCredit Automobile Receivables Trust, Series 05-BM, Class A4, MBIA, Variable Rate, 1 mo. LIBOR +.08%, 4.65%, due 05/06/12		19,565,273

See accompanying notes to the financial statements.

9

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Insured Auto Financing — continued
	1,090,944	AmeriCredit Automobile Receivables Trust, Series 05-CF, Class A1, FSA, 3.84%, due 09/06/06		1,090,868
	17,000,000	Capital One Auto Finance Trust, Series 04-A, Class A4, AMBAC, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 03/15/11		17,014,620
	11,000,000	Capital One Auto Finance Trust, Series 04-B, Class A4, MBIA, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 08/15/11		11,012,430
	8,000,000	Hertz Vehicle Financing Llc, Series 05-2A, Class A5, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 11/25/11		8,006,562
	15,000,000	Rental Car Finance Corp., Series 04-1A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 06/25/09		15,024,300
				128,180,740
		Insured Business Loans — 0.4%
	8,733,811	CNL Commercial Mortgage Loan Trust, Series 03-2A, Class A1, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .44%, 5.02%, due 10/25/30		8,793,375
	10,839,735	Golden Securities Corp., Series 03-A, Class A1, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .30%, 4.87%, due 12/02/13		10,842,229
				19,635,604
		Insured Collateralized Loan Obligations — 0.1%
	4,170,958	PAMCO CLO, Series 98-1W, Class A, 144A, FSA, Variable Rate, 3 mo. LIBOR + .17%, 4.85%, due 05/01/10		4,166,787
		Insured Credit Cards — 1.0%
	11,000,000	Cabela's Master Credit Card Trust, Series 03-1A, Class A, 144A, MBIA, Variable Rate, 1 mo. LIBOR + .30%, 4.87%, due 01/15/10		11,046,420
	35,000,000	Cabela's Master Credit Card Trust, Series 04-2A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 03/15/11		35,071,050
				46,117,470
		Insured High Yield Collateralized Debt Obligations — 1.6%
	30,961,538	Augusta Funding Ltd., Series 10A, Class F-1, 144A, CapMAC, Variable Rate, 3 mo. LIBOR +.25%, 4.27%, due 06/30/17		30,651,923
	2,030,223	Cigna CBO, Series 96-1, Class A2, 144A, CapMAC, 6.46%, due 11/15/08		2,030,223
	618,815	Clydesdale CBO I Ltd., Series 1A, Class A2, 144A, FSA, 6.83%, due 03/25/11		618,815
	1,289,248	DLJ CBO Ltd., Series 1A, Class A2, FSA, 6.68%, due 04/15/11		1,302,141

See accompanying notes to the financial statements.

10

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Insured High Yield Collateralized Debt Obligations — continued
	10,000,000	GSC Partners CDO Fund Ltd., Series 03-4A, Class A3, 144A, AMBAC, Variable Rate, 3 mo. LIBOR + .46%, 5.06%, due 12/16/15		10,000,000
	5,970,094	GSC Partners CDO Fund Ltd., Series 1A-A, 144A, FSA, Variable Rate, 6 mo. LIBOR + .40%, 4.93%, due 05/09/12		5,969,259
	19,129,167	GSC Partners CDO Fund Ltd., Series 2A, Class A, 144A, FSA, Variable Rate, 6 mo. LIBOR + .52%, 5.09%, due 05/22/13		19,181,007
	1,047,437	Spirit CBO, Series 03-4AW, AMBAC, Variable Rate, 6 mo. LIBOR + .55%, 5.14%, due 05/23/11		1,047,437
				70,800,805
		Insured Insurance Premiums — 0.6%
	25,000,000	PFS Financing Corp., Series 01-FA, Class A, MBIA, 144A, Variable Rate, 1 mo. LIBOR + .33%, 4.90%, due 06/15/08		25,021,000
		Insured Residential Asset-Backed Securities (European) — 0.7%
GBP	7,771,598	RMAC Plc, Series 03-NS1A, Class A2A, 144A, AMBAC, Variable Rate, 3 mo. GBP LIBOR + .45%, 5.09%, due 06/12/35		13,679,874
GBP	9,940,449	RMAC Plc, Series 03-NS2A, Class A2A, 144A, AMBAC, Variable Rate, 3 mo. GBP LIBOR + .40%, 5.04%, due 09/12/35		17,476,647
				31,156,521
		Insured Residential Asset-Backed Securities (United States) — 0.5%
	9,067,380	Citigroup Mortgage Loan Trust, Inc., Series 03-HE3, Class A, AMBAC, Variable Rate, 1 mo. LIBOR + .38%, 4.96%, due 12/25/33		9,109,090
	3,856,169	Quest Trust, Series 03-X4A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .43%, 5.01%, due 12/25/33		3,862,713
	3,452,595	Quest Trust, Series 04-X1, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .33%, 4.91%, due 03/25/34		3,455,012
	4,346,778	Residential Asset Securities Corp., Series 02-KS3, Class A1B, AMBAC, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 05/25/32		4,347,778
	2,028,236	Residential Asset Securities Corp., Series 02-KS5, Class AIB3, AMBAC, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 08/25/32		2,032,039
				22,806,632

See accompanying notes to the financial statements.

11

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Insured Residential Mortgage-Backed Securities (United States) — 2.2%
	3,815,516	Chevy Chase Mortgage Funding Corp., Series 03-4, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .34%, 4.72%, due 10/25/34		3,820,095
	10,288,186	Chevy Chase Mortgage Funding Corp., Series 04-1A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .33%, 4.71%, due 01/25/38		10,295,388
	37,000,000	GMAC Mortgage Corp. Loan Trust, Series 05-HE3, Class A1, AMBAC, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 02/25/36		37,005,781
	2,352,723	GreenPoint Home Equity Loan Trust, Series 04-1, Class A, AMBAC, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 07/25/29		2,353,829
	2,828,914	GreenPoint Home Equity Loan Trust, Series 04-4, Class A, AMBAC, Variable Rate, 1 mo. LIBOR + .28%, 4.85%, due 08/15/30		2,833,214
	6,314,517	Lehman ABS Corp., Series 04-2, Class A, AMBAC, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 06/25/34		6,316,491
	2,026,508	Residential Funding Mortgage Securities II, Series 03-HS1, Class AII, FGIC, Variable Rate, 1 mo. LIBOR + .29%, 4.87%, due 12/25/32		2,027,774
	14,383,257	SBI Heloc Trust, Series 05-HE1, Class 1A, 144A, FSA, Variable Rate, 1 mo. LIBOR + .19%, 4.77%, due 11/25/35		14,383,257
	9,831,220	Wachovia Asset Securitization Inc., Series 02-HE1, Class A, AMBAC, Variable Rate, 1 mo. LIBOR + .37%, 4.95%, due 09/27/32		9,856,290
	10,949,416	Wachovia Asset Securitization Inc., Series 04-HE1, Class A, MBIA, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 06/25/34		10,953,686
				99,845,805
		Insured Time Share — 0.5%
	6,953,383	Cendant Timeshare Receivables Funding Llc, Series 04-1A, Class A2, 144A, MBIA, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 05/20/16		6,953,362
	14,817,116	Cendant Timeshare Receivables Funding Llc, Series 05-1A, Class A2, 144A, FGIC, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 05/20/17		14,817,116
				21,770,478
		Insured Transportation — 0.3%
	12,250,000	GE Seaco Finance, Series 04-1A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .30%, 4.87%, due 04/17/19		12,250,000
		Investment Grade Corporate Collateralized Debt Obligations — 3.3%
	20,000,000	Counts Trust, Series 04-2, 144A, Variable Rate, 3 mo. LIBOR + .95%, 5.45%, due 09/20/09		20,419,200

See accompanying notes to the financial statements.

12

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Investment Grade Corporate Collateralized Debt Obligations — continued
	10,000,000	Morgan Stanley ACES SPC, Series 04-12, Class A, 144A, Variable Rate, 3 mo. LIBOR + .60%, 5.31%, due 08/05/09		10,019,125
	7,000,000	Morgan Stanley ACES SPC, Series 04-12, Class I, 144A, Variable Rate, 3 mo. LIBOR + .80%, 5.51%, due 08/05/09		6,993,000
	6,000,000	Morgan Stanley ACES SPC, Series 04-15, Class I, 144A, Variable Rate, 3 mo. LIBOR + .45%, 4.95%, due 12/20/09		6,008,437
	11,000,000	Morgan Stanley ACES SPC, Series 04-15, Class II, 144A, Variable Rate, 3 mo. LIBOR + .65%, 5.15%, due 12/20/09		11,021,270
	3,000,000	Morgan Stanley ACES SPC, Series 04-15, Class III, 144A, Variable Rate, 3 mo. LIBOR + .75%, 5.25%, due 12/20/09		2,993,400
	16,000,000	Morgan Stanley ACES SPC, Series 05-10, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .52%, 5.02%, due 03/20/10		16,000,000
	30,000,000	Morgan Stanley ACES SPC, Series 05-15, Class A, 144A, Variable Rate, 3 mo. LIBOR + .40%, 4.90%, due 12/20/10		30,037,500
	16,000,000	Morgan Stanley ACES SPC, Series 05-2A, Class A, 144A, Variable Rate, 3 mo. LIBOR + .45%, 4.95%, due 03/20/10		16,000,000
	30,000,000	Salisbury International Investments Ltd., Series E, MTN, Variable Rate, 3 mo. LIBOR + .42%, 4.92%, due 06/22/10		29,865,000
				149,356,932
		Other — 0.8%
	5,000,000	Ensec Home Finance Pool Ltd., Series 05-R1A, 144A, Variable Rate, 1 mo. LIBOR + .20%, 4.77%, due 05/15/14		5,003,754
	29,000,000	TIB Card Receivables Fund, 144A, FGIC, Variable Rate, 4 mo. LIBOR + .25%, 4.79%, due 01/05/14		28,982,600
				33,986,354
		Rate Reduction Bonds — 1.6%
	6,640,682	California Infrastructure PG&E, Series 97-1, Class A7, 6.42%, due 09/25/08		6,664,522
	3,510,000	Connecticut RRB Special Purpose Trust CL&P-1, Series 01-1, Class A4, Variable Rate, 3 mo. LIBOR + .31%, 4.84%, due 12/30/10		3,509,812
	23,000,000	Massachusetts RRB Special Purpose Trust, Series 2005-1, Class A3, 4.13%, due 09/15/13		22,242,478
	30,000,000	PG&E Energy Recovery Funding Llc, Series 05-1, Class A4, 4.37%, due 06/25/14		28,973,220

See accompanying notes to the financial statements.

13

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Rate Reduction Bonds — continued
	12,500,000	PSE&G Transition Funding Llc, Series 01-1, Class A4, Variable Rate, 3 mo. LIBOR + .30%, 4.79%, due 06/15/11		12,560,457
				73,950,489
		Residential Asset-Backed Securities (United States) — 21.8%
	6,682,588	ACE Securities Corp., Series 04-OP1, Class A2B, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 04/25/34		6,683,590
	16,378,000	ACE Securities Corp., Series 05-AG1, Class A2B, Variable Rate, 1 mo. LIBOR + .21%, 4.79%, due 08/25/35		16,380,457
	20,000,000	ACE Securities Corp., Series 05-ASP1, Class A2B, Variable Rate, 1 mo. LIBOR + .21%, 4.85%, due 09/25/35		20,022,400
	7,000,000	ACE Securities Corp., Series 05-ASP1, Class A2C, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 09/25/35		7,006,720
	36,409,000	ACE Securities Corp., Series 06-ASP1, Class A2B, 4.73%, due 12/25/35		36,409,000
	8,184,000	ACE Securities Corp., Series 06-ASP1, Class A2B, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 12/25/35		8,187,437
	34,170,473	ACE Securities Corp., Series 06-SL1, Class A, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 09/25/35		34,175,940
	3,331,908	Aegis Asset Backed Securities Trust, Series 04-1, Class A, Variable Rate, 1 mo. LIBOR + .35%, 4.93%, due 04/25/34		3,333,973
	15,000,000	Aegis Asset Backed Securities Trust, Series 04-5, Class 1A2, Variable Rate, 1 mo. LIBOR + .34%, 4.92%, due 03/25/31		15,016,350
	29,835,000	Aegis Asset Backed Securities Trust, Series 04-6, Class 1A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 03/25/25		29,872,294
	14,346,555	Aegis Asset Backed Securities Trust, Series 05-3, Class A1, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 08/25/35		14,347,114
	7,000,000	Aegis Asset Backed Securities Trust, Series 05-5 , Class 1A2, Variable Rate, 1 mo. LIBOR + .18%, 4.76%, due 12/25/35		7,009,870
	5,034,681	Ameriquest Mortgage Securities, Inc., Series 04-R2, Class A3, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 04/25/34		5,035,271
	22,000,000	Argent Securities, Inc., Series 04-W8, Class A5, Variable Rate, 1 mo. LIBOR + .52%, 5.10%, due 05/25/34		22,079,062
	35,000,000	Argent Securities, Inc., Series 06-W2, Class A2B, Variable Rate, 1 mo. LIBOR + .19%, 4.77%, due 03/25/36		35,000,000
	10,000,000	Bayview Financial Acquisition Trust, Series 04-B, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .50%, 5.11%, due 05/28/39		10,010,937

See accompanying notes to the financial statements.

14

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	10,400,000	Bayview Financial Acquisition Trust, Series 04-B, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .65%, 5.26%, due 05/28/39		10,411,375
	15,000,000	Bayview Financial Acquisition Trust, Series 05-A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .50%, 5.11%, due 02/28/40		15,030,469
	4,000,000	Carrington Mortgage Loan Trust, Series 05-OPT2, Class A1B, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 05/25/35		3,996,800
	26,000,000	Carrington Mortgage Loan Trust, Series 05-OPT2, Class A1C, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 05/25/35		25,979,200
	3,409,065	Centex Home Equity, Series 04-B, Class AV3, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 03/25/34		3,409,597
	202,296	Centex Home Equity, Series 04-C, Class AV3, Variable Rate, 1 mo. LIBOR + .13%, 4.71%, due 11/25/28		202,300
	9,400,000	Centex Home Equity, Series 05-A, Class AV2, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 07/25/34		9,400,000
	7,000,000	Centex Home Equity, Series 05-A, Class AV3, Variable Rate, 1 mo. LIBOR + .34%, 4.92%, due 01/25/35		7,008,750
	32,000,000	Centex Home Equity, Series 05-C, Class AV3, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 06/25/35		32,040,000
	1,418,157	Chase Funding Mortgage Loan Trust, Series 03-3, Class 2A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 04/25/33		1,419,575
	2,081,365	Citifinancial Mortgage Securities, Inc., Series 04-1, Class AF1, Variable Rate, 1 mo. LIBOR + .09%, 4.67%, due 04/25/34		2,080,117
	4,212,238	Citigroup Mortgage Loan Trust, Inc., Series 04-OPT1, Class A1B, Variable Rate, 1 mo. LIBOR + .41%, 4.99%, due 10/25/34		4,227,402
	6,607,171	Countrywide Asset-Backed Certificates, Series 04-9, Class 2AV2, Variable Rate, 1 mo. LIBOR + .34%, 4.92%, due 05/25/33		6,611,115
	16,812,355	Countrywide Asset-Backed Certificates, Series 05-4, Class AF1, Variable Rate, 1 mo. LIBOR + .13%, 4.71%, due 10/25/35		16,812,519
	6,421,182	Credit-Based Asset Servicing and Securitization, Series 04-CB6, Class AV1, Variable Rate, 1 mo. LIBOR + .33%, 4.91%, due 07/25/35		6,432,219
	2,810,101	Equity One ABS, Inc., Series 04-1, Class AV2, Variable Rate, 1 mo. LIBOR + .30%, 4.88%, due 04/25/34		2,810,979
	30,000,000	Fremont Home Loan Trust, Series 05-B, Class 2A2, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 04/25/35		29,985,613
	11,000,000	Fremont Home Loan Trust, Series 05-C, Class 2A2, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 07/25/35		11,003,437

See accompanying notes to the financial statements.

15

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	29,477,000	GE-WMC Mortgage Securities, Series 05-2, Class A2B, Variable Rate, 1 mo. LIBOR + .17%, 4.75%, due 12/25/35		29,500,029
	26,800,000	Greenpoint Mortgage Funding Trust, Series 05-HE1, Class A2, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 09/25/34		26,800,000
	10,659,000	GreenPoint Mortgage Funding Trust, Series 05-HE4, Class 2A3C, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 07/25/30		10,668,993
	19,145,000	GSAMP Trust, Series 05-HE3, Class A2B, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 06/25/35		19,136,507
	10,874,342	Household Home Equity Loan Trust, Series 05-2, Class A2, Variable Rate, 1 mo. LIBOR + .31%, 4.88%, due 01/20/35		10,894,731
	11,822,070	Household Home Equity Loan Trust, Series 05-3, Class A2, Variable Rate, 1 mo. LIBOR + .29%, 4.86%, due 01/20/35		11,838,233
	5,352,164	Household Mortgage Loan Trust, Series 04-HC1, Class A, Variable Rate, 1 mo. LIBOR + .35%, 4.92%, due 02/20/34		5,355,391
	691,754	Indy Mac Home Equity Loan Asset-Backed Trust, Series 04-C, Class 2A1, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 03/25/35		691,761
	3,586,332	Master Asset Backed Securities Trust, Series 04-OPT1, Class A3, Variable Rate, 1 mo. LIBOR + .26%, 4.84%, due 02/25/34		3,587,049
	10,000,000	Master Asset Backed Securities Trust, Series 05-FRE1, Class A4, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 10/25/35		9,999,000
	10,321,812	Master Asset Backed Securities Trust, Series 05-HE1, Class A1, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 05/25/35		10,320,780
	14,000,000	Master Asset Backed Securities Trust, Series 06-HE1, Class A1, Variable Rate, 1 mo. LIBOR + .08%, 4.66%, due 01/25/36		14,000,000
	30,828,000	Master Second Lien Trust, Series 06-1, Class A, Variable Rate, 1 mo. LIBOR + .16%, 4.73%, due 09/25/08		30,803,338
	15,000,000	Morgan Stanley ABS Capital I, Series 04-HE5, Class A4, Variable Rate, 1 mo. LIBOR + .53%, 5.11%, due 06/25/34		15,121,875
	8,191,456	Morgan Stanley ABS Capital I, Series 04-HE9, Class A3C, Variable Rate, 1 mo. LIBOR + .30%, 4.88%, due 11/25/34		8,206,815
	6,467,993	Morgan Stanley ABS Capital I, Series 04-NC4, Class A3, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 04/25/34		6,470,768
	8,487,067	Morgan Stanley ABS Capital I, Series 04-SD1, Class A, Variable Rate, 1 mo. LIBOR + .40%, 4.98%, due 08/25/34		8,495,023
	11,795,600	New Century Home Equity Loan Trust, Series 04-3, Class A5, Variable Rate, 1 mo. LIBOR + .35%, 4.93%, due 11/25/34		11,814,031

See accompanying notes to the financial statements.

16

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	10,527,521	New Century Home Equity Loan Trust, Series 05-3, Class A2A, Variable Rate, 1 mo. LIBOR + .09%, 4.67%, due 07/25/35		10,531,216
	20,000,000	Nomura Home Equity Loan, Inc., Series 05-FM1, Class 2A2, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 05/25/35		20,000,000
	16,016,000	Nomura Home Equity Loan, Inc., Series 06-FM1, Class 2A2, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 11/25/35		16,016,000
	4,000,000	Option One Mortgage Loan Trust, Series 05-3, Class A4, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 08/25/35		4,000,000
	12,003,526	Ownit Mortgage Loan Asset Backed Certificates, Series 05-2, Class A2A, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 03/25/36		12,003,526
	33,000,000	Park Place Securities, Inc., Series 05-WCW2, Class A2B, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 07/25/35		32,967,000
	28,000,000	People's Choice Home Loan Securities Trust, Series 05-4, Class 1A2, Variable Rate, 1 mo. LIBOR + .26%, 4.84%, due 12/25/35		28,048,160
	25,000,000	People's Choice Home Loan Securities, Series 05-3, Class 1A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 08/25/35		25,031,250
	22,751,937	RAAC, Series 05-RP3, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 05/29/39		22,743,519
	16,000,000	Residential Asset Mortgage Products, Inc., Series 05-RS4, Class A3, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 04/25/35		16,012,500
	12,000,000	Residential Asset Mortgage Products, Inc., Series 05-RS8 Class A2, 4.82%, due 10/25/33		12,025,308
	3,830,304	Saxon Asset Securities Trust, Series 04-1, Class A, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 03/25/35		3,832,697
	8,864,395	Security National Mortgage Loan Trust, Series 05-2A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .29%, 4.87%, due 02/25/36		8,869,935
	14,455,000	SG Mortgage Securities Trust, Series 05-OPT1, Class A2, Variable Rate, 1 mo. LIBOR + .26%, 4.84%, due 10/25/35		14,479,863
	5,465,372	Specialty Underwriting & Residential Finance, Series 05-BC2, Class A2A, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 12/25/35		5,464,518
	13,000,000	Structured Asset Investment Loan Trust, Series 06-1, Class A3, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 01/25/36		13,002,032
	34,000,000	Structured Asset Securities Corp., Series 05-S6, Class A2, Variable Rate, 1 mo. LIBOR + .29%, 4.87%, due 11/25/35		34,053,142
	4,294,679	Wells Fargo Home Equity Trust, Series 04-2, Class AI1A, Variable Rate, 1 mo. LIBOR + .17%, 4.75%, due 02/25/18		4,294,008
				976,510,880

See accompanying notes to the financial statements.

17

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Mortgage-Backed Securities (Australian) — 4.5%
	18,121,765	Australian Mortgage Securities II, G3 A1A, Variable Rate, 3 mo. LIBOR + .21%, 4.76%, due 01/10/35		18,161,271
	18,358,665	Crusade Global Trust, Series 04-2, Class A1, Variable Rate, 3 mo. LIBOR + .13%, 4.90%, due 11/19/37		18,381,949
	8,865,184	Crusade Global Trust, Series 05-1, Class A1, Variable Rate, 3 mo. LIBOR + .06%, 4.56%, due 06/17/37		8,860,042
	25,000,000	Crusade Global Trust, Series 06-1, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .06%, 4.74%, due 07/20/38		25,000,000
	14,567,770	Interstar Millennium Trust, Series 03-3G, Class A2, Variable Rate, 3 mo. LIBOR + .25%, 4.77%, due 09/27/35		14,600,031
	14,224,355	Interstar Millennium Trust, Series 03-5G, Class A2, Variable Rate, 3 mo. LIBOR + .25%, 4.85%, due 01/20/36		14,254,420
	14,795,109	Interstar Millennium Trust, Series 04-2G, Class A, Variable Rate, 3 mo. LIBOR + .20%, 4.69%, due 03/14/36		14,818,257
	9,307,726	Medallion Trust, Series 03-1G, Class A, Variable Rate, 3 mo. LIBOR + .19%, 4.69%, due 12/21/33		9,327,551
	7,872,363	Medallion Trust, Series 04-1G, Class A1, Variable Rate 3 mo. LIBOR + .13%, 4.93%, due 05/25/35		7,875,512
	5,711,969	Medallion Trust, Series 04-1G, Class A1, Variable Rate, 3 mo. LIBOR + .13%, 4.93%, due 05/25/35		5,714,254
	7,201,924	Medallion Trust, Series 05-1G, Class A1, Variable Rate, 3 mo. LIBOR + .08%, 4.80%, due 05/10/36		7,200,340
	23,503,453	National RMBS Trust, Series 04-1, Class A1, Variable Rate, 3 mo. LIBOR + .11%, 4.61%, due 03/20/34		23,521,081
	7,826,455	Superannuation Members Home Loans Global Fund, Series 7, Class A1, Variable Rate, 3 mo. LIBOR + .14%, 4.60%, due 03/09/36		7,833,655
	6,593,710	Superannuation Members Home Loans Global Fund, Series 8, Class A1, Variable Rate, 3 mo. LIBOR + .07%, 4.64%, due 01/12/37		6,594,738
	21,423,706	Westpac Securitization Trust, Series 05-1G, Class A1, Variable Rate, 3 mo. LIBOR + .07%, 4.57%, due 03/23/36		21,412,780
				203,555,881
		Residential Mortgage-Backed Securities (European) — 4.6%
	15,000,000	Gracechurch Mortgage Funding Plc, Series 1A, Class A2B, 144A, Variable Rate, 3 mo. LIBOR + .07%, 4.60%, due 10/11/41		14,995,076
	8,571,425	Granite Master Issuer Plc, Series 05-1, Class A1, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 12/20/19		8,571,401

See accompanying notes to the financial statements.

18

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Mortgage-Backed Securities (European) — continued
	9,000,000	Granite Master Issuer Plc, Series 05-2, Class A4, Variable Rate, 3 mo. LIBOR + .08%, 4.85%, due 12/20/54		9,004,219
	15,000,000	Granite Mortgages Plc, Series 04-3, Class 2A1, Variable Rate, 3 mo. LIBOR + .14%, 4.64%, due 09/20/44		15,027,000
	18,668,200	Leek Finance Plc, Series 14A, Class A2B, 144A, Variable Rate, 3 mo. LIBOR + .18%, 4.83%, due 09/21/36		18,673,800
	22,113,250	Leek Finance Plc, Series 15A, Class AB, 144A, Variable Rate, 3 mo. LIBOR + .14%, 4.64%, due 03/21/37		22,102,193
	8,000,000	Leek Finance Plc, Series 16A, Class A1B, 144A, Variable Rate, 3 mo. LIBOR + .06%, 4.36%, due 09/21/37		7,997,600
	9,888,200	Lothian Mortgages Plc, Series 3A, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .14%, 4.76%, due 07/24/19		9,895,122
	14,000,000	Paragon Mortgages Plc, Series 6A, Class A2A, 144A, Variable Rate, 3 mo. LIBOR + .35%, 4.84%, due 03/15/30		14,013,791
	15,951,288	Paragon Mortgages Plc, Series 7A, Class A1A, 144A, Variable Rate, 3 mo. LIBOR + .46%, 4.96%, due 05/15/34		15,961,698
	20,000,000	Permanent Financing Plc, Series 5, Class 2A, Variable Rate, 3 mo. LIBOR + .11%, 4.59%, due 06/10/11		20,016,000
	10,000,000	Permanent Financing Plc, Series 6, Class 2A, Variable Rate, 3 mo. LIBOR + .09%, 4.57%, due 12/10/11		9,989,000
	5,000,000	Permanent Financing Plc, Series 7, Class 2A, Variable Rate, 3 mo. LIBOR + .04%, 4.52%, due 09/10/14		5,000,000
	22,500,000	Permanent Financing Plc, Series 8, Class 2A, Variable Rate, 3 mo. LIBOR + .07%, 4.55%, due 06/10/14		22,482,000
	13,998,720	Residential Mortgage Securities, Series 20A, Class A1B, 144A, Variable Rate, 3 mo. LIBOR + .07%, 4.79%, due 08/10/30		13,989,971
				207,718,871
		Residential Mortgage-Backed Securities (United States) — 0.4%
	5,480,182	Chevy Chase Mortgage Funding Corp., Series 04-3, Class A2, Variable Rate, 1 mo. LIBOR + .25%, 4.63%, due 08/25/35		5,431,956
	13,284,492	Mellon Residential Funding Corp., Series 04-TBC1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 02/26/34		13,284,492
				18,716,448

See accompanying notes to the financial statements.

19

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Student Loans — 6.7%
	22,000,000	College Loan Corp. Trust, Series 04-1, Class A2, Variable Rate, 3 mo. LIBOR + .11%, 4.73%, due 04/25/16		22,028,600
	8,000,000	College Loan Corp. Trust, Series 05-1, Class A1, Variable Rate, 3 mo. LIBOR + .03%, 4.65%, due 01/25/14		7,997,600
	16,969,513	Collegiate Funding Services Education Loan Trust I, Series 05-A, Class A1, Variable Rate, 3 mo. LIBOR + .02%, 4.54%, due 09/29/14		16,968,850
	19,500,000	Keycorp Student Loan Trust, Series 05-A, Class 2A1, Variable Rate, 3 mo. LIBOR + .05%, 4.24%, due 09/27/21		19,491,030
	11,351,290	Montana Higher Education Student Assistance Corp., Series 05-1, Class A, Variable Rate, 3 mo. LIBOR +.04%, 4.54%, due 06/20/15		11,344,479
	17,589,268	National Collegiate Student Loan Trust, Series 04-1, Class A1, Variable Rate, 3 mo. LIBOR +.12%, 4.64%, due 06/25/14		17,594,545
	15,494,015	National Collegiate Student Loan Trust, Series 04-2, Class A1, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 04/25/23		15,488,902
	20,000,000	Nelnet Educational Loan Funding Corp., Series 04-2A, Class A3, Variable Rate, 3 mo. LIBOR + .10%, 4.90%, due 11/25/15		20,011,600
	37,000,000	Nelnet Student Loan Trust, Series 05-3, Class A3, Variable Rate, 3 mo. LIBOR + .05%, 4.55%, due 06/22/17		37,000,000
	20,000,000	SLM Student Loan Trust, Series 05-10, Class A2, Variable Rate, 3 mo. LIBOR + .01%, 4.57%, due 04/25/15		19,989,063
	17,000,000	SLM Student Loan Trust, Series 05-3, Class A3, Variable Rate, 3 mo. LIBOR + .03%, 4.65%, due 07/25/16		16,975,727
	30,000,000	SLM Student Loan Trust, Series 05-6, Class A2, Variable Rate, 3 mo. LIBOR, 4.62%, due 07/25/16		29,990,625
	28,449,755	SLM Student Loan Trust, Series 05-7, Class A1, Variable Rate, 3 mo. LIBOR, 4.62%, due 01/25/18		28,055,726
	28,000,000	SLM Student Loan Trust, Series 06-1, Class A1, Variable Rate, 3 mo. LIBOR - .02%, 4.61%, due 01/25/12		28,000,000
	7,691,815	SMS Student Loan Trust, Series 97-A, Class A, Variable Rate, 3 mo. U.S. Treasury Bill + .60%, 5.16%, due 10/27/25		7,726,197
				298,662,944
		Trade Receivable — 0.3%
	13,000,000	SSCE Funding Llc, Series 04-1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .23%, 4.80%, due 11/15/10		13,008,125
		Total Asset-Backed Securities		4,198,272,594

See accompanying notes to the financial statements.

20

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Corporate Debt — 1.0%
	22,000,000	TIAA Global Markets, 144A, Variable Rate, 3 mo. LIBOR + .10%, 4.67%, due 01/12/11		22,011,000
	20,500,000	Westralia Airports Corp., 144A, MBIA, 6.48%, due 04/01/10		21,358,745
				43,369,745
		U.S. Government — 0.2%
	10,000,000	U.S. Treasury Note, 2.25%, due 04/30/06(a)		9,959,375
		U.S. Government Agency — 1.6%
	800,000	Agency for International Development Floater (Support of Belize), Variable Rate, 6 mo. U.S. Treasury Bill + .50%, 5.25%, due 01/01/14		799,000
	2,920,000	Agency for International Development Floater (Support of C.A.B.E.I.), Variable Rate, 6 mo. U.S. Treasury Bill + .40%, 5.15%, due 10/01/12		2,909,050
	1,203,594	Agency for International Development Floater (Support of Honduras), Variable Rate, 3 mo. U.S. Treasury Bill x 117%, 4.49%, due 10/01/11		1,195,320
	15,000,000	Agency for International Development Floater (Support of India), Variable Rate, 3 mo. LIBOR + .10%, 4.79%, due 02/01/27		14,887,500
	4,244,853	Agency for International Development Floater (Support of Jamaica), Variable Rate, 6 mo. U.S. Treasury Bill + .75%, 5.50%, due 03/30/19		4,258,118
	19,000,000	Agency for International Development Floater (Support of Morocco), Variable Rate, 6 mo. LIBOR - .015%, 4.93%, due 02/01/25		18,750,625
	15,000,000	Agency for International Development Floater (Support of Morocco), Variable Rate, 6 mo. LIBOR + .15%, 5.09%, due 10/29/26		14,962,500
	1,008,720	Agency for International Development Floater (Support of Morocco), Variable Rate, 6 mo. U.S. Treasury Bill + .45%, 5.20%, due 11/15/14		1,003,677
	1,856,571	Agency for International Development Floater (Support of Peru), Series A, Variable Rate, 6 mo. U.S. Treasury Bill +.35%, 5.10%, due 05/01/14		1,843,806
	12,337,500	Agency for International Development Floater (Support of Tunisia), Variable Rate, 6 mo. LIBOR, 4.94%, due 07/01/23		12,244,969
	1,000,001	Agency for International Development Floater (Support of Zimbabwe), Variable Rate, 3 mo. U.S. Treasury Bill X 115%, 4.82%, due 01/01/12		988,126
				73,842,691
		TOTAL DEBT OBLIGATION(S) (COST $4,327,276,662)		4,325,444,405

See accompanying notes to the financial statements.

21

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Principal Amount / Shares / Par Value ($)		Description	Value ($)
		CALL OPTIONS PURCHASED — 0.0%
		Options on Bonds — 0.0%
	25,000,000	Bellsouth Telecommunications, 7.00%, due 12/01/95, Expires 10/26/06, Strike 100.00		777,585
		TOTAL CALL OPTIONS PURCHASED (COST $2,281,250)		777,585
		MUTUAL FUNDS — 0.7%
	29,902,734	Merrimac Cash Series, Premium Class		29,902,734
		TOTAL MUTUAL FUNDS (COST $29,902,734)		29,902,734
		SHORT-TERM INVESTMENT(S) — 2.8%
	50,000,000	Rabobank USA Financial Corp. Commercial Paper, 4.54%, due 03/01/2006		50,000,000
	75,000,000	UBS Financial Corp. Commercial Paper, 4.48%, due 03/01/2006		75,000,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $125,000,000)		125,000,000
		TOTAL INVESTMENTS — 100.0% (Cost $4,484,460,646)		4,481,124,724
		Other Assets and Liabilities (net) — 0.0%		(812,341	)
		TOTAL NET ASSETS — 100.0%	$	4,480,312,383

See accompanying notes to the financial statements.

22

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Sales
	260	U.S. Treasury Note 5 Yr. (CBT)	June 2006	$	27,296,962	$	(51,788	)

At February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Forward currency contracts

Settlement Date		Deliver		Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Sales
	4/11/06		GBP		25,000,000	$	43,861,810	$	535,690

Swap Agreements

Credit Default Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable on Default		Net Unrealized Appreciation (Depreciation)
	60,000,000	USD	9/20/2010	Morgan Stanley					Credit Swap
				Capital Services Inc.	Receive		0.40	%	Eagle Creek
									CDO		$	94,172
	31,000,000	USD	3/20/2013	Morgan Stanley
				Capital Services Inc.	Receive		0.25	%	MS Synthetic
										2006-1		(184,701	)
	28,000,000	USD	3/20/2015	Lehman Brothers	Receive		0.88	%	Credit Swap AAA
									CDO			(442,696	)
											$	(533,225	)

See accompanying notes to the financial statements.

23

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Interest Rate Swaps

Notional Amount

Expiration Date

Counterparty

Receive (Pay)

Fixed Rate

Variable Rate

Net Unrealized Appreciation (Depreciation)

50,000,000

USD

1/09/2008

JP Morgan

Chase Bank

(Pay)

3.43

%

3 month LIBOR

$

1,581,460

45,000,000

USD

3/04/2008

JP Morgan

Chase Bank

(Pay)

3.10

%

3 month LIBOR

1,751,611

*

40,000,000

USD

1/24/2011

Goldman Sachs

(Pay)

6.07

%

3 month LIBOR

(1,704,741

)**

30,000,000

USD

2/07/2012

Deutsche Bank

AG

(Pay)

4.33

%

3 month LIBOR

1,129,204

38,100,000

USD

2/24/2013

JP Morgan

Chase Bank

(Pay)

4.54

%

3 month LIBOR

1,180,781

*

$

3,938,315

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	50,000,000	USD	3/01/2006	Citigroup	1 month LIBOR	Return on Lehman
					- 0.025%	Brothers CMBS AAA	$	(98,876	)
	65,000,000	USD	3/31/2006	Citigroup	1 month LIBOR	Return on Lehman
					+ 0.15%	Brothers CMBS AAA		(137,071	)
							$	(235,947	)

*  Includes unrealized gains of $513,041 incurred by GMO Alpha LIBOR Fund prior to transfer to the Fund on March 31, 2004.

**  Includes unrealized gains of $4,887,149 incurred by GMO Alpha LIBOR Fund prior to transfer to the Fund on November 27, 2002.

See accompanying notes to the financial statements.

24

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ACES - Aerolineas Centrales de Colombia

AMBAC - Insured as to the payment of principal and interest by AMBAC Assurance Corporation.

C.A.B.E.I. - Central American Bank of Economic Integration

CapMAC - Insured as to the payment of principal and interest by Capital Markets Assurance Corporation.

CBO - Collateralized Bond Obligation

CDO - Collateralized Debt Obligation

CLO - Collateralized Loan Obligation

CMBS - Commercial Mortgage Backed Security

FGIC - Insured as to the payment of principal and interest by Financial Guaranty Insurance Corporation.

FSA - Insured as to the payment of principal and interest by Financial Security Assurance.

GBP - British Pound

GMAC - Insured as to the payment of principal and interest by General Motors Acceptance Corporation.

LIBOR - London Interbank Offered Rate

MBIA - Insured as to the payment of principal and interest by MBIA Insurance Corp.

MTN - Medium Term Note

USD - United States Dollar

(a)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

See accompanying notes to the financial statements.

25

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $4,484,460,646) (Note 2)	$	4,481,124,724
Cash		3,851,104
Receivable for Fund shares sold		15,475,000
Interest receivable		14,792,382
Unrealized appreciation on open forward currency contracts (Note 2)		535,690
Receivable for open swap contracts (Note 2)		5,737,228
Receivable for expenses reimbursed by Manager (Note 3)		67,389
Total assets		4,521,583,517
Liabilities:
Payable for investments purchased		38,000,000
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		6,971
Interest payable for open swap contracts (Note 2)		380,244
Payable for open swap contracts (Note 2)		2,568,085
Payable for variation margin on open futures contracts (Note 2)		60,315
Accrued expenses		255,519
Total liabilities		41,271,134
Net assets	$	4,480,312,383
Net assets consist of:
Paid-in capital	$	4,449,646,723
Accumulated undistributed net investment income		57,266,002
Accumulated net realized loss		(31,531,841	)
Net unrealized appreciation		4,931,499
	$	4,480,312,383
Net assets:	$	4,480,312,383
Shares outstanding		175,028,944
Net asset value per share	$	25.60

See accompanying notes to the financial statements.

26

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest (including securities lending income of $435)	$	159,156,464
Total investment income		159,156,464
Expenses:
Custodian, fund accounting agent and transfer agent fees		448,389
Audit and tax fees		112,236
Legal fees		96,258
Trustees fees and related expenses (Note 3)		74,980
Interest expense (Note 2)		529,506
Miscellaneous		70,513
Total expenses		1,331,882
Fees and expenses reimbursed by Manager (Note 3)		(677,613	)
Net expenses		654,269
Net investment income (loss)		158,502,195
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		826,998
Closed futures contracts		735,354
Closed swap contracts		2,505,303
Foreign currency, forward contracts and foreign currency related transactions		3,559,937
Net realized gain (loss)		7,627,592
Change in net unrealized appreciation (depreciation) on:
Investments		(12,899,266	)
Open futures contracts		(323,172	)
Open swap contracts		(111,928	)
Foreign currency, forward contracts and foreign currency related transactions		2,083,982
Net unrealized gain (loss)		(11,250,384	)
Net realized and unrealized gain (loss)		(3,622,792	)
Net increase (decrease) in net assets resulting from operations	$	154,879,403

See accompanying notes to the financial statements.

27

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	158,502,195		$	65,897,081
Net realized gain (loss)		7,627,592			(9,874,861	)
Change in net unrealized appreciation (depreciation)		(11,250,384	)		5,200,805
Net increase (decrease) in net assets from operations		154,879,403			61,223,025
Distributions to shareholders from:
Net investment income		(117,072,626	)		(43,986,168	)
Net realized gains		—			(1,370,773	)
		(117,072,626	)		(45,356,941	)
Net share transactions (Note 7):		958,616,426			1,716,487,912
Total increase (decrease) in net assets		996,423,203			1,732,353,996
Net assets:
Beginning of period		3,483,889,180			1,751,535,184
End of period (including accumulated undistributed net investment income of $57,266,002 and $7,014,031, respectively)	$	4,480,312,383		$	3,483,889,180

See accompanying notes to the financial statements.

28

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Financial Highlights
(For a share outstanding throughout each period)

	Year Ended February 28/29
	2006			2005			2004			2003(a)
Net asset value, beginning of period	$	25.33		$	25.18		$	25.01		$	25.00
Income (loss) from investment operations:
Net investment income (loss)†		1.01			0.59			0.56			0.18
Net realized and unrealized gain (loss)		(0.03	)		(0.09	)		0.06	(b)		(0.12	)
Total from investment operations		0.98			0.50			0.62			0.06
Less distributions to shareholders:
From net investment income		(0.71	)		(0.34	)		(0.45	)		(0.05	)
From net realized gains		—			(0.01	)		—			—
Total distributions		(0.71	)		(0.35	)		(0.45	)		(0.05	)
Net asset value, end of period	$	25.60		$	25.33		$	25.18		$	25.01
Total Return(c)		3.89	%		2.01	%		2.48	%		0.24	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	4,480,312		$	3,483,889		$	1,751,535		$	1,146,954
Net operating expenses to average daily net assets(d)		0.00	%		0.00	%		0.00	%		0.00	%*
Interest expense to average daily net assets		0.02	%		—			0.00	%(e)		—
Total net expenses to average daily net assets		0.02	%		0.00	%(f)		0.00	%(f)		0.00	%*
Net investment income to average daily net assets		3.96	%		2.31	%		2.51	%		2.94	%*
Portfolio turnover rate		45	%		34	%		33	%		15	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.02	%		0.02	%		0.05	%*

(a)  Period from November 26, 2002 (commencement of operations) through February 28, 2003.

(b)  The amount shown for a share outstanding does not correspond with the aggregate net realized and unrealized gain/loss for the period due to the timing of purchases and redemptions of Fund shares in relation to the fluctuating market values of the Fund.

(c)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(d)  Net operating expenses were less than 0.01% to average daily net assets.

(e)  Interest expense was less than 0.01% to average daily net assets.

(f)  Total net expenses were less than 0.01% to average daily net assets.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

29

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Short-Duration Collateral Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks total return in excess of its benchmark. The Fund seeks to achieve its objective by investing primarily in relatively high quality fixed income instruments. The Fund's benchmark is the J.P. Morgan U.S. 3-Month Cash Index.

Shares of the Fund are not publicly offered and are principally available only to other funds of the Trust and certain accredited investors.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value or exchange rate may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

30

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund. As of February 28, 2006, the total value of these securities represented 30.6% of net assets.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

31

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

32

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Loan agreements

The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the "lender") that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. As of February 28, 2006, the Fund did not enter into any loan agreements.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. As of February 28, 2006, the Fund did not hold any indexed securities.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the

33

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

34

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had no securities on loan.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $117,072,626 and $44,069,070, respectively and long-term capital gains – $0 and $1,287,871, respectively.

35

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $59,255,603 of undistributed ordinary income. The temporary differences between book and tax basis distributable earnings are primarily due to derivative contracts transactions.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $29,576,884, $142,552 and $614,650 expiring in 2011, 2012 and 2014, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital losses of $1,248,363.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	4,484,202,390	$	10,128,516	$	(13,206,182	)	$	(3,077,666	)

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to derivative contract transactions and certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Loss			Paid-in Capital
$	8,822,402	$	(9,166,947	)	$	344,545

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income.

36

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

3.  Fees and other transactions with affiliates

GMO does not charge the Fund any management or service fees for its services. In addition, effective until at least June 30, 2007, GMO has contractually agreed to reimburse all of the Fund's expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes).

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $43,328 and $26,129, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	—	$	137,989,920
Investments (non-U.S. Government securities)		2,854,185,802		1,550,687,196

37

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 60.3% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. All of the shareholders are other funds of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 100% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
	Shares			Amount			Shares			Amount
Shares sold		96,847,329		$	2,480,509,800			107,900,318		$	2,728,975,542	*
Shares issued to shareholders in reinvestment of distributions		4,614,675			117,072,626			1,801,070			45,356,941
Shares repurchased		(63,990,041	)		(1,638,966,000	)		(41,697,536	)		(1,057,844,571	)
Net increase (decrease)		37,471,963		$	958,616,426			68,003,852		$	1,716,487,912

*  Shares sold amount is reduced by unrealized loss on investments of $2,036,420 incurred by GMO Alpha LIBOR Fund prior to conversion to the Fund on March 31, 2004.

38

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Short-Duration Collateral Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Short-Duration Collateral Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (Untied States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

39

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
1) Actual		0.02	%	$	1,000.00	$	1,021.10	$	0.10
2) Hypothetical		0.02	%	$	1,000.00	$	1,024.70	$	0.10

*  Expenses are calculated using the annualized net expense ratio (including interest expense), for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

40

GMO Short-Duration Collateral Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $83,913,391 or if determined to be different, the qualified interest income of such year.

41

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

42

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

43

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

44

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

45

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Core Plus Bond Fund returned +3.1% for the fiscal year ended February 28, 2006, as compared to +2.7% for the Lehman Brothers U.S. Aggregate Index. The Fund's exposure to various issues is achieved directly and indirectly through its investment in certain underlying GMO mutual funds, primarily in the GMO Emerging Country Debt Fund, the GMO World Opportunity Overlay Fund, and the GMO Short-Duration Collateral Fund.

The Fund outperformed the benchmark during the fiscal year by 0.4%. Value added from currency selection, emerging debt exposure, and cash management offset interest rate strategy underperformance.

Global bond yields fell across the board during the first half of 2005, although they began heading higher in the third quarter of 2005 and carrying into the New Year. Major, sustained bond market positions included overweights in Sweden and Canada and underweights in the U.K. and Switzerland. The Fund had been overweight Australia early in 2005 and moved to an underweight position later in the year. U.S., Canada, Australia, and Euro-area positions were the largest positive contributors. Underweights in the U.K. and Switzerland and a recent overweight in Japan detracted from performance.

The U.S. dollar gained versus most currencies in 2005, began weakening in December, then stabilized in February. For much of 2005 the Fund had been overweight relatively higher yielding currencies like Australian dollars, New Zealand dollars, and British sterling and underweight lower yielding currencies such as Japanese yen and euro. In general, the underweights added value, while the overweights did not.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class IV will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Core Plus Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		98.2	%
Short-Term Investment(s)		2.4
Mutual Funds		0.9
Call Options Purchased		0.2
Loan Assignments		0.2
Loan Participations		0.2
Put Options Purchased		0.2
Forward Currency Contracts		0.2
Preferred Stocks		0.1
Forward Start Options		0.0
Futures		0.0
Promissory Notes		0.0
Rights and Warrants		0.0
Written Options		0.1
Swaps		0.0
Reverse Repurchase Agreements		(0.5	)
Other		(2.0	)
		100.0	%
Country/Region Summary**	% of Investments
United States		95.3	%
Sweden		18.2
Canada		15.7
Euro Region***		5.1
Japan		3.3
Switzerland		(7.7	)
Australia		(13.5	)
United Kingdom		(16.4	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

1

GMO Core Plus Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value		Description	Value ($)
		DEBT OBLIGATION(S) — 6.2%
		Albania — 0.2%
		Foreign Government Obligations
USD	15,681,227	Republic of Albania Par Bond, Zero Coupon, due 08/31/25 (a)(b)		5,716,759
		Austria — 0.2%
		Corporate Debt
GBP	500,000	Bank Austria Creditanstalt AG, 8.38%, due 11/04/11		1,022,070
USD	4,175,000	Bank Austria Creditanstalt AG, 144A, 7.25%, due 02/15/17		4,832,104
		Total Austria		5,854,174
		Brazil — 0.2%
		Foreign Government Obligations
USD	10,000,000	Brazil Discount Bond, Principal Strip, Series D1A, Zero Coupon, due 04/15/24 (a)(b)		3,889,821
		Canada — 0.1%
		Foreign Government Obligations
CAD	4,000,000	Government of Canada (Cayman), 7.25%, due 06/01/08		3,739,434
		Luxembourg — 0.3%
		Corporate Debt
USD	8,000,000	Tyco International Group SA, 5.80%, due 08/01/06		8,019,040
		United States — 5.2%
		Corporate Debt — 0.9%
USD	10,000,000	General Electric Capital Corp, Series MTNA, 5.88%, due 02/15/12		10,350,800
USD	5,000,000	Wells Fargo & Co, 5.00%, due 11/15/14		4,899,900
USD	5,000,000	Target Corp, 4.00%, due 06/15/13		4,681,500
USD	5,000,000	Verizon Global Funding Corp, 4.38%, due 06/01/13		4,689,100
				24,621,300

See accompanying notes to the financial statements.

2

GMO Core Plus Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value / Principal Amount		Description	Value ($)
		U.S. Government — 2.1%
USD	5,000,000	U.S. Treasury Note, 4.00%, due 09/30/07		4,944,531
USD	10,100,000	U.S. Treasury Receipts, 0.00%, due 02/15/10 (b)		8,206,949
USD	10,100,000	U.S. Treasury Receipts, 0.00%, due 02/15/12 (b)		7,402,611
USD	10,100,000	U.S. Treasury Receipts, 0.00%, due 08/15/12 (b)		7,210,463
USD	30,458,500	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (c)(d)		31,534,066
				59,298,620
		U.S. Government Agency — 2.2%
USD	60,000,000	Fannie Mae, TBA, 6.00%, due 03/01/36		60,562,500
		Total United States		144,482,420
		TOTAL DEBT OBLIGATION(S) (COST $166,996,220)		171,701,648
		CALL OPTIONS PURCHASED — 0.1%
		Currency Options — 0.1%
	130,300,000	AUD Call/USD Put, Expires 06/07/06, Strike 0.744		1,516,327
		TOTAL CALL OPTIONS PURCHASED (COST $2,409,414)		1,516,327
		PUT OPTIONS PURCHASED — 0.2%
		Currency Options — 0.2%
	14,500,000,000	USD Put/JPY Call, Expires 04/04/06, Strike 116.30		1,979,105
	14,700,000,000	USD Put/JPY Call, Expires 04/18/06, Strike 118.50		3,961,650
				5,940,755
		TOTAL PUT OPTIONS PURCHASED (COST $4,842,401)		5,940,755

See accompanying notes to the financial statements.

3

GMO Core Plus Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Principal Amount		Description	Value ($)
		FORWARD START OPTIONS — 0.0%
		Currency Options — 0.0%
	18,080,000,000	JPY Put/USD Call, Expires 09/18/06, Strike TBD		69,789
		TOTAL FORWARD START OPTIONS (COST $0)		69,789
		PREFERRED STOCKS — 0.1%
		United States — 0.1%
	10,000	Home Ownership Funding 2 Preferred 144A, 13.338%		2,791,760
		TOTAL PREFERRED STOCKS (COST $3,318,495)		2,791,760
		MUTUAL FUNDS — 95.4%
		Affiliated Issuer(s) — 95.4%
	7,359,112	GMO Emerging Country Debt Fund, Class IV		83,157,963
	78,174,311	GMO Short-Duration Collateral Fund		2,001,262,353
	93,858	GMO Special Purpose Holding Fund		772,451
	21,968,896	GMO World Opportunity Overlay Fund		554,275,256
		TOTAL MUTUAL FUNDS (COST $2,624,482,314)		2,639,468,023
		TOTAL INVESTMENTS — 102.0% (Cost $2,802,048,844)		2,821,488,302
		Other Assets and Liabilities (net) — (2.0%)		(55,001,365	)
		TOTAL NET ASSETS — 100.0%	$	2,766,486,937

See accompanying notes to the financial statements.

4

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
3/21/06	AUD		475,900,000	$	353,191,817	$	(1,344,854	)
4/18/06	CHF		141,000,000		107,981,494		(1,067,230	)
4/11/06	GBP		92,100,000		161,586,908		788,213
3/07/06	JPY		30,560,000,000		264,173,222		135,803
5/02/06	NZD		231,300,000		152,500,716		511,690
						$	(976,378	)
Sales
3/21/06	AUD		369,000,000	$	273,855,391	$	3,017,943
3/28/06	CAD		125,900,000		110,853,821		(1,736,270	)
4/18/06	CHF		198,400,000		151,939,918		529,569
4/25/06	EUR		277,500,000		331,826,380		(212,350	)
4/11/06	GBP		61,000,000		107,022,816		1,307,084
3/07/06	JPY		93,470,000,000		807,993,164		5,355,388
						$	8,261,364

Forward cross currency contracts

Settlement Date	Deliver/Units of Currency		Receive/In Exchange For		Net Unrealized Appreciation (Depreciation)
3/14/06	EUR	161,500,000	NOK	1,281,550,950	$	(2,595,827	)
4/04/06	EUR	132,500,000	SEK	1,224,559,700		(3,126,638	)
3/14/06	NOK	636,093,965	EUR	79,100,000		23,899
4/04/06	SEK	1,859,791,661	EUR	199,000,000		2,081,065
					$	(3,617,501	)

See accompanying notes to the financial statements.

5

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	4,270	Canadian Government Bond 10 Yr.	June 2006	$	423,712,350	$	(560,877	)
	299	EURO BOBL	March 2006		39,967,382		(66,462	)
	623	EURO Bund	March 2006		89,411,041		(130,513	)
	63	Japanese Government Bond 10 Yr. (TSE)	March 2006		74,012,958		(105,736	)
	1,406	U.S. Long Bond	June 2006		159,009,812		(268,301	)
	2,133	U.S. Treasury Note 10 Yr.	June 2006		230,164,031		(234,176	)
						$	(1,366,065	)
Sales
	1,653	Australian Government Bond 10 Yr.	March 2006	$	129,386,745	$	677,001
	3,258	Australian Government Bond 3 Yr.	March 2006		246,815,206		433,814
	445	U.S. Treasury Note 5 Yr. (CBT)	June 2006		46,808,437		(45,265	)
	2,521	UK Gilt Long Bond	June 2006		501,508,785		2,115,038
						$	3,180,588

See accompanying notes to the financial statements.

6

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Swap Agreements

Credit Default Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	5,000,000	USD	4/2/2007	Lehman Brothers	Receive		0.52	%	General Electric
									Capital Corp.	$	29,055
	3,000,000	USD	4/17/2007	UBS AG	Receive		0.80	%	EOP Operating LP		25,544
	3,000,000	USD	4/17/2007	UBS AG	Receive		0.47	%	Goldman Sachs Group, Inc.		14,434
	3,000,000	USD	4/17/2007	Bear Stearns	Receive		1.28	%	National Rural Utilities Cooperative Finance Corp.		44,470
	10,000,000	USD	12/20/2007	Citigroup	Receive		2.41	%	AOL Time Warner, Inc.		428,168
	5,000,000	USD	6/20/2008	Lehman Brothers	Receive		0.50	%	Dominion Resources, Inc.		32,323
	5,000,000	USD	6/20/2008	Deutsche Bank AG	Receive		0.48	%	Household Finance Corp.		46,253
	5,000,000	USD	6/20/2008	Deutsche Bank AG	Receive		0.65	%	Kraft Foods, Inc.		64,847
	5,000,000	USD	6/20/2008	Deutsche Bank AG	Receive		0.40	%	Norfolk Southern Corp.		36,141
	5,000,000	USD	6/20/2008	Deutsche Bank AG	Receive		0.40	%	Washington Mutual, Inc.		25,613
	10,000,000	USD	9/20/2008	Deutsche Bank AG	Receive		0.32	%	American International Group, Inc.		57,962
	10,000,000	USD	12/20/2008	Lehman Brothers	Receive		0.27	%	Federal Home Loan Bank System		61,098

See accompanying notes to the financial statements.

7

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	5,000,000	USD	5/20/2009	JP Morgan					United
				Chase Bank	Receive		1.13	%	Mexican States	$	129,050
	5,000,000	USD	6/20/2009	Citigroup	Receive		0.25	%	ConocoPhillips Co.		20,496
	5,000,000	USD	6/20/2009	Barclays Bank PLC	Receive		0.91	%	Sprint Capital Corp.		114,975
	5,000,000	USD	6/20/2009	Lehman Brothers	Receive		0.67	%	Wyeth Energy		89,488
	5,000,000	USD	9/20/2009	UBS AG	Receive		0.59	%	Capital One Bank		73,377
	5,000,000	USD	9/20/2009	Citigroup	Receive		0.30	%	Coca-Cola Enterprises, Inc.		23,888
	5,000,000	USD	9/20/2009	Citigroup	Receive		0.69	%	Comcast Cable Communications, Inc.		69,971
	5,000,000	USD	9/20/2009	UBS AG	Receive		0.62	%	Devon Energy Corp.		77,480
	5,000,000	USD	9/20/2009	Barclays Bank PLC	Receive		0.54	%	Duke Energy Corp.		50,919
	5,000,000	USD	9/20/2009	Citigroup	Receive		0.25	%	International Business Machines		23,481
	5,000,000	USD	9/20/2009	UBS AG	Receive		0.53	%	Kinder Morgan Energy Partners LP		48,891
	5,000,000	USD	12/20/2009	Deutsche Bank AG	Receive		0.25	%	AT&T Wireless Services, Inc.		4,036
	5,000,000	USD	12/20/2009	Deutsche Bank AG	Receive		0.21	%	Bank of America Corp.		19,877
	5,000,000	USD	12/20/2009	Barclays Bank PLC	Receive		0.30	%	Boeing Capital Corp.		32,124
	5,000,000	USD	12/20/2009	Deutsche Bank AG	Receive		0.21	%	Citigroup, Inc.		19,527
	5,000,000	USD	12/20/2009	Barclays Bank PLC	Receive		0.82	%	Clear Channel Communications, Inc.		27,007

See accompanying notes to the financial statements.

8

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	5,000,000	USD	12/20/2009	Deutsche					Daimler-
				Bank AG	Receive		0.66	%	Chrysler AG	$	32,945
	5,000,000	USD	12/20/2009	Barclays Bank PLC	Receive		0.26	%	Morgan Stanley		16,715
	5,000,000	USD	12/20/2009	Barclays Bank PLC	Receive		0.39	%	SBC Communications, Inc.		35,277
	5,000,000	USD	12/20/2009	Deutsche Bank AG	Receive		0.35	%	The Kroger Co.		(8,436	)
	5,000,000	USD	12/20/2009	Barclays Bank PLC	Receive		0.38	%	Weyerhaueser Co.		(1,019	)
	5,000,000	USD	6/20/2010	Barclays Bank PLC	Receive		0.30	%	Credit Suisse First Boston (USA), Inc.		22,258
	5,000,000	USD	6/20/2010	Barclays Bank PLC	Receive		0.31	%	HSBC Finance Corp.		28,246
	5,000,000	USD	6/20/2010	UBS AG	Receive		0.29	%	JP Morgan Chase Bank		24,709
	5,000,000	USD	6/20/2010	Barclays Bank PLC	Receive		0.31	%	Lehman Brothers Holdings, Inc.		21,286
	5,000,000	USD	6/20/2010	Barclays Bank PLC	Receive		0.29	%	Merrill Lynch & Co., Inc.		18,693
	5,000,000	USD	6/20/2010	Barclays Bank PLC	Receive		0.27	%	Merrill Lynch & Co., Inc.		22,773
	5,000,000	USD	6/20/2010	Lehman Brothers	Receive		0.40	%	PSEG Energy LLC		15,208
	5,000,000	USD	6/20/2010	Lehman Brothers	Receive		0.20	%	Royal Bank of Scotland PLC		17,523
	5,000,000	USD	6/20/2010	UBS AG	Receive		0.36	%	The Bear Stearns Companies, Inc.		32,065
	5,000,000	USD	6/20/2010	UBS AG	Receive		0.34	%	The Goldman Sachs Group, Inc.		32,305
	5,000,000	USD	6/20/2010	UBS AG	Receive		0.52	%	TXU Electric Delivery Co.		(61,298	)

See accompanying notes to the financial statements.

9

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	5,000,000	USD	6/20/2010	Barclays
				Bank PLC	Receive		0.17	%	Wachovia Corp.	$	10,830
	5,000,000	USD	12/20/2010	Barclays Bank PLC	Receive		0.20	%	Bank of America Corp.		5,140
	5,000,000	USD	12/20/2010	Barclays Bank PLC	Receive		0.19	%	Citigroup, Inc.		1,913
	5,000,000	USD	12/20/2010	Deutsche Bank AG	Receive		0.75	%	Enterprise Products Partners LP		51,850
	5,000,000	USD	12/20/2010	Citigroup	Receive		0.39	%	Exelon Generation Co. LLC		18,523
	5,000,000	USD	12/20/2010	Barclays Bank PLC	Receive		0.45	%	First Energy Corp.		12,114
	5,000,000	USD	12/20/2010	Barclays Bank PLC	Receive		0.28	%	JP Morgan Chase Bank		9,319
	5,000,000	USD	12/20/2010	UBS AG	Receive		0.47	%	Progress Energy, Inc.		25,018
	5,000,000	USD	3/20/2011	Barclays Bank PLC	Receive		0.25	%	Bell South		7,517
	5,000,000	USD	3/20/2011	Barclays Bank PLC	Receive		0.25	%	HSBC Finance Corp.		10,770
	5,000,000	USD	3/20/2013	Barclays Bank PLC	Receive		0.25	%	Goldman Sachs Group, Inc.		(4,274	)
	15,376,000	USD	3/20/2015	JP Morgan Chase Bank	Receive		0.70	%	Reference security within CDX Index		97,208
	24,800,000	USD	3/20/2015	JP Morgan Chase Bank	Receive		0.70	%	Reference security within CDX Index		156,788
	9,920,000	USD	3/20/2015	JP Morgan Chase Bank	Receive		0.70	%	Reference security within CDX Index		62,715
	25,000,000	USD	6/20/2015	JP Morgan Chase Bank	Receive		0.65	%	Reference security within CDX Index		(86,377	)

See accompanying notes to the financial statements.

10

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	5,000,000	USD	6/20/2015	Lehman Brothers	Receive		0.65	%	Reference
									security within
									CDX Index	$	(17,275	)
	25,000,000	USD	6/20/2015	Lehman Brothers	Receive		0.65	%	Reference security within CDX Index		(86,377	)
	20,000,000	USD	12/20/2015	Deutsche Bank AG	Receive		0.70	%	Reference security within CDX Index		(48,588	)
	15,000,000	USD	12/20/2015	Lehman Brothers	Receive		0.70	%	Reference security within CDX Index		(36,441	)
	10,000,000	USD	12/20/2015	Lehman Brothers	Receive		0.70	%	Reference security within CDX Index		(24,294	)
	25,000,000	USD	12/20/2015	Lehman Brothers	Receive		0.70	%	Reference security within CDX Index		(60,735	)
										$	2,045,089

Interest Rate Swaps

Notional Amount

Expiration Date

Counterparty

Receive (Pay)

Fixed Rate

Variable Rate

Net Unrealized Appreciation (Depreciation)

26,000,000

SEK

3/17/2008

Deutsche

3 Month SEK

Bank AG

Receive

2.90

%

STIBOR

$

2,368

430,000,000

SEK

3/17/2008

JP Morgan Chase Bank

Receive

2.90

%

3 Month SEK STIBOR

39,380

10,100,000

USD

2/15/2010

JP Morgan Chase Bank

(Pay)

0.00

%

3 Month LIBOR

(885,560

)

394,000,000

SEK

3/15/2011

Citigroup

Receive

3.40

%

3 Month SEK STIBOR

10,942

See accompanying notes to the financial statements.

11

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	839,000,000	SEK	3/15/2011	Deutsche					3 Month SEK
				Bank AG	Receive		3.40	%	STIBOR	$	23,301
	112,000,000	SEK	3/15/2011	JP Morgan Chase Bank	Receive		3.40	%	3 Month SEK STIBOR		3,110
	167,000,000	CHF	3/15/2011	Deutsche Bank AG	(Pay)		2.25	%	6 Month CHF LIBOR		100,513
	10,100,000	USD	2/15/2012	JP Morgan Chase Bank	(Pay)		0.00	%	3 Month LIBOR		(868,477	)
	10,100,000	USD	8/15/2012	JP Morgan Chase Bank	(Pay)		0.00	%	3 Month LIBOR		(872,121	)
	168,000,000	SEK	3/15/2013	Deutsche Bank AG	Receive		3.50	%	3 Month SEK STIBOR		(46,857	)
	324,000,000	SEK	3/15/2013	JP Morgan Chase Bank	Receive		3.50	%	3 Month SEK STIBOR		(90,368	)
	65,000,000	CHF	3/15/2013	JP Morgan Chase Bank	(Pay)		2.40	%	6 Month CHF LIBOR		(2,729	)
	8,500,000	USD	10/24/2013	JP Morgan Chase Bank	(Pay)		4.70	%	3 Month LIBOR		200,543
	540,000,000	SEK	3/15/2016	Deutsche Bank AG	Receive		3.75	%	3 Month SEK STIBOR		524,057
	294,000,000	SEK	3/15/2016	JP Morgan Chase Bank	Receive		3.75	%	3 Month SEK STIBOR		285,320
	80,000,000	SEK	3/15/2016	Merrill Lynch	Receive		3.75	%	3 Month SEK STIBOR		77,638
	71,600,000	CHF	3/15/2016	Deutsche Bank AG	(Pay)		2.50	%	6 Month CHF LIBOR		178,183
	10,000,000	USD	4/15/2024	JP Morgan Chase Bank	(Pay)		0.00	%	3 Month LIBOR		(845,113	)
	15,680,000	USD	8/31/2025	JP Morgan Chase Bank	(Pay)		0.00	%	3 Month LIBOR		(1,314,490	)
										$	(3,480,360	)

See accompanying notes to the financial statements.

12

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	88,000,000	USD	3/1/2006	Lehman Brothers	1 month LIBOR	Return on Lehman
					–0.03%	Mortgage Total
						Return Index	$	73,844
	35,000,000	USD	3/1/2006	UBS AG	1 month LIBOR – 0.03%	Return on Lehman Mortgage Total Return Index		29,370
	335,000,000	USD	4/28/2006	UBS AG	1 month LIBOR	Return on Lehman Mortgage Total Return Index		273,573
	15,000,000	USD	4/30/2006	JP Morgan Chase Bank	1 month LIBOR – 0.01%	Return on Lehman Aggregate Total Return Index		(4,172	)
	25,000,000	USD	4/30/2006	JP Morgan Chase Bank	1 month LIBOR – 0.11%	Return on Lehman Mortgage Total Return Index		22,478
	50,000,000	USD	5/31/2006	UBS AG	1 month LIBOR – 0.03%	Return on Lehman Mortgage Total Return Index		41,957
	105,000,000	USD	5/31/2006	UBS AG	1 month LIBOR – 0.02%	Return on Lehman Mortgage Total Return Index		87,322
	245,000,000	USD	6/30/2006	UBS AG	1 month LIBOR – 0.01%	Return on Lehman Mortgage Total Return Index		201,913
	30,000,000	USD	7/31/2006	JP Morgan Chase Bank	1 month LIBOR – 0.01%	Return on Lehman Aggregate Total Return Index		(8,345	)
	150,000,000	USD	7/31/2006	Lehman Brothers	1 month LIBOR – 0.04%	Return on Lehman Brothers U.S. Government Index		(275,862	)
	75,000,000	USD	7/31/2006	Lehman Brothers	1 month LIBOR – 0.05%	Return on Lehman Brothers U.S. Government Index		(137,368	)

See accompanying notes to the financial statements.

13

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements — continued

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	55,000,000	USD	8/31/2006	JP Morgan	1 month LIBOR	Return on Lehman
				Chase Bank	–0.01%	Aggregate Total
						Return Index	$	0
	163,000,000	USD	8/31/2006	Lehman Brothers	1 month LIBOR – 0.01%	Return on Lehman Mortgage Total Return Index		0
	130,000,000	USD	8/31/2006	UBS AG	1 month LIBOR – 0.01%	Return on Lehman Mortgage Total Return Index		0
	350,000,000	USD	1/31/2007	Lehman Brothers	1 month LIBOR – 0.04%	Return on Lehman Brothers U.S. Government Index		(643,677	)
							$	(338,967	)

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

MTN - Medium Term Note

TBA - To Be Announced - Delayed Delivery Security (Note 2)

TBD - To Be Determined

(a)  Security is backed by the U.S. Government.

(b)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(c)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(d)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

Currency Abbreviations:

AUD - Australian Dollar	JPY - Japanese Yen
CAD - Canadian Dollar	NOK - Norwegian Krone
CHF - Swiss Franc	NZD - New Zealand Dollar
EUR - Euro	SEK - Swedish Krona
GBP - British Pound	USD - United States Dollar

See accompanying notes to the financial statements.

14

GMO Core Plus Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $177,566,530) (Note 2)	$	182,020,279
Investments in affiliated issuers, at value (cost $2,624,482,314) (Notes 2 and 8)		2,639,468,023
Cash		697,705
Receivable for investments sold - delayed delivery (Note 2)		80,722,266
Receivable for Fund shares sold		2,000,000
Interest receivable		744,841
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		13,750,654
Receivable for variation margin on open futures contracts (Note 2)		2,135,167
Receivable for realized swap contracts		100,893
Receivable for open swap contracts (Note 2)		4,656,015
Periodic payments from open swap agreements (Note 2)		1,756,042
Receivable for expenses reimbursed by Manager (Note 3)		251,050
Total assets		2,928,302,935
Liabilities:
Foreign cash due to custodian (cost $445,358)		302,592
Payable for investments purchased (Note 2)		3,000,000
Payable for investments purchased - delayed delivery (Note 2)		140,841,250
Payable to affiliate for (Note 3):
Management fee		529,755
Shareholder service fee		218,926
Trustees and Chief Compliance Officer fees		5,928
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		10,083,169
Payable for realized swap contracts		11,357
Payable for open swap contracts (Note 2)		6,430,253
Accrued expenses		392,768
Total liabilities		161,815,998
Net assets	$	2,766,486,937

See accompanying notes to the financial statements.

15

GMO Core Plus Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006 — (Continued)

Net assets consist of:
Paid-in capital	$	2,796,355,537
Distributions in excess of net investment income		(29,333,970	)
Accumulated net realized loss		(29,469,514	)
Net unrealized appreciation		28,934,884
	$	2,766,486,937
Net assets attributable to:
Class III shares	$	148,475,890
Class IV shares	$	2,618,011,047
Shares outstanding:
Class III		14,383,699
Class IV		253,442,607
Net asset value per share:
Class III	$	10.32
Class IV	$	10.33

See accompanying notes to the financial statements.

16

GMO Core Plus Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	57,267,130
Interest (including securities lending income of $1,152)		5,921,847
Dividends		236,264
Total investment income		63,425,241
Expenses:
Management fee (Note 3)		4,966,203
Shareholder service fee – Class III (Note 3)		1,063,582
Shareholder service fee – Class IV (Note 3)		1,277,427
Custodian, fund accounting agent and transfer agent fees		723,590
Audit and tax fees		58,085
Legal fees		48,564
Trustees fees and related expenses (Note 3)		35,413
Registration fees		164,748
Miscellaneous		42,712
Total expenses		8,380,324
Fees and expenses reimbursed by Manager (Note 3)		(1,013,658	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(242,019	)
Shareholder service fee waived – Class III (Note 3)		(67,622	)
Net expenses		7,057,025
Net investment income (loss)		56,368,216
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		(12,870,216	)
Investments in affiliated issuers		(2,215,708	)
Realized gains distributions from affiliated issuers (Note 8)		4,020,615
Closed futures contracts		(9,411,994	)
Closed swap contracts		(13,765,787	)
Foreign currency, forward contracts and foreign currency related transactions		18,168,408
Net realized gain (loss)		(16,074,682	)
Change in net unrealized appreciation (depreciation) on:
Investments		(975,869	)
Open futures contracts		5,722,620
Open swap contracts		8,124,835
Foreign currency, forward contracts and foreign currency related transactions		5,380,590
Net unrealized gain (loss)		18,252,176
Net realized and unrealized gain (loss)		2,177,494
Net increase (decrease) in net assets resulting from operations	$	58,545,710

See accompanying notes to the financial statements.

17

GMO Core Plus Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	56,368,216		$	15,604,929
Net realized gain (loss)		(16,074,682	)		36,570,115
Change in net unrealized appreciation (depreciation)		18,252,176			(10,346,019	)
Net increase (decrease) in net assets from operations		58,545,710			41,829,025
Distributions to shareholders from:
Net investment income
Class III		(8,334,939	)		(24,425,784	)
Class IV		(78,000,540	)		—
Total distributions from net investment income		(86,335,479	)		(24,425,784	)
Net realized gains
Class III		—			(20,284,796	)
		(86,335,479	)		(44,710,580	)
Net share transactions (Note 7):
Class III		(1,076,194,776	)		616,308,628
Class IV		2,654,220,272			—
Increase (decrease) in net assets resulting from net share transactions		1,578,025,496			616,308,628
Total increase (decrease) in net assets		1,550,235,727			613,427,073
Net assets:
Beginning of period		1,216,251,210			602,824,137
End of period (including distributions in excess of net investment income of $29,333,970 and accumulated undistributed net investment income of $2,622,009, respectively)	$	2,766,486,937		$	1,216,251,210

See accompanying notes to the financial statements.

18

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	10.35		$	10.40		$	9.95		$	10.39		$	10.17
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.15			0.18			0.25			0.20			0.77
Net realized and unrealized gain (loss)		0.17			0.24			0.91			0.44			0.07
Total from investment operations		0.32			0.42			1.16			0.64			0.84
Less distributions to shareholders:
From net investment income		(0.35	)		(0.25	)		(0.28	)		(0.47	)		(0.62	)
From net realized gains		—			(0.22	)		(0.43	)		(0.61	)		—	(b)
Total distributions		(0.35	)		(0.47	)		(0.71	)		(1.08	)		(0.62	)
Net asset value, end of period	$	10.32		$	10.35		$	10.40		$	9.95		$	10.39
Total Return(c)		3.10	%		4.01	%		11.99	%		6.45	%		8.53	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	148,476		$	1,216,251		$	602,824		$	286,030		$	340,039
Net expenses to average daily net assets(d)		0.39	%		0.39	%		0.39	%		0.38	%		0.38	%
Net investment income to average daily net assets(a)		1.40	%		1.77	%		2.43	%		1.91	%		7.38	%
Portfolio turnover rate		62	%		108	%		114	%		108	%		113	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.07	%		0.09	%		0.09	%		0.09	%

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The distribution from net realized gains was less than $0.01 per share.

(c)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

19

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout the period)

	Period from July 26, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	10.46
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.23	(b)
Net realized and unrealized gain (loss)		(0.01	)
Total from investment operations		0.22
Less distributions to shareholders:
From net investment income		(0.35	)
Total distributions		(0.35	)
Net asset value, end of period	$	10.33
Total Return(c)		2.06	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	2,618,011
Net expenses to average daily net assets(d)		0.34	%*
Net investment income to average daily net assets(a)		2.16	%(e)
Portfolio turnover rate		62	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.07	%*

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The per share amount is not in accord with the net realized and unrealized gain (loss) on investments for the period because of the timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at such time.

(c)  The total return would have been lower had certain expenses not been reimbursed during periods shown.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(e)  The ratio for the period ended February 28, 2006 has not been annualized since the Fund believes it would not be appropriate because the Fund's net income is not earned ratably throughout the fiscal year.

†  Calculated using average shares outstanding throughout the period.

††  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2006.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

20

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Core Plus Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks a high total return through direct and indirect investment in U.S. securities, with additional return sought through exposure to foreign bond and currency markets. The Fund achieves U.S. interest rate market exposure by investing in other fund(s) of the Trust ("underlying fund(s)"), primarily GMO Emerging Country Debt Fund, GMO Short-Duration Collateral Fund, and GMO World Opportunity Overlay Fund, and "synthetic" bonds (created by the Manager by combining a futures contract, swap contract, or option, on a fixed income security with cash, a cash equivalent or another fixed income security) and/or directly in U.S. Government securities and other high-quality U.S. dollar denominated fixed income securities. The Fund's benchmark is the Lehman Brothers U.S. Aggregate Bond Index.

As of February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class IV. Effective July 26, 2005, Class IV shares commenced operations. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request by calling (617) 346-7646 (collect). Shares of the GMO Short-Duration Collateral Fund, the GMO World Opportunity Overlay Fund and the GMO Special Purpose Holding Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations

21

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 29.3% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $585,387 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $3,258,666 in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

22

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund

23

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the

24

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash

25

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Delayed delivery commitments

The Fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Collateral consisting of liquid securities or cash and cash equivalents is maintained with the custodian in an amount at least equal to these commitments. See the Schedule of Investments for delayed delivery commitments entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had no securities on loan.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

26

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income - $86,335,479 and $39,264,226, respectively and long-term capital gains - $0 and $5,446,354, respectively.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $45,859,280 expiring in 2014. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital and currency losses of $11,821,136 and $2,454,565, respectively.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	2,797,051,073	$	27,144,809	$	(2,707,580	)	$	24,437,229

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income			Accumulated Net Realized Loss			Paid-in Capital
$	(1,988,716	)	$	(22,267,321	)	$	24,256,037

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

27

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities 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 U.S. and developed foreign markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.25% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares and 0.10% for Class IV shares. The Fund may invest in GMO Emerging Country Debt Fund ("ECDF"). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in ECDF. The Fund does not incur any indirect shareholder service fees as a result of the Fund's investment in GMO Short-Duration Collateral Fund ("SDCF"), GMO Special Purpose Holding Fund ("SPHF"), and GMO World Opportunity Overlay Fund ("Overlay Fund").

28

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total direct annual operating expenses plus the amount of indirect fees and operating expenses incurred through its investment in underlying fund(s) exceed 0.25% of the average daily net assets, with such indirect expenses subject to a maximum total reimbursement to the Fund equal to 0.25% of the Fund's average daily net assets. For purposes of this calculation, the Fund's total direct annual operating expenses excludes shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees) ("Trustees fees"), and the following investment-related costs: brokerage commissions, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes. Additionally, the indirect fees and operating expenses incurred through investment in underlying fund(s) excludes investment-related expenses and Trustees fees. Through June 29, 2004, the indirect Trustees fees incurred by the Fund through its investment in ECDF were not excluded.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.016	%		0.003	%		0.016	%		0.035	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $21,773 and $15,731, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	1,195,254,564	$	1,136,824,805
Investments (non-U.S. Government securities)		1,697,802,367		158,277,324

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in

29

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 67.4% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. One of the shareholders is another fund of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares was held by five related parties comprised of certain GMO employee accounts, and 94.6% of the Fund's shares was held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		65,768,202		$	689,623,823			57,848,297		$	599,398,741
Shares issued to shareholders in reinvestment of distributions		589,802			6,119,804			4,307,518			44,152,060
Shares repurchased		(169,430,468	)		(1,771,938,403	)		(2,681,366	)		(27,242,173	)
Net increase (decrease)		(103,072,464	)	$	(1,076,194,776	)		59,474,449		$	616,308,628

	Period from July 26, 2005 (commencement of operations) through February 28, 2006
Class IV:	Shares			Amount
Shares sold		247,726,958		$	2,595,011,214
Shares issued to shareholders in reinvestment of distributions		7,535,843			78,000,540
Shares repurchased		(1,820,194	)		(18,791,482	)
Net increase (decrease)		253,442,607		$	2,654,220,272

30

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the securities of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Country Debt Fund, Class III	$	35,506,057	$	17,978,061	$	54,464,555	$	159,365	$	918,696	$	—
GMO Emerging Country Debt Fund, Class IV		—		83,912,059		—		7,869,753		2,277,750		83,157,963
GMO Short-Duration Collateral Fund		815,781,713		1,312,538,012		134,100,000		49,238,012		—		2,001,262,353
GMO Special Purpose Holding Fund		1,455,738		—		—		—		824,169		772,451	*
GMO World Opportunity Overlay Fund		241,800,555		317,740,000		8,150,000		—		—		554,275,256
Totals	$	1,094,544,063	$	1,732,168,132	$	196,714,555	$	57,267,130	$	4,020,615	$	2,639,468,023

*  After the effect of return of capital distributions of $517,416 and $139,040 on April 5, 2005 and February 21, 2006, respectively.

31

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Core Plus Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Core Plus Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

32

GMO Core Plus Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.43	%	$	1,000.00	$	1,010.70	$	2.14
2) Hypothetical		0.43	%	$	1,000.00	$	1,022.66	$	2.16
Class IV
1) Actual		0.38	%	$	1,000.00	$	1,011.90	$	1.90
2) Hypothetical		0.38	%	$	1,000.00	$	1,022.91	$	1.91

*  Expenses are calculated using each Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

33

GMO Core Plus Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $34,338,263 or if determined to be different, the qualified interest income of such year.

34

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

35

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

36

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, VanOtterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

37

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

38

GMO Global Bond Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Global Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Global Bond Fund returned -4.3% for the fiscal year ended February 28, 2006, as compared to -4.6% for the JPMorgan Global Government Bond Index. The Fund's exposure to various issues is achieved directly and indirectly through its investment in certain underlying GMO mutual funds, primarily in the GMO Emerging Country Debt Fund, the GMO World Opportunity Overlay Fund, and the GMO Short-Duration Collateral Fund.

The Fund outperformed the benchmark during the fiscal year by 0.3%. Value added from currency selection, emerging debt exposure, and cash management offset interest rate strategy underperformance.

Global bond yields fell across the board during the first half of 2005, although they began heading higher in the third quarter of 2005 and carrying into the New Year. Major, sustained bond market positions included overweights in Sweden and Canada and underweights in the U.K. and Switzerland. The Fund had been overweight Australia early in 2005 and moved to an underweight position later in the year. U.S., Canada, Australia, and Euro-area positions were the largest positive contributors. Underweights in the U.K. and Switzerland and a recent overweight in Japan detracted from performance.

The U.S. dollar gained versus most currencies in 2005, began weakening in December, then stabilized in February. For much of 2005 the Fund had been overweight relatively higher yielding currencies like Australian dollars, New Zealand dollars, and British sterling and underweight lower yielding currencies such as Japanese yen and euro. In general, the underweights added value, while the overweights did not.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Global Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		95.3	%
Short-Term Investment(s)		2.2
Mutual Funds		1.6
Swaps		0.7
Put Options Purchased		0.3
Forward Currency Contracts		0.2
Call Options Purchased		0.2
Loan Assignments		0.2
Loan Participations		0.2
Written Options		0.0
Forward Start Options		0.0
Promissory Notes		0.0
Rights and Warrants		(0.1	)
Futures		(0.1	)
Reverse Repurchase Agreements		(0.5	)
Other		(0.2	)
		100.0	%
Country Summary**	% of Investments
Euro Region***		44.4	%
Japan		33.8
Sweden		19.1
Canada		18.0
United States		14.5
Denmark		0.6
Switzerland		(7.6	)
United Kingdom		(9.6	)
Australia		(13.2	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

1

GMO Global Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value		Description	Value ($)
		DEBT OBLIGATION(S) — 11.5%
		Australia — 0.9%
		Asset-Backed Securities
USD	1,512,505	Medallion Trust, Series 03-1G, Class A, Variable Rate, 3 mo. LIBOR + .19%, 4.69%, due 12/21/33		1,515,727
		Austria — 1.7%
		Corporate Debt
USD	2,500,000	Bank Austria Creditanstalt AG, 144A, 7.25%, due 02/15/17		2,893,475
		Canada — 1.2%
		Foreign Government Obligations
GBP	1,000,000	Province of Quebec, 8.63%, due 11/04/11		2,078,468
		United Kingdom — 4.7%
		Asset-Backed Securities
GBP	1,883,978	RMAC, Series 03-NS1X Class A2A, 144A, AMBAC, Variable Rate, 3 mo. LIBOR + .45%, 5.09%, due 06/12/35		3,316,253
GBP	2,565,277	RMAC, Series 03-NS2A Class A2A, 144A, AMBAC, Variable Rate, 3 mo. LIBOR + .40%, 5.04%, due 09/12/35		4,510,101
		Total United Kingdom		7,826,354
		United States — 3.0%
		U.S. Government
	3,600,510	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (a) (b)		3,809,227
USD	1,169,890	U.S. Treasury Inflation Indexed Note, 4.25%, due 01/15/10 (a)		1,273,535
		Total United States		5,082,762
		TOTAL DEBT OBLIGATION(S) (COST $18,107,561)		19,396,786

See accompanying notes to the financial statements.

2

GMO Global Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Principal Amount / Shares		Description	Value ($)
		CALL OPTIONS PURCHASED — 0.1%
		Currency Options — 0.1%
	8,700,000	AUD Call/USD Put, Expires 06/07/06, Strike 0.744		101,244
		TOTAL CALL OPTIONS PURCHASED (COST $160,874)		101,244
		PUT OPTIONS PURCHASED — 0.2%
		Currency Options — 0.2%
	1,000,000,000	USD Put/JPY Call, Expires 04/04/06, Strike 116.30		136,490
	1,000,000,000	USD Put/JPY Call, Expires 04/18/06, Strike 118.50		269,500
				405,990
		TOTAL PUT OPTIONS PURCHASED (COST $331,659)		405,990
		FORWARD START OPTIONS — 0.0%
		Currency Options — 0.0%
	1,220,000,000	JPY Put/USD Call, Expires 09/18/06, Strike TBD		4,709
		TOTAL FORWARD START OPTIONS (COST $0)		4,709
		MUTUAL FUNDS — 87.7%
	447,123	GMO Emerging Country Debt Fund, Class III (c)		5,052,494
	4,159,420	GMO Short-Duration Collateral Fund (c)		106,481,153
	45,838	GMO Special Purpose Holding Fund (c)		377,249
	1,364,018	GMO World Opportunity Overlay Fund (c)		34,414,166
	1,264,698	Merrimac Cash Series, Premium Class		1,264,698
		TOTAL MUTUAL FUNDS (COST $145,073,529)		147,589,760
		TOTAL INVESTMENTS — 99.5% (Cost $163,673,623)		167,498,489
		Other Assets and Liabilities (net) — 0.5%		825,737
		TOTAL NET ASSETS — 100.0%	$	168,324,226

See accompanying notes to the financial statements.

3

GMO Global Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
3/21/06	AUD		31,600,000	$	23,452,116	$	(94,447	)
3/28/06	CAD		1,300,000		1,144,638		31,148
4/18/06	CHF		9,400,000		7,198,766		(71,149	)
4/25/06	EUR		50,000,000		59,788,537		(156,163	)
4/11/06	GBP		6,700,000		11,754,965		59,226
3/07/06	JPY		5,560,000,000		48,062,929		25,548
5/02/06	NZD		14,000,000		9,230,480		30,862
						$	(174,975	)
Sales
3/21/06	AUD		24,500,000	$	18,182,810	$	184,626
3/28/06	CAD		5,100,000		4,490,504		(37,847	)
4/18/06	CHF		12,700,000		9,725,993		41,982
4/25/06	EUR		12,300,000		14,707,980		(28,646	)
4/11/06	GBP		4,800,000		8,421,468		102,852
3/07/06	JPY		3,710,000,000		32,070,767		364,615
						$	627,582

Forward cross currency contracts

Settlement Date	Deliver/Units of Currency		Receive/In Exchange For		Net Unrealized Appreciation (Depreciation)
3/14/06	EUR	10,400,000	NOK	82,527,120	$	(167,162	)
4/04/06	EUR	9,100,000	SEK	84,101,836		(214,735	)
4/04/06	SEK	109,395,740	EUR	11,700,000		115,867
3/14/06	NOK	42,623,175	EUR	5,300,000		1,235
					$	(264,795	)

See accompanying notes to the financial statements.

4

GMO Global Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	271	Canadian Government Bond 10 Yr.	June 2006	$	26,891,346	$	(35,188	)
	61	EURO BOBL	March 2006		8,153,881		(26,261	)
	68	EURO Bund	March 2006		9,759,150		(9,021	)
	15	Japanese Government Bond 10Yr.(TSE)	March 2006		17,622,133		(171,353)
						$	(241,823	)
Sales
	99	Australian Government Bond 10 Yr.	March 2006	$	7,749,115	$	40,651
	196	Australian Government Bond 3 Yr.	March 2006		14,848,306		26,065
	9	U.S. Long Bond	June 2006		1,017,844		(1,219	)
	20	U.S. Treasury Note 10 Yr.	June 2006		2,158,125		219
	103	U.S. Treasury Note 5 Yr. (CBT)	June 2006		10,834,312		(19,249	)
	137	UK Gilt Long Bond	June 2006		27,253,750		114,939
						$	161,406

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

See accompanying notes to the financial statements.

5

GMO Global Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements

Interest Rate Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	36,000,000	SEK	3/17/2008	JP Morgan Chase Bank	Receive		2.90	%	3 month SEKSTIBOR	$	3,297
	31,000,000	SEK	3/15/2011	Citigroup	Receive		3.40	%	3 month SEKSTIBOR		861
	16,000,000	SEK	3/15/2011	Deutsche Bank AG	Receive		3.40	%	3 month SEKSTIBOR		444
	9,000,000	CHF	3/15/2011	Deutsche Bank AG	(Pay)		2.25	%	6 month CHFLIBOR		5,417
	47,000,000	SEK	3/15/2013	Deutsche Bank AG	Receive		3.50	%	3 month SEKSTIBOR		(13,109	)
	15,000,000	SEK	3/15/2013	JP Morgan Chase Bank	Receive		3.50	%	3 month SEKSTIBOR		(4,184	)
	4,000,000	CHF	3/15/2013	JP Morgan Chase Bank	(Pay)		2.40	%	6 month CHFLIBOR		(168	)
	30,000,000	SEK	3/15/2016	Deutsche Bank AG	Receive		3.75	%	3 month SEK STIBOR		29,114
	20,000,000	SEK	3/15/2016	JP Morgan Chase Bank	Receive		3.75	%	3 month SEKSTIBOR		19,410
	4,800,000	CHF	3/15/2016	Deutsche Bank AG	(Pay)		2.50	%	6 month CHFLIBOR		11,945
	3,000,000	EUR	3/21/2030	UBS Warburg	Receive		5.90	%	3 month Floating Rate EURLIBOR		1,122,493
										$	1,175,520

See accompanying notes to the financial statements.

6

GMO Global Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay	Receive	Net Unrealized Appreciation (Depreciation)
	31,000,000	USD	7/21/2006	JP Morgan	1 month LIBOR	Return on
				Chase Bank		JP Morgan
						Non - U.S. Hedged
						Traded Total Return
						Government
						Bond Index	$	(84,446	)
	75,000,000	USD	9/24/2006	JP Morgan	1 month LIBOR	Return on
				Chase Bank		JP Morgan Hedged
						Traded Total Return
						Government
						Bond Index		25,010
							$	(59,436	)

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

AMBAC - Insured as to the payment of principal and interest by AMBAC Assurance Corporation.

LIBOR - London Interbank Offered Rate

STIBOR - Stockholm Interbank Offered Rate

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

(a)  Indexed security in which price and/or coupon is linked to prices of other securities, securities indices, or other financial indicators (Note 2).

(b)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(c)  Affiliated issuer (Note 8).

Currency Abbreviations:

AUD - Australian Dollar	JPY - Japanese Yen
CAD - Canadian Dollar	NOK - Norwegian Krone
CHF - Swiss Franc	NZD - New Zealand Dollar
EUR -Euro	SEK - Swedish Krona
GBP - British Pound	USD - United States Dollar

See accompanying notes to the financial statements.

7

GMO Global Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $19,864,792) (Note 2)	$	21,173,427
Investments in affiliated issuers, at value (cost $143,808,831) (Notes 2 and 8)		146,325,062
Cash		1,177
Interest receivable		182,733
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		957,961
Receivable for variation margin on open futures contracts (Note 2)		35,674
Receivable for open swap contracts (Note 2)		1,217,991
Periodic payments from open swap agreements (Note 2)		143,778
Receivable for expenses reimbursed by Manager (Note 3)		6,335
Total assets		170,044,138
Liabilities:
Foreign cash due to custodian (cost $113,994)		105,866
Payable to affiliate for (Note 3):
Management fee		24,404
Shareholder service fee		19,266
Trustees and Chief Compliance Officer fees		227
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		770,149
Payable for open swap contracts (Note 2)		101,907
Payable for closed swap contracts (Note 2)		632,953
Accrued expenses		65,140
Total liabilities		1,719,912
Net assets	$	168,324,226
Net assets consist of:
Paid-in capital	$	184,854,232
Distributions in excess of net investment income		(4,986,613	)
Accumulated net realized loss		(16,454,932	)
Net unrealized appreciation		4,911,539
	$	168,324,226
Net assets attributable to:
Class III shares	$	168,324,226
Shares outstanding:
Class III		19,727,974
Net asset value per share:
Class III	$	8.53

See accompanying notes to the financial statements.

8

GMO Global Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	3,437,670
Interest		733,532
Total investment income		4,171,202
Expenses:
Management fee (Note 3)		318,918
Shareholder service fee – Class III (Note 3)		251,778
Custodian, fund accounting agent and transfer agent fees		96,235
Audit and tax fees		55,219
Legal fees		3,822
Trustees fees and related expenses (Note 3)		3,232
Registration fees		5,001
Miscellaneous		3,485
Total expenses		737,690
Fees and expenses reimbursed by Manager (Note 3)		(94,151	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(21,843	)
Shareholder service fee waived – Class III (Note 3)		(7,972	)
Net expenses		613,724
Net investment income (loss)		3,557,478
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		(568,802	)
Investments in affiliated issuers		(978,309	)
Realized gains distributions from affiliated issuers (Note 8)		654,967
Closed futures contracts		841,158
Closed swap contracts		513,162
Foreign currency, forward contracts and foreign currency related transactions		(9,498,124	)
Net realized gain (loss)		(9,035,948	)
Change in net unrealized appreciation (depreciation) on:
Investments		(1,404,278	)
Open futures contracts		209,568
Open swap contracts		333,602
Foreign currency, forward contracts and foreign currency related transactions		(1,119,004	)
Net unrealized gain (loss)		(1,980,112	)
Net realized and unrealized gain (loss)		(11,016,060	)
Net increase (decrease) in net assets resulting from operations	$	(7,458,582	)

See accompanying notes to the financial statements.

9

GMO Global Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	3,557,478		$	3,535,655
Net realized gain (loss)		(9,035,948	)		8,728,147
Change in net unrealized appreciation (depreciation)		(1,980,112	)		1,684,945
Net increase (decrease) in net assets from operations		(7,458,582	)		13,948,747
Distributions to shareholders from:
Net investment income
Class III		(3,512,926	)		(8,082,420	)
Net share transactions (Note 7):
Class III		8,545,306			26,199,761
Total increase (decrease) in net assets		(2,426,202	)		32,066,088
Net assets:
Beginning of period		170,750,428			138,684,340
End of period (including distributions in excess of net investment income of $4,986,613 and accumulated undistributed net investment income of $1,906,362, respectively)	$	168,324,226		$	170,750,428

See accompanying notes to the financial statements.

10

GMO Global Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	9.11		$	8.73		$	9.20		$	9.33		$	10.04
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.18			0.21			0.12			0.09			0.52
Net realized and unrealized gain (loss)		(0.57	)		0.63			1.42			1.49			(0.65	)
Total from investment operations		(0.39	)		0.84			1.54			1.58			(0.13	)
Less distributions to shareholders:
From net investment income		(0.19	)		(0.46	)		—			(1.51	)		(0.39	)
From net realized gains		—			—			(1.90	)		(0.20	)		(0.19	)
Return of capital		—			—			(0.11	)		—			—
Total distributions		(0.19	)		(0.46	)		(2.01	)		(1.71	)		(0.58	)
Net asset value, end of period	$	8.53		$	9.11		$	8.73		$	9.20		$	9.33
Total Return(b)		(4.33	)%		9.52	%		20.21	%		17.76	%		(1.34	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	168,324		$	170,750		$	138,684		$	235,842		$	273,074
Net expenses to average daily net assets(c)		0.37	%		0.33	%		0.32	%		0.33	%		0.32	%
Net investment income to average daily net assets(a)		2.12	%		2.40	%		1.44	%		1.10	%		5.36	%
Portfolio turnover rate		20	%		38	%		45	%		50	%		28	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.07	%		0.12	%		0.12	%		0.08	%		0.08	%

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

11

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Global Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in global bond and currency markets, primarily by investing in other fund(s) of the Trust ("underlying fund(s)"), including GMO Short-Duration Collateral Fund and GMO World Opportunity Overly Fund and "synthetic" bonds (created by the Manager by combining a futures contract, swap contract, or option, on a fixed income security with cash, a cash equivalent, or another fixed income security). The Fund's benchmark is the JPMorgan Global Government Bond Index.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available without charge, upon request by calling (617) 346-7646 (collect). Shares of the GMO Short-Duration Collateral Fund, the GMO World Opportunity Overlay Fund and the GMO Special Purpose Holding Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

12

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 26.8% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), an investment of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $285,890 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $1,591,463 (approximately $0.08 per share as of April 18, 2006) in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the

13

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over

14

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the

15

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

16

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $3,512,926 and $8,082,420, respectively.

17

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $10,615,925 and $15,114,495 expiring in 2012 and 2014, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

The Fund elected to defer to March 1, 2006 post-October capital and currency losses of $64,919 and $2,877,065, respectively.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	156,267,074	$	11,319,506	$	(88,091	)	$	11,231,415

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions and certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income			Accumulated Net Realized Loss		Paid-in Capital
$	(6,937,527	)	$	1,273,117	$	5,664,410

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

18

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities 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 U.S. and developed foreign markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.19% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. The Fund may invest in Class III shares of GMO Emerging Country Debt Fund ("ECDF"). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in ECDF. The Fund does not incur any indirect shareholder service fees as a result of the Fund's investment in GMO Short-Duration Collateral Fund ("SDCF"), GMO Special Purpose Holding Fund ("SPHF") and GMO World Opportunity Overlay Fund ("Overlay Fund").

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total direct annual expenses plus the amount of indirect fees and operating expenses incurred through its investment in underlying fund(s) exceed 0.25% of the average daily net assets, with such indirect expenses subject to a maximum total reimbursement to the Fund equal to 0.25% of the Fund's average daily net assets. Prior to July 1, 2005, GMO agreed to reimburse the Fund to the extent that the Fund's total direct annual expenses plus the amount of indirect fees and operating expenses incurred through its investment in underlying fund(s) exceeded 0.19% of the average daily net assets. For purposes of this calculation, the Fund's total direct annual operating expenses excludes shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees) ("Trustees fees"), and the following investment-related costs: brokerage commissions, hedging transaction fees, extraordinary, non-

19

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes. Additionally, the indirect fees and operating expenses incurred through investment in underlying fund(s) excludes investment-related expenses and Trustees fees. Through June 29, 2004, the indirect Trustees fees incurred by the Fund through its investment in ECDF were not excluded.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.019	%		0.005	%		0.015	%		0.039	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $1,850 and $1,048, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $35,727,333 and $32,935,961, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 73.8% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

20

GMO Global Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 0.2% of the Fund's shares were held by three related parties comprised of certain GMO employee accounts, and 6.5% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		701,206		$	6,078,711			2,193,277		$	20,132,327
Shares issued to shareholders in reinvestment of distributions		407,835			3,466,595			864,819			7,947,689
Shares repurchased		(115,877	)		(1,000,000	)		(217,972	)		(1,880,255	)
Net increase (decrease)		993,164		$	8,545,306			2,840,124		$	26,199,761

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Country Debt Fund, Class III	$	4,994,024	$	829,430	$	900,000	$	577,620	$	251,810	$	5,052,494
GMO Short-Duration Collateral Fund		97,283,265		32,660,050		24,500,000		2,860,050		—		106,481,153
GMO Special Purpose Holding Fund		710,951		—		—		—		403,157		377,249	*
GMO World Opportunity Overlay Fund		34,194,946		150,000		—		—		—		34,414,166
Totals	$	137,183,186	$	33,639,480	$	25,400,000	$	3,437,670	$	654,967	$	146,325,062

* After the effect of return of capital distributions of $252,695 and $67,253 on April 5, 2005 and February 21, 2006, respectively.

21

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Global Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Global Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

22

GMO Global Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.43	%	$	1,000.00	$	980.50	$	2.11
2) Hypothetical		0.43	%	$	1,000.00	$	1,022.66	$	2.16

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

23

GMO Global Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund hereby designates as qualified interest income with respect to its taxable year ended February28,2006 of $0 or if determined to be different, the qualified interest income of such year.

24

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

25

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

26

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

27

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

28

GMO U.S. Sector Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO U.S. Sector Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO U.S. Sector Fund returned +6.5% for the fiscal year ended February 28, 2006, as compared to +10.4% for the Russell 3000 Index. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed substantially to common stocks through its investment in underlying GMO mutual funds.

Implementation was negative, as the underlying GMO mutual funds underperformed their respective benchmarks by approximately 2.7%.

Asset allocation detracted approximately 1.2%. The Fund's allocations to the GMO U.S. Core Equity Fund and GMO U.S. Quality Equity Fund were the biggest detractors.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .04% on the purchase and .04% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  Russell 3000 Index + represents the S&P 500 Index prior to 2/28/03 and the Russell 3000 Index thereafter.

GMO U.S. Sector Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		95.7	%
Short-Term Investment(s)		11.0
Futures		0.0
Other		(6.7	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO U.S. Sector Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	8,868,942	GMO U.S. Core Equity Fund, Class III		128,599,664
	1,547,494	GMO U.S. Quality Equity Fund, Class III		32,203,358
	317,113	GMO U.S. Small/Mid Cap Growth Fund, Class III		6,237,620
	580,969	GMO U.S. Small/Mid Cap Value Fund, Class III		6,111,798
		TOTAL MUTUAL FUNDS (COST $161,405,559)		173,152,440
		SHORT-TERM INVESTMENT(S) — 0.0%
	15,607	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $15,609 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $15,920.		15,607
		TOTAL SHORT-TERM INVESTMENT(S) (COST $15,607)		15,607
		TOTAL INVESTMENTS — 100.0% (Cost $161,421,166)		173,168,047
		Other Assets and Liabilities (net) — 0.0%		(21,574	)
		TOTAL NET ASSETS — 100.0%	$	173,146,473

See accompanying notes to the financial statements.

2

GMO U.S. Sector Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $15,607) (Note 2)	$	15,607
Investments in affiliated issuers, at value (cost $161,405,559) (Notes 2 and 8)		173,152,440
Receivable for investments sold		3,000,000
Receivable for expenses reimbursed by Manager (Note 3)		67,151
Miscellaneous receivable		1,201
Total assets		176,236,399
Liabilities:
Payable for Fund shares repurchased		3,001,200
Payable to affiliate for (Note 3):
Management fee		44,343
Shareholder service fee		20,155
Trustees and Chief Compliance Officer fees		256
Accrued expenses		23,972
Total liabilities		3,089,926
Net assets	$	173,146,473
Net assets consist of:
Paid-in capital	$	156,171,244
Accumulated undistributed net investment income		727,370
Accumulated net realized gain		4,500,978
Net unrealized appreciation		11,746,881
	$	173,146,473
Net assets attributable to:
Class III shares	$	173,146,473
Shares outstanding:
Class III		26,375,925
Net asset value per share:
Class III	$	6.56

See accompanying notes to the financial statements.

3

GMO U.S. Sector Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	2,327,720
Interest		5,374
Total investment income		2,333,094
Expenses:
Management fee (Note 3)		502,360
Shareholder service fee – Class III (Note 3)		228,346
Custodian, fund accounting agent and transfer agent fees		17,687
Audit and tax fees		23,646
Legal fees		3,507
Trustees fees and related expenses (Note 3)		2,750
Registration fees		5,566
Miscellaneous		2,766
Total expenses		786,628
Fees and expenses reimbursed by Manager (Note 3)		(51,599	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(490,601	)
Shareholder service fee waived – Class III (Note 3)		(228,235	)
Net expenses		16,193
Net investment income (loss)		2,316,901
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		2,664,253
Realized gains distributions from affiliated issuers (Note 8)		6,101,698
Net realized gain (loss)		8,765,951
Change in net unrealized appreciation (depreciation) on investments		(947,845	)
Net realized and unrealized gain (loss)		7,818,106
Net increase (decrease) in net assets resulting from operations	$	10,135,007

See accompanying notes to the financial statements.

4

GMO U.S. Sector Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	2,316,901		$	1,726,696
Net realized gain (loss)		8,765,951			5,585,264
Change in net unrealized appreciation (depreciation)		(947,845	)		1,814,127
Net increase (decrease) in net assets from operations		10,135,007			9,126,087
Distributions to shareholders from:
Net investment income
Class III		(2,798,187	)		(2,495,238	)
Net realized gains
Class III		(3,368,950	)		(5,083,911	)
		(6,167,137	)		(7,579,149	)
Net share transactions (Note 7):
Class III		17,780,604			76,428,482
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		20,076			60,143
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		17,800,680			76,488,625
Total increase (decrease) in net assets		21,768,550			78,035,563
Net assets:
Beginning of period		151,377,923			73,342,360
End of period (including accumulated undistributed net investment income of $727,370 and $832,772, respectively)	$	173,146,473		$	151,377,923

See accompanying notes to the financial statements.

5

GMO U.S. Sector Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	6.41		$	6.40		$	4.53		$	5.45		$	5.11
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.10			0.11			0.08			0.09			0.11
Net realized and unrealized gain (loss)		0.31			0.34			1.89			(1.00	)		0.39
Total from investment operations		0.41			0.45			1.97			(0.91	)		0.50
Less distributions to shareholders:
From net investment income		(0.12	)		(0.14	)		(0.02	)		(0.01	)		(0.16	)
From net realized gains		(0.14	)		(0.30	)		(0.08	)		—			—
Total distributions		(0.26	)		(0.44	)		(0.10	)		(0.01	)		(0.16	)
Net asset value, end of period	$	6.56		$	6.41		$	6.40		$	4.53		$	5.45
Total Return(b)		6.45	%(c)		7.18	%(c)		43.72	%(c)		(16.78	)%		9.80	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	173,146		$	151,378		$	73,342		$	13,144		$	270
Net expenses to average daily net assets(d)		0.01	%		0.00	%(e)		0.00	%(e)		0.02	%		0.00	%(e)
Net investment income to average daily net assets(a)		1.52	%		1.75	%		1.43	%		1.93	%		1.99	%
Portfolio turnover rate		13	%		16	%		17	%		24	%		2	%
Fees and expenses reimbursed and/or wavied by the Manager to average daily net assets:		0.51	%		0.54	%		0.58	%		0.88	%		8.97	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.00	(f)	$	0.00	(f)	$	0.00	(f)		—			—

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown.

(c)  Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(d)  Net expenses exclude expenses incurred indirectly through investments in underlying fund(s). (See Note 3).

(e)  Net expenses were less than 0.01%.

(f)  Purchase premiums and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

6

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO U.S. Sector Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks total return greater than that of the Russell 3000 Index, its benchmark. The Fund pursues its objective through investments in common stocks, either directly or indirectly through investments in shares of other domestic equity funds of the Trust ("underlying fund(s)").

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Shares of the underlying fund(s) are valued at their net asset value. Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last quoted sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

7

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $2,820,714 and $2,711,100, respectively and long-term capital gains – $3,346,423 and $4,868,049, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $727,370 and $5,195,255 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to capital loss carryforwards.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $581,632 expiring in 2012. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

8

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	161,533,811	$	12,340,419	$	(706,183	)	$	11,634,236

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	375,884	$	(375,884	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

9

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.04% of the amount invested or redeemed. For the period June 30, 2004 to June 29, 2005, the premium on cash purchases and fee on redemptions of Fund shares were each 0.08%. The redemption fee is only applicable to shares acquired on or after June 30, 2003. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $10,965 and $60,023 in purchase premiums and $9,111 and $120 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.33% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. As described in Note 1, the Fund invests in certain underlying fund(s). The Fund invests in Class III shares of each underlying fund(s) being offered. Like the management fee (as described below), the Fund's shareholder service fee is waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in shares of underlying fund(s).

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees and the following expenses: fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes (collectively, "fund expenses")) plus the amount of fees and expenses, excluding shareholder service fees and fund expenses (as defined above), incurred indirectly by the Fund through investment in the underlying fund(s), exceed 0.33% of the Fund's average daily net assets. Because GMO will not reimburse expenses incurred indirectly by the Fund to the extent they exceed 0.33% of the Fund's average daily net assets, and because the amount of fees and expenses incurred indirectly by the Fund will vary, the operating expenses (excluding shareholder service fees and fund expenses (as defined above)) incurred indirectly by the Fund through its investment in the underlying fund(s) may exceed 0.33% of the Fund's average daily net assets.

10

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As noted above, the Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees)			Indirect Shareholder Service Fees			Total Indirect Expenses
	0.326	%		0.150	%		0.476	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $1,718 and $949, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $40,449,920 and $20,361,383, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $117,471,328 and $117,471,328, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 39.2% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's shares outstanding. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 0.2% of the Fund's shares were held by two related parties comprised of certain GMO employee accounts.

11

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		4,237,227		$	27,401,967			11,159,900		$	70,254,066
Shares issued to shareholders in reinvestment of distributions		960,534			6,158,153			1,144,256			7,226,158
Shares repurchased		(2,430,815	)		(15,779,516	)		(162,091	)		(1,051,742	)
Purchase premiums and redemption fees		—			20,076			—			60,143
Net increase (decrease)		2,766,946		$	17,800,680			12,142,065		$	76,488,625

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Real Estate Fund, Class III	$	4,290,702	$	755,329	$	4,926,022	$	52,277	$	703,052	$	—
GMO Small/Mid Cap Growth Fund, Class III (formerly GMO Small Cap Growth Fund)		5,194,424		429,123		5,487,266		10,211		418,913		—
GMO Small/Mid Cap Value Fund, Class III (formerly GMO Small Cap Value Fund)		6,300,437		558,998		6,745,142		80,208		478,790		—
GMO U.S. Core Fund, Class III		109,034,777		4,845,643		115,210,919		1,007,643		—		—

12

GMO U.S. Sector Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO U.S. Core Equity Fund, Class III	$	—	$	131,923,755	$	3,989,362	$	850,324	$	2,632,009	$	128,599,664
GMO U.S. Quality Equity Fund, Class III		26,554,454		5,929,541		1,474,000		298,827		50,714		32,203,358
GMO U.S. Small/Mid Cap Growth Fund, Class III		—		6,710,790		—		6,085		917,439		6,237,620
GMO U.S. Small/Mid Cap Value Fund, Class III		—		6,768,068		—		22,145		900,781		6,111,798
Totals	$	151,374,794	$	157,921,247	$	137,832,711	$	2,327,720	$	6,101,698	$	173,152,440

9.  Subsequent event

Effective June 30, 2006, the Fund's name will be the U.S. Equity Allocation Fund. In connection with this change, the Fund's principal investment strategies will be revised to eliminate the Fund's ability to directly invest in portfolio securities (as opposed to underlying funds). In addition, the Fund will no longer directly bear management and shareholder service fees.

13

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO U.S. Sector Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO U.S. Sector Fund (the "Fund") ( a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

14

GMO U.S. Sector Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.49	%	$	1,000.00	$	1,050.00	$	2.49
2) Hypothetical		0.49	%	$	1,000.00	$	1,022.36	$	2.46

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

15

GMO U.S. Sector Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $3,346,423 from long-term capital gains.

For taxable, non-corporate shareholders, 70.43% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 54.10% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February28,2006 of $73,086 and $0, respectively, or if determined to be different, the qualiified interest income of such year.

16

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

17

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

18

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

19

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

GMO International Small Companies Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO International Small Companies Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO International Small Companies Fund returned +25.8% for the fiscal year ended February 28, 2006, as compared to +17.4% for the MSCI EAFE Index and +23.8% for the S&P/Citigroup EMI World ex-U.S. Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in equity securities of small companies in countries outside of the U.S. throughout the fiscal year.

Among the portfolio holdings with the largest positive impact to relative returns were German steel maker Salzgitter, Japanese heavy equipment maker Ishikawajima-Harima, French steel manufacturer Vallourec, Japanese steel maker Daido Steel Co., and Japanese real estate developer Urban Corp. Less successful holdings included German travel and logistics company TUI, Canadian printer Quebecor World, Italian insurer Unipol, and Irish sales and distribution company DCC.

The portfolio benefited slightly from an allocation to emerging markets and to Canada. This was offset somewhat by overweights to Ireland and Italy.

The strong U.S. dollar relative to most foreign currencies detracted from returns for U.S. investors. The MSCI EAFE Index returned 12% less in U.S. dollar terms than in local currency.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .60% on the purchase and .60% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO International Small Companies Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		95.5	%
Preferred Stocks		2.8
Mutual Funds		0.2
Rights and Warrants		0.0
Forward Currency Contracts		0.0
Futures Contracts		0.1
Short-Term Investment(s)		14.6
Other		(13.2	)
		100.0	%
Country Summary	% of Equity Investments
Japan		24.6	%
United Kingdom		20.1
Germany		9.7
Canada		4.9
France		4.7
Netherlands		4.6
Italy		4.0
Australia		3.5
Singapore		2.5
Sweden		2.5
South Korea		2.3
Taiwan		1.9
Finland		1.9
Ireland		1.6
Spain		1.6
Switzerland		1.4
Austria		1.2
Brazil		1.2
Belgium		1.1
Hong Kong		1.0
South Africa		0.8
China		0.8
Mexico		0.6
Denmark		0.3
Russia		0.2
Israel		0.2
Turkey		0.2
Poland		0.2
Greece		0.1
Malaysia		0.1
Thailand		0.1
Philippines		0.1
Indonesia		0.0
		100.0	%

1

GMO International Small Companies Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Consumer Discretionary		20.8	%
Industrials		20.6
Financials		18.5
Materials		11.4
Information Technology		6.7
Consumer Staples		6.5
Energy		5.6
Health Care		5.3
Utilities		2.5
Telecommunication Services		2.1
		100.0	%

2

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 95.5%
		Australia — 3.4%
	94,063	Australian Stock Exchange Ltd		2,256,301
	604,294	Babcock & Brown Infrastructure Group (a)		692,102
	390,066	Boral Ltd		2,531,690
	81,940	Cochlear Ltd		2,971,119
	1,285,421	Commonwealth Property Office Fund		1,284,179
	939,440	CSR Ltd		2,644,282
	2,895,911	DB RREEF Trust		3,024,921
	295,773	Healthscope Ltd (a)		841,222
	1,836,163	Investa Property Group		2,735,019
	406,418	James Hardies Industries NV		2,664,136
	906,845	Mirvac Group Ltd		2,828,535
	880,266	Oil Search Ltd		2,374,324
	512,233	Promina Group Ltd		2,064,029
	52,474	Ramsay Health Care Ltd		388,147
	62,826	Record Investments Ltd		454,578
	52,231	SFE Corp NPV		493,173
	359,660	Valad Property Group		366,576
	165,944	Worleyparsons Ltd		1,948,115
	209,838	Zinifex Ltd		1,192,592
				33,755,040
		Austria — 1.2%
	76,675	Austrian Airlines * (a)		766,790
	5,954	Betandwin.com Interactive * (a)		692,244
	10,610	Boehler Uddeholm (Bearer)		1,990,458
	43,618	Flughafen Wien AG		3,517,848
	9,616	Mayr-Melnhof Karton AG (Bearer)		1,415,125
	63,248	RHI AG * (a)		1,804,197
	14,465	Voestalpine AG		1,685,902
				11,872,564

See accompanying notes to the financial statements.

3

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Belgium — 1.1%
	25,508	CMB Cie Maritime Belge		826,309
	4,721	Cofinimmo SA		748,399
	12,350	Colruyt SA		1,779,136
	28,089	Euronav SA		815,746
	50,136	Tessenderlo Chemie (a)		1,767,003
	36,623	Umicore		5,202,168
				11,138,761
		Brazil — 0.4%
	115,200	Companhia de Concessoes Rodoviarias		1,087,714
	3,945,916	Companhia Saneamento Basico SAO PA		317,940
	22,527,200	Electrobras (Centro)		477,277
	15,244	Tele Centro Oeste Celular Participacoes SA		233,308
	19,700	Unibanco-Uniao de Bancos Brasileiros SA GDR		1,732,615
				3,848,854
		Canada — 4.7%
	36,000	ARC Energy Trust		837,872
	82,300	Biovail Corp		2,071,169
	30,000	Bonavista Energy Trust		909,411
	13,000	Calfrac Well Services Ltd		387,215
	19,384	Canadian Tire Corp Class A		1,134,265
	61,600	Canadian Utilities Class A		2,192,547
	23,700	CCS Income Trust		761,186
	52,400	Duvernay Oil Corp *		1,791,776
	43,300	Ensign Resource Service Group		1,478,323
	49,400	First Quantum Minerals Ltd		1,573,132
	65,300	FNX Mining Co Inc *		769,959
	27,900	Gildan Activewear Inc Class A *		1,393,220
	64,000	GMP Capital Fund		1,304,835
	25,625	Harvest Energy Trust		746,348
	123,702	Hudson's Bay Co		1,654,512
	35,800	Inmet Mining Corp		998,601
	30,900	Mega Bloks Inc *		712,104

See accompanying notes to the financial statements.

4

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Canada — continued
	26,900	Metro Inc Class A		701,821
	27,200	NuVista Energy Ltd *		341,062
	64,366	Onex Corp		1,141,818
	45,900	Opti CDA Inc *		1,688,257
	45,400	Paramount Energy Trust		770,216
	17,600	Paramount Resources Ltd *		565,269
	35,200	Primewest Energy Trust		1,028,945
	190,771	Quebecor Inc Class B		4,532,375
	126,456	Quebecor World Inc		1,285,201
	54,400	Real Resources Inc *		995,662
	20,500	Ritchie Brothers Auctioneers		979,678
	38,600	Russel Metals Inc		879,704
	47,004	Sobeys Inc		1,565,490
	57,100	Total Energy Trust Ltd		843,097
	70,900	Trican Well Service Ltd *		3,013,305
	21,400	Trilogy Energy Trust		350,060
	34,600	TSX Group Inc		1,467,482
	21,600	Vermilion Trust		583,501
	60,500	Western Oil Sands Inc Class A *		1,650,315
	93,700	Yamana Gold Inc *		842,636
				45,942,369
		China — 0.7%
	664,000	Aluminum Corp of China Ltd		676,650
	1,136,000	Bank of Communications Co Ltd *		681,360
	1,096,000	China Life Insurance Co Ltd *		1,243,110
	3,830,992	China Petroleum & Chemical Corp Class H		2,279,218
	638,000	China Shenhua Energy Co Ltd *		962,917
	24,000	China Telecom Corp Ltd ADR (a)		880,560
	447,500	China Telecom Corp Ltd Class H		163,526
	1,108,000	Denway Motors Ltd		438,107
				7,325,448

See accompanying notes to the financial statements.

5

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Denmark — 0.3%
	15,153	Danske Bank A/S		2,035,123
	10,125	East Asiatic Co		1,012,187
				3,047,310
		Finland — 1.8%
	93,502	Amer Group Class A (a)		1,955,052
	58,176	Elcoteq Network Corp		1,284,725
	105,103	Kemira Oyj		1,818,983
	110,779	Kesko Oyj Class B		3,481,488
	273,819	M-real Oyj Class B		1,373,704
	204,629	OKO Bank		3,442,725
	83,800	Outokumpu Oyj		1,520,577
	4,739	Rautaruukki Oyj		159,701
	58,600	Yit Yhtymae Oyj		2,973,228
				18,010,183
		France — 4.6%
	5,649	Alstom *		482,814
	9,846	Bourbon SA		1,005,598
	70,542	Business Objects SA *		2,618,172
	19,537	Cap Gemini SA *		963,240
	17,816	Dassault Systemes SA		994,926
	12,655	Etablissements Economiques du Casino Guichard-Perrachon SA		788,824
	10,036	Eurazeo		1,086,161
	48,917	Euronext NV		3,066,375
	30,225	Generale de Sante		869,563
	11,997	Groupe Steria SCA		650,056
	228,916	Havas SA (a)		1,079,965
	57,244	Michelin SA Class B		3,492,007
	19,431	Nexans SA		1,282,300
	155,406	Publicis Groupe		5,929,249
	37,363	Remy Cointreau SA		1,857,038
	1,602,586	SCOR SA		3,851,262
	46,888	Soitec *		1,248,984

See accompanying notes to the financial statements.

6

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		France — continued
	33,768	Technip SA		2,029,141
	19,003	Ubisoft Entertainment SA *		739,588
	7,553	Vallourec		5,909,415
	5,747	Wendel Investissement		657,760
	81,602	Zodiac SA		5,122,179
				45,724,617
		Germany — 8.1%
	88,493	Aareal Bank AG *		3,918,487
	37,798	Altana AG		2,030,016
	29,514	Balda AG		373,974
	60,321	Bankgesellschaft Berlin AG * (a)		349,541
	48,270	Bilfinger & Berger AG		2,775,795
	404,305	Depfa Bank Plc		6,741,198
	4,281	Deutsche Wohnen AG		1,224,623
	114,593	Hannover Rueckversicherungs AG (Registered) (a)		4,350,092
	59,624	Hochtief AG (a)		3,199,907
	18,691	IKB Deutsche Industriebank AG		661,133
	33,136	IVG Immobilien AG		860,823
	69,718	IWKA AG		1,877,100
	156,921	KarstadtQuelle AG * (a)		3,787,011
	40,319	Lanxess AG *		1,390,557
	24,275	MAN AG		1,531,758
	101,603	Merck KGaA		10,174,764
	57,629	Mobilcom AG		1,517,669
	26,772	Norddeutsche Affinerie AG		743,237
	57,755	Rheinmetall AG		4,500,680
	26,182	Rhoen-Klinikum AG		1,138,654
	174,333	Salzgitter AG		11,846,187
	24,607	Software AG		1,419,182
	4,375	Solarworld AG		1,142,840
	223,778	Suedzucker AG (a)		5,912,303
	335,528	TUI AG (a)		6,626,717
				80,094,248

See accompanying notes to the financial statements.

7

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Greece — 0.1%
	140,813	Hellenic Technodomiki Tev SA		1,215,413
		Hong Kong — 0.9%
	381,000	Asia Satellite Telecommunications Holdings Ltd		651,647
	334,800	Dah Sing Financial Services		2,336,604
	1,650,000	First Pacific Co		585,675
	117,000	Guoco Group		1,456,185
	1,038,000	Hang Lung Group Co Ltd		2,285,944
	242,000	Orient Overseas International Ltd		887,685
	192,000	Television Broadcasts Ltd		1,078,899
				9,282,639
		Indonesia — 0.0%
	343,315	Astra International Tbk PT		363,566
		Ireland — 1.6%
	126,599	C&C Group Plc		845,552
	375,097	DCC Plc		8,543,576
	1,881,721	Fyffes Plc		4,711,392
	67,400	Olivetti SPA		1,491,580
				15,592,100
		Israel — 0.2%
	195,000	Bank Hapoalim B.M.		892,427
	128,800	Bank Leumi Le		464,745
	34,400	Check Point Software Technologies Ltd *		731,344
				2,088,516
		Italy — 3.5%
	38,341	Aedes (a)		265,266
	1,980,759	AEM SPA (a)		4,199,742
	193,764	Banca Popolare di Lodi (a)		2,123,085
	75,090	Banca Popolare di Milano		949,125
	52,997	Benetton Group SPA		675,281

See accompanying notes to the financial statements.

8

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Italy — continued
	101,712	Buzzi Unicem SPA		2,104,454
	143,782	Cementir SPA		950,821
	14,775	Datamat SPA		168,864
	152,093	ERG SPA		3,579,423
	22,065	Fondiaria - Sai SPA - Di RISP		657,355
	102,000	Fornara & Co SPA * (b) (c)		—
	213,400	Grassetto SPA * (b) (c)		2,544
	506,840	IFIL SPA		2,597,594
	497,335	Impregilo SPA * (a)		2,129,600
	134,019	Italcementi SPA (a)		2,743,500
	362,996	Italcementi SPA - Di RISP		5,173,734
	35,710	Italmobiliare SPA - RNC		2,197,241
	277,957	Milano Assicurazioni SPA		2,125,361
	45,557	Recordati Aor Post Fraz		337,136
	129,387	Risanamento SPA		730,322
	6,953	Tod's SPA		508,387
				34,218,835
		Japan — 24.2%
	169,700	Aderans Co Ltd		4,691,689
	26,000	Alfresa Holdings Corp		1,517,222
	82,000	Alps Electric Co Ltd		1,282,201
	114,000	Amada Co Ltd		1,075,925
	59,000	Amano Corp		1,062,485
	72,000	AOC Holdings Inc		1,294,767
	600	Aoyama Trading Co Ltd		18,482
	104	Aplix Corp * (a)		843,348
	17,800	Arrk Corp		1,273,953
	39,000	Asahi Denka Co Ltd		622,532
	150,000	Asics Corp		1,422,580
	33,800	Autobacs Seven Co Ltd		1,697,153
	39,000	Avex Group Holding Inc (a)		1,032,201
	127,000	Bosch Automotive Systems Corp (a)		549,736
	112,000	Brother Industries Ltd		1,201,841

See accompanying notes to the financial statements.

9

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	212,000	Calsonic Kansei Corp		1,467,093
	22,000	Canon Sales Co Inc		470,433
	128,000	Central Glass Co Ltd		721,560
	55,000	Chiba Kogyo Bank Ltd *		1,007,031
	1,000	Chudenko Corp		18,234
	70,000	CKD Corporation (a)		1,054,408
	78,900	Coca-Cola West Japan Co Ltd (a)		1,890,523
	507,000	Cosmo Oil Co Ltd		2,577,697
	310	Creed Corp		1,305,750
	177,350	Daiei Inc * (a)		4,892,734
	113,000	Daifuku		2,086,260
	17,000	Daiichikosho Co Ltd		453,658
	590,000	Daikyo Inc *		3,105,621
	34,000	Daimaru Inc		457,228
	109,000	Daio Paper Corp (a)		1,157,802
	91,000	Denki Kogyo Co Ltd (a)		1,022,056
	35,000	Edion Corp		730,269
	24,000	Exedy Corp		706,758
	349,000	Fuji Electric Holdings Co Ltd		1,631,623
	197,000	Fujikura Ltd		2,187,718
	281,000	Furakawa Co Ltd * (a)		678,091
	118,100	Futaba Industrial Co Ltd (a)		2,669,779
	57,100	H.I.S. Co Ltd (a)		1,455,446
	4,000	Hakuhodo Dy Holdings Inc		324,440
	82,000	Hankyu Department Stores Inc (a)		723,792
	225,000	Hanwa Co Ltd		984,444
	1,922,400	Haseko Corp * (a)		6,698,448
	215,000	Heiwa Real Estate Co Ltd (a)		1,527,306
	27,000	Hisamitsu Pharmaceutical Co Inc		644,226
	1,685,000	Hitachi Zosen Corp * (a)		3,141,672
	41,000	Horiba Ltd (a)		1,189,089
	129,700	Hosiden Corp		1,502,537
	51,000	Intec Corp		767,094
	9,819	Invoice Inc (a)		509,739

See accompanying notes to the financial statements.

10

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	55,000	Ito En Ltd (a)		1,709,007
	625,000	Iwatani International Corp (a)		2,091,797
	15,000	Izumi Co Ltd (a)		510,722
	257,000	JACCS Co Ltd		2,539,198
	54,000	Japan Securities Finance Co		610,293
	385,000	Japan Steel Works Ltd (a)		2,381,998
	46,000	Joint Corp		1,320,598
	219,000	Juki Corp		1,229,508
	43,000	Kaga Electronics Co Ltd		1,085,345
	101,000	Kandenko Co		727,379
	43,000	Kanto Tsukuba Bank Ltd *		810,477
	126,000	Kawasaki Kisen Kaisha Ltd (a)		783,745
	252,000	Kayaba Industry Co (a)		860,535
	265,000	Keisei Electric Railway Co (a)		1,704,347
	513	Kenedix Inc		2,386,729
	400,000	Kiyo Holdings Inc *		1,095,417
	51,000	Kohnan Shoji Co Ltd (a)		673,445
	160,000	Koito Manufacturing Co Ltd		1,985,416
	85,000	Kojima Co Ltd (a)		961,424
	127,200	Konami Corp (a)		3,136,148
	475,000	Kurabo Industries Ltd		1,639,233
	209,000	Kyokuyo Co Ltd (a)		515,014
	104,000	Kyudenko Corp		656,626
	27,400	Lintec Corp		667,756
	365,000	Maeda Corp		2,261,979
	90,000	Makino Milling Machine Co Ltd		1,037,659
	287,000	Maruha Group Inc (a)		646,525
	90,000	Marusan Securities Co Ltd		1,050,869
	110,000	Matsuzakaya Co Ltd (a)		881,879
	158,000	Mediceo Paltac Holdings Co Ltd (a)		2,597,757
	34,000	Miraca Holdings Inc		669,188
	177,000	Mitsubishi Rayon Co Ltd		1,422,263
	176,000	Mitsubishi Steel Manufacturing Co Ltd (a)		1,107,950
	250,000	Nagase & Co		3,194,361

See accompanying notes to the financial statements.

11

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	205,000	Nichiro Corp (a)		444,379
	30,000	Nidec Sankyo Corp		452,695
	9,000	Nihon Dempa Kogyo Co Ltd		376,381
	191,000	Nippon Corp		1,506,789
	1,426,000	Nippon Light Metal (a)		3,991,441
	271,000	Nippon Soda Co Ltd		1,012,460
	22,000	Nippon System Development Co Ltd		727,087
	61,000	Nipro Corp (a)		906,564
	449,000	Nishimatsu Construction (a)		1,904,751
	37,000	Nishimatsuya Chain Co Ltd		712,595
	238,000	Nissan Chemical Industries Ltd		3,916,294
	353,000	Nissan Diesel Motor Co (a)		1,944,751
	460,000	Nissan Shatai Co Ltd		3,167,360
	244,000	Nisshin Seifun Group Inc		2,476,566
	685,500	Nissin Company Ltd (a)		1,319,554
	12,000	Nissin Kogyo Co Ltd		706,207
	26,000	Nitori Co Ltd		1,279,723
	97,000	NOF Corp (a)		588,119
	178,000	Okasan Securities Co Ltd (a)		1,859,275
	14,000	Okinawa Electric Power Co		869,080
	182,000	Okuma Corp (a)		2,199,341
	484,000	Orient Corp *		1,716,666
	26,000	Park24 Co Ltd (a)		836,130
	900,000	Penta Ocean Construction Co Ltd * (a)		1,841,574
	28,000	Point Inc		2,074,037
	144,900	Q.P. Corp		1,386,558
	402	Round One Corp (a)		1,634,726
	159,000	Ryobi Ltd		1,149,149
	11,800	Ryohin Keikaku Co Ltd		885,453
	130,300	Ryosan Co		3,554,511
	4,000	Sanden Corp		17,276
	67,000	Sanki Engineering		571,454
	339,000	Sankyo-Tateyama Holdings Inc		762,196
	548,000	Sankyu Inc (a)		3,087,539

See accompanying notes to the financial statements.

12

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	145,000	Sanyo Securities Co Ltd * (b) (c)		1,253
	96,000	Sanyo Shokai Ltd		700,808
	220,000	Seino Holdings Co Ltd (a)		2,147,652
	29,000	Shinko Electric Industries		2,124,055
	41,000	Showa Corp		675,519
	118,290	Sojitz Corp * (a)		649,109
	41,000	Star Micronics Co Ltd		632,696
	42,000	Sugi Pharmacy Co Ltd (a)		987,696
	1,131,000	Sumitomo Light Metal Industry (a)		2,846,364
	287,000	Sumitomo Warehouse		2,262,636
	17,000	Sundrug Co Ltd		857,879
	110,100	Suzuken Co Ltd		3,273,048
	196,000	Taiheiyo Cement Co Ltd		843,369
	388	Take And Give Needs Co Ltd *		626,550
	53,000	Tamura Taiko Holdings Inc		311,114
	142,000	Tanabe Seiyaku Co Ltd		1,567,999
	398,000	TOA Corp (a)		739,263
	207,000	Toagosei Co Ltd		897,955
	1,420,000	Toho Gas Co Ltd		5,761,822
	121,000	Toho Zinc Co Ltd (a)		1,013,921
	29,300	Tokyo Seimitsu Co Ltd		1,707,111
	320,000	Tokyo Tatemono Co Ltd		3,095,087
	54,000	Tokyo Tomin Bank Ltd (a)		2,425,710
	127,000	Topy Industries Ltd		518,501
	159,000	Toshiba Machine Co Ltd		1,684,660
	331,000	Toyo Construction Co *		566,391
	236,000	Toyo Engineering (a)		1,383,327
	43,000	Toyo Suisan Kaisha Ltd		626,959
	995,000	Toyo Tire & Rubber Co Ltd		4,673,761
	19,100	Trans Cosmos Inc (a)		1,127,163
	157,000	Tsugami Corp		1,097,704
	171,000	Tsumura & Co (a)		4,429,436
	1,041,000	Ube Industries Ltd		3,071,688
	118,000	Uchida Yoko Co Ltd		713,323

See accompanying notes to the financial statements.

13

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	383,000	Unitika Ltd		699,175
	120,000	Urban Corp		1,758,304
	123,000	Venture Link Co Ltd * (a)		411,844
	66,000	Yamatake Honeywell		1,575,339
	94,000	Yamato Kogyo Co		1,951,038
	152,000	Yaskawa Electric Corp * (a)		1,655,474
	706,000	Yokohama Rubber Co		3,756,283
	96,000	Zeon Corp		1,209,429
				239,236,357
		Malaysia — 0.1%
	208,800	Maxis Communications Berhad		488,727
	167,400	MISC Berhad		436,691
	357,000	Promet Berhad * (b) (c)		961
	312,000	Rekapacific Berhad * (b) (c)		840
				927,219
		Mexico — 0.6%
	171,000	Carso Global Telecom Class A *		411,379
	136,000	Controladora Comercial Mexicana SA de CV		245,384
	140,000	Fomento Economico Mexicano SA de CV		1,209,547
	245,000	Grupo Financiero Banorte SA de CV		597,823
	318,100	Grupo Mexico SA Class B		815,369
	104,000	Grupo Modelo SA de CV Class C		359,905
	293,000	Grupo Televisa SA (Participating Certificates)		1,163,888
	41,000	Telefonos de Mexico SA de CV Class L ADR		917,990
				5,721,285
		Netherlands — 4.6%
	48,275	Boskalis Westminster NV		3,057,806
	412,043	Buhrmann NV (a)		6,903,766
	56,340	Chicago Bridge & Iron ADR		1,378,640
	38,435	Corio NV		2,525,430
	151,067	CSM		4,511,449

See accompanying notes to the financial statements.

14

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Netherlands — continued
	632,561	Hagemeyer NV * (a)		2,545,760
	32,902	Heineken Holding NV		1,144,629
	27,549	Hunter Douglas NV		1,660,282
	39,702	Imtech NV		1,658,277
	35,735	Koninklijke Wessanen NV		562,141
	25,157	Nutreco Holding NV		1,478,199
	194,591	OCE NV (a)		3,366,446
	31,623	Ordina NV		633,768
	10,722	Sbm Offshore NV		1,056,095
	28,706	Stork NV		1,638,251
	18,491	Univar NV		971,024
	131,792	Van der Moolen Holding NV (a)		1,185,766
	80,200	Van Ommeren Vopak NV		2,551,869
	20,051	Vastned NV		1,481,476
	44,144	Wereldhave NV		4,706,059
				45,017,133
		Philippines — 0.1%
	149,600	Bank of the Philippine Islands		170,315
	12,882	Philippine Long Distance Telephone		442,206
				612,521
		Poland — 0.2%
	47,300	Polski Koncern Naftowy Orlen SA		869,855
	90,200	Telekomunikacja Polska SA		627,953
				1,497,808
		Russia — 0.2%
	34,300	Mobile Telesystems ADR		1,237,201
	4,300	Tatneft ADR		489,125
				1,726,326

See accompanying notes to the financial statements.

15

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Singapore — 2.5%
	501,000	Ascendas Real Estate Investment Trust		666,199
	691,000	Asia Food & Properties Ltd *		199,017
	329,000	CapitaMall Trust		471,327
	1,986,000	Cosco Corp		1,448,158
	2,623,000	GES International Ltd		1,585,601
	740,000	Hyflux Ltd		1,320,689
	423,000	Jurong Technologies Industrial Corp Ltd		466,538
	1,825,000	Keppel Land Ltd		4,940,941
	258,000	Marco Polo Developments Ltd		225,068
	1,454,350	MobileOne Ltd		1,970,835
	458,000	Noble Group Ltd		343,422
	11,646,100	Pacific Century Region Developments Ltd *		2,095,939
	1,279,000	Parkway Holdings Ltd		1,925,713
	652,000	Singapore Exchange Ltd		1,526,464
	444,000	Singapore Petroleum Co		1,378,220
	753,000	SMRT Corp Ltd		509,580
	2,477,000	Want Want Holdings Ltd		3,108,883
				24,182,594
		South Africa — 0.8%
	40,840	ABSA Group Ltd		758,611
	27,600	Bidvest Group Ltd		464,139
	193,700	FirstRand Ltd		583,935
	9,490	Impala Platinum Holdings Ltd		1,611,303
	57,700	MTN Group Ltd		558,486
	21,200	Nedcor Ltd		409,204
	43,200	Remgro Ltd		906,066
	260,550	Sanlam Ltd		674,486
	46,800	Telkom SA Ltd		1,231,325
	20,104	Tiger Brands Ltd		498,345
				7,695,900

See accompanying notes to the financial statements.

16

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		South Korea — 2.2%
	34,400	Daewoo Engineering & Construction Co Ltd		444,500
	33,734	Hana Financial Group Inc		1,441,772
	16,300	Hanjin Shipping		381,555
	45,200	Hynix Semiconductor Inc *		1,524,724
	14,780	Hyundai Development Co		670,757
	7,100	Hyundai Engineering & Construction *		341,690
	6,400	Hyundai Heavy Industries		506,066
	13,400	Hyundai Mobis		1,126,630
	34,700	KIA Motors Corp		744,960
	3,500	Korea Express Co Ltd *		290,584
	46,400	KT Corp ADR		947,488
	19,300	KT Freetel Co Ltd		513,450
	25,600	KT&G Corp		1,517,585
	5,700	LG Cable & Machinery Ltd		191,777
	9,600	LG Chemicals Ltd		481,686
	72,300	LG Corp		2,511,573
	14,200	LG Electronics Inc		1,166,053
	2,419	LG Home Shopping Inc		245,629
	7,700	Samsung SDI Co Ltd		680,373
	43,300	Shinhan Financial Group Co Ltd		1,691,656
	2,400	Shinsegae Co Ltd		1,137,382
	26,100	SK Corp		1,608,232
	1,500	SK Telecom Co Ltd		311,711
	32,800	SK Telecom Co Ltd ADR		792,120
	39,000	Woori Finance Holdings Co Ltd		766,094
				22,036,047
		Spain — 1.6%
	12,071	Acciona SA		1,682,756
	106,647	Aguas de Barcelona SA Class A		2,949,926
	48,556	Corp Financiera Alba		2,473,697
	29,949	Fomento de Construcciones y Contratas SA		2,036,179
	8,419	Inmobiliaria Colonia SA		540,462
	535,633	Jazztel Plc *		485,218

See accompanying notes to the financial statements.

17

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Spain — continued
	22,013	Metrovacesa SA		1,638,826
	32,055	Red Electrica de Espana		1,072,052
	91,638	Sacyr Vallehermoso SA		2,576,465
				15,455,581
		Sweden — 2.4%
	62,500	Alfa Laval AB		1,579,201
	152,400	Boliden AB *		1,889,232
	37,800	Elekta AB B Shares		558,626
	95,855	Getinge AB		1,385,775
	69,838	Holmen AB Class B (a)		2,709,261
	323,917	Kinnevik Investment AB (a)		3,866,466
	23,900	Kungsleden AB		836,296
	44,019	Lundbergforetagen AB Class B		2,121,521
	67,000	Lundin Petroleum AB * (a)		739,356
	30,950	Modern Times Group AB *		1,433,821
	29,800	NCC Class B		677,307
	88,220	SSAB Swedish Steel Class A		3,963,796
	203,600	Tele2 AB Class B (a)		2,197,465
				23,958,123
		Switzerland — 1.4%
	23,425	Baloise Holding Ltd		1,484,029
	9,455	Charles Voegele Holding AG		864,598
	180,623	Converium Holding AG *		1,989,999
	2,652	Fischer (George) AG (Registered) *		1,073,442
	3,446	Forbo Holdings AG (Registered) *		870,776
	4,820	Helvetia Patria Holding (Registered)		1,084,472
	338	Jelmoli Holding AG (Bearer)		546,159
	190	Jelmoli Holding AG (Registered)		61,650
	31,397	Logitech International SA *		1,264,780
	36	Motor-Columbus (Bearer)		191,936
	886	Movenpick Holdings (Bearer) *		219,502
	32,864	Phonak Holding AG (Registered)		1,586,214
	13,951	Valora Holding AG *		2,834,925
				14,072,482

See accompanying notes to the financial statements.

18

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Taiwan — 1.9%
	322,857	Acer Inc		714,388
	445,770	Asustek Computer Inc		1,256,298
	960,630	AU Optronics Corp		1,534,820
	457,000	Cathay Financial Holding Co Ltd		878,495
	619,000	Chi Mei Optoelectronics Corp		936,179
	5,000	China Bills Finance Corp		1,630
	1,264,000	China Development Financial Holding Corp *		483,978
	1,177,000	Chunghwa Picture Tubes Ltd		305,656
	238,000	Chunghwa Telecom Co Ltd		433,291
	635,818	Compal Electronics Inc		591,411
	233,546	Delta Electronics Inc		555,948
	564,130	Far Eastern Textile Co Ltd		415,205
	288,000	Far Eastone Telecommunications Co Ltd		352,402
	566,316	Formosa Chemicals & Fibre Co		890,314
	853,941	Formosa Plastics Corp		1,351,280
	720,000	Fubon Financial Holding Co Ltd		643,182
	2,451	Gigabyte Technology Co Ltd		2,065
	74,920	High Tech Computer Corp		1,604,824
	493,884	Inventec Co Ltd		301,082
	594,640	Lite-On Technology Corp		801,374
	1,710,000	Mega Financial Holdings Co Ltd		1,297,077
	876,000	Powerchip Semiconductor Corp		532,605
	443,550	Quanta Computer Inc		675,651
	187,150	Realtek Semiconductor Corp		205,210
	369,000	Siliconware Precision Industries Co		467,704
	996,144	Taishin Financial Holdings Co Ltd		605,201
	583,000	Taiwan Cellular Corp		537,985
				18,375,255
		Thailand — 0.1%
	168,000	Bangkok Dusit Medical Service Pcl (Foreign Registered) (c)		101,519
	216,000	Kasikornbank Pcl NVDR (c)		367,850
	32,000	PTT Exploration & Production Pcl (Foreign Registered) (c)		425,779
				895,148

See accompanying notes to the financial statements.

19

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Turkey — 0.2%
	104,598	Akbank TAS		1,058,832
	61,700	Haci Omer Sabanci Holding		482,974
	21,311	Tupras-Turkiye Petrol Rafineriler AS		406,335
				1,948,141
		United Kingdom — 19.8%
	76,090	Admiral Group Plc		753,782
	531,876	Aggreko Plc		2,768,850
	877,008	AMEC		6,097,904
	239,547	Amlin		1,087,114
	357,151	Arriva Plc		3,773,907
	152,371	Autonomy Corp Plc *		1,282,327
	87,406	AWG Plc		1,696,458
	136,618	Balfour Beatty Plc		895,996
	809,905	Barratt Developments Plc		14,672,092
	642,724	BBA Group Plc		3,017,830
	65,198	Bellway Plc		1,339,486
	415,429	Berkeley Group Holdings Plc *		8,115,504
	313,657	Bradford & Bingley Plc		2,572,779
	637,056	Brit Insurance Holdings Plc		1,195,459
	128,113	British Energy Group Plc *		1,385,799
	265,776	Bunzl Plc		2,978,257
	59,207	Burren Energy Plc		1,031,301
	746,092	Cable & Wireless Plc		1,393,787
	77,717	Charter Plc *		904,560
	1,865,353	Cobham Group Plc		5,556,210
	146,493	Collins Stewart Tullett Plc		1,782,683
	262,909	Computacenter Plc		1,307,782
	153,406	Countrywide Plc		1,345,474
	88,398	Crest Nicholson Plc		731,382
	168,782	Croda International Plc		1,455,818
	160,708	CSR Plc *		2,550,330
	81,267	Dana Petroleum (Ordinary Shares) *		1,356,139
	160,706	De la Rue (Ordinary Shares)		1,567,023

See accompanying notes to the financial statements.

20

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	1,218,469	DSG International Plc		3,674,261
	534,000	First Choice Holidays Plc		2,113,265
	148,936	Firstgroup Plc		1,095,337
	509,524	GKN Plc		3,035,553
	21,077	Go-Ahead Group Plc		649,033
	187,243	Gyrus Group Plc *		1,331,376
	171,821	Helphire Group Plc		1,144,774
	175,819	Hiscox Plc		770,671
	296,886	HMV Group Plc		963,316
	52,449	Homeserve Plc		1,441,616
	370,153	ICAP Plc		2,883,931
	454,409	IMI Plc		4,165,773
	82,443	Inchcape Plc		3,480,552
	3,870,819	Invensys Plc *		1,425,859
	21,513	Investec Plc		1,102,954
	102,577	Johnson Matthey Plc		2,571,186
	67,733	Kelda Group Plc		945,898
	118,454	London Stock Exchange		1,775,045
	68,283	Lonmin Plc		2,716,202
	111,619	Luminar Plc		952,875
	278,146	Michael Page International Plc		1,517,112
	295,269	Mitchells & Butlers Plc		2,049,869
	35,490	Morgan Sindall Plc		731,678
	96,082	National Express Group Plc		1,496,427
	1,619,767	Northern Foods Plc		3,911,526
	381,867	Northgate Info Solutions Plc *		556,162
	432,613	Paragon Group Cos Plc		5,186,791
	17,269	Persimmon Plc		422,752
	371,548	Rank Group Plc		1,695,547
	84,604	Rotork Plc		1,083,304
	1,717,986	Royal & Sun Alliance Insurance Group		3,917,274
	59,124	Schroders Plc		1,192,077
	46,286	Schroders Plc (New shares) (Non Voting)		870,189
	875,994	Signet Group Plc		1,583,908

See accompanying notes to the financial statements.

21

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	656,115	Smith WH Plc		4,694,716
	108,200	Tate & Lyle Plc		1,134,567
	1,943,087	Taylor Woodrow Plc		14,161,773
	235,124	TDG Plc		923,309
	1,567,248	THUS Group Plc *		425,837
	550,197	Tomkins Plc		3,212,048
	164,765	Travis Perkins Plc		4,287,498
	599,042	Tullow Oil Plc		3,132,059
	69,704	Vedanta Resources Plc		1,202,797
	193,893	Venture Production (Ordinary Shares) *		2,035,647
	113,349	Victrex Plc		1,435,898
	173,253	Wilson Bowden Plc		4,531,499
	1,355,403	Wimpey (George) Plc		13,140,987
	104,934	Wolfson Microelectronics Plc *		664,198
	282,429	Wood Group (John) Plc		1,175,654
				195,228,613
		TOTAL COMMON STOCKS (COST $699,271,092)		942,106,996
		PREFERRED STOCKS — 2.8%
		Brazil — 0.8%
	61,260	Banco Itau Holding Financeira SA 2.79%		1,981,899
	2,274,000	Companhia de Bebidas das Americas 3.03%		964,857
	19,643,200	Companhia Energetica de Minas Gerais 4.11%		1,008,292
	23,956,000	Electrobras (Centro) SA Class B 8.09%		526,276
	14,200	Empresa Brasileira de Aeronautica SA ADR 2.72%		564,450
	19,100	Gerdau Metalurgica SA 4.62		534,908
	305,803	Investimentos Itau SA 4.28%		1,332,083
	32,800	Tele Norte Leste Participacs SA 7.11%		625,571
				7,538,336

See accompanying notes to the financial statements.

22

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — 1.5%
	52,578	Fresenius Medical Care AG (Non Voting) 0.92%		8,437,161
	153,847	Hugo Boss AG 2.89% (a)		6,098,322
				14,535,483
		Italy — 0.5%
	46,119	Compagnia Assicuratrice Unipol 5.02%		120,755
	242,278	IFI Istituto Finanziario Industries *		4,547,060
				4,667,815
		Russia — 0.0%
	250	Transneft 0.48%		618,750
		South Korea — 0.0%
	6,100	Hyundai Motor Co 2.48%		327,552
	3,960	LG Electronics Inc 2.84%		202,099
				529,651
		TOTAL PREFERRED STOCKS (COST $13,365,244)		27,890,035
		MUTUAL FUNDS — 0.2%
		Canada — 0.2%
	24,000	Energy Savings Income Fund		400,194
	56,900	Keyera Facilities Income Fund		1,185,615
	22,500	Petrofund Energy Trust		456,157
				2,041,966
		TOTAL MUTUAL FUNDS (COST $1,772,808)		2,041,966

See accompanying notes to the financial statements.

23

GMO International Small Companies Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		RIGHTS AND WARRANTS — 0.0%
		Hong Kong — 0.0%
	307,764	Global Bio-Chem Technology Group Ltd Warrants, Expire 5/31/07 *		2,380
		TOTAL RIGHTS AND WARRANTS (COST $0)		2,380
		SHORT-TERM INVESTMENT(S) — 14.6%
	133,661,574	The Boston Global Investment Trust (d)		133,661,574
	6,600,000	Branch Bank & Trust Time Deposit, 4.52%, due 03/01/06		6,600,000
	4,000,000	U.S. Treasury Bill, 4.64%, due 08/24/06 (e) (f)		3,912,048
		TOTAL SHORT-TERM INVESTMENT(S) (COST $144,173,183)		144,173,622
		TOTAL INVESTMENTS — 113.1% (Cost $858,582,327)		1,116,214,999

Other Assets and Liabilities (net) — (13.1%)		(129,613,033	)
TOTAL NET ASSETS — 100.0%	$	986,601,966

See accompanying notes to the financial statements.

24

GMO International Small Companies Fund

(A Series of GMO Trust)

Schedule of Investments – (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
5/26/06	CAD		49,662,041	$	43,800,202	$	625,421
5/26/06	CHF		88,125,525		67,763,280		(17,783	)
5/26/06	EUR		5,019,001		6,013,926		13,926
5/26/06	JPY		5,730,880,918		50,071,879		1,084,734
5/26/06	NOK		252,809,005		37,668,828		95,839
5/26/06	NZD		1,568,756		1,032,469		(5,067	)
5/26/06	SEK		233,960,957		29,759,525		(156,078	)
5/26/06	SGD		10,201,092		6,306,736		42,641
						$	1,683,633
Sales
5/26/06	AUD		34,452,957	$	25,536,704	$	(187,276	)
5/26/06	CAD		3,876,240		3,418,709		(35,173	)
5/26/06	CHF		4,267,069		3,281,122		47,042
5/26/06	DKK		9,084,600		1,458,528		1,713
5/26/06	EUR		65,504,056		78,489,034		(80,117	)
5/26/06	GBP		42,772,535		75,085,938		(622,930	)
5/26/06	HKD		72,097,590		9,305,817		(196	)
5/26/06	JPY		3,150,371,850		27,525,443		(569,992	)
5/26/06	SEK		25,379,460		3,228,234		81,943
						$	(1,364,986	)

See accompanying notes to the financial statements.

25

GMO International Small Companies Fund

(A Series of GMO Trust)

Schedule of Investments – (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	75	CAC 40	March 2006	$	4,473,504	$	36,456
	85	DAX	March 2006		14,702,765		771,492
	66	S&P/MIB	March 2006		14,836,030		1,040,483
	61	TOPIX	March 2006		8,737,247		89,586
						$	1,938,017
Sales
	252	FTSE 100	March 2006	$	25,481,004	$	(121,615	)
	115	SPI 200	March 2006		10,511,201		(298,271	)
						$	(419,886	)

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

GDR - Global Depository Receipt

NVDR - Non-Voting Depository Receipt

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  Bankrupt issuer.

(c)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(d)  All or a portion of this security represents investment of security lending collateral (Note 2).

(e)  Rate shown represents yield-to-maturity.

(f)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

As of February 28, 2006, 90.8% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor.

See accompanying notes to the financial statements.

26

GMO International Small Companies Fund

(A Series of GMO Trust)

Schedule of Investments – (Continued)
February 28, 2006

Currency Abbreviations:

AUD - Australian Dollar			HKD - Hong Kong Dollar
CAD - Canadian Dollar			JPY - Japanese Yen
CHF - Swiss Franc			NOK - Norwegian Krone
DKK - Danish Krone			NZD - New Zealand Dollar
EUR	-	Euro	SEK - Swedish Krona
GBP - British Pound			SGD - Singapore Dollar

See accompanying notes to the financial statements.

27

GMO International Small Companies Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $122,109,730 (cost $858,582,327) (Note 2)	$	1,116,214,999
Cash		32,208
Foreign currency, at value (cost $3,138,623) (Note 2)		3,166,585
Receivable for investments sold		17,077
Receivable for Fund shares sold		163,996
Dividends and interest receivable		1,346,824
Unrealized appreciation on open forward currency contracts (Note 2)		1,993,259
Receivable for expenses reimbursed by Manager (Note 3)		92,007
Total assets		1,123,026,955
Liabilities:
Collateral on securities loaned (Note 2)		133,661,574
Payable to affiliate for (Note 3):
Management fee		466,754
Shareholder service fee		116,688
Trustees and Chief Compliance Officer fees		1,372
Unrealized depreciation on open forward currency contracts (Note 2)		1,674,612
Payable for variation margin on open futures contracts (Note 2)		156,442
Accrued expenses		347,547
Total liabilities		136,424,989
Net assets	$	986,601,966
Net assets consist of:
Paid-in capital	$	611,944,791
Distributions in excess of net investment income		(4,700,433	)
Accumulated net realized gain		119,851,285
Net unrealized appreciation		259,506,323
	$	986,601,966
Net assets attributable to:
Class III shares	$	986,601,966
Shares outstanding:
Class III		66,073,631
Net asset value per share:
Class III	$	14.93

See accompanying notes to the financial statements.

28

GMO International Small Companies Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $2,667,160)	$	28,595,640
Interest (including securities lending income of $1,939,995)		3,122,596
Total investment income		31,718,236
Expenses:
Management fee (Note 3)		6,890,335
Shareholder service fee – Class III (Note 3)		1,722,584
Custodian and fund accounting agent fees		1,131,659
Transfer agent fees		29,839
Audit and tax fees		77,082
Legal fees		20,859
Trustees fees and related expenses (Note 3)		23,811
Registration fees		2,730
Miscellaneous		30,450
Total expenses		9,929,349
Fees and expenses reimbursed by Manager (Note 3)		(1,272,556	)
Net expenses		8,656,793
Net investment income (loss)		23,061,443
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of CPMF tax of $11,701) (Note 2)		399,552,612
Closed futures contracts		6,800,699
Foreign currency, forward contracts and foreign currency related transactions		(5,110,017	)
Net realized gain (loss)		401,243,294
Change in net unrealized appreciation (depreciation) on:
Investments		(182,228,215	)
Open futures contracts		(474,064	)
Foreign currency, forward contracts and foreign currency related transactions		(997,100	)
Net unrealized gain (loss)		(183,699,379	)
Net realized and unrealized gain (loss)		217,543,915
Net increase (decrease) in net assets resulting from operations	$	240,605,358

See accompanying notes to the financial statements.

29

GMO International Small Companies Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	23,061,443		$	28,790,114
Net realized gain (loss)		401,243,294			265,953,227
Change in net unrealized appreciation (depreciation)		(183,699,379	)		30,605,592
Net increase (decrease) in net assets from operations		240,605,358			325,348,933
Distributions to shareholders from:
Net investment income
Class III		(24,571,287	)		(44,309,416	)
Net realized gains
Class III		(364,443,342	)		(219,556,744	)
		(389,014,629	)		(263,866,160	)
Net share transactions (Note 7):
Class III		(386,907,384	)		(144,200,631	)
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		4,695,237			7,477,157
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		(382,212,147	)		(136,723,474	)
Total increase (decrease) in net assets		(530,621,418	)		(75,240,701	)
Net assets:
Beginning of period		1,517,223,384			1,592,464,085
End of period (including distributions in excess of net investment income of $4,700,433 and $12,831,294, respectively)	$	986,601,966		$	1,517,223,384

See accompanying notes to the financial statements.

30

GMO International Small Companies Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	17.84		$	17.09		$	9.50		$	10.44		$	11.68
Income (loss) from investment operations:
Net investment income (loss)		0.34	†		0.30	†		0.20			0.15			0.22
Net realized and unrealized gain (loss)		3.44			3.56			7.94			(0.80	)		(1.11	)
Total from investment operations		3.78			3.86			8.14			(0.65	)		(0.89	)
Less distributions to shareholders:
From net investment income		(0.44	)		(0.54	)		(0.20	)		(0.29	)		(0.35	)
From net realized gains		(6.25	)		(2.57	)		(0.35	)		—			(0.00	)(a)
Total distributions		(6.69	)		(3.11	)		(0.55	)		(0.29	)		(0.35	)
Net asset value, end of period	$	14.93		$	17.84		$	17.09		$	9.50		$	10.44
Total Return(b)		25.77	%		24.45	%		86.62	%		(6.30	)%		(7.57	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	986,602		$	1,517,223		$	1,592,464		$	536,648		$	253,612
Net expenses to average daily net assets		0.75	%		0.75	%		0.75	%		0.75	%		0.75	%
Net investment income to average daily net assets		2.01	%		1.75	%		1.60	%		1.65	%		2.02	%
Portfolio turnover rate		49	%		53	%		46	%		44	%		34	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.11	%		0.11	%		0.13	%		0.17	%		0.22	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.07		$	0.08		$	0.04		$	0.06		$	0.05

(a)  The distribution from net realized gains was less than $0.01 per share.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

31

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO International Small Companies Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in equity securities of non-U.S. issuers. The Fund's benchmark is the S&P/Citigroup Extended Market Index ("EMI") World ex-U.S. Index.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after the close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

32

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the

33

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

34

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail

35

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $122,109,730, collateralized by cash in the amount of $133,661,574, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to/from the Brazilian market. The CPMF tax has been included in the net realized gain (loss) on investments throughout the period. During the year ended February 28, 2006, the Fund incurred $11,701 in CPMF tax which is included in net realized gain (loss) in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $60,424,505 and $105,921,114, respectively and long-term capital gains – $328,590,124 and $157,945,046, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $31,984,898 and $91,719,713 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and losses on wash sale transactions.

36

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	866,739,100	$	270,593,847	$	(21,117,948	)	$	249,475,899

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to passive foreign investment company transactions and redemption in-kind transactions. Net gains resulting from in-kind transactions were $6,787,837. The financial highlights exclude these adjustments.

Distributions In Excess of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	9,640,705	$	(16,254,618	)	$	6,613,913

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on cash redemptions of Fund shares were each 0.60% of the amount invested or redeemed. If the Manager determines that any portion of a cash

37

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $140,159 and $2,413,955 in purchase premiums and $4,555,078 and $5,063,202 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.60% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.60% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $12,711 and $7,029, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $546,070,996 and $1,247,188,184, respectively.

38

GMO International Small Companies Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 14.1% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

As of February 28, 2006, 1.7% of the Fund's shares were held by fourteen related parties comprised of certain GMO employee accounts, and 18.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		2,353,389		$	39,930,302			35,119,471		$	600,052,388
Shares issued to shareholders in reinvestment of distributions		26,493,616			380,866,673			14,064,629			234,243,805
Shares repurchased		(47,804,290	)		(807,704,359	)		(57,321,117	)		(978,496,824	)
Purchase premiums and redemption fees		—			4,695,237			—			7,477,157
Net increase (decrease)		(18,957,285	)	$	(382,212,147	)		(8,137,017	)	$	(136,723,474	)

39

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO International Small Companies Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO International Small Companies Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

40

GMO International Small Companies Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		0.75	%	$	1,000.00	$	1,187.80	$	4.07
2) Hypothetical				0.75	%	$	1,000.00	$	1,021.08	$	3.76

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

41

GMO International Small Companies Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $2,667,160 and recognized foreign source income of $31,262,781.

The Fund's distributions to shareholders include $328,590,124 from long-term capital gains.

For taxable, non-corporate shareholders, 39.52% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, of $1,432,506 and $29,033,658, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

42

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date ofbirth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

43

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

44

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

45

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

46

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO World Opportunity Overlay Fund returned +0.2% for the fiscal year ended February 28, 2006, as compared to +3.7% for the JPMorgan U.S. 3-Month Cash Index.

The Fund underperformed the benchmark during the fiscal year by 3.5%. The Fund is comprised of overlay strategies involving investments in derivative instruments (largely interest-rate swaps and exchange-traded futures). These derivative instruments are backed by a collateral pool consisting of investment-grade, short-duration fixed income instruments and mostly asset-backed securities. During the time period, the overlay strategies detracted 3.3%. In total, cash management detracted 0.2%.

The Fund's duration at fiscal year-end was 0.1 years.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Investments Concentration Summary

February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Debt Obligation(s)		97.7	%
Short-Term Investment(s)		2.0
Mutual Funds		1.8
Written Options		0.2
Put Options Purchased		0.0
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Futures		(0.2	)
Swaps		(0.5	)
Other		(1.0	)
		100.0	%

1

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		DEBT OBLIGATION(S) — 97.7%
		Asset-Backed Securities — 92.3%
		Auto Financing — 9.9%
	7,000,000	ARG Funding Corp., Series 05-2A, Class A3, 144A, Variable Rate, 1 mo. LIBOR + .14%, 4.71%, due 05/20/10		7,024,066
	4,000,000	Daimler Chrysler Auto Trust, Series 06-A, Class A1, 144A, 4.79%, due 03/08/07		4,000,000
	7,000,000	Daimler Chrysler Master Owner Trust, Series 04-A, Class A, Variable Rate, 1 mo. LIBOR + .03%, 4.60%, due 01/15/09		6,994,400
	5,750,000	Daimler Chrysler Master Owner Trust, Series 04-B, Class A, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 08/17/09		5,753,594
	6,300,000	Ford Credit Auto Owner Trust, Series 06-A, Class A2B, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 09/15/08		6,278,344
	10,000,000	Ford Credit Floorplan Master Owner Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 05/15/10		9,989,402
	3,482,950	Franklin Auto Trust, Series 05-1, Class A1, 4.50%, due 12/20/06		3,480,512
	4,000,000	GE Dealer Floorplan Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 04/20/10		4,000,640
	101,832	Honda Auto Receivables Owner Trust, Series 05-3, Class A1, 3.42%, due 06/19/06		101,679
	1,506,219	Honda Auto Receivables Owner Trust, Series 05-6, Class A1, 4.51%, due 12/18/06		1,505,089
	7,000,000	Nissan Master Owner Trust Receivables, Series 03-A, Class A1, Variable Rate, 1 mo. LIBOR + .06%, 4.63%, due 09/15/08		6,995,800
	8,000,000	Nissan Master Owner Trust Receivables, Series 05-A, Class A, Variable Rate, 1 mo. LIBOR + .03%, 4.60%, due 07/15/10		8,000,000
	10,000,000	Superior Wholesale Inventory Financing Trust, Series 04-A10, Class A, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 09/15/11		9,931,000
	8,000,000	Superior Wholesale Inventory Financing Trust, Series 05, Class A, Variable Rate, 1 mo. LIBOR +.18%, 4.75%, due 06/15/10		7,979,200
	8,000,000	Truck Retail Installment Paper Corp., Series 05-1A, Class A, 144A, Variable Rate, 1 mo. LIBOR +.27%, 4.84%, due 12/15/16		7,993,760
	5,000,000	Wheels SPV, Llc, Series 05-B, Class A1, Variable Rate, 1 mo. LIBOR + .08%, 4.65%, due 06/10/10		4,998,700
	73,785	World Omni Auto Receivables Trust, Series 05-B, Class A1, 3.83%, due 08/21/06		773,477

See accompanying notes to the financial statements.

2

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Auto Financing — continued
	4,000,000	World Omni Auto Receivables Trust, Series 06-A, Class A1, 4.85%, due 03/15/07		4,000,000
				99,799,663
		Business Loans — 6.7%
	4,387,845	Bayview Commercial Asset Trust, Series 04-3, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .37%, 4.95%, due 01/25/35		4,389,601
	5,961,696	Bayview Commercial Asset Trust, Series 05-4A, Class A2, Variable Rate, 1 mo. LIBOR + .39%, 4.97%, due 01/25/36		5,958,118
	1,550,751	Capitalsource Commercial Loan Trust, Series 05-1A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .09%, 4.66%, due 03/22/10		1,549,511
	9,000,000	CNH Wholesale Master Note Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 06/15/11		9,000,000
	7,464,270	GE Business Loan Trust, Series 05-1A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .07%, 4.64%, due 06/15/14		7,459,773
	2,984,036	GE Business Loan Trust, Series 05-2A, Class A, 144A, Variable Rate, 1 mo. LIBOR + .24%, 4.81%, due 11/15/33		2,987,766
	77,112	GE Commercial Equipment Financing Llc, Series 05-1, Class A1, 3.42%, due 06/20/06		77,227
	6,000,000	GE Commercial Equipment Financing Llc, Series 05-1, Class A3B, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 03/20/09		6,000,720
	5,070,241	Lehman Brothers Small Balance Commercial, Series 05-1, Class A, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 02/25/30		5,070,241
	3,432,121	Lehman Brothers Small Balance Commercial, Series 05-2, Class 1A, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 09/25/30		3,433,193
	3,069,223	Marlin Leasing Receivables Llc, Series 05-1A, Class A1, 144A, 4.05%, due 08/15/06		3,065,632
	5,000,000	Navistar Financial Dealer Note Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 02/25/13		4,996,000
	14,000,000	Textron Financial Floorplan Master Note, Series 05-1A, Class A, 144A, Variable Rate, 1 mo. LIBOR +.12%, 4.69%, due 05/13/10		14,000,000
				67,987,782
		CMBS — 2.4%
	5,898,283	Bear Stearns Commercial Mortgage Securities, Inc., Series 05-PW10, Class A1, 5.09%, due 12/11/40		5,885,380

See accompanying notes to the financial statements.

3

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		CMBS — continued
	7,000,000	Citigroup/Deutsche Bank Commercial Mortgage, Series 05-CD1, Class A2FL, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 07/15/44		6,994,400
	7,000,000	GE Capital Commercial Mortgage Corp, Series 05-C4, Class A2, 5.31%, due 11/10/45		7,005,469
	4,123,638	Greenwich Capital Commercial Funding Corp., Series 05-FL3A, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .20%, 4.86%, due 10/05/20		4,124,926
				24,010,175
		CMBS Collateralized Debt Obligations — 0.7%
	7,000,000	Guggenheim Structured Real Estate Funding, Series 05-2A, Class A, 144A, Variable Rate, 1 mo. LIBOR + .32%, 4.90%, due 08/26/30		7,000,000
		Credit Cards — 18.4%
	10,000,000	Advanta Business Card Master Trust, Series 03-B, Class A, Variable Rate, 1 mo. LIBOR + .35%,, 4.92%, due 12/22/08		10,010,500
	6,500,000	Advanta Business Card Master Trust, Series 05-A1, Class A1, Variable Rate, 1 mo. LIBOR + .07%, 4.64%, due 04/20/11		6,502,080
	2,000,000	Advanta Business Card Master Trust, Series 05-A5, Class A5, Variable Rate, 1 mo. LIBOR + .06%, 4.63%, due 04/20/12		1,999,400
	7,000,000	American Express Credit Account Master Trust, Series 01-7, Class A, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 02/16/09		7,003,641
	5,000,000	American Express Credit Account Master Trust, Series 05-3, Class A, Variable Rate, 1 mo. LIBOR, 4.57%, due 06/16/08		4,995,500
	10,000,000	American Express Credit Account Master Trust, Series 05-5, Class A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 02/15/13		10,001,600
	6,000,000	Arran, Series 2005-A, Class A, Variable Rate, 1 mo. LIBOR + .02%, 4.59%, due 12/15/10		5,999,400
	5,760,000	Bank One Issuance Trust Series, Series 03-A6, Class A6, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 02/15/11		5,775,972
	1,000,000	Bank One Issuance Trust, Series 03-A10, Class A10, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 06/15/11		1,001,400
	3,000,000	Bank One Issuance Trust, Series 03-A3, Class A3, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 12/15/10		3,004,200
	5,530,000	Capital One Mulit-Asset Execution Trust, Series 03-A3, Class A3, Variable Rate, 1 mo. LIBOR + .25%, 4.82%, due 05/16/11		5,560,242

See accompanying notes to the financial statements.

4

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Credit Cards — continued
	5,000,000	Capital One Multi-Asset Execution Trust, Series 04-A7, Class A7, Variable Rate, 3 mo. LIBOR + .15%, 4.90%, due 06/16/14		5,022,650
	7,875,000	Chase Credit Card Master Trust, Series 03-3, Class A, Variable Rate, 1 mo. LIBOR +.11%, 4.68%, due 10/15/10		7,892,167
	4,000,000	Citibank Credit Card Issuance Trust, Series 01-A1, Class A1, Variable Rate, 3 mo. LIBOR + .17%, 4.88%, due 02/07/10		4,010,975
	7,400,000	Citibank Credit Card Issuance Trust, Series 03-A4, Class A4, Variable Rate, 3 mo. LIBOR + .07%, 4.57%, due 03/20/09		7,406,359
	9,750,000	Discover Card Master Trust I, Series 03-2, Class A, Variable Rate, 1 mo. LIBOR + .13%, 4.70%, due 08/15/10		9,774,375
	10,000,000	Discover Card Master Trust I, Series 04-2, Class A2, Variable Rate, 1 mo. LIBOR + .07%, 4.64%, due 05/15/12		10,011,300
	4,000,000	Discover Card Master Trust I, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 09/16/10		4,001,094
	7,500,000	First USA Credit Card Master Trust, Series 97-8, Class A, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 05/17/10		7,516,992
	7,000,000	GE Capital Credit Card Master Note Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 03/15/13		7,004,375
	7,000,000	Gracechurch Card Funding Plc, Series 3, Class A, Variable Rate, 1 mo. LIBOR + .11%, 4.68%, due 03/15/10		7,013,160
	5,000,000	Gracechurch Card Funding Plc, Series 4, Class A, Variable Rate, 1 mo. LIBOR + .05%, 4.62%, due 06/15/08		5,000,700
	7,000,000	Gracechurch Card Funding Plc, Series 8, Class A, Variable Rate, 1 mo. LIBOR + .01%, 4.58%, due 06/15/10		6,999,978
	5,500,000	Household Private Label Credit Card Master Note Trust I, Series 02-2, Class A, Variable Rate, 1 mo. LIBOR + .17%, 4.74%, due 01/18/11		5,504,950
	5,000,000	MBNA Credit Card Master Note Trust, Series 05-A5, Class A5, Variable Rate, 1 mo. LIBOR, 4.57%, due 12/15/10		5,000,000
	7,500,000	MBNA Master Credit Card Trust, Series 04-A8, Class A8, Variable Rate, 1 mo. LIBOR + .15%, 4.72%, due 01/15/14		7,529,144
	7,000,000	Pillar Funding Plc, Series 04-2, Class A, 144A, Variable Rate, 3 mo. LIBOR + .14%, 4.63%, due 09/15/11		7,010,565
	4,400,000	World Financial Network Credit Card Master Trust, Series 04-A, Class A, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 03/15/13		4,409,238
	7,000,000	World Financial Network Credit Card Master Trust, Series 04-A, Class B, Variable Rate, 1 mo. LIBOR + .10%, 4.67%, due 07/15/10		6,998,460
	6,640,000	World Financial Network Credit Card Master Trust, Series 2003-A, Class A2, Variable Rate, 1 mo. LIBOR + .37%, 4.94%, due 05/15/12		6,684,612
				186,645,029

See accompanying notes to the financial statements.

5

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Emerging Markets Collateralized Debt Obligations — 0.4%
	4,000,000	Santiago CDO Ltd., Series 05-1A, Class A, 144A, Variable Rate, 6 mo. LIBOR + .40%, 4.75%, due 04/18/17		4,006,400
		Equipment Leases — 0.9%
	7,000,000	CNH Equipment Trust, Series 05-A, Class A4A, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 06/15/12		7,001,050
	1,851,867	GE Equipment Small Ticket Llc, Series 05-2A, Class A1, 144A, 4.56%, due 12/22/06		1,850,571
				8,851,621
		Insurance Premiums — 1.0%
	7,000,000	AICCO Premium Finance Master Trust, Series 04-1A, Class A, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 11/17/08		7,009,023
	3,000,000	AICCO Premium Finance Master Trust, Series 05-1, Class A, Variable Rate, 1 mo. LIBOR + .08%, 4.65%, due 04/15/10		2,998,200
				10,007,223
		Insured Auto Financing — 3.4%
	5,000,000	Aesop Funding II Llc, Series 05-1A, Class A3, 144A, MBIA, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 04/20/10		4,967,500
	7,000,000	Aesop Funding II Llc, Series 06-1, Class A1, 144A, MBIA, Variable Rate, 1 mo. LIBOR + .22%, 4.75%, due 03/20/12		6,997,550
	6,000,000	AmeriCredit Automobile Receivables Trust, Series 05-BM, Class A4, MBIA, Variable Rate, 1 mo. LIBOR +.08%, 4.65%, due 05/06/12		6,004,687
	260,878	AmeriCredit Automobile Receivables Trust, Series 05-CF, Class A1, FSA, 3.84%, due 09/06/06		260,860
	7,000,000	Capital One Auto Finance Trust, Series 05-A, Class A4, AMBAC, Variable Rate, 1 mo. LIBOR + .05%, 4.62%, due 12/15/11		6,995,310
	2,000,000	Hertz Vehicle Financing Llc, Series 05-2A, Class A5, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 11/25/11		2,001,641
	7,000,000	Rental Car Finance Corp., Series 04-1A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 06/25/09		7,011,340
				34,238,888

See accompanying notes to the financial statements.

6

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Insured Credit Cards — 0.7%
	7,000,000	Cabela's Master Credit Card Trust, Series 04-2A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .12%, 4.69%, due 03/15/11		7,014,210
		Insured Residential Mortgage-Backed Securities (United States) — 1.1%
	8,000,000	GMAC Mortgage Corp. Loan Trust, Series 05-HE3, Class A1, AMBAC, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 02/25/36		8,001,250
	3,595,814	SBI Heloc Trust, Series 05-HE1, Class 1A, 144A, FSA, Variable Rate, 1 mo. LIBOR + .19%, 4.77%, due 11/25/35		3,595,814
				11,597,064
		Insured Time Share — 0.5%
	5,185,991	Cendant Timeshare Receivables Funding Llc, Series 05-1A, Class A2, 144A, FGIC, Variable Rate, 1 mo. LIBOR + .18%, 4.75%, due 05/20/17		5,185,991
		Investment Grade Corporate Collateralized Debt Obligations — 3.5%
	2,000,000	Morgan Stanley ACES SPC, Series 04-12, Class A, 144A, Variable Rate, 3 mo. LIBOR + .60%, 5.31%, due 08/05/09		2,003,825
	5,000,000	Morgan Stanley ACES SPC, Series 04-15, Class II, 144A, Variable Rate, 3 mo. LIBOR + .65%, 5.15%, due 12/20/09		5,009,668
	3,000,000	Morgan Stanley ACES SPC, Series 04-15, Class III, 144A, Variable Rate, 3 mo. LIBOR + .75%, 5.25%, due 12/20/09		2,993,400
	6,000,000	Morgan Stanley ACES SPC, Series 04-16, Class I, 144A, Variable Rate, 3 mo. LIBOR + .40%, 5.11%, due 08/05/09		6,007,500
	3,000,000	Morgan Stanley ACES SPC, Series 05-10, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .52%, 5.02%, due 03/20/10		3,000,000
	6,000,000	Morgan Stanley ACES SPC, Series 05-15, Class A, 144A, Variable Rate, 3 mo. LIBOR + .40%, 4.90%, due 12/20/10		6,007,500
	3,000,000	Morgan Stanley ACES SPC, Series 05-2A, Class A, 144A, Variable Rate, 3 mo. LIBOR + .45%, 4.95%, due 03/20/10		3,000,000
	7,000,000	Salisbury International Investments Ltd., Series E, MTN, Variable Rate, 3 mo. LIBOR + .42%, 4.92%, due 06/22/10		6,968,500
				34,990,393

See accompanying notes to the financial statements.

7

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Other — 0.8%
	2,000,000	Ensec Home Finance Pool Ltd., Series 05-R1A, 144A, Variable Rate, 1 mo. LIBOR + .20%, 4.77%, due 05/15/14		2,001,502
	6,500,000	TIB Card Receivables Fund, 144A, FGIC, Variable Rate, 4 mo. LIBOR + .25%, 4.79%, due 01/05/14		6,496,100
				8,497,602
		Rate Reduction Bonds — 1.7%
	5,000,000	Massachusetts RRB Special Purpose Trust, Series 05-1, Class A3, 4.13%, due 09/15/13		4,835,320
	5,000,000	PG&E Energy Recovery Funding Llc, Series 05-1, Class A4, 4.37%, due 06/25/14		4,828,870
	8,000,000	PSE&G Transition Funding Llc, Series 01-1, Class A4, Variable Rate, 3 mo. LIBOR + .30%, 4.79%, due 06/15/11		8,038,692
				17,702,882
		Residential Asset-Backed Securities (United States) — 23.8%
	3,688,975	ACE Securities Corp, Series 05-SDI, Class A1, Variable Rate, 1 mo. LIBOR + .40%, 4.98%, due 11/25/50		3,693,328
	7,000,000	ACE Securities Corp., Series 05-AG1, Class A2B, Variable Rate, 1 mo. LIBOR + .21%, 4.79%, due 08/25/35		7,001,050
	1,534,000	ACE Securities Corp., Series 05-ASP1, Class A2C, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 09/25/35		1,535,473
	7,593,438	ACE Securities Corp., Series 06-SL1, Class A, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 09/25/35		7,594,653
	7,000,000	Aegis Asset Backed Securities Trust, Series 04-6, Class 1A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 03/25/25		7,008,750
	4,590,897	Aegis Asset Backed Securities Trust, Series 05-3, Class A1, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 08/25/35		4,591,077
	3,000,000	Aegis Asset Backed Securities Trust, Series 05-5 , Class 1A2, Variable Rate, 1 mo. LIBOR + .18%, 4.76%, due 12/25/35		3,004,230
	7,000,000	Argent Securities, Inc., Series 06-W2, Class A2B, Variable Rate, 1 mo. LIBOR + .19%, 4.77%, due 03/25/36		7,000,000
	6,500,000	Bayview Financial Acquisition Trust, Series 05-A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .50%, 5.11%, due 02/28/40		6,513,203
	933,303	Bear Stearns Asset Backed Securities Inc, Series 04-HE4, Class A1, Variable Rate, 1 mo. LIBOR + .18%, 4.76%, due 06/25/31		933,359

See accompanying notes to the financial statements.

8

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	1,000,000	Carrington Mortgage Loan Trust, Series 05-OPT2, Class A1B, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 05/25/35		999,200
	6,000,000	Carrington Mortgage Loan Trust, Series 05-OPT2, Class A1C, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 05/25/35		5,995,200
	56,643	Centex Home Equity, Series 04-C, Class AV3, Variable Rate, 1 mo. LIBOR + .13%, 4.71%, due 11/25/28		56,644
	1,600,000	Centex Home Equity, Series 05-A, Class AV2, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 07/25/34		1,600,000
	1,200,000	Centex Home Equity, Series 05-A, Class AV3, Variable Rate, 1 mo. LIBOR + .34%, 4.92%, due 01/25/35		1,201,500
	8,000,000	Centex Home Equity, Series 05-C, Class AV3, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 06/25/35		8,010,000
	1,120,735	Citifinancial Mortgage Securities, Inc., Series 04-1, Class AF1, Variable Rate, 1 mo. LIBOR + .09%, 4.67%, due 04/25/34		1,120,063
	1,830,405	Citigroup Mortgage Loan Trust, Inc, Series 05-HE1, Class A3A, Variable Rate, 1 mo. LIBOR + .09%, 4.67%, due 05/25/35		1,829,307
	4,737,621	Countrywide Asset-Backed Certificates, Series 04-14, Class A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 06/25/35		4,740,599
	1,401,030	Countrywide Asset-Backed Certificates, Series 05-4, Class AF1, Variable Rate, 1 mo. LIBOR + .13%, 4.71%, due 10/25/35		1,401,043
	550,988	Finance America Mortgage Loan Trust, Series 04-1, Class 2A1, Variable Rate, 1 mo. LIBOR + .17%, 4.75%, due 06/25/34		551,005
	9,000,000	First Franklin Mortgage Loan Asset Backed Certificates, Series 05-FFH2, Class A2, 144A, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 04/25/35		9,005,625
	6,000,000	Fremont Home Loan Trust, Series 05-B, Class 2A2, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 04/25/35		5,997,123
	9,000,000	Fremont Home Loan Trust, Series 05-C, Class 2A2, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 07/25/35		9,002,812
	7,000,000	GE-WMC Mortgage Securities, Series 05-2, Class A2B, Variable Rate, 1 mo. LIBOR + .17%, 4.75%, due 12/25/35		7,005,469
	7,000,000	Greenpoint Mortgage Funding Trust, Series 05-HE1, Class A2, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 09/25/34		7,000,000
	3,000,000	GreenPoint Mortgage Funding Trust, Series 05-HE4, Class 2A3C, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 07/25/30		3,002,813
	10,500,000	GSAMP Trust, Series 05-HE3, Class A2B, Variable Rate, 1 mo. LIBOR + 0.22%, 4.80%, due 06/25/35		10,495,342
	3,624,781	Household Home Equity Loan Trust, Series 05-2, Class A2, Variable Rate, 1 mo. LIBOR + .31%, 4.88%, due 01/20/35		3,631,577

See accompanying notes to the financial statements.

9

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	2,533,301	Household Home Equity Loan Trust, Series 05-3, Class A2, Variable Rate, 1 mo. LIBOR + .29%, 4.86%, due 01/20/35		2,536,764
	302,643	Indy Mac Home Equity Loan Asset-Backed Trust, Series 04-C, Class 2A1, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 03/25/35		302,646
	2,100,000	Master Asset Backed Securities Trust, Series 05-FRE1, Class A4, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 10/25/35		2,099,790
	2,064,362	Master Asset Backed Securities Trust, Series 05-HE1, Class A1, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 05/25/35		2,064,156
	4,000,000	Master Asset Backed Securities Trust, Series 06-HE1, Class A1, Variable Rate, 1 mo. LIBOR + .08%, 4.66%, due 01/25/36		4,000,000
	7,500,000	Master Second Lien Trust, Series 06-1, Class A, Variable Rate, 1 mo. LIBOR + .16%, 4.73%, due 03/25/36		7,494,000
	4,678,898	New Century Home Equity Loan Trust, Series 05-3, Class A2A, Variable Rate, 1 mo. LIBOR + .09%, 4.67%, due 07/25/35		4,680,541
	4,500,000	Nomura Home Equity Loan, Inc., Series 05-FM1, Class 2A2, Variable Rate, 1 mo. LIBOR + .22%, 4.80%, due 05/25/35		4,500,000
	8,000,000	Option One Mortgage Loan Trust, Series 05-3, Class A4, Variable Rate, 1 mo. LIBOR + .25%, 4.83%, due 08/25/35		8,000,000
	2,143,487	Ownit Mortgage Loan Asset Backed Certificates, Series 05-2, Class A2A, Variable Rate, 1 mo. LIBOR + .11%, 4.69%, due 03/25/36		2,143,487
	9,000,000	Park Place Securities, Inc, Series 05-WCW2, Class A2B, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 07/25/07		8,991,000
	8,000,000	Park Place Securities, Inc, Series 05-WCWI, Class A3B, Variable Rate, 1 mo. LIBOR + .16%, 4.74%, due 09/25/35		7,997,500
	8,000,000	People's Choice Home Loan Securities Trust, Series 05-3, Class 1A2, Variable Rate, 1 mo. LIBOR + .27%, 4.85%, due 08/25/35		8,010,000
	7,000,000	People's Choice Home Loan Securities Trust, Series 05-4, Class 1A2, Variable Rate, 1 mo. LIBOR + .26%, 4.84%, due 12/25/35		7,012,040
	688,301	Quest Trust, Series 05-X1, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .18%, 4.76%, due 03/25/35		687,957
	3,500,298	RAAC, Series 05-RP3, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 05/29/39		3,499,003
	693,515	Residential Asset Mortgage Products, Inc, Series 04-RZ3, Class AII1, Variable Rate, 1 mo. LIBOR + .17%, 4.75%, due 06/25/24		693,515
	4,000,000	Residential Asset Mortgage Products, Inc., Series 05-RS4, Class A3, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 04/25/35		4,003,125
	7,000,000	Residential Asset Securities Corp, Series 04-KS12, Class AI2, Variable Rate, 1 mo. LIBOR + .23%, 4.81%, due 01/25/35		7,000,000

See accompanying notes to the financial statements.

10

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Asset-Backed Securities (United States) — continued
	1,927,042	Security National Mortgage Loan Trust, Series 05-2A, Class A1, 144A, Variable Rate, 1 mo. LIBOR + .29%, 4.87%, due 02/25/36		1,928,247
	3,500,000	SG Mortgage Securities Trust, Series 05-OPT1, Class A2, Variable Rate, 1 mo. LIBOR + .26%, 4.84%, due 10/25/35		3,506,020
	1,138,619	Specialty Underwriting & Residential Finance, Series 05-BC2, Class A2A, Variable Rate, 1 mo. LIBOR + .10%, 4.68%, due 12/25/35		1,138,441
	3,000,000	Structured Asset Investment Loan Trust, Series 06-1, Class A3, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 01/25/36		3,000,469
	7,000,000	Structured Asset Securities Corp, Series 05-WF1, Class A2, Variable Rate, 1 mo. LIBOR + .20%, 4.78%, due 02/25/35		7,006,566
	7,000,000	Structured Asset Securities Corp., Series 05-S6, Class A2, Variable Rate, 1 mo. LIBOR + .29%, 4.87%, due 11/25/35		7,010,941
				240,826,653
		Residential Mortgage-Backed Securities (Australian) — 3.6%
	4,530,441	Australian Mortgage Securities II, G3 A1A, Variable Rate, 3 mo. LIBOR + .21%, 4.76%, due 01/10/35		4,540,318
	5,354,610	Crusade Global Trust, Series 04-2, Class A1, Variable Rate, 3 mo. LIBOR + .13%, 4.90%, due 11/19/37		5,361,402
	7,000,000	Crusade Global Trust, Series 06-1, Class A1, 144A, Variable Rate, 3 mo. LIBOR + .06%, 4.74%, due 07/20/38		7,000,000
	6,560,972	Interstar Millennium Trust, Series 05-1G, Class A, Variable Rate, 3 mo. LIBOR + .12%, 4.58%, due 12/08/36		6,557,560
	5,041,347	Medallion Trust, Series 05-1G, Class A1, Variable Rate, 3 mo. LIBOR + .08%, 4.80%, due 05/10/36		5,040,238
	4,446,599	National RMBS Trust, Series 04-1, Class A1, Variable Rate, 3 mo. LIBOR + .11%, 4.61%, due 03/20/34		4,449,934
	3,570,618	Westpac Securitization Trust, Series 05-1G, Class A1, Variable Rate, 3 mo. LIBOR + .07%, 4.57%, due 03/23/36		3,568,797
				36,518,249
		Residential Mortgage-Backed Securities (European) — 5.6%
	4,000,000	Gracechurch Mortgage Funding Plc, Series 1A, Class A2B, 144A, Variable Rate, 3 mo. LIBOR + .07%, 4.60%, due 10/11/41		3,998,687
	3,428,570	Granite Master Issuer Plc, Series 05-1, Class A1, Variable Rate, 1 mo. LIBOR + .04%, 4.61%, due 12/20/19		3,428,560
	5,000,000	Granite Master Issuer Plc, Series 05-2, Class A4, Variable Rate, 3 mo. LIBOR + .08%, 4.85%, due 12/20/54		5,002,344

See accompanying notes to the financial statements.

11

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Residential Mortgage-Backed Securities (European) — continued
	6,191,710	Leek Finance Plc, Series 15A, Class AB, 144A, Variable Rate, 3 mo. LIBOR + .14%, 4.64%, due 03/21/37		6,188,614
	10,000,000	Leek Finance Plc, Series 16A, Class A2B, 144A, Variable Rate, 3 mo. LIBOR + .16%, 4.46%, due 09/21/37		10,006,700
	7,000,000	Paragon Mortgages Plc, Series 6A, Class A2A, 144A, Variable Rate, 3 mo. LIBOR + .35%, 4.84%, due 03/15/30		7,006,895
	3,550,000	Permanent Financing Plc, Series 6, Class 2A, Variable Rate, 3 mo. LIBOR + .09%, 4.57%, due 12/10/11		3,546,095
	5,000,000	Permanent Financing Plc, Series 7, Class 2A, Variable Rate, 3 mo. LIBOR + .04%, 4.52%, due 09/10/14		5,000,000
	6,000,000	Permanent Financing Plc, Series 8, Class 2A, Variable Rate, 3 mo. LIBOR + .07%, 4.55%, due 06/10/14		5,995,200
	6,124,440	Residential Mortgage Securities, Series 20A, Class A1B, 144A, Variable Rate, 3 mo. LIBOR + .07%, 4.79%, due 08/10/30		6,120,612
				56,293,707
		Student Loans — 7.2%
	5,000,000	College Loan Corp. Trust, Series 04-1, Class A2, Variable Rate, 3 mo. LIBOR + .11%, 4.73%, due 04/25/16		5,006,500
	2,000,000	College Loan Corp. Trust, Series 05-1, Class A1, Variable Rate, 3 mo. LIBOR + .03%, 4.65%, due 01/25/14		1,999,400
	3,529,659	Collegiate Funding Services Education Loan Trust I, Series 05-A, Class A1, Variable Rate, 3 mo. LIBOR + .02%, 4.54%, due 09/29/14		3,529,521
	4,500,000	Keycorp Student Loan Trust, Series 05-A, Class 2A1, Variable Rate, 3 mo. LIBOR + .05%, 4.24%, due 09/27/21		4,497,930
	4,365,881	Montana Higher Education Student Assistance Corp., Series 05-1, Class A, Variable Rate, 3 mo. LIBOR +.04%, 4.54%, due 06/20/15		4,363,261
	8,000,000	National Collegiate Student Loan Trust, Series 05-2, Class A2, Variable Rate, 1 mo. LIBOR + .15%, 4.73%, due 02/25/26		7,985,200
	7,000,000	Nelnet Educational Loan Funding Corp., Series 04-2A, Class A3, Variable Rate, 3 mo. LIBOR + .10%, 4.90%, due 11/25/15		7,004,060
	9,000,000	Nelnet Student Loan Trust, Series 05-3, Class A3, Variable Rate, 3 mo. LIBOR + .05%, 4.55%, due 06/22/17		9,000,000
	5,000,000	SLM Student Loan Trust, Series 05-3, Class A3, Variable Rate, 3 mo. LIBOR + .03%, 4.65%, due 07/25/16		4,992,861
	5,998,593	SLM Student Loan Trust, Series 05-4, Class A1, Variable Rate, 3 mo. LIBOR +.01%, 4.63%, due 10/26/15		5,994,393

See accompanying notes to the financial statements.

12

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)		Description	Value ($)
		Student Loans — continued
	9,000,000	SLM Student Loan Trust, Series 05-6, Class A2, Variable Rate, 3 mo. LIBOR, 4.62%, due 07/25/16		8,997,188
	4,741,626	SLM Student Loan Trust, Series 05-7, Class A1, Variable Rate, 3 mo. LIBOR, 4.62%, due 01/25/18		4,675,954
	5,000,000	SLM Student Loan Trust, Series 06-1, Class A1, Variable Rate, 3 mo. LIBOR - .02%, 4.61%, due 01/25/12		5,000,000
				73,046,268
		Total Asset-Backed Securities		934,219,800
		Corporate Debt — 0.5%
	5,000,000	TIAA Global Markets, 144A, Variable Rate, 3 mo. LIBOR + .10%, 4.67%, due 01/12/11		5,002,500
		U.S. Government — 4.9%
	24,366,800	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (a)(b)		25,227,253
	25,000,000	U.S. Treasury Note, 2.50%, due 10/31/06 (b)		24,632,813
				49,860,066
		TOTAL DEBT OBLIGATION(S) (COST $990,578,389)		989,082,366
Principal Amount		Description	Value ($)
		CALL OPTIONS PURCHASED — 0.0%
		Options on Interest Rate Swaps — 0.0%
USD	71,000,000	Interest Rate Swaption, Expires 03/22/06, Strike 5.08%		386,472
		TOTAL CALL OPTIONS PURCHASED (COST $415,350)		386,472
		PUT OPTIONS PURCHASED — 0.0%
		Options on Interest Rate Swaps — 0.0%
USD	71,000,000	Interest Rate Swaption, Expires 03/22/06, Strike 5.08%		358,422
		TOTAL PUT OPTIONS PURCHASED (COST $415,350)		358,422

See accompanying notes to the financial statements.

13

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($)/ Shares		Description	Value ($)
		MUTUAL FUNDS — 1.8%
	17,954,476	Merrimac Cash Series, Premium Class		17,954,476
		TOTAL MUTUAL FUNDS (COST $17,954,476)		17,954,476
		SHORT-TERM INVESTMENT(S) — 2.0%
	20,000,000	Federal Farm Credit Bank, 0.00% due 03/01/06 (c)		20,000,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $20,000,000)		20,000,000
		TOTAL INVESTMENTS — 101.5% (Cost $1,029,363,565)		1,027,781,736
		Other Assets and Liabilities (net) — (1.5%)		(15,504,346	)
		TOTAL NET ASSETS — 100.0%	$	1,012,277,390

See accompanying notes to the financial statements.

14

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward Currency Contracts

Settlement Date		Receive		Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
	3/02/06		SEK		187,900	$	23,746	$	107

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	3,350	Eurodollar 90 Day	March 2007	$	795,625,000	$	(1,710,005	)
Sales
	99	U.S. Treasury Note 10 Yr.	June 2006	$	10,682,719	$	14,349

At February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Written Options

A summary of open written option contracts for the Fund at February 28, 2006, is as follows:

	Notional Amount		Expiration Date		Description	Premiums		Market Value
Call	$	70,000,000	3/01/2006	USD	Interest Rate Swaption, Strike 5.09%	$	476,000	$	(135,915	)
Call		71,000,000	3/15/2006	USD	Interest Rate Swaption, Strike 5.13%		450,850		(486,935	)
Put		70,000,000	3/01/2006	USD	Interest Rate Swaption, Strike 5.09%		476,000		(39,597	)
Put		71,000,000	3/15/2006	USD	Interest Rate Swaption, Strike 5.13%		450,850		(179,475	)
Call		71,000,000	3/08/2006	USD	Interest Rate Swaption, Strike 5.10%		447,300		(306,601	)
Put		71,000,000	3/08/2006	USD	Interest Rate Swaption, Strike 5.10%		447,300		(159,308	)
						$	2,748,300	$	(1,307,831	)

See accompanying notes to the financial statements.

15

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements

Credit Default Swaps
Notional Amount	Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
13,000,000 USD	9/20/2010	Morgan Stanley	Receive		0.40	%	Credit Swap	$	20,404
		Capital Services Inc.					Eagle Creek CDO
7,000,000 USD	3/20/2013	Morgan Stanley Capital Services Inc.	Receive		0.25	%	MS Synthetic 2006-1		(41,707	)
5,000,000 USD	3/20/2015	Lehman Brothers	Receive		0.88	%	Credit Swap AAA CDO		(79,053	)
								$	(100,356	)
Interest Rate Swaps
Notional Amount	Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
51,000,000 USD	1/21/2008	Deutsche Bank AG	(Pay)		3.81	%	3 month LIBOR	$	1,185,204
391,000,000 CAD	4/4/2008	Deutsche Bank AG	Receive		4.11	%	3 month Floating Canadian Dollar Offering Rate		(745,358	)
339,600,000 USD	4/6/2008	JP Morgan Chase Bank	(Pay)		4.81	%	3 month LIBOR		1,896,595
340,100,000 USD	5/3/2008	JP Morgan Chase Bank	(Pay)		4.99	%	3 month LIBOR		763,060
281,100,000 EUR	5/3/2008	Deutsche Bank AG	Receive		3.25	%	6 month EUR LIBOR		(200,753	)
32,500,000 CAD	5/28/2008	JP Morgan Chase Bank	(Pay)		4.31	%	3 month Floating Canadian Dollar Offering Rate		(33,444	)
360,000,000 CAD	5/28/2008	Merrill Lynch Capital Services Inc.	(Pay)		4.31	%	3 month Floating Canadian Dollar Offering Rate		(370,453	)
291,500,000 EUR	6/2/2008	Deutsche Bank AG	Receive		3.32	%	6 month EUR LIBOR		47,420
1,832,500,000 AUD	6/21/2008	Deutsche Bank AG	Receive		5.60	%	3 month AUD BBSW		(857,485	)
541,000,000 AUD	6/21/2008	JP Morgan Chase Bank	Receive		5.60	%	3 month AUD BBSW		(354,198	)
585,000,000 USD	6/21/2008	JP Morgan Chase Bank	Receive		4.80	%	3 month LIBOR		(3,363,393	)
1,450,000,000 SEK	6/21/2008	Deutsche Bank AG	(Pay)		3.10	%	3 month SEK STIBOR		(296,143	)
3,217,000,000 SEK	6/21/2008	JP Morgan Chase Bank	(Pay)		3.10	%	3 month SEK STIBOR		(816,533	)
254,000,000 CHF	6/21/2008	Citigroup	(Pay)		2.00	%	6 month CHF LIBOR		356,830

See accompanying notes to the financial statements.

16

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Notional Amount	Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
283,000,000 EUR	6/21/2008	Deutsche Bank AG	(Pay)		3.20	%	6 month EUR LIBOR	$	1,052,646
78,000,000 EUR	6/21/2008	JP Morgan Chase Bank	(Pay)		3.20	%	6 month EUR LIBOR		152,005
583,000,000 GBP	6/21/2008	Deutsche Bank AG	Receive		4.60	%	6 month GBP LIBOR		(2,084,736	)
16,800,000,000 JPY	6/21/2008	Citigroup	(Pay)		0.55	%	6 month JPY LIBOR		801,217
49,500,000,000 JPY	6/21/2008	JP Morgan Chase Bank	(Pay)		0.55	%	6 month JPY LIBOR		2,346,252
200,600,000,000 JPY	6/21/2008	Merrill Lynch Capital Services Inc.	(Pay)		0.55	%	6 month JPY LIBOR		9,657,794
225,000,000 USD	1/21/2010	Deutsche Bank AG	Receive		4.10	%	3 month LIBOR		(7,740,035	)
5,000,000 USD	2/7/2012	Deutsche Bank AG	(Pay)		4.33	%	3 month LIBOR		188,201
150,000,000 USD	1/21/2013	Deutsche Bank AG	(Pay)		4.41	%	3 month LIBOR		5,746,846
15,000,000 USD	2/8/2015	JP Morgan Chase Bank	(Pay)		4.47	%	3 month LIBOR		676,747
21,000,000 EUR	2/22/2015	Deutsche Bank AG	Receive		3.69	%	6 month EUR LIBOR		145,066
21,000,000 EUR	3/21/2015	UBS AG	Receive		3.78	%	6 month EUR LIBOR		268,859
60,000,000 EUR	3/21/2015	UBS AG	(Pay)		4.84	%	6 month EUR LIBOR		(2,421,724	)
21,000,000 EUR	5/23/2015	JP Morgan Chase Bank	Receive		3.44	%	6 month EUR LIBOR		(370,718	)
35,800,000 GBP	3/15/2016	Citigroup	(Pay)		4.62	%	6 month GBP LIBOR		(430,310	)
7,280,000,000 JPY	3/20/2016	JP Morgan Chase Bank	Receive		1.67	%	6 month JPY LIBOR		(856,968	)
37,000,000 GBP	4/18/2016	Citigroup	(Pay)		4.33	%	6 month GBP LIBOR		1,038,748
7,471,000,000 JPY	4/19/2016	JP Morgan Chase Bank	Receive		1.62	%	6 month JPY LIBOR		(1,318,809	)
38,300,000 GBP	5/17/2016	Deutsche Bank AG	(Pay)		4.47	%	6 month GBP LIBOR		316,602
7,835,000,000 JPY	5/21/2016	JP Morgan Chase Bank	Receive		1.78	%	6 month JPY LIBOR		(464,878	)
141,000,000 USD	6/21/2016	JP Morgan Chase Bank	(Pay)		4.90	%	3 month LIBOR		1,823,121
334,000,000 SEK	6/21/2016	Deutsche Bank AG	Receive		3.60	%	3 month SEK STIBOR		(420,380	)
742,000,000 SEK	6/21/2016	JP Morgan Chase Bank	Receive		3.60	%	3 month SEK STIBOR		(688,305	)
457,000,000 AUD	6/21/2016	Deutsche Bank AG	(Pay)		5.70	%	6 month AUD BBSW		(13,149	)
135,000,000 AUD	6/21/2016	JP Morgan Chase Bank	(Pay)		5.70	%	6 month AUD BBSW		308,335
56,000,000 CHF	6/21/2016	Citigroup	Receive		2.50	%	6 month CHF LIBOR		(469,846	)
65,000,000 EUR	6/21/2016	Deutsche Bank AG	Receive		3.50	%	6 month EUR LIBOR		(1,063,240	)
18,000,000 EUR	6/21/2016	JP Morgan Chase Bank	Receive		3.50	%	6 month EUR LIBOR		(44,573	)
139,000,000 GBP	6/21/2016	Deutsche Bank AG	(Pay)		4.50	%	6 month GBP LIBOR		1,857,376
3,600,000,000 JPY	6/21/2016	Citigroup	Receive		1.65	%	6 month JPY LIBOR		(630,527	)
10,500,000,000 JPY	6/21/2016	JP Morgan Chase Bank	Receive		1.65	%	6 month JPY LIBOR		(1,782,857	)
42,800,000,000 JPY	6/21/2016	Merrill Lynch	Receive		1.65	%	6 month JPY LIBOR		(6,642,334	)
60,000,000 EUR	2/22/2025	Deutsche Bank AG	(Pay)		4.70	%	6 month EUR LIBOR		(1,873,484	)
60,000,000 EUR	5/23/2025	JP Morgan Chase Bank	(Pay)		4.52	%	6 month EUR LIBOR		(1,078,443	)
								$	(6,804,152	)

See accompanying notes to the financial statements.

17

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay			Receive	Net Unrealized Appreciation (Depreciation)
	10,000,000	USD	3/1/2006	Citigroup	1 month			Return on Lehman	$	(19,775	)
					LIBOR			Brothers CMBS AAA
						– 0.025	%
	20,000,000	USD	3/31/2006	Citigroup	1 month LIBOR + 0.15%			Return on Lehman Brothers CMBS AAA		(42,176	)
									$	(61,951	)

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

AMBAC - Insured as to the payment of principal and interest by AMBAC Assurance Corporation.

BBSW - Bank Bill Swap Rate

CDO - Collateralized Debt Obligation

CMBS - Collateralized Mortgage Backed Security

FGIC - Insured as to the payment of principal and interest by Financial Guaranty Insurance Corporation.

FSA - Insured as to the payment of principal and interest by Financial Security Assurance.

LIBOR - London Interbank Offered Rate

MBIA - Insured as to the payment of principal and interest by MBIA Insurance Corp.

MTN - Medium Term Note

STIBOR - Stockholm Interbank Offered Rate

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

(a)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(b)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(c)  Rate shown represents yield to maturity.

See accompanying notes to the financial statements.

18

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

CHF - Swiss Franc

EUR - Euro

GBP - British Pound

JPY - Japanese Yen

SEK - Swedish Krona

USD - United States Dollar

See accompanying notes to the financial statements.

19

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value (cost $1,029,363,565) (Note 2)	$	1,027,781,736
Cash		152,413
Interest receivable		2,935,496
Unrealized appreciation on open forward currency contracts (Note 2)		107
Receivable for variation margin on open futures contracts (Note 2)		381,625
Interest receivable for open swap contracts		1,204,235
Receivable for open swap contracts (Note 2)		23,531,501
Receivable for expenses reimbursed by Manager (Note 3)		30,570
Receivable for option premiums		690,760
Total assets		1,056,708,443
Liabilities:
Payable for investments purchased		8,000,000
Written options outstanding, at value (premiums $2,748,300) (Note 2)		1,307,831
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		1,703
Interest payable for open swap contracts		83,366
Payable for open swap contracts (Note 2)		34,945,557
Accrued expenses		92,596
Total liabilities		44,431,053
Net assets	$	1,012,277,390
Net assets consist of:
Net capital(1)	$	1,021,080,758
Net unrealized depreciation		(8,803,368	)
	$	1,012,277,390
Shares outstanding		40,125,390
Net asset value per share	$	25.23
(1) Net capital includes net investment income (loss) and net realized gain (loss) on investments.

See accompanying notes to the financial statements.

20

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest	$	32,720,995
Total investment income		32,720,995
Expenses:
Custodian, fund accounting agent and transfer agent fees		123,508
Audit and tax fees		72,649
Legal fees		12,962
Trustees fees and related expenses (Note 3)		11,993
Miscellaneous		16,142
Total expenses		237,254
Fees and expenses reimbursed by Manager (Note 3)		(216,608	)
Net expenses		20,646
Net investment income (loss)		32,700,349
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		(28,768,060	)
Closed futures contracts		1,153,548
Closed swap contracts		7,219,839
Written options		1,239,297
Foreign currency, forward contracts and foreign currency related transactions		38,345
Net realized gain (loss)		(19,117,031	)
Change in net unrealized appreciation (depreciation) on:
Investments		(922,521	)
Open futures contracts		(1,742,669	)
Open swap contracts		(8,427,425	)
Written options		1,440,469
Foreign currency, forward contracts and foreign currency related transactions		1,442
Net unrealized gain (loss)		(9,650,704	)
Net realized and unrealized gain (loss)		(28,767,735	)
Net increase (decrease) in net assets resulting from operations	$	3,932,614

See accompanying notes to the financial statements.

21

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Period from November 22, 2004 (commencement of operations) through February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	32,700,349		$	3,173,280
Net realized gain (loss)		(19,117,031	)		(351,840	)
Change in net unrealized appreciation (depreciation)		(9,650,704	)		847,336
Net increase (decrease) in net assets from operations		3,932,614			3,668,776
Net share transactions (Note 7):		426,066,000			578,610,000
Total increase (decrease) in net assets		429,998,614			582,278,776
Net assets:
Beginning of period		582,278,776			—
End of period	$	1,012,277,390		$	582,278,776

See accompanying notes to the financial statements.

22

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Financial Highlights
(For a share outstanding throughout each period)

	Year Ended February 28,
	2006			2005(a)
Net asset value, beginning of period	$	25.17		$	25.00
Income (loss) from investment operations:
Net investment income (loss)†		0.96			0.15
Net realized and unrealized gain (loss)		(0.90	)		0.02
Total from investment operations		0.06			0.17
Net asset value, end of period	$	25.23		$	25.17
Total Return(b)		0.24	%		0.68	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,012,277		$	582,279
Net expenses to average daily net assets		0.00	%(c)		0.01	%*
Net investment income to average daily net assets		3.84	%		2.21	%*
Portfolio turnover rate		31	%		8	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.03	%		0.06	%*

(a)  Period from November 22, 2004 (commencement of operations) through February 28, 2005.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses were less than 0.01%.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

23

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO World Opportunity Overlay Fund (the "Fund"), which commenced operations on November 22, 2004, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return relative to its benchmark. The Fund seeks to achieve its objective of outperforming its benchmark primarily through returns on the Fund's derivatives positions. The Fund's benchmark index is the J.P. Morgan U.S. 3-Month Cash Index.

Shares of the Fund are not publicly offered and are principally available only to other funds of the Trust and certain accredited investors.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value or exchange rate may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing

24

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund. As of February 28, 2006, the total value of these securities represented 31.8% of net assets.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

25

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. See the Schedule of Investments for open written options contracts entered into by the Fund as of February 28, 2006.

26

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Written options

For the year ended February 28, 2006, the Fund's investment activity in written option contracts was as follows:

	Puts						Calls
	Principal Amount of Contracts			Premiums			Principal Amount of Contracts			Premiums
Outstanding, beginning of period	$	—		$	—		$	—		$	—
Options written		2,214,000,000			16,599,250			2,214,000,000			16,599,250
Options exercised		(1,262,000,000	)		(9,528,800	)		(740,000,000	)		(5,696,300	)
Options expired		(740,000,000	)		(5,696,300	)		(1,262,000,000	)		(9,528,800	)
Options sold		—			—			—			—
Outstanding, end of period	$	212,000,000		$	1,374,150		$	212,000,000		$	1,374,150

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Loan agreements

The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the "lender") that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is

27

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. As of February 28, 2006, the Fund did not enter into any loan agreements.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial

28

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a

29

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes

The Fund elected to be taxed as a partnership for federal income tax purposes. As a partnership, the Fund will not be subject to federal and state income tax. Instead, each shareholder is responsible for the tax liability or benefit related to his/her allocable share of taxable income or loss. Accordingly, no provision (benefit) for federal and state income taxes is reflected in the accompanying financial statements. A more detailed discussion of the tax consequences of owning an interest in the Fund is included in the Fund's Private Placement Memorandum.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	1,029,363,565	$	267,301	$	(1,849,130	)	$	(1,581,829	)

Distributions

The Fund does not intend to make any distributions to its shareholders but may do so in the sole discretion of the Trustees.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

30

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

3.  Fees and other transactions with affiliates

GMO does not charge the Fund any management or service fees for its services. In addition, effective until at least June 30, 2007, GMO has contractually agreed to reimburse all of the Fund's expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes).

The Fund's portion of the fees paid by the Trust to the CCO and independent Trustees during the year ended February 28, 2006 was $5,990 and $5,837, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	—	$	—
Investments (non-U.S. Government securities)		913,265,857		231,965,451

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

31

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

6.  Principal shareholders

As of February 28, 2006, 73.7% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Both of the shareholders are other funds of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 100% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Period from November 22, 2004 (commencement of operations) through February 28, 2005
	Shares			Amount			Shares			Amount
Shares sold		21,368,341		$	535,516,000			23,385,215		$	584,910,000
Shares repurchased		(4,377,470	)		(109,450,000	)		(250,696	)		(6,300,000	)
Net increase (decrease)		16,990,871		$	426,066,000			23,134,519		$	578,610,000

32

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO World Opportunity Overlay Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO World Opportunity Overlay Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

33

GMO World Opportunity Overlay Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
1) Actual		0.00	%	$	1,000.00	$	1,014.10	$	0.00	**
2) Hypothetical		0.00	%	$	1,000.00	$	1,024.79	$	0.00	**

*  Expenses are calculated using the annualized expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

**  Net expenses incurred are less than $0.01.

34

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

35

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:10/03/1941	Trustee	Since May1996	Acting Dean (since 2005) , Senior Associate Dean (1998 – 2005) , and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present) ; Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

36

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo& Co. LLC.
Sheppard N. Burnett c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).
David L. Bohan c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

37

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott D. Hogan c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB:01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/oGMOTrust 40 RowesWharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

38

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Currency Hedged International Equity Fund returned +28.4% for the fiscal year ended February 28, 2006, as compared to +31.0% for the MSCI EAFE Index (Hedged) benchmark. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was substantially exposed to international equity securities through its investment in underlying GMO mutual funds.

The Fund's exposure to international equities comes indirectly through investments in the GMO International Intrinsic Value Fund and the GMO International Growth Equity Fund. The Fund also holds currency hedges in addition to the shares of those funds, which make predominantly unhedged investments.

Currency hedging had a strong positive impact on our international equity investing. The U.S. dollar rose strongly against most foreign currencies, but hedging protected the Fund's return. In U.S. dollar terms the unhedged MSCI EAFE Index returned +17.4% during the period, nearly 14% lower than the hedged benchmark.

The Fund is fairly evenly allocated between the GMO International Intrinsic Value Fund (the Fund was invested in Class IV shares), which returned +18.3%, and the GMO International Growth Equity Fund, which returned +15.6% during the period. Each of the underlying funds underperformed their respective international style benchmarks, hurting the return of the GMO Currency Hedged International Equity Fund, but the currency hedging helped significantly.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		93.6	%
Short-Term Investment(s)		9.1
Preferred Stocks		0.5
Futures		0.1
Forward Currency Contracts		(0.8	)
Other		(2.5	)
		100.0	%
Country Summary**	% of Investments
Japan		27.4	%
United Kingdom		21.8
France		8.8
Netherlands		6.2
Germany		5.9
Canada		4.1
Italy		4.0
Switzerland		3.6
Australia		3.5
Finland		3.2
Spain		2.3
Belgium		1.8
Norway		1.4
Hong Kong		1.2
Sweden		1.2
Austria		1.1
Ireland		0.9
Singapore		0.8
Denmark		0.7
Greece		0.1
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

1

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 98.6%
		United States — 98.6%
		Affiliated Issuer(s)
	11,812,928	GMO International Growth Equity Fund, Class III		353,206,539
	11,224,932	GMO International Intrinsic Value Fund, Class IV		365,708,285
				718,914,824
		TOTAL MUTUAL FUNDS (COST $617,098,281)		718,914,824
		COMMON STOCKS — 0.0%
		China — 0.0%
	796	China Digicontent Co Ltd * (a) (b)		1
		United Kingdom — 0.0%
	19,018	British Energy Plc (Deferred Shares) * (a) (b)		—
		TOTAL COMMON STOCKS (COST $19)		1
		SHORT-TERM INVESTMENT(S) — 1.7%
	12,000,000	Bank of Montreal Time Deposit, 4.64%, due 03/01/06		12,000,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $12,000,000)		12,000,000
		TOTAL INVESTMENTS — 100.3% (Cost $629,098,300)		730,914,825
		Other Assets and Liabilities (net) — (0.3%)		(2,100,436	)
		TOTAL NET ASSETS — 100.0%	$	728,814,389

See accompanying notes to the financial statements.

2

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
5/26/06	CAD		2,369,200	$	2,089,552	$	26,028
5/26/06	NZD		4,533,220		2,983,516		(23,287	)
5/26/06	SGD		17,103,580		10,574,138		67,102
						$	69,843
Sales
5/26/06	AUD		43,842,753	$	32,496,468	$	(238,317	)
5/26/06	CHF		29,657,013		22,804,477		5,984
5/26/06	DKK		231,740,660		37,205,849		(49,116	)
5/26/06	EUR		164,162,162		196,704,301		(214,772	)
5/26/06	GBP		85,811,351		150,639,324		(1,343,926	)
5/26/06	HKD		76,246,301		9,841,301		(912	)
5/26/06	JPY		22,701,823,030		198,350,471		(4,252,426	)
5/26/06	NOK		55,909,864		8,330,633		(23,290	)
5/26/06	SEK		130,010,469		16,537,160		94,387
						$	(6,022,388	)

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(b)  Bankrupt issuer.

As of February 28, 2006, 89.8% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

AUD - Australian Dollar	HKD - Hong Kong Dollar
CAD - Canadian Dollar	JPY - Japanese Yen
CHF - Swiss Franc	NOK - Norwegian Krone
DKK - Danish Krone	NZD - New Zealand Dollar
EUR - Euro	SEK - Swedish Krona
GBP - British Pound	SGD - Singapore Dollar

See accompanying notes to the financial statements.

3

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $12,000,019) (Note 2)	$	12,000,001
Investments in affiliated issuers, at value (cost $617,098,281) (Notes 2 and 8)		718,914,824
Cash		95,773
Foreign currency, at value (cost $43,018) (Note 2)		43,218
Receivable for Fund shares sold		3,804,000
Interest receivable		1,507
Unrealized appreciation on open forward currency contracts (Note 2)		193,501
Receivable for expenses reimbursed by Manager (Note 3)		368,003
Total assets		735,420,827
Liabilities:
Payable to affiliate for (Note 3):
Management fee		299,039
Shareholder service fee		83,070
Trustees and Chief Compliance Officer fees		1,025
Unrealized depreciation on open forward currency contracts (Note 2)		6,146,046
Accrued expenses		77,258
Total liabilities		6,606,438
Net assets	$	728,814,389
Net assets consist of:
Paid-in capital	$	600,726,568
Accumulated undistributed net investment income		15,211,254
Accumulated net realized gain		17,012,387
Net unrealized appreciation		95,864,180
	$	728,814,389
Net assets attributable to:
Class III shares	$	728,814,389
Shares outstanding:
Class III		80,374,716
Net asset value per share:
Class III	$	9.07

See accompanying notes to the financial statements.

4

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	5,334,297
Interest		454,265
Total investment income		5,788,562
Expenses:
Management fee (Note 3)		3,581,769
Shareholder service fee – Class III (Note 3)		994,936
Custodian and fund accounting agent fees		86,481
Transfer agent fees		27,949
Audit and tax fees		50,514
Legal fees		10,958
Trustees fees and related expenses (Note 3)		11,789
Registration fees		16,673
Miscellaneous		11,870
Total expenses		4,792,939
Fees and expenses reimbursed by Manager (Note 3)		(197,955	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(3,458,077	)
Shareholder service fee waived – Class III (Note 3)		(774,872	)
Net expenses		362,035
Net investment income (loss)		5,426,527
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		64,424,363
Realized gains distributions from affiliated issuers (Note 8)		31,367,730
Foreign currency, forward contracts and foreign currency related transactions		57,687,445
Net realized gain (loss)		153,479,538
Change in net unrealized appreciation (depreciation) on:
Investments		7,694,199
Foreign currency, forward contracts and foreign currency related transactions		2,733,123
Net unrealized gain (loss)		10,427,322
Net realized and unrealized gain (loss)		163,906,860
Net increase (decrease) in net assets resulting from operations	$	169,333,387

See accompanying notes to the financial statements.

5

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	5,426,527		$	8,376,827
Net realized gain (loss)		153,479,538			(20,210,427	)
Change in net unrealized appreciation (depreciation)		10,427,322			65,699,602
Net increase (decrease) in net assets from operations		169,333,387			53,866,002
Distributions to shareholders from:
Net investment income
Class III		(52,100,981	)		—
Net realized gains
Class III		(66,360,906	)		—
		(118,461,887	)		—
Net share transactions (Note 7):
Class III		97,037,616			366,453,256
Total increase (decrease) in net assets		147,909,116			420,319,258
Net assets:
Beginning of period		580,905,273			160,586,015
End of period (including accumulated undistributed net investment income of $15,211,254 and accumulated undistributed net investment loss of $9,175,548, repectively)	$	728,814,389		$	580,905,273

See accompanying notes to the financial statements.

6

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	8.38		$	7.33		$	5.54		$	7.14		$	9.25
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.07			0.21			0.20			0.22			0.46
Net realized and unrealized gain (loss)		2.17			0.84			1.59			(1.55	)		(1.00	)
Total from investment operations		2.24			1.05			1.79			(1.33	)		(0.54	)
Less distributions to shareholders:
From net investment income		(0.71	)(d)		—			—			(0.27	)		(1.53	)
From net realized gains		(0.84	)		—			—			—			(0.04	)
Total distributions		(1.55	)		—			—			(0.27	)		(1.57	)
Net asset value, end of period	$	9.07		$	8.38		$	7.33		$	5.54		$	7.14
Total Return(b)		28.42	%		14.32	%		32.31	%		(19.53	)%		(5.38	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	728,814		$	580,905		$	160,586		$	28,923		$	37,581
Net expenses to average daily net assets(c)		0.05	%		0.04	%		0.04	%		0.06	%		0.31	%
Net investment income to average daily net assets(a)		0.82	%		2.64	%		2.98	%		3.32	%		5.33	%
Portfolio turnover rate		36	%		3	%		5	%		90	%		120	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.67	%		0.71	%		0.87	%		1.32	%		0.79	%

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  On July 3, 2001, the Fund began to invest a substantial portion of its assets in other funds of GMO Trust and revised its reimbursement policy. Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(d)  Distributions from net investment income include amounts (approximately $0.07 per share) from foreign currency transactions which are treated as realized capital gain for book purposes.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

7

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Currency Hedged International Equity Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in other fund(s) of the Trust ("underlying fund(s)"), including GMO International Intrinsic Value Fund and GMO International Growth Equity Fund, and through management of the Fund's foreign currency positions. The Fund's benchmark is the MSCI EAFE Index (Europe, Australasia, Far East) (Hedged).

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request by calling (617) 346-7646 (collect) or visiting GMO's website at www.gmo.com.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of underlying fund(s) and other mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do

8

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver

9

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss.

10

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Securities Lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other

11

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $52,100,981 and $0, respectively and long-term capital gains – $66,360,906 and $0, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $9,241,829 and $18,956,639 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to foreign currency transactions and capital loss carryforwards.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $261,972 and $1,682,281 expiring in 2010 and 2011, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

12

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	629,098,300	$	101,816,543	$	(18	)	$	101,816,525

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	71,061,256	$	(71,061,256	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

13

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.54% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. As described in Note 1, the Fund invests in certain underlying fund(s). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in shares of the underlying fund(s).

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes (collectively, "fund expenses")) plus the amount of fees and expenses, excluding shareholder service fees and fund expenses (as defined above), incurred indirectly by the Fund through its investment in the underlying fund(s), exceed 0.54% of the Fund's average daily net assets. Because GMO will not reimburse expenses incurred indirectly by the Fund to the extent they exceed 0.54% of the Fund's average daily net assets, and because the amount of fees and expenses incurred indirectly by the Fund will vary, the operating expenses (excluding shareholder service fees and fund expenses (as defined above)) incurred indirectly by the Fund through its investment in the underlying fund(s) may exceed 0.54% of the Fund's average daily net assets.

14

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees)			Indirect Shareholder Service Fees			Total Indirect Expenses
	0.525	%		0.117	%		0.642	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $7,508 and $4,172, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $299,202,024 and $231,399,999, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006, were $293,867,301 and $293,867,301, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related party

As of February 28, 2006, 50.0% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the outstanding shares of the Fund. One of the shareholders is another fund of the Trust.

15

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, less than 0.1% of the Fund's shares were held by one related party comprised of a certain GMO employee account, and 99.9% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		23,875,120		$	209,368,988			49,419,111		$	381,261,853
Shares issued to shareholders in reinvestment of distributions		13,307,037			115,516,716			—			—
Shares repurchased		(26,162,473	)		(227,848,088	)		(1,958,952	)		(14,808,597	)
Net increase (decrease)		11,019,684		$	97,037,616			47,460,159		$	366,453,256

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO International Growth Fund, Class III	$	289,439,426	$	83,177,203	$	392,067,300	$	784,065	$	5,893,138	$	—
GMO International Growth Equity Fund, Class III		—		356,490,350		17,500,000		411,785		9,711,265		353,206,539
GMO International Intrinsic Value Fund, Class IV		289,554,810		153,401,772		115,700,000		4,138,447		15,763,327		365,708,285
Totals	$	578,994,236	$	593,069,325	$	525,267,300	$	5,334,297	$	31,367,730	$	718,914,824

16

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Currency Hedged International Equity Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Currency Hedged International Equity Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

17

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.70	%	$	1,000.00	$	1,157.00	$	3.74
2) Hypothetical		0.70	%	$	1,000.00	$	1,021.32	$	3.51

*  Expenses are calculated using the Class's annualized expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

18

GMO Currency Hedged International Equity Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $66,360,906 from long-term capital gains.

For taxable, non-corporate shareholders, 24.37% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 $5,814,469 or if determined to be different, the qualified interest income of such year.

19

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

20

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee3.
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

21

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June2004– present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

22

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

GMO International Bond Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO International Bond Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO International Bond Fund returned -6.8% for the fiscal year ended February 28, 2006, as compared to -6.8% for the JPMorgan Non-U.S. Government Bond Index. The Fund's exposure to various issues is achieved directly and indirectly through its investment in certain underlying GMO mutual funds, primarily in the GMO Emerging Country Debt Fund, the GMO World Opportunity Overlay Fund, and the GMO Short-Duration Collateral Fund.

Interest rate strategy underperformance offset value added from currency selection, emerging debt exposure, and cash management.

Global bond yields fell across the board during the first half of 2005, although they began heading higher in the third quarter of 2005 and carrying into the New Year. Major, sustained bond market positions included overweights in Sweden and Canada and underweights in the U.K. and Switzerland. The Fund had been overweight Australia early in 2005 and moved to an underweight position later in the year. U.S., Canada, Australia, and Euro-area positions were the largest positive contributors. Underweights in the U.K. and Switzerland and a recent overweight in Japan detracted from performance.

The U.S. dollar gained versus most currencies in 2005, began weakening in December, then stabilized in February. For much of 2005 the Fund had been overweight relatively higher yielding currencies like Australian dollars, New Zealand dollars, and British sterling and underweight lower yielding currencies such as Japanese yen and euro. In general, the underweights added value, while the overweights did not.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO International Bond Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		95.5	%
Short-Term Investment(s)		3.1
Mutual Fund		1.2
Call Options Purchased		0.5
Swaps		0.5
Loan Assignments		0.2
Loan Participations		0.2
Forward Start Options		0.0
Promissory Notes		0.0
Put Options Purchased		0.0
Rights and Warrants		0.0
Written Options		(0.1	)
Forward Currency Contracts		(0.1	)
Futures		(0.3	)
Reverse Repurchase Agreements		(0.5	)
Other		(0.2	)
		100.0	%
Country/Region Summary**	% of Investments
Euro Region***		57.4	%
Japan		43.0
Sweden		19.4
Canada		18.8
Denmark		0.4
Switzerland		(7.8	)
United Kingdom		(8.0	)
United States		(10.2	)
Australia		(13.0	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

1

GMO International Bond Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value / Principal Amount		Description	Value ($)
		DEBT OBLIGATION(S) — 5.9%
		Australia — 0.2%
		Asset-Backed Securities
USD	814,426	Medallion Trust, Series 03-1G, Class A, Variable Rate, 3 mo. LIBOR + .19%, 4.69%, due 12/21/33		816,161
		Canada — 1.8%
		Foreign Government Obligations
CAD	2,000,000	Government of Canada (Cayman), 7.25%, due 06/01/08		1,869,717
CAD	2,000,000	Province of British Columbia, 7.88%, due 11/30/23		2,438,330
GBP	1,500,000	Province of Quebec, 8.63%, due 11/04/11		3,117,702
		Total Canada		7,425,749
		United Kingdom — 0.9%
		Asset-Backed Securities
GBP	941,989	RMAC, Series 03-NS1X Class A2A, 144A, AMBAC, Variable Rate, 3 mo. LIBOR + .45%, 5.09%, due 06/12/35		1,658,126
GBP	1,282,639	RMAC, Series 03-NS2A Class A2A, 144A, AMBAC, Variable Rate, 3 mo. LIBOR + .40%, 5.04%, due 09/12/35		2,255,051
		Total United Kingdom		3,913,177
		United States — 3.0%
		U.S. Government
USD	7,310,040	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (b) (c)		7,568,176
USD	5,000,000	U.S. Treasury Note, 4.00%, due 09/30/07 (a)		4,944,531
		Total United States		12,512,707
		TOTAL DEBT OBLIGATION(S) (COST $22,565,506)		24,667,794
		CALL OPTIONS PURCHASED — 0.3%
		Currency Options — 0.3%
	23,100,000	AUD Call/USD Put, Expires 06/07/06, Strike 0.744		268,819

See accompanying notes to the financial statements.

2

GMO International Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Principal Amount / Shares / Par Value ($)		Description	Value ($)
		Currency Options — continued
	2,600,000,000	JPY Call/USD Put, Expires 4/18/06, Strike 118.50		700,700
	2,600,000,000	JPY Call/USD Put, Expires 4/4/06, Strike 116.3		354,874
				1,324,393
		TOTAL CALL OPTIONS PURCHASED (COST $1,289,463)		1,324,393
		FORWARD START OPTIONS — 0.0%
		Currency Options — 0.0%
	3,240,000,000	JPY Put/USD Call, Expires 09/18/06, Strike TBD		12,506
		TOTAL FORWARD START OPTIONS (COST $0)		12,506
		MUTUAL FUNDS — 93.3%
	1,147,488	GMO Emerging Country Debt Fund, Class III (d)		12,966,615
	11,541,722	GMO Short-Duration Collateral Fund (d)		295,468,092
	37,466	GMO Special Purpose Holding Fund (d)		308,345
	3,338,659	GMO World Opportunity Overlay Fund (d)		84,234,362
	1,360,202	Merrimac Cash Series, Premium Class (e)		1,360,202
		TOTAL MUTUAL FUNDS (COST $390,812,511)		394,337,616
		SHORT-TERM INVESTMENT(S) — 0.7%
	106,908	American Beacon Money Market Select Fund (e)		106,908
	347,450	BGI Institutional Money Market Fund (e)		347,450
	160,362	Fortis Bank Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.53%, due 03/23/06 (e)		160,362
	534,539	Goldman Sachs Group Inc. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $534,539 and an effective yield of 4.60%, collateralized by various corporate debt obligations with an aggregate market value of $545,229. (e)		534,539

See accompanying notes to the financial statements.

3

GMO International Bond Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Par Value ($) / Shares		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — continued
	481,085	Merrill Lynch & Co. Tri Party Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $481,085 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $493,527. (e)		481,085
	389,808	Morgan Stanley & Co. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $389,808 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $397,607. (e)		389,808
	320,723	National Australia Bank Eurodollar Overnight Time Deposit, 4.56%, due 03/01/06 (e)		320,723
	213,815	Rabobank Nederland Eurodollar Overnight Time Deposit, 4.52%, due 03/01/06 (e)		213,815
	160,362	Royal Bank of Scotland Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.55%, due 03/31/06 (e)		160,362
	328,628	Svenska Handlesbanken Eurodollar Overnight Time Deposit, 4.57%, due 03/01/06 (e)		328,628
		TOTAL SHORT-TERM INVESTMENT(S) (COST $3,043,680)		3,043,680
		TOTAL INVESTMENTS — 100.2% (Cost $417,711,160)		423,385,989
		Other Assets and Liabilities (net) — (0.2%)		(858,117	)
		TOTAL NET ASSETS — 100.0%	$	422,527,872

See accompanying notes to the financial statements.

4

GMO International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	690	Canadian Government Bond 10 Yr.	June 2006	$	68,468,740	$	(93,694	)
	357	Euro BOBL	March 2006		47,720,252		(281,763	)
	638	Euro Bund	March 2006		91,563,794		(348,214	)
	85	Japanese Government Bond 10 Yr. (TSE)	March 2006		99,858,754		(816,470	)
						$	(1,540,141	)
	Sales
	244	Australian Government Bond 10 Yr.	March 2006	$	19,098,830	$	104,539
	481	Australian Government Bond 3 Yr.	March 2006		36,438,955		65,432
	147	U.S. Long Bond	June 2006		16,624,781		18,204
	79	U.S. Treasury Note 10 Yr.	June 2006		8,524,594		8,614
	448	U.S. Treasury Note 5 Yr. (CBT)	June 2006		47,124,000		(85,068	)
	265	UK Gilt Long Bond	June 2006		52,717,107		222,327
						$	334,048

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

See accompanying notes to the financial statements.

5

GMO International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Forward Currency Contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
3/21/06	AUD		80,800,000	$	59,966,167	$	(250,292	)
3/28/06	CAD		2,000,000		1,760,982		47,920
4/18/06	CHF		23,900,000		18,303,246		(180,899	)
4/25/06	EUR		170,600,000		203,998,488		(532,828	)
4/11/06	GBP		19,800,000		34,738,553		88,836
3/07/06	JPY		19,670,000,000		170,035,579		(21,917	)
5/02/06	NZD		35,100,000		23,142,132		78,088
						$	(771,092	)
Sales
3/21/06	AUD		62,900,000	$	46,681,583	$	474,900
3/28/06	CAD		13,300,000		11,710,531		(98,534	)
4/18/06	CHF		32,200,000		24,659,603		106,739
4/25/06	EUR		33,600,000		40,177,897		(92,229	)
3/07/06	JPY		10,480,000,000		90,593,435		1,004,321
						$	1,395,197

Forward Cross Currency Contracts

Settlement Date	Deliver/ Units of Currency		Receive/In Exchange For		Net Unrealized Appreciation (Depreciation)
3/14/06	EUR	27,000,000	NOK	214,253,100	$	(433,977	)
4/04/06	EUR	24,500,000	SEK	226,428,020		(578,133	)
4/04/06	SEK	280,469,430	EUR	30,000,000		301,209
3/14/06	NOK	114,199,645	EUR	14,200,000		3,057
					$	(707,844	)

See accompanying notes to the financial statements.

6

GMO International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements

Interest Rate Swaps

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	87,000,000	SEK	3/17/2008	JP Morgan
				Chase Bank	Receive		2.90	%	3 Month SEK STIBOR	$	7,968
	87,000,000	SEK	3/15/2011	Citigroup	Receive		3.40	%	3 Month SEK STIBOR		2,416
	30,000,000	SEK	3/15/2011	Deutsche Bank AG	Receive		3.40	%	3 Month SEK STIBOR		833
	10,000,000	SEK	3/15/2011	JP Morgan Chase Bank	Receive		3.40	%	3 Month SEK STIBOR		278
	22,000,000	CHF	3/15/2011	Deutsche Bank AG	(Pay)		2.25	%	6 Month CHF LIBOR		13,241
	116,000,000	SEK	3/15/2013	Deutsche Bank AG	Receive		3.50	%	3 Month SEK STIBOR		(32,354	)
	25,000,000	SEK	3/15/2013	JP Morgan Chase Bank	Receive		3.50	%	3 Month SEK STIBOR		(6,973	)
	10,000,000	CHF	3/15/2013	JP Morgan Chase Bank	(Pay)		2.40	%	6 Month CHF LIBOR		(420	)
	82,000,000	SEK	3/15/2016	Deutsche Bank AG	Receive		3.75	%	3 Month SEK STIBOR		79,579
	65,000,000	SEK	3/15/2016	JP Morgan Chase Bank	Receive		3.75	%	3 Month SEK STIBOR		63,081
	12,900,000	CHF	3/15/2016	Deutsche Bank AG	(Pay)		2.50	%	6 Month CHF LIBOR		32,103
	5,000,000	EUR	3/21/2030	UBS Warburg	Receive		5.90	%	3 Month Floating Rate EUR LIBOR		1,870,341
										$	2,030,093

See accompanying notes to the financial statements.

7

GMO International Bond Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Pay			Receive	Net Unrealized Appreciation (Depreciation)
	112,000,000	USD	7/21/2006	JP Morgan Chase	1 month LIBOR			Return on JP Morgan Non-
				Bank		– 0.01	%	U.S. Hedged Traded Total
								Return Government
								Bond Index	$	(304,879	)
	33,000,000	USD	7/21/2006	JP Morgan Chase	1 month LIBOR			Return on JP Morgan Non-
				Bank				U.S. Hedged Traded
								Total Return Government
								Bond Index		(89,895	)
									$	(394,774	)

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

AMBAC - Insured as to the payment of principal and interest by AMBAC Assurance Corporation.

LIBOR - London Interbank Offered Rate

STIBOR - Stockholm Interbank Offered Rate

Variable rates - The rates shown on variable rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security.

*  Non-income producing security.

(a)  Indexed security in which price and/or coupon is linked to prices of other securities, securities indices, or other financial indicators (Note 2).

(b)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(c)  All or a portion of this security is out on loan (Note 2).

(d)  Affiliated issuer (Note 8).

(e)  All or a portion of this security represents investment of security lending collateral (Note 2).

Currency Abbreviations:

AUD - Australian Dollar

CAD - Canadian Dollar

CHF - Swiss Franc

EUR - Euro

GBP - British Pound

JPY - Japanese Yen

NOK - Norwegian Krone

NZD - New Zealand Dollar

SEK - Swedish Krona

USD - United States Dollar

See accompanying notes to the financial statements.

8

GMO International Bond Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value, including securities on loan of $3,035,942 (cost $28,258,851) (Note 2)	$	30,408,575
Investments in affiliated issuers, at value (cost $389,452,309) (Notes 2 and 8)		392,977,414
Receivable for Fund shares sold		35,000
Interest receivable		363,014
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		2,105,070
Receivable for variation margin on open futures contracts (Note 2)		379,338
Receivable for open swap contracts (Note 2)		2,069,840
Periodic payments from open swap agreements (Note 2)		240,111
Receivable for expenses reimbursed by Manager (Note 3)		23,759
Total assets		428,602,121
Liabilities:
Foreign cash due to custodian (cost $81,500)		80,515
Collateral on securities loaned (Note 2)		3,150,588
Payable for Fund shares repurchased		4,500
Payable to affiliate for (Note 3):
Management fee		82,014
Shareholder service fee		49,209
Trustees and Chief Compliance Officer fees		553
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		2,188,809
Payable for open swap contracts (Note 2)		434,521
Accrued expenses		83,540
Total liabilities		6,074,249
Net assets	$	422,527,872
Net assets consist of:
Paid-in capital	$	433,460,827
Distributions in excess of net investment income		(5,102,178	)
Accumulated net realized loss		(11,788,263	)
Net unrealized appreciation		5,957,486
	$	422,527,872
Net assets attributable to:
Class III shares	$	422,527,872
Shares outstanding:
Class III		44,162,688
Net asset value per share:
Class III	$	9.57

See accompanying notes to the financial statements.

9

GMO International Bond Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest (including securities lending income of $360)	$	1,621,961
Dividends from affiliated issuers (Note 8)		9,846,899
Total investment income		11,468,860
Expenses:
Management fee (Note 3)		1,139,421
Shareholder service fee – Class III (Note 3)		683,653
Custodian, fund accounting agent and transfer agent fees		192,080
Audit and tax fees		55,233
Legal fees		9,039
Trustees fees and related expenses (Note 3)		8,146
Registration fees		9,071
Miscellaneous		8,285
Total expenses		2,104,928
Fees and expenses reimbursed by Manager (Note 3)		(267,717	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(58,372	)
Shareholder service fee waived – Class III (Note 3)		(21,306	)
Net expenses		1,757,533
Net investment income (loss)		9,711,327
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		(3,961,895	)
Investments in affiliated issuers		2,228,944
Realized gains distributions from affiliated issuers (Note 8)		996,811
Closed futures contracts		6,760,844
Closed swap contracts		774,271
Foreign currency, forward contracts and foreign currency related transactions		(40,301,789	)
Net realized gain (loss)		(33,502,814	)
Change in net unrealized appreciation (depreciation) on:
Investments		(2,344,491	)
Open futures contracts		(41,945	)
Open swap contracts		(387,589	)
Foreign currency, forward contracts and foreign currency related transactions		(4,834,295	)
Net unrealized gain (loss)		(7,608,320	)
Net realized and unrealized gain (loss)		(41,111,134	)
Net increase (decrease) in net assets resulting from operations	$	(31,399,807	)

See accompanying notes to the financial statements.

10

GMO International Bond Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	9,711,327		$	5,508,928
Net realized gain (loss)		(33,502,814	)		31,679,192
Change in net unrealized appreciation (depreciation)		(7,608,320	)		2,505,047
Net increase (decrease) in net assets from operations		(31,399,807	)		39,693,167
Distributions to shareholders from:
Net investment income
Class III		(14,894,446	)		(31,212,330	)
Net realized gains
Class III		(287,353	)		(1,835,152	)
		(15,181,799	)		(33,047,482	)
Net share transactions (Note 7):
Class III		30,744,414			160,704,821
Increase (decrease) in net assets resulting from net share transactions		30,744,414			160,704,821
Total increase (decrease) in net assets		(15,837,192	)		167,350,506
Net assets:
Beginning of period		438,365,064			271,014,558
End of period (including distributions in excess of net investment income of $5,102,178 and accumulated undistributed net investment income of $9,101,507, respectively)	$	422,527,872		$	438,365,064

See accompanying notes to the financial statements.

11

GMO International Bond Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	10.61		$	10.38		$	9.94		$	9.05		$	9.44
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.21			0.17			0.20			0.20			0.44
Net realized and unrealized gain (loss)		(0.93	)		1.02			1.94			2.00			(0.80	)
Total from investment operations		(0.72	)		1.19			2.14			2.20			(0.36	)
Less distributions to shareholders:
From net investment income		(0.31	)		(0.91	)		(0.71	)		(1.31	)		(0.03	)
From net realized gains		(0.01	)		(0.05	)		(0.99	)		—			—
Total distributions		(0.32	)		(0.96	)		(1.70	)		(1.31	)		(0.03	)
Net asset value, end of period	$	9.57		$	10.61		$	10.38		$	9.94		$	9.05
Total Return(b)		(6.83	)%		11.81	%		23.17	%		25.17	%		(3.80	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	422,528		$	438,365		$	271,015		$	122,521		$	135,048
Net expenses to average daily net assets(c)		0.39	%		0.39	%		0.39	%		0.38	%		0.38	%
Net investment income to average daily net assets(a)		2.13	%		1.65	%		1.98	%		1.96	%		4.73	%
Portfolio turnover rate		36	%		51	%		26	%		40	%		36	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.08	%		0.09	%		0.12	%		0.11	%		0.11	%

(a)  Net investment income is affected by the timing of the declaration of the dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying funds (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

12

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO International Bond Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investment in foreign bond and currency markets, primarily by investing in other fund(s) of the Trust "(underlying fund(s)"), including GMO Short-Duration Collateral Fund, GMO World Opportunity Overlay Fund and GMO Emerging Country Debt Fund and "synthetic" bonds (created by the Manager by combining a futures contract, swap contract, or option, on a fixed income security with cash, a cash equivalent, or another fixed income security). The Fund's benchmark is the JPMorgan Non-U.S. Government Bond Index.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, upon request, without charge by calling (617) 346-7646 (collect). Shares of the GMO Short-Duration Collateral Fund, the GMO World Opportunity Overlay Fund and the GMO Special Purpose Holding Fund are not publicly available for direct purchase.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's

13

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and, at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund, or underlying fund(s) in which it invests, are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market maker may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. As of February 28, 2006, the total value of these securities represented 28.6% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $233,673 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $1,300,783 (approximately $0.03 per share as of April 18, 2006) in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange

14

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency

15

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the

16

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

17

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. As of February 28, 2006, the Fund did not enter into any reverse repurchase agreements.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $3,035,942 collateralized by cash in the amount of $3,150,588, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $14,894,446 and $32,298,440, respectively and long-term capital gains – $287,353 and $749,042, respectively.

18

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital losses of $21,531,334.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	413,211,271	$	10,453,473	$	(278,755	)	$	10,174,718

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains due to foreign currency transactions and certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income			Accumulated Net Realized Loss		Paid-in Capital
$	(9,020,566	)	$	17,324,937	$	(8,304,371	)

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature

19

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities 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 U.S. and developed foreign markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.25% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. The Fund may invest in Class III shares of GMO Emerging Country Debt Fund ("ECDF"). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in ECDF. The Fund does not incur any indirect shareholder service fees as a result of the Fund's investment in GMO Short-Duration Collateral Fund ("SDCF"), GMO Special Purpose Holding Fund ("SPHF") and GMO World Opportunity Overlay Fund ("Overlay Fund").

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total direct annual operating expenses plus the amount of indirect fees and operating expenses incurred through its investment in underlying fund(s) exceed 0.25% of the average daily net assets, with such indirect expenses subject to a maximum total reimbursement to the Fund equal to 0.25% of the Fund's average daily net assets. For purposes of this calculation, the Fund's total direct annual operating expenses excludes shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees) ("Trustees fees"), and the following investment-related costs: brokerage commissions, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes. Additionally, the indirect fees and operating expenses incurred through investment in underlying fund(s) excludes investment-related expenses and Trustees fees. Through June 29, 2004, the indirect Trustees fees incurred by the Fund through its investment in ECDF were not excluded.

20

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.017	%		0.005	%		0.016	%		0.038	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $5,020 and $2,835, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	4,988,672	$	—
Investments (non-U.S. Government securities)		158,289,829		166,380,585

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 48.8% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

21

GMO International Bond Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 0.9% of the Fund's shares were held by seven related parties comprised of certain GMO employee accounts, and 49.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		9,855,130		$	99,990,204			13,143,558		$	138,918,584
Shares issued to shareholders in reinvestment of distributions		1,466,265			14,090,802			2,982,381			31,230,984
Shares repurchased		(8,493,772	)		(83,336,592	)		(905,666	)		(9,444,747	)
Net increase (decrease)		2,827,623		$	30,744,414			15,220,273		$	160,704,821

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the securities of these issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Country Debt Fund, Class III	$	13,036,542	$	2,883,792	$	3,350,000	$	1,513,057	$	670,735	$	12,966,615
GMO Short-Duration Collateral Fund		297,103,689		137,633,842		143,100,000		8,333,842		—		295,468,092
GMO Special Purpose Holding Fund		581,096		—		—		—		326,076		308,345	*
GMO World Opportunity Overlay Fund		88,260,749		12,275,000		16,500,000		—		—		84,234,362
Totals	$	398,982,076	$	152,792,634	$	162,950,000	$	9,846,899	$	996,811	$	392,977,414

*  After the effect of return of capital distributions of $206,540 and $58,414 on April 5, 2005 and February 21, 2006, respectively.

22

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO International Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO International Bond Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

23

GMO International Bond Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.43	%	$	1,000.00	$	971.60	$	2.10
2) Hypothetical		0.43	%	$	1,000.00	$	1,022.66	$	2.16

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

24

GMO International Bond Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $287,353 from long-term capital gains.

25

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

26

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

27

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

28

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

29

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Emerging Country Debt Fund returned +19.5% for the fiscal year ended February 28, 2006, as compared to +13.1% for the JPMorgan Emerging Markets Bond Index Global (EMBIG).

The Fund outperformed the benchmark during the fiscal year by 6.4%. EMBIG spreads over U.S. Treasuries tightened 93 basis points to 187 basis points (net of the effect of changes in the composition of the index's Argentina sub-component), while the yield on the 10-year U.S. Treasury bond rose by 17 basis points to 4.55%. The EMBIG return of +13.1% was driven by carry (the yield on the index averaged 7%) and capital gains from spread tightening, despite the 17 basis point increase in U.S. interest rates.

The biggest gainers of the fiscal year were Ivory Coast (+47.8%), Argentina (+25.2%), Venezuela (+23.8%), and Dominican Republic (+23.8%). Latin American countries outperformed those outside the region, +15.4% to +10.0%. The worst performing countries for the year were Bulgaria (+1.3%), Tunisia (+1.4%), and China (+2.9%).

Market selection added value, primarily from the Venezuela and Ivory Coast overweights and the Malaysia and China underweights. Overweighting Ukraine and underweighting Philippines detracted from value added. Security selection added 530 basis points of positive alpha in total. Positions in Brazil were the largest contributor, as credit default swaps and currency options added value. Bond selection was also highly positive in Russia, Turkey, and Mexico.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		85.3	%
Loan Participations		6.8
Loan Assignments		6.6
Call Options Purchased		4.4
Swaps		4.4
Mutual Funds		0.9
Rights and Warrants		0.7
Promissory Notes		0.3
Put Options Purchased		0.2
Short-Term Investment(s)		0.1
Forward Currency Contracts		0.1
Futures		0.0
Written Options		(1.6	)
Reverse Repurchase Agreements		(17.6	)
Other		9.4
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMOTrust ("underlying fund(s)").

1

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary**	% of Investments
Brazil		18.0	%
Mexico		16.2
Russia		12.6
Venezuela		10.5
Turkey		10.3
Colombia		4.0
Ukraine		3.7
Philippines		3.0
Uruguay		2.3
Argentina		2.1
Peru		1.9
Qatar		1.3
Indonesia		1.3
Nigeria		1.2
Ecuador		1.1
Algeria		1.0
India		0.9
Thailand		0.9
Ivory Coast		0.8
Vietnam		0.7
Malaysia		0.7
Jamaica		0.6
Serbia		0.6
Dominican Republic		0.6
Chile		0.5
Panama		0.5
Poland		0.5
Egypt		0.4
Africa		0.4
South Africa		0.4
Bosnia		0.3
Morocco		0.3
El Salvador		0.3
Costa Rica		0.2
China		0.2
Nicaragua		0.2
Tunisia		0.2
Belize		0.1
Trinidad & Tobago		0.1
Bulgaria		(0.1	)
Lebanon		(0.1	)
Romania		(0.1	)
South Korea		(0.6	)
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

2

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			DEBT OBLIGATION(S) — 80.9%
			Argentina — 7.8%
			Foreign Government Obligations
USD		24,087	Republic of Argentina, 8.28%, due 12/31/33		23,461
USD		3,433,525	Republic of Argentina Capitalization Bond, 12.25%, due 06/19/18 (a)		1,098,728
USD		45,720,000	Republic of Argentina Capitalization Bond, 12.00%, due 06/19/31 (a)		14,630,400
USD		32,000,000	Republic of Argentina Discount Bond, Series L-GL, Variable Rate, 6 mo. LIBOR + .81%, 5.44%, due 03/31/23 (a)		16,640,000
DEM		3,830,000	Republic of Argentina Discount Bond, Variable Rate, 6 mo. DEM LIBOR + .81%, 3.40%, due 03/31/23 (a)		1,213,902
ARS		220,171,475	Republic of Argentina GDP linked, 0.00%, due 12/15/35 (a) (b) (c)		16,921,387
DEM		5,000,000	Republic of Argentina Global Bond, 9.00%, due 11/19/08 (a)		822,840
ARS		7,400,813	Republic of Argentina Global Bond, 2.00%, due 02/04/18 (a)		2,845,382
USD		26,545,000	Republic of Argentina Global Bond, 12.13%, due 02/25/19 (a)		7,963,500
USD		6,931,000	Republic of Argentina Global Bond, 12.00%, due 02/01/20 (a)		2,079,300
USD		3,540,000	Republic of Argentina Global Bond, 8.88%, due 03/01/29 (a)		920,400
ARS		28,000,000	Republic of Argentina Global Bond, 0.63%, due 12/31/38 (c)		4,022,336
USD		31,390,000	Republic of Argentina Global Bond, Reg. S, Variable Rate, 3 mo. LIBOR + .58%, 10.30%, due 04/06/04 (a)		8,396,825
USD		198,230	Republic of Argentina Global Bond, Series 2008, Step Up, 15.50%, due 12/19/08 (a)		61,451
USD		8,000,000	Republic of Argentina Global Bond, Series BT04, 9.38%, due 09/19/27 (a)		2,400,000
DEM		20,000,000	Republic of Argentina Global Bond, Series DM, 5.87%, due 03/31/23 (a)		7,070,328
EUR		3,500,000	Republic of Argentina Global Bond, Series FEB, Step Down, 8.00%, due 02/26/08 (a)		1,350,798
USD		15,000,000	Republic of Argentina Global Par Bond, Series L-GP, Variable Rate, Step Up, 6.00%, due 03/31/23 (a)		7,800,000
USD		2,000,000	Republic of Argentina Pro 4, 2.00%, due 12/28/10 (a)		335,000
JPY		500,000,000	Republic of Argentina Series EMTN, 7.40%, due 04/25/06 (a) (c)		1,339,035
EUR		2,500,000	Republic of Argentina Series EMTN, Variable Rate, 3 mo. EURIBOR +5.10%, 7.59%, due 12/22/04 (a)		774,865
EUR		112,500,000	Republic of Argentina, Step Up, 1.20%, due 12/31/38		54,482,695
USD		164,600,000	Republic of Argentina, Step Up, 1.33%, due 12/31/38		66,251,500
					219,444,133

See accompanying notes to the financial statements.

3

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Belize — 0.1%
			Foreign Government Obligations
USD		4,000,000	Belize Government International Bond, 9.50%, due 08/15/12		3,700,000
			Bosnia & Herzegovina — 0.5%
			Foreign Government Obligations
DEM		24,739,120	Bosnia & Herzegovina, Series A, Step Up, Variable Rate, 6 mo. DEM LIBOR + .81%, 3.50%, due 12/11/17		13,080,830
			Brazil — 13.7%
			Foreign Government Obligations
USD		38,236,106	Brazil DCB (Bearer), Series 18 Yr, Variable Rate, 6 mo. LIBOR + .88%, 5.25%, due 04/15/12		38,236,106
USD		68,442,440	Brazil DCB (Registered), Variable Rate, 6 mo. LIBOR + .88%, 5.25%, due 04/15/12		68,442,440
USD		29,525,000	Brazil Discount ZL Bond, Series 30 Yr, Variable Rate, 6 mo. LIBOR + .81%, 5.19%, due 04/15/24		29,525,000
USD		14,172,765	Brazil FLIRB (Registered), Variable Rate, 6 mo. LIBOR + .81%, 5.19%, due 04/15/09		14,155,049
USD		5,537,732	Brazil MYDFA Trust Certificates, 144A, Variable Rate, 6 mo. LIBOR + .81%, 5.94%, due 09/15/07		5,537,732
USD		10,533,484	Brazilian Government International Exit Bonds, 6.00%, due 09/15/13		10,533,484
USD		527,304	Brazilian Government International Exit Bonds Odd Lot, 6.00%, due 09/15/13		516,758
USD		14,000,000	Republic of Brazil, 8.75%, due 02/04/25		16,919,000
USD		56,000,000	Republic of Brazil, 8.25%, due 01/20/34		66,976,000
USD		101,000,000	Republic of Brazil, 11.00%, due 08/17/40 (b)		134,229,000
					385,070,569
			China — 0.3%
			Foreign Government Obligations
USD		7,500,000	China Government International Bond, 6.80%, due 05/23/11		8,033,812

See accompanying notes to the financial statements.

4

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Colombia — 0.5%
			Foreign Government Obligations
USD		8,000,000	Republic of Colombia, 8.70%, due 02/15/16		9,040,000
USD		3,800,000	Republic of Colombia, 11.85%, due 03/09/28		5,016,000
					14,056,000
			Costa Rica — 0.3%
			Foreign Government Obligations
USD		3,000,000	Republic of Costa Rica, Reg S, 8.05%, due 01/31/13		3,277,500
USD		3,710,000	Republic of Costa Rica, Reg S, 10.00%, due 08/01/20		4,748,800
					8,026,300
			Dominican Republic — 1.5%
			Foreign Government Obligations
USD		2,355,962	Dominican Republic Bond, Variable Rate, 6 mo. LIBOR + .81%, 5.81%, due 08/30/09		2,338,292
USD		42,557,000	Dominican Republic Bond, Variable Rate, 6 mo. LIBOR + .81%, 5.39%, due 08/30/24		39,578,010
					41,916,302
			Ecuador — 1.3%
			Foreign Government Obligations
USD		2,755,597	Republic of Ecuador PDI (Global Bearer Capitalization Bond), PIK, Variable Rate, 6 mo. LIBOR + .81%, 5.81%, due 02/27/15 (c)		1,561,505
USD		2,000,000	Republic of Ecuador, 144A, 9.38%, due 12/15/15		2,095,000
USD		33,587,000	Republic of Ecuador, Variable Rate, Step Up, 9.00%, due 08/15/30		33,251,130
					36,907,635

See accompanying notes to the financial statements.

5

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			El Salvador — 0.4%
			Foreign Government Obligations
USD		7,000,000	Republic of El Salvador, Reg S, 8.50%, due 07/25/11		7,875,000
USD		4,000,000	Republic of El Salvador, Reg S, 8.25%, due 04/10/32		4,680,000
					12,555,000
			Iraq — 0.4%
			Foreign Government Obligations
USD		16,000,000	Republic of Iraq, 144A, 5.80%, due 01/15/28		11,400,000
			Ivory Coast — 1.2%
			Foreign Government Obligations
FRF		37,500,000	Ivory Coast Discount Bond, Series FF, Variable Rate, Step Up, 3.00%, due 03/31/28 (a)		2,317,115
FRF		155,755,000	Ivory Coast FLIRB, Variable Rate, Step Up, 2.50%, due 03/29/18 (a)		21,209,356
FRF		256,889,500	Ivory Coast PDI, Series FF, Variable Rate, Step Up, 1.90%, due 03/30/18 (a)		11,204,563
					34,731,034
			Jamaica — 0.8%
			Corporate Debt — 0.7%
USD		17,000,000	Air Jamaica Ltd., Reg S, 144A, 9.38%, due 07/08/15		17,637,500
			Foreign Government Obligations — 0.1%
USD		3,000,000	Government of Jamaica, 10.63%, due 06/20/17		3,492,000
			Total Jamaica		21,129,500
			Kazakhstan — 0.1%
			Foreign Government Obligations
USD		4,000,000	Kaztransoil, Reg S, 8.50%, due 07/06/06		4,040,000

See accompanying notes to the financial statements.

6

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Luxembourg — 0.7%
			Corporate Debt
USD		19,000,000	VTB Capital SA, Reg S, 6.25%, due 06/30/35		19,592,800
			Malaysia — 1.3%
			Corporate Debt — 1.0%
MYR		45,000,000	Transshipment Megahub Berhad, Series C, 5.45%, due 11/03/09		12,576,985
MYR		50,000,000	Transshipment Megahub Berhad, Series F, 6.70%, due 11/03/12		14,592,194
					27,169,179
			Foreign Government Obligations — 0.3%
USD		8,000,000	Malaysia Global Bond, 7.50%, due 07/15/11		8,845,038
			Total Malaysia		36,014,217
			Mexico — 10.3%
			Corporate Debt — 2.4%
USD		4,000,000	Pemex Project Funding Master Trust, 8.63%, due 02/01/22		4,960,000
USD		16,500,000	Pemex Project Funding Master Trust, 144A, 9.50%, due 09/15/27		22,481,250
EUR		7,500,000	Pemex Project Funding Master Trust, Reg S, 6.38%, due 08/05/16		10,165,633
USD		8,000,000	Pemex Project Funding Master Trust, Reg S, 6.63%, due 06/15/35		8,096,658
GBP		7,689,000	Pemex Project Funding Master Trust, Series EMTN, 7.50%, due 12/18/13		15,206,902
ITL		11,955,000,000	Petroleos Mexicanos, Series EMTN, Variable Rate, 11.25% - 12 mo. IL LIBOR, 8.91%, due 03/04/08		7,967,540
					68,877,983
			Foreign Government Obligations — 7.9%
USD		89,500,000	United Mexican States, 8.30%, due 08/15/31 (b)		117,245,000
USD		10,000,000	United Mexican States Global Bond, 11.50%, due 05/15/26		16,550,000
ITL		28,000,000,000	United Mexican States, Series EMTN, 11.00%, due 05/08/17		27,366,455
GBP		29,994,000	United Mexican States, Series GMTN, 6.75%, due 02/06/24		61,096,237
					222,257,692
			Total Mexico		291,135,675

See accompanying notes to the financial statements.

7

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Nicaragua — 0.3%
			Foreign Government Obligations
USD		10,194,188	Republic of Nicaragua BPI Series E, 5.00%, due 02/01/11		8,636,924
			Nigeria — 0.9%
			Foreign Government Obligations
USD		26,000,000	Central Bank of Nigeria Par Bond, Series WW, Step Up, 6.25%, due 11/15/20		26,000,000
			Panama — 0.7%
			Foreign Government Obligations
USD		4,000,000	Republic of Panama, 7.13%, due 01/29/26		4,240,000
USD		14,317,875	Republic of Panama PDI Bond, Variable Rate, 6 mo. LIBOR + .81%, 5.56%, due 07/17/16		14,031,517
					18,271,517
			Peru — 3.8%
			Foreign Government Obligations
USD		17,566,500	Peru FLIRB, Series 20 Yr, Variable Rate, Step Up, 5.00%, due 03/07/17		17,039,505
USD		25,000,000	Peru Par Bond, Series 30 Yr, Variable Rate, Step Up, 3.00%, due 03/07/27		18,437,500
USD		4,824,253	Peru Trust II, Series 98-A LB, 0.00%, due 02/28/16		3,473,462
USD		10,490,607	Peru Trust, Series 97-I-P Class A3, 0.00%, due 12/31/15		5,943,558
USD		5,000,000	Republic of Peru, 7.35%, due 07/21/25		5,262,500
USD		40,381,000	Republic of Peru Discount Bond, Variable Rate, 6 mo. LIBOR + .81%, 5.88%, due 03/07/27		38,765,760
EUR		13,700,000	Republic of Peru Global Bond, 7.50%, due 10/14/14		19,067,341
					107,989,626
			Philippines — 5.0%
			Corporate Debt — 0.3%
USD		8,500,000	National Power Corp. Global Bond, 8.40%, due 12/15/16		8,670,000

See accompanying notes to the financial statements.

8

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Foreign Government Obligations — 4.7%
USD		59,501,000	Central Bank of the Philippines, Series A, 8.60%, due 06/15/27		59,739,004
USD		4,310,000	Central Bank of the Philippines, Series B, Variable Rate, Step Up, 6.50%, due 12/01/17		4,310,000
EUR		12,000,000	Republic of Philippines, 9.13%, due 02/22/10		16,415,217
USD		27,843,000	Republic of Philippines, 8.38%, due 02/15/11		30,173,459
USD		7,450,000	Republic of Philippines, 10.63%, due 03/16/25		9,666,375
USD		11,000,000	Republic of Philippines, 144A, 7.75%, due 01/14/31		11,055,000
USD		1,600,000	Republic of Philippines, Series 92-B, Variable Rate, 6 mo. LIBOR + .81%, 5.44%, due 12/01/09		1,552,000
					132,911,055
			Total Philippines		141,581,055
			Poland — 0.6%
			Foreign Government Obligations
USD		10,000,000	Delphes Co. No. 2 Ltd., Reg S, 7.75%, due 05/05/09		10,699,470
USD		6,000,000	Poland Government International Bond, 6.25%, due 07/03/12		6,345,000
					17,044,470
			Qatar — 0.9%
			Foreign Government Obligations
USD		17,000,000	Qatar Government International Bond, Reg S, 9.75%, due 06/15/30		26,180,000
			Russia — 8.8%
			Corporate Debt — 2.5%
USD		70,000,000	Volga Investments Ltd. Notes, Variable Rate, 3 mo. LIBOR + 1.85%, 5.99%, due 04/02/08 (b)		70,280,000
			Foreign Government Obligations — 6.3%
EUR		45,000,000	Aries Vermogensverwaltung, Reg S, 7.75%, due 10/25/09		60,953,563
USD		91,500,000	Aries Vermogensverwaltung, Reg S, 9.60%, due 10/25/14		117,463,125
					178,416,688
			Total Russia		248,696,688

See accompanying notes to the financial statements.

9

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Serbia — 0.5%
			Foreign Government Obligations
USD		13,868,290	Republic of Serbia, 144A, Step Up, 3.75%, due 11/01/24		12,793,498
USD		1,097,736	Republic of Serbia, Reg S, Step Up, 3.75%, due 11/01/24		1,012,661
					13,806,159
			South Africa — 0.1%
			Foreign Government Agency
ZAR		163,000,000	Eskom Holdings Ltd., 0.00%, due 12/31/32		3,525,538
			South Korea — 0.2%
			Foreign Government Agency
USD		6,000,000	Export Import Bank of Korea, 7.10%, due 03/15/07		6,113,323
			Thailand — 0.2%
			Foreign Government Agency
USD		5,000,000	PTT Public Co. Ltd., 144A, 5.75%, due 08/01/14		5,150,975
			Tunisia — 0.1%
			Foreign Government Obligations
JPY		360,000,000	Banque Centrale De Tunisie, Series 6RG, 4.35%, due 08/15/17		3,638,720
			Turkey — 1.7%
			Foreign Government Obligations
USD		10,000,000	Republic of Turkey, 11.88%, due 01/15/30 (b)		15,850,000
USD		31,500,000	Republic of Turkey, 6.88%, due 03/17/36 (b)		31,893,750
					47,743,750
			Ukraine — 0.7%
			Corporate Debt — 0.3%
USD		9,000,000	Credit Suisse First Boston The EXIM of Ukraine, 6.80%, due 10/04/12		8,775,000

See accompanying notes to the financial statements.

10

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Foreign Government Obligations — 0.4%
USD		10,000,000	Dresdner Kleinwort Wasserstein for CJSC The EXIM of Ukraine, Note, 7.75%, due 09/23/09		10,213,000
USD		560,040	Ukraine Government International Bond Series, Reg S, 11.00%, due 03/15/07		575,441
					10,788,441
			Total Ukraine		19,563,441
			United Kingdom — 0.3%
			Asset-Backed Securities
GBP		1,883,978	RMAC Plc, Series 03-NS1A, Class A2A, 144A, AMBAC, Variable Rate, 3 mo. GBP LIBOR + .45%, 5.09%, due 06/12/35		3,316,252
GBP		3,206,596	RMAC Plc, Series 03-NS2A, Class A2A, 144A, AMBAC, Variable Rate, 3 mo. GBP LIBOR + .40%, 5.04%, due 09/12/35		5,637,628
					8,953,880
			United States — 3.2%
			Asset-Backed Securities — 1.8%
USD		4,000,000	Aircraft Finance Trust, Series 99-1A, Class A1, Variable Rate, 1 mo. LIBOR + .48%, 5.05%, due 05/15/24		2,540,000
USD		879,859	California Infrastructure PG&E, Series 97-1, Class A7, 6.42%, due 09/25/08		883,017
USD		1,161,244	Chevy Chase Mortgage Funding Corp., Series 03-4, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .34%, 4.72%, due 10/25/34		1,162,638
USD		3,256,332	CHYPS CBO Ltd., Series 1997-1A, Class A2A, 6.72%, due 01/15/10		1,660,729
USD		3,797,309	CNL Commercial Mortgage Loan Trust, Series 03-2A, Class A1, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .44%, 5.26%, due 10/25/30		3,823,207
USD		4,516,556	Golden Securities Corp., Series 03-A, Class A1, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .30%, 4.87%, due 12/02/13		4,517,595
USD		15,000,000	Huntsman International Asset-Backed Securities Ltd., Series 1, Class A1, Variable Rate, 1 mo. LIBOR + .39%, 4.96%, due 03/15/07		14,983,050
USD		10,000,000	Morgan Stanley ACES SPC, Series 04-15, Class I, 144A, Variable Rate, 3 mo. LIBOR + .45%, 4.95%, due 12/20/09		10,014,062
USD		2,029,563	Quest Trust, Series 03-X4A, Class A, 144A, AMBAC, Variable Rate, 1 mo. LIBOR + .43%, 5.01%, due 12/25/33		2,033,007
USD		422,310	Rhyno CBO Delaware Corp., Series 97-1, Class A-2, 144A, Step Up, 6.33%, due 09/15/09		423,193
USD		10,313,033	SHYPPCO Finance Co., Series II, Class A-2B, 144A, 6.64%, due 06/15/10		9,797,381
					51,837,879

See accompanying notes to the financial statements.

11

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			U.S. Government — 1.4%
USD		37,768,540	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (d) (e)		39,108,019
			Total United States		90,945,898
			Uruguay — 3.0%
			Foreign Government Obligations
USD		350,000	Republic of Uruguay, 7.63%, due 01/20/12		346,500
USD		1,000,000	Republic of Uruguay, 7.50%, due 03/15/15		1,060,000
USD		1,000,000	Republic of Uruguay, 9.25%, due 05/17/17		1,185,000
USD		28,270,738	Republic of Uruguay PIK Bond, 7.88%, due 01/15/33		30,249,690
USD		4,056,000	Uruguay Government International Bond, 7.00%, due 04/07/08		4,137,120
USD		400,000	Uruguay Government International Bond, 7.88%, due 03/25/09		409,000
USD		5,650,000	Uruguay Government International Bond, 7.25%, due 05/04/09		5,650,000
USD		75,000	Uruguay Government International Bond, 8.38%, due 09/26/11		80,250
USD		24,500,000	Uruguay Government International Bond, 8.00%, due 11/18/22		26,460,000
USD		69,106	Uruguay Government International Bond PIK, 7.88%, due 01/15/33		73,944
JPY		1,648,000,000	Uruguay Government International Bond, Series 3BR, 2.50%, due 03/14/11		13,738,672
					83,390,176
			Venezuela — 7.8%
			Foreign Government Obligations
EUR		25,000,000	Republic of Venezuela, 11.00%, due 03/05/08		33,989,751
EUR		8,400,000	Republic of Venezuela, 11.13%, due 07/25/11		13,017,732
USD		7,000,000	Republic of Venezuela, 8.50%, due 10/08/14		7,945,000
EUR		5,000,000	Republic of Venezuela, 7.00%, due 03/16/15		6,690,661
USD		49,250,000	Republic of Venezuela, 9.38%, due 01/13/34 (b)		64,271,250
USD		413,580	Republic of Venezuela DCB DL Odd Lot, Variable Rate, 6 mo. LIBOR + .88%, 5.56%, due 12/18/07 (c)		409,445
USD		4,304,348	Republic of Venezuela DCB IL, Variable Rate, 6 mo. LIBOR + .88%, 5.56%, due 12/18/08		4,239,783
DEM		34,500,000	Republic of Venezuela Discount Bond, Variable Rate, 6 mo. LIBOR + .81%, 3.13%, due 03/31/20 (c)		20,187,006

See accompanying notes to the financial statements.

12

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Venezuela — continued
CHF		5,713,600	Republic of Venezuela FLIRB, Series SFR, Variable Rate, CHF 6 mo. LIBOR + .88%, 1.75%, due 03/31/07		4,311,494
DEM		30,190,000	Republic of Venezuela Global Bond, Step Down, 7.38%, due 10/29/08		19,873,230
DEM		24,500,000	Republic of Venezuela Par Bond, 6.66%, due 03/31/20		13,902,642
USD		20,000,000	Republic of Venezuela Par Bond, Series B, 6.75%, due 03/31/20		20,000,000
FRF		54,175,000	Republic of Venezuela Par Bond, Series WOIL, 7.71%, due 03/31/20		9,855,311
					218,693,305
			Vietnam — 0.9%
			Foreign Government Obligations
USD		4,000,000	Vietnam Discount Bond, Series 30 Yr, Variable Rate, 6 mo. LIBOR + .81%, 5.88%, due 03/13/28		3,810,000
USD		19,750,000	Vietnam Par Bond, Series 30 Yr, Variable Rate, Step Up, 3.75%, due 03/12/28		16,046,876
USD		5,478,261	Vietnam PDI, Series 18 Yr, Variable Rate, Step Up, 5.88%, due 03/12/16		5,327,609
					25,184,485
			TOTAL DEBT OBLIGATION(S) (COST $2,100,501,656)		2,281,943,737
			LOAN ASSIGNMENTS — 6.6%
			Algeria — 1.0%
JPY		76,220,035	Algeria Tranche 1 Loan Agreement, 6 mo. JPY LIBOR + .8125%, (0.9375%), due 09/04/10		655,168
JPY		2,728,212,391	Algeria Tranche 3 Loan Agreement, 6 mo. JPY LIBOR + .8125%, (2.14875%), due 03/04/10		23,451,007
JPY		421,875,000	Algeria Tranche 3 Loan Agreement, JPY Long Term Prime +.8125%, (2.3875%), due 03/04/10		3,626,328
					27,732,503
			Argentina — 0.0%
ARS		15,432,863	Argentina INDER Certificates (a)		336,671

See accompanying notes to the financial statements.

13

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Congo Republic (Brazzaville) — 0.5%
EUR		4,976,732	Republic of Congo Loan Agreement *		1,275,544
EUR		14,565,612	Republic of Congo Loan Agreement *		3,733,188
FRF		102,097,963	Republic of Congo Loan Agreement *		3,989,265
USD		8,496,466	Republic of Congo Loan Agreement *		1,826,740
EUR		6,987,247	Republic of Congo Loan Agreement *		1,790,842
					12,615,579
			Indonesia — 1.0%
JPY		230,040,002	Republic of Indonesia Loan Agreement, 6 mo. JPY LIBOR + .88% (0.95%), due 3/29/13		1,927,682
USD		4,708,000	Republic of Indonesia Loan Agreement, dated January 1, 1994, 6 mo. LIBOR + .88% , (5.10%), due 3/29/13		4,613,840
USD		3,837,600	Republic of Indonesia Loan Agreement, dated June 14, 1995, 3 mo. LIBOR + .88%, (5.56%), due 12/14/19		3,434,652
USD		5,116,800	Republic of Indonesia Loan Agreement, dated June 14, 1995, 3 mo. LIBOR + .88%, (5.56%), due 12/14/19		4,579,536
USD		3,837,600	Republic of Indonesia Loan Agreement, dated June 14, 1995, 3 mo. LIBOR + .88%, (5.56%), due 12/14/19		3,434,652
USD		1,961,066	Republic of Indonesia Loan Agreement, dated September 29, 1994, 6 mo. LIBOR, (4.63%), due 12/01/19		1,794,376
USD		3,438,334	Republic of Indonesia Loan Agreement, dated September 29, 1994, 6 mo. LIBOR, (4.63%), due 12/01/19		3,146,076
USD		2,811,119	Republic of Indonesia Loan Agreement, dated September 29, 1994, 6 mo. LIBOR, (4.63%), due 12/01/19		2,572,174
EUR		3,986,211	Republic of Indonesia, Indonesia Paris Club Debt, 4.76%, due 6/01/21 *		3,706,530
					29,209,518
			Morocco — 0.2%
USD		6,136,364	Morocco Tranche A Restructuring and Consolidating Agreement 6 mo. LIBOR + .8125%, (5.69%), due 1/01/09		6,136,364
			Russia — 3.9%
USD		12,727,607	Russia Foreign Trade Obligations * (c)		16,864,128
USD		7,489,028	Russia Foreign Trade Obligations * (c)		9,854,812
USD		269,844	Russia Foreign Trade Obligations * (c)		348,670
USD		3,281,440	Russia Foreign Trade Obligations * (c)		4,511,155

See accompanying notes to the financial statements.

14

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Russia — continued
USD		3,006,950	Russia Foreign Trade Obligations * (c)		4,054,162
ATS		1,208,022	Russia Foreign Trade Obligations * (c)		128,618
ATS		964,717	Russia Foreign Trade Obligations * (c)		98,467
ATS		1,733,698	Russia Foreign Trade Obligations * (c)		170,414
ATS		447,177	Russia Foreign Trade Obligations * (c)		53,055
ATS		631,501	Russia Foreign Trade Obligations * (c)		56,852
FRF		3,660,000	Russia Foreign Trade Obligations * (c)		734,987
FRF		3,660,000	Russia Foreign Trade Obligations * (c)		673,824
FRF		3,660,000	Russia Foreign Trade Obligations * (c)		628,192
FRF		3,660,000	Russia Foreign Trade Obligations * (c)		585,150
FRF		3,660,000	Russia Foreign Trade Obligations * (c)		551,936
NLG		495,100	Russia Foreign Trade Obligations * (c)		331,562
USD		15,060,875	Russia Foreign Trade Obligations * (c)		13,954,923
USD		18,580,206	Russia Foreign Trade Obligations * (c)		24,261,024
DEM		2,503,894	Russia Foreign Trade Obligations * (c)		1,454,419
FRF		71,883,000	Russia Foreign Trade Obligations * (c)		16,721,786
CHF		231,420	Russia Foreign Trade Obligations * (c)		169,056
USD		10,840,000	Russia Foreign Trade Obligations * (c)		14,718,520
					110,925,712
			TOTAL LOAN ASSIGNMENTS (COST $155,776,564)		186,956,347
			LOAN PARTICIPATIONS — 6.8%
			Algeria — 0.3%
JPY		112,500,000	Algeria Tranche 3 Loan Agreement (Participation with Salomon Brothers), JPY Long Term Prime +.8125%, (2.3875%), due 03/04/10		967,021
JPY		756,710,526	Algeria Tranche S1 Loan Agreement (Participation with Merrill Lynch), JPY Long Term Prime + .8125%, (2.14875%), due 03/04/10		6,504,488
					7,471,509
			Egypt — 0.1%
CHF		6,576,771	Egypt Paris Club Loan (Participation with Standard Chartered Bank), 0.00%, due 1/03/24 *		3,132,131

See accompanying notes to the financial statements.

15

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value		Description	Value ($)
			Indonesia — 2.1%
USD		28,962,050	Republic of Indonesia Loan Agreement (Participation with Deutsche Bank), 3 mo. LIBOR + 1.25%, (5.99%), due 02/12/13		26,645,086
JPY		1,315,305,185	Republic of Indonesia Loan Agreement (Participation with Deutsche Bank), dated January 1, 1994, 6 mo. JPY LIBOR + .88%, (0.95%), due 3/29/13		11,135,580
USD		22,366,236	Republic of Indonesia Loan Agreement (Participation with Deutsche Bank), dated September 29, 1995, 3 mo. LIBOR + .88%, (5.42%), due 9/29/19		20,129,612
USD		472,320	Republic of Indonesia Loan Agreement (Participation with Salomon Brothers), dated June 14, 1995, 3 mo. LIBOR + .88%, (5.56%), due 12/14/19		422,726
USD		472,320	Republic of Indonesia Loan Agreement (Participation with Salomon Brothers), dated June 14, 1995, 3 mo. LIBOR + .88%, (5.56%), due 12/14/19		422,726
USD		629,760	Republic of Indonesia Loan Agreement (Participation with Salomon Brothers), dated June 14, 1995, 3 mo. LIBOR + 88%, (5.56%), due 12/14/19		563,635
					59,319,365
			Poland — 0.6%
JPY		2,120,000,000	Poland Paris Club Debt (Participation with Deutsche Bank), 2.22%, due 3/31/09		18,314,544
			Russia — 3.7%
USD		10,000,000	Russia Foreign Trade Obligations, (Participation with Banca Lombardi) * (c)		13,539,556
USD		531,297	Russia Foreign Trade Obligations, (Participation with Deutsche Bank) * (c)		766,207
USD		214,371	Russia Foreign Trade Obligations, (Participation with Deutsche Bank) * (c)		275,759
USD		81,965	Russia Foreign Trade Obligations, (Participation with Deutsche Bank) * (c)		110,897
DEM		2,625,598	Russia Foreign Trade Obligations, (Participation with Deutsche Bank) * (c)		1,974,032
DEM		10,399,680	Russia Foreign Trade Obligations, (Participation with Deutsche Bank) * (c)		7,231,890
EUR		2,244,362	Russian Paris Club Debt, (Participation with Deutsche Bank), Variable Rate, 6.28%, due 08/20/20		2,675,505
USD		14,040,695	Russian Paris Club Debt, (Participation with Deutsche Bank), Variable Rate, 6.37%, due 08/20/16		13,727,587
EUR		9,647,573	Russian Paris Club Debt, (Participation with Deutsche Bank), Variable Rate, 6.45%, due 08/20/20		11,500,871
EUR		24,171,956	Russian Paris Club Debt, (Participation with Deutsche Bank), Variable Rate, 6.52%, due 08/20/20		28,815,389
EUR		8,577,706	Russian Paris Club Debt, (Participation with Deutsche Bank), Variable Rate, 6.61%, due 08/20/20		10,225,484

See accompanying notes to the financial statements.

16

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Par Value / Principal Amount		Description	Value ($)
			Russia — continued
USD		965,249	Russian Paris Club Debt, (Participation with Mediocredito), Variable Rate, 6 mo. USD LIBOR + .50%, 5.44%, due 8/20/20		945,944
EUR		2,562,438	Russian Paris Club Debt, (Participation with Mediocredito), Variable Rate, EURIBOR + .50%, 3.22%, due 8/20/20		3,024,135
USD		8,849,042	Russian Paris Club Debt, (Participation with Standard Bank), Variable Rate, 6 mo. USD LIBOR + .05%, 6.37%, due 08/20/16		8,495,081
					103,308,337
			TOTAL LOAN PARTICIPATIONS (COST $163,213,335)		191,545,886
			PROMISSORY NOTES — 0.3%
			Nigeria — 0.3%
USD		27,000,000	Central Bank of Nigeria Promissory Notes, Series RC, 0.00%, due 1/5/2010		7,560,000
			TOTAL PROMISSORY NOTES (COST $13,653,619)		7,560,000
			CALL OPTIONS PURCHASED — 4.4%
			Options on Bonds — 0.2%
USD		10,000,000	Qatar Government International Bond, 9.75%, due 06/15/30, Expires 04/20/06, Strike 157.50		77,005
USD		50,000,000	Republic of Brazil, 11.00%, due 08/17/40, Expires 03/08/06, Strike 130.00		1,395,790
USD		7,500,000	Republic of Turkey, 11.875%, due 01/15/30, Expires 05/02/06 Strike 153.25		373,337
USD		45,000,000	Republic of Turkey, 11.875%, due 1/15/30, Expires 4/19/06, Strike 153.75		2,040,169
USD		25,000,000	Republic of Turkey, 6.875%, due 03/17/36, Expires 03/06/06, Strike 96.25		1,300,985
USD		17,500,000	Republic of Venezuela, 9.375%, due 01/13/34, Expires 03/06/06, Strike 125.40		882,200
USD		12,500,000	Republic of Venezuela, 9.375%, due 01/13/34, Expires 03/08/06, Strike 127.30		399,546
					6,469,032
			Options on Interest Rates
TWD		1,849,200,000	TWD Interest Rate Cap Option, 2.19%, Expires 03/15/10, Strike 2.19		329,805
TWD		1,849,200,000	TWD Interest Rate Floor Option, 2.19%, Expires 03/16/10, Strike 2.19		730,212
					1,060,017

See accompanying notes to the financial statements.

17

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Principal Amount		Description	Value ($)
			Options on Interest Rate Swaps — 0.2%
KRW		72,000,000,000	KRW Swaption, Expires 02/24/09, Strike 6.05		2,718,990
KRW		72,000,000,000	KRW Swaption, Expires 04/08/09, Strike 6.20		495,316
					3,214,306
			Currency Options — 4.0%
USD		30,000,000	Republic of Brazil Real, Expires 04/06/06, Strike 2.985		11,405,430
USD		40,000,000	Republic of Brazil Real, Expires 04/07/06, Strike 2.954		14,636,000
USD		40,000,000	Republic of Brazil Real, Expires 04/20/06, Strike 2.939		14,170,160
USD		110,000,000	Republic of Brazil Real, Expires 04/27/06, Strike 2.8715		35,278,320
USD		60,000,000	Republic of Brazil Real, Expires 05/17/06, Strike 2.822		17,477,580
USD		30,000,000	Republic of Brazil Real, Expires 06/20/06, Strike 2.703		6,844,710
USD		40,000,000	Republic of Brazil Real, Expires 04/25/07, Strike 3.24		14,019,840
					113,832,040
			TOTAL CALL OPTIONS PURCHASED (COST $30,998,439)		124,575,395
			PUT OPTIONS PURCHASED — 0.1%
			Options on Bonds — 0.0%
USD		10,000,000	Qatar Government International Bond, 9.75%, due 06/15/30, Expires 04/20/06, Strike 152.50		129,013
			Options on Interest Rate Swaps — 0.1%
KRW		72,000,000,000	KRW Swaption, Expires 02/24/09, Strike 6.05		550,037
KRW		72,000,000,000	KRW Swaption, Expires 04/08/09, Strike 6.20		3,133,244
					3,683,281
			Currency Options — 0.0%
USD		30,000,000	Republic of Brazil Real, Expires 04/06/06, Strike 2.985		30
USD		30,000,000	Republic of Brazil Real, Expires 06/20/06, Strike 2.703		52,470
USD		40,000,000	Republic of Brazil Real, Expires 04/25/07, Strike 3.24		456,880
					509,380
			TOTAL PUT OPTIONS PURCHASED (COST $10,770,938)		4,321,674

See accompanying notes to the financial statements.

18

GMO Emerging Country Debt Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		MUTUAL FUNDS — 5.4%
	3,846,873	GMO Short-Duration Collateral Fund (f)		98,479,942
	21,409	GMO Special Purpose Holding Fund (f)		176,198
	1,175,193	GMO World Opportunity Overlay Fund (f)		29,650,120
	23,041,261	Merrimac Cash Series, Premium Class		23,041,261
		TOTAL MUTUAL FUNDS (COST $150,558,421)		151,347,521
		RIGHTS AND WARRANTS — 0.7%
		Mexico — 0.2%
	48,000	Mexican Government International Bond Warrants, Expires 10/10/06 **		2,112,000
	33,077,000	United Mexican States Value Recovery Rights, Series D, Expires 6/30/06 **		446,539
	2,942,000	United Mexican States Value Recovery Rights, Series F, Expires 6/30/08 **		70,608
	36,000	United Mexican States Warrants, Series XW20, Expires 9/1/06 **		2,700,000
				5,329,147
		Nigeria — 0.0%
	25,000	Central Bank of Nigeria Warrants, Expires 11/15/20 **		550,000
		Uruguay — 0.0%
	4,000,000	Banco Central Del Uruguay Value Recovery Rights Series VRRB, Expires 1/02/21 **		—
		Venezuela — 0.5%
	164,215	Republic of Venezuela Bond Warrants, Expires 4/18/20 **		5,172,773
	262,360	Republic of Venezuela Recovery Warrants, Expires 4/15/20 **		8,264,340
				13,437,113
		TOTAL RIGHTS AND WARRANTS (COST $2,460,000)		19,316,260
		TOTAL INVESTMENTS — 105.2% (Cost $2,627,932,972)		2,967,566,820
		Other Assets and Liabilities (net) — (5.2%)		(146,798,768	)
		TOTAL NET ASSETS — 100.0%	$	2,820,768,052

See accompanying notes to the financial statements.

19

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

	Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
	4/25/06	EUR		38,000,000	$	45,439,288	$	(54,312	)
Sales
	4/18/06	CHF		8,000,000	$	6,126,610	$	60,552
	4/25/06	EUR		352,500,000		421,509,186		1,100,949
	4/11/06	GBP		50,500,000		88,600,856		1,082,094
	10/25/06	HKD		382,500,000		49,487,657		512,343
	11/01/06	HKD		190,000,000		24,584,776		415,224
	3/07/06	JPY		9,800,000,000		84,715,235		151,252
							$	3,322,414

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Sales
	4,500	Federal Funds 30 day	March 2006	$	1,789,830,675	$	(109,242	)

At February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Reverse repurchase agreements

Face Value		Description	Market Value
USD	70,000,000	Deutsche Bank, 4.31%, dated 12/09/05, to be repurchased on demand at face value plus accrued interest.	$	70,687,206
USD	26,070,056	Chase Manhattan Bank, 4.50%, dated 1/31/06, to be repurchased on demand at face value plus accrued interest.		26,158,043

See accompanying notes to the financial statements.

20

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Reverse repurchase agreements — continued

Face Value		Description	Market Value
USD	38,634,688	Deutsche Bank, 4.60%, dated 2/10/06, to be repurchased on demand at face value plus accrued interest.	$	38,708,737
USD	12,741,458	Deutsche Bank, 4.50%, dated 2/16/06, to be repurchased on demand at face value plus accrued interest.		12,754,200
USD	89,810,625	Chase Manhattan Bank, 4.40%, dated 2/17/06, to be repurchased on demand at face value plus accrued interest.		89,887,463
USD	3,521,600	Chase Manhattan Bank, 3.00%, dated 2/21/06, to be repurchased on demand at face value plus accrued interest.		3,523,361
USD	11,258,590	Lehman Brothers, 4.40%, dated 2/22/06, to be repurchased on demand at face value plus accrued interest.		11,265,470
USD	66,227,000	Lehman Brothers, 4.40%, dated 2/22/06, to be repurchased on demand at face value plus accrued interest.		66,267,472
USD	15,336,000	Lehman Brothers, 4.65%, dated 2/27/06, to be repurchased on demand at face value plus accrued interest.		15,336,000
USD	96,270,000	Lehman Brothers, 1.90%, dated 2/28/06, to be repurchased on demand at face value plus accrued interest.		96,270,000
USD	33,477,082	Chase Manhattan Bank, 4.40%, dated 2/28/06, to be repurchased on demand at face value plus accrued interest.		33,477,082
USD	33,477,083	Chase Manhattan Bank, 4.40%, dated 2/28/06, to be repurchased on demand at face value plus accrued interest.		33,477,083
			$	497,812,117

See accompanying notes to the financial statements.

21

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Average balance outstanding	$	230,466,041
Average interest rate		2.29	%
Maximum balance outstanding	$	496,824,183
Average shares outstanding		235,636,829
Average balance per share outstanding	$	0.98

Average balance outstanding was calculated based on daily balances outstanding during the period that the Fund had entered into reverse repurchase agreements.

Written options

A summary of open written option contracts for the Fund at February 28, 2006, is as follows:

Currency options

Notional Amount		Expiration Date	Description	Market Value
$	40,000,000	4/7/2006	BRL Call/ USD Put Currency Option, Strike 2.592	$	7,968,000
	40,000,000	4/20/2006	BRL Call/ USD Put Currency Option, Strike 2.565		7,329,200
	50,000,000	5/4/2006	USD Put/ BRL Call Currency Option, Strike 2.367		4,729,250
	110,000,000	4/27/2006	USD Put/ BRL Call Currency Option, Strike 2.512		17,318,620
	60,000,000	5/17/2006	USD Put/ BRL Call Currency Option, Strike 2.475		8,259,360
			Total written options (premiums received, $5,344,500)	$	45,604,430

Swap Agreements

Credit Default Swaps

Notional Amount

Expiration Date

Counterparty

Receive (Pay)

Annual Premium

Deliverable On Default

Net Unrealized Appreciation (Depreciation)

15,000,000

USD

4/3/2006

Morgan Guaranty

(Pay)

0.25

%

Banco Santander

Trust Company

Senior Bonds or Loans

$

(8,843

)

15,000,000

USD

4/6/2006

Morgan Guaranty Trust Company

(Pay)

0.26

%

Banco Santander Senior Bonds or Loans

(9,169

)

See accompanying notes to the financial statements.

22

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	30,000,000	USD	4/10/2006	Morgan Guaranty	(Pay)		0.28	%	Banco Santander
				Trust Company					Senior Bonds or Loans	$	(19,331	)
	10,000,000	USD	4/10/2006	Morgan Guaranty Trust Company	(Pay)		0.26	%	Banco Santander Senior Bonds or Loans		(6,142	)
	25,000,000	USD	5/1/2006	Morgan Guaranty Trust Company	(Pay)		0.27	%	Banco Bilbao Vizcaya Senior Bonds and Notes		(15,582	)
	15,000,000	USD	6/8/2006	JP Morgan Chase Bank	Receive		2.95	%	United Mexican States		213,663
	35,000,000	USD	7/5/2006	Deutsche Bank AG	Receive		5.00	%	Gazprom Loan Facility		825,141
	35,000,000	USD	7/5/2006	UBS AG	(Pay)		3.40	%	Gazprom Loan Facility		(548,517	)
	20,000,000	USD	8/9/2006	JP Morgan Chase Bank	(Pay)		0.42	%	Banco Bilbao Vizcaya Argentaria SA		(38,786	)
	15,000,000	USD	8/21/2006	Deutsche Bank AG	Receive		5.45	%	Gazprom Loan Facility		377,931
	5,000,000	USD	9/27/2006	Merrill Lynch	Receive		5.70	%	Dominican Republic		238,620
	25,000,000	USD	10/19/2006	Deutsche Bank AG	(Pay)		2.10	%	Government of Ukraine		(386,096	)
	15,000,000	USD	11/20/2006	Deutsche Bank AG	(Pay)		4.55	%	Republic of Brazil		(651,960	)
	10,000,000	USD	11/20/2006	Deutsche Bank AG	(Pay)		4.40	%	Republic of Brazil		(419,842	)
	30,000,000	USD	12/7/2006	Deutsche Bank AG	(Pay)		1.60	%	Gazprom Loan Facility		(399,421	)
	8,000,000	USD	12/20/2006	JP Morgan Chase Bank	Receive		3.00	%	Kingdom of Swaziland		(13,960	)
	5,000,000	USD	12/20/2006	JP Morgan Chase Bank	Receive		3.00	%	Kingdom of Swaziland		(8,725	)
	20,000,000	USD	12/20/2006	JP Morgan Chase Bank	(Pay)		4.75	%	Republic of Brazil		(904,060	)
	40,000,000	USD	1/20/2007	JP Morgan Chase Bank	(Pay)		0.45	%	Republic of Turkey		(107,886	)
	10,000,000	USD	2/18/2007	JP Morgan Chase Bank	(Pay)		4.60	%	Russia Federation		(428,717	)
	45,000,000	USD	2/20/2007	Deutsche Bank AG	(Pay)		1.50	%	Republic of Ecuador		(284,657	)
	10,000,000	USD	2/20/2007	JP Morgan Chase Bank	(Pay)		1.25	%	Republic of Ecuador		(7,648	)
	10,000,000	USD	2/26/2007	Citigroup	(Pay)		2.15	%	Republic of South Africa		(198,055	)
	5,000,000	USD	3/20/2007	JP Morgan Chase Bank	(Pay)		1.70	%	Republic of Philippines		(77,425	)

See accompanying notes to the financial statements.

23

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	10,000,000	USD	6/27/2007	JP Morgan	(Pay)		0.33	%	Banco Bilbao
				Chase Bank					Vizcaya Argentaria SA	$	(43,053	)
	3,000,000	USD	7/2/2007	Deutsche Bank AG	(Pay)		0.64	%	Bank of China Bonds or Loans		(24,475	)
	10,000,000	USD	7/2/2007	Citibank N.A.	(Pay)		0.64	%	Bank of China Bonds or Loans		(80,997	)
	15,000,000	USD	8/20/2007	Morgan Stanley	(Pay)		0.87	%	Government of Ukraine		47,699
	15,000,000	USD	9/27/2007	JP Morgan Chase Bank	(Pay)		0.33	%	HSBC Bank Plc		(90,197	)
	10,000,000	USD	10/10/2007	JP Morgan Chase Bank	(Pay)		0.70	%	Banco Bilbao Vizcaya Argentaria SA		(111,445	)
	8,000,000	USD	10/19/2007	Deutsche Bank AG	(Pay)		15.00	%	Republic of Venezuela		(2,270,635	)
	5,000,000	USD	10/22/2007	JP Morgan Chase Bank	(Pay)		0.54	%	Banco Bilbao Vizcaya Argentaria SA		(41,889	)
	5,000,000	USD	10/23/2007	JP Morgan Chase Bank	(Pay)		0.48	%	Banco Bilbao Vizcaya Argentaria SA		(36,868	)
	5,000,000	USD	10/30/2007	Deutsche Bank AG	(Pay)		0.44	%	Banco Bilbao Vizcaya Argentaria SA		(33,380	)
	10,000,000	USD	11/4/2007	Deutsche Bank AG	Receive		1.68	%	Aries Russia Paris Club		344,579
	10,000,000	USD	11/4/2007	Deutsche Bank AG	(Pay)		1.21	%	Russian Federation		(197,439	)
	10,000,000	USD	11/23/2007	Deutsche Bank AG	(Pay)		1.15	%	Endesa SA Spain		(206,460	)
	15,000,000	USD	11/27/2007	JP Morgan Chase Bank	(Pay)		1.10	%	Endesa SA Spain		(294,524	)
	30,000,000	USD	12/23/2007	Deutsche Bank AG	(Pay)		2.35	%	Gazprom Loan Facility		(1,106,421	)
	15,000,000	USD	2/20/2008	JP Morgan Chase Bank	(Pay)		1.70	%	Republic of Ecuador		(1,479	)
	50,000,000	USD	5/4/2008	Deutsche Bank AG	(Pay)		1.80	%	Government of Ukraine		(815,287	)
	5,000,000	USD	5/7/2008	JP Morgan Chase Bank	Receive		9.65	%	Republic of Brazil		1,095,217
	5,000,000	USD	5/30/2008	JP Morgan Chase Bank	Receive		8.65	%	Republic of Turkey		960,654
	5,000,000	USD	8/6/2008	Bear Stearns International Limited	Receive		1.10	%	Republic of Trinidad and Tobago		96,823
	2,000,000	USD	9/20/2008	UBS AG	Receive		9.20	%	Dominican Republic		437,383

See accompanying notes to the financial statements.

24

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	10,000,000	USD	9/20/2008	Morgan Stanley	Receive		5.15	%	Republic of Colombia
				Capital Services, Inc.						$	1,332,226
	4,000,000	USD	10/20/2008	Deutsche Bank AG	Receive		8.50	%	Republic of Uruguay		789,357
	18,000,000	USD	11/20/2008	Deutsche Bank AG	Receive		1.50	%	Credit of Uttam Galva		53,431
	10,000,000	USD	11/20/2008	Deutsche Bank AG	Receive		5.70	%	Republic of Brazil		1,445,679
	9,000,000	USD	11/20/2008	Deutsche Bank AG	Receive		4.77	%	Republic of Colombia		1,075,825
	14,000,000	USD	12/20/2008	Deutsche Bank AG	(Pay)		0.79	%	Korean Deposit Insurance Corporation		(282,991	)
	5,000,000	USD	3/20/2009	JP Morgan Chase Bank	Receive		2.85	%	Republic of Peru		357,206
	10,000,000	USD	3/20/2009	JP Morgan Chase Bank	Receive		4.30	%	Republic of Philippines		966,521
	10,000,000	USD	4/17/2009	Deutsche Bank AG	Receive		3.90	%	Gazprom Loan Facility		1,072,409
	5,000,000	USD	5/20/2009	JP Morgan Chase Bank	Receive		4.40	%	Gazprom Loan Facility		607,493
	25,000,000	USD	5/21/2009	UBS AG	Receive		4.50	%	Gazprom Loan Facility		3,119,682
	25,000,000	USD	6/20/2009	JP Morgan Chase Bank	Receive		8.01	%	Republic of Brazil		5,860,043
	7,000,000	USD	8/5/2009	Deutsche Bank AG	Receive		4.85	%	Government of Ukraine		734,011
	10,000,000	USD	11/20/2009	JP Morgan Chase Bank	(Pay)		0.90	%	United Mexican States		(195,517	)
	10,000,000	USD	11/20/2009	JP Morgan Chase Bank	(Pay)		0.88	%	United Mexican States		(188,221	)
	25,000,000	USD	12/29/2009	Deutsche Bank AG	Receive		2.25	%	Videocon Loan Facility		266,415
	7,000,000	USD	2/5/2010	Deutsche Bank AG	Receive		4.85	%	Government of Ukraine		792,038
	20,000,000	USD	2/20/2010	JP Morgan Chase Bank	Receive		3.70	%	Republic of Brazil		1,989,594
	10,000,000	USD	2/20/2010	JP Morgan Chase Bank	Receive		3.57	%	Republic of Brazil		948,477
	12,000,000	USD	2/20/2010	Morgan Stanley Capital Services, Inc.	Receive		3.63	%	Republic of Brazil		1,163,827
	10,000,000	USD	2/20/2010	UBS AG	Receive		3.62	%	Republic of Brazil		966,292
	12,000,000	USD	3/5/2010	Deutsche Bank AG	Receive		9.10	%	Republic of Turkey		3,978,736

See accompanying notes to the financial statements.

25

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	18,000,000	USD	3/20/2010	Morgan Stanley	Receive		0.75	%	United Mexican States
				Capital Services, Inc.						$	277,239
	3,000,000	USD	3/29/2010	JP Morgan Chase Bank	Receive		4.70	%	Arab Republic of Egypt		533,462
	85,000,000	USD	6/20/2010	Deutsche Bank AG	(Pay)		2.10	%	Reference security within CDX Index		(4,639,583	)
	36,000,000	USD	6/20/2010	Lehman Brothers	(Pay)		2.10	%	Reference security within CDX Index		(1,965,000	)
	12,000,000	USD	6/20/2010	JP Morgan Chase Bank	(Pay)		4.00	%	Republic of Argentina		(940,666	)
	12,000,000	USD	6/20/2010	JP Morgan Chase Bank	(Pay)		3.87	%	Republic of Argentina		(879,939	)
	10,000,000	USD	7/20/2010	Deutsche Bank AG	(Pay)		3.77	%	Republic of Argentina		(655,927	)
	6,000,000	USD	7/20/2010	Deutsche Bank AG	(Pay)		3.80	%	Republic of Argentina		(400,510	)
	5,000,000	USD	7/23/2010	Deutsche Bank AG	Receive		4.56	%	Government of Ukraine		554,077
	7,000,000	USD	8/5/2010	Deutsche Bank AG	Receive		4.90	%	Government of Ukraine		859,048
	3,000,000	USD	8/25/2010	Deutsche Bank AG	Receive		3.40	%	Deutsche Bank Loan to Ukrtelekom		(8,655	)
	5,000,000	USD	10/25/2010	Deutsche Bank AG	Receive		4.60	%	Government of Ukraine		635,899
	10,000,000	USD	12/20/2010	JP Morgan Chase Bank	(Pay)		3.57	%	Republic of Argentina		(590,235	)
	5,000,000	USD	12/20/2010	JP Morgan Chase Bank	(Pay)		3.43	%	Republic of Argentina		(264,204	)
	5,000,000	USD	1/25/2011	Deutsche Bank AG	Receive		4.63	%	Government of Ukraine		599,231
	7,000,000	USD	2/7/2011	Deutsche Bank AG	Receive		4.95	%	Government of Ukraine		925,378
	5,000,000	USD	2/20/2011	Morgan Stanley Capital Services, Inc.	(Pay)		2.80	%	Republic of Argentina		(91,211	)
	3,000,000	USD	2/25/2011	Deutsche Bank AG	Receive		3.50	%	Deutsche Bank Loan to Ukrtelekom		(10,197	)
	8,000,000	USD	3/20/2011	Citigroup	(Pay)		3.70	%	Republic of Iraq		(11,079	)
	8,000,000	USD	3/20/2011	UBS AG	(Pay)		3.55	%	Republic of Iraq		65,430
	5,000,000	USD	4/26/2011	Deutsche Bank AG	Receive		4.66	%	Government of Ukraine		678,674
	9,000,000	USD	7/17/2011	UBS AG	Receive		5.05	%	Government of Ukraine		1,307,273
	5,000,000	USD	7/25/2011	Deutsche Bank AG	Receive		4.68	%	Government of Ukraine		637,252

See accompanying notes to the financial statements.

26

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	7,000,000	USD	8/5/2011	Deutsche Bank AG	Receive		5.00	%	Government of Ukraine	$	985,939
	3,000,000	USD	8/25/2011	Deutsche Bank AG	Receive		3.60	%	Deutsche Bank Loan to Ukrtelekom		(3,506	)
	15,000,000	USD	10/17/2011	Deutsche Bank AG	Receive		3.55	%	Gazprom Loan Facility		2,010,532
	5,000,000	USD	10/25/2011	Deutsche Bank AG	Receive		4.70	%	Government of Ukraine		714,664
	19,000,000	USD	10/30/2011	Deutsche Bank AG	Receive		4.00	%	Naftofaz Ukraine		697,015
	9,895,840	USD	12/20/2011	Deutsche Bank AG	Receive		1.60	%	Stemcor UK Ltd.		173,741
	3,000,000	USD	2/25/2012	Deutsche Bank AG	Receive		3.68	%	Deutsche Bank Loan to Ukrtelekom		1,294
	19,000,000	USD	5/5/2012	Deutsche Bank AG	Receive		4.00	%	Naftofaz Ukraine		639,118
	10,000,000	USD	6/20/2012	Morgan Stanley Capital Services, Inc.	Receive		2.10	%	Republic of Panama		509,161
	5,000,000	USD	7/30/2012	JP Morgan Chase Bank	Receive		3.05	%	Republic of Chile		792,769
	3,000,000	USD	8/28/2012	Deutsche Bank AG	Receive		3.75	%	Deutsche Bank Loan to Ukrtelekom		5,080
	10,000,000	USD	10/4/2012	JP Morgan Chase Bank	Receive		2.95	%	Republic of Chile		1,661,435
	5,000,000	USD	11/5/2012	Deutsche Bank AG	Receive		6.50	%	Republic of Jamaica		253,856
	10,000,000	USD	1/8/2013	Deutsche Bank AG	Receive		7.15	%	Republic of Colombia		3,365,754
	10,000,000	USD	1/9/2013	Deutsche Bank AG	Receive		8.25	%	Republic of Turkey		3,804,956
	7,000,000	USD	1/10/2013	JP Morgan Chase Bank	Receive		7.50	%	Republic of Colombia		2,496,454
	10,000,000	USD	2/7/2013	JP Morgan Chase Bank	Receive		8.30	%	Republic of Colombia		3,989,133
	15,000,000	USD	2/11/2013	JP Morgan Chase Bank	Receive		3.05	%	United Mexican States		2,087,912
	10,000,000	USD	6/6/2013	Deutsche Bank AG	Receive		9.40	%	Republic of Brazil		4,767,880
	20,000,000	USD	6/12/2013	Deutsche Bank AG	Receive		9.08	%	Republic of Brazil		9,134,928
	130,000,000	USD	10/20/2013	Deutsche Bank AG	Receive		3.30	%	Republic of Brazil		15,546,969
	80,000,000	USD	10/20/2013	Deutsche Bank AG	Receive		4.05	%	Republic of Brazil		13,183,450
	15,000,000,000	JPY	10/20/2013	Deutsche Bank AG	(Pay)		3.20	%	Republic of Brazil		(17,733,585	)
	9,000,000,000	JPY	10/20/2013	Deutsche Bank AG	(Pay)		3.95	%	Republic of Brazil		(14,704,587	)

See accompanying notes to the financial statements.

27

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	10,000,000	USD	12/20/2013	Deutsche Bank AG	Receive		10.50	%	Republic of Ecuador	$	2,864,432
	10,000,000	USD	12/24/2013	JP Morgan Chase Bank	Receive		3.80	%	Republic of Turkey		1,367,033
	10,000,000	USD	1/20/2014	Deutsche Bank AG	Receive		4.28	%	Republic of Brazil		1,705,538
	10,000,000	USD	1/20/2014	Citibank N.A.	Receive		4.94	%	Republic of Colombia		2,235,728
	10,000,000	USD	1/20/2014	Deutsche Bank AG	Receive		1.77	%	United Mexican States		697,380
	15,000,000	USD	3/20/2014	JP Morgan Chase Bank	Receive		4.30	%	Republic of Brazil		2,814,201
	5,000,000	USD	3/20/2014	JP Morgan Chase Bank	Receive		4.32	%	Republic of Brazil		944,691
	5,000,000	USD	3/20/2014	JP Morgan Chase Bank	Receive		4.90	%	Republic of Colombia		1,199,587
	20,000,000	USD	4/20/2014	Goldman Sachs	Receive		1.59	%	United Mexican States		1,254,980
	20,000,000	USD	4/20/2014	Lehman Brothers	Receive		1.58	%	United Mexican States		1,241,301
	10,000,000	USD	5/14/2014	Deutsche Bank AG	Receive		6.64	%	Republic of Turkey		3,278,333
	5,000,000	USD	5/19/2014	Deutsche Bank AG	Receive		6.42	%	Republic of Turkey		1,562,464
	7,000,000	USD	5/20/2014	JP Morgan Chase Bank	Receive		6.25	%	Republic of Turkey		2,110,379
	5,000,000	USD	5/20/2014	Deutsche Bank AG	Receive		2.03	%	United Mexican States		457,119
	10,000,000	USD	5/20/2014	JP Morgan Chase Bank	Receive		2.10	%	United Mexican States		961,836
	10,000,000	USD	5/20/2014	JP Morgan Chase Bank	Receive		2.10	%	United Mexican States		961,836
	10,000,000	USD	5/20/2014	UBS AG	Receive		2.10	%	United Mexican States		961,836
	15,000,000	USD	6/7/2014	Deutsche Bank AG	Receive		3.10	%	Gazprom Loan Facility		1,914,671
	10,000,000	USD	6/16/2014	Deutsche Bank AG	Receive		6.22	%	Republic of Turkey		2,964,097
	10,000,000	USD	6/20/2014	JP Morgan Chase Bank	Receive		2.10	%	United Mexican States		949,266
	10,000,000	USD	6/20/2014	JP Morgan Chase Bank	Receive		2.10	%	United Mexican States		949,266
	10,000,000	USD	6/20/2014	JP Morgan Chase Bank	Receive		2.15	%	United Mexican States		983,114
	10,000,000	USD	7/20/2014	JP Morgan Chase Bank	Receive		2.00	%	United Mexican States		868,108

See accompanying notes to the financial statements.

28

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Credit Default Swaps — continued
Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Annual Premium			Deliverable On Default	Net Unrealized Appreciation (Depreciation)
	35,000,000	USD	7/20/2014	JP Morgan	Receive		2.01	%	United Mexican States
				Chase Bank						$	3,061,942
	2,000,000	USD	8/24/2014	Deutsche Bank AG	(Pay)		4.25	%	Lebanese Republic		(209,596	)
	15,000,000	USD	12/7/2014	Deutsche Bank AG	Receive		3.10	%	Gazprom Loan Facility		1,967,567
	50,000,000	USD	12/23/2014	Deutsche Bank AG	Receive		3.35	%	Gazprom Loan Facility		7,366,278
	600,000,000	EUR	3/20/2015	Deutsche Bank AG	(Pay)		3.72	%	Bolivarian Republic of Venezuela		(113,635,776	)
	800,000,000	USD	3/20/2015	Deutsche Bank AG	Receive		3.80	%	Bolivarian Republic of Venezuela		119,373,655
	412,500,000	USD	4/20/2015	Deutsche Bank AG	Receive		4.40	%	Bolivarian Republic of Venezuela		76,927,322
	300,000,000	EUR	4/20/2015	Deutsche Bank AG	(Pay)		4.32	%	Bolivarian Republic of Venezuela		(71,567,358	)
	10,000,000	USD	4/20/2015	JP Morgan Chase Bank	Receive		4.65	%	Republic of Colombia		2,316,881
	15,000,000	USD	5/20/2015	Deutsche Bank AG	Receive		3.85	%	Republic of Turkey		2,233,786
	25,000,000	USD	11/20/2015	Deutsche Bank AG	Receive		3.83	%	Republic of Brazil		3,979,518
	25,000,000	USD	11/20/2015	Citigroup	Receive		1.81	%	Republic of Colombia		1,410,841
	15,000,000	USD	2/20/2016	Citigroup	(Pay)		2.16	%	Republic of Colombia		(635,918	)
	25,000,000	USD	2/20/2016	Citigroup	Receive		1.46	%	Republic of Colombia		708,462
	10,000,000	USD	10/7/2017	JP Morgan Chase Bank	Receive		4.20	%	United Mexican States		2,981,373
	20,000,000	USD	3/20/2019	JP Morgan Chase Bank	Receive		1.90	%	United Mexican States		2,064,430
	30,000,000	USD	8/15/2031	Goldman Sachs	(Pay)		1.84	%	United Mexican States		(3,441,550	)
	20,000,000	USD	8/15/2031	Goldman Sachs	(Pay)		1.89	%	United Mexican States		(2,419,630	)
										$	120,326,414

Interest Rate Swaps

Notional Amount

Expiration Date

Counterparty

Receive (Pay)

Fixed Rate

Variable Rate

Net Unrealized Appreciation (Depreciation)

6,000,000,000

JPY

3/10/2008

Deutsche Bank AG

(Pay)

0.29

%

6 month

Japanese LIBOR

$

340,779

See accompanying notes to the financial statements.

29

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Interest Rate Swaps — continued

Notional Amount			Expiration Date	Counterparty	Receive (Pay)	Fixed Rate			Variable Rate	Net Unrealized Appreciation (Depreciation)
	6,000,000,000	JPY	5/29/2008	Deutsche Bank AG	(Pay)		0.22	%	6 month
									Japanese LIBOR	$	357,866
	6,000,000,000	JPY	6/11/2008	JP Morgan Chase Bank	(Pay)		0.19	%	6 month Japanese LIBOR		580,526
	6,000,000,000	JPY	6/12/2008	Deutsche Bank AG	(Pay)		0.19	%	6 month Japanese LIBOR		588,092
	1,983,674	USD	12/1/2008	Citigroup	(Pay)		7.10	%	6 month LIBOR		(100,473	)
	3,438,368	USD	12/1/2011	Citigroup	(Pay)		6.32	%	6 month LIBOR		(210,101	)
	36,000,000,000	KRW	3/16/2014	Deutsche Bank AG	(Pay)		4.80	%	Korean bond rate for 91 day certificates of deposit		336,488
	36,000,000,000	KRW	3/16/2014	Deutsche Bank AG	(Pay)		5.03	%	Korean bond rate for 91 day certificates of deposit		659,434
	20,000,000	USD	10/3/2015	JP Morgan Chase Bank	Receive		4.64	%	3 month LIBOR		(668,297	)
	25,000,000	USD	12/2/2023	JP Morgan Chase Bank	Receive		5.34	%	3 month LIBOR		667,184
										$	2,551,498

Total Return Swaps

Notional Amount			Expiration Date		Counterparty	Pay		Receive	Net Unrealized Appreciation (Depreciation)
	223,800,000	RUB		12/5/2007	JP Morgan Chase Bank		3 month	Return on
							LIBOR +0.25%	Russian Railways	$	202,048

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ACES - Aerolineas Centrales de Colombia

AMBAC - Insured as to the payment of principal and interest by AMBAC Assurance Corporation.

BPI - Indemnification payment bonds

CBO - Collateralized Bond Obligation

See accompanying notes to the financial statements.

30

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

DCB - Debt Conversion Bond

EMTN - Euromarket Medium Term Note

EURIBOR - Euro Interbank Offered Rate

FLIRB - Front Loaded Interest Reduction Bond

GDP - Gross Domestic Product

GMTN - Global Medium Term Note

LIBOR - London Interbank Offered Rate

MYDFA - Multi-Year Deposit Facility Agreement

PDI - Past Due Interest

PIK - Payment In Kind

VRRB - Variable Rate Reduction Bond

*  Non-performing. Borrower not currently paying interest.

* *  Non-income producing security.

(a)  Security is in default.

(b)  All or a portion of this security has been segregated to cover collateral requirements on reverse repurchase agreements (Note 2).

(c)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(d)  Indexed security in which price and/or coupon is linked to the prices of a specific instrument or financial statistic (Note 2).

(e)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(f)  Affiliated issuer (Note 8).

Variable and step up rates - The rates shown on variable and step up rate notes are the current interest rates at February 28, 2006, which are subject to change based on the terms of the security, including varying reset dates.

Currency Abbreviations:

ARS - Argentine Peso	JPY - Japanese Yen
ATS - Austrian Schilling	KRW - Korean Won
CHF - Swiss Franc	MYR - Malaysian Ringgit
DEM - German Mark	NLG - Netherlands Guilder
EUR - Euro	TWD - Taiwan Dollar
FRF - French Franc	USD - United States Dollar
GBP - British Pound	ZAR - South African Rand
ITL - Italian Lira

See accompanying notes to the financial statements.

31

GMO Emerging Country Debt Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $2,500,415,812) (Note 2)	$	2,839,248,808
Investments in affiliated issuers, at value (cost $127,517,160) (Notes 2 and 8)		128,318,012
Foreign currency, at value (cost $453,810) (Note 2)		432,861
Receivable for investments sold		404,860,599
Receivable for Fund shares sold		150,038
Interest receivable		39,352,625
Unrealized appreciation on open forward currency contracts (Note 2)		3,322,414
Receivable for open swap contracts (Note 2)		369,423,643
Receivable for closed swap contracts (Note 2)		5,409,373
Receivable for option premiums		1,843,500
Total assets		3,792,361,873
Liabilities:
Payable for investments purchased		178,663,750
Payable for Fund shares repurchased		516,268
Written options outstanding, at value (premiums $5,344,500) (Note 2)		45,604,430
Payable to affiliate for (Note 3):
Management fee		749,555
Shareholder service fee		254,777
Trustees and Chief Compliance Officer fees		3,505
Unrealized depreciation on open forward currency contracts (Note 2)		54,312
Payable for open swap contracts (Note 2)		246,343,683
Payable for closed swap contracts (Note 2)		971,134
Payable for variation margin on open futures contracts (Note 2)		109,242
Payable for reverse repurchase agreements (Note 2)		497,812,117
Accrued expenses		511,048
Total liabilities		971,593,821
Net assets	$	2,820,768,052

See accompanying notes to the financial statements.

32

GMO Emerging Country Debt Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006 — (Continued)

Net assets consist of:
Paid-in capital	$	2,381,733,152
Distributions in excess of net investment income		(51,321,688	)
Accumulated net realized gain		71,439,459
Net unrealized appreciation		418,917,129
	$	2,820,768,052
Net assets attributable to:
Class III shares	$	1,020,976,146
Class IV shares	$	1,799,791,906
Shares outstanding:
Class III		90,323,171
Class IV		159,207,055
Net asset value per share:
Class III	$	11.30
Class IV	$	11.30

See accompanying notes to the financial statements.

33

GMO Emerging Country Debt Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest	$	224,377,329
Dividends		1,451,764
Dividends from affiliated issuers (Note 8)		2,565,653
Total investment income		228,394,746
Expenses:
Management fee (Note 3)		9,396,929
Shareholder service fee – Class III (Note 3)		1,631,227
Shareholder service fee – Class IV (Note 3)		1,597,352
Custodian and fund accounting agent fees		1,413,104
Audit and tax fees		120,449
Legal fees		251,820
Trustees fees and related expenses (Note 3)		74,660
Registration fees		33,336
Interest expense (Note 2)		5,823,624
Miscellaneous		48,131
Total expenses		20,390,632
Net investment income (loss)		208,004,114
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		96,077,973
Investments in affiliated issuers		1,052,526
Realized gains distributions from affiliated issuers (Note 8)		185,975
Closed futures contracts		(13,666	)
Closed swap contracts		65,169,364
Written options		1,990,250
Foreign currency, forward contracts and foreign currency related transactions		53,378,078
Net realized gain (loss)		217,840,500
Change in net unrealized appreciation (depreciation) on:
Investments		59,109,815
Open futures contracts		(107,028	)
Open swap contracts		28,652,429
Written options		(40,259,930	)
Foreign currency, forward contracts and foreign currency related transactions		8,051,656
Net unrealized gain (loss)		55,446,942
Net realized and unrealized gain (loss)		273,287,442
Net increase (decrease) in net assets resulting from operations	$	481,291,556

See accompanying notes to the financial statements.

34

GMO Emerging Country Debt Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	208,004,114		$	199,238,722
Net realized gain (loss)		217,840,500			106,376,098
Change in net unrealized appreciation (depreciation)		55,446,942			158,824,769
Net increase (decrease) in net assets from operations		481,291,556			464,439,589
Distributions to shareholders from:
Net investment income
Class III		(109,362,466	)		(101,367,334	)
Class IV		(171,688,730	)		(152,736,370	)
Total distributions from net investment income		(281,051,196	)		(254,103,704	)
Net realized gains
Class III		(50,025,113	)		(25,122,881	)
Class IV		(74,287,587	)		(37,649,329	)
Total distributions from net realized gains		(124,312,700	)		(62,772,210	)
		(405,363,896	)		(316,875,914	)
Net share transactions (Note 7):
Class III		(100,779,282	)		104,134,829
Class IV		205,303,225			220,470,474
Increase (decrease) in net assets resulting from net share transactions		104,523,943			324,605,303
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		839,203			1,308,564
Class IV		466,801			1,294,427
Increase in net assets resulting from net purchase premiums and redemption fees		1,306,004			2,602,991
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		105,829,947			327,208,294
Total increase (decrease) in net assets		181,757,607			474,771,969
Net assets:
Beginning of period		2,639,010,445			2,164,238,476
End of period (including distributions in excess of net investment income of $51,321,688 and $43,698,393, respectively)	$	2,820,768,052		$	2,639,010,445

See accompanying notes to the financial statements.

35

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	11.09		$	10.51		$	9.51		$	9.30		$	8.96
Income (loss) from investment operations:
Net investment income (loss)†		0.88			0.89			1.01			0.90			0.97
Net realized and unrealized gain (loss)		1.14			1.16			1.81			0.49			0.56
Total from investment operations		2.02			2.05			2.82			1.39			1.53
Less distributions to shareholders:
From net investment income		(1.26	)		(1.18	)		(1.06	)		(0.99	)		(1.19	)
From net realized gains		(0.55	)		(0.29	)		(0.76	)		(0.19	)		—
Total distributions		(1.81	)		(1.47	)		(1.82	)		(1.18	)		(1.19	)
Net asset value, end of period	$	11.30		$	11.09		$	10.51		$	9.51		$	9.30
Total Return(a)		19.50	%		20.58	%		30.46	%		15.94	%(b)		18.53	%(b)
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,020,976		$	1,088,609		$	925,517		$	822,080		$	570,459
Net operating expenses to average daily net assets(c)		0.57	%		0.57	%		0.57	%		0.57	%		0.57	%
Interest expense to average daily net assets(d)		0.22	%		0.08	%		0.08	%		0.08	%		0.14	%
Total net expenses to average daily net assets		0.79	%		0.65	%		0.65	%		0.65	%		0.71	%
Net investment income to average daily net assets		7.75	%		8.22	%		9.44	%		9.78	%		10.78	%
Portfolio turnover rate		144	%		121	%		119	%		121	%		130	%
Fees and expenses reimbursed by the Manager to average daily net assets:		—	(e)		—	(e)		—	(e)		0.01	%(e)		0.02	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.01		$	0.01		$	0.03		$	0.01			—	(f)

(a)  Calculation excludes purchase premiums and redemption fees which are borne by shareholders.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the period shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(d)  Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expenses. Income earned on investing proceeds from reverse repurchase agreements is included in interest income.

(e)  Effective June 30, 2002, the Fund ceased reimbursing any Fund fees or expenses (See Note 3).

(f)  Purchase and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

36

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	11.09		$	10.51		$	9.52		$	9.29		$	8.95
Income (loss) from investment operations:
Net investment income (loss)†		0.88			0.90			1.06			0.91			0.98
Net realized and unrealized gain (loss)		1.15			1.16			1.75			0.50			0.55
Total from investment operations		2.03			2.06			2.81			1.41			1.53
Less distributions to shareholders:
From net investment income		(1.27	)		(1.19	)		(1.06	)		(0.99	)		(1.19	)
From net realized gains		(0.55	)		(0.29	)		(0.76	)		(0.19	)		—
Total distributions		(1.82	)		(1.48	)		(1.82	)		(1.18	)		(1.19	)
Net asset value, end of period	$	11.30		$	11.09		$	10.51		$	9.52		$	9.29
Total Return(a)		19.57	%		20.64	%		30.38	%		16.25	%(b)		18.60	%(b)
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,799,792		$	1,550,402		$	1,238,209		$	616,174		$	489,615
Net operating expenses to average daily net assets(c)		0.52	%		0.52	%		0.52	%		0.52	%		0.52	%
Interest expense to average daily net assets(d)		0.22	%		0.08	%		0.08	%		0.08	%		0.14	%
Total net expenses to average daily net assets		0.74	%		0.60	%		0.60	%		0.60	%		0.66	%
Net investment income to average daily net assets		7.75	%		8.29	%		9.95	%		9.89	%		10.83	%
Portfolio turnover rate		144	%		121	%		119	%		121	%		130	%
Fees and expenses reimbursed by the Manager to average daily net assets:		—	(e)		—	(e)		—	(e)		0.01	%(e)		0.02	%
Purchase premiums and redemption fees consisted of the following per share amounts:†		—	(f)	$	0.01		$	0.04		$	0.01			—	(f)

(a)  Calculation excludes purchase premiums and redemption fees which are borne by shareholders.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses exclude expenses incurred indirectly through invesment in underlying fund(s) (See Note 3).

(d)  Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expenses. Income earned on investing proceeds from reverse repurchase agreements is included in interest income.

(e)  Effective June 30, 2002, the Fund ceased reimbursing any Fund fees or expenses (See Note 3).

(f)  Purchase and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

37

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Emerging Country Debt Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investment primarily in sovereign debt of developing countries in Asia, Latin America, the Middle East, Africa and Eastern Europe. The Fund's benchmark is the J.P. Morgan Emerging Markets Bond Index Global (EMBIG).

Throughout the year ended February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class IV. The principal economic difference between the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the classes of shares is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Fund's prospectus.

The financial statements of other fund(s) of the Trust in which the Fund invests ("underlying fund(s)") should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect). Shares of GMO Short-Duration Collateral Fund, GMO Special Purpose Holding Fund and GMO World Opportunity Overlay Fund are not publicly available for direct purchase.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations

38

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security, and at its discretion, may override a price supplied by a source (by taking a price supplied by another source).

Certain investments in securities held by the Fund, or underlying fund(s) in which it invests, are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market maker may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or underlying fund(s). As of February 28, 2006, the total value of these securities represented 25.3% of net assets.

GMO Special Purpose Holding Fund ("SPHF"), a holding of the Fund, has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $133,529 indirectly in conjunction with the settlement. In April of 2006, SPHF entered into an additional settlement agreement with another defendant and the Fund indirectly received $743,312 in conjunction with that settlement. Those settlement proceeds received in April of 2006 are not reflected in the net asset value of the Fund as of February 28, 2006. The outcome of the lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net assets of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and

39

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

40

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. See the Schedule of Investments for open written options contracts entered into by the Fund as of February 28, 2006.

For the year ended February 28, 2006, the Fund's investment activity in written option contracts was as follows:

	Puts						Calls
	Principal Amount of Contracts			Premiums			Principal Amount of Contracts			Premiums
Outstanding, beginning of period	$	—		$	—		$	—		$	—
Options written		480,000,000			6,943,750			130,000,000			1,187,250
Options exercised		(60,000,000	)		(540,000	)		(38,000,000	)		(256,250	)
Options expired		(120,000,000	)		(1,059,250	)		(92,000,000	)		(931,000	)
Options sold		—			—			—			—
Outstanding, end of period	$	300,000,000		$	5,344,500		$	—		$	—

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss.

41

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The risk associated with purchasing put and call options is limited to the premium paid. See the Schedule of Investments for open purchased option contracts entered into by the Fund as of February 28, 2006.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Loan agreements

The Fund may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. The Fund's investments in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the "lender") that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan agreement and only upon receipt by the lender of payments from the borrower. The Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When the Fund purchases assignments from lenders it acquires direct rights against the borrower on the loan. See the Schedule of Investments for open loan agreements entered into by the Fund as of February 28, 2006.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into interest rate, total return, forward swap spread lock and credit default swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. Total return swap agreements involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Forward swap spread lock swap agreements involve commitments to pay or receive a settlement amount calculated as the

42

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

difference between the swap spread and a fixed spread, multiplied by the notional amount times the duration of the swap rate. The swap spread is the difference between the benchmark swap rate (market rate) and the specific treasury rate. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party on its obligation. The Fund may use credit default swaps to provide a measure of protection against defaults of sovereign or corporate issuers (i.e., to reduce risk where the Fund owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreements. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in interest rates or the price of the index or security underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Reverse repurchase agreements

The Fund may enter into reverse repurchase agreements with banks and broker-dealers whereby the Fund sells portfolio assets concurrent with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. In connection with these agreements, the Fund establishes segregated accounts with its

43

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

custodian in which the Fund maintains cash, U.S. government securities or other assets equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase under the agreement. The market value of the securities the Fund has sold is determined daily and any additional required collateral is allocated to or sent by the Fund on the next business day. Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expense. As of February 28, 2006, the Fund had entered into reverse repurchase agreements having a market value plus accrued interest of $497,812,117, collateralized by securities with a market value of $498,754,640. See the Schedule of Investments for open reverse repurchase agreements entered into by the Fund as of February 28, 2006.

Delayed delivery commitments

The Fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Collateral consisting of liquid securities or cash and cash equivalents is maintained with the custodian in an amount at least equal to these commitments. As of February 28, 2006, the Fund did not enter into any delayed delivery commitments.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. For the year ended February 28, 2006, the Fund did not participate in securities lending.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in

44

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $314,677,198 and $254,103,704, respectively and long-term capital gains – $90,686,698 and $62,772,210, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $65,079,075 and $33,725,771 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to differing treatments for defaulted bonds and certain differences in the computation of distributable income and capital gains under U.S. Federal tax rules versus U.S. GAAP.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	2,646,629,059	$	442,963,600	$	(122,025,839	)	$	320,937,761

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions and certain differences in the computation of distributable income and capital gains under U.S. Federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	65,423,787	$	(65,423,787	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if

45

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Income is not recognized, nor are premiums amortized or discounts accreted on securities for which collection is not expected. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases of Fund shares was 0.50% of the amount invested. In the case of cash redemptions, the fee is currently 0.25% of the amount redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in-capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $394,550 and $1,785,929 in purchase premiums and $911,454 and $817,062 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

Investments in emerging country debt present certain risks that are not inherent in many other securities. Many emerging countries present elements of political and/or economic instability, which may result in the Fund's inability to collect on a timely basis, or in full, principal and interest payments. Further, countries may impose various types of foreign currency regulations or controls which may impede the Fund's ability to repatriate amounts it receives. The Fund may acquire interests in securities or bank loans which are in default at the time of acquisition in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The markets for emerging country debt are typically less liquid than those of developed markets.

The Fund owns loans and bonds representing significant exposure to the risk of default in many countries, but has the most sizable of such positions relating to Russia, Mexico and Brazil. The Fund's financial

46

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

position would be substantially adversely affected in the case of a default by these countries on obligations held by the Fund, or on obligations issued by those countries generally. The Fund has purchased default protection in the form of credit default swap agreements with respect to debt associated with those countries, which may offset some of the losses that the Fund might experience in the case of a default on bonds issued by such countries; however the Fund as of February 28, 2006, has sold more of such default protection than it has purchased. In addition, it is important to note that (i) such protection would not cover losses due to defaults on loan assignments or participations, (ii) such protection will generally not be sufficient to cover all of the Fund's losses in the case of default, and (iii) due to the privately negotiated nature of such instruments, under some circumstances, the protection offered by such instruments may not be realized, even if the Fund incurs substantial losses due to weakening of the credit or virtual default by the countries.

Other matters

In July 2005, the Fund entered into litigation against the Government of Argentina ("Argentina") related to Argentina's failure to make payments on certain sovereign debt. The applicable defaulted sovereign debt, which continues to be valued according to the Fund's valuation policy, represented 1.6% of the net assets of the Fund as of February 28, 2006. The Fund's costs associated with this action will be borne by the Fund.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.35% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.15% for Class III shares and 0.10% for Class IV shares.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)	Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
< 0.001%		0.000	%		0.001	%		0.001	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and Chief Compliance Officer ("CCO") during the year ended February 28, 2006 was $51,874 and $16,734, respectively. No remuneration was paid to any other officer of the Trust.

47

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $3,818,839,739 and $3,887,455,427, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 50.1% of the outstanding shares of the Fund were held by four shareholders, each holding in excess of 10% of the Fund's shares outstanding. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 0.2% of the Fund's shares were held by twenty-five related parties comprised of certain GMO employee accounts, and 18.4% of the Fund's shares was held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		7,279,052		$	82,133,042			18,447,846		$	196,778,449
Shares issued to shareholders in reinvestment of distributions		14,206,621			151,317,024			10,496,759			111,419,528
Shares repurchased		(29,288,921	)		(334,229,348	)		(18,872,655	)		(204,063,148	)
Purchase premiums and redemption fees		—			839,203			—			1,308,564
Net increase (decrease)		(7,803,248	)	$	(99,940,079	)		10,071,950		$	105,443,393

48

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		12,753,479		$	144,733,629			20,627,830		$	217,128,999
Shares issued to shareholders in reinvestment of distributions		22,808,057			243,099,656			17,398,521			184,619,120
Shares repurchased		(16,093,592	)		(182,530,060	)		(16,105,655	)		(181,277,645	)
Purchase premiums and redemption fees		—			466,801			—			1,294,427
Net increase (decrease)		19,467,944		$	205,770,026			21,920,696		$	221,764,901

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Short-Duration Collateral Fund	$	102,308,184	$	107,465,653	$	113,000,000	$	2,565,653	$	—	$	98,479,942
GMO Special Purpose Holding Fund		332,058		—		—		—		185,975		176,198	*
GMO World Opportunity Overlay Fund		16,308,824		13,200,000		—		—		—		29,650,120
Totals	$	118,949,066	$	120,665,653	$	113,000,000	$	2,565,653	$	185,975	$	128,306,260

*  After the effect of return of capital distributions of $118,024 and $33,736 on April 5, 2005 and February 21, 2006, respectively.

49

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Emerging Country Debt Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Emerging Country Debt Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

50

GMO Emerging Country Debt Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.83	%	$	1,000.00	$	1,105.60	$	4.33
2) Hypothetical		0.83	%	$	1,000.00	$	1,020.68	$	4.16
Class IV
1) Actual		0.78	%	$	1,000.00	$	1,106.10	$	4.07
2) Hypothetical		0.78	%	$	1,000.00	$	1,020.93	$	3.91

*  Expenses are calculated using each Class's annualized expense ratio (including interest expense and indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

51

GMO Emerging Country Debt Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $90,686,698 from long-term capital gains.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $9,012,028 and $19,353,010, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

52

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

53

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

54

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004– present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

55

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

56

GMO Emerging Markets Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Emerging Markets Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Emerging Markets Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Emerging Markets Fund returned +38.0% for the fiscal year ended February 28, 2006, as compared to +37.9% for the S&P/IFC Investable Composite Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in emerging markets equities throughout the fiscal year.

Country selection detracted 0.3% from performance during the period. The Fund's overweights in Brazil and Korea contributed positively to performance. The Fund's underweight in Russia and overweight in Taiwan detracted from performance.

Stock selection added 0.4% during the fiscal year. Stock selection was particularly successful in Brazil, Korea, and Taiwan. Stock selection in South Africa detracted from performance.

For the period, the value and the momentum models outperformed while the macroeconomic and the reversal models underperformed.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .80% on the purchase and .80% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Performance for Class IV, V and VI shares will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  For the period from 10/27/04 to 2/11/05, no Class V shares were outstanding. Performance for that period is that of Class IV shares, which have higher expenses. Therefore, the performance shown is lower than it would have been if Class V shares had been outstanding.

GMO Emerging Markets Fund

(A Series of GMO Trust)

Investments Concentration Summary

February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		77.9	%
Preferred Stocks		16.6
Debt Obligation(s)		2.0
Private Equity Securities		0.7
Investment Funds		0.3
Convertible Securities		0.0
Mutual Funds		0.0
Rights And Warrants		0.0
Swaps		0.1
Short-Term Investment(s)		2.5
Other		(0.1	)
		100.0	%
Country Summary**	% of Investments
South Korea		25.3	%
Brazil		19.2
Taiwan		18.6
China		7.8
Mexico		6.6
South Africa		6.3
Russia		3.3
India		2.8
United States		2.0
Malaysia		1.8
Israel		1.7
Thailand		1.4
Turkey		1.1
Poland		0.9
Philippines		0.5
Chile		0.3
Argentina		0.2
Venezuela		0.1
Indonesia		0.1
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table excludes short-term investments and any investment in the underlying fund(s) that is less than 3% of invested assets.

1

GMO Emerging Markets Fund

(A Series of GMO Trust)

Investments Concentration Summary — (Continued)

February 28, 2006 (Unaudited)

Industry Sector Summary	% of Investments*
Financials		21.3	%
Information Technology		20.7
Energy		13.5
Materials		9.6
Telecommunication Services		9.3
Consumer Discretionary		8.8
Industrials		8.1
Utilities		3.6
Consumer Staples		3.0
Health Care		1.0
Miscellaneous		1.1
		100.0	%

* The table excludes short-term investment(s).

2

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 77.8%
		Argentina — 0.2%
	431,100	IRSA Inversiones y Representaciones SA GDR *		5,505,147
	273,350	Telecom Argentina SA ADR *		3,441,477
	124,598	Tenaris SA ADR		19,954,370
				28,900,994
		Brazil — 5.3%
	267,637,000	Aes Tiete SA		6,742,915
	6,380,020	Banco do Brasil SA		165,216,529
	3,834,000	Companhia de Concessoes Rodoviarias		36,200,471
	383,277,898	Companhia Saneamento Basico SAO PA		30,882,434
	1,574,272	Companhia Siderurgica Nacional SA		47,402,379
	14,306	Cyrela Brazil Realty ADR		2,628,099
	896,700	Cyrela Brazil Realty SA		16,472,930
	2,425,069,400	Electrobras (Centro)		51,379,266
	1,791,100	Iochpe Maxion SA		14,296,748
	1,503,000	Localiza Rent A Car *		26,167,134
	2,533,400	Petroleo Brasileiro SA (Petrobras)		57,981,276
	200,000	Petroleo Brasileiro SA (Petrobras) ADR		17,508,000
	1,073,200	Rossi Residencial SA		14,302,595
	2,413,104	Souza Cruz SA (Registered)		39,807,409
	3,029,538	Tele Centro Oeste Celular Participacoes SA		46,366,840
	535,900	Tractebel Energia SA		4,403,793
	872,900	Unibanco-Uniao de Bancos Brasileiros SA GDR		76,771,555
	357,400	Universo Online SA *		2,642,421
				657,172,794
		Chile — 0.3%
	123,076	Banco De Chile ADR		5,398,113
	230,600	Banco Santander Chile SA ADR		10,951,194
	131,000	Compania Cervecerias Unidas ADR		3,563,200
	624,600	Compania de Telecommunicaciones de Chile ADR		5,371,560
	129,400	Empresa Nacional de Electricidad SA ADR		4,089,040

See accompanying notes to the financial statements.

3

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Chile — continued
	354,281	Enersis SA ADR		4,347,028
	86,700	Lan Airlines SA		3,541,695
				37,261,830
		China — 7.5%
	41,492,000	Bank of Communications Co Ltd *		24,886,429
	6,316,800	Beijing Enterprises H Shares		12,514,884
	64,444,000	China Construction Bank Class H 144A *		30,112,466
	38,171,100	China Cosco Holdings Co Ltd *		18,426,477
	282,600	China Finance Online Co ADR *		1,667,340
	50,708,442	China Mobile Ltd		245,005,068
	382,249	China Mobile Ltd ADR *		9,261,893
	8,516,000	China Paradise Eletronics *		4,061,563
	209,189,301	China Petroleum & Chemical Corp Class H		124,455,487
	9,779,000	China Resources Enterprise Ltd		21,386,513
	983,000	China Telecom Corp Ltd ADR		36,066,270
	173,074,100	China Telecom Corp Ltd Class H		63,244,920
	25,108,000	CNOOC Ltd		20,807,415
	52,000	CNOOC Ltd ADR		4,309,760
	10,622,000	Foxconn International Holdings 144A *		18,271,499
	32,395,200	Guangdong Investments Ltd		14,672,818
	16,304,000	Huaneng Power International Inc Class H		10,914,658
	2,258,000	Parkson Retail Group Ltd *		5,733,846
	2,910,000	Peace Mark Holdings Ltd		1,259,891
	217,104,601	PetroChina Co Ltd Class H		211,135,407
	21,824,000	Pico Far East Holding Ltd *		4,810,456
	1,060,300	Shandong Molong Petroleum Machinery Co Ltd		239,712
	12,255,000	Shanghai Industrial Holdings Ltd		26,235,958
	33,902,000	Sinochem Hong Kong Holding *		9,900,228
	9,064,887	Weiqiao Textile Co		14,515,224
				933,896,182
		Hungary — 0.0%
	100	Magyar Telecom		2,325

See accompanying notes to the financial statements.

4

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		India — 2.7%
	1,686,500	Amtek Auto Ltd		13,231,862
	2,252,000	Bank of India		6,801,956
	535,463	Bharat Electronics Ltd		13,284,667
	5,948,177	CBAY Systems Ltd (a) (b)		9,718,528
	2,974,088	CBAY Systems Ltd INR (a) (b)		4,859,264
	21,797,849	Centurion Bank Ltd *		12,622,863
	3,000	Cipla Ltd (Shares Under Objection) * (b)		—
	184,105	Galaxy Entertainment Corp Ltd *		1,034,715
	2,242,410	Gammon India Ltd		26,989,834
	1,046,820	Geodesic Information Systems Ltd		4,983,537
	200	HCL Infosystems Ltd (Shares Under Objection)		—
	636,800	HCL Technologies Ltd		8,731,941
	155,789	Hero Honda Motors Ltd		3,120,138
	2,593,725	Hexaware Technologies Ltd		8,006,792
	714,000	ICICI Bank Ltd		9,851,236
	136,000	Infosys Technologies Inc		8,646,585
	1,500	ITC Ltd (Shares Under Objection) *		—
	1,522,593	IVRCL Infrastructure		35,438,891
	1,656,245	Jaiprakash Associates Ltd		16,585,849
	325,272	Jindal Steel & Power Ltd		11,296,194
	440,338	KEI Industries		3,077,357
	1,235,178	Kirloskar Brothers Ltd		8,591,711
	87	Mahind GESCO Developers Ltd *		707
	680,000	Mahindra & Mahindra		8,976,883
	700	National Thermal Power Co		2,077
	15,956	NIIT Technologies Ltd		63,016
	306,800	Raymond Ltd		3,021,769
	912,279	Reliance Capital Ltd		10,263,152
	364,911	Reliance Energy Ltd		5,083,355
	900	Reliance Energy Ltd (Shares Under Objection) *		—
	7,133	Reliance Industries Ltd (Shares Under Objection) *		—
	1,882,800	Rolta India Ltd		9,374,809
	174,899	Sakthi Sugars Ltd *		668,057
	328,200	Satyam Computer Services Ltd		5,697,594
	2,889,220	Shasun Chemicals		6,270,165

See accompanying notes to the financial statements.

5

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		India — continued
	219,144	Siemens India Ltd		22,257,439
	1,975,450	Sintex Industries Ltd		8,548,449
	2,053,963	Spicejet Ltd *		3,474,814
	1,846,700	Syndicate Bank		3,872,902
	668,119	Tasc Pharmaceuticals Ltd *		3,381,618
	1,850,100	Union Bank of India		5,065,672
	5,748,111	United Phosphorous		35,110,682
	262,100	UTV Software Communications Ltd * (a)		1,050,192
	67,166	Welspun India Ltd *		155,249
	600	Wockhardt Ltd		6,908
				339,219,429
		Indonesia — 0.1%
	60,628,000	Matahari Putra Prima Tbk PT		5,184,576
	15,814,950	Mayora Indah Tbk PT		1,253,708
	63,946,500	Summarecon Agung		5,884,793
				12,323,077
		Israel — 1.6%
	8,509,700	Bank Hapoalim B.M.		38,945,062
	5,624,300	Bank Leumi Le		20,293,995
	1,296,500	Check Point Software Technologies Ltd *		27,563,590
	2,359,900	Israel Chemicals Ltd		8,814,993
	4,167,800	Israel Discount Bank Class A *		7,868,888
	22,300	Teva Pharmaceutical Industries		937,994
	2,138,400	Teva Pharmaceutical Industries ADR		89,791,416
	31,500	The Israel Corp Ltd		10,517,956
				204,733,894
		Lebanon — 0.0%
	12,059	Banque Libanaise pour le Commerce Sal *		35,695
		Malaysia — 1.8%
	21,744,060	Arab-Malaysian Corp Berhad *		7,613,640

See accompanying notes to the financial statements.

6

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Malaysia — continued
	18,047,700	Berjaya Sports Toto		22,256,239
	49,781,030	Bumiputra-Commerce Holdings Berhad		77,632,947
	1,073,817	Edaran Otomobil Berhad		866,685
	11,370,000	Habib Corporation Berhad		4,342,636
	9,802,531	Highlands and Lowlands Berhad		11,120,002
	9,954,740	IJM Corp Berhad		12,264,293
	11,900,860	Maxis Communications Berhad		27,855,701
	14,749,540	MISC Berhad		38,476,647
	1,370,900	Sunway City Berhad		622,127
	3,343,628	Top Glove Corp Berhad		6,886,344
	6,651,800	UMW Holdings Berhard		12,888,198
				222,825,459
		Mexico — 6.4%
	5,700,900	Alfa SA de CV Class A		30,265,112
	3,034,530	America Movil SA de CV Class L ADR		105,389,227
	4,595,289	Carso Global Telecom Class A *		11,055,015
	77,471	Cemex SA de CV ADR (Participating Certificates)		4,784,609
	22,703,072	Cemex SA de CV CPO		140,531,474
	27,921,500	Corporacion GEO SA de CV Series B *		109,287,017
	2,985,854	Fomento Economico Mexicano SA de CV		25,796,638
	6,551,000	Grupo Cementos de Chihuahua SA de CV		20,000,094
	31,344,600	Grupo Financiero Banorte SA de CV		76,483,816
	8,232,755	Grupo Financiero Serfin SA de CV Class B *(b)(c)(c)		7,859
	11,703,800	Grupo Mexico SA Class B		29,999,716
	3,638,532	Sare Holding SA de CV *		4,473,918
	9,395,400	Telefonos de Mexico SA de CV Class L ADR		210,363,006
	11,406,320	Wal-Mart de Mexico SA de CV Class V		32,580,152
				801,017,653
		Philippines — 0.5%
	88,961,950	Ayala Land Inc		19,291,321
	4,011,240	Bank of the Philippine Islands		4,566,677
	6,219,000	Fil-Hispano Corp *		936,447

See accompanying notes to the financial statements.

7

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Philippines — continued
	5,745,823	First Philippine Holdings		4,605,572
	367,517	Philippine Long Distance Telephone		12,615,911
	253,700	Philippine Long Distance Telephone ADR		8,752,650
	4,665,776	San Miguel Corp Class B		7,490,745
	39,545,999	SM Prime Holdings		6,091,155
				64,350,478
		Poland — 0.2%
	179,000	BRE Bank *		10,590,931
	850,100	Polski Koncern Naftowy Orlen SA		15,633,478
				26,224,409
		Russia — 2.9%
	410,400	JSC Mining & Smelting Co ADR		36,525,600
	2,705,600	Lukoil ADR		216,448,000
	651,800	Mobile Telesystems ADR		23,510,426
	204,400	OAO Gazprom ADR		17,292,240
	317,700	Polyus Gold Co ZAO ADR *		11,437,200
	135,000	Rusia Petroleum *		418,500
	5,500	Sberbank RF		8,552,500
	2,200	Sberbank RF *		3,399,000
	726,500	Unified Energy Systems GDR		50,092,175
				367,675,641
		South Africa — 6.1%
	857,875	ABSA Group Ltd		15,935,203
	1,850,600	AECI Ltd		16,033,546
	6,088,430	African Bank Investments Ltd		28,450,519
	204,300	AngloGold Ashanti Ltd		10,449,935
	6,330,100	AVI Ltd		17,153,856
	2,060,000	Barlow Ltd		39,729,890
	4,335,790	Foschini Ltd		40,053,715
	632,700	Impala Platinum Holdings Ltd		107,425,853
	2,422,500	Mr. Price Group Ltd		8,324,239

See accompanying notes to the financial statements.

8

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		South Africa — continued
	1,051,000	Naspers Ltd Class N		20,788,728
	632,953	Nedcor Ltd		12,217,293
	35,105,000	Old Mutual Plc		110,323,744
	2,990,842	Remgro Ltd		62,729,159
	27,075,971	Sanlam Ltd		70,091,550
	2,581,310	Sasol Ltd		88,396,459
	4,106,400	Steinhoff International Holdings		13,439,998
	2,469,541	Telkom SA Ltd		64,974,545
	1,400,948	Tiger Brands Ltd		34,727,214
	413,600	Tongaat-Hulett Group		6,172,067
				767,417,513
		South Korea — 21.5%
	856,356	Ace Digitech Co Ltd *		7,552,915
	78,080	Amorepacific Corp		27,232,786
	497,400	CDNetworks Co Ltd *		12,940,875
	1,093,400	Cheil Industries Inc		42,079,559
	131,800	CJ CGV Co Ltd		3,488,812
	51,236	Clover Hitech Co Ltd *		212,395
	767,230	Dae Han Pulp Industries *		2,893,639
	88,400	Dae Won Kang Up Co		1,624,446
	3,479,450	Daegu Bank		53,870,386
	420,320	Daelim Industrial Co Ltd		28,091,741
	709,260	Daesang Corp *		10,815,967
	401,390	Daewoo Engineering & Construction Co Ltd		5,186,567
	600,240	Daewoo International Corp		22,805,217
	629,800	Daewoo Securities Co Ltd *		10,946,873
	1,235,300	Dongwon Financial Holding Co Ltd		47,324,088
	2,305,610	Doosan Infracore Co Ltd		38,724,355
	924,000	DPI Co Ltd		7,456,217
	853,000	Ecoplastic Corp		4,956,874
	995,300	Global Enterprises		8,710,859
	482,679	Hana Financial Group Inc		20,629,432
	500,200	Hana Securities Co Ltd		9,133,022

See accompanying notes to the financial statements.

9

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		South Korea — continued
	251,400	Hana Tour Service Inc		16,412,339
	221,465	Hanil Cement Manufacturing		17,377,087
	956,500	Hanjin Heavy Industry & Construction		23,947,385
	637,900	Hanjin Shipping		14,932,126
	286,700	Hanjin Transportation Co		8,171,584
	2,287,200	Hansol CSN		10,009,688
	3,452,938	Hanwha Corp		106,514,373
	147,800	Honam Petrochemical Co		8,676,699
	3,144,140	Hynix Semiconductor Inc *		106,060,741
	1,917,800	Hyundai Development Co		87,034,985
	193,100	Hyundai Engineering & Construction *		9,292,999
	165,069	Hyundai Mipo Dockyard		13,150,238
	518,300	Hyundai Mobis		43,577,020
	2,122,820	Hyundai Motor Co		180,417,706
	1,998,100	Hyundai Securities Co *		31,438,319
	5,032,000	Industrial Bank of Korea		82,504,570
	549,800	Inzi Controls Co Ltd		5,240,969
	3,510,700	KIA Motors Corp		75,369,746
	1,798,970	Kolon Construction		21,481,194
	2,794,590	Kookmin Bank		211,822,192
	40,900	Kookmin Bank ADR		3,098,175
	212,900	Korea Cement Co Ltd *		2,847,441
	1,402,500	Korea Electric Power Corp		59,847,411
	201,500	Korea Electric Terminal Co		3,585,412
	9,249,900	Korea Real Estate *		10,386,417
	963,500	Korean Air Lines Co Ltd		31,760,443
	400	KT Corp		15,845
	1,743,300	KT&G Corp		103,343,982
	576,000	KT&G Corp GDR 144A *		16,646,400
	343,400	Kumgang Construction Co		8,139,342
	563,100	Kumho Industrial Co Ltd		12,809,937
	3,089,894	LG Corp		107,337,400
	127,618	LG Home Shopping Inc		12,958,530
	1,431,800	LG Insurance Co Ltd		21,688,919

See accompanying notes to the financial statements.

10

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		South Korea — continued
	1,003,120	LG Investment & Securities Co Ltd		23,725,550
	214,600	Megastudy Co Ltd		12,588,125
	747,360	Nasan Co Ltd *		10,823,742
	166,828	NHN Corp *		47,028,839
	1,058,600	Poongsan Corp		22,798,626
	267,349	POSCO		63,007,528
	794,190	Pumyang Construction Co Ltd		8,679,199
	455,300	Pyung Hwa Industrial Co		3,008,757
	4,176,800	Samick Musical Instruments		7,993,729
	566,924	Samsung Electronics Co Ltd		397,455,647
	215,900	Samsung SDI Co Ltd		19,076,960
	188,690	Samsung Securities		11,078,186
	656,400	Sejong Industrial Co		3,051,900
	234,600	SFA Engineering Corp		7,355,942
	979,270	Shinhan Financial Group Co Ltd		38,258,377
	1,523,620	Simm Tech Co Ltd		15,909,963
	605,120	SK Corp		37,286,324
	6,000	SK Telecom Co Ltd		1,246,844
	2,150,400	SK Telecom Co Ltd ADR		51,932,160
	264,683	SM Entertainment *		3,364,342
	1,006,200	SSCP Co Ltd *		21,968,527
	629,233	Taewoong Co Ltd		9,428,581
	275,127	Wooree Eti Co Ltd		4,765,972
	1,863,700	Woori Finance Holdings Co Ltd		36,609,454
				2,693,017,913
		Sri Lanka — 0.0%
	417,000	Lanka Walltile Ltd		182,528
		Taiwan — 18.1%
	30,826,240	Acer Inc		68,209,486
	62,206,511	Asustek Computer Inc		175,314,417
	13,154,000	AU Optronics Corp		21,016,444
	4,689,000	Avermedia Technologies Inc		6,257,443

See accompanying notes to the financial statements.

11

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Taiwan — continued
	26,736,255	Benq Corp		26,229,469
	27,470,820	Cheng Loong Corp		8,566,362
	70,039,000	China Bills Finance Corp		22,827,830
	75,319,651	China Development Financial Holding Corp *		28,839,438
	72,193,096	China Steel Corp		65,321,176
	23,883,382	Chinatrust Financial Holding Co		20,032,734
	37,486,499	Chung Hung Steel Corp		12,095,765
	41,326,000	Chunghwa Telecom Co Ltd		75,236,103
	845,220	Chunghwa Telecom Co Ltd ADR		15,974,658
	24,561,565	Compal Electronics Inc		22,846,142
	5,901,000	Delta Electronics Inc		14,047,110
	22,474,300	Evergreen Marine Corp		14,549,825
	25,671,305	Far Eastern International Bank		11,206,756
	32,829,868	Far Eastern Textile Co Ltd		24,163,119
	9,187,000	Far Eastone Telecommunications Co Ltd		11,241,374
	26,176,960	Formosa Chemicals & Fibre Co		41,153,177
	19,951,587	Formosa Petrochemical Corp		35,606,240
	33,523,590	Formosa Plastics Corp		53,047,862
	21,184,000	Fubon Financial Holding Co Ltd		18,923,842
	18,975,917	Gigabyte Technology Co Ltd		15,985,546
	4,200,600	High Tech Computer Corp		89,978,987
	41,810,477	Hon Hai Precision Industry Co Ltd		264,378,841
	47,844,876	Inventec Co Ltd		29,167,232
	21,232,080	KGI Securities Co Ltd		6,549,063
	4,020,633	Les Enphants Co Ltd		2,479,707
	30,850,842	Lite-On Technology Corp		41,576,502
	10,013,000	MediaTek Inc		102,485,102
	96,647,000	Mega Financial Holdings Co Ltd		73,309,119
	22,259,735	Micro-Star International Co Ltd		12,595,935
	15,411,306	Mitac International Corp		21,665,303
	6,987,772	Nan Ya Plastic Corp		9,884,433
	6,530,719	Novatek Microelectronics		45,018,279
	14,792,462	Oriental Union Chemical		9,543,156
	22,582,556	Realtek Semiconductor Corp		24,761,722

See accompanying notes to the financial statements.

12

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Taiwan — continued
	22,886,736	Shin Kong Financial Holdings		19,783,639
	19,969,636	Siliconware Precision Industries Co		25,311,324
	39,289,128	Sinopac Holdings Co		20,784,294
	49,900,125	Taishin Financial Holdings Co Ltd		30,316,511
	50,716,000	Taiwan Cellular Corp		46,800,066
	65,597,046	Taiwan Cement Corp		49,434,142
	6,491,000	Taiwan FU Hsing Ind Co Ltd		7,031,995
	193,917,804	Taiwan Semiconductor Manufacturing Co Ltd		359,321,465
	2,873,238	Taiwan Semiconductor Manufacturing Co Ltd ADR		27,956,606
	12,636,800	Tsann Kuen Enterprises Co Ltd		22,056,737
	14,451,000	U-Ming Marine Transport Co		14,545,721
	5,649,000	Waffer Technology Co Ltd		5,448,651
	68,902,450	Walsin Lihwa Corp		22,408,133
	23,361,703	Wan Hai Lines Ltd		14,353,296
	44,157,000	Waterland Financial Holdings		14,372,644
	9,903,445	Wintek Corp		13,928,180
	29,161,600	Yang Ming Marine Transport		17,845,995
	35,196,659	Yieh Phui Enterprise		14,355,135
				2,268,140,233
		Thailand — 1.4%
	5,246,500	Advanced Info Service Pcl (Foreign Registered) (b)		12,632,166
	27,379,600	Bangkok Dusit Medical Service Pcl (Foreign Registered) (b)		16,544,951
	14,833,400	Central Pattana Pcl (Foreign Registered) (b)		6,824,236
	13,394,100	Home Product Center Pcl (Foreign Registered) (b)		2,722,656
	24,756,000	Kasikornbank Pcl NVDR (b)		42,159,702
	20,525,000	Major Cineplex Group (b)		8,081,948
	28,256,000	Power Line Engineering PCL (b)		6,412,833
	7,807,900	Ptt Pcl (Foreign Registered) (b)		49,738,719
	14,256,100	Saha Pathana International Holding Pcl (Foreign Registered) (b)		6,215,820
	2,268,000	Siam Cement Pcl (Foreign Registered) NVDR (b)		14,021,384
	3,108,050	Star Block Co Ltd (Foreign Registered) * (b) (c)		795
	18,117,900	Yarnapund PCL (b)		6,055,761
				171,410,971

See accompanying notes to the financial statements.

13

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Turkey — 1.1%
	5,937,992	Akbank TAS		60,109,746
	2,862,695	Doktas Dokumculuk Ticaret		5,739,551
	926,823	Finansbank AS *		5,074,956
	81,588	Galatasaray Sportif Sinai ve Ticari Yatirimlar AS		7,420,149
	42,150	Medya Holding AS * (b) (c)		321
	2,865,700	Petkim Petrokimya Holding *		15,892,640
	2,210,123	Trakya Cam Sanayii AS		9,580,564
	2,178,571	Turkiye IS Bankasi Class C		20,571,747
	1,716,996	Vestel Elektronik Sanayi *		7,460,047
				131,849,721
		Venezuela — 0.1%
	1,054,012	Compania Anonima Nacional Telefonos de Venezuela (CANTV) ADR		18,255,488
		TOTAL COMMON STOCKS (COST $6,647,108,966)		9,745,914,227
		PREFERRED STOCKS — 16.6%
		Brazil — 13.4%
	2,978,106	Banco Bradesco SA 3.66%		122,854,761
	4,803,370	Banco Itau Holding Financeira SA 2.79%		155,399,821
	31,182,998	Caemi Mineracao e Metalurgica SA 1.35%		53,746,067
	1,365,517,800	Companhia Energetica de Minas Gerais 4.11%		70,092,508
	3,538,342,100	Companhia Paranaense de Energia 2.89%		38,824,286
	449,800	Companhia Vale do Rio Doce Class A 0.36%		19,148,538
	2,592,292,560	Electrobras (Centro) SA Class B 8.09%		56,948,645
	741,656,700	Geracao Tiete 8.80%		19,380,518
	4,145,388	Gerdau SA 4.84%		95,655,292
	63,983,539	Investimentos Itau SA 4.28%		278,713,320
	65,404,510	Net Servicos de Comunicacoa SA *		34,804,378
	31,021,652	Petroleo Brasileiro SA (Petrobras) 0.44%		653,740,959
	521,700	Petroleo Brasileiro SA ADR 2.26%		41,720,349
	7,876,923	Sadia SA 4.03%		25,223,959
	407,300	Tele Centro Oeste Celular SA ADR 6.50% (d)		5,991,383
	13,373,023	Unipar, Class B 1.99%		13,413,958
				1,685,658,742

See accompanying notes to the financial statements.

14

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		South Korea — 3.2%
	679,600	Hyundai Motor Co 2.48%		36,492,562
	425,560	LG Electronics Inc 2.84%		21,718,533
	644,353	Samsung Electronics Co Ltd (Non Voting) 1.18% *		340,956,779
				399,167,874
		TOTAL PREFERRED STOCKS (COST $591,967,972)		2,084,826,616
		DEBT OBLIGATION(S) — 2.0%
		United States — 2.0%
	61,922,771	U.S. Treasury Inflation Indexed Note, 3.88%, due 01/15/09 (e) (f)		65,514,787
	173,156,573	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (e)		179,284,757
				244,799,544
		TOTAL DEBT OBLIGATION(S) (COST $246,364,578)		244,799,544
		PRIVATE EQUITY SECURITIES — 0.7%
		Poland — 0.7%
	18,179,074	CHP Investors (Multimedia) * (a) (b)		42,295,435
	18,340,378	MHP Investors (Tri Media Holdings Ltd) * (a) (b)		39,633,556
				81,928,991
		Russia — 0.0%
	90,000	Divot Holdings NV-Class D * (a) (b) (c)		900
	124,330	Divot Holdings NV-Class E * (a) (b) (c)		1,243
	46,624	Divot Holdings NV, Convertible Securities-Class F * (a) (b) (c)		466
				2,609
		Sri Lanka — 0.0%
	2,545,869	Millenium Information Technology * (a) (b)		787,470
		TOTAL PRIVATE EQUITY SECURITIES (COST $51,088,068)		82,719,070

See accompanying notes to the financial statements.

15

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		INVESTMENT FUNDS — 0.4%
		China — 0.1%
	692,433	Martin Currie Sino-American Class B Series January 2007 (a)		7,755,247
	500,000	Martin Currie Sino-American Class B Series June 2006 * (a)		5,600,000
				13,355,247
		India — 0.0%
	170	SPG Infinity Technology Fund I * (a) (b)		132,688
	1,371,900	TDA India Technology Fund II LP * (a) (b)		1,030,146
	100	UTI Masterplus 1991 Units (Shares Under Objection) * (b)		—
				1,162,834
		Kazakhstan — 0.0%
	450,000	Kazakhstan Investment Fund * (a) (b)		98,466
		Poland — 0.0%
	1,749,150	The Emerging European Fund II, LP* (a) (b)		519,497
		Russia — 0.3%
	9,500,000	NCH Eagle Fund LP* (a) (b)		30,201,328
		Ukraine — 0.0%
	16,667	Societe Generale Thalmann Ukraine Fund* (a) (b)		57,856
		TOTAL INVESTMENT FUNDS (COST $28,855,825)		45,395,228
		MUTUAL FUNDS — 0.0%
		United States — 0.0%
		Affiliated Issuer
	8,064	GMO Special Purpose Holding Fund		45,402
		TOTAL MUTUAL FUNDS (COST $0)		45,402

See accompanying notes to the financial statements.

16

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)

(showing percentage of total net assets)

February 28, 2006

	Shares / Par Value ($)		Description	Value ($)
			RIGHTS AND WARRANTS — 0.0%
			India — 0.0%
		126,997	Arvind Mills Ltd Warrants, 144A, Expires 06/12/07 (Goldman Sachs) * (b) (g)		282,788
		107,835	Hero Honda Motors Ltd Warrants, 144A, Expires 05/05/06 (Merrill Lynch) * (b) (g)		2,153,419
		32,542	Uniphos Enterprises Ltd Warrants, 144A, Expires 01/28/09 (Merrill Lynch) * (b) (g)		25,523
		142,330	United Phosphorus Ltd Warrants, 144A, Expires 01/28/09 (Merrill Lynch) * (b) (g)		4,346,566
					6,808,296
			Taiwan — 0.0%
		301,091	Waffer Technology Corp Rights, Expires 03/22/06 *		15,310
			Thailand — 0.0%
		2,689,393	True Corp Pcl Warrants, Expires 04/03/08 * (b)		—
			TOTAL RIGHTS AND WARRANTS (COST $2,604,510)		6,823,606
			CONVERTIBLE SECURITIES — 0.0%
			India — 0.0%
USD		182,000	Jaiprakash, 0.50%, due 02/17/10		326,690
			Russia — 0.0%
USD		56,000	Lukinter Finance BV, 0.03%, due 11/29/07		221,746
			TOTAL CONVERTIBLE SECURITIES (COST $373,240)		548,436
			SHORT-TERM INVESTMENT(S) — 2.5%
		310,600,000	Societe Generale Time Deposit, 4.56%, due 03/01/06		310,600,000
		2,049,075	The Boston Global Investment Trust (h)		2,049,075
			TOTAL SHORT-TERM INVESTMENT(S) (COST $312,649,075)		312,649,075
			TOTAL INVESTMENTS — 100.0% (Cost $7,881,012,234)		12,523,721,204
			Other Assets and Liabilities (net) — 0.0%		(3,811,068	)
			TOTAL NET ASSETS — 100.0%	$	12,519,910,136

See accompanying notes to the financial statements.

17

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Additional information on each restricted security is as follows:

Issuer, Description	Acquisition Date	Acquisition Cost		Market Value as a Percentage of Fund's Net Assets			Market Value as of February 28, 2006
CBAY Systems Ltd	5/06/03-8/04/05	$	6,100,570		0.12	%	$	14,577,792
CHP Investors (Multimedia)	12/13/99-3/05/01		18,178,923		0.34	%		42,295,435
Divot Holdings NV, Private Equity Securities-Class E	9/21/01		124,330		0.00	%		1,243
Divot Holdings NV, Private Equity Securities-Class D	6/26/00		1,502,100		0.00	%		900
Divot Holdings NV, Convertible Securities-Class F	3/27/02		46,624		0.00	%		466
Kazakhstan Investment Fund	10/16/97		3,285,000		0.00	%		98,466
Martin Currie Sino-American Class B Series June 2006	3/17/05		5,000,000		0.04	%		5,600,000
Martin Currie Sino-American Class B Series January 2007	1/20/06		7,500,000		0.06	%		7,755,247
MHP Investors (Tri Media Holdings Ltd)	11/27/01		27,983,521		0.32	%		39,633,556
Millenium Information Technology	10/21/99		2,252,570		0.01	%		787,470
NCH Eagle Fund LP	1/21/97		9,500,000		0.24	%		30,201,328
Societe Generale Thalmann Ukraine Fund	7/15/97		260,172		0.00	%		57,856
SPG Infinity Technology Fund I	12/23/99		189,555		0.00	%		132,688
TDA India Technology Fund II LP	2/23/00-3/23/04		1,371,900		0.01	%		1,030,146
The Emerging European Fund II, LP	12/05/97-3/17/00		1,749,150		0.00	%		519,498
UTV Software Communications Ltd.	2/29/00		3,004,959		0.01	%		1,050,192
							$	143,742,283

See accompanying notes to the financial statements.

18

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Swap Agreements

Total Return Swaps

Notional Amount			Expiration Date	Counterparty	Receive	(Pay)			Index	Net Unrealized Appreciation (Depreciation)
	47,818,481	USD	1/10/2007	Deutsche Bank	Return on		1 month LIBOR
					Index		+ 0.55	%	Gazprom	$	1,330,874
	37,919,200	USD	1/31/2007	Deutsche Bank	Return on		1 month LIBOR
					Index		+ 0.55	%	Gazprom		203,404
	21,450,275	USD	2/02/2007	Deutsche Bank	Return on		1 month LIBOR
					Index		+ 0.55	%	Gazprom		1,185
	45,986,950	USD	2/02/2007	Deutsche Bank	Return on		1 month LIBOR
					Index		+ 0.55	%	Gazprom		246,680
	50,231,250	USD	2/07/2007	Deutsche Bank	Return on		1 month LIBOR
					Index		+ 0.55	%	Gazprom		6,924,535
	37,175,077	USD	5/19/2006	Merrill Lynch	Return on		3 month LIBOR		MSCI Turkey
					Index		–4.00%		Index		1,555,922
	13,763,101	USD	9/11/2006	Merrill Lynch	Return on		3 month LIBOR		MSCI Taiwan
					Index		–3.50%		Index		1,156,625
										$	11,419,225

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ADR - American Depositary Receipt

GDR - Global Depository Receipt

NVDR - Non-Voting Depository Receipt

USD - United States Dollar

*  Non-income producing security.

(a)  Direct placement securities are restricted as to resale.

(b)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

See accompanying notes to the financial statements.

19

GMO Emerging Markets Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

(c)  Bankrupt issuer.

(d)  All or a portion of this security is out on loan (Note 2).

(e)  Indexed security in which price and/or coupon is linked to prices of other securities, securities indices, or other financial indicators (Note 2).

(f)  All or a portion of this security is held as collateral for open swap contracts.

(g)  Structured warrants with risks similar to equity swaps.

(h)  All or a portion of this security represents investment of security lending collateral (Note 2).

As of February 28, 2006, 62.3% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor.

See accompanying notes to the financial statements.

20

GMO Emerging Markets Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value, including securities on loan of $1,913,771 (cost $7,881,012,234) (Note 2)	$	12,523,675,802
Investments in affiliated issuers, at value (cost $0) (Notes 2 and 8)		45,402
Cash		22,043,505
Foreign currency, at value (cost $38,143,871) (Note 2)		38,097,296
Receivable for investments sold		36,039,997
Receivable for Fund shares sold		1,521
Dividends and interest receivable		42,503,387
Foreign taxes receivable		1,677,267
Receivable for open swap contracts (Note 2)		11,419,225
Receivable for expenses reimbursed by Manager (Note 3)		149,214
Total assets		12,675,652,616
Liabilities:
Payable for investments purchased		58,386,649
Collateral on securities loaned (Note 2)		2,049,075
Payable for Fund shares repurchased		78,440,056
Accrued capital gain and repatriation taxes payable (Note 2)		3,521,633
Payable to affiliate for (Note 3):
Management fee		7,813,815
Shareholder service fee		1,053,721
Trustees and Chief Compliance Officer fees		22,987
Accrued expenses		4,454,544
Total liabilities		155,742,480
Net assets	$	12,519,910,136

See accompanying notes to the financial statements.

21

GMO Emerging Markets Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006 — (Continued)

Net assets consist of:
Paid-in capital	$	6,853,244,910
Distributions in excess of net investment income		(4,399,665	)
Accumulated net realized gain		1,018,497,950
Net unrealized appreciation		4,652,566,941
	$	12,519,910,136
Net assets attributable to:
Class III shares	$	4,788,394,870
Class IV shares	$	3,081,021,381
Class V shares	$	1,447,059,003
Class VI shares	$	3,203,434,882
Shares outstanding:
Class III		212,880,072
Class IV		137,260,284
Class V		64,500,031
Class VI		142,667,750
Net asset value per share:
Class III	$	22.49
Class IV	$	22.45
Class V	$	22.44
Class VI	$	22.45

See accompanying notes to the financial statements.

22

GMO Emerging Markets Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $33,147,118)	$	299,376,263
Interest (including securities lending income of $166,046)		8,064,424
Total investment income		307,440,687
Expenses:
Management fee (Note 3)		84,958,860
Shareholder service fee – Class III (Note 3)		6,846,533
Shareholder service fee – Class IV (Note 3)		3,053,914
Shareholder service fee – Class V (Note 3)		678,348
Shareholder service fee – Class VI (Note 3)		1,219,588
Custodian and fund accounting agent fees		14,030,341
Transfer agent fees		65,019
Audit and tax fees		164,658
Legal fees		229,315
Trustees fees and related expenses (Note 3)		197,225
Registration fees		142,282
Miscellaneous		271,915
Total expenses		111,857,998
Fees and expenses reimbursed by Manager (Note 3)		(696,016	)
Net expenses		111,161,982
Net investment income (loss)		196,278,705
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers (net of foreign capital gains tax and CPMF tax of $1,857,451 and $440,804, respectively) (Note 2)		2,073,003,290
Investments in affiliated issuers		70,333
Closed swap contracts		21,272,655
Foreign currency, forward contracts and foreign currency related transactions		(10,347,881	)
Net realized gain (loss)		2,083,998,397
Change in net unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax accrual of $218,291) (Note 2)		1,325,998,306
Open swap contracts		7,318,173
Foreign currency, forward contracts and foreign currency related transactions		53,411
Net unrealized gain (loss)		1,333,369,890
Net realized and unrealized gain (loss)		3,417,368,287
Net increase (decrease) in net assets resulting from operations	$	3,613,646,992

See accompanying notes to the financial statements.

23

GMO Emerging Markets Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	196,278,705		$	163,707,788
Net realized gain (loss)		2,083,998,397			979,476,425
Change in net unrealized appreciation (depreciation)		1,333,369,890			1,234,346,922
Net increase (decrease) in net assets from operations		3,613,646,992			2,377,531,135
Distributions to shareholders from:
Net investment income
Class III		(94,886,366	)		(72,005,938	)
Class IV		(59,321,922	)		(49,441,849	)
Class V		(24,130,575	)		(1,769,486	)
Class VI		(48,705,197	)		(31,573,876	)
Total distributions from net investment income		(227,044,060	)		(154,791,149	)
Net realized gains
Class III		(605,236,149	)		(257,307,655	)
Class IV		(364,582,631	)		(179,643,341	)
Class V		(160,197,509	)		(24,240	)
Class VI		(297,291,532	)		(117,184,878	)
Total distributions from net realized gains		(1,427,307,821	)		(554,160,114	)
		(1,654,351,881	)		(708,951,263	)
Net share transactions (Note 7):
Class III		(459,485,882	)		(332,269,901	)
Class IV		(618,210,434	)		842,762,604
Class V		1,113,485,811			(316,414,743	)
Class VI		706,806,874			801,130,131
Increase (decrease) in net assets resulting from net share transactions		742,596,369			995,208,091
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		2,889,096			3,225,794
Class IV		1,273,937			697,130
Class V		611,195			—
Class VI		2,341,043			2,255,094
Increase in net assets resulting from net purchase premiums and redemption fees		7,115,271			6,178,018
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		749,711,640			1,001,386,109
Total increase (decrease) in net assets		2,709,006,751			2,669,965,981
Net assets:
Beginning of period		9,810,903,385			7,140,937,404
End of period (including distributions in excess of net investment income of $4,399,665 and accumulated undistributed net investment income of $1,958,038, respectively)	$	12,519,910,136		$	9,810,903,385

See accompanying notes to the financial statements.

24

GMO Emerging Markets Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	19.05		$	15.78		$	8.82		$	9.84		$	9.04
Income (loss) from investment operations:
Net investment income (loss)†		0.37			0.34			0.23			0.11			0.18
Net realized and unrealized gain (loss)		6.24			4.40			6.97			(1.00	)		0.80
Total from investment operations		6.61			4.74			7.20			(0.89	)		0.98
Less distributions to shareholders:
From net investment income		(0.43	)		(0.32	)		(0.24	)		(0.13	)		(0.18	)
From net realized gains		(2.74	)		(1.15	)		—			—			—
Total distributions		(3.17	)		(1.47	)		(0.24	)		(0.13	)		(0.18	)
Net asset value, end of period	$	22.49		$	19.05		$	15.78		$	8.82		$	9.84
Total Return(a)		37.99	%		31.45	%		82.10	%		(9.14	)%		11.15	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	4,788,395		$	4,433,098		$	4,079,172		$	1,215,653		$	826,960
Net expenses to average daily net assets		1.10	%		1.11	%		1.12	%		1.16	%		1.19	%(b)
Net investment income to average daily net assets		1.88	%		2.17	%		1.85	%		1.12	%		2.32	%
Portfolio turnover rate		41	%		57	%		46	%		59	%		74	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.01	%		0.02	%		0.02	%		0.02	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.01		$	0.01		$	0.06		$	0.05		$	0.05

(a)  The total returns would have been lower had certain expenses not been reimbursed on the Fund and underlying fund(s) during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(b)  Includes stamp duties and transfer taxes not reimbursed by the Manager, which approximate 0.035% of average daily net assets.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

25

GMO Emerging Markets Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	19.02		$	15.75		$	8.81		$	9.83		$	9.03
Income (loss) from investment operations:
Net investment income (loss)†		0.40			0.34			0.24			0.11			0.17
Net realized and unrealized gain (loss)		6.20			4.41			6.94			(0.99	)		0.82
Total from investment operations		6.60			4.75			7.18			(0.88	)		0.99
Less distributions to shareholders:
From net investment income		(0.43	)		(0.33	)		(0.24	)		(0.14	)		(0.19	)
From net realized gains		(2.74	)		(1.15	)		—			—			—
Total distributions		(3.17	)		(1.48	)		(0.24	)		(0.14	)		(0.19	)
Net asset value, end of period	$	22.45		$	19.02		$	15.75		$	8.81		$	9.83
Total Return(a)		38.05	%		31.59	%		81.97	%		(9.09	)%		11.22	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	3,081,021		$	3,255,865		$	1,799,736		$	1,003,594		$	735,455
Net expenses to average daily net assets		1.05	%		1.06	%		1.08	%		1.12	%		1.14	%(b)
Net investment income to average daily net assets		2.03	%		2.13	%		2.05	%		1.16	%		2.27	%
Portfolio turnover rate		41	%		57	%		46	%		59	%		74	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.01	%		0.02	%		0.02	%		0.02	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.01		$	0.00	(c)	$	0.05		$	0.02		$	0.03

(a)  The total returns would have been lower had certain expenses not been reimbursed on the Fund and underlying fund(s) during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(b)  Includes stamp duties and transfer taxes not reimbursed by the Manager, which approximate 0.035% of average daily net assets.

(c)  Purchase premiums and redemption fees were less than $0.01 per share

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

26

GMO Emerging Markets Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class V share outstanding throughout each period)

	Year Ended February 28, 2006			Period from February 11, 2005 (commencement of operations) through February 28, 2005(a)			Period from March 1, 2004 through October 26, 2004(a)			Period from August 4, 2003 (commencement of operations) through February 29, 2004
Net asset value, beginning of period	$	19.02		$	17.88		$	15.77		$	10.81
Income (loss) from investment operations:
Net investment income (loss)†		0.22			(0.01	)		0.25			0.13
Net realized and unrealized gain (loss)		6.39			1.15			(0.09	)		5.02
Total from investment operations		6.61			1.14			0.16			5.15
Less distributions to shareholders:
From net investment income		(0.45	)		—			(0.07	)		(0.19	)
From net realized gains		(2.74	)		—			(0.00	)(b)		—
Total distributions		(3.19	)		—			(0.07	)		(0.19	)
Net asset value, end of period	$	22.44		$	19.02		$	15.86		$	15.77
Total Return(c)		38.12	%		6.38	%**		1.10	%**		47.82	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,447,059		$	38,564		$	116,417		$	382,193
Net expenses to average daily net assets		1.04	%		1.03	%*		1.05	%*		1.07	%*
Net investment income to average daily net assets		1.06	%		(0.05)%(d)**			1.70%(d)**			1.69	%*
Portfolio turnover rate		41	%		57	%***		57	%***		46	%****
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.02	%*		0.01	%*		0.02	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02			—			—		$	0.03

(a)  The class was inactive from October 27, 2004 to February 11, 2005.

(b)  Distributions from net realized gains were less than $0.01 per share.

(c)  The total returns would have been lower had certain expenses not been reimbursed on the Fund and underlying fund(s) during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(d)  The ratio for the period has not been annualized since the Fund believes it would not be appropriate because the Fund's dividend income is not earned ratably throughout the fiscal year.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

***  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2005.

****  Calculation represents portfolio turnover of the Fund for the year ended February 29, 2004.

See accompanying notes to the financial statements.

27

GMO Emerging Markets Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class VI share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004(a)
Net asset value, beginning of period	$	19.03		$	15.76		$	10.45
Income (loss) from investment operations:
Net investment income (loss)†		0.38			0.34			0.14
Net realized and unrealized gain (loss)		6.23			4.41			5.42
Total from investment operations		6.61			4.75			5.56
Less distributions to shareholders:
From net investment income		(0.45	)		(0.33	)		(0.25	)
From net realized gains		(2.74	)		(1.15	)		—
Total distributions		(3.19	)		(1.48	)		(0.25	)
Net asset value, end of period	$	22.45		$	19.03		$	15.76
Total Return(b)		38.07	%		31.63	%		53.62	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	3,203,435		$	2,083,376		$	879,837
Net expenses to average daily net assets		1.00	%		1.01	%		1.04	%*
Net investment income to average daily net assets		1.94	%		2.15	%		1.54	%*
Portfolio turnover rate		41	%		57	%		46	%***
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.01	%		0.02	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02		$	0.03		$	0.04

(a)  Period from June 30, 2003 (commencement of operations) through February 29, 2004.

(b)  The total returns would have been lower had certain expenses not been reimbursed on the Fund and underlying fund(s) during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

***  Calculation represents portfolio turnover of the Fund for the year ended February 29, 2004.

See accompanying notes to the financial statements.

28

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Emerging Markets Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through direct and indirect investment in equity securities traded in the securities markets of emerging countries in Asia, Latin America, the Middle East, Africa, and Europe ("Emerging Markets"). The Fund's benchmark is the S&P/IFC (Investable) Composite Index.

Throughout the year ended February 28, 2006, the Fund had four classes of shares outstanding: Class III, Class IV, Class V and Class VI. Class V was liquidated on October 26, 2004, but became operational again on February 11, 2005. The principal economic difference among the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the various classes of shares is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Fund's prospectus.

The financial statements of other fund(s) of the Trust in which the Fund invests ("underlying fund(s)") should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect). Shares of GMO Special Purpose Holding Fund are not publicly available for direct purchase.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining

29

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of underlying fund(s) and other mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close, but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Indian regulators have alleged that the Fund violated certain conditions under which it was granted permission to operate in India and have restricted a portion of the Fund's locally held assets pending resolution of the dispute. The amount of these restricted assets is small relative to the size of the Fund, representing less than 0.1% of the Fund's net assets as of February 28, 2006. The valuation of this possible claim and all matters relating to the Fund's response to these allegations are subject to supervision and control of the Trustees, and all costs in respect of this matter are being borne by the Fund.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These

30

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

31

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of

32

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $1,913,771, collateralized by cash in the amount of $2,049,075, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

33

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund has recorded a deferred tax liability in respect of unrealized appreciation on foreign securities of $3,521,633 for potential capital gains and repatriation taxes as of February 28, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized gain (loss) in the Statement of Operations. For the year ended February 28, 2006, the Fund incurred $1,857,451 in capital gain taxes which is included in net realized gain (loss) in the Statement of Operations.

The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to/from the Brazilian market. During the year ended February 28, 2006, the Fund incurred $440,804 in CPMF tax which is included in the net realized gain (loss) on investments in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income - $394,742,796 and $226,404,971, respectively and long-term capital gains - $1,259,609,085 and $482,546,292, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $168,163,226 and $907,893,265 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	7,940,662,294	$	4,769,558,410	$	(186,499,500	)	$	4,583,058,910

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions and passive foreign investment company transactions. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	24,407,652	$	(24,407,652	)	$	—

34

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Interest income on inflation indexed securities is accrued daily based upon an inflation adjusted principal. Additionally, any increase in the principal or face amount of the securities adjusted for inflation is recorded as interest income. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata among the classes of shares of the Fund based on the relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.80% of the amount invested or redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. These fees are allocated relative to each class's net assets on the share transaction date. For the years ended February 28, 2006 and February 28, 2005, the Fund received $1,258,611 and $4,614,444 in purchase premiums and $5,856,660 and $1,563,574 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

Investments in securities of issuers in emerging countries present certain risks that are not inherent in many other investments. Many emerging countries present elements of political and/or economic instability. The securities markets of emerging countries are generally smaller and less developed than the securities markets of the U.S. and developed foreign markets. Further, countries may impose various types of foreign currency regulations or controls which may impede the Fund's ability to repatriate amounts it receives. The Fund may

35

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

acquire interests in securities in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The markets in emerging countries are typically less liquid than those of developed markets. Accordingly, the Fund may not be able to realize in an actual sale amounts approximating those used to value its holdings.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.81% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.15% for Class III shares, 0.105% for Class IV shares, 0.085% for Class V shares, and 0.055% for Class VI shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual direct operating expenses (excluding shareholder service fees, custody fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.81% of the average daily net assets.

The Fund incurs fees and expenses indirectly as a shareholder in the GMO Special Purpose Holding Fund. For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees)	Indirect Shareholder Service Fees			Total Indirect Expenses
< (0.001%)		0.000	%	< 0.001%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $117,529 and $70,965, respectively. No remuneration was paid to any other officer of the Trust.

36

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 were as follows:

	Purchases		Sales
Investments (non-U.S. Government securities)	$	4,236,416,328	$	5,097,089,506

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Related parties

As of February 28, 2006, 0.7% of the Fund's shares were held by thirty-one related parties comprised of certain GMO employee accounts, and 25.4% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		11,031,646		$	215,401,452			22,789,985		$	356,466,932
Shares issued to shareholders in reinvestment of distributions		33,704,110			653,183,451			18,207,389			302,857,058
Shares repurchased		(64,515,411	)		(1,328,070,785	)		(66,895,746	)		(991,593,891	)
Purchase premiums and redemption fees		—			2,889,096			—			3,225,794
Net increase (decrease)		(19,779,655	)	$	(456,596,786	)		(25,898,372	)	$	(329,044,107	)

37

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		44,751,392		$	920,854,601			50,766,722		$	746,501,294
Shares issued to shareholders in reinvestment of distributions		21,481,005			412,298,040			13,485,724			223,882,226
Shares repurchased		(100,173,580	)		(1,951,363,075	)		(7,304,133	)		(127,620,916	)
Purchase premiums and redemption fees		—			1,273,937			—			697,130
Net increase (decrease)		(33,941,183	)	$	(616,936,497	)		56,948,313		$	843,459,734
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class V:	Shares			Amount			Shares			Amount
Shares sold		89,416,484		$	1,733,477,556			2,027,531		$	36,252,254
Shares issued to shareholders in reinvestment of distributions		9,153,541			184,328,084			39,776			557,259
Shares repurchased		(36,097,525	)		(804,319,829	)		(24,279,304	)		(353,224,256	)
Purchase premiums and redemption fees		—			611,195			—			—
Net increase (decrease)		62,472,500		$	1,114,097,006			(22,211,997	)	$	(316,414,743	)
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class VI:	Shares			Amount			Shares			Amount
Shares sold		35,580,099		$	780,535,719			49,525,885		$	729,514,934
Shares issued to shareholders in reinvestment of distributions		16,848,581			326,739,274			8,119,899			135,307,131
Shares repurchased		(19,260,319	)		(400,468,119	)		(3,976,582	)		(63,691,934	)
Purchase premiums and redemption fees		—			2,341,043			—			2,255,094
Net increase (decrease)		33,168,361		$	709,147,917			53,669,202		$	803,385,225

38

GMO Emerging Markets Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Special Purpose Holding Fund	$	125,078	$	—	$	—	$	—	$	70,333	$	45,402	*

*  After the effect of return of capital distributions of $44,457 and $12,427 on April 5, 2005 and February 21, 2006, respectively.

39

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Emerging Markets Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Emerging Markets Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

40

GMO Emerging Markets Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

41

GMO Emerging Markets Fund

(A Series of GMO Trust)

Fund Expenses — (Continued)
February 28, 2006 (Unaudited)

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		1.10	%	$	1,000.00	$	1,309.60	$	6.30
	2) Hypothetical			1.10	%	$	1,000.00	$	1,019.34	$	5.51
Class IV
	1	) Actual		1.06	%	$	1,000.00	$	1,310.60	$	6.07
	2) Hypothetical			1.06	%	$	1,000.00	$	1,019.54	$	5.31
Class V
	1	) Actual		1.04	%	$	1,000.00	$	1,310.30	$	5.96
	2) Hypothetical			1.04	%	$	1,000.00	$	1,019.64	$	5.21
Class VI
	1	) Actual		1.01	%	$	1,000.00	$	1,310.60	$	5.79
	2) Hypothetical			1.01	%	$	1,000.00	$	1,019.79	$	5.06

*  Expenses are calculated using each Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

42

GMO Emerging Markets Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $35,004,569 and recognized foreign source income of $332,523,381.

The Fund's distributions to shareholders include $1,259,609,085 from long-term capital gains.

For taxable, non-corporate shareholders, 38.62% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006 $0 and $113,412,132, respectively, or if determined to be different, the qualified short-term capital gains of such year.

43

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

44

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

45

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

46

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

47

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Consolidated Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

Since its inception on April 11, 2005, the GMO Alternative Asset Opportunity Fund returned +6.5% for the fiscal year ended February 28, 2006, as compared to +5.1% for the Fund's benchmark, the GMO Alternative Asset Opportunity Index (50% JPMorgan U.S. 3-Month Cash Index / 50% Dow Jones AIG Commodities Index) for the same period. Consistent with the Fund's investment objectives and policies, during the period the Fund was exposed to commodities through futures and swaps.

The largest contributors to outperformance were Sugar, Natural Gas, and Gold. The largest detractors were Heating Oil, Wheat, and Soybean Oil.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  The GMO Alternative Asset Opportunity Index is a composite benchmark computed by GMO and comprised 50% JPMorgan U.S. 3-Month Cash Index and 50% Dow Jones AIG Commodity Index.

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)
Consolidated Investment Concentration Summary (a)
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Debt Obligation(s)		73.9	%
Short-Term Investment(s)		14.8
Mutual Fund		4.9
Futures		0.1
Call Options Purchased		0.0
Forward Currency Contracts		0.0
Swaps		0.0
Other		6.3
		100.0	%

(a)  GMO Alternative Asset SPC Ltd. is a 100% owned subsidiary of GMO Alternative Asset Opportunity Fund.

1

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)
Consolidated Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Par Value ($) / Shares		Description	Value ($)
		DEBT OBLIGATIONS — 8.2%
		U.S. Government — 8.2%
	15,000,000	U.S. Treasury Note, 3.75%, due 03/31/07 (a) (c)		14,834,595
		TOTAL DEBT OBLIGATIONS (COST $15,001,887)		14,834,595
		MUTUAL FUNDS — 72.5%
	4,837,581	GMO Short-Duration Collateral Fund (b)		123,842,063
	8,155,414	Merrimac Cash Series, Premium Class (c)		8,155,414
		TOTAL MUTUAL FUNDS (COST $131,785,470)		131,997,477
		SHORT-TERM INVESTMENT(S) — 12.9%
	7,000,000	Fannie Mae, 4.37%, due 03/27/06 (c)		6,954,115
	1,600,000	Fannie Mae, 4.30%, due 03/03/06 (c)		1,598,089
	1,800,000	Federal Farm Credit Bank, 4.38%, due 03/15/06 (c)		1,795,401
	6,800,000	Federal Farm Credit Bank, 4.38%, due 03/06/06 (c)		6,790,899
	4,600,000	Federal Home Loan Bank, 4.37%, due 03/01/06 (c)		4,595,533
	1,800,000	Freddie Mac, 4.40%, due 03/28/06 (c)		1,792,520
				23,526,557
		TOTAL SHORT-TERM INVESTMENT(S) (COST $23,526,557)		23,526,557
		TOTAL INVESTMENTS — 93.6% (Cost $170,313,914)		170,358,629
		Other Assets and Liabilities (net) — 6.4%		11,587,991
		TOTAL NET ASSETS — 100.0%	$	181,946,620

See accompanying notes to the financial statements.

2

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Consolidated Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Futures Contracts ^(c)

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	63	Gold 100 OZ	April 2006	$	3,552,570	$	8,027
	74	Silver	May 2006		3,627,850		61,717
	27	Wheat	May 2006		514,350		(122	)
						$	69,622
	Sales
	60	Cocoa	May 2006	$	876,600	$	18,974
	15	Coffee "C"	May 2006		639,563		(1,321	)
	206	Corn	May 2006		2,459,125		(75,447	)
	6	Copper	May 2006		326,775		6,798
	7	Cotton No. 2	May 2006		194,040		(32	)
	19	Heating Oil	April 2006		1,374,475		(27,122	)
	103	Lean Hogs	April 2006		2,532,770		20,204
	6	Live Cattle	April 2006		209,340		33
	18	Natural Gas	April 2006		1,208,520		140,925
	19	Gasoline NY Unleaded	April 2006		1,269,379		1,162
	86	Soybean	May 2006		2,554,200		4,000
	95	Soybean Meal	May 2006		1,672,950		55,307
	85	Soybean Oil	May 2006		1,222,470		(66,683	)
	111	Sugar (World)	May 2006		2,128,358		77,901
						$	154,699

At February 28, 2006, GMO Alternative Asset SPC Ltd. had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

See accompanying notes to the financial statements.

3

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Consolidated Schedule of Investments — (Continued)
February 28, 2006

Swap Agreements

Total Return Swaps ^(c)

Notional Amount			Expiration Date	Counterparty	Pay			Receive	Net Unrealized Appreciation (Depreciation)
	5,648,766	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.36	%	Commodity Total
								Return Index	$	(5,870	)
	5,529,541	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.36	%	Commodity Total
								Return Index		(5,746	)
	15,291,079	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.36	%	Commodity Total
								Return Index		(15,890	)
	4,000,000	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.33	%	Commodity Total
								Return Index		(78,724	)
	9,342,060	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.36	%	Commodity Total
								Return Index		(9,708	)
	50,508,855	USD	4/12/2006	AIG		3 month T-Bill		Return on DJ-AIG
						+ 0.36	%	Commodity Total
								Return Index		(52,489	)
									$	(168,427	)

Notes to Schedule of Investments:

(a)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts and open swap contracts (Note 2).

(b)  Affiliated issuer.

(c)  All or a portion of this security is owned by GMO Alternative Asset SPC Ltd., which is a 100% owned subsidiary of GMO Alternative Asset Opportunity Fund.

Currency Abbreviations:

USD - United States Dollar

See accompanying notes to the financial statements.

4

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)


Consolidated Statement of Assets and Liabilities — February 28, 2006

	GMO Alternative Asset Opportunity Fund		GMO Alternative Asset SPC Ltd.		Eliminations			Consolidated Totals
Assets:
Investments in unaffiliated issuers, at value (consolidated cost $46,683,858) (Note 2)	$	3,435,599	$	43,080,967	$	—		$	46,516,566
Investments in affiliated issuer, at value (consolidated cost $123,630,056) (Note 2)		171,709,678		—		(47,867,615	)		123,842,063
Cash		6,952,582		4,719,815		—			11,672,397
Interest receivable		1,781		284,249		—			286,030
Receivable for expenses reimbursed by Manager (Note 3)		5,852		10,220		—			16,072
Total assets		182,105,492		48,095,251		(47,867,615	)		182,333,128
Liabilities:
Payable to affiliate for (Note 3):
Management fee		63,100		—		—			63,100
Shareholder service fee		21,033		—		—			21,033
Trustees and Chief Compliance Officer fees		365		—		—			365
Payable for open swap contracts (Note 2)		—		168,427		—			168,427
Payable for variation margin on open futures contracts (Note 2)		—		8,146		—			8,146
Accrued expenses		74,374		51,063		—			125,437
Total liabilities		158,872		227,636		—			386,508
Net assets	$	181,946,620	$	47,867,615	$	(47,867,615	)	$	181,946,620
Net assets consist of:
Net capital(1)	$	181,846,011						$	181,846,011
Net unrealized appreciation		100,609							100,609
	$	181,946,620						$	181,946,620
Shareholders capital
Class III	$	181,946,620						$	181,946,620
Shares outstanding
Class III		6,832,447							6,832,447
Net asset value per share
Class III	$	26.63						$	26.63

(1)  Net capital includes net investment income (loss) and net realized gain (loss) on investments.

See accompanying notes to the financial statements.

5

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Consolidated Statement of Operations — For the Period from April 11, 2005
(commencement of operations) to February 28, 2006

	GMO Alternative Asset Opportunity Fund			GMO Alternative Asset SPC Ltd.			Eliminations		Consolidated Totals
Investment Income:
Dividend from affiliated issuers (Note 8)	$	3,623,033		$	—		$	—	$	3,623,033
Interest		33,157			1,339,241			—		1,372,398
Total income		3,656,190			1,339,241			—		4,995,431
Expenses:
Management fee (Note 3)		603,360			—					603,360
Shareholder service fee – Class III (Note 3)		201,120			—					201,120
Custodian and transfer agent fees		14,829			68,155			—		82,984
Audit and tax fees		70,014			22,806			—		92,820
Legal fees		6,459			8,056			—		14,515
Trustees fees and related expenses (Note 3)		7,726			7,015			—		14,741
Miscellaneous		4,932			1,775			—		6,707
Total expenses		908,440			107,807			—		1,016,247
Fees and expenses reimbursed by Manager (Note 3)		(95,131	)		(107,807	)		—		(202,938	)
Net expenses		813,309			—			—		813,309
Net investment income		2,842,881			1,339,241			—		4,182,122
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuer		—			(7	)		—		(7	)
Investments in affiliated issuer		107,023			—			—		107,023
Closed futures contracts		—			2,597,409			—		2,597,409
Closed swap contracts		—			1,847,370			—		1,847,370
Net realized gain (loss)		107,023			4,444,772			—		4,551,795
Change in net unrealized appreciation (depreciation) on:
Investments		100,609			(167,262	)		111,368		44,715
Open futures contracts		—			224,321			—		224,321
Open swap contracts		—			(168,427	)		—		(168,427	)
Net unrealized gain (loss)		100,609			(111,368	)		111,368		100,609
Net realized and unrealized gain (loss)		207,632			4,333,404			111,368		4,652,404
Net increase (decrease) in net assets resulting from operations	$	3,050,513		$	5,672,645		$	111,368	$	8,834,526

See accompanying notes to the financial statements.

6

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)


Consolidated Statement of Changes in Net Assets

	Period from April 11, 2005 (commencement of operations) to February 28, 2006
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	4,182,122
Net realized gain (loss)		4,551,795
Change in net unrealized appreciation (depreciation)		100,609
Net increase (decrease) in net assets from operations		8,834,526
Fund share transactions: (Note 7)
Proceeds from sale of shares
Class III		173,438,589
Cost of shares repurchased
Class III		(326,495	)
Net increase (decrease) in Fund share transactions		173,112,094
Total increase (decrease) in net assets		181,946,620
Net assets:
Beginning of period		—
End of period	$	181,946,620

See accompanying notes to the financial statements.

7

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Consolidated Financial Highlights
(For a share outstanding throughout the period)

	Period from April 11, 2005 (commencement of operations) to February 28, 2006
Net asset value, beginning of period	$	25.00
Income (loss) from investment operations:
Net investment income (loss)(a)		0.73	†
Net realized and unrealized gain (loss)		0.90
Total from investment operations		1.63
Net asset value, end of period	$	26.63
Total Return(b)		6.52	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	181,947
Net expenses to average daily net assets(c)		0.61	%*
Net investment income to average daily net assets(a)		3.12	%*
Portfolio turnover rate		13	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.15	%*

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying funds in which the Fund invests.

(b)  Total return would have been lower had certain expenses not been reimbursed during the period shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying funds (See Note 3).

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

8

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements
February 28, 2006

1.  Organization

GMO Alternative Asset Opportunity Fund (the "Fund"), which commenced operations on April 11, 2005, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return by seeking exposure to investment returns of commodity futures; commodity index options and options on futures; swap contracts and other commodity related derivatives; and non-commodity futures, options and swap contracts. Additionally, the Fund seeks exposure to high quality U.S. and foreign fixed income securities directly or indirectly through investments in GMO Short-Duration Collateral Fund ("underlying fund(s)").

The Fund's benchmark is a composite benchmark computed by GMO consisting of the Dow Jones-AIG Commodity Index and the JPMorgan 3-Month Cash Index in the following proportions: 50% (Dow Jones-AIG Commodity), and 50% (JPMorgan 3-Month Cash). The Manager does not seek to manage risk relative to the Fund's benchmark or match the Fund's portfolio composition to that of its benchmark.

Shares of the Fund are not publicly offered and are principally available only to other funds of the Trust and certain accredited investors.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect).

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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.

9

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements include the accounts of the GMO Alternative Asset Opportunity Fund and its majority-owned investment in GMO Alternative Asset SPC Ltd. The consolidated financial statements include 100% of the assets and liabilities of GMO Alternative Asset SPC Ltd. All significant fund accounts and transactions have been eliminated in consolidation.

Portfolio valuation

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Foreign equity securities held by certain underlying fund(s) in which the Fund invests are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available, or whose values the Manager has determined to be unreliable, are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market maker may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 20.8% of net assets.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with a futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures

10

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

11

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Taxes

The Fund elected to be taxed as a partnership for federal income tax purposes. As a partnership, the Fund will not be subject to federal and state income tax. Instead, each shareholder is responsible for the tax liability or benefit related to his/her allocable share of taxable income or loss. Accordingly, no provision (benefit) for federal and state income taxes is reflected in the accompanying financial statements.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	174,678,802	$	212,007	$	(4,532,180	)	$	(4,320,173	)

Distributions

The Fund does not intend to make any distributions to its shareholders but may do so in the sole discretion of the Trustees.

Security transactions and related investment income

Security transactions are accounted for on the trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

12

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets.

Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.45% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.45% of the average daily net assets.

13

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

The Fund incurs fees and expenses indirectly as a shareholder in the GMO Short-Duration Collateral Fund. For the period ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.002	%		0.000	%		0.010	%		0.012	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the period ended February 28, 2006 was $1,483 and $1,102, respectively. No remuneration was paid by the Fund to any other officer of the Trust.

The Fund's investments in commodity-related derivatives are generally made through GMO Alternative Asset Opportunity SPC Ltd., a wholly-owned subsidiary organized as a Bermuda limited liability company, which GMO serves as investment manger but does not receive any additional management or other fees for such services.

4.  Purchases and sales of securities

For the year ended February 28, 2006, cost of purchases and proceeds from sales of investments, other than short-term obligations, were as follows:

	Purchases		Sales
U.S. Government securities	$	15,003,516	$	—
Investments (non-U.S. Government securities)		142,623,033		19,100,000

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

14

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Notes to Consolidated Financial Statements — (Continued)
February 28, 2006

6.  Principal shareholders

As of February 28, 2006, 65.0% of the outstanding shares of the Fund was held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Both of the shareholders are other funds of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 100.0% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Period from April 11, 2005 (commencement of operations) through February 28, 2006
Class III:	Shares			Amount
Shares sold		6,844,512		$	173,438,589
Shares repurchased		(12,065	)		(326,495	)
Net increase (decrease)		6,832,447		$	173,112,094

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of an affiliated issuer during the period ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gain Distributions		Value, end of period
GMO Short-Duration Collateral Fund	$	—	$	142,623,033	$	19,100,000	$	1,623,033	$	—	$	123,842,063
Totals	$	—	$	142,623,033	$	19,100,000	$	1,623,033	$	—	$	123,842,063

15

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Alternative Asset Opportunity Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Alternative Asset Opportunity Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the period from April 11, 2005 (commencement of operations) to February 28, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

16

GMO Alternative Asset Opportunity Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management, shareholder service fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.62	%	$	1,000.00	$	990.00	$	3.06
2) Hypothetical		0.62	%	$	1,000.00	$	1,021.72	$	3.11

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

17

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

18

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee3.
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

19

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

21

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Emerging Country Debt Share Fund returned +19.2% for the fiscal year ended February 28, 2006, as compared to +13.1% for the JPMorgan Emerging Markets Bond Index Global (EMBIG).

The Fund outperformed the benchmark during the fiscal year by 6.1%. EMBIG spreads over U.S. Treasuries tightened 93 basis points to 187 basis points (net of the effect of changes in the composition of the index's Argentina sub-component), while the yield on the 10-year U.S. Treasury bond rose by 17 basis points to 4.55%. The EMBIG return of +13.1% was driven by carry (the yield on the index averaged 7%) and capital gains from spread tightening, despite the 17 basis point increase in U.S. interest rates.

The biggest gainers of the fiscal year were Ivory Coast (+47.8%), Argentina (+25.2%), Venezuela (+23.8%) and Dominican Republic (+23.8%). Latin American countries outperformed those outside the region, +15.4% to +10.0%. The worst performing countries for the year were Bulgaria (+1.3%), Tunisia (+1.4%), and China (+2.9%).

Market selection added value; primarily from the Venezuela and Ivory Coast overweights and the Malaysia and China underweights. Overweighting Ukraine and underweighting Philippines detracted from value added. Security selection added 530 basis points of positive alpha in total. Positions in Brazil were the largest contributor, as credit default swaps and currency options added value. Bond selection was also highly positive in Russia, Turkey, and Mexico.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  JPMorgan EMBI Global + represents the JPMorgan EMBI prior to 8/95, JPMorgan EMBI+ through 12/31/99 and the JPMorgan EMBI Global thereafter. The Manager changed the benchmark due to the belief that the EMBIG is more diversified and representative of the universe of emerging country debt.

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Debt Obligation(s)		85.3	%
Loan Participations		6.8
Loan Assignments		6.6
Call Options Purchased		4.4
Swaps		4.4
Mutual Funds		0.9
Rights and Warrants		0.7
Promissory Notes		0.3
Put Options Purchased		0.2
Short-Term Investment(s)		0.1
Forward Currency Contracts		0.1
Futures		0.0
Written Options		(1.6	)
Reverse Repurchase Agreements		(17.6	)
Other		9.4
		100.0	%
Country Summary**	% of Investments
Brazil		18.0	%
Mexico		16.2
Russia		12.6
Venezuela		10.5
Turkey		10.3
Colombia		4.0
Ukraine		3.7
Philippines		3.0
Uruguay		2.3
Argentina		2.1
Peru		1.9
Qatar		1.3
Indonesia		1.3
Nigeria		1.2

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

1

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary** — (Continued)	% of Investments
Ecuador		1.1	%
Algeria		1.0
India		0.9
Thailand		0.9
Ivory Coast		0.8
Vietnam		0.7
Malaysia		0.7
Jamaica		0.6
Serbia		0.6
Dominican Republic		0.6
Chile		0.5
Panama		0.5
Poland		0.5
Egypt		0.4
Africa		0.4
South Africa		0.4
Bosnia		0.3
Morocco		0.3
El Salvador		0.3
Costa Rica		0.2
China		0.2
Nicaragua		0.2
Tunisia		0.2
Belize		0.1
Trinidad & Tobago		0.1
Bulgaria		(0.1	)
Lebanon		(0.1	)
Romania		(0.1	)
South Korea		(0.6	)
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

2

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		MUTUAL FUND — 99.9%
		Affiliated Issuer(s) — 99.9%
	16,699,156	GMO Emerging Country Debt Fund, Class III		188,700,447
		TOTAL MUTUAL FUND (COST $178,513,394)		188,700,447
		TOTAL INVESTMENTS — 99.9% (Cost $178,513,394)		188,700,447
		Other Assets and Liabilities (net) — 0.1%		154,120
		TOTAL NET ASSETS — 100.0%	$	188,854,567

See accompanying notes to the financial statements.

3

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in affiliated issuers, at value (cost $178,513,394) (Notes 2 and 8)	$	188,700,447
Cash		248,096
Receivable for Fund shares sold		72,641
Interest receivable		290
Total assets		189,021,474
Liabilities:
Payable for investments purchased		148,096
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		209
Accrued expenses		18,602
Total liabilities		166,907
Net assets	$	188,854,567
Net assets consist of:
Paid-in capital	$	177,339,237
Accumulated net realized gain		1,328,277
Net unrealized appreciation		10,187,053
	$	188,854,567
Net assets attributable to:
Class III shares	$	188,854,567
Shares outstanding:
Class III		18,291,563
Net asset value per share:
Class III	$	10.32

See accompanying notes to the financial statements.

4

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	16,837,804
Interest		18,388
Total investment income		16,856,192
Expenses:
Custodian, fund accounting agent and transfer agent fees		18,743
Audit and tax fees		13,201
Legal fees		3,157
Trustees fees and related expenses (Note 3)		2,893
Registration fees		20,611
Miscellaneous		3,812
Total expenses		62,417
Fees and expenses reimbursed by Manager (Note 3)		(19,728	)
Net expenses		42,689
Net investment income (loss)		16,813,503
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		4,574,761
Realized gains distributions from affiliated issuers (Note 8)		7,262,517
Net realized gain (loss)		11,837,278
Change in net unrealized appreciation (depreciation) on investments		(714,732	)
Net realized and unrealized gain (loss)		11,122,546
Net increase (decrease) in net assets resulting from operations	$	27,936,049

See accompanying notes to the financial statements.

5

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	16,813,503		$	11,949,262
Net realized gain (loss)		11,837,278			6,251,534
Change in net unrealized appreciation (depreciation)		(714,732	)		2,746,511
Net increase (decrease) in net assets from operations		27,936,049			20,947,307
Distributions to shareholders from:
Net investment income
Class III		(18,779,578	)		(11,946,927	)
Net realized gains
Class III		(10,909,948	)		(3,945,279	)
		(29,689,526	)		(15,892,206	)
Net share transactions (Note 7):
Class III		58,758,037			25,852,230
Total increase (decrease) in net assets		57,004,560			30,907,331
Net assets:
Beginning of period		131,850,007			100,942,676
End of period (including accumulated undistributed net investment income of $0 and $4,608, respectively)	$	188,854,567		$	131,850,007

See accompanying notes to the financial statements.

6

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	10.54		$	10.05		$	9.56		$	9.25		$	8.90
Income (loss) from investment operations:
Net investment income (loss)(a)†		1.18			1.13			1.10			0.83			1.03
Net realized and unrealized gain (loss)		0.71			0.86			1.73			0.57			0.51
Total from investment operations		1.89			1.99			2.83			1.40			1.54
Less distributions to shareholders:
From net investment income		(1.33	)		(1.12	)		(1.85	)		(1.09	)		(1.19	)
From net realized gains		(0.78	)		(0.38	)		(0.49	)		—			—
Total distributions		(2.11	)		(1.50	)		(2.34	)		(1.09	)		(1.19	)
Net asset value, end of period	$	10.32		$	10.54		$	10.05		$	9.56		$	9.25
Total Return(b)		19.21	%		20.27	%		29.91	%		15.81	%		18.47	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	188,855		$	131,850		$	100,943		$	66,140		$	89,952
Net expenses to average daily net assets(c)		0.03	%		0.00	%(d)		0.00	%(d)		0.00	%(d)		0.00	%(d)
Net investment income to average daily net assets(a)		10.91	%		10.81	%		10.06	%		8.88	%		11.43	%
Portfolio turnover rate		13	%		14	%		20	%		30	%		14	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.06	%		0.08	%		0.08	%		0.06	%

(a)  Net investment income is affected by the timing of the declaration of dividends by GMO Emerging Country Debt Fund ("ECDF").

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Net expenses exclude expenses incurred indirectly through investment in ECDF (See note 3).

(d)  Net expenses to average daily net assets were less than 0.01%.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

7

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Emerging Country Debt Share Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in Class III Shares of GMO Emerging Country Debt Fund ("ECDF" or "underlying fund(s)"), a fund of the Trust. GMO also serves as investment manager to ECDF. ECDF pursues its objective by investing primarily in sovereign debt of developing countries in Asia, Latin America, the Middle East, Africa and Eastern Europe. The Fund's benchmark is the J.P. Morgan Emerging Markets Bond Index Global (EMBIG). The financial statements of ECDF should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Shares of ECDF are valued at their net asset value. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value.

Certain investments in securities held by the underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market maker may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements of the underlying fund(s). As of February 28, 2006, the total value of these securities represented 25.3% of net assets.

8

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $18,772,148 and $11,946,927, respectively and long-term capital gains – $10,917,378 and $3,945,279, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $1,508,752 of undistributed long-term capital gains. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)		Net Unrealized Appreciation (Depreciation)
$	178,693,870	$	10,006,577	$	—	$	10,006,577

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	1,961,467	$	(1,961,467	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

9

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in ECDF (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the Fund does not charge any purchase premium or redemption fee in connection with the purchase and sale of Fund shares. As a shareholder in ECDF, the Fund will indirectly bear ECDF's purchase premiums and redemption fees which are 0.50% and 0.25%, respectively. These fees are paid to and retained by ECDF. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the underlying fund may be waived in extraordinary circumstances if the underlying fund will not incur transaction costs. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in ECDF. Investments in emerging country debt present certain risks that are not inherent in many other securities. Many emerging countries present elements of political and/or economic instability, which may result in ECDF's inability to collect on a timely basis, or in full, principal and interest payments. Further, countries may impose various types of foreign currency regulations or controls which may impede ECDF's ability to repatriate amounts it receives. ECDF may acquire interests in securities or bank loans which are in default at the time of acquisition in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The markets for emerging country debt are relatively illiquid. Accordingly, ECDF may not be able to realize in an actual sale amounts approximating those used to value its holdings. Additionally, the investment risk associated with an investment in ECDF may be more pronounced to the extent that ECDF engages in derivative transactions.

ECDF owns loans and bonds representing significant exposure to the risk of default in many countries, but has the most sizable of such positions relating to Russia, Mexico and Brazil. The Fund's financial position would be substantially adversely affected in the case of a default by these countries on obligations held by ECDF, or on obligations issued by those countries generally. ECDF has purchased default protection in the form of credit default swap agreements with respect to debt associated with those countries, which may

10

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

offset some of the losses that ECDF might experience in the case of default on bonds issued by such countries; however ECDF as of February 28, 2006 has sold more of such default protection than it has purchased. However, it is important to note that (i) such protection would not cover losses due to defaults on loan assignments or participations, (ii) such protection will generally not be sufficient to cover all of ECDF's losses in the case of default, and (iii) due to the privately negotiated nature of such instruments, under some circumstances, the protection offered by such instruments may not be realized, even if ECDF incurs substantial losses due to weakening of the credit or virtual default by the countries.

3.  Fees and other transactions with affiliates

The manager does not directly charge an advisory fee or shareholder service fee. GMO, in its capacity as Manager of ECDF, earns a management fee at the annual rate of 0.35% of ECDF's average daily net assets. Additionally, Class III shares of ECDF bear a shareholder service fee at the annual rate of 0.15% of ECDF Class III shares' average daily net assets.

Effective July 1, 2005, GMO no longer reimburses any Fund fees or expenses. Prior to July 1, 2005, GMO had been contractually obligated to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes).

The Fund incurs fees and expenses indirectly as a shareholder in ECDF. For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.419	%		0.149	%		0.217	%		0.785	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $1,687 and $1,017, respectively. No remuneration was paid to any other officer of the Trust.

11

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $74,077,468 and $20,429,958, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 100% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		4,335,883		$	46,077,234			2,747,234		$	29,345,812
Shares issued to shareholders in reinvestment of distributions		3,010,030			29,689,525			1,545,795			15,892,206
Shares repurchased		(1,562,483	)		(17,008,722	)		(1,831,725	)		(19,385,788	)
Net increase (decrease)		5,783,430		$	58,758,037			2,461,304		$	25,852,230

12

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of this issuer during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Country Debt Fund, Class III	$	131,192,910	$	74,077,468	$	20,429,958	$	16,837,804	$	7,262,517	$	188,700,447

8.  Subsequent event

On April 11, 2006, the Fund received a redemption request that represented approximately 45% of the Fund's assets.

13

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Emerging Country Debt Share Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Emerging Country Debt Share Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

14

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.87	%	$	1,000.00	$	1,104.30	$	4.54
2) Hypothetical		0.87	%	$	1,000.00	$	1,020.48	$	4.36

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

15

GMO Emerging Country Debt Share Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $10,917,378 from long-term capital gains.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $1,546,326 or if determined to be different, the qualified interest income of such year.

16

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

17

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004) ; and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

18

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002;Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

19

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Fixed Income Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Special Purpose Holding Fund returned +124.8% for the fiscal year ended February 28, 2006, as compared to +3.7% for the JPMorgan U.S. 3-Month Cash Index.

The Fund outperformed the benchmark during the fiscal year by +121.1%. The returns on the Fund were positive as trust administrators released a portion of principal to bondholders and the Fund received litigation proceeds.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Special Purpose Holding Fund

(A Series of GMO Trust)
Consolidated Investments Concentration Summary (a)
February 28, 2006

Asset Class Summary	% of Total Net Assets
Debt Obligations		86.9	%
Other		13.1
		100.0	%

(a)  GMO SPV I, LLC is a 74.9% owned subsidiary of GMO Special Purpose Holding Fund.

1

GMO Special Purpose Holding Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Description	Value ($)
DEBT OBLIGATIONS — 86.9% (a)
Asset-Backed Securities — 86.9%
Health Care Receivables — 86.9%
Interest related to the Bankruptcy Estate of NPF VI Inc. Series 02-1 Class A (b)		990,000
Interest related to the Bankruptcy Estate of NPF XII Inc Series 00-3 Class A (b)		836,000
Interest related to the Bankruptcy Estate of NPF XII Inc Series 02-1 Class A (b)		2,128,000
		3,954,000
Total Asset-Backed Securities		3,954,000
TOTAL DEBT OBLIGATIONS (COST $0)		3,954,000
TOTAL INVESTMENTS — 86.9% (Cost $0)		3,954,000

Other Assets and Liabilities (net) — 13.1%		598,535
TOTAL NET ASSETS — 100.0%	$	4,552,535

Notes to Schedule of Investments:

(a)  Owned by GMO SPV I, LLC. GMO SPV I, LLC is a 74.9% subsidiary of GMO Special Purpose Holding Fund.

(b)  Security in default.

See accompanying notes to the financial statements.

2

GMO Special Purpose Holding Fund

(A Series of GMO Trust)


Consolidated Statement of Assets and Liabilities — February 28, 2006

	GMO Special Purpose Holding Fund		GMO SPV I, LLC		Minority Interest			Eliminations			Consolidated Totals
Assets:
Investments in unaffiliated issuers, at value (cost $0) (Note 2)	$	—	$	3,954,000	$	—		$	—		$	3,954,000
Investments in affiliated issuers, at value (cost $0) (Note 2)		4,162,820		—		—			(4,162,820	)		—
Cash		464,389		1,696,848		—			—			2,161,237
Interest receivable		1,009		1,053		—			—			2,062
Receivable for expenses reimbursed by Manager (Note 3)		946		3,586		—			—			4,532
Total assets		4,629,164		5,655,487		—			(4,162,820	)		6,121,831
Liabilities:
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		294		—		—			—			294
Accrued expenses		76,335		92,259		—			—			168,594
Minority interest		—		—		1,400,408			—			1,400,408
Total liabilities		76,629		92,259		1,400,408			—			1,569,296
Net assets	$	4,552,535	$	5,563,228	$	(1,400,408	)	$	(4,162,820	)	$	4,552,535
Shareholders' capital
Net capital (1)	$	389,715	$	1,609,228	$	(405,084	)	$	(1,204,144	)	$	389,715
Net unrealized appreciation (depreciation)		4,162,820		3,954,000		(995,324	)		(2,958,676	)		4,162,820
Shareholders' capital	$	4,552,535	$	5,563,228	$	(1,400,408	)	$	(4,162,820	)	$	4,552,535
Shares outstanding		554,071										554,071
Net asset value per share	$	8.22									$	8.22

(1)  Net capital includes cumulative net investment gains/(losses) and net realized gains/(losses) on investments in Portfolio Funds.

See accompanying notes to the financial statements.

3

GMO Special Purpose Holding Fund

(A Series of GMO Trust)


Consolidated Statement of Operations — Year Ended February 28, 2006

	GMO Special Purpose Holding Fund			GMO SPV I, LLC			Minority Interest			Eliminations			Consolidated Totals
Investment Income:
Interest	$	11,249		$	14,726		$	—		$	—		$	25,975
Total income		11,249			14,726			—			—			25,975
Expenses:
Custodian and transfer agent fees		644			27,535			—			—			28,179
Audit and tax fees		33,414			4,552			—			—			37,966
Legal fees		10,114			103,543			—			—			113,657
Trustees fees and related expenses (Note 3)		4,432			—			—			—			4,432
Miscellaneous		3,173			797			—			—			3,970
Total expenses		51,777			136,427			—			—			188,204
Fees and expenses reimbursed by Manager (Note 3)		(47,261	)		(51,380	)		—			—			(98,641	)
Net expenses		4,516			85,047			—			—			89,563
Net income (loss)		6,733			(70,321	)		—			—			(63,588	)
Minority Interest		—			—			17,702			—			17,702
Net investment income (loss) after minority interest		6,733			(70,321	)		17,702			—			(45,886	)
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in unaffiliated issuers		—			6,496,465			—			—			6,496,465
Investments in affiliated issuers		—			—			—			—			—
Realized gains distributions from affiliated issuers		3,957,402			—			—			(3,957,402	)		—
Net realized gain (loss)		3,957,402			6,496,465			—			(3,957,402	)		6,496,465
Change in net unrealized appreciation (depreciation) on:
Investments		734,427			87,940			—			(734,427	)		87,940
Net unrealized gain (loss)		734,427			87,940			—			(734,427	)		87,940
Net realized and unrealized gain (loss)		4,691,829			6,584,405			—			(4,691,829	)		6,584,405
Minority interest in realized and unrealized gain (loss)		—			—			(1,839,957	)		—			(1,839,957	)
Net increase (decrease) in net assets resulting from operations	$	4,698,562		$	6,514,084		$	(1,822,255	)	$	(4,691,829	)	$	4,698,562

See accompanying notes to the financial statements.

4

GMO Special Purpose Holding Fund

(A Series of GMO Trust)


Consolidated Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations (after minority interest):
Net investment income (loss)	$	(63,588	)	$	517,399
Net realized gain (loss)		6,496,465			(75,420,900	)
Change in net unrealized appreciation (depreciation)		87,940			101,186,067
Minority Interest		(1,822,255	)		(19,278,614	)
Net increase (decrease) in net assets from operations		4,698,562			7,003,952
Distributions to shareholders from:
Net Investment income		—			(6,893,402	)
Return of capital		—			(596,105	)
Cash distributions		(8,740,567	)		(9,580,120	)
		(8,740,567	)		(17,069,627	)
Fund share transactions (Note 7):
Proceeds from sale of shares		—			—
Net asset value of shares issued to shareholders in payment of distributions declared		—			7,489,507
Cost of shares repurchased		—			(214,556,130	)
Net increase (decrease) in Fund share transactions		—			(207,066,623	)
Total increase (decrease) in net assets		(4,042,005	)		(217,132,298	)
Net assets:
Beginning of period		8,594,540			225,726,838
End of period	$	4,552,535		$	8,594,540

See accompanying notes to the financial statements.

5

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Financial Highlights
(For a share outstanding throughout each period

	Year Ended			Year Ended			Period from December 1, 2003 through			Year Ended
	February 28, 2006			February 28, 2005			February 29, 2004(a)			November 30, 2003
Net asset value, beginning of period	$	15.51		$	24.11		$	23.89		$	23.77
Income from investment operations:
Net investment income (loss)†		(0.08	)		0.41			0.13			0.75
Net realized and unrealized gain (loss)		8.57			9.08			0.09			(0.63	)
Total from investment operations		8.49			9.49			0.22			0.12
From net investment income		—			(0.74	)		—			—
From net realized gains		—			—			—			—
From cash distributions		(15.78	)		(17.29	)					—
From return of capital		—			(0.06	)		—			—
Total distributions		(15.78	)		(18.09	)		—			—
Net asset value, end of period	$	8.22		$	15.51		$	24.11		$	23.89
Total Return(c)		124.75	%		36.35	%		0.92	%**		0.50	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	4,553		$	8,595		$	225,727		$	224,113
Net operating expenses to average daily net assets		1.26	%		(0.01	)%		0.08	%*		0.13	%
Interest expense to average daily net assets		—			—			0.04	%(e)*		—	(b)(f)
Total net expenses to average daily net assets		1.26	%		(0.01	)%		0.12	%*		0.13	%
Net investment income to average daily net assets		(0.65	)%		1.83	%		0.49	%*		3.11	%
Portfolio turnover rate		0	%		0	%		4	%**		80	%
Fees and expenses reimbursed by the Manager to average daily net assets:		1.39	%		0.67	%		0.11	%*		0.10	%

(a)  The Fund changed its fiscal year end from November 30 to February 28.

(b)  The Fund changed its fiscal year end from February 28 to November 30.

(c)  The total return would have been lower had certain expenses not been reimbursed during the period shown.

(d)  Net operating expenses as a percentage of average daily net assets was less than 0.01%.

(e)  Interest expense incurred as a result of entering into reverse repurchase agreements is included in the Fund's net expenses.
Income earned on investing proceeds from reverse repurchase agreements is included in interest income.

(f)  Interest expense as a percentage of average daily net assets was less than 0.01%.

†  Computed using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

6

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Financial Highlights — (Continued)
(For a share outstanding throughout each period

	Period from March 1, 2002 through			Year Ended February 28
	November 30, 2002(b)			2002			2001
Net asset value, beginning of period	$	25.66		$	26.14		$	25.29
Income from investment operations:
Net investment income (loss)†		0.73			1.29			1.83
Net realized and unrealized gain (loss)		(2.39	)		(0.33	)		0.07
Total from investment operations		(1.66	)		0.96			1.90
From net investment income		(0.15	)		(1.44	)		(1.05	)
From net realized gains		(0.08	)		—			—
From cash distributions		—			—			—
From return of capital		—			—			—
Total distributions		(0.23	)		(1.44	)		(1.05	)
Net asset value, end of period	$	23.77		$	25.66		$	26.14
Total Return(c)		(6.53	)%**		3.69	%		7.61	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	281,715		$	1,440,711		$	1,520,173
Net operating expenses to average daily net assets		0.01	%*		—	(d)		—	(d)
Interest expense to average daily net assets		0.03	%(e)		0.05	%(e)		0.20	%(e)
Total net expenses to average daily net assets		0.04	%*		0.05	%		0.20	%
Net investment income to average daily net assets		3.76	%*		4.91	%		7.05	%
Portfolio turnover rate		39	%**		29	%		39	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%*		0.02	%		0.02	%

See accompanying notes to the financial statements.

7

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements
February 28, 2006

1.  Organization

GMO Special Purpose Holding Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts Business Trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees to create an unlimited number of series ("Funds"), each of which issues a separate series of shares, and to subdivide a series of shares into classes.

Shares of the Fund are not publicly offered and are principally available only to other GMO Funds of the Trust and certain accredited investors. Presently, the Fund is closed to new investment.

On November 26, 2002, approximately 78% of the Fund's assets were transferred to a new fund, the GMO Short-Duration Collateral Fund ("SDCF"). The Fund retained certain defaulted bonds sponsored by National Century Financial Enterprises (the "NPF Securities") (through its investment in GMO SPV I, LLC ("SPV")) and generally retained other lower quality issues.

On January 23, 2004, the trustees of the Trust approved a transaction pursuant to which the Fund contributed its net assets, other than its interest in SPV, its claims resulting from its holdings of the NPF Securities, and a fixed amount of cash, such contribution representing $214,143,316 or 94.14% of the Fund's assets, to SDCF in exchange for SDCF shares. The transaction, which was structured as a tax-free reorganization, was consummated after the close of business on March 31, 2004 and the shares received by the Fund were then distributed to the shareholders. After distribution of the SDCF shares, the Fund changed its name to GMO Special Purpose Holding Fund and elected partnership status for Federal income tax purposes.

In April 2004, a plan of liquidation ("the Plan") was approved by the bankruptcy court with respect to National Century Financial Enterprises and the NPF Securities. Pursuant to the Plan, the Fund received a cash distribution, less expenses associated with the transaction and an interest in additional amounts recovered by the bankruptcy estate. The Fund, together with other creditors, are continuing to pursue various claims resulting from its holdings of the NPF Securities. The ultimate amount of losses and costs associated with the NPF Securities that may be recovered by the Fund (through its investment in SPV) is not known at this time.

GMO Special Purpose Holding Fund ("SPHF") has litigation pending against various entities related to the default of certain asset-backed securities previously held by SPHF. In July of 2005, SPHF entered into a settlement agreement with one defendant in the lawsuit and the Fund received $3,445,710 in conjunction with the settlement. The outcome of lawsuits against the remaining defendants is not predictable and any potential recoveries are not reflected in the net asset value of the Fund. To the extent additional recoveries are realized, such recoveries may be material to the net asset value of the Fund.

8

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements — (Continued)
February 28, 2006

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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.

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements include the accounts of the GMO Special Purpose Holding Fund and its majority-owned investment in SPV. The consolidated financial statements include 100% of the assets and liabilities of SPV and the ownership interests of minority participants are recorded as "Minority Interest". All significant fund accounts and transactions have been eliminated in consolidation.

Portfolio valuation

Shares of investment funds are valued at their net asset value. Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are valued at amortized cost, which approximates fair value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value using fair value prices supplied by an independent pricing service to the extent that such prices are available. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events occurring after the close of a foreign market that would materially affect that security's value. The prices provided by the Manager may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements.

Some fixed income securities are valued at the closing bid for such securities as supplied by a primary pricing source chosen by the Manager. The Manager evaluates such primary pricing sources on an ongoing basis, and may change a pricing source should it deem it appropriate. The Manager is informed of erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and at its discretion may override a price supplied by a source (by taking a price supplied by another source).

Certain securities held by the Fund were valued solely on the basis of a price provided by the principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. At February 28, 2006, the total value of these securities represented 100% of total investments.

9

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements — (Continued)
February 28, 2006

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreements. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

Taxes

Effective April 1, 2004, the Fund elected to be taxed as a partnership for federal income tax purposes and, accordingly, the Fund is no longer a "regulated investment company" for federal income tax purposes. As a partnership the Fund will not be subject to federal and state income tax. Instead, each shareholder is responsible for the tax liability or benefit related to his/her allocable share of taxable income or loss. Accordingly, no provision (benefit) for federal and state income taxes is reflected in the accompanying financial statements.

The Fund qualified as a regulated investment company until March 31, 2004, under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Through March 31, 2004, The Fund's policy was to declare and pay distributions from its net investment income annually, and from net realized short-term and long-term capital gains at least annually. All distributions were paid in shares of the Fund, at net asset value, unless the shareholder elected to receive cash distributions. Distributions to shareholders were recorded by the Fund on the ex-dividend date. Income dividends and capital gain distributions were determined in accordance with U.S. federal income tax regulations which may have differed from U.S. GAAP. Distributions in excess of tax basis earnings and profits, if any, were reported in the Fund's financial statements as a return of capital. For the Fund's tax year ended March 31, 2004, the Fund had a return of capital distribution of $596,105.

Certain tax-related characteristics of the Fund as of March 31, 2004 became attributable to SDCF, effective April 1, 2004. Included in such tax characteristics was the Fund's capital loss carryover of $31,628,512. See Note 1 for additional information to the Fund's March 31, 2004 tax free reorganization with SDCF.

10

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	6,884,922	$	—	$	(2,722,102	)	$	(2,722,102	)

SPV is also treated as a partnership for federal income tax purposes and subject to the same rules as the Fund with respect to federal income taxation of partnerships.

Distributions

The Fund will distribute proceeds and other cash receipts received from its underlying investments. Distributions made by the Fund, other than a distribution in partial or complete redemption of a shareholder's interest in the Fund, are reported in the Fund's financial statements as cash distributions.

Security transactions and related investment income

Security transactions are accounted for on trade date. Interest income is recorded on an accrual basis and is adjusted for the amortization of premiums and discounts. Income is not recognized, nor are premium and discount amortized on securities for which collection in the ordinary course of business is not expected. Dividend income is recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date, if later. Non-cash dividends, if any, are recorded at fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

3.  Fees and other transactions with affiliates

GMO does not charge the Fund any management or service fees for its services. In addition, effective until at least June 30, 2006, GMO has contractually agreed to reimburse all of the Fund's expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees of the Trust (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes). The costs incurred in connection with the Fund's pursuit of legal claims arising from the Fund's investment in the NPF securities are being treated as extraordinary expenses.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $3,138 and $28, respectively. No remuneration was paid to any other officer of the Trust.

11

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

There were no purchases or sales of securities, excluding short-term investments, for the year ended February 28, 2006.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the business of the Fund.

6.  Principal shareholders

At February 28, 2006, 61.7% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's outstanding shares. One of the shareholders is another fund of GMO Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 100% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006		Year Ended February 28, 2005
Shares sold		—		—
Shares issued to shareholders in reinvestment of distributions				320,338
Shares repurchased		—		(9,128,161	)
Net increase (decrease)		—		(8,807,823	)
Fund shares:
Beginning of period		554,071		9,361,894
End of period		554,071		554,071

12

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Consolidated Notes to the Financial Statements — (Continued)
February 28, 2006

8.  Subsequent event

GMO Special Purpose Holding Fund ("SPHF") has litigation pending against various entities related to the default of certain asset-backed securities, NPF VI Trust and NPF XII Trust (the "NPF Trusts"), previously held by SPHF. In April 2006, SPHF entered into a settlement agreement with J.P. Morgan Chase Bank, the indenture trustee for the NPF Trusts, in which SPHF received $19,236,857 in connection with the settlement.

13

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Special Purpose Holding Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Special Purpose Holding Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United Sates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

14

GMO Special Purpose Holding Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		1.49	%	$	1,000.00	$	1,341.30	$	8.65
2) Hypothetical		1.49	%	$	1,000.00	$	1,017.41	$	7.45

*  Expenses are calculated using the annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

15

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

16

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	3Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

17

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

18

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

19

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO International Equity Allocation Fund returned +21.2% for the fiscal year ended February 28, 2006, as compared to +20.6% for the MSCI ACWI (All Country World Index) ex-U.S. Index. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed to international equity securities through its investment in underlying GMO mutual funds.

Implementation detracted 1.1%, as the GMO International Growth Equity Fund and the GMO International Value funds underperformed their respective benchmarks.

Asset allocation added nearly 1.7%. The Fund's overweight to emerging equities was the main contributor to the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .17% on the purchase and .17% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO International Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		91.2	%
Short-Term Investment(s)		6.5
Preferred Stocks		4.1
Debt Obligation(s)		0.4
Futures		0.1
Investment Funds		0.1
Private Equity Securities		0.1
Convertible Securities		0.0
Mutual Funds		0.0
Rights and Warrants		0.0
Forward Currency Contracts		0.0
Swaps		0.0
Other		(2.5	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO International Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary**	% of Investments
Japan		21.9	%
United Kingdom		17.4
France		7.0
South Korea		5.1
Netherlands		4.9
Germany		4.7
Brazil		3.9
Taiwan		3.7
Canada		3.3
Italy		3.2
Switzerland		2.9
Australia		2.8
Finland		2.6
Spain		1.9
China		1.5
Belgium		1.4
Mexico		1.3
South Africa		1.3
Norway		1.2
Hong Kong		1.0
Sweden		0.9
Austria		0.8
Ireland		0.7
Russia		0.7
Denmark		0.6
India		0.6
Singapore		0.6
Malaysia		0.4
United States		0.4
Israel		0.3
Thailand		0.3
Poland		0.2
Turkey		0.2
Chile		0.1
Greece		0.1
Philippines		0.1
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

2

GMO International Equity Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	846,865	GMO Emerging Countries Fund, Class III		16,259,817
	5,756,309	GMO Emerging Markets Fund, Class VI		129,229,135
	8,523,669	GMO International Growth Equity Fund, Class III		254,857,704
	7,869,569	GMO International Intrinsic Value Fund, Class IV		256,390,561
	188,008	GMO International Small Companies Fund, Class III		2,806,956
		TOTAL MUTUAL FUNDS (COST $500,329,004)		659,544,173
		SHORT-TERM INVESTMENT(S) — 0.0%
	11,441	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $11,442 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $11,670.		11,441
		TOTAL SHORT-TERM INVESTMENT(S) (COST $11,441)		11,441
		TOTAL INVESTMENTS — 100.0% (Cost $500,340,445)		659,555,614
		Other Assets and Liabilities (net) — 0.0%		(35,357	)
		TOTAL NET ASSETS — 100.0%	$	659,520,257

Notes to Schedule of Investments:

As of February 28, 2006, 84.8% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

3

GMO International Equity Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in affiliated issuers, at value (cost $500,329,004) (Notes 2 and 8)	$	659,544,173
Investments in unaffiliated issuers, at value (cost $11,441) (Note 2)		11,441
Receivable for Fund shares sold		26,003
Receivable for expenses reimbursed by Manager (Note 3)		8,735
Total assets		659,590,352
Liabilities:
Payable for investments purchased		26,002
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		970
Accrued expenses		43,123
Total liabilities		70,095
Net assets	$	659,520,257
Net assets consist of:
Paid-in capital	$	471,658,241
Accumulated net realized gain		28,646,847
Net unrealized appreciation		159,215,169
	$	659,520,257
Net assets attributable to:
Class III shares	$	659,520,257
Shares outstanding:
Class III		38,490,599
Net asset value per share:
Class III	$	17.13

See accompanying notes to the financial statements.

4

GMO International Equity Allocation Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	6,537,289
Interest		404
Total investment income		6,537,693
Expenses:
Custodian, fund accounting agent and transfer agent fees		47,286
Audit and tax fees		22,800
Legal fees		9,010
Trustees fees and related expenses (Note 3)		10,848
Registration fees		12,813
Miscellaneous		9,921
Total expenses		112,678
Fees and expenses reimbursed by Manager (Note 3)		(96,218	)
Net expenses		16,460
Net investment income (loss)		6,521,233
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		11,594,407
Realized gains distributions from affiliated issuers (Note 8)		39,806,651
Net realized gain (loss)		51,401,058
Change in net unrealized appreciation (depreciation) on investments		60,422,264
Net realized and unrealized gain (loss)		111,823,322
Net increase (decrease) in net assets resulting from operations	$	118,344,555

See accompanying notes to the financial statements.

5

GMO International Equity Allocation Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	6,521,233		$	8,737,061
Net realized gain (loss)		51,401,058			26,888,838
Change in net unrealized appreciation (depreciation)		60,422,264			60,533,545
Net increase (decrease) in net assets from operations		118,344,555			96,159,444
Distributions to shareholders from:
Net investment income
Class III		(17,722,273	)		(13,316,966	)
Net realized gains
Class III		(24,911,633	)		(5,216,511	)
		(42,633,906	)		(18,533,477	)
Net share transactions (Note 7):
Class III		94,760,352			154,841,820
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		22,825			281,874
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		94,783,177			155,123,694
Total increase (decrease) in net assets		170,493,826			232,749,661
Net assets:
Beginning of period		489,026,431			256,276,770
End of period	$	659,520,257		$	489,026,431

See accompanying notes to the financial statements.

6

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.19		$	12.83		$	8.23		$	9.02		$	9.67
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.18			0.29			0.25			0.36			0.25
Net realized and unrealized gain (loss)		2.90			2.65			4.60			(0.83	)		(0.66	)
Total from investment operations		3.08			2.94			4.85			(0.47	)		(0.41	)
Less distributions to shareholders:
From net investment income		(0.47	)		(0.42	)		(0.25	)		(0.32	)		(0.24	)
From net realized gains		(0.67	)		(0.16	)		—			—			—
Total distributions		(1.14	)		(0.58	)		(0.25	)		(0.32	)		(0.24	)
Net asset value, end of period	$	17.13		$	15.19		$	12.83		$	8.23		$	9.02
Total Return(b)		21.15	%(c)		23.25	%(c)		60.41	%(c)		(5.58	)%		(4.26	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	659,520		$	489,026		$	256,277		$	103,768		$	65,712
Net expenses to average daily net assets(d)(e)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Net investment income to average daily net assets(a)		1.15	%		2.18	%		2.35	%		4.11	%		2.83	%
Portfolio turnover rate		7	%		15	%		43	%		19	%		50	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.03	%		0.05	%		0.05	%		0.05	%
Purchase premiums and redemption fees consisted of the following per share amounts:	$	0.00	(f)†	$	0.01	†	$	0.02	†		—			—

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(c)  Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying funds (See Note 3).

(e)  Net expenses to average daily net assets were less than 0.01%.

(f)  Purchase premiums and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

7

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO International Equity Allocation Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks total return greater than the return of the MSCI ACWI (All Country World Index) ex-U.S. Index through investment to varying extents in shares of the underlying fund(s).

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of underlying fund(s) are valued at their asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investment will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close, but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

8

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S.federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $18,337,640 and $13,316,966, respectively and long-term capital gains – $24,296,266 and $5,216,511, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $29,384,523 of undistributed long-term capital gains. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	501,078,119	$	158,525,903	$	(48,408	)	$	158,477,495

9

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	11,201,040	$	(11,201,040	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares are each 0.17% of the amount invested. The redemption fee is only applicable to shares acquired on or after June 30, 2003. The Fund's purchase premium or redemption fee are approximately equal to the weighted average of the purchase premiums and redemptions fees, if any, of the underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur

10

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $228 and $275,721 in purchase premiums and $22,597 and $6,153 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge a management fee or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense, transfer taxes and expenses indirectly incurred by investments in the underlying fund(s)).

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

11

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Indirect Net Expenses (excluding shareholder service fees)			Indirect Shareholder Service Fees			Total Indirect Expenses
	0.624	%		0.109	%		0.733	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $6,479 and $3,740, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $137,267,997 and $38,761,824, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $237,736,373 and $237,736,373, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 25.9% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by three related parties comprised of certain GMO employee accounts.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

12

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		5,248,587		$	78,942,946			12,788,854		$	161,936,882
Shares issued to shareholders in reinvestment of distributions		2,550,396			39,686,743			1,172,649			16,727,131
Shares repurchased		(1,499,797	)		(23,869,337	)		(1,742,829	)		(23,822,193	)
Purchase premiums and redemption fees		—			22,825			—			281,874
Net increase (decrease)		6,299,186		$	94,783,177			12,218,674		$	155,123,694

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Countries Fund, Class III	$	11,981,142	$	1,659,104	$	46,986	$	268,433	$	1,390,671	$	16,259,817
GMO Emerging Markets Fund, Class VI		88,609,723		32,581,342		12,573,616		2,441,725		14,975,218		129,229,135
GMO International Growth Equity Fund, Class III		—		247,320,334		2,550,000		298,087		7,029,875		254,857,704
GMO International Growth Fund, Class III		190,312,376		38,096,880		241,099,114		508,236		3,819,967		—
GMO International Intrinsic Value Fund, Class IV		187,917,565		52,745,228		11,026,144		2,905,405		10,927,079		256,390,561
GMO International Small Companies Fund, Class III		10,200,522		2,601,480		9,202,336		115,403		1,663,841		2,806,956
Totals	$	489,021,328	$	375,004,368	$	276,498,196	$	6,537,289	$	39,806,651	$	659,544,173

13

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO International Equity Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO International Equity Allocation Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

14

GMO International Equity Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.74	%	$	1,000.00	$	1,157.80	$	3.96
2) Hypothetical		0.74	%	$	1,000.00	$	1,021.12	$	3.71

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

15

GMO International Equity Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $24,296,266 from long-term capital gains.

For taxable, non-corporate shareholders, 58.05% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $6,095,890 and $112,881, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

16

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

17

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003)		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

18

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

19

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Global Balanced Asset Allocation Fund returned +11.1% for the fiscal year ended February 28, 2006, as compared to +8.4% for the Fund's benchmark, the GMO Global Balanced Index (48.75% S&P 500 Index / 16.25% MSCI ACWI [All Country World Index] ex-U.S. Index / 35% Lehman Brothers U.S. Aggregate Index). Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed to global equity and fixed income securities through its investment in underlying GMO mutual funds.

Implementation was negative, detracting 0.8% from returns as the GMO U.S. Core Equity, GMO U.S. Quality Equity, GMO International Intrinsic Value, and GMO International Growth Equity Funds underperformed their respective benchmarks.

Asset allocation added nearly 3.4%. The Fund's overweight to emerging equities and currency hedged international equities drove the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .08% on the purchase and .08% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*   The GMO Global Balanced Index is a composite benchmark computed by GMO and comprised 48.75% S&P 500 Index, 16.25% MSCI ACWI (All Country World Index) ex-U.S. Index and 35% Lehman Brothers U.S. Aggregate Index.

**  The GMO Global Balanced Index +: MSCI ACWI (All Country World Index) prior to 7/02 and GMO Global Balanced Index thereafter.

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		63.6	%
Debt Obligation(s)		28.8
Short-Term Investment(s)		7.4
Preferred Stocks		2.2
Mutual Funds		0.4
Call Options Purchased		0.1
Loan Assignments		0.1
Loan Participations		0.1
Private Equity Securities		0.1
Put Options Purchased		0.1
Convertible Securities		0.0
Forward Start Options		0.0
Investment Funds		0.0
Promissory Notes		0.0
Rights and Warrants		0.0
Swaps		0.0
Written Options		0.0
Forward Currency Contracts		0.0
Futures		(0.3	)
Reverse Repurchase Agreements		(0.5	)
Other		(2.1	)
		100.0	%

*   The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country/Region Summary**	% of Investments
United States		53.9	%
Euro Region***		13.6
Japan		8.5
Canada		4.6
Sweden		4.1
United Kingdom		3.8
South Korea		3.1
Brazil		2.3
Taiwan		2.3
China		0.9
Mexico		0.8
South Africa		0.8
Hong Kong		0.4
Norway		0.4
Russia		0.4
Austria		0.3
India		0.3
Denmark		0.2
Israel		0.2
Malaysia		0.2
Singapore		0.2
Thailand		0.2
Cayman Islands		0.1
Philippines		0.1
Poland		0.1
Turkey		0.1
Switzerland		(0.5	)
Australia		(1.4	)
		100.0	%

**   The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

2

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	23,145,852	GMO Alpha Only Fund, Class III		239,791,023
	2,042,883	GMO Alternative Asset Opportunity Fund, Class III		54,401,971
	27,719,452	GMO Core Plus Bond Fund, Class IV		286,341,943
	6,717,028	GMO Currency Hedged International Bond Fund, Class III		60,721,936
	7,662,296	GMO Currency Hedged International Equity Fund, Class III		69,497,027
	6,211,308	GMO Domestic Bond Fund, Class VI		60,995,048
	983,316	GMO Emerging Countries Fund, Class III		18,879,661
	933,721	GMO Emerging Country Debt Fund, Class IV		10,551,044
	7,763,640	GMO Emerging Markets Fund, Class VI		174,293,709
	3,535,893	GMO Inflation Indexed Bond Fund, Class III		39,248,409
	2,453,474	GMO International Bond Fund, Class III		23,479,744
	4,930,464	GMO International Growth Equity Fund, Class III		147,420,878
	4,488,406	GMO International Intrinsic Value Fund, Class IV		146,232,252
	517,573	GMO International Small Companies Fund, Class III		7,727,372
	370,123	GMO Short-Duration Investment Fund, Class III		3,264,489
	21,803,440	GMO U.S. Core Equity Fund, Class VI		315,495,777
	7,362,067	GMO U.S. Quality Equity Fund, Class IV		153,278,225
	64,881	GMO U.S. Value Fund, Class III		665,029
		TOTAL MUTUAL FUNDS (COST $1,676,889,796)		1,812,285,537
		SHORT-TERM INVESTMENT(S) — 0.0%
	11,733	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a market value of $11,734 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $11,968.		11,733
		TOTAL SHORT-TERM INVESTMENT(S) (COST $11,733)		11,733

See accompanying notes to the financial statements.

3

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Value ($)
TOTAL INVESTMENTS — 100.0% (Cost $1,676,901,529)		1,812,297,270
Other Assets and Liabilities (net) — 0.0%		(105,822	)
TOTAL NET ASSETS — 100.0%	$	1,812,191,448

Notes to Schedule of Investments:

As of February 28, 2006, 31.4% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor.

See accompanying notes to the financial statements.

4

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $11,733) (Note 2)	$	11,733
Investments in affiliated issuers, at value (cost $1,676,889,796) (Notes 2 and 8)		1,812,285,537
Receivable for Fund shares sold		22,939,491
Receivable for expenses reimbursed by Manager (Note 3)		37,369
Miscellaneous receivable		18,367
Total assets		1,835,292,497
Liabilities:
Payable for investments purchased		22,858,555
Payable for Fund shares repurchased		120,000
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		3,301
Accrued expenses		119,193
Total liabilities		23,101,049
Net assets	$	1,812,191,448
Net assets consist of:
Paid-in capital	$	1,633,186,377
Accumulated undistributed net investment income		1,362,675
Accumulated net realized gain		42,246,655
Net unrealized appreciation		135,395,741
	$	1,812,191,448
Net assets attributable to:
Class III shares	$	1,812,191,448
Shares outstanding:
Class III		154,116,992
Net asset value per share:
Class III	$	11.76

See accompanying notes to the financial statements.

5

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	43,233,069
Interest		34,527
Total investment income		43,267,596
Expenses:
Custodian, fund accounting agent and transfer agent fees		53,906
Audit and tax fees		20,957
Legal fees		21,296
Trustees fees and related expenses (Note 3)		24,078
Registration fees		70,730
Miscellaneous		23,372
Total expenses		214,339
Fees and expenses reimbursed by Manager (Note 3)		(176,149	)
Net expenses		38,190
Net investment income (loss)		43,229,406
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		30,479,014
Realized gains distributions from affiliated issuers (Note 8)		55,604,485
Net realized gain (loss)		86,083,499
Change in net unrealized appreciation (depreciation) on investments		26,009,769
Net realized and unrealized gain (loss)		112,093,268
Net increase (decrease) in net assets resulting from operations	$	155,322,674

See accompanying notes to the financial statements.

6

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	43,229,406		$	17,661,800
Net realized gain (loss)		86,083,499			39,731,226
Change in net unrealized appreciation (depreciation)		26,009,769			40,552,791
Net increase (decrease) in net assets from operations		155,322,674			97,945,817
Distributions to shareholders from:
Net investment income
Class III		(51,560,906	)		(24,420,472	)
Net realized gains
Class III		(52,999,421	)		(20,083,566	)
		(104,560,327	)		(44,504,038	)
Net share transactions (Note 7):
Class III		730,598,623			522,541,342
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		592,545			447,679
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		731,191,168			522,989,021
Total increase (decrease) in net assets		781,953,515			576,430,800
Net assets:
Beginning of period		1,030,237,933			453,807,133
End of period (including accumulated undistributed net investment income of $1,362,675 and $1,061,860, respectively)	$	1,812,191,448		$	1,030,237,933

See accompanying notes to the financial statements.

7

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	11.33		$	10.74		$	8.13		$	8.64		$	8.99
Income (loss) from investment operations:
Net investment income (loss)(a)		0.36	†		0.27	†		0.18			0.20			0.23
Net realized and unrealized gain (loss)		0.86			0.90			2.68			(0.28	)		(0.20	)
Total from investment operations		1.22			1.17			2.86			(0.08	)		0.03
Less distributions to shareholders:
From net investment income		(0.37	)		(0.32	)		(0.23	)		(0.43	)		(0.38	)
From net realized gains		(0.42	)		(0.26	)		(0.02	)		—			—
Total distributions		(0.79	)		(0.58	)		(0.25	)		(0.43	)		(0.38	)
Net asset value, end of period	$	11.76		$	11.33		$	10.74		$	8.13		$	8.64
Total Return(b)		11.05	%(c)		11.07	%(c)		35.53	%(c)		(1.06	)%		0.49	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,812,191		$	1,030,238		$	453,807		$	304,145		$	7,318
Net expenses to average daily net assets(d)(e)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Net investment income to average daily net assets(a)		3.17	%		2.53	%		2.19	%		4.01	%		2.66	%
Portfolio turnover rate		16	%		10	%		59	%		61	%		25	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.02	%		0.03	%		0.05	%		0.31	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.01		$	0.01		$	0.01		$	—		$	—

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown.

(c)  Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(e)  Net expenses to average daily net assets were less than 0.01%.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

8

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Global Balanced Asset Allocation Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks total return greater than the return of the GMO Global Balanced Index through investments to varying extents in the underlying fund(s). The GMO Global Balanced Index is a composite benchmark computed by GMO consisting of (i) the S&P 500 Index (a U.S. large capitalization stock index, independently maintained and published by Standard & Poor's Corporation); (ii) the MSCI ACWI (All Country World Index) ex-U.S. Index (an international (excluding U.S. and including emerging markets) equity index, independently maintained and published by Morgan Stanley Capital International); (iii) the Lehman Brothers U.S. Aggregate Index (an independently maintained and published index comprised of U.S. fixed rate debt issues, having a maturity of at least one year and rated investment grade or higher by Moody's Investors Service, Standard & Poor's or Fitch IBCA, Inc.) in the following proportions: 48.75% (S&P 500), 16.25% (MSCI ACWI), and 35% (Lehman Brothers). The GMO Global Balanced Index reflects investment of all applicable dividends, capital gains, and interest. The Fund pursues its objective by investing in the least expensive class of the underlying fund(s) that is currently operational.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect).

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Shares of underlying fund(s) and other mutual funds are valued at their net asset value. Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing

9

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close, but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Certain investments in securities held by the underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market maker may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or underlying fund(s). As of February 28, 2006, the total value of these securities represented 1.0% of net assets.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

10

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $51,560,906 and $31,726,069, respectively and long-term capital gains – $52,999,421 and $12,777,969, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $4,004,551 and $42,470,076 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to partnership interest tax allocations and losses on wash sale transactions.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $1,276 and $1,276 expiring in 2008 and 2010, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	1,679,764,265	$	141,555,376	$	(9,022,371	)	$	132,533,005

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	8,632,315	$	(8,632,315	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

11

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.08% of the amount invested or redeemed. The redemption fee is only applicable to shares acquired on or after June 30, 2003. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemption fees, if any, of the underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $562,037 and $444,839 in purchase premiums and $30,508 and $2,840 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

12

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge a management fee or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense, transfer taxes, and expenses indirectly incurred by investments in the underlying fund(s)).

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.426	%		0.108	%		0.012	%		0.546	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $15,005 and $10,154, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $948,172,382 and $222,682,310, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $596,961,743 and $596,961,743, respectively.

5.   Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's

13

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 25.6% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

As of February 28, 2006, 0.3% of the Fund's shares were held by thirteen related parties comprised of certain GMO employee accounts.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		59,476,732		$	689,148,423			47,326,709		$	506,574,167
Shares issued to shareholders in reinvestment of distributions		8,489,047			96,761,248			3,584,010			39,497,603
Shares repurchased		(4,818,243	)		(55,311,048	)		(2,189,911	)		(23,530,428	)
Purchase premium and redemption fees		—			592,545			—			447,679
Net increase (decrease)		63,147,536		$	731,191,168			48,720,808		$	522,989,021

14

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Alpha Only Fund, Class III	$	32,963,379	$	208,780,939	$	90,298	$	7,265,726	$	—	$	239,791,023
GMO Alternative Asset Opportunity Fund, Class III		—		52,128,089		26,435		—		—		54,401,971
GMO Core Plus Bond Fund, Class III		127,328,898		58,754,887		187,302,955		143,143		—		—
GMO Core Plus Bond Fund, Class IV		—		293,282,055		3,012,991		8,848,508		—		286,341,943
GMO Currency Hedged International Bond Fund, Class III		71,877,970		20,092,419		27,976,325		6,562,252		775,898		60,721,936
GMO Currency Hedged International Equity Fund, Class III		45,196,546		37,263,077		17,502,806		4,962,748		5,875,911		69,497,027
GMO Domestic Bond Fund, Class III		102,330,133		3,419,813		107,018,243		10,475		1,172,088		—
GMO Domestic Bond Fund, Class VI		—		61,733,996		44,411		1,256,742		—		60,995,048
GMO Emerging Countries Fund, Class III		11,466,947		4,772,441		257,992		302,678		1,526,888		18,879,661
GMO Emerging Country Debt Fund, Class IV		9,414,586		1,661,980		755,305		1,103,721		478,351		10,551,044
GMO Emerging Markets Fund, Class VI		84,567,353		73,489,052		6,903,857		2,781,608		17,468,606		174,293,709
GMO Inflation Indexed Bond Fund, Class III		28,364,806		37,366,729		26,004,775		693,451		176,901		39,248,409
GMO International Bond Fund, Class III		21,786,870		5,110,464		1,206,462		643,098		12,407		23,479,744
GMO International Growth Equity Fund, Class III		—		149,531,354		7,833,488		172,850		4,076,369		147,420,878

15

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO International Growth Fund, Class III	$	87,262,780	$	25,489,391	$	118,826,523	$	238,847	$	1,795,205	$	—
GMO International Intrinsic Value Fund, Class IV		86,427,234		62,320,267		16,523,111		1,632,106		5,983,780		146,232,252
GMO International Small Companies Fund, Class III		19,084,299		4,202,691		14,002,188		230,285		3,345,207		7,727,372
GMO Real Estate Fund, Class III		22,680,730		7,654,180		28,314,523		449,530		6,016,947		—
GMO Short-Duration Investment Fund, Class III		3,145,592		102,874		1,644		102,874		—		3,264,489
GMO U.S. Core Equity Fund, Class VI		—		317,840,153		3,908,042		2,422,433		6,713,787		315,495,777
GMO U.S. Core Fund, Class VI		195,163,591		52,276,721		250,956,004		2,117,106		—		—
GMO U.S. Quality Equity Fund, Class IV		80,387,878		66,970,332		64,422		1,279,251		186,140		153,278,225
GMO U.S. Value Fund, Class III		—		876,628		221,809		7,258		—		665,029
GMO Value Fund, Class III		857,087		13,593		889,444		6,379		—		—
Totals	$	1,030,306,679	$	1,545,134,125	$	819,644,053	$	43,233,069	$	55,604,485	$	1,812,285,537

16

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Global Balanced Asset Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Global Balanced Asset Allocation Fund (the "Fund") at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

17

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.56	%	$	1,000.00	$	1,074.40	$	2.88
2) Hypothetical		0.56	%	$	1,000.00	$	1,022.02	$	2.81

*  Expenses are calculated using the Class's annualized expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

18

GMO Global Balanced Asset Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $52,999,421 from long-term capital gains.

For taxable, non-corporate shareholders, 30.91% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 9.77% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $11,041,235 or if determined to be different, the qualified interest income of such year.

19

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

20

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

21

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

22

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Global (U.S.+) Equity Allocation Fund returned +13.9% for the fiscal year ended February 28, 2006, as compared to +11.4% for the Fund's benchmark the GMO Global Equity Index (75% S&P 500 Index / 25% MSCI ACWI [All Country World Index] ex-U.S. Index). Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed to global equity and fixed income securities through its investment in underlying GMO mutual funds.

Implementation was negative, detracting approximately 1.6%.

Asset allocation added nearly 4.1%. The Fund's underweight to U.S. equities and overweight to international equities, particularly emerging market equities, were the drivers of the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .10% on the purchase and .10% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  The GMO Global Equity Index is a composite benchmark computed by GMO and comprised 75% S&P 500 Index and 25% MSCI ACWI (All Country World Index) ex-U.S. Index.

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		91.0	%
Short-Term Investment(s)		8.5
Preferred Stocks		2.6
Debt Obligation(s)		1.7
Private Equity Securities		0.1
Call Options Purchased		0.0
Convertible Securities		0.0
Investment Funds		0.0
Loan Assignments		0.0
Loan Participations		0.0
Mutual Fund		0.0
Promissory Notes		0.0
Put Options Purchased		0.0
Rights and Warrants		0.0
Swaps		0.0
Written Options		0.0
Futures		(0.1	)
Forward Currency Contracts		(0.1	)
Reverse Repurchase Agreements		(0.2	)
Other		(3.5	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary**	% of Investments
United States		50.6	%
Japan		9.9
United Kingdom		7.9
South Korea		3.4
France		3.2
Brazil		2.6
Taiwan		2.5
Netherlands		2.3
Germany		2.1
Canada		1.5
Italy		1.4
Australia		1.3
Switzerland		1.3
Finland		1.2
China		1.0
Mexico		0.9
South Africa		0.9
Spain		0.8
Belgium		0.6
Hong Kong		0.5
Norway		0.5
Austria		0.4
India		0.4
Russia		0.4
Sweden		0.4
Denmark		0.3
Ireland		0.3
Malaysia		0.3
Singapore		0.3
Israel		0.2
Thailand		0.2
Turkey		0.2
Philippines		0.1
Poland		0.1
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

2

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		AFFILIATED ISSUERS — 100.0%
		Mutual Funds — 100.0%
	2,067,843	GMO Alpha Only Fund, Class III		21,422,854
	1,534,401	GMO Currency Hedged International Equity Fund, Class III		13,917,020
	324,134	GMO Emerging Countries Fund, Class III		6,223,371
	1,712,727	GMO Emerging Markets Fund, Class VI		38,450,725
	243,136	GMO Inflation Indexed Bond Fund, Class III		2,698,811
	1,421,227	GMO International Growth Equity Fund, Class III		42,494,690
	1,324,493	GMO International Intrinsic Value Fund, Class IV		43,151,981
	83,579	GMO International Small Companies Fund, Class III		1,247,841
	15,369	GMO Short-Duration Investment Fund, Class III		135,556
	8,712,646	GMO U.S. Core Equity Fund, Class VI		126,071,991
	2,515	GMO U.S. Growth Fund, Class III		45,689
	1,348,550	GMO U.S. Quality Equity Fund, Class IV		28,076,814
	44,377	GMO U.S. Value Fund, Class III		454,865
	145,799	GMO Emerging Country Debt Fund, Class IV		1,647,525
				326,039,733
		Private Investment Fund — 0.0%
	175	GMO SPV I, LLC		740
		TOTAL AFFILIATED ISSUERS (COST $270,200,213)		326,040,473
		SHORT-TERM INVESTMENT(S) — 0.0%
	9,510	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $9,511 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $9,701.		9,510
		TOTAL SHORT-TERM INVESTMENT(S) (COST $9,510)		9,510

See accompanying notes to the financial statements.

3

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

	Value ($)
TOTAL INVESTMENTS — 100.0% (Cost $270,209,723)		326,049,983
Other Assets and Liabilities (net) — 0.0%		(18,416	)
TOTAL NET ASSETS — 100.0%	$	326,031,567

Notes to Schedule of Investments:

As of February 28, 2006, 39.8% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

4

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $9,510) (Note 2)	$	9,510
Investments in affiliated issuers, at value (cost $270,200,213) (Notes 2 and 8)		326,040,473
Receivable for Fund shares sold		1,520
Receivable for expenses reimbursed by Manager (Note 3)		6,653
Total assets		326,058,156
Liabilities:
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		409
Accrued expenses		26,180
Total liabilities		26,589
Net assets	$	326,031,567
Net assets consist of:
Paid-in capital	$	256,901,300
Accumulated undistributed net investment income		51,723
Accumulated net realized gain		13,238,284
Net unrealized appreciation		55,840,260
	$	326,031,567
Net assets attributable to:
Class III shares	$	326,031,567
Shares outstanding:
Class III		27,420,863
Net asset value per share:
Class III	$	11.89

See accompanying notes to the financial statements.

5

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	6,238,406
Interest		8,305
Total investment income		6,246,711
Expenses:
Custodian, fund accounting agent and transfer agent fees		37,180
Audit and tax fees		21,180
Legal fees		7,883
Trustees fees and related expenses (Note 3)		5,985
Registration fees		5,383
Miscellaneous		5,615
Total expenses		83,226
Fees and expenses reimbursed by Manager (Note 3)		(74,104	)
Net expenses		9,122
Net investment income (loss)		6,237,589
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		18,638,091
Realized gains distributions from affiliated issuers (Note 8)		15,194,818
Net realized gain (loss)		33,832,909
Change in net unrealized appreciation (depreciation) on investments		(94,267	)
Net realized and unrealized gain (loss)		33,738,642
Net increase (decrease) in net assets resulting from operations	$	39,976,231

See accompanying notes to the financial statements.

6

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	6,237,589		$	5,507,879
Net realized gain (loss)		33,832,909			16,196,803
Change in net unrealized appreciation (depreciation)		(94,267	)		19,014,524
Net increase (decrease) in net assets from operations		39,976,231			40,719,206
Distributions to shareholders from:
Net investment income
Class III		(8,578,882	)		(7,147,138	)
Net realized gains
Class III		(23,838,281	)		(10,998,619	)
		(32,417,163	)		(18,145,757	)
Net share transactions (Note 7):
Class III		(17,370,663	)		90,283,380
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		23,772			106,660
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		(17,346,891	)		90,390,040
Total increase (decrease) in net assets		(9,787,823	)		112,963,489
Net assets:
Beginning of period		335,819,390			222,855,901
End of period (including accumulated undistributed net investment income of $51,723 and $0, respectively)	$	326,031,567		$	335,819,390

See accompanying notes to the financial statements.

7

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	11.63		$	10.86		$	7.51		$	8.66		$	8.92
Income (loss) from investment operations:
Net investment income (loss)(a)		0.23	†		0.23	†		0.14			0.15			0.23
Net realized and unrealized gain (loss)		1.32			1.23			3.55			(1.07	)		(0.14	)
Total from investment operations		1.55			1.46			3.69			(0.92	)		0.09
Less distributions to shareholders:
From net investment income		(0.34	)		(0.27	)		(0.21	)		(0.23	)		(0.13	)
From net realized gains		(0.95	)		(0.42	)		(0.13	)		—			(0.22	)
Total distributions		(1.29	)		(0.69	)		(0.34	)		(0.23	)		(0.35	)
Net asset value, end of period	$	11.89		$	11.63		$	10.86		$	7.51		$	8.66
Total Return(b)		13.91	%(c)		13.70	%(c)		49.63	%(c)		(10.84	)%		1.12	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	326,032		$	335,819		$	222,856		$	79,736		$	40,124
Net expenses to average daily net assets(d)(e)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Net investment income to average daily net assets(a)		1.99	%		2.11	%		1.99	%		3.06	%		2.73	%
Portfolio turnover rate		20	%		17	%		73	%		30	%		13	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.02	%		0.04	%		0.05	%		0.07	%		0.07	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.00	(f)	$	0.00	(f)	$	0.01			—			—

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown.

(c)  Calculations exclude purchase premiums and redemption fees which are borne by the shareholders.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(e)  Net expenses to average daily net assets were less than 0.01%.

(f)  Purchase premiums and redemption fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

8

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Global (U.S.+) Equity Allocation Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks total return greater than that of the GMO Global Equity Index through investments to varying extents in the underlying fund(s). The GMO Global Equity Index, a composite index computed by the Manager, consists of (i) the S&P 500 Index (an index of large capitalization U.S. stocks, independently maintained and published by Standard & Poor's) and (ii) the MSCI ACWI (All Country World Index) ex-U.S. Index (an international (excluding U.S. and including emerging markets) equity index, independently maintained and published by Morgan Stanley Capital International) in the following proportions: 75% (S&P 500 Index) and 25% (MSCI ACWI (All Country World Index) ex-U.S. Index).

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect).

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of underlying fund(s) and other mutual funds are valued at their net asset value. For other assets, and in cases

9

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 0.2% of net assets.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S.federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

10

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $8,857,253 and $11,543,007, respectively and long-term capital gains – $23,559,910 and $6,602,750, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $51,713 and $13,403,121 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	270,374,554	$	55,801,633	$	(126,204	)	$	55,675,429

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	2,393,016	$	(2,393,016	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

11

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchase and redemption of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.10% of the amount invested or redeemed. For the period June 30, 2004 to June 29, 2005, the premium on cash purchases and fee on redemptions of Fund shares were 0.15% and 0.14%, respectively. The redemption fee is only applicable to shares acquired on or after June 30, 2003. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemption fees, if any, of the underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $10,757 and $105,459 in purchase premiums and $13,015 and $1,201 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

12

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge an advisory fee or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense, transfer taxes and expenses indirectly incurred by investments in the underlying fund(s)).

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.477	%		0.091	%		0.007	%		0.575	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $3,534 and $1,852, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $61,937,521 and $90,270,650, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $165,538,494 and $165,538,494, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's

13

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 33.7% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, less than 0.1% of the Fund's shares were held by two related parties comprised of certain GMO employee accounts.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		820,653		$	9,603,497			7,760,948		$	83,476,617
Shares issued to shareholders in reinvestment of distributions		2,486,440			28,419,617			1,354,357			15,196,295
Shares repurchased		(4,753,170	)		(55,393,777	)		(777,061	)		(8,389,532	)
Purchase premiums and redemption fees		—			23,772			—			106,660
Net increase (decrease)		(1,446,077	)	$	(17,346,891	)		8,338,244		$	90,390,040

14

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Alpha Only Fund, Class III	$	4,261,184	$	18,158,700	$	878,950	$	630,198	$	—	$	21,422,854
GMO Currency Hedged International Bond Fund, Class III		6,866,604		178,133		7,183,780		164,186		13,946		—
GMO Currency Hedged International Equity Fund, Class III		14,004,042		3,846,876		5,023,547		1,010,292		1,336,583		13,917,020
GMO Emerging Countries Fund, Class III		5,157,459		635,015		563,758		102,742		532,273		6,223,371
GMO Emerging Country Debt Fund, Class IV		2,681,246		263,425		1,416,867		173,440		89,985		1,647,525
GMO Emerging Markets Fund, Class VI		34,241,582		5,019,366		6,584,838		703,692		4,315,674		38,450,725
GMO Growth Fund, Class III		123,851		3,247		126,334		467		2,780		—
GMO Inflation Indexed Bond Fund, Class III		2,712,770		2,174,700		2,122,449		132,298		39,597		2,698,811
GMO International Growth Equity Fund, Class III		—		45,325,993		4,579,381		50,088		1,181,248		42,494,690
GMO International Growth Fund, Class III		46,704,145		2,441,153		51,349,486		93,781		704,872		—
GMO International Intrinsic Value Fund, Class IV		46,508,288		4,868,754		12,796,264		492,277		1,878,978		43,151,981
GMO International Small Companies Fund, Class III		8,458,729		717,213		7,554,351		44,062		673,151		1,247,841
GMO Real Estate Fund, Class III		7,195,261		1,783,814		8,491,790		124,801		1,659,012		—
GMO Short-Duration Investment Fund, Class III		147,457		4,281		17,049		4,281		—		135,556
GMO SPV I, LLC		1,355		—		—		—		570		740	*
GMO U.S. Core Equity Fund, Class VI		—		126,956,480		1,250,000		972,553		2,717,019		126,071,991
GMO U.S. Core Fund, Class VI		129,975,587		9,141,270		140,612,856		1,243,961		—		—

15

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO U.S. Growth Fund, Class III	$	—	$	115,384	$	70,000	$	539	$	2,939	$	45,689
GMO U.S. Quality Equity Fund, Class IV		25,966,395		5,078,618		4,030,450		282,427		46,191		28,076,814
GMO U.S. Value Fund, Class III		—		758,054		310,000		6,782		—		454,865
GMO Value Fund, Class III		824,736		5,539		846,994		5,539		—		—
Totals	$	335,830,691	$	227,476,015	$	255,809,144	$	6,238,406	$	15,194,818	$	326,040,473

* After effect of the return of capital distributions of $504 and $407 on April 4, 2005 and February 21, 2006, respectively.

16

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Global (U.S.+) Equity Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Global (U.S.+) Equity Allocation Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

17

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.58	%	$	1,000.00	$	1,103.20	$	3.02
2) Hypothetical		0.58	%	$	1,000.00	$	1,021.92	$	2.91

*  Expenses are calculated using the Class's annualized expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

18

GMO Global (U.S.+) Equity Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $23,559,910 from long-term capital gains.

For taxable, non-corporate shareholders, 56.49% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 20.98% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $1,521,036 and $278,371, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

19

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

20

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

21

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

22

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)
Annual Report
February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Benchmark-Free Allocation Fund returned +16.5% for the period ended February 28, 2006, as compared to +4.3% for the CPI Index. During the period, the Fund was exposed to a range of asset classes through its investment in underlying GMO mutual funds.

Implementation was positive, as the underlying GMO mutual funds outperformed their respective benchmarks by approximately 0.3%.

Asset allocation contributed +16.1%. The Fund's overweight to international equities, particularly emerging equities, and currency hedged international equities drove the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .28% on the purchase and .25% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		58.7	%
Debt Obligation(s)		29.5
Short-Term Investment(s)		7.3
Preferred Stocks		4.8
Mutual Fund		0.4
Loan Assignments		0.2
Loan Participations		0.2
Private Equity Securities		0.2
Call Options Purchased		0.1
Investment Funds		0.1
Put Options Purchased		0.1
Swaps		0.1
Convertible Securities		0.0
Promissory Notes		0.0
Rights and Warrants		0.0
Written Options		0.0
Forward Currency Contracts		(0.1	)
Futures		(0.6	)
Reverse Repurchase Agreements		(1.1	)
Other		0.1
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country/Region Summary**	% of Investments
United States		28.6	%
Euro Region***		22.6
South Korea		8.0
Japan		6.3
Brazil		6.0
Taiwan		5.8
Canada		5.0
Sweden		4.4
United Kingdom		3.8
China		2.4
Mexico		2.1
South Africa		2.0
Russia		1.0
India		0.9
Malaysia		0.6
Israel		0.5
Thailand		0.4
Hong Kong		0.3
Norway		0.3
Poland		0.3
Turkey		0.3
Austria		0.2
Philippines		0.2
Singapore		0.2
Denmark		0.2
Argentina		0.1
Chile		0.1
Switzerland		(0.9	)
Australia		(1.7	)
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

2

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	28,827,018	GMO Alpha Only Fund, Class III		298,647,908
	2,398,943	GMO Alternative Asset Opportunity Fund, Class III		63,883,855
	4,089,796	GMO Core Plus Bond Fund, Class IV		42,247,589
	20,715,099	GMO Currency Hedged International Bond Fund, Class III		187,264,495
	8,565,347	GMO Currency Hedged International Equity Fund, Class III		77,687,695
	2,180,619	GMO Emerging Country Debt Fund, Class IV		24,640,997
	13,597,568	GMO Emerging Markets Fund, Class VI		305,265,395
	4,786,210	GMO Inflation Indexed Bond Fund, Class III		53,126,931
	1,129,474	GMO International Growth Equity Fund, Class III		33,771,273
	1,066,203	GMO International Intrinsic Value Fund, Class IV		34,736,907
	1,600,814	GMO International Small Companies Fund, Class III		23,900,156
	3,001,258	GMO U.S. Quality Equity Fund, Class IV		62,486,196
		TOTAL MUTUAL FUNDS (COST $1,098,345,449)		1,207,659,397
		SHORT-TERM INVESTMENT(S) — 0.0%
	11,847	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $11,848 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $12,084.		11,847
		TOTAL SHORT-TERM INVESTMENT(S) (COST $11,847)		11,847
		TOTAL INVESTMENTS — 100.0% (Cost $1,098,357,296)		1,207,671,244
		Other Assets and Liabilities (net) — 0.0%		(46,523	)
		TOTAL NET ASSETS — 100.0%	$	1,207,624,721

Notes to Schedule of Investments:

As of February 28, 2006, 40.0% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

3

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $11,847) (Note 2)	$	11,847
Investments in affiliated issuers, at value (cost $1,098,345,449) (Notes 2 and 8)		1,207,659,397
Receivable for Fund shares sold		31,412
Receivable for expenses reimbursed by Manager (Note 3)		11,827
Miscellaneous receivable		89
Total assets		1,207,714,572
Liabilities:
Payable for investments purchased		31,500
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		1,699
Accrued expenses		56,652
Total liabilities		89,851
Net assets	$	1,207,624,721
Net assets consist of:
Paid-in capital	$	1,035,924,306
Accumulated undistributed net investment income		69,541
Accumulated net realized gain		62,316,926
Net unrealized appreciation		109,313,948
	$	1,207,624,721
Net assets attributable to:
Class III shares	$	1,207,624,721
Shares outstanding:
Class III		43,500,729
Net asset value per share:
Class III	$	27.76

See accompanying notes to the financial statements.

4

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	51,971,866
Interest		5,103
Total investment income		51,976,969
Expenses:
Chief Compliance Officer (Note 3)		7,072
Custodian, fund accounting agent and transfer agent fees		48,648
Audit and tax fees		22,659
Legal fees		17,310
Trustees fees and related expenses (Note 3)		20,958
Registration fees		9,516
Printing expense		8,284
Miscellaneous		4,504
Total expenses		138,951
Fees and expenses reimbursed by Manager (Note 3)		(106,847	)
Net expenses		32,104
Net investment income (loss)		51,944,865
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		33,145,036
Realized gains distributions from affiliated issuers (Note 8)		68,233,188
Net realized gain (loss)		101,378,224
Change in net unrealized appreciation (depreciation) on investments		21,287,396
Net realized and unrealized gain (loss)		122,665,620
Net increase (decrease) in net assets resulting from operations	$	174,610,485

See accompanying notes to the financial statements.

5

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)
Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	51,944,865		$	30,875,154
Net realized gain (loss)		101,378,224			62,056,996
Change in net unrealized appreciation (depreciation)		21,287,396			63,161,953
Net increase (decrease) in net assets from operations		174,610,485			156,094,103
Distributions to shareholders from:
Net investment income
Class III		(61,779,932	)		(37,871,765	)
Net realized gains
Class III		(57,743,585	)		(28,936,618	)
		(119,523,517	)		(66,808,383	)
Net share transactions (Note 7):
Class III		84,329,738			689,182,292
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		109,413			2,140,230
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		84,439,151			691,322,522
Total increase (decrease) in net assets		139,526,119			780,608,242
Net assets:
Beginning of period		1,068,098,602			287,490,360
End of period (including accumulated undistributed net investment income of $69,541 and $0, respectively)	$	1,207,624,721		$	1,068,098,602

See accompanying notes to the financial statements.

6

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004(a)
Net asset value, beginning of period	$	26.50		$	24.28		$	20.00
Income (loss) from investment operations:
Net investment income (loss)(b)		1.26	†		0.98	†		0.61
Net realized and unrealized gain (loss)		2.93			3.00			4.53
Total from investment operations		4.19			3.98			5.14
Less distributions to shareholders:
From net investment income		(1.51	)		(0.99	)		(0.75	)
From net realized gains		(1.42	)		(0.77	)		(0.11	)
Total distributions		(2.93	)		(1.76	)		(0.86	)
Net asset value, end of period	$	27.76		$	26.50		$	24.28
Total Return(c)		16.50	%		16.74	%		25.92	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,207,625		$	1,068,099		$	287,490
Net expenses to average daily net assets(d)(e)		0.00	%		0.00	%		0.00	%*
Net investment income to average daily net assets(b)		4.64	%		3.92	%		5.05	%*
Portfolio turnover rate		47	%		50	%		24	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.02	%		0.07	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.00	(f)	$	0.07		$	0.13

(a)  Period from July 23, 2003 (commencement of operations) through February 29, 2004.

(b)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(c)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholders.

(d)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(e)  Net expenses to average daily net assets were less than 0.01%.

(f)  Purchase premiums and redemptions fees were less than $0.01 per share.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

7

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Benchmark-Free Allocation Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks positive return regardless of market direction. The Fund will not seek to control risk relative to a particular securities market index or benchmark.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request by calling (617) 346-7646 (collect).

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Shares of underlying fund(s) are valued at their net asset value. Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Securities for which quotations are not readily available, or whose values the Manager has determined to be unreliable, are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that

8

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 7.6% of net assets.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions were as follows: ordinary income – $66,921,938 and $60,088,474, respectively and long-term capital gains – $52,601,579 and $6,719,909, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consists of $3,199,420 and $62,936,356 of undistributed ordinary income and undistributed long-term capital gains, respectively. The

9

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

temporary differences between book and tax basis distributable earnings are primarily due to partnership interest tax allocations and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	1,102,106,616	$	114,527,179	$	(8,962,551	)	$	105,564,628

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	9,904,608	$	(9,904,608	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

10

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Purchase and redemption of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were 0.28% and 0.25%, of the amount invested or redeemed, respectively. For the period June 20, 2004 to June 29, 2005, the premium on cash purchases and fee on redemptions of Fund shares were 0.36% and 0.32%, respectively. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemptions fees, if any, of the underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $23,654 and $2,103,988 in purchase premiums and $85,759 and $36,242 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge a management or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses

11

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

(including taxes), securities lending fees and expenses, interest expense, transfer taxes and expenses indirectly incurred by investments in the underlying fund(s)).

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.527	%		0.121	%		0.064	%		0.712	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $12,713 and $7,072, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $615,167,407 and $530,108,273, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $29,618,095 and $29,618,095, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholder and related parties

As of February 28, 2006, 13.7% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

12

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 1.8% of the Fund's shares were held by eighteen related parties comprised of certain GMO employee accounts, and 97.4% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		302,694		$	8,228,184			27,019,490		$	652,106,084
Shares issued to shareholders in reinvestment of distributions		4,145,312			110,385,444			2,333,898			59,349,385
Shares repurchased		(1,246,919	)		(34,283,890	)		(895,813	)		(22,273,177	)
Purchase premiums and redemption fees		—			109,413			—			2,140,230
Net increase (decrease)		3,201,087		$	84,439,151			28,457,575		$	691,322,522

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Alpha Only Fund, Class III	$	—	$	300,234,063	$	83,919	$	9,168,499	$	—	$	298,647,908
GMO Alternative Asset Opportunity Fund, Class III		—		60,000,000		29,054		—		—		63,883,855
GMO Core Plus Bond Fund, Class III		—		41,631,907		41,751,819		31,908		—		—
GMO Core Plus Bond Fund, Class IV		—		42,841,070		78,491		1,369,251		—		42,247,589
GMO Currency Hedged International Bond Fund, Class III		269,724,169		32,518,117		105,934,385		21,916,831		2,541,940		187,264,495

13

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Currency Hedged International Equity Fund, Class III	$	85,231,973	$	18,013,706	$	32,032,239	$	5,539,490	$	8,459,216	$	77,687,695
GMO Emerging Country Debt Fund, Class IV		92,884,914		3,883,686		73,278,618		2,464,782		1,418,903		24,640,997
GMO Emerging Markets Fund, Class VI		259,580,754		44,519,969		50,922,103		6,239,156		38,280,814		305,265,395
GMO Inflation Indexed Bond Fund, Class III		224,758,112		10,000,563		179,825,347		3,760,262		1,697,301		53,126,931
GMO International Growth Equity Fund, Class III		—		32,530,552		12,813		37,117		875,341		33,771,273
GMO International Growth Fund, Class III		16,000,551		11,938,255		29,618,095		62,677		471,087		—
GMO International Intrinsic Value Fund, Class IV		16,247,098		15,008,318		20,936		364,520		1,367,846		34,736,907
GMO International Small Companies Fund, Class III		103,740,259		13,862,642		87,578,259		741,902		13,120,740		23,900,156
GMO U.S. Quality Equity Fund, Class IV		—		59,254,471		12,109		275,471		—		62,486,196
Totals	$	1,068,167,830	$	686,237,319	$	601,178,187	$	51,971,866	$	68,233,188	$	1,207,659,397

14

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Benchmark-Free Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Benchmark-Free Allocation Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

15

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.72	%	$	1,000.00	$	1,107.90	$	3.76
2) Hypothetical		0.72	%	$	1,000.00	$	1,021.22	$	3.61

*  Expenses are calculated using the Class's annualized expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

16

GMO Benchmark-Free Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $52,601,579 from long-term capital gains.

For taxable, non-corporate shareholders, 15.44% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 3.31% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $11,503,423 and $3,609,983, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

17

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

18

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (abook publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

19

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo& Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

21

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

Since its inception on June 16, 2005, the GMO World Opportunities Equity Allocation Fund returned +15.9% for the fiscal year ended February 28, 2006, as compared to +14.2% for the Fund's benchmark, the MSCI World Index. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was fully exposed to global equity and fixed income securities through its investment in underlying GMO mutual funds.

Implementation was negative, detracting approximately 2.9% with most of the underperformance coming from the GMO U.S. Core Equity, GMO International Intrinsic Value, and GMO International Growth Equity Funds, which underperformed their respective benchmarks.

Asset allocation added nearly 4.6%. The Fund's underweight to U.S. equities and overweight to international equities, particularly emerging market equities, were the drivers of the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .04% on the purchase and .04% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		94.4	%
Short-Term Investment(s)		8.0
Preferred Stocks		0.9
Debt Obligation(s)		0.1
Futures		0.1
Convertible Securities		0.0
Investment Funds		0.0
Mutual Funds		0.0
Private Equity Securities		0.0
Rights and Warrants		0.0
Swaps		0.0
Forward Currency Contracts		(0.1	)
Other		(3.4	)
		100.0	%
Country Summary**	% of Investments
United States		31.4	%
Japan		16.5
United Kingdom		13.1
France		5.3
Netherlands		3.7
Germany		3.5
Canada		2.5
Italy		2.4
Switzerland		2.2
Australia		2.1
Finland		1.9
South Korea		1.6
Spain		1.4
Taiwan		1.2
Belgium		1.1
Brazil		0.9
Norway		0.9
South Africa		0.9
Hong Kong		0.8
China		0.7
Sweden		0.7
Austria		0.6

1

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary**	% of Investments
India		0.6	%
Russia		0.6
Ireland		0.6
Mexico		0.5
Singapore		0.5
Denmark		0.4
Israel		0.3
Malaysia		0.3
Thailand		0.2
Argentina		0.1
Chile		0.1
Greece		0.1
Indonesia		0.1
Poland		0.1
Turkey		0.1
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

2

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	158,126	GMO Alpha Only Fund, Class III		1,638,184
	3,813,164	GMO Currency Hedged International Equity Fund, Class III		34,585,400
	3,228,906	GMO Emerging Markets Quality Fund, Class VI		33,548,336
	3,429,157	GMO International Growth Equity Fund, Class III		102,531,806
	3,146,989	GMO International Intrinsic Value Fund, Class IV		102,528,906
	45,523	GMO International Small Companies Fund, Class III		679,653
	6,736,026	GMO U.S. Core Equity Fund, Class VI		97,470,295
	1,645,560	GMO U.S. Quality Equity Fund, Class IV		34,260,556
		TOTAL MUTUAL FUNDS (COST $390,728,383)		407,243,136
		SHORT-TERM INVESTMENT(S) — 0.0%
	20,155	Citigroup Cash Reserve Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $20,157 and an effective yield of 3.01%, collateralized by a U.S.Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $20,558.		20,155
		TOTAL SHORT-TERM INVESTMENT(S) (COST $20,155)		20,155
		TOTAL INVESTMENTS — 100.0% (Cost $390,748,538)		407,263,291
		Other Assets and Liabilities (net) — 0.0%		(33,184	)
		TOTAL NET ASSETS — 100.0%	$	407,230,107

Notes to Schedule of Investments:

As of February 28, 2006, 59.1% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

3

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $20,155) (Note 2)	$	20,155
Investments in affiliated issuers, at value (cost $390,728,383) (Notes 2 and 8)		407,243,136
Receivable for Fund shares sold		57,804,000
Interest receivable		10
Receivable for expenses reimbursed by Manager (Note 3)		16,604
Total assets		465,083,905
Liabilities:
Payable for investments purchased		57,804,000
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		554
Accrued expenses		49,244
Total liabilities		57,853,798
Net assets	$	407,230,107
Net assets consist of:
Paid-in capital	$	387,441,964
Accumulated undistributed net investment income		22,190
Accumulated net realized gain		3,251,200
Net unrealized appreciation		16,514,753
	$	407,230,107
Net assets attributable to:
Class III shares	$	407,230,107
Shares outstanding:
Class III		18,108,635
Net asset value per share:
Class III	$	22.49

See accompanying notes to the financial statements.

4

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Statement of Operations — Period from June 16, 2005 (commencement of
operations) through February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	2,765,039
Interest		18,290
Total investment income		2,783,329
Expenses:
Custodian, fund accounting agent and transfer agent fees		12,496
Audit and tax fees		20,108
Legal fees		3,816
Trustees fees and related expenses (Note 3)		3,063
Registration fees		28,633
Miscellaneous		3,030
Total expenses		71,146
Fees and expenses reimbursed by Manager (Note 3)		(66,959	)
Net expenses		4,187
Net investment income (loss)		2,779,142
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		9,997
Realized gains distributions from affiliated issuers (Note 8)		6,155,978
Net realized gain (loss)		6,165,975
Change in net unrealized appreciation (depreciation) on investments		16,514,753
Net realized and unrealized gain (loss)		22,680,728
Net increase (decrease) in net assets resulting from operations	$	25,459,870

See accompanying notes to the financial statements.

5

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Period from June 16, 2005 (commencement of operations) through February 28, 2006
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	2,779,142
Net realized gain (loss)		6,165,975
Change in net unrealized appreciation (depreciation)		16,514,753
Net increase (decrease) in net assets from operations		25,459,870
Distributions to shareholders from:
Net investment income
Class III		(3,995,989	)
Net realized gains
Class III		(1,675,738	)
		(5,671,727	)
Net share transactions (Note 7):
Class III		387,323,355
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		118,609
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		387,441,964
Total increase (decrease) in net assets		407,230,107
Net assets:
Beginning of period		—
End of period (including accumulated undistributed net investment income of $22,190)	$	407,230,107

See accompanying notes to the financial statements.

6

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout the period)

	Period from June 16, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	20.00
Income (loss) from investment operations:
Net investment income (loss)(a)		0.37	†
Net realized and unrealized gain (loss)		2.78
Total from investment operations		3.15
Less distributions to shareholders:
From net investment income		(0.46	)
From net realized gains		(0.20	)
Total distributions		(0.66	)
Net asset value, end of period	$	22.49
Total Return(b)		15.90	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	407,230
Net expenses to average daily net assets(c)		0.00	%*(d)
Net investment income to average daily net assets		2.42	%*
Portfolio turnover rate		5	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total return would have been lower had certain expenses not been reimbursed and/or waived during the period shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholders.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

(d)  Net expenses to average daily net assets were less than 0.01%.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

7

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO World Opportunities Equity Allocation Fund (the "Fund"), which commenced operations on June 16, 2005, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks total return greater than the return of the MSCI World Index, the Fund's benchmark. The MSCI World Index is a global developed markets equity index that is independently maintained and published by Morgan Stanley Capital International.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Shares of underlying fund(s) are valued at their net asset value. Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Securities for which quotations are not readily available, or whose values the Manager has determined to be unreliable, are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close, but before the close of the NYSE. As a

8

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulation, which may differ from U.S. GAAP. During the period ended February 28, 2006, the tax basis of distributions paid were as follows: ordinary income – $4,442,853 and long-term capital gains – $1,228,874.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $22,190 and $3,251,200 of undistributed ordinary income and undistributed long-term capital gains, respectively.

9

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	390,748,538	$	16,592,767	$	(78,014	)	$	16,514,753

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	1,239,037	$	(1,239,037	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.04% of the amount invested or redeemed. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemption fees, if any, of the

10

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the period ended February 28, 2006, the Fund received $118,609 in purchase premiums and $0 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge a management fee or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense, transfer taxes, and expenses indirectly incurred by investments in the underlying fund(s).

11

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the period ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees)			Indirect Shareholder Service Fees			Total Indirect Expenses
	0.473	%		0.102	%		0.575	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the period ended February 28, 2006, was $1,093 and $1,124, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $399,318,627 and $8,600,242, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the period ended February 28, 2006 were $82,121,832 and $82,121,832, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 76.3% of the outstanding shares of the Fund were held by four shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

12

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Period from June 16, 2005 (commencement of operations) through February 28, 2006
Class III:	Shares		Amount
Shares sold		17,845,201	$	381,651,629
Shares issued to shareholders in reinvestment of distributions		263,434		5,671,726
Purchase premiums and redemption fees		—		118,609
Net increase (decrease)		18,108,635	$	387,441,964

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Alpha Only Fund, Class III	$	—	$	1,654,388	$	—	$	56,462	$	—	$	1,638,184
GMO Currency Hedged International Equity Fund, Class III		—		33,978,671		—		1,419,068		1,265,569		34,585,400
GMO Emerging Markets Quality Fund, Class VI		—		30,284,384		—		175,464		35,011		33,548,336
GMO International Growth Equity Fund, Class III		—		103,630,959		3,250,000		57,751		1,361,963		102,531,806
GMO International Growth Fund, Class III		—		41,081,013		43,426,672		23,023		173,043		—
GMO International Intrinsic Value Fund, Class IV		—		99,689,532		3,500,000		497,727		1,658,058		102,528,906
GMO International Small Companies Fund, Class III		—		741,461		—		14,472		191,470		679,653

13

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Real Estate Fund, Class III	$	—	$	2,277,886	$	1,849,242	$	40,921	$	550,262	$	—
GMO U.S. Core Equity Fund, Class VI		—		96,869,953		—		319,618		910,827		97,470,295
GMO U.S. Core Fund, Class VI		—		38,080,888		38,696,160		58,950		—		—
GMO U.S. Quality Equity Fund, Class IV		—		33,151,324		—		101,583		9,775		34,260,556
Totals	$	—	$	481,440,459	$	90,722,074	$	2,765,039	$	6,155,978	$	407,243,136

14

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO World Opportunities Equity Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO World Opportunities Equity Allocation Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the period June 16, 2005 (commencement of operations) to February 28, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

15

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.58	%	$	1,000.00	$	1,074.60	$	2.98
2) Hypothetical		0.58	%	$	1,000.00	$	1,021.92	$	2.91

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

16

GMO World Opportunities Equity Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $1,228,874 from long-term capital gains.

For taxable, non-corporate shareholders, 47.02% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 10.64% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $1,140,455 and $446,863, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

17

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

18

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

19

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

21

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

Since its inception on May 31, 2005, the GMO Strategic Balanced Allocation Fund returned +14.4% for the fiscal year ended February 28, 2006, as compared to +12.1% for the Fund's benchmark, the GMO Strategic Balanced Index (75% MSCI World Index / 25% Lehman Brothers U.S. Aggregate Index) for the same period. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed to global equity and fixed income securities through its investment in underlying GMO mutual funds.

Implementation was negative, detracting 1.4%. The primary drivers of the underperformance were negative relative returns from the GMO U.S. Core Equity, GMO U.S. Quality Equity, GMO International Intrinsic Value, and GMO International Growth Equity Funds.

Asset allocation added 3.7%. The Fund's underweight to U.S. equities and overweight to international equities, particularly emerging market equities, were the drivers of the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .06% on the purchase and .06% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

*  The GMO Strategic Balanced Index is a composite benchmark computed by GMO and comprised 75% MSCI World Index and 25% Lehman Brothers U.S. Aggregate Index.

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		69.1	%
Debt Obligation(s)		26.5
Short-Term Investment(s)		5.9
Preferred Stocks		1.0
Mutual Funds		0.2
Call Options Purchased		0.1
Loan Assignments		0.1
Loan Participations		0.1
Futures		0.0
Promissory Notes		0.0
Put Options Purchased		0.0
Rights and Warrants		0.0
Swaps		0.0
Written Options		0.0
Forward Currency Contracts		0.0
Reverse Repurchase Agreements		(0.6	)
Other		(2.4	)
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMO Trust ("underlying fund(s)").

1

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country/Region Summary**	% of Investments
United States		35.0	%
Euro Region***		20.4
Japan		15.9
United Kingdom		7.0
Canada		5.4
Sweden		4.4
South Korea		2.0
Taiwan		1.5
Brazil		1.1
South Africa		1.1
China		0.8
Russia		0.8
India		0.7
Norway		0.7
Hong Kong		0.6
Mexico		0.6
Austria		0.5
Denmark		0.4
Singapore		0.4
Israel		0.3
Malaysia		0.3
Chile		0.2
Poland		0.2
Switzerland		0.2
Thailand		0.2
Argentina		0.1
Indonesia		0.1
Turkey		0.1
Australia		(1.0	)
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets. The table includes values of derivative contracts.

***  The "Euro Region" is comprised of Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands and Spain.

2

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 100.0%
		Affiliated Issuer(s) — 100.0%
	5,601,677	GMO Core Plus Bond Fund, Class IV		57,865,320
	1,020,921	GMO Currency Hedged International Bond Fund, Class III		9,229,127
	110,865	GMO Currency Hedged International Equity Fund, Class III		1,005,543
	751,752	GMO Domestic Bond Fund, Class VI		7,382,206
	95,982	GMO Emerging Country Debt Fund, Class IV		1,084,598
	3,258,673	GMO Emerging Markets Quality Fund, Class VI		33,857,607
	923,895	GMO Inflation Indexed Bond Fund, Class III		10,255,231
	1,242,468	GMO International Bond Fund, Class III		11,890,420
	2,800,500	GMO International Growth Equity Fund, Class III		83,734,942
	2,556,557	GMO International Intrinsic Value Fund, Class IV		83,292,632
	79,541	GMO International Small Companies Fund, Class III		1,187,543
	2,386,884	GMO U.S. Core Equity Fund, Class VI		34,538,207
	1,501,328	GMO U.S. Quality Equity Fund, Class IV		31,257,649
		TOTAL MUTUAL FUNDS (COST $353,328,349)		366,581,025
		SHORT-TERM INVESTMENT(S) — 0.0%
	60,549	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $60,554 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturity date of 02/15/36 and a market value, including accrued interest, of $61,760.		60,549
		TOTAL SHORT-TERM INVESTMENT(S) (COST $60,549)		60,549
		TOTAL INVESTMENTS — 100.0% (Cost $353,388,898)		366,641,574
		Other Assets and Liabilities (net) — 0.0%		(19,245	)
		TOTAL NET ASSETS — 100.0%	$	366,622,329

As of February 28, 2006, 48.0% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

See accompanying notes to the financial statements.

3

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $60,549) (Note 2)	$	60,549
Investments in affiliated issuers, at value (cost $353,328,349) (Notes 2 and 8)		366,581,025
Receivable for Fund shares sold		25,192,440
Receivable for expenses reimbursed by Manager (Note 3)		26,796
Miscellaneous receivable		7,565
Total assets		391,868,375
Liabilities:
Payable for investments purchased		12,510,000
Payable for Fund shares repurchased		12,668,475
Payable to affiliate for (Note 3):
Trustees and Chief Compliance Officer fees		1,011
Accrued expenses		66,560
Total liabilities		25,246,046
Net assets	$	366,622,329
Net assets consist of:
Paid-in capital	$	348,768,164
Accumulated undistributed net investment income		41,901
Accumulated net realized gain		4,559,588
Net unrealized appreciation		13,252,676
	$	366,622,329
Net assets attributable to:
Class III shares	$	366,622,329
Shares outstanding:
Class III		16,386,112
Net asset value per share:
Class III	$	22.37

See accompanying notes to the financial statements.

4

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Statement of Operations — Period from May 31, 2005
(commencement of operations) through February 28, 2006

Investment Income:
Dividends from affiliated issuers (Note 8)	$	4,702,121
Interest		34,820
Total investment income		4,736,941
Expenses:
Custodian, fund accounting agent and transfer agent fees		24,804
Audit and tax fees		20,112
Legal fees		6,062
Trustees fees and related expenses (Note 3)		4,400
Registration fees		40,384
Miscellaneous		4,814
Total expenses		100,576
Fees and expenses reimbursed by Manager (Note 3)		(94,382	)
Net expenses		6,194
Net investment income (loss)		4,730,747
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		(999,088	)
Realized gains distributions from affiliated issuers (Note 8)		6,786,824
Net realized gain (loss)		5,787,736
Change in net unrealized appreciation (depreciation) on investments		13,252,676
Net realized and unrealized gain (loss)		19,040,412
Net increase (decrease) in net assets resulting from operations	$	23,771,159

See accompanying notes to the financial statements.

5

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Period from May 31, 2005 (commencement of operations) through February 28, 2006
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	4,730,747
Net realized gain (loss)		5,787,736
Change in net unrealized appreciation (depreciation)		13,252,676
Net increase (decrease) in net assets from operations		23,771,159
Distributions to shareholders from:
Net investment income
Class III		(6,503,776	)
Net realized gains
Class III		(316,251	)
		(6,820,027	)
Net share transactions (Note 7):
Class III		349,524,197
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		147,000
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		349,671,197
Total increase (decrease) in net assets		366,622,329
Net assets:
Beginning of period		—
End of period (including accumulated undistributed net investment income of $41,901)	$	366,622,329

See accompanying notes to the financial statements.

6

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout the period)

	Period from May 31, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	20.00
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.52
Net realized and unrealized gain (loss)		2.34
Total from investment operations		2.86
Less distributions to shareholders:
From net investment income		(0.47	)
From net realized gains		(0.02	)
Total distributions		(0.49	)
Net asset value, end of period	$	22.37
Total Return(b)		14.42	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	366,622
Net expenses to average daily net assets(c)(d)		0.00	%*
Net investment income to average daily net assets(a)		3.22	%*
Portfolio turnover rate		10	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%*
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total return would have been lower had certain expenses not been reimbursed and/or waived during the period shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(c)  Net expenses exclude expenses incurred indirectly through investments in underlying fund(s) (See Note 3).

(d)  Net expenses to average daily net assets were less than 0.01%.

†  Calculated using average shares outstanding throughout the period.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

7

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Strategic Balanced Allocation Fund (the "Fund"), which commenced operations on May 31, 2005, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund operates as a "fund-of-funds" and makes investments in other funds of the Trust ("underlying fund(s)"). The Fund seeks total return greater than the return of the GMO Strategic Balanced Index through investments to varying extent in the underlying fund(s). The GMO Strategic Balanced Index is a composite benchmark computed by GMO consisting of (i) the MSCI World Index (a global developed markets equity index that is independently maintained and published by Morgan Stanley Capital International) and (ii) the Lehman Brothers U.S. Aggregate Bond Index (an independently maintained and published index comprised of U.S. fixed rate debt issues having a maturity of at least one year and rated investment grade or higher by Moody's Investors Service, Standard & Poor's or Fitch IBCA, Inc.) in the following proportions: 75% (MSCI World), and 25% (Lehman Brothers). The GMO Strategic Balanced Index reflects investment of all applicable dividends, capital gains, and interest. The Fund pursues its objective by investing in the least expensive class of the underlying fund(s) that is currently operational.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request, by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares

8

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

of underlying fund(s) are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Certain investments in securities held by the Fund or underlying fund(s) are valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold and the differences could be material to the Fund or the underlying fund(s). As of February 28, 2006, the total value of these securities represented 7.3% of net assets.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

9

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the period ended February 28, 2006, the tax basis of distributions paid were as follows: ordinary income – $6,503,776 and long-term capital gains – $316,251.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $199,042 and $4,537,652 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	347,911,937	$	26,922,313	$	(8,192,676	)	$	18,729,637

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to differing treatment of mutual fund distributions received. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	1,814,930	$	(911,897	)	$	(903,033	)

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Income dividends and capital gain distributions from underlying fund(s) are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature

10

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the premiums on cash purchases and fee on redemptions of Fund shares were each 0.06% of the amount invested or redeemed. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemption fees, if any, of the underlying fund(s) in which the Fund was invested. The level of purchase premium and redemption fee in an amount approximately equal to the fee for the Fund may be adjusted to account for changes in the Fund's investments (i.e., changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the period ended February 28, 2006, the Fund received $143,850 in purchase premiums and $3,150 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments, including the possible imposition of capital controls 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. 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 U.S. and developed foreign markets. Additionally, the investment risks associated with an investment in the underlying fund(s) may be more pronounced to the extent that the underlying fund(s) engage in derivative transactions.

3.  Fees and other transactions with affiliates

The Manager determines the allocation of the assets of the Fund among designated underlying fund(s). The Manager does not directly charge a management fee or shareholder service fee, but receives management and shareholder service fees from the underlying fund(s) in which the Fund invests.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund for its total annual direct operating expenses (excluding fees and expenses of the Chief Compliance Officer

11

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense, transfer taxes, and expenses indirectly incurred by investments in the underlying fund(s)).

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the period ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees and interest expense)			Indirect Shareholder Service Fees			Indirect Interest Expense			Total Indirect Expenses
	0.417	%		0.105	%		0.012	%		0.534	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the period ended February 28, 2006 was $1,419 and $1,794, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the period ended February 28, 2006 aggregated $355,288,121 and $19,392,340, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $57,002,682 and $57,002,682, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 54.6% of the outstanding shares of the Fund was held by three shareholders, each holding in excess of 10% of the Fund's shares outstanding. Investment activities of these shareholders may have a material effect on the Fund.

12

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

As of February 28, 2006, 100% of the Fund's shares was held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Period from May 31, 2005 (commencement of operations) through February 28, 2006
Class III:	Shares			Amount
Shares sold		17,293,712		$	369,830,731
Shares issued to shareholders in reinvestment of distributions		295,550			6,375,003
Shares repurchased		(1,203,150	)		(26,681,537	)
Purchase premiums and redemption fees		—			147,000
Net increase (decrease)		16,386,112		$	349,671,197

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of these affiliated issuers during the period ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Core Plus Bond Fund, Class III	$	—	$	7,564,725	$	7,491,746	$	5,725	$	—	$	—
GMO Core Plus Bond Fund, Class IV		—		58,775,016		—		1,578,884		—		57,865,320
GMO Currency Hedged International Bond Fund, Class III		—		13,633,071		3,450,000		958,919		122,292		9,229,127
GMO Currency Hedged International Equity Fund, Class III		—		1,000,000		—		—		—		1,005,543
GMO Domestic Bond Fund, Class III		—		2,803,279		2,773,691		—		12,279		—

13

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Domestic Bond Fund, Class VI	$	—	$	8,037,621	$	530,000	$	161,669	$	—	$	7,382,206
GMO Emerging Country Debt Fund, Class IV		—		1,728,417		600,995		125,049		48,824		1,084,598
GMO Emerging Markets Quality Fund, Class VI		—		30,099,761		1,700,000		331,537		69,595		33,857,607
GMO Inflation Indexed Bond Fund, Class III		—		10,381,862		—		109,426		16,137		10,255,231
GMO International Bond Fund, Class III		—		12,750,132		300,000		127,584		2,461		11,890,420
GMO International Growth Equity, Class III		—		84,133,700		3,040,000		80,160		1,890,429		83,734,942
GMO International Growth Fund, Class III		—		39,007,992		40,268,111		29,564		222,206		—
GMO International Intrinsic Value Fund, Class IV		—		81,004,331		3,040,000		687,383		2,280,525		83,292,632
GMO International Small Companies Fund, Class III		—		2,299,818		900,000		40,310		486,765		1,187,543
GMO Real Estate Fund, Class III		—		4,548,420		3,647,345		81,025		1,044,368		—
GMO U.S. Core Equity Fund, Class VI		—		35,477,189		1,204,000		200,405		582,211		34,538,207
GMO U.S. Core Fund, Class VI		—		16,642,629		16,734,572		23,875		—		—
GMO U.S. Quality Equity Fund, Class IV		—		30,869,933		750,000		160,606		8,732		31,257,649
Totals	$	—	$	440,757,896	$	86,430,460	$	4,702,121	$	6,786,824	$	366,581,025

9.  Subsequent event

As of April 1, 2006, the Fund changed its name to GMO Strategic Opportunities Allocation Fund.

14

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Strategic Balanced Allocation Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Strategic Balanced Allocation Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the period from May 31, 2005 (commencement of operations) to February 28, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

15

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs including indirect management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.54	%	$	1,000.00	$	1,086.60	$	2.79
2) Hypothetical		0.54	%	$	1,000.00	$	1,022.12	$	2.71

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

16

GMO Strategic Balanced Allocation Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $316,251 from long-term capital gains.

For taxable, non-corporate shareholders, 34.17% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 5.84% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 $2,322,498 or if determined to be different, the qualified interest income of such year.

17

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

18

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

19

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

20

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

21

GMO Alpha Only Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Alpha Only Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Asset Allocation Team within the Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Alpha Only Fund returned +4.6% for the fiscal year ended February 28, 2006, as compared to +3.3% for the Citigroup 3-Month Treasury Bill Index. Consistent with the Fund's investment objectives and policies, during the fiscal year the Fund was exposed to global equity securities through its investment in underlying GMOmutual funds.

Implementation was negative, as the underlying GMO mutual funds underperformed their respective benchmarks by 2.0%.

Asset allocation added approximately 3.3%. The portfolio's allocation to international and emerging equities drove the outperformance.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .09% on the purchase and .09% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Alpha Only Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary*	% of Total Net Assets
Common Stocks		84.4	%
Short-Term Investment(s)		15.6
Preferred Stocks		2.1
Debt Obligation(s)		0.2
Private Equity Securities		0.1
Convertible Securities		0.0
Investment Funds		0.0
Rights and Warrants		0.0
Swaps		0.0
Forward Currency Contracts		(0.4	)
Futures		(2.3	)
Other		0.3
		100.0	%

*  The table above incorporates aggregate indirect asset class exposure associated with investments in other funds of GMOTrust ("underlying fund(s)").

1

GMO Alpha Only Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Country Summary**	% of Investments
United States		38.9	%
Japan		13.5
United Kingdom		10.7
France		4.3
South Korea		3.1
Netherlands		3.0
Germany		2.9
Brazil		2.4
Taiwan		2.3
Canada		2.1
Italy		2.0
Switzerland		1.8
Australia		1.7
Finland		1.6
Spain		1.1
Belgium		0.9
China		0.9
Mexico		0.8
South Africa		0.8
Norway		0.7
Hong Kong		0.6
Sweden		0.6
Austria		0.5
Denmark		0.4
Ireland		0.4
Russia		0.4
Singapore		0.4
India		0.3
Israel		0.2
Malaysia		0.2
Thailand		0.2
Philippines		0.1
Poland		0.1
Turkey		0.1
		100.0	%

**  The table above incorporates aggregate indirect country exposure associated with investments in underlying fund(s). The table excludes short-term investment(s) and any investment in underlying fund(s) that is less than 3% of invested assets.

2

GMO Alpha Only Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		MUTUAL FUNDS — 90.8%
		United States — 90.8%
		Affiliated Issuer(s)
	7,100,412	GMO Emerging Markets Fund, Class III		159,688,267
	10,679,589	GMO International Growth Equity Fund, Class III		319,319,726
	9,799,353	GMO International Intrinsic Value Fund, Class III		319,360,923
	23,621,033	GMO U.S. Core Equity Fund, Class III		342,268,774
	8,893,996	GMO U.S. Quality Equity Fund, Class III		185,084,052
				1,325,721,742
		TOTAL MUTUAL FUNDS (COST $1,249,170,502)		1,325,721,742
		COMMON STOCKS — 0.0%
		Italy — 0.0%
	12,500	Grassetto SPA *(a)(b)		149
		TOTAL COMMON STOCKS (COST $7,040)		149
		SHORT-TERM INVESTMENT(S) — 8.8%
	70,600,000	Rabobank Time Deposit, 4.53%, due 03/01/06		70,600,000
	58,685,000	U.S. Treasury Bill, 4.64%, due 08/24/06 (c)(d)		57,394,634
		TOTAL SHORT-TERM INVESTMENT(S) (COST $127,988,192)		127,994,634
		TOTAL INVESTMENTS — 99.6% (Cost $1,377,165,734)		1,453,716,525
		Other Assets and Liabilities (net) — 0.4%		6,444,836
		TOTAL NET ASSETS — 100.0%	$	1,460,161,361

See accompanying notes to the financial statements.

3

GMO Alpha Only Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Sales
5/26/06	AUD		49,306,243	$	36,546,034	$	(260,677	)
5/26/06	CHF		63,340,841		48,705,334		41,880
5/26/06	DKK		28,940,170		4,646,330		(16,473	)
5/26/06	EUR		190,211,565		227,917,521		(166,913	)
5/26/06	GBP		97,459,428		171,087,183		(1,521,303	)
5/26/06	HKD		88,901,412		11,474,728		49
5/26/06	JPY		20,689,223,359		180,765,976		(3,901,625	)
5/26/06	NOK		30,377,373		4,526,263		(8,821	)
5/26/06	NZD		2,128,989		1,401,183		10,937
5/26/06	SEK		124,877,308		15,884,229		109,012
5/26/06	SGD		8,164,568		5,047,672		(37,576	)
						$	(5,751,510	)

Futures contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Sales
	1,380	CAC 40	March 2006	$	82,312,478	$	(675,257	)
	352	DAX	March 2006		60,886,746		(4,521,052	)
	2,080	FTSE 100	March 2006		210,319,397		(7,375,083	)
	145	HANG SENG	March 2006		14,802,041		(243,165	)
	237	IBEX 35	March 2006		33,252,098		(916,276	)
	1,621	OMXS 30	March 2006		20,363,009		39,913
	334	Russell 2000	March 2006		122,244,000		(5,598,034	)
	1,510	S&P 500	March 2006		484,106,000		(2,583,990	)
	148	S&P/MIB	March 2006		33,268,674		(2,172,562	)
	512	SPI 200	March 2006		46,797,696		(2,789,491	)
	1,543	TOPIX	March 2006		221,009,373		(7,273,530	)
						$	(34,108,527	)

See accompanying notes to the financial statements.

4

GMO Alpha Only Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  Bankrupt issuer.

(b)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(c)  Rate shown represents yield-to-maturity.

(d)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

As of February 28, 2006, 46.6% of the Net Assets of the Fund, through investments in the underlying fund(s), was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

AUD - Australian Dollar	JPY - Japanese Yen
CHF - Swiss Franc	NOK - Norwegian Krone
DKK - Danish Krone	NZD - New Zealand Dollar
EUR - Euro	SEK - Swedish Krona
GBP - British Pound	SGD - Singapore Dollar
HKD - Hong Kong Dollar

See accompanying notes to the financial statements.

5

GMO Alpha Only Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments in unaffiliated issuers, at value (cost $127,995,232) (Note 2)	$	127,994,783
Investments in affiliated issuers, at value (cost $1,249,170,502) (Notes 2 and 8)		1,325,721,742
Cash		40,001
Foreign currency, at value (cost $587) (Note 2)		590
Receivable for Fund shares sold		51,667
Interest receivable		8,884
Unrealized appreciation on open forward currency contracts (Note 2)		161,878
Receivable for variation margin on open futures contracts (Note 2)		12,354,720
Receivable for expenses reimbursed by Manager (Note 3)		645,633
Total assets		1,466,979,898
Liabilities:
Payable to affiliate for (Note 3):
Management fee		539,046
Shareholder service fee		161,714
Trustees and Chief Compliance Officer fees		2,205
Unrealized depreciation on open forward currency contracts (Note 2)		5,913,388
Accrued expenses		202,184
Total liabilities		6,818,537
Net assets	$	1,460,161,361
Net assets consist of:
Paid-in capital	$	1,467,231,545
Accumulated undistributed net investment income		12,822,573
Accumulated net realized loss		(56,583,515	)
Net unrealized appreciation		36,690,758
	$	1,460,161,361
Net assets attributable to:
Class III shares	$	1,460,161,361
Shares outstanding:
Class III		140,901,127
Net asset value per share:
Class III	$	10.36

See accompanying notes to the financial statements.

6

GMO Alpha Only Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Interest	$	3,025,123
Dividends from affiliated issuers (Note 8)		10,143,791
Total investment income		13,168,914
Expenses:
Management fee (Note 3)		4,061,865
Shareholder service fee – Class III (Note 3)		1,218,559
Custodian and fund accounting agent fees		129,166
Transfer agent fees		28,386
Audit and tax fees		41,795
Legal fees		23,406
Trustees fees and related expenses (Note 3)		14,599
Registration fees		119,571
Miscellaneous		20,018
Total expenses		5,657,365
Fees and expenses reimbursed by Manager (Note 3)		(224,837	)
Indirectly incurred fees waived or borne by Manager (Note 3)		(3,514,000	)
Shareholder service fee waived – Class III (Note 3)		(1,094,422	)
Net expenses		824,106
Net investment income (loss)		12,344,808
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments in affiliated issuers		29,073,836
Realized gains distributions from affiliated issuers (Note 8)		45,815,348
Closed futures contracts		(108,406,918	)
Foreign currency, forward contracts and foreign currency related transactions		35,971,604
Net realized gain (loss)		2,453,870
Change in net unrealized appreciation (depreciation) on:
Investments		53,612,136
Open futures contracts		(31,306,514	)
Foreign currency, forward contracts and foreign currency related transactions		(4,641,607	)
Net unrealized gain (loss)		17,664,015
Net realized and unrealized gain (loss)		20,117,885
Net increase (decrease) in net assets resulting from operations	$	32,462,693

See accompanying notes to the financial statements.

7

GMO Alpha Only Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	12,344,808		$	2,150,898
Net realized gain (loss)		2,453,870			(8,006,672	)
Change in net unrealized appreciation (depreciation)		17,664,015			9,821,663
Net increase (decrease) in net assets from operations		32,462,693			3,965,889
Distributions to shareholders from:
Net investment income
Class III		(44,049,884	)		—
Net share transactions (Note 7):
Class III		1,290,587,348			100,566,657
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		1,673,529			114,581
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		1,292,260,877			100,681,238
Total increase (decrease) in net assets		1,280,673,686			104,647,127
Net assets:
Beginning of period		179,487,675			74,840,548
End of period (including accumulated undistributed net investment income of $12,822,573 and distributions in excess of net investment income of $1,185,487, respectively)	$	1,460,161,361		$	179,487,675

See accompanying notes to the financial statements.

8

GMO Alpha Only Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	10.26		$	9.99		$	9.63		$	9.23		$	8.73
Income (loss) from investment operations:
Net investment income (loss)(a)†		0.16			0.19			0.17			0.20			0.17
Net realized and unrealized gain (loss)		0.31			0.08			0.19			0.49			0.96
Total from investment operations		0.47			0.27			0.36			0.69			1.13
Less distributions to shareholders:
From net investment income		(0.37	)		—			—			(0.29	)		(0.63	)
Total distributions		(0.37	)		—			—			(0.29	)		(0.63	)
Net asset value, end of period	$	10.36		$	10.26		$	9.99		$	9.63		$	9.23
Total Return(b)		4.63	%		2.70	%		3.74	%		7.61	%		13.32	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	1,460,161		$	179,488		$	74,841		$	26,329		$	16,628
Net expenses to average daily net assets(c)		0.10	%		0.18	%		0.26	%		0.64	%		0.37	%
Net investment income to average daily net assets(a)		1.52	%		1.94	%		1.72	%		2.06	%		1.88	%
Portfolio turnover rate		40	%		19	%		11	%		111	%		22	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.59	%		0.62	%		0.72	%		0.94	%		0.78	%
Purchase premiums and redemption fees consisted of the following per share amounts:†	$	0.02		$	0.01		$	0.01			—			—

(a)  Net investment income is affected by the timing of the declaration of dividends by the underlying fund(s) in which the Fund invests.

(b)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

(c)  Net expenses exclude expenses incurred indirectly through investment in underlying fund(s) (See Note 3).

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

9

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Alpha Only Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return. The Fund pursues its objective by investing primarily in shares of domestic equity, international equity and fixed income funds of the Trust ("underlying fund(s)") or in securities of the type invested in by the underlying fund(s). The Fund typically hedges the corresponding market exposure resulting from such investments by investing in futures, swap contracts, forward currency contracts and other derivatives. To the extent the Fund's hedges are effective, the performance of the Fund is not expected to correlate with the movements of markets generally but rather will reflect the Manager's outperformance or underperformance relative to such markets generally. The Fund's benchmark is the Citigroup 3-Month Treasury Bill Index.

The financial statements of the underlying fund(s) in which the Fund invests should be read in conjunction with the Fund's financial statements. These financial statements are available, without charge, upon request by calling (617) 346-7646 (collect) or by visiting GMO's website at www.gmo.com.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of the underlying fund(s) and other mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good

10

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the underlying fund(s) are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument

11

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as

12

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

13

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $44,049,884 and $0, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $7,125,063 of undistributed ordinary income. The temporary differences between book and tax basis distributable earnings are primarily due to foreign currency transactions.

As of February 28, 2006, the Fund had capital loss carryforwards available to offset future capital gains, if any, to the extent permitted by the Code, of $523,745, $6,598,186, $2,024,420 and $23,713,990 expiring in 2007, 2012, 2013 and 2014, respectively. Utilization of the capital loss carryforwards above could be subject to limitations imposed by the Code related to share ownership activity.

As of February 28, 2006, the Fund elected to defer to March 1, 2006 post-October capital losses of $31,744,372.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	1,377,319,184	$	76,404,232	$	(6,891	)	$	76,397,341

14

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	45,713,136	$	(44,191,901	)	$	(1,571,235	)

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. In addition, the Fund will also incur certain fees and expenses indirectly as a shareholder in the underlying fund(s). Because the underlying fund(s) have varied expense and fee levels and the Fund may own different proportions of underlying fund(s) at different times, the amount of fees and expenses indirectly incurred by the Fund will vary (See Note 3).

Purchases and redemptions of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.09% of the amount invested or redeemed. For the period June 30, 2004 to June 29, 2005, the premium on cash purchases and fee on redemptions of Fund shares were 0.11% each. The redemption fee is only applicable to shares acquired on or after June 30, 2003 and is subject to adjustment based upon purchase premiums and redemption fees of the underlying fund(s) in which the Fund invests and the estimated transaction costs of investing directly in securities. The Fund's purchase premium and redemption fee are approximately equal to the weighted average of the purchase premiums and redemption fees, if any, of the underlying fund(s) in which the Fund was invested and the estimated transaction costs of investing in securities. The level of purchase premium and redemption fee for the Fund may be adjusted to account for

15

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

changes in the Fund's investments (i.e. changes in the percentage of Fund assets allocated to each underlying fund). If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transaction costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in capital. For the years ended February 28, 2006 and February 28, 2005, the Fund received $1,425,013 and $114,247 in purchase premiums and $248,516 and $334 in redemption fees, respectively. There is no premium for reinvested distributions or in-kind transactions.

Investment risks

The Fund is subject to the investment risks associated with an investment in the underlying fund(s), some of which may invest in foreign securities. There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.50% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares. As described in Note 1, the Fund invests in certain underlying fund(s). Like the management fee (as described below), the Fund's shareholder service fee will be waived (but not below zero) to the extent of the indirect shareholder service fees paid in connection with the Fund's investment in shares of the underlying fund(s).

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, custody fees, and the following expenses: fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes (collectively, "fund expenses")) plus the amount of fees and expenses, excluding shareholder service fees and fund expenses (as defined above), incurred indirectly by the Fund through investment in the underlying fund(s), exceed 0.50% of the Fund's average daily net assets. Because GMO will not reimburse expenses incurred indirectly by the Fund to the extent they exceed 0.50% of the Fund's average daily net assets, and because the amount of fees and

16

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

expenses incurred indirectly by the Fund will vary, the operating expenses (excluding shareholder service fees and fund expenses (as defined above)) incurred indirectly by the Fund through its investment in the underlying fund(s) may exceed 0.50% of the Fund's average daily net assets.

The Fund incurs fees and expenses indirectly as a shareholder in the underlying fund(s). For the year ended February 28, 2006, these indirect fees and expenses expressed as an annualized percentage of the Fund's average daily net assets were as follows:

Indirect Net Expenses (excluding shareholder service fees)			Indirect Shareholder Service Fees			Total Indirect Expenses
	0.450	%		0.135	%		0.585	%

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $8,975 and $7,567, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchase and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $1,385,404,072 and $301,207,339, respectively. Cost of purchases and proceeds from sale of securities for in-kind transactions for the year ended February 28, 2006 were $370,263,424 and $370,263,424, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

17

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

6.  Principal shareholders and related parties

As of February 28, 2006, 78.8% of the outstanding shares of the Fund were held by three shareholders, each holding in excess of 10% of the Fund's outstanding shares. Two of the shareholders are other funds of the Trust. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 2.7% of the Fund's shares were held by six related parties comprised of certain GMO employee accounts, and 97.1% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		157,546,087		$	1,649,310,656			10,298,449		$	103,560,173
Shares issued to shareholders in reinvestment of distributions		4,211,361			43,039,715			—			—
Shares repurchased		(38,346,631	)		(401,763,023	)		(302,412	)		(2,993,516	)
Purchase premiums and redemption fees		—			1,673,529			—			114,581
Net increase (decrease)		123,410,817		$	1,292,260,877			9,996,037		$	100,681,238

18

GMO Alpha Only Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

8.  Investments in affiliated issuers

A summary of the Fund's transactions in the shares of affiliated issuers during the year ended February 28, 2006 is set forth below:

Affiliate	Value, beginning of period		Purchases		Sales Proceeds		Dividend Income		Realized Gains Distributions		Value, end of period
GMO Emerging Markets Fund, Class III	$	16,878,480	$	163,692,003	$	44,000,000	$	2,159,533	$	14,632,471	$	159,688,267
GMO International Growth Equity Fund, Class III		—		374,837,107		66,000,000		336,397		7,933,350		319,319,726
GMO International Growth Fund, Class III		29,239,694		146,475,459		186,267,361		252,516		1,897,943		—
GMO International Intrinsic Value Fund, Class III		30,052,195		327,552,440		66,000,000		2,886,285		10,344,877		319,360,923
GMO International Small Companies Fund, Class III		5,549,424		1,800,000		7,008,682		—		—		—
GMO Real Estate Fund, Class III		3,717,233		16,428,595		17,198,657		358,449		4,820,147		—
GMO U.S. Core Equity Fund, Class III		—		406,580,003		67,000,000		2,143,814		6,056,469		342,268,774
GMO U.S. Core Fund, Class III		47,493,750		132,752,995		183,996,063		702,995		—		—
GMO U.S. Quality Equity Fund, Class III		25,915,830		185,548,894		34,000,000		1,303,802		130,091		185,084,052
Totals	$	158,846,606	$	1,755,667,496	$	671,470,763	$	10,143,791	$	45,815,348	$	1,325,721,742

19

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Alpha Only Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Alpha Only Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

20

GMO Alpha Only Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
1) Actual		0.68	%	$	1,000.00	$	1,021.40	$	3.41
2) Hypothetical		0.68	%	$	1,000.00	$	1,021.42	$	3.41

*  Expenses are calculated using the Class's annualized net expense ratio (including indirect expenses incurred) for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

21

GMO Alpha Only Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

For taxable, non-corporate shareholders, 30.53% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 5.62% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 $1,202,562 or if determined to be different, the qualified interest income of such year.

22

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

23

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

24

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

25

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

26

GMO Real Estate Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Real Estate Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the U.S. Quantitative Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The GMO Real Estate Fund returned +28.9% for the fiscal year ended February 28, 2006, as compared to +30.7% for the MSCI U.S. REIT Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in REIT stocks throughout the period.

During the period, overall sector selection was negative due largely to an overweight position in Regional Mall and an underweight in Storage. This negative performance was partially offset by an underweight in Manufactured Housing.

Stock selection was also negative for the fiscal year. Selections among Office-CBD and Office-Suburban both hindered overall relative performance. Stock selection in Regional Mall, Industrial, and Diversified/Miscellaneous were all positive for the period.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Real Estate Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Real Estate Investments		81.3	%
Short-Term Investment(s)		11.9
Other		6.8
		100.0	%
Industry Sector Summary	% of REIT Investments
Apartments		18.0	%
Office Suburban		15.5
Shopping Centers		13.1
Regional Malls		9.7
Office Central Business District		8.1
Diversified		7.7
Industrial		6.4
Health Care		5.7
Storage		5.6
Hotels		5.2
Triple Net		3.6
Manufactured Housing		1.0
Outlets		0.4
		100.0	%

1

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		REAL ESTATE INVESTMENTS — 81.3%
		REAL ESTATE INVESTMENT TRUSTS — 81.3%
		Apartments — 14.6%
	5,100	Apartment Investment & Management Co., Class A (a)		225,981
	31,600	Archstone-Smith Trust		1,497,840
	9,800	Avalonbay Communities, Inc. (a)		1,009,400
	3,100	BRE Properties-Class A		168,547
	3,500	Camden Property Trust		230,475
	41,300	Equity Residential Properties Trust		1,870,064
	3,300	Essex Property Trust, Inc. (a)		328,845
	3,300	GMH Communities Trust		54,846
	2,000	Home Properties of NY, Inc. (a)		98,720
	4,700	Investors Real Estate Trust		44,462
	1,300	Mid-America Apartment Communities, Inc.		70,590
	3,600	Post Properties		159,840
	1,800	Town & Country Trust (a)		72,522
	7,800	United Dominion Realty Trust, Inc.		208,650
				6,040,782
		Diversified — 6.3%
	2,800	Colonial Properties Trust (a)		135,380
	9,100	Cousins Properties, Inc.		279,097
	5,700	Crescent Real Estate Equities		119,985
	5,400	Glenborough Realty Trust, Inc. (a)		104,490
	2,300	Pennslyvania Real Estate Investment Trust		92,920
	19,200	Vornado Realty Trust		1,708,608
	4,400	Washington Real Estate Investment Trust		147,048
				2,587,528
		Health Care — 4.7%
	19,600	Health Care Property Investors, Inc. (a)		538,412
	6,600	Health Care, Inc.		240,570
	5,500	Healthcare Realty Trust, Inc.		205,205
	9,500	Nationwide Health Properties		213,940

See accompanying notes to the financial statements.

2

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Health Care — continued
	9,700	Omega Healthcare Investors, Inc.		125,518
	10,700	Senior Housing Properties Trust		191,851
	2,200	Universal Health Realty Income Trust		77,550
	10,800	Ventas, Inc.		334,800
				1,927,846
		Hotels — 4.2%
	5,100	Equity Inns, Inc.		78,948
	3,800	Felcor Lodging Trust, Inc.		75,430
	4,900	Highland Hospitality Corp.		60,368
	10,000	Hospitality Properties Trust		445,000
	30,600	Host Marriott Corp. (a)		594,558
	3,800	Innkeepers USA Trust		66,614
	2,900	Lasalle Hotel Properties		115,855
	6,700	Meristar Hospitality Corp. *		69,077
	4,900	Strategic Hotel Capital		105,840
	4,900	Sunstone Hotel Investors, Inc.		143,864
				1,755,554
		Industrial — 5.2%
	8,400	AMB Property Corp.		450,660
	1,800	Centerpoint Properties Corp.		89,730
	1,800	Eastgroup Properties, Inc.		82,710
	4,700	First Industrial Realty Trust		181,326
	25,638	Prologis		1,346,508
				2,150,934
		Manufactured Housing — 0.8%
	4,500	Affordable Residential Communities (a)		42,570
	3,700	Equity Lifestyle Properties, Inc.		176,453
	3,500	Sun Communities, Inc. (a)		121,170
				340,193

See accompanying notes to the financial statements.

3

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Office Central Business District — 6.6%
	11,600	American Financial Realty Trust (a)		137,112
	4,300	BioMed Realty Trust, Inc.		119,024
	9,900	Boston Properties, Inc.		838,233
	40,300	Equity Office Properties Trust		1,267,435
	4,100	Maguire Properties, Inc.		138,744
	2,300	SL Green Realty Corp.		199,893
	800	Trizec Properties, Inc.		19,416
				2,719,857
		Office Suburban — 12.6%
	3,400	Alexandria Real Estate Equity, Inc.		299,268
	8,900	Arden Realty Group, Inc.		403,704
	2,300	Bedford Property Investors		61,686
	10,589	Brandywine Reality Trust		310,999
	11,000	CarrAmerica Realty Corp.		456,060
	4,900	Corporate Office Properties		203,448
	20,900	Duke Realty Investments		733,590
	6,900	Highwood Properties, Inc.		223,215
	43,100	HRPT Properties Trust		462,032
	4,200	Kilroy Realty Corp.		314,244
	14,100	Liberty Property Trust		631,398
	10,600	Mack-Cali Realty Corp.		475,940
	2,000	Parkway Properties, Inc.		88,080
	2,500	PS Business Parks, Inc.		132,975
	10,500	Reckson Associates Realty Corp.		429,450
				5,226,089
		Outlets — 0.3%
	3,700	Tanger Factory Outlet Centers, Inc.		119,510
		Regional Malls — 7.9%
	5,600	CBL & Associates Properties, Inc. (a)		238,560
	16,900	General Growth Properties (a)		851,591
	2,000	Glimcher Realty Trust		53,360

See accompanying notes to the financial statements.

4

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Regional Malls — continued
	2,400	Macerich Co.		172,920
	2,500	Mills Corp. (a)		98,825
	20,900	Simon Property Group, Inc.		1,734,073
	2,800	Taubman Centers, Inc.		111,272
				3,260,601
		Shopping Centers — 10.7%
	2,300	Acadia Reality Trust		50,439
	11,600	Developers Diversified Realty Corp.		582,204
	12,200	Equity One, Inc.		274,500
	5,100	Federal Reality Investment Trust		355,419
	6,100	Heritage Property Investment Trust		233,996
	30,200	Kimco Realty Corp.		1,085,086
	16,200	New Plan Excel Realty Trust		405,810
	4,900	Pan Pacific Retail Property, Inc.		339,129
	2,500	Ramco-Gershenson Properties		72,650
	7,700	Regency Centers Corp.		496,650
	2,300	Saul Centers, Inc.		89,217
	2,900	Urstadt Biddle Properties, Inc.		49,358
	9,500	Weingarten Realty		374,110
				4,408,568
		Storage — 4.5%
	5,100	Extra Space Storage, Inc.		76,500
	15,700	Public Storage, Inc.		1,224,914
	4,800	Shurgard Storage Centers, Inc.		307,824
	2,300	Sovran Self Storage (a)		119,600
	6,300	U-Store-It Trust		140,301
				1,869,139
		Triple Net — 2.9%
	9,600	Commercial Net Lease Realty (a)		218,400
	4,800	Entertainment Properties Trust		198,480
	5,700	Getty Reality Corp.		161,595

See accompanying notes to the financial statements.

5

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		Triple Net — continued
	6,500	Lexington Corporate Properties Trust		138,580
	14,800	Realty Income Corp.		341,140
	8,000	Spirit Finance Corp.		96,400
	4,400	Trustreet Properties, Inc.		63,800
				1,218,395
		TOTAL REAL ESTATE INVESTMENT TRUSTS (COST $29,785,654)		33,624,996
		TOTAL REAL ESTATE INVESTMENTS (COST $29,785,654)		33,624,996
		SHORT-TERM INVESTMENT(S) — 11.9%
	125,904	American Beacon Money Market Fund (b)		125,904
	409,189	BGI Institutional Money Market Fund (b)		409,189
	1,227,789	Citigroup Global Markets Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $1,227,892 and an effective yield of 3.01%, collateralized by a U.S. Treasury Bond with a rate of 4.50%, maturitiy date of 02/15/36 and a market value, including accrued interest, of $1,252,345.		1,227,789
	188,857	Fortis Bank Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.53%, due 03/23/06 (b)		188,857
	629,521	Goldman Sachs Group Inc. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $629,601 and an effective yield of 4.60%, collateralized by various corporate debt obligations with an aggregate market value of $642,111. (b)		629,521
	566,569	Merrill Lynch & Co. Tri Party Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $566,641 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $581,222. (b)		566,569
	125,904	Merrimac Cash Series-Premium Class (b)		125,904
	459,073	Morgan Stanley & Co. Repurchase Agreement, dated 02/28/06, due 03/01/06, with a maturity value of $459,131 and an effective yield of 4.55%, collateralized by various U.S. government obligations with an aggregate market value of $468,258. (b)		459,073
	251,808	Rabobank Nederland Eurodollar Overnight Time Deposit, 4.52%, due 03/01/06 (b)		251,808

See accompanying notes to the financial statements.

6

GMO Real Estate Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		SHORT-TERM INVESTMENT(S) — continued
	188,856	Royal Bank of Scotland Eurodollar Term Fixed Rate Yankee Certificate of Deposit, 4.55%, due 03/31/06 (b)		188,856
	387,022	Svenska Handlesbanken Eurodollar Overnight Time Deposit, 4.57%, due 03/01/06 (b)		387,022
	377,713	National Australia Bank Eurodollar Overnight Time Deposit, 4.56%, due 03/01/06 (b)		377,713
		TOTAL SHORT-TERM INVESTMENT(S) (COST $4,938,205)		4,938,205
		TOTAL INVESTMENTS — 93.2% (Cost $34,723,859)		38,563,201
		Other Assets and Liabilities (net) — 6.8%		2,827,855
		TOTAL NET ASSETS — 100.0%	$	41,391,056

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  All or a portion of this security represents investment of security lending collateral (Note 2).

See accompanying notes to the financial statements.

7

GMO Real Estate Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $3,580,224 (cost $34,723,859) (Note 2)	$	38,563,201
Receivable for investments sold		6,558,000
Dividends and interest receivable		32,466
Receivable for expenses reimbursed by Manager (Note 3)		15,848
Total assets		45,169,515
Liabilities:
Collateral on securities loaned (Note 2)		3,710,416
Payable to affiliate for (Note 3):
Management fee		19,454
Shareholder service fee		5,404
Trustees and Chief Compliance Officer fees		250
Accrued expenses		42,935
Total liabilities		3,778,459
Net assets	$	41,391,056
Net assets consist of:
Paid-in capital	$	32,119,032
Accumulated undistributed net investment income		179,132
Accumulated net realized gain		5,253,550
Net unrealized appreciation		3,839,342
	$	41,391,056
Net assets attributable to:
Class III shares	$	41,391,056
Shares outstanding:
Class III		3,373,385
Net asset value per share:
Class III	$	12.27

See accompanying notes to the financial statements.

8

GMO Real Estate Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends	$	9,397,955
Interest (including securities lending income of $16,233)		171,435
Total investment income		9,569,390
Expenses:
Management fee (Note 3)		1,177,304
Shareholder service fee – Class III (Note 3)		327,029
Custodian, fund accounting agent and transfer agent fees		38,759
Audit and tax fees		44,131
Legal fees		5,666
Trustees fees and related expenses (Note 3)		4,998
Registration fees		1,472
Miscellaneous		6,223
Total expenses		1,605,582
Fees and expenses reimbursed by Manager (Note 3)		(93,870	)
Fees and expenses waived by Manager (Note 3)		(457,840	)
Net expenses		1,053,872
Net investment income (loss)		8,515,518
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		79,362,313
Net realized gain (loss)		79,362,313
Change in net unrealized appreciation (depreciation) on investments		(33,161,588	)
Net realized and unrealized gain (loss)		46,200,725
Net increase (decrease) in net assets resulting from operations	$	54,716,243

See accompanying notes to the financial statements.

9

GMO Real Estate Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	8,515,518		$	11,218,155
Net realized gain (loss)		79,362,313			49,872,213
Change in net unrealized appreciation (depreciation)		(33,161,588	)		(944,523	)
Net increase (decrease) in net assets from operations		54,716,243			60,145,845
Distributions to shareholders from:
Net investment income
Class III		(5,491,758	)		(19,209,916	)
Net realized gains
Class III		(75,846,588	)		(30,227,807	)
		(81,338,346	)		(49,437,723	)
Net share transactions (Note 7):
Class III		(167,824,324	)		33,671,365
Total increase (decrease) in net assets		(194,446,427	)		44,379,487
Net assets:
Beginning of period		235,837,483			191,457,996
End of period (including accumulated undistributed net investment income of $179,132 and $0, respectively)	$	41,391,056		$	235,837,483

See accompanying notes to the financial statements.

10

GMO Real Estate Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	14.54		$	14.65		$	10.49		$	11.17		$	10.31
Income (loss) from investment operations:
Net investment income (loss)†		0.61			0.59			0.58			0.50			0.56
Net realized and unrealized gain (loss)		3.24			1.55			4.01			(0.71	)		0.84
Total from investment operations		3.85			2.14			4.59			(0.21	)		1.40
Less distributions to shareholders:
From net investment income		(0.40	)		(0.87	)		(0.43	)		(0.47	)		(0.54	)
From net realized gains		(5.72	)		(1.38	)		—			—			—
Total distributions		(6.12	)		(2.25	)		(0.43	)		(0.47	)		(0.54	)
Net asset value, end of period	$	12.27		$	14.54		$	14.65		$	10.49		$	11.17
Total Return(a)		28.89	%		16.01	%		44.56	%		(2.16	)%		13.73	%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	41,391		$	235,837		$	191,458		$	142,256		$	192,606
Net expenses to average daily net assets		0.48	%		0.48	%		0.52	%		0.69	%		0.69	%
Net investment income to average daily net assets		3.91	%		4.13	%		4.61	%		4.47	%		5.18	%
Portfolio turnover rate		52	%		134	%		56	%		61	%		6	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.25	%		0.25	%		0.24	%		0.04	%		0.05	%

†  Calculated using average shares outstanding throughout the period.

(a)  The total returns would have been lower had certain expenses not been reimbursed and/or waived during the periods shown.

See accompanying notes to the financial statements.

11

GMO Real Estate Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Real Estate Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in primarily real estate investment trusts ("REITs") and other real estate related companies. REITs are managed vehicles that invest in real estate, or real estate-related investments. The Fund's benchmark is the MSCI U.S. REIT Index.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. Securities for which quotations are not readily available or whose values the Manager has determined to be unreliable are valued at fair value as determined in good faith by the Trustees or other persons acting at their direction.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or

12

GMO Real Estate Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. See the Schedule of Investments for open repurchase agreements entered into by the Fund as of February 28, 2006.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $3,580,224, collateralized by cash in the amount of $3,710,416, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect

13

GMO Real Estate Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $9,818,297 and $25,338,802, respectively and long-term capital gains – $71,520,049 and $24,098,921, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $4,989,506 and $491,255 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to losses on wash sale transactions.

At February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	34,771,937	$	3,942,983	$	(151,719	)	$	3,791,264

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to certain differences in the computation of distributable income and capital gains under U.S. federal tax rules versus U.S. GAAP. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(2,844,628	)	$	2,844,628	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

14

GMO Real Estate Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Expenses

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.

Investment risks

There are certain additional risks involved in investing in REITs rather than a more diversified portfolio of investments. Since the Fund's investments are concentrated in real-estate related securities, the value of its shares can be expected to change in light of factors affecting the real estate industry, including local or regional economic conditions, changes in zoning laws, changes in real estate value and property taxes, and changes in interest rates. The value of the Fund's shares may fluctuate more widely than the value of shares of a portfolio that invests in a broader range of industries.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.54% of average daily net assets. For the year ended February 28, 2006, GMO waived 0.21% of the Fund's management fee. GMO has temporarily agreed to waive 0.21% of the Fund's management fee until such time as it notifies shareholders that it is discontinuing the waiver. This waiver is in addition to the Manager's contractual agreement to reimburse the Fund with respect to certain Fund expenses through June 30, 2006 as described below. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.54% of the average daily net assets.

15

GMO Real Estate Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $2,570 and $1,511, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $106,978,267 and $348,991,354, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 81.3% of the outstanding shares of the Fund were held by four shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 12.9% of the Fund's shares were held by eleven related parties comprised of certain GMO employee accounts, and 64.0% of the Fund's shares were held by accounts for which the Manager has investment discretion.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		2,850,336		$	43,674,507			18,990,769		$	259,781,790
Shares issued to shareholders in reinvestment of distributions		6,089,368			80,126,509			3,374,325			45,470,152
Shares repurchased		(21,782,410	)		(291,625,340	)		(19,221,933	)		(271,580,577	)
Net increase (decrease)		(12,842,706	)	$	(167,824,324	)		3,143,161		$	33,671,365

16

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Real Estate Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Real Estate Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

17

GMO Real Estate Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		0.48	%	$	1,000.00	$	1,111.60	$	2.51
2) Hypothetical				0.48	%	$	1,000.00	$	1,022.41	$	2.41

*  Expenses are calculated using the Class's annualized expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

18

GMO Real Estate Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

The Fund's distributions to shareholders include $71,520,049 from long-term capital gains.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $119,720 and $4,326,540, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

19

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

20

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

21

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer sinceOctober 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

22

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

23

GMO Emerging Countries Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO Emerging Countries Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the Emerging Markets Division at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO Emerging Countries Fund returned +36.4% for the fiscal year ended February 28, 2006, as compared to +37.9% for the S&P/IFC Investable Composite Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in emerging markets equities throughout the fiscal year.

Country selection detracted 1.1% from performance during the period. The Fund's overweights in Brazil and Korea contributed positively to performance. The Fund's underweight in Russia and overweight in Taiwan detracted from performance.

Stock selection detracted 0.4% during the fiscal year. Stock selection was particularly successful in Brazil, China, Korea, and Taiwan. Stock selection in Mexico and South Africa detracted from performance.

For the period, the value and the momentum models outperformed while the macroeconomic and the reversal models underperformed.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Class M shares will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Emerging Countries Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		82.7	%
Preferred Stocks		15.3
Debt Obligation(s)		1.9
Rights and Warrants		0.0
Swaps		0.1
Short-Term Investment(s)		4.2
Other		(4.2	)
		100.0	%
Country Summary	% of Investments*
South Korea		25.5	%
Taiwan		16.4
Brazil		14.3
China		7.7
South Africa		7.6
Russia		6.1
Mexico		6.0
India		2.6
Israel		2.5
Malaysia		2.2
United States		1.9
Turkey		1.7
Thailand		1.4
Chile		1.2
Poland		1.1
Indonesia		0.5
Philippines		0.5
Argentina		0.4
Hungary		0.3
Venezuela		0.1
Czech Republic		0.0
		100.0	%

*  The table excludes short-term investment(s).

1

GMO Emerging Countries Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Investments*
Financials		23.8	%
Information Technology		19.7
Energy		17.3
Telecommunication Services		9.9
Materials		8.8
Consumer Discretionary		6.3
Industrials		5.5
Utilities		4.0
Consumer Staples		3.6
Health Care		1.1
		100.0	%

*  The table excludes short-term investment(s).

2

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares Description Value ($)

	COMMON STOCKS — 82.7%
	Argentina — 0.4%
20,600	IRSA Inversiones y Representaciones SA GDR *	263,062
6,401	Telecom Argentina SA ADR *	80,589
7,493	Tenaris SA ADR	1,200,004
45,247	Transportadora de Gas del Sur ADR *(a)	228,950
		1,772,605
	Brazil — 4.6%
8,569,000	Aes Tiete SA	215,890
241,480	Banco do Brasil SA	6,253,348
44,400	Companhia de Concessoes Rodoviarias	419,223
23,164,428	Companhia Saneamento Basico SAO PA	1,866,463
54,738	Companhia Siderurgica Nacional SA	1,648,198
10,700	Compania Vale do Rio Doce	526,308
44,057,200	Electrobras (Centro)	933,428
22,500	Petroleo Brasileiro SA (Petrobras)	514,952
11,800	Petroleo Brasileiro SA (Petrobras) ADR	1,032,972
80,023	Souza Cruz SA (Registered)	1,320,087
57,715	Tele Centro Oeste Celular Participacoes SA	883,323
31,000	Unibanco-Uniao de Bancos Brasileiros SA GDR	2,726,450
		18,340,642
	Chile — 1.2%
22,328	Banco De Chile ADR	979,306
10,900	Banco Santander Chile SA ADR	517,641
15,200	Compania Cervecerias Unidas ADR	413,440
42,500	Compania de Telecommunicaciones de Chile ADR	365,500
15,800	Empresa Nacional de Electricidad SA ADR	499,280
107,100	Enersis SA ADR	1,314,117
18,200	Lan Airlines SA	743,470
15,896	Quinenco SA ADR	195,521
		5,028,275

See accompanying notes to the financial statements.

3

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		China — 7.7%
	1,172,000	Aluminum Corp of China Ltd		1,194,328
	808,000	Bank of Communications Co Ltd *		484,629
	1,560,000	China Construction Bank Class H 144A *		728,934
	8,500	China Finance Online Co ADR *		50,150
	288,240	China International Marine Containers Co Ltd Class B		285,479
	1,595,364	China Mobile Ltd		7,708,229
	12,872	China Mobile Ltd ADR		311,889
	5,397,883	China Petroleum & Chemical Corp Class H		3,211,427
	488,000	China Resources Enterprise Ltd		1,067,248
	61,500	China Telecom Corp Ltd ADR (a)		2,256,435
	2,601,400	China Telecom Corp Ltd Class H		950,606
	912,000	CNOOC Ltd		755,789
	5,800	CNOOC Ltd ADR		480,704
	535,000	Foxconn International Holdings 144A *		920,284
	2,222,100	Guangdong Investments Ltd		1,006,460
	944,000	Huaneng Power International Inc Class H		631,958
	8,513,553	PetroChina Co Ltd Class H		8,279,477
	236,000	Shanghai Industrial Holdings Ltd		505,238
	594,000	Zhejiang Southeast Electric Power Co Class B		238,669
				31,067,933
		Czech Republic — 0.0%
	2,679	CEZ AS		93,186
	425	Komercni Banka AS		60,342
	1,600	Unipetrol *		18,987
				172,515
		Hungary — 0.3%
	600	Egis Rt		87,351
	500	Gedeon Richter Right		101,890
	5,000	MOL Magyar Olaj es Gazipari Rt (New Shares)		516,389
	14,400	OTP Bank		537,579
				1,243,209

See accompanying notes to the financial statements.

4

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		India — 2.6%
	41,400	Bharti Televentures *		336,317
	21,400	HCL Technologies Ltd		293,441
	24,100	HDFC Bank		396,390
	36,300	Hindalco Industries Ltd GDR		125,322
	12,000	Hindalco Industries Ltd GDR 144A (London International Exchange)		41,400
	73,000	Hindalco Industries Ltd GDR 144A (Luxembourg Exchange)		251,850
	21,250	Hindalco Industries Ltd GDR 144A (OTC)		12,750
	143,900	ICICI Bank Ltd		1,985,424
	2,100	ICICI Banking Ltd ADR		64,491
	5,200	Infosys Technologies Inc		330,605
	82,757	Mahanagar Telephone Nigam		265,165
	78,600	Oil & Natural Gas Corp Ltd		2,014,381
	115,931	Satyam Computer Services Ltd		2,012,577
	11,500	Satyam Computer Services Ltd ADR		473,225
	11,100	State Bank of India		219,192
	23,494	State Bank of India Ltd GDR		1,126,718
	10,500	Tata Consultancy Services Ltd		402,155
				10,351,403
		Indonesia — 0.5%
	18	Astra International Tbk PT		19
	282,600	Bank Central Asia Tbk PT		110,265
	534,000	Bank Rakyat Indonesia		188,200
	103,000	Gudang Garam Tbk PT		122,515
	7,562,120	Matahari Putra Prima Tbk PT		646,671
	176,000	Perusahan Gas Negara PT		183,619
	988,000	PT Bank Mandiri Persero Tbk PT		173,325
	1,522,000	Ramayana Lestari Sentosa Tbk PT		120,408
	914,224	Telekomunikasi Indonesia Tbk PT		604,911
				2,149,933
		Israel — 2.4%
	323,700	Bank Hapoalim B.M.		1,481,429
	604,100	Bank Leumi Le		2,179,756

See accompanying notes to the financial statements.

5

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Israel — continued
	49,600	Check Point Software Technologies Ltd *		1,054,496
	0	IDB Development Corp Ltd		3
	159,400	Israel Chemicals Ltd		595,411
	400	Teva Pharmaceutical Industries		16,825
	98,600	Teva Pharmaceutical Industries ADR		4,140,214
	1,200	The Israel Corp Ltd		400,684
				9,868,818
		Malaysia — 2.2%
	1,287,000	Bumiputra-Commerce Holdings Berhad		2,007,062
	138,000	Genting Berhad		886,747
	316,000	Hong Leong Bank Berhad		433,426
	227,000	IOI Corp Berhad		843,572
	101,000	Kuala Lumpur Kepong Berhad		252,660
	533,090	Malakoff Berhad		1,261,005
	237,478	Maxis Communications Berhad		555,852
	387,640	MISC Berhad		1,011,224
	318,000	Proton Holdings Berhad		474,509
	316,585	Public Bank Berhad		570,552
	230,090	Sime Darby Berhad		383,758
				8,680,367
		Mexico — 6.0%
	278,800	Alfa SA de CV Class A		1,480,102
	119,700	America Movil SA de CV Class L ADR		4,157,180
	723,771	Cemex SA de CV CPO		4,480,125
	31,427	Fomento Economico Mexicano SA de CV		271,517
	1,287,600	Grupo Financiero Banorte SA de CV		3,141,867
	725,340	Grupo Mexico SA Class B		1,859,225
	196,700	Organizacion Soriana SA de CV Class B *		871,301
	319,800	Telefonos de Mexico SA de CV Class L ADR		7,160,322
	216,000	Wal-Mart de Mexico SA de CV Class V		616,966
				24,038,605

See accompanying notes to the financial statements.

6

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Philippines — 0.5%
	4,454,754	Ayala Land Inc		966,009
	158,400	Equitable PCI Bank		196,558
	245,421	Ginebra San Miguel Inc		93,650
	15,436	Philippine Long Distance Telephone		529,878
	4,200	Philippine Long Distance Telephone ADR		144,900
				1,930,995
		Poland — 1.1%
	16,800	Bank Pekao SA		989,918
	168,300	Big Bank Gdanski SA		341,654
	42,400	KGHM Polska Miedz SA		957,607
	79,100	Polski Koncern Naftowy Orlen SA		1,454,662
	114,100	Telekomunikacja Polska SA		794,339
				4,538,180
		Russia — 6.1%
	18,200	JSC Mining & Smelting Co ADR		1,619,800
	156,900	Lukoil ADR		12,552,000
	4,100	Lukoil ADR 144A		328,000
	14,300	Mobile Telesystems ADR		515,801
	54,700	OAO Gazprom ADR		4,627,620
	16,300	Polyus Gold Co ZAO ADR *		586,800
	19,300	Rostelecom ADR (a)		388,123
	390	Sberbank RF		606,450
	14,700	Unified Energy Systems ADR		1,010,625
	18,600	Unified Energy Systems GDR		1,282,470
	24,400	Vimpel-Communications ADR *		1,073,600
				24,591,289
		South Africa — 7.6%
	13,452	ABSA Group Ltd		249,874
	31,200	AECI Ltd		270,316
	9,800	Anglo American Platinum Corp		777,855
	6,000	AngloGold Ashanti Ltd		306,900

See accompanying notes to the financial statements.

7

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		South Africa — continued
	54,700	Barlow Ltd		1,054,964
	143,600	Foschini Ltd		1,326,566
	21,300	Impala Platinum Holdings Ltd		3,616,518
	20,500	Investec Ltd		1,025,989
	41,167	Mittal Steel South Africa Ltd		405,549
	20,100	Naspers Ltd Class N		397,577
	32,694	Nedcor Ltd		631,061
	1,240,738	Old Mutual Plc		3,899,241
	8,100	Pretoria Portland Cement Co Ltd		498,296
	213,507	Remgro Ltd		4,478,041
	1,297,240	Sanlam Ltd		3,358,164
	122,000	Sasol Ltd		4,177,866
	68,900	Telkom SA Ltd		1,812,785
	46,860	Tiger Brands Ltd		1,161,583
	465,850	Woolworths Holdings		1,187,228
				30,636,373
		South Korea — 19.9%
	3,000	Amorepacific Corp		1,046,342
	50,570	Cheil Industries Inc		1,946,189
	40,660	Daesang Corp *		620,051
	9,900	Daewoo International Corp		376,136
	100,700	Daewoo Securities Co Ltd *		1,750,318
	66,120	Doosan Infracore Co Ltd		1,110,532
	14,510	GS Engineering & Construction Corp		787,967
	48,581	Hana Financial Group Inc		2,076,325
	74,600	Hanjin Heavy Industry & Construction		1,867,721
	21,600	Hanjin Shipping		505,618
	146,300	Hynix Semiconductor Inc *		4,935,113
	34,100	Hyundai Development Co		1,547,551
	19,800	Hyundai Mobis		1,664,721
	95,940	Hyundai Motor Co		8,153,906
	139,000	Industrial Bank of Korea		2,279,041
	245,300	KIA Motors Corp		5,266,243

See accompanying notes to the financial statements.

8

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		South Korea — continued
	97,660	Kookmin Bank		7,402,358
	2,200	Kookmin Bank ADR		166,650
	68,500	Korea Electric Power Corp		2,923,029
	50,100	Korean Air Lines Co Ltd		1,651,477
	29,200	KT Corp		1,156,711
	1,700	KT Corp ADR		34,714
	18,300	KT Freetel Co Ltd		486,846
	101,000	KT&G Corp		5,987,347
	14,500	KT&G Corp GDR 144A *(a)		419,050
	65,700	LG Corp		2,282,301
	7,300	LG Electronics Inc		599,450
	61,300	LG Telecom Co Ltd *		504,913
	7,935	NHN Corp *		2,236,878
	13,200	POSCO		3,110,913
	25,900	Samsung Corp		663,590
	574	Samsung Electronics Co Ltd		402,416
	1,614	Samsung Electronics Co Ltd GDR 144A (Non Voting)		431,745
	46,900	Samsung Heavy Industries Co Ltd		804,552
	15,300	Samsung SDI Co Ltd		1,351,911
	25,430	Samsung Securities		1,493,022
	51,363	Shinhan Financial Group Co Ltd		2,006,663
	90,446	SK Corp		5,573,108
	129,000	Woori Finance Holdings Co Ltd		2,534,002
				80,157,420
		Taiwan — 16.4%
	1,395,918	Acer Inc		3,088,760
	2,594,489	Asustek Computer Inc		7,311,957
	163,000	AU Optronics Corp		260,429
	863,940	Benq Corp		847,564
	5,439,533	China Development Financial Holding Corp *		2,082,764
	2,609,759	China Steel Corp		2,361,341
	686,540	Chinatrust Financial Holding Co		575,851
	1,271,000	Chunghwa Telecom Co Ltd		2,313,921

See accompanying notes to the financial statements.

9

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Taiwan — continued
	31,050	Chunghwa Telecom Co Ltd ADR		586,845
	463,707	Compal Electronics Inc		431,321
	640,400	Evergreen Marine Corp		414,594
	1,010,190	Far Eastern Textile Co Ltd		743,510
	528,300	Formosa Chemicals & Fibre Co		830,548
	403,655	Formosa Petrochemical Corp		720,376
	833,270	Formosa Plastics Corp		1,318,570
	79,000	Foxconn Technology Co Ltd		382,841
	53,000	High Tech Computer Corp		1,135,287
	1,231,915	Hon Hai Precision Industry Co Ltd		7,789,728
	2,352,662	Inventec Co Ltd		1,434,232
	935,300	Lite-On Technology Corp		1,260,468
	315,800	MediaTek Inc		3,232,277
	3,307,000	Mega Financial Holdings Co Ltd		2,508,441
	246,000	Mitac International Corp		345,828
	303,425	Nan Ya Plastic Corp		429,205
	389,800	Novatek Microelectronics		2,687,013
	715,759	Shin Kong Financial Holdings		618,713
	698,563	Siliconware Precision Industries Co		885,422
	1,876,960	Sinopac Holdings Co		992,928
	1,445,000	Taishin Financial Holdings Co Ltd		877,901
	2,325,000	Taiwan Cellular Corp		2,145,480
	3,875,074	Taiwan Cement Corp		2,920,268
	4,935,235	Taiwan Semiconductor Manufacturing Co Ltd		9,144,781
	61,499	Taiwan Semiconductor Manufacturing Co Ltd ADR		598,385
	3,107,687	Walsin Lihwa Corp		1,010,667
	410,288	Wan Hai Lines Ltd		252,079
	2,293,000	Yang Ming Marine Transport		1,403,245
				65,943,540
		Thailand — 1.4%
	262,900	Advanced Info Service Pcl (Foreign Registered) (b)		632,993
	182,300	Bangkok Dusit Medical Service Pcl (Foreign Registered) (b)		110,160
	112,600	Kasikornbank Pcl (Foreign Registered) (b)		197,483

See accompanying notes to the financial statements.

10

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Thailand — continued
	1,030,000	Kasikornbank Pcl NVDR (b)		1,754,100
	51,440	PTT Exploration & Production Pcl (Foreign Registered) (b)		684,439
	173,902	Ptt Pcl (Foreign Registered) (b)		1,107,809
	136,000	Siam Cement Pcl (Foreign Registered) NVDR (b)		840,788
	258,400	Thai Airways International Pcl (Foreign Registered) (b)		280,249
				5,608,021
		Turkey — 1.7%
	308,764	Akbank TAS		3,125,585
	22,372	Aksa Akrilik Kimya Sanayii AS		209,801
	20,674	Tupras-Turkiye Petrol Rafineriler AS		394,189
	68,528	Turkcell Iletisim Hizmet AS		491,388
	103,134	Turkiye IS Bankasi Class C		973,871
	275,061	Yapi Ve Kredi Bankasi AS *		1,608,981
				6,803,815
		Venezuela — 0.1%
	19,500	Compania Anonima Nacional Telefonos de Venezuela (CANTV) ADR		337,740
		TOTAL COMMON STOCKS (COST $212,383,180)		333,261,678
		PREFERRED STOCKS — 15.3%
		Brazil — 9.8%
	63,000	Banco Bradesco SA 3.66%		2,598,917
	131,000	Banco Itau Holding Financeira SA 2.79%		4,238,145
	213,600	Caemi Mineracao e Metalurgica SA 1.35%		368,154
	59,098,500	Companhia Energetica de Minas Gerais 4.11%		3,033,547
	17,700	Companhia Vale do Rio Doce Class A 0.36%		753,511
	23,565,000	Geracao Tiete 8.80%		615,786
	73,770	Gerdau SA 4.84%		1,702,251
	1,975,126	Investimentos Itau SA 4.28%		8,603,680
	5,327,800	Lojas Americanas SA 1.99%		229,320
	818,912	Petroleo Brasileiro SA (Petrobras) 0.44%		17,257,505
				39,400,816

See accompanying notes to the financial statements.

11

GMO Emerging Countries Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		South Korea — 5.5%
	10,200	Hyundai Motor Co 2.48%		547,711
	40,860	Samsung Electronics Co Ltd (Non Voting) 1.18% *		21,620,903
	3,000	Samsung SDI Co Ltd 3.36%		163,098
				22,331,712
		TOTAL PREFERRED STOCKS (COST $18,650,136)		61,732,528
		DEBT OBLIGATION(S) — 1.9%
		United States — 1.9%
	7,279,582	U.S. Treasury Inflation Indexed Note, 3.63%, due 01/15/08 (c) (d) (e)		7,537,213
		TOTAL DEBT OBLIGATION(S) (COST $7,515,256)		7,537,213
		RIGHTS AND WARRANTS — 0.0%
		Thailand — 0.0%
	116,526	True Corp Pcl Warrants, Expires 04/03/08 * (b)		—
		TOTAL RIGHTS AND WARRANTS (COST $0)		—
		SHORT-TERM INVESTMENT(S) — 4.2%
	1,985,125	The Boston Global Investment Trust (f)		1,985,125
	15,100,000	Bank of Montreal Time Deposit, 4.64%, due 03/01/06		15,100,000
		TOTAL SHORT-TERM INVESTMENT(S) (COST $17,085,125)		17,085,125
		TOTAL INVESTMENTS — 104.1% (Cost $255,633,697)		419,616,544
		Other Assets and Liabilities (net) — (4.1%)		(16,462,856	)
		TOTAL NET ASSETS — 100.0%	$	403,153,688

See accompanying notes to the financial statements.

12

GMO Emerging Countries Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Swap Agreements

Total Return Swaps

Notional Amount	Expiration Date	Counterparty	Receive	(Pay)	Index	Net Unrealized Appreciation (Depreciation)
1,521,535USD	1/09/2007	Deutsche Bank	Return on Index	1 month LIBOR + 0.55%	Gazprom	$	209,748
2,182,981USD	2/02/2007	Deutsche Bank	Return on Index	1 month LIBOR + 0.55%	Gazprom		60,757
2,099,475USD	2/02/2007	Deutsche Bank	Return on Index	1 month LIBOR + 0.55%	Gazprom		11,262
1,731,350USD	2/02/2007	Deutsche Bank	Return on Index	1 month LIBOR + 0.55%	Gazprom		9,287
						$	291,054

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

144A - Securities exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors.

ADR - American Depositary Receipt

Foreign Registered - Shares issued to foreign investors in markets that have foreign ownership limits.

GDR - Global Depository Receipt

LIBOR - London Interbank Offered Rate

NVDR - Non-Voting Depository Receipt

OTC - Over-the-counter

USD - United States Dollar

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(c)  Indexed security in which price and/or coupon is linked to prices of other securities, securities indices, or other financial indicators (Note 2).

(d)  Rate shown represents yield-to-maturity.

(e)  All or a portion of this security has been segregated to cover open margin requirements on open swap contracts (Note 2).

(f)  All or a portion of this security represents investment of security lending collateral (Note 2).

  As of February 28, 2006, 66.0% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor.

See accompanying notes to the financial statements.

13

GMO Emerging Countries Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $1,884,486 (cost $255,633,697) (Note 2)	$	419,616,544
Cash		79,121
Foreign currency, at value (cost $4,241,286) (Note 2)		4,229,115
Receivable for investments sold		25,574
Receivable for Fund shares sold		768,841
Dividends and interest receivable		1,444,123
Foreign taxes receivable		219,975
Receivable for open swap contracts (Note 2)		291,054
Payable for closed swap contracts (Note 2)		18,489
Receivable for expenses reimbursed by Manager (Note 3)		25,468
Total assets		426,718,304
Liabilities:
Payable for investments purchased		16,084
Collateral on securities loaned (Note 2)		1,985,125
Payable for Fund shares repurchased		20,958,310
Accrued capital gain and repatriation taxes payable (Note 2)		64,485
Payable to affiliate for (Note 3):
Management fee		209,755
Shareholder service fee		41,858
Administration fee – Class M		8,730
Trustees and Chief Compliance Officer fees		840
Payable for 12b-1 fee – Class M		22,946
Accrued expenses		256,483
Total liabilities		23,564,616
Net assets	$	403,153,688
Net assets consist of:
Paid-in capital	$	208,000,428
Distributions in excess of net investment income		(1,446,929	)
Accumulated net realized gain		32,328,488
Net unrealized appreciation		164,271,701
	$	403,153,688
Net assets attributable to:
Class III shares	$	346,017,693
Class M shares	$	57,135,995
Shares outstanding:
Class III		18,022,434
Class M		2,999,491
Net asset value per share:
Class III	$	19.20
Class M	$	19.05

See accompanying notes to the financial statements.

14

GMO Emerging Countries Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $1,086,376)	$	9,480,638
Interest (including securities lending income of $19,015)		247,200
Total investment income		9,727,838
Expenses:
Management fee (Note 3)		2,240,795
Shareholder service fee – Class III (Note 3)		425,349
12b-1 fee – Class M (Note 3)		152,929
Administration fee – Class M (Note 3)		122,344
Custodian and fund accounting agent fees		876,363
Transfer agent fees		45,989
Audit and tax fees		83,782
Legal fees		7,904
Trustees fees and related expenses (Note 3)		6,537
Registration fees		31,808
Miscellaneous		11,045
Total expenses		4,004,845
Fees and expenses reimbursed by Manager (Note 3)		(30,576	)
Net expenses		3,974,269
Net investment income (loss)		5,753,569
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments (net of foreign capital gains tax and CPMF tax of $24,591 and $11,524, respectively) (Note 2)		57,174,525
Closed swap contracts		18,489
Foreign currency, forward contracts and foreign currency related transactions		(284,262	)
Net realized gain (loss)		56,908,752
Change in net unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax accrual of $65,555) (Note 2)		53,124,531
Open swap contracts		291,054
Foreign currency, forward contracts and foreign currency related transactions		(16,597	)
Net unrealized gain (loss)		53,398,988
Net realized and unrealized gain (loss)		110,307,740
Net increase (decrease) in net assets resulting from operations	$	116,061,309

See accompanying notes to the financial statements.

15

GMO Emerging Countries Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	5,753,569		$	5,625,787
Net realized gain (loss)		56,908,752			46,634,322
Change in net unrealized appreciation (depreciation)		53,398,988			12,243,929
Net increase (decrease) in net assets from operations		116,061,309			64,504,038
Distributions to shareholders from:
Net investment income
Class III		(6,104,851	)		(4,433,864	)
Class M		(951,842	)		(1,026,623	)
Total distributions from net investment income		(7,056,693	)		(5,460,487	)
Net realized gains
Class III		(31,132,069	)		(34,276,629	)
Class M		(6,343,672	)		(9,292,661	)
Total distributions from net realized gains		(37,475,741	)		(43,569,290	)
		(44,532,434	)		(49,029,777	)
Net share transactions (Note 7):
Class III		37,400,362			(12,170,481	)
Class M		(23,889,400	)		6,619,994
Increase (decrease) in net assets resulting from net share transactions		13,510,962			(5,550,487	)
Total increase (decrease) in net assets		85,039,837			9,923,774
Net assets:
Beginning of period		318,113,851			308,190,077
End of period (including distributions in excess of net investment income of $1,446,929 and $814,888, respectively)	$	403,153,688		$	318,113,851

See accompanying notes to the financial statements.

16

GMO Emerging Countries Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	15.99		$	14.99		$	8.54		$	9.65		$	8.81
Income (loss) from investment operations:
Net investment income (loss)		0.28	†		0.30	†		0.18			0.08			0.14
Net realized and unrealized gain (loss)		5.09			3.43			6.71			(1.04	)		0.77
Total from investment operations		5.37			3.73			6.89			(0.96	)		0.91
Less distributions to shareholders:
From net investment income		(0.35	)		(0.31	)		(0.22	)		(0.15	)		(0.07	)
From net realized gains		(1.81	)		(2.42	)		(0.22	)		—			—
Total distributions		(2.16	)		(2.73	)		(0.44	)		(0.15	)		(0.07	)
Net asset value, end of period	$	19.20		$	15.99		$	14.99		$	8.54		$	9.65
Total Return(a)		36.38	%		28.76	%		81.45	%		(10.15	)%(b)		10.49	%(b)
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	346,018		$	249,005		$	249,844		$	89,042		$	72,405
Net expenses to average daily net assets		1.10	%		1.10	%		1.16	%		1.27	%		1.40	%
Net investment income to average daily net assets		1.68	%		2.12	%		1.82	%		0.78	%		2.12	%
Portfolio turnover rate		35	%		53	%		57	%		108	%		109	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.05	%		0.06	%		0.31	%		0.17	%
Purchase premiums and redemption fees consisted of the following per share amounts:		—			—			—		$	0.00	(c)	$	0.04

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

(b)  Calculations exclude purchase premiums and redemption fees which are borne by the shareholder.

(c)  Purchase premiums and redemption fees were less than $0.01 per share. The purchase premium and redemption fee were rescinded effective April 1, 2002.

†  Calculated using average shares outstanding throughout the period.

See accompanying notes to the financial statements.

17

GMO Emerging Countries Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class M share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003(a)
Net asset value, beginning of period	$	15.87		$	14.91		$	8.51		$	9.85
Income (loss) from investment operations:
Net investment income (loss)		0.27	†		0.26	†		0.11			0.01
Net realized and unrealized gain (loss)		5.00			3.39			6.71			(1.35	)
Total from investment operations		5.27			3.65			6.82			(1.34	)
Less distributions to shareholders:
From net investment income		(0.28	)		(0.27	)		(0.20	)		—
From net realized gains		(1.81	)		(2.42	)		(0.22	)		—
Total distributions		(2.09	)		(2.69	)		(0.42	)		—
Net asset value, end of period	$	19.05		$	15.87		$	14.91		$	8.51
Total Return(b)		35.99	%		28.30	%		80.98	%		(13.60)%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	57,136		$	69,109		$	58,346		$	579
Net expenses to average daily net assets		1.39	%		1.40	%		1.45	%		1.57	%*
Net investment income to average daily net assets		1.65	%		1.82	%		1.27	%		0.20	%*
Portfolio turnover rate		35	%		53	%		57	%		108	%***
Fees and expenses reimbursed by the Manager to average daily net assets:		0.01	%		0.05	%		0.06	%		0.41	%*

(a)  Period from July 9, 2002 (commencement of operations) through February 28, 2003.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding during the period.

*  Annualized.

**  Not annualized.

***  Calculation represents portfolio turnover of the Fund for the year ended February 28, 2003.

See accompanying notes to the financial statements.

18

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Emerging Countries Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in equity securities traded in the securities markets of emerging countries in Asia, Latin America, the Middle East, Africa and Europe ("Emerging Countries"). The Fund's benchmark is the S&P/IFCI Investable Composite Index.

Throughout the year ended February 28, 2006, the Fund had two classes of shares outstanding: Class III and Class M. Class M shares bear an administration fee and a 12b-1 fee, while Class III shares bear a shareholder service fee (See Note 3). The principle economic difference between the classes of shares is the type and level of fees.

The Fund currently limits subscriptions due to capacity considerations.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many

19

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. As of February 28, 2006, the Fund did not enter into any forward currency contracts.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver

20

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. As of February 28, 2006, the Fund did not enter into any futures contracts.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

21

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Indexed securities

The Fund may invest in indexed securities where the redemption values and/or coupons are linked to the prices of a specific instrument or financial statistic. The Fund uses indexed securities to increase or decrease its exposure to different underlying instruments and to gain exposure to markets in which it may be difficult to invest through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. See the Schedule of Investments for indexed securities held by the Fund as of February 28, 2006.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. See the Schedule of Investments for a summary of open swap agreements entered into by the Fund as of February 28, 2006.

22

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $1,884,486 collateralized by cash in the amount of $1,985,125 which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. The Fund has recorded a deferred tax liability in respect of unrealized appreciation on foreign securities of $64,485 for potential capital gains and repatriation taxes as of February 28, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized gain (loss) in the Statement of Operations. For the year ended February 28, 2006, the Fund incurred $24,591 in capital gains taxes which is included in net realized gain (loss) in the Statement of Operations.

The Fund is subject to a Contribuição Provisória sobre Movimentações Financiera ("CPMF") tax which is applied to foreign exchange transactions representing capital inflows or outflows to/from the Brazilian market. The CPMF tax has been included in the net realized gain (loss) on investments throughout the year.

23

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

During the year ended February 28, 2006, the Fund incurred $11,524 in CPMF tax which is included in net realized gain (loss) on investments in the Statement of Operations.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $8,983,811 and $16,833,004, respectively and long-term capital gains – $35,548,623 and $32,196,773, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $2,959,480 and $30,867,970 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	258,560,339	$	165,479,032	$	(4,422,827	)	$	161,056,205

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to passive foreign investment company transactions. The financial highlights exclude these adjustments.

Distributions In Excess Of Net Investment Income		Accumulated Net Realized Gain			Paid-in Capital
$	671,083	$	(671,083	)	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities

24

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the relative net assets of each class. Shareholder service, 12b-1, and administration fees, which are directly attributable to a class of shares, are charged to that class's operations.

Investment risks

Investments in securities of issuers in emerging countries present certain risks that are not inherent in many other investments. Many emerging countries present elements of political and/or economic instability. The securities markets of emerging countries are generally smaller and less developed than the securities markets of the U.S. and developed foreign markets. Further, countries may impose various types of foreign currency regulations or controls which may impede the Fund's ability to repatriate amounts it receives. The Fund may acquire interests in securities in anticipation of improving conditions in the related countries. These factors may result in significant volatility in the values of its holdings. The markets in emerging countries are typically less liquid than those of developed markets. Accordingly, the Fund may not be able to realize in an actual sale amounts approximating those used to value its holdings.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.65% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares.

Class M shares of the Fund pay GMO an administration fee monthly at an annual rate of 0.20% of average daily Class M net assets for support services provided to Class M shareholders.

Fund Distributors, Inc. (the "Distributor") serves as the Fund's distributor. Pursuant to a Rule 12b-1 distribution and service plan adopted by the Fund, Class M shares of the Fund may pay a fee, at the annual rate of 1.00% of average daily Class M net assets for any activities or expenses primarily intended to result in the sale of Class M shares of the Fund and/or the provision of certain other services incidental thereto. The Trustees currently limit payments on Class M shares to 0.25% of the Fund's average daily net asset value

25

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

attributable to its Class M shares. This fee may be spent by the Distributor on personal services rendered to Class M shareholders of the Fund and/or maintenance of Class M shareholder accounts.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees (Class III only), administration fees (Class M only), 12b-1 fees (Class M only), fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses and transfer taxes) exceed 1.00% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $3,809 and $2,404, respectively. No remuneration was paid to any other officer of the Trust.

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $118,770,612 and $132,736,782, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 28.1% of the outstanding shares of the Fund were held by two shareholders, each holding in excess of 10% Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

As of February 28, 2006, 0.1% of the Fund's shares were held by ten related parties comprised of certain GMO employee accounts and, 14.0% of the Fund's shares were held by accounts for which the Manager has investment discretion.

26

GMO Emerging Countries Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		4,414,349		$	76,364,209			2,384,407		$	34,258,956
Shares issued to shareholders in reinvestment of distributions		2,108,709			34,716,984			2,421,224			33,371,388
Shares repurchased		(4,068,752	)		(73,680,831	)		(5,901,106	)		(79,800,825	)
Net increase (decrease)		2,454,306		$	37,400,362			(1,095,475	)	$	(12,170,481	)
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class M:	Shares			Amount			Shares			Amount
Shares sold		1,020,576		$	16,564,539			1,851,406		$	26,301,677
Shares issued to shareholders in reinvestment of distributions		456,256			7,295,513			756,405			10,319,284
Shares repurchased		(2,830,875	)		(47,749,452	)		(2,168,546	)		(30,000,967	)
Net increase (decrease)		(1,354,043	)	$	(23,889,400	)		439,265		$	6,619,994

27

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Emerging Countries Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Emerging Countries Fund (the "Fund") (a series of GMO Trust) at February 28, 2006, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

28

GMO Emerging Countries Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, shareholder service fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

			Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class III
	1	) Actual		1.12	%	$	1,000.00	$	1,301.60	$	6.39
2) Hypothetical				1.12	%	$	1,000.00	$	1,019.24	$	5.61
Class M
	1	) Actual		1.41	%	$	1,000.00	$	1,300.40	$	8.04
2) Hypothetical				1.41	%	$	1,000.00	$	1,017.80	$	7.05

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in theperiod, divided by 365 days in the year.

29

GMO Emerging Countries Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $1,110,968 and recognized foreign source income of $10,566,463.

The Fund's distributions to shareholders include $35,548,623 from long-term capital gains.

For taxable, non-corporate shareholders, 53.20% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006 $0 and $1,927,118, respectively, or if determined to be different, the qualified short-term capital gains of such year.

30

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer,Esq. c/oGMO Trust 40Rowes Wharf Boston, MA 02110 DOB:07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005) ; Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

31

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee3
W. Nicholas Thorndike c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

32

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40Rowes Wharf Boston, MA 02110 DOB:01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, VanOtterloo & Co. LLC.
Brent C. Arvidson c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB:06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/oGMO Trust 40 RowesWharf Boston,MA 02110 DOB:10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/oGMO Trust 40RowesWharf Boston,MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

33

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/oGMO Trust 40RowesWharf Boston,MA 02110 DOB:06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/oGMO Trust 40RowesWharf Boston,MA 02110 DOB:01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer,October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/oGMO Trust 40 RowesWharf Boston,MA 02110 DOB:10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/oGMO Trust 40RowesWharf Boston,MA 02110 DOB:10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

34

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on our website at www.gmo.com, or on the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund's complete schedule of portfolio holdings is also available at www.gmo.com.

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

The Class III shares of the GMO International Intrinsic Value Fund returned +18.3% for the fiscal year ended February 28, 2006, as compared to +17.4% for the MSCI EAFE Index and +20.3% for the S&P/Citigroup PMI EPAC Value Style Index. Consistent with the Fund's investment objectives and policies, the Fund was invested substantially in international equity securities throughout the period.

Relative to the S&P/Citigroup PMI EPAC Value Style Index, the strongest positive stock selection impacts came from benchmark stocks not held or held at an underweight. Several of these came from the telecommunications sector and included Vodafone, Telefonica, Telecom Italia, and France Telecom. Compared to MSCI EAFE Index, overweights in energy stocks such as Canadian Natural Resources and OMV helped relative returns.

Country and currency weighting had a negative impact against the value index. Not holding Korea, which as an emerging market is not part of the strategy, hurt returns. Also an overweight position in the weak yen hurt relative returns and outweighed the effects of a smaller overweight in the outperforming Japanese market. The strong U.S. dollar relative to most foreign currencies detracted from returns for U.S. investors. The MSCI EAFE Index returned 12% less in U.S. dollar terms than in local currency.

Sector allocation was positive against both the S&P/Citigroup PMI EPAC Value Style Index and MSCI EAFE Index. The underweight in telecommunications was the most significant positive impact. The position in financials, which outperformed, was greater than EAFE, but lower than the value index, and so was a positive contributor against the former, but a negative against the latter.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Performance for Classes II, IV and M will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		95.6	%
Preferred Stocks		0.6
Forward Currency Contracts		0.1
Futures		0.2
Short-Term Investment(s)		8.0
Other		(4.5	)
		100.0	%
Country Summary	% of Equity Investments
Japan		26.2	%
United Kingdom		24.0
France		8.9
Germany		8.5
Netherlands		8.1
Italy		3.7
Finland		3.3
Switzerland		2.6
Canada		2.5
Australia		2.5
Belgium		1.9
Spain		1.9
Hong Kong		1.2
Austria		1.2
Norway		0.9
Singapore		0.8
Sweden		0.8
Ireland		0.7
Denmark		0.3
Malaysia		0.0
		100.0	%

1

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Financials		33.0	%
Consumer Discretionary		13.6
Health Care		11.8
Energy		10.5
Utilities		8.0
Materials		7.3
Industrials		7.2
Consumer Staples		4.3
Telecommunication Services		2.4
Information Technology		1.9
		100.0	%

2

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 95.6%
		Australia — 2.4%
	1,121,666	Australia and New Zealand Banking Group Ltd		21,333,203
	661,658	Commonwealth Bank of Australia		21,964,538
	1,410,612	General Property Trust Units		4,335,313
	162,153	Macquarie Bank Ltd		7,669,885
	1,401,987	National Australia Bank Ltd		38,052,542
	830,172	Promina Group Ltd		3,345,156
	197,889	Rio Tinto Ltd		10,367,460
	888,224	Santos Ltd		7,465,612
	2,398,754	Stockland		11,948,519
	277,519	Suncorp-Metway Ltd		4,201,623
	5,190,003	Telstra Corp Ltd		14,768,449
	828,068	Woolworths Ltd		11,277,650
				156,729,950
		Austria — 1.2%
	72,291	Austrian Airlines * (a)		722,948
	61,096	Boehler Uddeholm (Bearer)		11,461,737
	69,213	Flughafen Wien AG		5,582,117
	37,322	Generali Holding Vienna AG (a)		1,778,955
	595,933	OMV AG		36,959,312
	126,213	RHI AG * (a)		3,600,322
	132,648	Voestalpine AG (a)		15,460,181
				75,565,572
		Belgium — 1.8%
	23,203	Colruyt SA		3,342,614
	84,992	Delhaize Group (a)		5,669,931
	1,337,827	Dexia		33,226,395
	1,653,958	Fortis		58,916,067
	260,067	UCB SA		12,318,475
	38,820	Umicore		5,514,244
				118,987,726

See accompanying notes to the financial statements.

3

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Canada — 2.4%
	228,100	BCE Inc		5,543,686
	360,800	Canadian Imperial Bank of Commerce		25,382,516
	857,900	Canadian Natural Resources		46,871,407
	229,400	EnCana Corp		9,487,263
	75,400	Magna International Inc Class A		5,622,905
	255,100	National Bank of Canada		14,545,717
	695,100	Petro - Canada		31,842,057
	21,400	Quebecor Inc Class B		508,425
	205,200	Royal Bank of Canada		17,146,194
				156,950,170
		Denmark — 0.3%
	509	AP Moller - Maersk A/S Class A		4,583,709
	359	AP Moller - Maersk A/S Class B		3,290,405
	331,200	Danske Bank A/S		11,809,608
				19,683,722
		Finland — 3.2%
	993,600	Fortum Oyj		24,038,238
	303,000	Kesko Oyj Class B (a)		9,522,482
	259,700	Metso Oyj		9,569,686
	4,610,750	Nokia Oyj		85,796,678
	267,800	Outokumpu Oyj		4,859,314
	596,154	Rautaruukki Oyj		20,090,006
	1,970,300	Sampo Oyj Class A		39,490,284
	38,760	Stockmann Oyj AB Class A		1,524,112
	38,200	Wartsila Oyj Class A		1,394,471
	169,100	Wartsila Oyj Class B		6,162,204
	132,950	Yit Yhtymae Oyj		6,745,575
				209,193,050
		France — 8.6%
	1,099,329	Arcelor		40,170,935
	61,134	Assurances Generales de France		6,350,531

See accompanying notes to the financial statements.

4

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		France — continued
	673,979	Axa		23,830,740
	1,311,222	BNP Paribas		121,349,525
	35,055	Bongrain SA		2,223,538
	116,097	Carrefour SA		5,763,276
	330,057	Cie de Saint-Gobain		22,019,412
	165,028	Credit Agricole SA		6,027,784
	79,325	Etablissements Economiques du Casino Guichard-Perrachon SA		4,944,565
	104,914	European Aero Defense		3,846,128
	5,686	Fromageries Bel Vache qui Rit		1,077,107
	198,717	Michelin SA Class B (a)		12,122,162
	700,080	Peugeot SA		40,812,834
	305,242	Renault SA		29,331,630
	328,458	Sanofi-Aventis		27,960,066
	154,020	Schneider Electric SA		15,738,207
	3,462,983	SCOR SA		8,322,083
	315,849	Societe Generale		44,728,593
	557,025	Total SA		140,091,101
	93,867	Veolia Environnement		4,907,772
				561,617,989
		Germany — 7.7%
	94,330	Aareal Bank AG * (a)		4,176,951
	48,325	Adidas-Salomon AG		9,444,052
	240,580	Allianz AG (Registered)		38,854,900
	241,567	Altana AG		12,973,831
	116,288	Bankgesellschaft Berlin AG * (a)		673,852
	113,054	Bayer AG		4,560,013
	808,735	Bayerische Motoren Werke AG		38,879,557
	599,228	Commerzbank AG		21,894,797
	711,570	DaimlerChrysler AG (Registered)		39,540,234
	670,493	Depfa Bank Plc		11,179,495
	427,603	Deutsche Bank AG (Registered)		47,306,476
	68,611	Deutsche Postbank AG (a)		4,840,451
	610,857	E. On AG		67,749,060

See accompanying notes to the financial statements.

5

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Germany — continued
	118,371	MAN AG		7,469,238
	87,101	Merck KGaA		8,722,500
	1,009	Mobilcom AG		26,572
	324,121	Muenchener Rueckversicherungs AG (Registered)		44,000,981
	109,405	RWE AG		9,407,617
	143,147	Salzgitter AG		9,727,052
	285,891	Schering AG		20,505,385
	267,135	Suedzucker AG (a)		7,057,812
	1,422,557	ThyssenKrupp AG (a)		36,034,357
	659,907	TUI AG (a)		13,033,240
	697,603	Volkswagen AG (a)		48,854,326
				506,912,749
		Hong Kong — 1.2%
	1,250,000	Cheung Kong Holdings Ltd		13,102,692
	526,000	Cheung Kong Infrastructure Holdings Ltd		1,649,348
	2,904,098	CLP Holdings Ltd		16,603,659
	285,000	Guoco Group		3,547,116
	1,852,511	Hang Lung Group Co Ltd		4,079,708
	721,100	Hong Kong Aircraft Engineering Co Ltd		5,691,028
	4,049,469	Hong Kong Electric Holdings Ltd		18,646,589
	561,700	Hong Kong Ferry Co Ltd		685,655
	162	Jardine Matheson Holdings Ltd		2,861
	194,911	Jardine Strategic Holdings Ltd		2,238,572
	320,862	Mandarin Oriental International Ltd		319,322
	602,500	Swire Pacific Ltd Class A		5,752,629
	1,560,400	Yue Yuen Industrial Holdings		4,817,953
				77,137,132
		Ireland — 0.6%
	673,041	Bank of Ireland		11,973,524
	901,538	CRH Plc		29,571,983
				41,545,507

See accompanying notes to the financial statements.

6

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Italy — 3.4%
	893,080	Banca Intesa SPA - Di RISP		4,910,442
	4,153,158	Banca Monte dei Paschi di Siena SPA (a)		21,481,806
	559,623	Banca Popolare di Milano		7,073,543
	811,612	Capitalia SPA		6,130,224
	4,614,857	ENI SPA		131,930,029
	1,158,482	Fiat SPA * (a)		12,540,963
	185,747	Fiat SPA - Di RISP *		1,767,978
	83,051	Fondiaria - Sai SPA		3,326,502
	256,425	Fondiaria - Sai SPA - Di RISP		7,639,355
	588,000	Grassetto SPA * (b) (c)		7,010
	317,390	Italcementi SPA - Di RISP		4,523,717
	24,342	Italmobiliare SPA		1,868,966
	607,433	Milano Assicurazioni SPA		4,644,656
	96,800	Natuzzi SPA ADR		719,224
	663,010	Sanpaolo IMI SPA		11,700,147
	491,236	SMI (Societa Metallurgica Italy) *		245,133
				220,509,695
		Japan — 25.2%
	135,130	Acom Co Ltd		8,282,744
	216,100	Aeon Co Ltd		5,155,469
	480,000	AIOI Insurance Co Ltd		3,542,246
	81,000	Aisin Seiki Co Ltd		2,874,600
	579,000	Asahi Kasei Corp		3,819,297
	122,100	Autobacs Seven Co Ltd		6,130,841
	1,419,300	Chubu Electric Power Co Inc		37,621,461
	225,200	Chugoku Electric Power Co Inc		4,877,792
	797,000	Cosmo Oil Co Ltd (a)		4,052,120
	1,270,000	Daido Steel Co Ltd		11,087,113
	405,100	Daiei Inc * (a)		11,175,904
	974,280	Daiichi Sankyo Co Ltd *		20,116,014
	1,671,000	Daikyo Inc * (a)		8,795,751
	221,900	Daito Trust Construction Co Ltd		10,391,209
	162,000	Daiwa House Industry Co Ltd		2,592,767

See accompanying notes to the financial statements.

7

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	371,000	Daiwa Kosho Lease Co Ltd		2,263,595
	1,009,000	Daiwa Securities Co Ltd		11,979,005
	433	East Japan Railway Co		3,080,320
	574,800	Eisai Co Ltd		26,582,978
	132,000	Ezaki Glico Co Ltd		1,235,737
	1,027,000	Fuji Electric Holdings Co Ltd		4,801,365
	3,206,000	Fuji Heavy Industries Ltd (a)		17,372,294
	747,000	Fujikura Ltd		8,295,560
	1,538,000	Furukawa Electric Co Ltd *		12,001,802
	5,789,000	Haseko Corp * (a)		20,171,305
	110,800	Hitachi Chemical Co Ltd		3,073,388
	352,100	Hokkaido Electric Power		8,264,357
	2,093,000	Honda Motor Co Ltd		122,252,737
	2,719,000	Isuzu Motors Ltd (a)		9,362,742
	4,280,000	Itochu Corp		35,573,302
	515	Japan Tobacco Inc		8,847,852
	137,000	Kajima Corp		802,842
	307,000	Kandenko Co		2,210,945
	867,600	Kansai Electric Power Co Inc		20,188,897
	1,064,000	Kao Corp		28,900,857
	3,959,000	Kawasaki Heavy Industries Ltd (a)		13,561,508
	1,195,000	Kawasaki Kisen Kaisha Ltd (a)		7,433,141
	768,000	Keisei Electric Railway Co (a)		4,939,390
	4,077,000	Kobe Steel Ltd		15,493,734
	968,000	Komatsu Ltd		17,167,073
	218,600	Konami Corp		5,389,637
	1,131,000	Kubota Corp		11,060,991
	887,200	Kyushu Electric Power Co Inc		21,400,798
	616,000	Leopalance21 Corp		22,156,776
	508,000	Maeda Corp		3,148,179
	69,000	Makita Corp		2,006,664
	4,185,000	Marubeni Corp		20,756,241
	1,900	Maruichi Steel Tube		48,237
	330,000	Matsushita Electric Industrial Co Ltd		6,939,707

See accompanying notes to the financial statements.

8

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	3,014,000	Mazda Motor Corp (a)		17,141,423
	2,583,100	Mitsubishi Corp		59,930,872
	443,000	Mitsubishi Electric Corp		3,527,673
	1,627,000	Mitsubishi Heavy Industries		7,641,629
	2,819,000	Mitsubishi Materials Corp (a)		14,573,262
	8,194,000	Mitsubishi Motors Corp * (a)		16,944,078
	1,343,000	Mitsubishi Rayon Co Ltd		10,791,523
	1,003	Mitsubishi Tokyo Financial Group Inc		14,894,862
	145,000	Mitsubishi UFJ Securities Corp		2,110,219
	1,282,000	Mitsui & Co		17,539,641
	224,000	Mitsui Fudosan Co Ltd		4,653,037
	462,000	Mitsui Sumitomo Insurance Co Ltd		6,093,085
	2,533,000	Mitsui Trust Holding Inc		37,138,185
	3,626	Mizuho Financial Group Inc		28,903,636
	54,700	Murata Manufacturing Co Ltd		3,373,060
	219,000	Nagase & Co		2,798,260
	292,000	NGK Spark Plug Co Ltd		6,619,823
	361,000	Nikko Cordial Corp		5,682,951
	67,300	Nintendo Co Ltd		9,925,248
	151,000	Nippon Corp		1,191,231
	1,692,000	Nippon Light Metal (a)		4,735,988
	893,500	Nippon Mining Holdings Inc		6,672,506
	7,260	Nippon Telegraph & Telephone Corp		31,348,093
	1,444,000	Nippon Yusen Kabushiki Kaisha		9,393,536
	675,000	Nishimatsu Construction (a)		2,863,489
	5,423,300	Nissan Motor Co		62,258,060
	166,400	Nissin Food Products Co Ltd		5,076,173
	405,100	Nomura Securities Co Ltd		7,730,573
	318,000	NSK Ltd		2,437,259
	7,100	NTT Docomo Inc		10,504,864
	162,900	Ono Pharmaceutical Co Ltd		7,285,941
	1,966,000	Orient Corp * (a)		6,973,069
	103,410	ORIX Corp		27,224,817
	6,145,000	Osaka Gas Co Ltd		23,527,103

See accompanying notes to the financial statements.

9

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	137,050	Promise Co Ltd		8,270,486
	12,492	Resona Holdings Inc *		44,049,403
	483,000	Ricoh Company Ltd		8,942,914
	3,000	Royal Co Ltd		45,387
	101,100	Ryosan Co		2,757,952
	7,215	SBI Holdings Inc (a)		3,807,679
	941,000	Shimizu Corp		6,605,563
	900,000	Shinko Securities Co Ltd		4,626,674
	546,000	Showa Denko		2,336,221
	357,500	Showa Shell Sekiyu KK		4,065,911
	1,015,200	Sojitz Corp * (a)		5,570,846
	82,000	Stanley Electric Co Ltd		1,575,969
	1,455,000	Sumitomo Corp		19,656,479
	917,000	Sumitomo Heavy Industries Ltd		8,200,913
	7,228,000	Sumitomo Metal Industries Ltd		32,088,455
	1,621,000	Taiheiyo Cement Co Ltd		6,975,009
	644,000	Taisho Pharmaceutical Co Ltd		13,632,032
	381,000	Takashimaya Co Ltd		5,519,318
	3,243,200	Takeda Pharmaceutical Co Ltd		180,660,717
	74,490	Takefuji Corp		4,780,253
	868,300	Tohoku Electric Power Co Inc		19,647,416
	341,000	Tokuyama Corp (a)		5,087,531
	791,300	Tokyo Electric Power Co Inc		21,360,615
	3,569,000	Tokyo Gas Co Ltd		16,249,706
	208,000	Tokyo Tatemono Co Ltd		2,011,806
	1,547,000	Tomen Corp * (a)		2,459,601
	892,000	TonenGeneral Sekiyu KK (a)		8,915,319
	574,000	Toray Industries Inc		4,422,644
	158,000	Toyo Suisan Kaisha Ltd		2,303,711
	121,800	Toyota Industries Corp		4,872,827
	1,184,600	Toyota Motor Corp		63,148,004
	89,000	Toyota Tsusho Kaisha (a)		2,060,003
	2,231,000	Ube Industries Ltd		6,583,031
	105,000	Wacoal Corp (a)		1,447,633

See accompanying notes to the financial statements.

10

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	240,000	Yamaha Corp Ltd		4,123,919
	192,200	Yamaha Motor Co Ltd		4,383,388
				1,652,029,788
		Malaysia — 0.0%
	751,000	Promet Berhad * (b) (c)		2,021
		Netherlands — 7.8%
	5,634,452	ABN Amro Holdings NV		164,192,243
	4,215,749	Aegon NV		69,519,550
	488,346	Akzo Nobel NV		24,791,167
	168,337	Corio NV		11,060,839
	255,681	DSM NV		10,633,464
	14,788	Gamma Holdings NV		660,890
	382,222	Heineken NV		14,392,289
	5,231,075	ING Groep NV		196,614,972
	177,968	Koninklijke Wessanen NV (a)		2,799,585
	372,504	OCE NV (a)		6,444,361
	127,686	TNT NV		4,153,446
	61,825	Wereldhave NV		6,590,978
				511,853,784
		Norway — 0.9%
	85,530	Aker ASA		3,406,756
	219,169	DnB NOR ASA		2,659,211
	330,717	Norsk Hydro ASA		38,737,878
	425,200	Statoil ASA		10,888,849
				55,692,694
		Singapore — 0.7%
	1,429,000	Capitaland Ltd		3,681,227
	2,440,000	DBS Group Holdings Ltd		24,541,362
	393,000	Fraser & Neave Ltd		4,606,735
	254,193	Haw Par Corp Ltd		891,313
	810,104	Hotel Properties Ltd		802,015

See accompanying notes to the financial statements.

11

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		Singapore — continued
	469,000	Overseas Chinese Town Group		1,959,336
	3,241,100	Sembcorp Industrie		6,202,536
	1,881,201	Straits Trading Co Ltd		3,542,919
				46,227,443
		Spain — 1.8%
	555,739	Banco Santander Central Hispano SA		8,119,093
	507,138	Endesa SA		16,981,645
	38,036	Fomento de Construcciones y Contratas SA		2,585,999
	300,886	Gas Natural SDG SA		9,152,560
	1,033,457	Iberdrola SA		32,595,342
	90,910	Metrovacesa SA		6,768,075
	1,244,380	Repsol YPF SA		34,782,320
	280,805	Sacyr Vallehermoso SA		7,895,023
				118,880,057
		Sweden — 0.8%
	428,200	Electrolux AB		11,842,937
	302,300	Holmen AB Class B (a)		11,727,276
	414,400	Nordea AB		4,684,209
	136,300	Svenska Cellulosa - Series B Free		5,715,693
	348,300	Swedish Match AB		4,664,009
	971,300	Tele2 AB Class B (a)		10,483,289
				49,117,413
		Switzerland — 2.5%
	5,373	Banque Cantonale Vaudoise		1,720,129
	390,650	Credit Suisse Group		21,636,224
	42,148	Nestle SA (Registered)		12,391,666
	54,477	Swiss Life Holding		10,099,424
	197,369	Swiss Reinsurance Co (Registered)		14,059,647
	12,415	Valora Holding AG *		2,522,800
	433,908	Zurich Financial Services AG *		102,464,665
				164,894,555

See accompanying notes to the financial statements.

12

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		United Kingdom — 23.1%
	831,195	Alliance & Leicester Plc		15,581,783
	366,365	AMEC		2,547,364
	582,328	Anglo American Plc		21,693,290
	318,997	Arriva Plc		3,370,745
	3,127,313	AstraZeneca Plc		144,428,139
	2,622,709	Aviva Plc		36,287,775
	1,479,491	Barclays Plc		17,329,282
	1,346,923	Barratt Developments Plc		24,400,613
	1,048,520	BBA Group Plc		4,923,194
	259,103	Berkeley Group Holdings Plc *		5,061,638
	1,265,525	Boots Group Plc		15,737,235
	4,337,308	BP Plc		47,979,545
	1,231,772	British American Tobacco Plc		29,347,046
	511,082	British Energy Plc (Deferred Shares) * (b) (c)		—
	19,363,957	BT Group Plc		69,841,541
	1,943,886	Cadbury Schweppes Plc		19,747,003
	7,404,830	Centrica Plc		37,719,511
	3,395,729	Cobham Group Plc		10,114,645
	6,228,832	DSG International Plc		18,782,877
	880,034	Friends Provident Plc		3,190,761
	484,609	Gallaher Group Plc		7,509,195
	10,454,585	GlaxoSmithKline Plc		265,536,184
	723,962	GUS Plc		13,322,539
	793,197	Hanson Plc		9,683,218
	5,608,797	HBOS Plc		104,453,211
	974,275	IMI Plc		8,931,620
	947,656	Imperial Chemical Industries Plc		5,588,929
	1,194,881	Imperial Tobacco Group Plc		35,935,952
	115,430	Inchcape Plc		4,873,187
	2,355,235	J Sainsbury Plc		13,224,348
	4,427,945	Kingfisher Plc		17,710,446
	720,308	Ladbrokes Group		4,649,652
	6,818,983	Lloyds TSB Group Plc		66,241,004
	75,156	Man Group Plc		3,044,495

See accompanying notes to the financial statements.

13

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	1,415,404	National Grid Plc		14,881,913
	896,954	Next Plc		25,942,919
	2,824,310	Northern Foods Plc		6,820,340
	535,419	Northern Rock Plc		10,577,779
	1,047,897	Rio Tinto Plc		49,316,288
	9,940,572	Royal & Sun Alliance Insurance Group		22,666,041
	2,022,242	Royal Bank of Scotland Group		67,641,837
	2,257,433	Royal Dutch Shell Group Class A		68,055,947
	873,161	Royal Dutch Shell Plc B Shares		27,452,608
	181,255	Schroders Plc		3,654,523
	1,682,746	Scottish & Southern Energy Plc		33,892,360
	2,619,749	Scottish Power Plc		26,797,962
	758,229	Smith WH Plc		5,425,375
	2,324,291	Taylor Woodrow Plc		16,940,096
	636,083	Tomkins Plc		3,713,450
	445,740	Unilever Plc		4,586,152
	545,066	United Utilities Plc		6,526,532
	5,783,081	Vodafone Group Plc		11,080,403
	1,814,617	Wimpey (George) Plc		17,593,186
				1,512,353,678
		TOTAL COMMON STOCKS (COST $4,950,527,466)		6,255,884,695
		PREFERRED STOCKS — 0.6%
		Germany — 0.4%
	14,406	Fresenius Medical Care AG (Non Voting) 0.92%		2,311,722
	32,886	Henkel KGaA 1.46%		3,628,357
	75,505	RWE AG 2.70%		5,944,777
	9,000	Villeroy & Boch AG (Non Voting) 5.64%		140,469
	308,783	Volkswagen AG 2.82%		15,911,537
				27,936,862

See accompanying notes to the financial statements.

14

GMO International Intrinsic Value Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)

February 28, 2006

Shares /
Par Value ($) Description Value ($)

	Italy — 0.2%
2,815,875	Compagnia Assicuratrice Unipol 5.02%		7,372,886
155,430	Fiat SPA *		1,341,764
275,190	IFI Istituto Finanziario Industries *		5,164,751
			13,879,401
	TOTAL PREFERRED STOCKS (COST $30,853,715)		41,816,263
	SHORT-TERM INVESTMENT(S) — 8.0%
183,400,000	Royal Bank of Canada Time Deposit, 4.53%, due 03/01/06		183,400,000
314,278,281	The Boston Global Investment Trust (d)		314,278,281
25,950,000	U.S. Treasury Bill, 4.64%, due 08/24/06 (e) (f)		25,379,411
	TOTAL SHORT-TERM INVESTMENT(S) (COST $523,054,884)		523,057,692
	TOTAL INVESTMENTS — 104.2% (Cost $5,504,436,065)		6,820,758,650
	Other Assets and Liabilities (net) — (4.2%)		(277,111,102	)
	TOTAL NET ASSETS — 100.0%	$	6,543,647,548

See accompanying notes to the financial statements.

15

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward Currency Contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
	5/26/06	AUD	6,657,304	$	4,934,427	$	28,294
	5/26/06	CAD	2,069,075		1,824,853		30,873
	5/26/06	CHF	230,704,930		177,398,352		(46,554	)
	5/26/06	HKD	129,297,010		16,688,689		(15,488	)
	5/26/06	JPY	50,530,897,923		441,498,791		9,719,458
	5/26/06	NOK	1,550,521,687		231,029,489		587,799
	5/26/06	SEK	2,498,307,015		317,781,360		(2,405,824	)
	5/26/06	SGD	47,776,510		29,537,407		197,229
						$	8,095,787
Sales
5/26/06	DKK		141,173,848	$	22,665,392	$	(29,921	)
	5/26/06	EUR	337,344,053		404,216,327		(412,604	)
	5/26/06	GBP	266,689,292		468,165,274		(3,424,506	)
	5/26/06	HKD	732,262,417		94,514,946		724
	5/26/06	JPY	3,432,150,000		29,987,397		(583,670	)
						$	(4,449,977	)

See accompanying notes to the financial statements.

16

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
Buys
	66	CAC 40	March 2006	$	3,936,684	$	32,081
	701	DAX	March 2006		121,254,517		8,830,031
	8	Hang Seng	March 2006		816,664		12,519
	9	IBEX 35	March 2006		1,262,738		34,751
	167	MSCI Singapore	March 2006		6,066,552		97,885
	67	OMXS30	March 2006		841,654		(1,949	)
	96	S&P / MIB	March 2006		21,579,680		1,391,934
	1,834	TSE TOPIX	March 2006		262,690,337		9,441,413
						$	19,838,665
Sales
	1,644	FTSE 100	March 2006	$	166,233,215	$	(2,846,675	)
	764	S&P Toronto 60	March 2006		88,685,714		(3,714,242	)
	153	SPI 200	March 2006		13,984,468		(288,607	)
						$	(6,849,524	)

At February 28, 2006 the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  Bankrupt issuer.

(c)  Security valued at fair value using methods determined in good faith by or at the direction of the Trustees of GMO Trust (Note 2).

(d)  All or a portion of this security represents investment of security lending collateral (Note 2).

(e)  Rate shown represents yield-to-maturity.

(f)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

  As of February 28, 2006, 93.4% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor.

Currency Abbreviations:

AUD - Australian Dollar	HKD - Hong Kong Dollar
CAD - Canadian Dollar	JPY - Japanese Yen
CHF - Swiss Franc	NOK - Norwegian Krone
DKK - Danish Krone	SEK - Swedish Krona
EUR - Euro	SGD - Singapore Dollar
GBP - British Pound

See accompanying notes to the financial statements.

17

GMO International Intrinsic Value Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $295,552,197 (cost $5,504,436,065) (Note 2)	$	6,820,758,650
Cash		765,346
Foreign currency, at value (cost $8,021,285) (Note 2)		8,065,221
Receivable for Fund shares sold		31,230,489
Dividends and interest receivable		10,853,822
Foreign taxes receivable		927,803
Unrealized appreciation on open forward currency and cross currency contracts (Note 2)		10,564,377
Receivable for variation margin on open futures contracts (Note 2)		1,193,873
Receivable for expenses reimbursed by Manager (Note 3)		383,913
Total assets		6,884,743,494
Liabilities:
Collateral on securities loaned (Note 2)		314,278,281
Payable for Fund shares repurchased		15,644,761
Payable to affiliate for (Note 3):
Management fee		2,676,221
Shareholder service fee		630,677
Administration fee – Class M		4,512
Trustees and Chief Compliance Officer fees		11,550
Payable for 12b-1 fee – Class M		11,562
Unrealized depreciation on open forward currency and cross currency contracts (Note 2)		6,918,567
Accrued expenses		919,815
Total liabilities		341,095,946
Net assets	$	6,543,647,548

See accompanying notes to the financial statements.

18

GMO International Intrinsic Value Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006 — (Continued)

Net assets consist of:
Paid-in capital	$	5,025,408,553
Distributions in excess of net investment income		(2,009,307	)
Accumulated net realized gain		187,238,893
Net unrealized appreciation		1,333,009,409
	$	6,543,647,548
Net assets attributable to:
Class II shares	$	567,312,901
Class III shares	$	2,795,609,547
Class IV shares	$	3,150,741,286
Class M shares	$	29,983,814
Shares outstanding:
Class II		17,534,037
Class III		85,781,273
Class IV		96,707,685
Class M		928,967
Net asset value per share:
Class II	$	32.35
Class III	$	32.59
Class IV	$	32.58
Class M	$	32.28

See accompanying notes to the financial statements.

19

GMO International Intrinsic Value Fund

(A Series of GMO Trust)


Statement of Operations — Year Ended February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $12,991,279)	$	145,700,602
Interest (including securities lending income of $4,900,909)		13,556,327
Total investment income		159,256,929
Expenses:
Management fee (Note 3)		27,990,882
Shareholder service fee – Class II (Note 3)		818,481
Shareholder service fee – Class III (Note 3)		3,432,060
Shareholder service fee – Class IV (Note 3)		2,250,832
12b-1 fee – Class M (Note 3)		56,219
Administration fee – Class M (Note 3)		44,975
Custodian and fund accounting agent fees		2,345,673
Transfer agent fees		79,069
Audit and tax fees		72,293
Legal fees		99,642
Trustees fees and related expenses (Note 3)		95,630
Registration fees		215,299
Miscellaneous		151,299
Total expenses		37,652,354
Fees and expenses reimbursed by Manager (Note 3)		(2,909,623	)
Net expenses		34,742,731
Net investment income (loss)		124,514,198
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		360,335,198
Closed futures contracts		33,263,055
Foreign currency, forward contracts and foreign currency related transactions		(54,323,162	)
Net realized gain (loss)		339,275,091
Change in net unrealized appreciation (depreciation) on:
Investments		500,232,826
Open futures contracts		11,439,002
Foreign currency, forward contracts and foreign currency related transactions		(1,575,256	)
Net unrealized gain (loss)		510,096,572
Net realized and unrealized gain (loss)		849,371,663
Net increase (decrease) in net assets resulting from operations	$	973,885,861

See accompanying notes to the financial statements.

20

GMO International Intrinsic Value Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Year Ended February 28, 2006			Year Ended February 28, 2005
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	124,514,198		$	63,901,035
Net realized gain (loss)		339,275,091			201,214,536
Change in net unrealized appreciation (depreciation)		510,096,572			419,859,759
Net increase (decrease) in net assets from operations		973,885,861			684,975,330
Distributions to shareholders from:
Net investment income
Class II		(5,167,158	)		(4,280,990	)
Class III		(30,272,073	)		(35,499,046	)
Class IV		(33,052,892	)		(41,320,160	)
Class M		(236,681	)		(300,026	)
Total distributions from net investment income		(68,728,804	)		(81,400,222	)
Net realized gains
Class II		(19,940,346	)		(306,128	)
Class III		(115,581,160	)		(2,370,968	)
Class IV		(123,159,753	)		(2,783,896	)
Class M		(1,142,022	)		(22,496	)
Total distributions from net realized gains		(259,823,281	)		(5,483,488	)
		(328,552,085	)		(86,883,710	)
Net share transactions (Note 7):
Class II		285,566,330			115,923,125
Class III		711,856,761			196,107,018
Class IV		643,540,098			1,022,324,690
Class M		8,835,593			8,573,018
Increase (decrease) in net assets resulting from net share transactions		1,649,798,782			1,342,927,851
Total increase (decrease) in net assets		2,295,132,558			1,941,019,471
Net assets:
Beginning of period		4,248,514,990			2,307,495,519
End of period (including distributions in excess of net investment income of $2,009,307 and $10,937,487, respectively)	$	6,543,647,548		$	4,248,514,990

See accompanying notes to the financial statements.

21

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class II share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	29.04		$	24.18		$	16.04		$	17.41		$	20.30
Income (loss) from investment operations:
Net investment income (loss)†		0.65			0.49			0.44			0.37			0.28
Net realized and unrealized gain (loss)		4.45			5.07			8.31			(1.05	)		(2.44	)
Total from investment operations		5.10			5.56			8.75			(0.68	)		(2.16	)
Less distributions to shareholders:
From net investment income		(0.36	)		(0.66	)		(0.61	)		(0.69	)		(0.73	)
From net realized gains		(1.43	)		(0.04	)		—			—			—
Total distributions		(1.79	)		(0.70	)		(0.61	)		(0.69	)		(0.73	)
Net asset value, end of period	$	32.35		$	29.04		$	24.18		$	16.04		$	17.41
Total Return(a)		18.16	%		23.17	%		54.99	%		(4.11	)%		(10.71	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	567,313		$	231,695		$	85,625		$	67,896		$	42,495
Net expenses to average daily net assets		0.76	%		0.76	%		0.76	%		0.76	%		0.76	%
Net investment income to average daily net assets		2.16	%		1.88	%		2.15	%		2.06	%		1.56	%
Portfolio turnover rate		38	%		46	%		44	%		51	%		51	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.07	%		0.09	%		0.10	%		0.10	%

†  Calculated using average shares outstanding throughout the period.

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

22

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	29.23		$	24.32		$	16.13		$	17.50		$	20.37
Income (loss) from investment operations:
Net investment income (loss)†		0.72			0.59			0.45			0.40			0.44
Net realized and unrealized gain (loss)		4.44			5.02			8.36			(1.08	)		(2.59	)
Total from investment operations		5.16			5.61			8.81			(0.68	)		(2.15	)
Less distributions to shareholders:
From net investment income		(0.37	)		(0.66	)		(0.62	)		(0.69	)		(0.72	)
From net realized gains		(1.43	)		(0.04	)		—			—			—
Total distributions		(1.80	)		(0.70	)		(0.62	)		(0.69	)		(0.72	)
Net asset value, end of period	$	32.59		$	29.23		$	24.32		$	16.13		$	17.50
Total Return(a)		18.26	%		23.28	%		55.05	%		(4.05	)%		(10.60	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	2,795,610		$	1,804,485		$	1,350,850		$	845,997		$	1,053,104
Net expenses to average daily net assets		0.69	%		0.69	%		0.69	%		0.69	%		0.69	%
Net investment income to average daily net assets		2.39	%		2.30	%		2.22	%		2.26	%		2.37	%
Portfolio turnover rate		38	%		46	%		44	%		51	%		51	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.07	%		0.09	%		0.10	%		0.10	%

†  Calculated using average shares outstanding throughout the period.

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

23

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class IV share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004			2003			2002
Net asset value, beginning of period	$	29.22		$	24.31		$	16.12		$	17.50		$	20.37
Income (loss) from investment operations:
Net investment income (loss)†		0.74			0.54			0.43			0.38			0.36
Net realized and unrealized gain (loss)		4.43			5.09			8.39			(1.05	)		(2.49	)
Total from investment operations		5.17			5.63			8.82			(0.67	)		(2.13	)
Less distributions to shareholders:
From net investment income		(0.38	)		(0.68	)		(0.63	)		(0.71	)		(0.74	)
From net realized gains		(1.43	)		(0.04	)		—			—			—
Total distributions		(1.81	)		(0.72	)		(0.63	)		(0.71	)		(0.74	)
Net asset value, end of period	$	32.58		$	29.22		$	24.31		$	16.12		$	17.50
Total Return(a)		18.32	%		23.37	%		55.15	%		(4.02	)%		(10.52	)%
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	3,150,741		$	2,193,988		$	863,612		$	334,240		$	248,579
Net expenses to average daily net assets		0.63	%		0.63	%		0.63	%		0.63	%		0.63	%
Net investment income to average daily net assets		2.45	%		2.06	%		2.08	%		2.13	%		1.97	%
Portfolio turnover rate		38	%		46	%		44	%		51	%		51	%
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.07	%		0.09	%		0.10	%		0.10	%

†  Calculated using average shares outstanding throughout the period.

(a)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

See accompanying notes to the financial statements.

24

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class M share outstanding throughout each period)

	Year Ended February 28/29,
	2006			2005			2004(a)
Net asset value, beginning of period	$	28.98		$	24.15		$	20.92
Income (loss) from investment operations:
Net investment income (loss)†		0.61			0.44			0.01
Net realized and unrealized gain (loss)		4.41			5.04			3.73
Total from investment operations		5.02			5.48			3.74
Less distributions to shareholders:
From net investment income		(0.29	)		(0.61	)		(0.51	)
From net realized gains		(1.43	)		(0.04	)		—
Total distributions		(1.72	)		(0.65	)		(0.51	)
Net asset value, end of period	$	32.28		$	28.98		$	24.15
Total Return(b)		17.92	%		22.88	%		18.06	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	29,984		$	18,347		$	7,408
Net expenses to average daily net assets		0.99	%		0.99	%		0.99	%*
Net investment income to average daily net assets		2.07	%		1.72	%		0.12	%*
Portfolio turnover rate		38	%		46	%		44	%††
Fees and expenses reimbursed by the Manager to average daily net assets:		0.06	%		0.07	%		0.09	%*

(a)  Period from October 2, 2003 (commencement of operations) to February 29, 2004.

(b)  The total returns would have been lower had certain expenses not been reimbursed during the periods shown.

†  Calculated using average shares outstanding throughout the period.

††  Calculation represents portfolio turnover of the Fund for the year ended February 29, 2004.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

25

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.   Organization

GMO International Intrinsic Value Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks high total return through investment in equity securities of non-U.S. issuers. The Fund's benchmark is the S&P/Citigroup Primary Market Index ("PMI") Europe, Pacific, Asia Composite ("EPAC") Value Style Index.

Throughout the year ended February 28, 2006, the Fund had four classes of shares outstanding: Class II, Class III, Class IV and Class M. Class M shares bear an administration fee and a 12b-1 fee while classes II, III, and IV bear a shareholder service fee (See Note 3). The principal economic difference among the classes of shares is the type and level of fees borne by the classes. Eligibility for and automatic conversion among the various classes of shares, except Class M, is generally based on the total amount of assets invested in the Fund or with GMO, as more fully outlined in the Fund's prospectus.

2.   Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the

26

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange ("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with

27

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to

28

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts.

Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

29

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Delayed delivery commitments

The Fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Collateral consisting of liquid securities or cash and cash equivalents is maintained with the custodian in an amount at least equal to these commitments. As of February 28, 2006, the Fund did not enter into any delayed delivery commitments.

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006, the Fund had loaned securities having a market value of $295,552,197, collateralized by cash in the amount of $314,278,281, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income, if any, and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests.

30

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the years ended February 28, 2006 and February 28, 2005, the tax basis of distributions paid were as follows: ordinary income – $136,329,451 and $81,400,222, respectively and long-term capital gains – $192,222,634 and $5,483,488, respectively.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $66,204,933 and $138,284,659 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions, foreign currency transactions and losses on wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	5,520,174,370	$	1,341,862,016	$	(41,277,736	)	$	1,300,584,280

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions and passive foreign investment company transactions. The financial highlights exclude these adjustments.

Distributions in Excess of Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(46,857,214	)	$	46,865,230	$	(8,016	)

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of

31

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata among the classes of shares of the Fund based on the relative net assets of each class. Shareholder service, 12b-1, and administration fees, which are directly attributable to a class of shares, are charged to that class's operations.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.   Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.54% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets of each class at the annual rate of 0.22% for Class II shares, 0.15% for Class III shares, and 0.09% for Class IV shares.

Class M shares of the Fund pay GMO an administration fee monthly at the annual rate of 0.20% of average daily Class M net assets for support services provided to Class M shareholders.

Fund Distributors, Inc. (the "Distributor") serves as the Fund's distributor. Pursuant to a Rule 12b-1 distribution plan adopted by the Fund, Class M shares of the Fund may pay a fee, at the annual rate of 1.00% of average daily Class M net assets for any activities or expenses primarily intended to result in the sale of Class M shares of the Fund and/or the provision of certain other services incidental thereto. The Trustees currently limit payments on class M shares to 0.25% of the Fund's average net asset value attributable to its Class M shares. This fee may be spent by the Distributor on personal services rendered to Class M shareholders of the Fund and/or maintenance of Class M shareholder accounts.

32

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees (Class II, Class III and Class IV only), administration fees (Class M only), 12b-1 fees (Class M only), fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.54% of the average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the year ended February 28, 2006 was $57,691 and $35,918, respectively. No remuneration was paid to any other officer of the Trust.

4.   Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the year ended February 28, 2006 aggregated $3,198,738,380 and $1,860,632,262, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders and related parties

As of February 28, 2006, 12.4% of the outstanding shares of the Fund were held by one shareholder. Investment activities of this shareholder may have a material effect on the Fund.

As of February 28, 2006, 0.4% of the Fund's shares were held by nine related parties comprised of certain GMO employee accounts, and 56.2% of the Fund's shares were held by accounts for which the Manager has investment discretion.

33

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class II:	Shares			Amount			Shares			Amount
Shares sold		10,781,673		$	322,871,948			6,377,984		$	168,794,136
Shares issued to shareholders in reinvestment of distributions		775,560			23,182,022			144,228			3,997,525
Shares repurchased		(2,000,773	)		(60,487,640	)		(2,085,668	)		(56,868,536	)
Net increase (decrease)		9,556,460		$	285,566,330			4,436,544		$	115,923,125
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class III:	Shares			Amount			Shares			Amount
Shares sold		46,072,831		$	1,375,785,693			28,163,066		$	756,569,217
Shares issued to shareholders in reinvestment of distributions		4,646,865			139,574,505			1,025,850			28,475,859
Shares repurchased		(26,670,593	)		(803,503,437	)		(22,996,855	)		(588,938,058	)
Net increase (decrease)		24,049,103		$	711,856,761			6,192,061		$	196,107,018
	Year Ended February 28, 2006						Year Ended February 28, 2005
Class IV:	Shares			Amount			Shares			Amount
Shares sold		31,247,212		$	932,957,292			45,473,301		$	1,175,551,297
Shares issued to shareholders in reinvestment of distributions		4,986,675			149,411,212			1,351,198			37,496,919
Shares repurchased		(14,616,668	)		(438,828,406	)		(7,251,746	)		(190,723,526	)
Net increase (decrease)		21,617,219		$	643,540,098			39,572,753		$	1,022,324,690

34

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Year Ended February 28, 2006						Year Ended February 28, 2005
Class M:	Shares			Amount			Shares			Amount
Shares sold		327,947		$	9,736,006			357,710		$	9,318,333
Shares issued to shareholders in reinvestment of distributions		46,378			1,378,703			11,712			322,522
Shares repurchased		(78,413	)		(2,279,116	)		(43,165	)		(1,067,837	)
Net increase (decrease)		295,912		$	8,835,593			326,257		$	8,573,018

35

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO International Intrinsic Value Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO International Intrinsic Value Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

36

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, shareholder service fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table for each class below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table for each class below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

37

GMO International Intrinsic Value Fund

(A Series of GMO Trust)

Fund Expenses — (Continued)
February 28, 2006 (Unaudited)

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred*
Class II
1) Actual		0.76	%	$	1,000.00	$	1,140.00	$	4.03
2) Hypothetical		0.76	%	$	1,000.00	$	1,021.03	$	3.81
Class III
1) Actual		0.69	%	$	1,000.00	$	1,140.70	$	3.66
2) Hypothetical		0.69	%	$	1,000.00	$	1,021.37	$	3.46
Class IV
1) Actual		0.63	%	$	1,000.00	$	1,141.10	$	3.34
2) Hypothetical		0.63	%	$	1,000.00	$	1,021.67	$	3.16
Class M
1) Actual		0.99	%	$	1,000.00	$	1,139.00	$	5.25
2) Hypothetical		0.99	%	$	1,000.00	$	1,019.89	$	4.96

*  Expenses are calculated using each Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

38

GMO International Intrinsic Value Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

During the year ended February 28, 2006, the Fund paid foreign taxes of $12,992,650 and recognized foreign source income of $158,679,269.

The Fund's distributions to shareholders include $192,222,634 from long-term capital gains.

For taxable, non-corporate shareholders, 83.43% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

The Fund hereby designates as qualified interest income and qualified short-term capital gains with respect to its taxable year ended February 28, 2006, $3,890,924 and $51,453,041, respectively, or if determined to be different, the qualified interest income and qualified short-term gains of such year.

39

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

40

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

41

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

42

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

43

GMO Developed World Stock Fund

(A Series of GMO Trust)

Annual Report

February 28, 2006

For a free copy of the Fund's proxy voting guidelines, shareholders may call 1-617-346-7646 (collect), visit our website at www.gmo.com, or visit the Securities and Exchange Commission's website at www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which is available on the Commission's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

GMO Developed World Stock Fund

(A Series of GMO Trust)

Portfolio Management

Day-to-day management of the Fund's portfolio is the responsibility of the International Quantitative team at Grantham, Mayo, Van Otterloo & Co. LLC.

Management Discussion and Analysis of Fund Performance

Since inception on August 1, 2005, the Class III shares of the GMO Developed World Stock Fund returned +11.5% for the fiscal year ended February 28, 2006, as compared to +10.8% for the MSCI World Index for the same period. Consistent with the Fund's investment objectives and policies, the Fund was substantially invested throughout the period in equity securities drawn from the world's developed markets.

Stock selection had a positive impact on performance relative to the benchmark. Among the Fund's holdings with the largest contribution to relative returns were Apple Computer Inc. of the U.S., and Toyota Motor Corp. and Mitsubishi Corp. of Japan. Less successful holdings included Pfizer and Dell of the U.S.

The Fund benefited from country selection. Overweighting Japan and underweighting the U.S. made the largest contributions.

Industry weightings detracted from relative returns, particularly an overweight in energy and an underweight in materials stocks.

Currency forwards had a positive impact. The Fund's overweight position in the Canadian dollar and underweight in the euro explained much of the foreign exchange result.

The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC Management as of the date of this report and are subject to change. They are not meant as investment advice.

Performance shown is net of all fees after reimbursement from the Manager. Returns and net asset values of Fund investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The total returns would have been lower had certain expenses not been reimbursed during the periods shown and do not include the effect of taxes on distributions and redemptions. Each performance figure assumes a purchase at the beginning and a redemption at the end of the stated period and reflects a transaction fee of .30% on the purchase and .30% on the redemption. Transaction fees are retained by the Fund to cover trading costs. Performance for Class IV will vary due to different fees. Past performance is not indicative of future performance. Information is unaudited. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.gmo.com.

GMO Developed World Stock Fund

(A Series of GMO Trust)
Investments Concentration Summary
February 28, 2006 (Unaudited)

Asset Class Summary	% of Total Net Assets
Common Stocks		95.7	%
Preferred Stocks		0.1
Forward Currency Contracts		0.0
Futures		0.2
Short-Term Investment(s)		4.4
Other		(0.4	)
		100.0	%
Country Summary	% of Equity Investments
United States		44.8	%
Japan		16.5
United Kingdom		10.7
Germany		4.5
Netherlands		3.7
France		3.5
Italy		2.6
Switzerland		2.2
Canada		2.0
Finland		1.7
Belgium		1.6
Singapore		1.5
Norway		1.1
Sweden		0.9
Spain		0.6
Austria		0.6
Australia		0.6
Hong Kong		0.5
Ireland		0.4
		100.0	%

1

GMO Developed World Stock Fund

(A Series of GMO Trust)
Investments Concentration Summary — (Continued)
February 28, 2006 (Unaudited)

Industry Sector Summary	% of Equity Investments
Financials		25.7	%
Consumer Discretionary		13.1
Health Care		11.9
Energy		10.7
Industrials		8.8
Information Technology		7.5
Utilities		7.3
Consumer Staples		6.3
Materials		4.9
Telecommunication Services		3.8
		100.0	%

2

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		COMMON STOCKS — 95.7%
		Australia — 0.6%
	55,197	BHP Billiton Ltd		993,229
	141,670	Qantas Airways Ltd		429,333
	12,038	Woodside Petroleum Ltd		361,360
				1,783,922
		Austria — 0.6%
	1,846	Boehler Uddeholm (Bearer)		346,313
	10,578	OMV AG		656,040
	11,787	Telekom Austria AG		269,608
	4,767	Voestalpine AG		555,596
				1,827,557
		Belgium — 1.6%
	48,478	Dexia		1,204,004
	61,066	Fortis		2,175,248
	6,524	KBC Groep NV		681,083
	2,730	Solvay SA		302,040
	13,886	UCB SA		657,732
				5,020,107
		Canada — 1.9%
	23,600	BCE Inc		573,569
	10,800	Canadian National Railway Co		505,574
	22,900	Canadian Natural Resources		1,251,143
	10,000	EnCana Corp		413,569
	9,000	Husky Energy Inc		550,873
	7,300	Imperial Oil Ltd		704,017
	25,500	Petro - Canada		1,168,138
	10,400	Royal Bank of Canada		869,008
				6,035,891

See accompanying notes to the financial statements.

3

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Finland — 1.6%
	60,800	Fortum Oyj		1,470,939
	6,300	Metso Oyj		232,149
	60,250	Nokia Oyj		1,121,130
	20,750	Rautaruukki Oyj		699,262
	30,000	Sampo Oyj Class A		601,283
	44,400	UPM-Kymmene Oyj		941,987
				5,066,750
		France — 3.3%
	15,558	Air France		359,991
	3,783	Assurances Generales de France		392,974
	23,314	BNP Paribas		2,157,638
	9,877	Carrefour SA		490,313
	14,668	Cie de Saint-Gobain		978,560
	6,119	Etablissements Economiques du Casino Guichard-Perrachon SA		381,416
	6,199	Lafarge SA		648,510
	7,488	Michelin SA Class B		456,784
	14,780	Peugeot SA		861,635
	9,928	Renault SA		954,012
	16,874	Sanofi-Aventis		1,436,403
	16,313	Suez SA		599,142
	3,468	Total SA		872,198
				10,589,576
		Germany — 4.2%
	14,203	Altana AG		762,800
	8,773	BASF AG		663,720
	19,595	Bayer AG		790,361
	28,638	Bayerische Motoren Werke AG		1,376,758
	11,217	Commerzbank AG		409,851
	7,476	DaimlerChrysler AG (Registered)		415,423
	3,099	Deutsche Boerse AG		389,312
	24,526	Deutsche Post AG (Registered)		638,172
	5,874	Deutsche Postbank AG		414,406

See accompanying notes to the financial statements.

4

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Germany — continued
	5,285	E. On AG		586,150
	7,779	Hannover Rueckversicherungs AG (Registered) (a)		295,300
	4,745	Hypo Real Estate Holding AG		311,443
	21,589	KarstadtQuelle AG * (a)		521,012
	4,526	Linde AG		358,074
	2,827	Merck KGaA		283,102
	6,499	Muenchener Rueckversicherungs AG (Registered)		882,270
	11,175	RWE AG		960,926
	9,667	Schering AG		693,361
	39,147	ThyssenKrupp AG		991,621
	22,902	Volkswagen AG		1,603,866
				13,347,928
		Hong Kong — 0.5%
	120,000	CLP Holdings Ltd		686,078
	187,000	Hong Kong & China Gas		446,885
	110,000	Hong Kong Electric Holdings Ltd		506,517
				1,639,480
		Ireland — 0.4%
	62,472	Bank of Ireland		1,111,388
		Italy — 2.4%
	38,284	Banca Intesa SPA		226,197
	51,834	Banca Monte dei Paschi di Siena SPA		268,106
	16,974	Banche Popolari Unite Scrl		426,335
	64,305	Capitalia SPA		485,705
	209,117	Enel SPA		1,739,933
	112,390	ENI SPA		3,213,017
	45,328	Fiat SPA *		490,691
	22,676	Sanpaolo IMI SPA		400,164
	222,624	Telecom Italia Di RISP		511,513
				7,761,661

See accompanying notes to the financial statements.

5

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — 15.8%
	15,000	Aeon Co Ltd		357,853
	47,000	Bank of Yokohama		379,011
	48,200	Chubu Electric Power Co Inc		1,277,640
	60,000	Cosmo Oil Co Ltd		305,053
	82,000	Dainippon Ink and Chemicals Inc		332,554
	37,000	Daiwa Securities Co Ltd		439,270
	49	East Japan Railway Co		348,581
	15,300	Eisai Co Ltd		707,584
	13,080	Electric Power Development Co		416,358
	98,000	Fuji Heavy Industries Ltd		531,031
	95,000	Hitachi Ltd		661,784
	31,000	Hokuhoku Financial Group Inc		133,441
	22,800	Honda Motor Co Ltd		1,331,755
	12,000	Hoya Corp		476,090
	44	Inpex Corp		421,796
	172,000	Isuzu Motors Ltd (a)		592,273
	125,000	Itochu Corp		1,038,940
	59	Japan Tobacco Inc		1,013,637
	14,000	JGC Corp		297,394
	35,000	Kajima Corp		205,106
	39,700	Kansai Electric Power Co Inc		923,812
	18,000	Kao Corp		488,924
	44,000	Kawasaki Kisen Kaisha Ltd (a)		273,689
	160,000	Kobe Steel Ltd		608,045
	24,000	Komatsu Ltd		425,630
	29,000	Kyushu Electric Power Co Inc		699,530
	163,000	Marubeni Corp		808,427
	33,000	Matsushita Electric Industrial Co Ltd		693,971
	119,000	Mazda Motor Corp		676,785
	101,800	Mitsubishi Corp		2,361,876
	17,000	Mitsubishi Estate Co Ltd		358,510
	76,000	Mitsubishi Heavy Industries		356,954
	77	Mitsubishi Tokyo Financial Group Inc		1,143,246
	104,000	Mitsui & Co		1,422,873

See accompanying notes to the financial statements.

6

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	35,000	Mitsui Chemicals Inc		280,329
	18,000	Mitsui Fudosan Co Ltd		373,905
	38,000	Mitsui Trust Holding Inc		557,146
	142	Mizuho Financial Group Inc		1,131,913
	24,000	Nikko Cordial Corp		377,814
	135,300	Nissan Motor Co		1,553,208
	21,700	Nomura Securities Co Ltd		414,104
	59	NTT Data Corp		272,788
	22,000	Olympus Optical Co Ltd		633,415
	2,930	ORIX Corp		771,383
	167,000	Osaka Gas Co Ltd		639,386
	25,800	Pioneer Corp		403,309
	189	Resona Holdings Inc *		666,453
	15,000	Ricoh Company Ltd		277,730
	7,000	Secom Co		347,318
	16,000	Seven & I Holdings Co Ltd		654,483
	47,000	Shimizu Corp		329,927
	6,400	Shin-Etsu Chemical Co Ltd		340,755
	14,400	Softbank Corp.		440,338
	102,000	Sumitomo Corp		1,377,980
	21,000	Sumitomo Electric Industries Ltd		315,567
	181,000	Sumitomo Metal Industries Ltd		803,543
	69	Sumitomo Mitsui Financial Group Inc		753,576
	11,000	Sumitomo Realty & Development Co Ltd		255,644
	41,000	Sumitomo Trust & Banking		415,682
	79,000	Taisei Corp		382,672
	25,000	Taisho Pharmaceutical Co Ltd		529,194
	41,900	Takeda Pharmaceutical Co Ltd		2,334,017
	31,000	Teijin Ltd		209,179
	34,200	Tohoku Electric Power Co Inc		773,859
	42,900	Tokyo Electric Power Co Inc		1,158,057
	153,000	Tokyo Gas Co Ltd		696,611
	57,000	TonenGeneral Sekiyu KK (a)		569,701
	32,000	Toppan Printing Co Ltd		408,795

See accompanying notes to the financial statements.

7

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Japan — continued
	39,000	Toray Industries Inc		300,493
	15,500	Toyo Seikan Kaisha Ltd		267,280
	87,100	Toyota Motor Corp		4,643,079
	15,000	UNY Co Ltd		228,179
	15,000	Urban Corp		219,788
	69	West Japan Railway Co		279,683
	9,800	Yamaha Motor Co Ltd		223,503
				50,121,209
		Netherlands — 3.5%
	89,673	ABN Amro Holdings NV		2,613,140
	75,145	Aegon NV		1,239,174
	14,213	Akzo Nobel NV		721,531
	5,197	Corio NV		341,477
	7,778	DSM NV		323,478
	25,693	Heineken NV		967,451
	120,266	ING Groep NV		4,520,313
	4,168	Rodamco Europe NV		382,105
				11,108,669
		Norway — 1.1%
	33,600	DnB NOR ASA		407,674
	4,550	Frontline Ltd (a)		175,075
	4,860	Norsk Hydro ASA		569,266
	7,600	Orkla ASA		331,268
	73,100	Statoil ASA		1,872,001
				3,355,284
		Singapore — 1.4%
	206,000	Capitaland Ltd		530,674
	30,000	Fraser & Neave Ltd		351,659
	46,000	Keppel Corp Ltd		395,328
	145,000	Keppel Land Ltd		392,568
	234,000	Sembcorp Industrie		447,809

See accompanying notes to the financial statements.

8

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		Singapore — continued
	26,000	Singapore Airlines Ltd		235,977
	297,000	Singapore Technologies Engineering Ltd		555,047
	1,008,000	Singapore Telecommunications		1,615,906
				4,524,968
		Spain — 0.6%
	27,091	Endesa SA		907,149
	29,225	Iberdrola SA		921,760
				1,828,909
		Sweden — 0.9%
	14,600	Electrolux AB		403,799
	28,850	Hennes & Mauritz AB Class B		1,051,214
	68,500	Nordea AB		774,296
	10,100	Svenska Cellulosa Series B		423,540
	13,600	Swedish Match AB		182,115
				2,834,964
		Switzerland — 2.1%
	34,198	ABB Ltd *		409,748
	7,800	Alcon Inc		898,248
	15,680	Credit Suisse Group		868,440
	11,128	Roche Holding AG (Non Voting)		1,644,128
	731	Serono SA		518,684
	1,824	Swisscom AG (Registered)		547,767
	7,500	Zurich Financial Services AG *		1,771,078
				6,658,093
		United Kingdom — 10.3%
	14,287	Anglo American Plc		532,229
	12,744	AstraZeneca Plc		588,554
	77,144	Aviva Plc		1,067,364
	41,781	BAA Plc		586,187
	54,664	BAE Systems Plc		402,386

See accompanying notes to the financial statements.

9

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	69,679	Barclays Plc		816,150
	22,131	Barratt Developments Plc		400,921
	42,766	BG Group Plc		500,911
	41,695	BHP Billiton Plc		700,713
	20,319	Boots Group Plc		252,674
	64,115	BP Plc		709,244
	63,085	British Airways Plc *		363,034
	40,070	British American Tobacco Plc		954,670
	296,989	BT Group Plc		1,071,174
	47,673	Cadbury Schweppes Plc		484,287
	212,828	Centrica Plc		1,084,126
	156,659	DSG International Plc		472,401
	34,740	Gallaher Group Plc		538,309
	42,793	GKN Plc		254,945
	32,635	GlaxoSmithKline Plc		828,897
	17,546	Hanson Plc		214,199
	68,780	HBOS Plc		1,280,897
	30,832	Imperial Tobacco Group Plc		927,270
	91,077	J Sainsbury Plc		511,386
	133,244	Lloyds TSB Group Plc		1,294,360
	76,146	National Grid Plc		800,618
	19,150	Next Plc		553,882
	14,657	Persimmon Plc		358,809
	110,031	Pilkington		312,514
	10,215	Rio Tinto Plc		480,740
	176,081	Royal Bank of Scotland Group		5,889,722
	75,395	Royal Dutch Shell Group Class A		2,272,970
	36,537	Royal Dutch Shell Plc A Shares		1,098,482
	32,262	Scottish & Newcastle Plc		289,705
	28,890	Scottish & Southern Energy Plc		581,876
	15,518	Severn Trent Plc		313,785
	36,404	Taylor Woodrow Plc		265,323
	153,823	Tesco Plc		911,563
	63,290	Tomkins Plc		369,487

See accompanying notes to the financial statements.

10

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United Kingdom — continued
	37,303	United Utilities Plc		446,660
	37,756	Wimpey (George) Plc		366,054
	19,058	Wolseley Plc		472,782
				32,622,260
		United States — 42.9%
	9,300	Abercrombie & Fitch Co.-Class A		626,076
	6,900	Adobe Systems, Inc.		266,478
	20,400	Aetna, Inc.		1,040,400
	12,200	Agilent Technologies, Inc. *		439,200
	32,100	Albertson's, Inc.		816,624
	30,100	Allied Waste Industries, Inc. *		322,371
	20,100	Allstate Corp. (The)		1,101,078
	8,400	Alltel Corp.		530,460
	59,300	Altria Group, Inc.		4,263,670
	6,400	AMBAC Financial Group, Inc.		480,960
	11,400	American Electric Power Co., Inc.		416,100
	6,600	American Financial Group, Inc.		273,240
	15,800	AmerisourceBergen Corp.		726,642
	3,900	Amgen, Inc. *		294,411
	2,700	Anadarko Petroleum Corp.		267,732
	17,400	Apple Computer, Inc. *		1,192,596
	8,700	Archer-Daniels-Midland Co.		275,964
	66,957	AT&T, Inc.		1,847,344
	15,500	Autonation, Inc. *		324,105
	4,200	Autozone, Inc. *		406,056
	5,400	Baker Hughes, Inc.		367,038
	12,183	Bank of America Corp.		558,591
	2,800	Bear Stearns Cos. (The), Inc.		376,432
	25,400	Bed Bath & Beyond, Inc. *		915,416
	65,100	BellSouth Corp.		2,055,858
	8,300	BJ Services Co.		259,873
	14,400	Boeing Co.		1,046,736
	9,000	Broadcom Corp.-Class A *		405,810

See accompanying notes to the financial statements.

11

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	14,800	Burlington Northern Santa Fe Corp.		1,163,872
	9,500	Burlington Resources, Inc.		856,710
	19,500	Capital One Financial Corp.		1,708,200
	12,300	Cardinal Health, Inc.		892,980
	8,700	Caremark Rx, Inc. *		432,825
	12,500	Caterpillar, Inc.		913,500
	22,800	Cendant Corp.		378,936
	11,700	Centex Corp.		791,037
	6,800	Chesapeake Energy Corp.		201,892
	38,005	Chevron Corp.		2,146,522
	500	Chicago Mercantile Exchange		212,800
	5,800	Cigna Corp.		711,950
	12,500	CNA Financial Corp. *		386,500
	13,400	Computer Sciences Corp. *		728,156
	27,700	Compuware Corp. *		227,417
	48,100	ConocoPhillips		2,932,176
	13,000	Conseco, Inc. *		322,920
	17,100	Convergys Corp. *		297,027
	41,100	Corning, Inc. *		1,003,251
	6,400	Coventry Health Care, Inc. *		381,568
	5,100	CSX Corp.		282,438
	16,700	CVS Corp.		473,111
	24,900	D.R. Horton, Inc.		849,339
	119,500	Dell, Inc. *		3,465,500
	7,700	Devon Energy Corp.		451,451
	4,000	Diamond Offshore Drilling, Inc.		309,560
	11,000	Dow Chemical Co.		473,330
	20,900	Eastman Kodak Co.		586,245
	9,500	Edison International		421,420
	5,600	Emerson Electric Co.		458,136
	5,600	EOG Resources, Inc.		377,440
	6,800	Equity Residential REIT		307,904
	4,200	Everest RE Group Ltd.		415,968
	9,000	Exelon Corp.		513,990

See accompanying notes to the financial statements.

12

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	4,600	Express Scripts, Inc. *		401,442
	9,300	Exxon Mobil Corp.		552,141
	55,400	Fannie Mae		3,029,272
	8,216	Federated Department Stores, Inc.		583,665
	5,000	Federated Investors, Inc.-Class B		194,450
	3,400	FedEx Corp.		364,616
	13,900	Fidelity National Financial, Inc.		524,864
	11,800	First American Corp.		497,488
	8,200	First Data Corp.		370,066
	5,700	First Horizon National Corp.		222,927
	7,100	FirstEnergy Corp.		362,668
	142,800	Ford Motor Co.		1,138,116
	12,200	FPL Group, Inc.		511,546
	6,000	Franklin Resources, Inc.		616,080
	43,300	Freddie Mac		2,917,987
	6,300	Freeport-McMoRan Copper & Gold, Inc.-Class B		318,969
	34,100	Gap (The), Inc.		632,214
	21,700	Genentech, Inc. *		1,859,473
	2,800	General Dynamics Corp.		345,156
	35,300	General Motors Corp. (a)		716,943
	20,400	Genworth Financial, Inc.-Class A		649,128
	7,000	Gilead Sciences, Inc. *		435,890
	4,500	Global Santa Fe Corp		249,030
	6,200	Goldman Sachs Group, Inc.		875,998
	3,500	Google, Inc.-Class A *		1,269,170
	12,800	Halliburton Co.		870,400
	17,600	Harley-Davidson, Inc.		924,176
	4,900	Hartford Financial Services Group, Inc.		403,662
	8,700	Health Net, Inc. *		417,165
	80,200	Hewlett-Packard Co.		2,631,362
	86,200	Home Depot, Inc.		3,633,330
	6,400	Hovnanian Enterprises, Inc. *		295,104
	6,800	IndyMac Bancorp, Inc.		263,976
	56,300	Intel Corp.		1,159,780

See accompanying notes to the financial statements.

13

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	5,000	ITT Industries, Inc.		262,500
	20,700	Janus Capital Group, Inc.		453,951
	4,000	JC Penney Co., Inc.		234,560
	42,400	Johnson & Johnson		2,444,360
	6,200	Johnson Controls, Inc.		441,874
	9,100	Jones Apparel Group, Inc.		263,172
	9,100	KB Home		609,973
	23,600	Kraft Foods, Inc.		710,124
	25,600	Kroger Co. *		513,024
	3,200	Lafarge North America, Inc.		265,184
	5,300	Lehman Brothers Holdings, Inc.		773,535
	10,400	Lennar Corp.-Class A		622,544
	8,600	Lexmark International, Inc. *		404,974
	8,600	Lincare Holdings, Inc. *		351,740
	5,000	Loews Corp.		461,300
	10,700	Lowe's Cos., Inc.		729,526
	10,200	Marathon Oil Corp.		720,120
	14,900	Marsh & McLennan Cos., Inc.		460,559
	7,100	MBIA, Inc.		417,054
	4,500	MDC Holdings, Inc.		275,805
	6,000	Medco Health Solutions, Inc. *		334,320
	22,700	Merck & Co., Inc.		791,322
	5,800	Metlife, Inc.		290,696
	6,600	MGIC Investment Corp.		420,750
	7,300	Morgan Stanley		435,518
	62,200	Motorola, Inc.		1,331,080
	32,800	National City Corp.		1,141,440
	9,000	National Semiconductor Corp.		252,450
	5,300	New Century Financial Corp.		205,375
	6,900	NII Holdings, Inc.-Class B *		353,418
	10,200	Nordstrom, Inc.		387,600
	3,300	Northrop Grumman Corp.		211,530
	600	NVR, Inc. *		451,800
	11,200	Occidental Petroleum Corp.		1,025,248

See accompanying notes to the financial statements.

14

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares		Description	Value ($)
		United States — continued
	16,625	Old Republic International Corp.		353,946
	42,000	Oracle Corp. *		521,640
	6,800	Paychex, Inc.		272,340
	8,800	Peabody Energy Corp.		424,776
	6,400	PepsiCo, Inc.		378,304
	364,600	Pfizer, Inc.		9,548,874
	6,100	PMI Group (The), Inc.		264,130
	5,700	PNC Financial Services Group, Inc.		400,995
	7,600	Precision Castparts Corp.		403,104
	10,700	Progress Energy, Inc.		474,866
	10,900	Prudential Financial, Inc.		839,736
	13,300	Qualcomm, Inc.		627,893
	7,000	Radian Group, Inc.		397,250
	7,700	Rockwell Collins, Inc.		409,255
	6,100	Ryder Systems, Inc.		270,474
	3,900	Ryland Group, Inc.		272,025
	11,600	Sabre Holdings Corp.		279,908
	30,200	Safeway, Inc.		734,162
	5,900	SanDisk Corp. *		356,006
	18,900	Sara Lee Corp.		333,963
	11,500	Schlumberger Ltd.		1,322,500
	6,500	SEI Investment Co.		271,635
	4,700	Simon Property Group, Inc. REIT		389,959
	10,000	SPX Corp.		492,500
	20,900	St. Paul Travelers Cos. (The), Inc.		898,282
	6,700	Starwood Hotels & Resorts Worldwide, Inc.		425,450
	3,800	Sunoco, Inc.		281,580
	49,900	Tellabs, Inc. *		733,031
	40,900	Texas Instruments, Inc.		1,220,865
	10,200	Toll Brothers, Inc. *		330,072
	5,200	Transocean, Inc. *		385,736
	13,100	TXU Corp.		686,309
	28,100	UnitedHealth Group, Inc.		1,636,263
	36,000	UnumProvident Corp.		744,840

See accompanying notes to the financial statements.

15

GMO Developed World Stock Fund

(A Series of GMO Trust)
Schedule of Investments — (Continued)
(showing percentage of total net assets)
February 28, 2006

Shares / Par Value ($)		Description	Value ($)
		United States — continued
	4,200	USG Corp. *		354,816
	14,100	Valero Energy Corp.		758,439
	67,600	Verizon Communications, Inc.		2,278,120
	2,800	Vornado Realty Trust		249,172
	37,300	Wachovia Corp.		2,091,411
	10,800	Walgreen Co.		484,488
	33,649	Washington Mutual, Inc.		1,436,812
	13,400	WellPoint, Inc. *		1,028,986
	30,000	Wells Fargo & Co.		1,926,000
	4,700	Whirlpool Corp.		422,013
	3,400	Whole Foods Market, Inc.		217,192
				135,890,130
		TOTAL COMMON STOCKS (COST $280,489,791)		303,128,746
		PREFERRED STOCKS — 0.1%
		Germany — 0.1%
	8,638	Volkswagen AG 2.82%		445,115
		TOTAL PREFERRED STOCKS (COST $357,352)		445,115
		SHORT-TERM INVESTMENT(S) — 4.4%
	11,000,000	Barclays Time Deposit, 4.56%, due 03/01/06		11,000,000
	2,110,020	The Boston Global Investment Trust (b)		2,110,020
	1,000,000	U.S. Treasury Bill, 4.64%, due 08/24/06 (c) (d)		978,012
		TOTAL SHORT-TERM INVESTMENT(S) (COST $14,087,922)		14,088,032
		TOTAL INVESTMENTS — 100.2% (Cost $294,935,065)		317,661,893
		Other Assets and Liabilities (net) — (0.2%)		(786,803	)
		TOTAL NET ASSETS — 100.0%	$	316,875,090

See accompanying notes to the financial statements.

16

GMO Developed World Stock Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

A summary of outstanding financial instruments at February 28, 2006 is as follows:

Forward currency contracts

Settlement Date	Deliver/Receive	Units of Currency		Value		Net Unrealized Appreciation (Depreciation)
Buys
5/26/06	CAD		11,195,845	$	9,874,348	$	127,717
5/26/06	CHF		1,281,660		985,520		(6,949	)
5/26/06	JPY		852,959,340		7,452,480		167,220
5/26/06	NOK		64,899,395		9,670,083		27,035
5/26/06	NZD		1,891,753		1,245,048		(9,718	)
5/26/06	SEK		75,157,230		9,559,901		(44,415	)
5/26/06	SGD		3,853,682		2,382,505		18,138
						$	279,028
Sales
5/26/06	AUD		936,155	$	693,882	$	(3,758	)
5/26/06	CHF		6,998,207		5,381,204		(12,038	)
5/26/06	EUR		2,647,552		3,172,381		(10,823	)
5/26/06	GBP		9,382,286		16,470,329		(150,066	)
5/26/06	HKD		9,168,168		1,183,358		45
5/26/06	JPY		159,461,070		1,393,244		(19,113	)
						$	(195,753	)

See accompanying notes to the financial statements.

17

GMO Developed World Stock Fund

(A Series of GMO Trust)

Schedule of Investments — (Continued)
February 28, 2006

Futures Contracts

Number of Contracts		Type	Expiration Date	Contract Value		Net Unrealized Appreciation (Depreciation)
	Buys
	53	DAX	March 2006	$	9,167,607	$	620,121
	23	TOPIX	March 2006		3,294,372		(28,089	)
						$	592,032
	Sales
	29	FTSE 100	March 2006	$	2,932,338	$	(11,312	)
	17	SPI 200	March 2006		1,553,830		(87,549	)
						$	(98,861	)

As of February 28, 2006, the Fund had sufficient cash and/or securities to cover any commitments or margin requirements of the relevant broker or exchange.

Notes to Schedule of Investments:

*  Non-income producing security.

(a)  All or a portion of this security is out on loan (Note 2).

(b)  All or a portion of this security represents investment of security lending collateral (Note 2).

(c)  Rate shown represents yield-to-maturity.

(d)  All or a portion of this security has been segregated to cover margin requirements on open financial futures contracts (Note 2).

  As of February 28, 2006, 50.7% of the Net Assets of the Fund was valued using fair value prices based on tools by a third party vendor (Note 2).

Currency Abbreviations:

AUD - Australian Dollar	JPY - Japanese Yen
CAD - Canadian Dollar	NOK - Norwegian Krone
CHF - Swiss Franc	NZD - New Zealand Dollar
EUR - Euro	SEK - Swedish Krona
GBP - British Pound	SGD - Singapore Dollar
HKD - Hong Kong Dollar

See accompanying notes to the financial statements.

18

GMO Developed World Stock Fund

(A Series of GMO Trust)


Statement of Assets and Liabilities — February 28, 2006

Assets:
Investments, at value, including securities on loan of $1,961,166 (cost $294,935,065) (Note 2)	$	317,661,893
Cash		886,178
Foreign currency, at value (cost $289,806) (Note 2)		291,118
Dividends and interest receivable		395,595
Foreign taxes receivable		4,574
Unrealized appreciation on open forward currency contracts (Note 2)		340,155
Receivable for expenses reimbursed by Manager (Note 3)		41,608
Total assets		319,621,121
Liabilities:
Collateral on securities loaned (Note 2)		2,110,020
Payable to affiliate for (Note 3):
Management fee		113,049
Shareholder service fee		30,864
Trustees and Chief Compliance Officer fees		1,031
Unrealized depreciation on open forward currency contracts (Note 2)		256,880
Payable for variation margin on open futures contracts (Note 2)		120,098
Accrued expenses		114,089
Total liabilities		2,746,031
Net assets	$	316,875,090
Net assets consist of:
Paid-in capital	$	290,390,263
Accumulated undistributed net investment income		369,601
Accumulated net realized gain		2,809,942
Net unrealized appreciation		23,305,284
	$	316,875,090
Net assets attributable to:
Class III shares	$	179,466,422
Class IV shares	$	137,408,668
Shares outstanding:
Class III		8,068,115
Class IV		6,174,319
Net asset value per share:
Class III	$	22.24
Class IV	$	22.25

See accompanying notes to the financial statements.

19

GMO Developed World Stock Fund

(A Series of GMO Trust)

Statement of Operations — Period from August 1, 2005
(commencement of operations) through February 28, 2006

Investment Income:
Dividends (net of withholding taxes of $59,898)	$	1,991,876
Interest (including securities lending income of $31,474)		427,806
Total investment income		2,419,682
Expenses:
Management fee (Note 3)		619,034
Shareholder service fee – Class III (Note 3)		102,330
Shareholder service fee – Class IV (Note 3)		63,489
Custodian and fund accounting agent fees		129,995
Transfer agent fees		23,231
Audit and tax fees		50,007
Legal fees		6,007
Trustees fees and related expenses (Note 3)		2,287
Registration fees		36,065
Miscellaneous		6,151
Total expenses		1,038,596
Fees and expenses reimbursed by Manager (Note 3)		(249,673	)
Net expenses		788,923
Net investment income (loss)		1,630,759
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments		1,550,226
Closed futures contracts		1,263,016
Foreign currency, forward contracts and foreign currency related transactions		(511,435	)
Net realized gain (loss)		2,301,807
Change in net unrealized appreciation (depreciation) on:
Investments		22,726,828
Open futures contracts		493,171
Foreign currency, forward contracts and foreign currency related transactions		85,285
Net unrealized gain (loss)		23,305,284
Net realized and unrealized gain (loss)		25,607,091
Net increase (decrease) in net assets resulting from operations	$	27,237,850

See accompanying notes to the financial statements.

20

GMO Developed World Stock Fund

(A Series of GMO Trust)


Statement of Changes in Net Assets

	Period from August 1, 2005 (commencement of operations) through February 28, 2006
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	1,630,759
Net realized gain (loss)		2,301,807
Change in net unrealized appreciation (depreciation)		23,305,284
Net increase (decrease) in net assets from operations		27,237,850
Distributions to shareholders from:
Net investment income
Class III		(395,896	)
Class IV		(357,127	)
Total distributions from net investment income		(753,023	)
Net share transactions (Note 7):
Class III		164,617,846
Class IV		124,982,127
Increase (decrease) in net assets resulting from net share transactions		289,599,973
Purchase premiums and redemption fees (Notes 2 and 7):
Class III		415,290
Class IV		375,000
Increase in net assets resulting from net purchase premiums and redemption fees		790,290
Total increase (decrease) in net assets resulting from net share transactions and net purchase premiums and redemption fees		290,390,263
Total increase (decrease) in net assets		316,875,090
Net assets:
Beginning of period		—
End of period (including accumulated undistributed net investment income of $369,601)	$	316,875,090

See accompanying notes to the financial statements.

21

GMO Developed World Stock Fund

(A Series of GMO Trust)

Financial Highlights
(For a Class III share outstanding throughout the period)

	Period from August 1, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	20.00
Income (loss) from investment operations:
Net investment income (loss)†		0.15
Net realized and unrealized gain (loss)		2.15
Total from investment operations		2.30
Less distributions to shareholders:
From net investment income		(0.06	)
Total distributions		(0.06	)
Net asset value, end of period	$	22.24
Total Return(a)		11.51	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	179,466
Net expenses to average daily net assets		0.62	%*
Net investment income to average daily net assets		1.27	%*
Portfolio turnover rate		15	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.20	%*
Purchase premiums and redemption fees consisted of the following per share amounts:	$	0.07

†  Calculated using average shares outstanding throughout the period.

(a)  The total return would have been lower had certain expenses not been reimbursed during the period shown. Calculation excludes purchase premiums and redemption fees which are borne by the shareholder.

*  Annualized.

**  Not annualized.

See accompanying notes to the financial statements.

22

GMO Developed World Stock Fund

(A Series of GMO Trust)

Financial Highlights — (Continued)
(For a Class IV share outstanding throughout the period)

	Period from September 1, 2005 (commencement of operations) through February 28, 2006
Net asset value, beginning of period	$	20.24
Income (loss) from investment operations:
Net investment income (loss)†		0.12
Net realized and unrealized gain (loss)		1.95
Total from investment operations		2.07
Less distributions to shareholders:
From net investment income		(0.06	)
Total distributions		(0.06	)
Net asset value, end of period	$	22.25
Total Return(a)		10.23	%**
Ratios/Supplemental Data:
Net assets, end of period (000's)	$	137,409
Net expenses to average daily net assets		0.57	%*
Net investment income to average daily net assets		1.20	%*
Portfolio turnover rate††		15	%**
Fees and expenses reimbursed by the Manager to average daily net assets:		0.17	%*
Purchase premiums and redemption fees consisted of the following per share amounts:	$	0.06

†  Calculated using average shares outstanding throughout the period.

(a)  The total return would have been lower had certain expenses not been reimbursed during the periods shown. Calculations excludes purchase premiums and redemption fees which are borne by the shareholder.

*  Annualized.

**  Not annualized.

††  Calculation represents portfolio turnover rate of the Fund for the period August 1, 2005 through February 28, 2006.

See accompanying notes to the financial statements.

23

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements
February 28, 2006

1.  Organization

GMO Developed World Stock Fund (the "Fund"), which commenced operations on August 1, 2005, is a series of GMO Trust (the "Trust"). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified management investment company. The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or "GMO"). The Trust was established as a Massachusetts business trust under the laws of the Commonwealth of Massachusetts on June 24, 1985. The Declaration of Trust permits the Trustees of the Trust ("Trustees") to create an unlimited number of series of shares ("Funds") and to subdivide a series of shares into classes.

The Fund seeks a high total return through investing primarily in equity securities from the world's developed markets, including the U.S. The Fund's benchmark is the MSCI World Index (a global developed markets equity index that is independently maintained and published by Morgan Stanley Capital International).

For the period August 1, 2005 through February 28, 2006, the Fund offered Class III shares and for the period September 1, 2005 through February 28, 2006, the Fund offered Class IV shares. The principle economic difference between the classes of shares is the level of shareholder service fees borne by the classes. Eligibility for and automatic conversion between the various classes of shares is generally based on the total amount of assets invested in the Fund and with GMO, as more fully outlined in the Fund's prospectus.

2.  Significant accounting policies

The following is a summary of significant accounting policies which are in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and which are consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with U.S. GAAP 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

Portfolio securities listed on a securities exchange for which market quotations are readily available are valued at the last sale price or official closing price on each business day, or if there is no such reported sale or official closing price, at the most recent quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recent quoted bid price. Short-term investments with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates fair value. Shares of mutual funds are valued at their net asset value. For other assets, and in cases where market prices are not readily available or the Manager believes established valuation methodologies are unreliable, the Fund's investments will be valued at "fair value", as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees. A security's value may be deemed unreliable if, for example, the Manager becomes aware of information or events that would materially affect its value. Because many foreign equity securities markets and exchanges close prior to the close of the New York Stock Exchange

24

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

("NYSE"), closing prices for foreign securities in those markets or on those exchanges do not reflect the events that occur after that close but before the close of the NYSE. As a result, foreign equity securities held by the Fund are generally valued using fair value prices based on modeling tools by a third party vendor to the extent that these fair value prices are available.

Foreign currency translation

The accounting records of the Fund are maintained in U.S. dollars. The market values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. The Fund does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent gains and losses on disposition of currencies and forward currency contracts, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's accounting records and the U.S. dollar equivalent amounts actually received or paid.

Forward currency contracts

The Fund may enter into forward currency contracts and forward cross currency contracts. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward currency contract fluctuates with changes in forward currency exchange rates. Forward currency contracts are marked to market daily using rates supplied by a quotation service and changes in value are recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if there are movements in currency values that are unfavorable to the Fund. The value of the currencies the Fund has committed to buy or sell is shown in the Schedule of Investments and represents the currency exposure the Fund has acquired or hedged through forward currency contracts as of February 28, 2006.

Futures Contracts

The Fund may purchase and sell futures contracts. Buying futures tends to increase the Fund's exposure to the underlying instrument. Selling futures tends to decrease the Fund's exposure to the underlying instrument or hedge other Fund instruments. Upon entering into a futures contract, the Fund is required to deposit, with the futures clearing broker, an amount of cash, U.S. government and agency obligations or other liquid assets in accordance with the initial margin requirements of the broker or exchange. In addition, the Fund maintains cash or securities in an amount that at least equals the net amount payable in the event the Fund must deliver the full amount of the contracts. Futures contracts are marked to market daily and an appropriate payable or

25

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

receivable for the change in value ("variation margin") is recorded by the Fund. The payable or receivable is liquidated on the following business day. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day's settlement price, thereby effectively preventing liquidation of unfavorable positions. Losses may arise from changes in the value of the underlying instrument if the Fund is unable to liquidate a futures position due to an illiquid secondary market for the contracts or the imposition of price limits, or if counterparties do not perform under the contract terms. Futures contracts are generally valued at the settlement price established each day by the board of trade or exchange on which they are traded. See the Schedule of Investments for open futures contracts entered into by the Fund as of February 28, 2006.

Options

The Fund may write call and put options on futures, securities or currencies. Writing options increases the Fund's exposure to the underlying instrument by, in the case of a call option, obligating the Fund to sell the underlying instrument at a set price to the option-holder and, in the case of a put option, obligating the Fund to purchase the underlying instrument at a set price from the option-holder. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future, security or currency transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future, security or currency may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future, security or currency underlying the written option. In the event that the Fund writes uncovered call options (i.e. options for investments that the Fund does not own), it bears the risk of incurring substantial losses if the price of the underlying instrument increases during the term of the option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. As of February 28, 2006, the Fund did not enter into any written option contracts.

The Fund may also purchase put and call options. Purchasing options alters the Fund's exposure to the underlying instrument by, in the case of a call option, entitling the Fund to purchase the underlying instrument at a set price from the writer of the option and, in the case of a put option, entitling the Fund to sell the underlying instrument at a set price to the writer of the option. The Fund pays a premium as a cost for a purchased option disclosed in the Schedule of Investments which is subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the closing transaction to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. As of February 28, 2006, the Fund did not enter into any purchased option contracts. Exchange traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by a primary pricing source chosen by the Manager.

26

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Swap agreements

The Fund may enter into swap agreements. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund may enter into total return swap agreements, which involve a commitment by one party in the agreement to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. The Fund may also enter into contracts for differences in which the Fund agrees with the counterparty that its return will be based on the relative performance of two different groups or "baskets" of securities, adjusted by an interest rate payment. To the extent that the relative performance of the two baskets of securities exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. In connection with these agreements, cash or securities may be set aside as collateral by the Fund's custodian in accordance with the terms of the swap agreement. The Fund earns interest on cash set aside as collateral.

Swaps are marked to market daily using standard models that incorporate quotations from market makers and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. Payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are realized upon early termination of the swap agreement. These financial instruments are not actively traded on financial markets. The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values that would have been realized had a ready market for these instruments existed, and the differences could be material. Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there may be unfavorable changes in the price of the security or index underlying these transactions. As of February 28, 2006, the Fund did not enter into any swap agreements.

Repurchase agreements

The Fund may enter into repurchase agreements with banks and broker-dealers whereby the Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Fund and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults or enters into insolvency proceedings and the value of the collateral declines, recovery of cash by the Fund may be delayed or limited. As of February 28, 2006, the Fund did not enter into any repurchase agreements.

27

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

Securities lending

The Fund may lend its securities to certain qualified broker-dealers. The loans are collateralized with cash or liquid securities with a market value at least equal to the market value of the securities on loan. As with other extensions of credit, the Fund may bear the risk of loss with respect to the investment of the collateral, the risk of delay in and/or inability to exercise its rights with respect to the collateral, and the risk of delay in recovery or loss of rights in the loaned securities should the borrower of the securities fail financially. If a loan is collateralized by U.S. government securities, the Fund receives a fee from the borrower. If a loan is collateralized by cash, the Fund typically invests the cash collateral for its own account in interest-bearing, short-term securities and pays a fee to the borrower that normally represents a portion of the Fund's earnings on the collateral. As of February 28, 2006 the Fund had loaned securities having a market value of $1,961,166, collateralized by cash in the amount of $2,110,020, which was invested in short-term instruments.

Taxes and distributions

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund intends to distribute substantially all of its net investment income and net realized short-term and long-term capital gains, if any, after giving effect to any available capital loss carryovers for U.S. federal income tax purposes. Therefore, no provision for U.S. federal income or excise tax is necessary. Taxes on foreign interest and dividend income are generally withheld in accordance with the applicable country's tax treaty with the United States. The foreign withholding tax rates applicable to a Fund's investments in certain foreign jurisdictions may be higher if a significant portion of the Fund is held by non-U.S. shareholders.

The Fund's policy is to declare and pay distributions from net investment income, if any, semiannually, and from net realized short-term and long-term capital gains, if any, at least annually. All distributions are paid in shares of the Fund, at net asset value, unless the shareholder elects to receive cash distributions. Distributions to shareholders are recorded by the Fund on the ex-dividend date.

Dividends received by shareholders of the Fund which are derived from foreign source income and foreign taxes paid by the Fund may be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Fund.

The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests.

Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. During the year ended February 28, 2006, the tax basis of distributions paid were as follows: ordinary income – $753,023.

As of February 28, 2006, the components of distributable earnings on a tax basis consisted of $3,072,408 and $354,071 of undistributed ordinary income and undistributed long-term capital gains, respectively. The temporary

28

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

differences between book and tax basis distributable earnings are primarily due to passive foreign investment company transactions and wash sale transactions.

As of February 28, 2006, the approximate cost for U.S. federal income tax purposes and gross unrealized appreciation and depreciation in value of investments were as follows:

Aggregate Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
$	295,116,908	$	28,508,963	$	(5,963,978	)	$	22,544,985

The following reclassification represents the amount necessary to report the stated components of net assets on a tax basis, excluding certain temporary differences, as of February 28, 2006. This reclassification has no impact on net investment income, realized gain/loss or the net asset value of the Fund and is primarily attributable to foreign currency transactions. The financial highlights exclude these adjustments.

Accumulated Undistributed Net Investment Income			Accumulated Net Realized Gain		Paid-in Capital
$	(508,135	)	$	508,135	$	—

Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital.

Security transactions and related investment income

Security transactions are accounted for on trade date. Dividend income, net of applicable foreign withholding taxes, if any, is recorded on the ex-dividend date, or when the Fund is informed of the ex-dividend date, if later. Interest income is recorded on the accrual basis and is adjusted for the amortization of premiums and accretion of discounts. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital are reflected as a reduction of cost, when the amount of the return of capital is conclusively determined. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.

Allocation of operating activity

The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Investment income, common expenses and realized and unrealized gains and losses are allocated pro rata between the classes of shares of the Fund based on the

29

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

relative net assets of each class. Shareholder service fees, which are directly attributable to a class of shares, are charged to that class's operations.

Purchase and redemption of Fund shares

As of the date of this report, the premium on cash purchases and fee on redemptions of Fund shares were each 0.30% of the amount invested or redeemed. If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it will waive the purchase premium or redemption fee in an amount approximately equal to the fee with respect to that portion. In addition, the purchase premium or redemption fee charged by the Fund may be waived in extraordinary circumstances if the Fund will not incur transactions costs. All purchase premiums and redemption fees are paid to and recorded by the Fund as paid-in-capital. For the period ended February 28, 2006, the Fund received $785,790 in purchase premiums and $4,500 in redemption fees, respectively.

Investment risks

There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments including the possible imposition of capital controls or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times may be more volatile than securities of comparable U.S. companies and U.S. securities markets.

3.  Fees and other transactions with affiliates

GMO earns a management fee paid monthly at the annual rate of 0.47% of average daily net assets. The Fund has adopted a Shareholder Service Plan under which the Fund pays GMO a shareholder service fee for client and shareholder service, reporting, and other support. Pursuant to the Shareholder Service Plan, the shareholder service fee is calculated based on the average daily net assets at the annual rate of 0.15% for Class III shares and 0.10% for Class IV shares.

GMO has entered into a binding agreement effective until at least June 30, 2006 to reimburse the Fund to the extent that the Fund's total annual operating expenses (excluding shareholder service fees, fees and expenses of the Chief Compliance Officer ("CCO") and independent Trustees (including legal fees), brokerage commissions and other investment-related costs, hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes), securities lending fees and expenses, interest expense and transfer taxes) exceed 0.47% of average daily net assets.

The Fund's portion of the fees paid by the Trust to the independent Trustees and CCO during the period ended February 28, 2006, was $1,366 and $1,783, respectively. No remuneration was paid to any other officer of the Trust.

30

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

4.  Purchases and sales of securities

Cost of purchases and proceeds from sales of securities, excluding short-term investments, for the period ended February 28, 2006 aggregated $309,838,502 and $30,272,273, respectively.

5.  Guarantees

In the normal course of business the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote; however, there can be no assurance that material liabilities related to such obligations will not arise in the future that could adversely impact the Fund.

6.  Principal shareholders

As of February 28, 2006, 71.3% of the outstanding shares of the Fund were held by four shareholders, each holding in excess of 10% of the Fund's outstanding shares. Investment activities of these shareholders may have a material effect on the Fund.

7.  Share transactions

The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest (without par value). Transactions in Fund shares were as follows:

	Period from August 1, 2005 (commencement of operations) through February 28, 2006
Class III:	Shares			Amount
Shares sold		8,121,989		$	165,726,450
Shares issued to shareholders in reinvestment of distributions		18,807			395,896
Shares repurchased		(72,681	)		(1,504,500	)
Purchase premiums and redemption fees		—			415,290
Net increase (decrease)		8,068,115		$	165,033,136

31

GMO Developed World Stock Fund

(A Series of GMO Trust)

Notes to Financial Statements — (Continued)
February 28, 2006

	Period from September 1, 2005 (commencement of operations) through February 28, 2006
Class IV:	Shares		Amount
Shares sold		6,157,362	$	124,625,000
Shares issued to shareholders in reinvestment of distributions		16,957		357,127
Shares repurchased		—		—
Purchase premiums and redemption fees		—		375,000
Net increase (decrease)		6,174,319	$	125,357,127

32

Report of Independent Registered Public Accounting Firm

To the Trustees of GMO Trust and the Shareholders of
GMO Developed World Stock Fund

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of GMO Developed World Stock Fund (the "Fund") (a series of GMO Trust) at February 28, 2006 and the results of its operations, the changes in its net assets and the financial highlights for the period from August 1, 2005 (commencement of operations) to February 28, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at February 28, 2006 by correspondence with the custodian, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
April 25, 2006

33

GMO Developed World Stock Fund

(A Series of GMO Trust)

Fund Expenses
February 28, 2006 (Unaudited)

Expense Examples: The following information is in relation to expenses for the six month period ended February 28, 2006.

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including purchase premiums and redemption fees; and (2) ongoing costs, including management fees, shareholder service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, September 1, 2005 through February 28, 2006.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, a $5,000,000 account value divided by $1,000 = 5,000), then multiply the result by the number in the first line under the heading entitled "Net Expense Incurred" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Annualized Net Expense Ratio			Beginning Account Value		Ending Account Value		Net Expense Incurred
Class III
1) Actual		0.62	%	$	1,000.00	$	1,109.00	$	3.24	*
2) Hypothetical		0.62	%	$	1,000.00	$	1,021.72	$	3.11	*
Class IV
1) Actual		0.57	%	$	1,000.00	$	1,102.30	$	2.95	**
2) Hypothetical		0.57	%	$	1,000.00	$	1,021.85	$	2.84	**

*  Expenses are calculated using the Class's annualized net expense ratio for the six months ended February 28, 2006, multiplied by the average account value over the period, multiplied by 181 days in the period, divided by 365 days in the year.

**  Expenses are calculated using the Class's annualized net expense ratio for the period ended February 28, 2006, multiplied by the average account value over the period, multiplied by 180 days in the period, divided by 365 days in the year.

34

GMO Developed World Stock Fund

(A Series of GMO Trust)


Tax Information (Unaudited) for the Tax Year Ended February 28, 2006

For taxable, non-corporate shareholders, 83.28% of the Fund's income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, 92.41% of the income and short-term capital gains, if any, distributed in the Fund's fiscal year ended February 28, 2006 qualified for the dividends-received deduction.

The Fund hereby designates as qualified interest income with respect to its taxable year ended February 28, 2006 of $33,359 or if determined to be different, the qualified interest income of such year.

35

Trustees and Officers (Unaudited)

The following tables list the Trust's Trustees and Officers as of the date of this report; their address and date of birth ("DOB"); their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trust's trustees, including changes subsequent to the date of the report. The SAI is available, without charge, upon request by writing GMO, c/o GMO Trust, 40 Rowes Wharf, Boston, MA 02110.

Independent Trustees:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Donald W. Glazer, Esq. c/oGMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 07/26/1944	Chairman of the Board of Trustees	Chairman of the Board of Trustees since March 2005; Lead Independent Trustee (September 2004 – March 2005); Trustee since December 2000.	Consultant – Business and Law2, Vice Chair (since 2002) and Secretary, Provant, Inc.; Author of Legal Treatises.		54	None

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

²  As part of Mr. Glazer's work as a consultant, he provides part-time consulting services to Goodwin Procter LLP ("Goodwin"). Goodwin has provided legal services to Renewable Resources, LLC, an affiliate of GMO; GMO, in connection with its relationship with Renewable Resources; and funds managed by Renewable Resources. Mr. Glazer has represented that he has no financial interest in, and is not involved in the provision of, such legal services. In the calendar years ended December 31, 2004 and December 31, 2005 these entities paid $373,499 and $489,128 respectively, in legal fees and disbursements to Goodwin.

36

Independent Trustees — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office1 and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Trustee		Other Directorships Held by Trustee
Jay O. Light c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/13/1941	Trustee	Since May 1996	Acting Dean (since 2005), Senior Associate Dean (1998 – 2005), and Professor of Business Administration, Harvard Business School.		54	Director of Harvard Management, Company, Inc. and Verde, Inc.; Director of Partners HealthCare Systems, Inc.; and Chair of its Investment Committee.3
W. Nicholas Thorndike c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 03/28/1933	Trustee	Since March 2005	Director or trustee of various corporations and charitable organizations, including Courier Corporation (a book publisher and manufacturer) (July 1989 – present); Putnam Funds (December 1992 – June 2004); and Providence Journal (a newspaper publisher) (December 1986 – December 2003).		54	Director of Courier Corporation (a book publisher and manufacturer); Member of the Investment Committee of Partners HealthCare Systems, Inc.

¹  Each Trustee is elected to serve until the next meeting held for the purpose of electing Trustees and until his successor is elected and qualified.

³  Mr. Light is a director of Harvard Management Company, Inc. and Verde, Inc.; Director of Partners HealthCare System, Inc. and Chair of its Investment Committee. None of these companies has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act and none of these companies is a registered investment company.

37

Principal Officers:

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
Scott Eston c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/20/1956	President and Chief Executive Officer	President and Chief Executive Officer since October 2002; Vice President from August 1998 – October 2002.	Chief Financial Officer, Chief Operating Officer (2000 – present) and Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Susan Randall Harbert c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 04/25/1957	Chief Financial Officer and Treasurer	Chief Financial Officer since February 2000; Treasurer since February 1998.	Member, Grantham, Mayo, Van Otterloo & Co. LLC.
Brent C. Arvidson c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/26/1969	Assistant Treasurer	Since August 1998.	Senior Fund Administrator, Grantham, Mayo, Van Otterloo & Co. LLC.
Sheppard N. Burnett c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/24/1968	Assistant Treasurer	Since September 2004.	Fund Administration Staff, Grantham, Mayo, Van Otterloo & Co. LLC (June 2004 – present); Vice President, Director of Tax, Columbia Management Group (2002 – 2004) and Senior Tax Manager (2000 – 2002), PricewaterhouseCoopers LLP.
Michael E. Gillespie c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 02/18/1958	Chief Compliance Officer	Since March 2005.	Vice President of Compliance (June 2004 – February 2005) and Director of Domestic Compliance (March 2002 – June 2004), Fidelity Investments; Vice President and Senior Counsel, State Street Bank and Trust Company (May 1998 – March 2002).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

38

Principal Officers — (Continued)

Name, Address, and DOB	Position(s) Held with Trust	Term of Office4 and Length of Time Served	Principal Occupation(s) During Past Five Years
David L. Bohan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 06/21/1964	Vice President and Clerk	Since March 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC. (September 2003 – present); Attorney, Goodwin Procter LLP (September 1996 – September 2003).
Scott D. Hogan c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 01/06/1970	Vice President and Secretary	Since June 2005; Acting Chief Compliance Officer, October 2004 – February 2005.	Legal Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (2000 – present).
Julie L Perniola c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/07/1970	Vice President	Vice President, February 2003 – present; Anti-Money Laundering Compliance Officer, February 2003 – December 2004.	Chief Compliance Officer (April 1995 – present), Grantham, Mayo, Van Otterloo & Co. LLC and Anti-Money Laundering Reporting Officer (February 2003 – December 2004).
Cheryl Wakeham c/o GMO Trust 40 Rowes Wharf Boston, MA 02110 DOB: 10/29/1958	Vice President and Anti-Money Laundering Officer	Since December 2004.	Manager, Client Service Administration, Grantham, Mayo, Van Otterloo & Co. LLC (February 1999 – present).

⁴  Officers are elected to hold such office until their successor is elected and qualified to carry out the duties and responsibilities of their office, or until he or she resigns or is removed from office.

39

Item 2. Code of Ethics.

As of February 28, 2006, the registrant has adopted a Code of Ethics that applies to the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002. During the year ended February 28, 2006, there were no amendments to a provision of the Code of Ethics nor were there any waivers granted from a provision of the Code of Ethics. A copy of the registrant’s Code of Ethics is filed with this Form N-CSR under item 12 (a).

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Trustees has determined that the registrant does not have an “audit committee financial expert” (as such term has been defined in Form N-CSR) serving on its audit committee. The registrant’s Board believes that, although none of its members individually meets all required elements of the definition of an “audit committee financial expert”, the members of the registrant’s audit committee collectively possess the knowledge and experience necessary to execute all of the audit committee’s functions, duties and powers.

Item 4. Principal Accountant Fees and Services. *

(a)AUDIT FEES: The aggregate fees billed to the registrant for professional services rendered by its independent auditors, PricewaterhouseCoopers LLP for the audit of the registrant’s annual financial statements for 2006 and 2005 were $1,864,500 and $1,410,202, respectively.

(b)AUDIT-RELATED FEES: The aggregate fees billed to the registrant in 2006 and 2005 for engagements for audit-related services rendered by PricewaterhouseCoopers LLP that related directly to the operations and financial reporting of the Funds were $48,100 and $0, respectively. The aggregate fees billed in 2006 and 2005 to the registrant’s Investment Advisor, and any entity controlling, controlled, or under common control with the Advisor that provides ongoing services to the Funds (each, a “Service Affiliate”) for engagements for audit-related services rendered by PricewaterhouseCoopers LLP that related directly to the operations and financial reporting of the Funds were $312,262 and $287,000, respectively.

(c)TAX FEES:  The aggregate fees billed to the registrant in 2006 and 2005 for professional services rendered by PricewaterhouseCoopers LLP for tax compliance, tax advice, and tax planning, including the preparation of Form 1120 RIC, Form 8613 and review of excise tax distribution calculations were $715,213 and $598,775, respectively. The aggregate fees billed in 2006 and 2005 to the registrant’s Service Affiliates for engagements for tax services rendered by PricewaterhouseCoopers LLP that related directly to the operations and financial reporting of the Funds were $8,250 and $26,863, respectively.

(d)ALL OTHER FEES: No such fees were billed by PricewaterhouseCoopers LLP to the registrant or to the registrant’s Service Affiliates that related directly to the operations and financial reporting of the Funds in 2006 or 2005.

(e)(1) The Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”), which sets forth the procedures and the conditions pursuant to which services to be performed by the independent auditor are to be preapproved. Under the Policy, the Audit Committee pre-approves, on an annual basis, the following services: (1) the engagement, scope and terms of the annual audit; (2) certain audit-related services; (3) certain tax services that the Committee believes would not impair, and are consistent with the SEC’s rules on, auditor independence; and (4) those permissible non-audit services that the Committee believes are routine and recurring services and that would not impair, and are consistent with the SEC’s rules on, auditor independence, subject to certain limitations on the projected fees associated with each service. All other types of services not included on the schedule, or for which the projected fees exceed those provided in the schedule, require the specific pre-approval by the Audit Committee or the Chairperson of the Committee (if timing

necessitates that preapproval is required before the Committee’s next regularly scheduled meeting) if they are to be provided by the independent auditor.

(e)(2) None.

(f)Not applicable.

(g)NON-AUDIT FEES: The aggregate fees billed by PricewaterhouseCoopers LLP in 2006 and 2005 for non-audit services rendered to the registrant, the registrant’s Service Affiliates were $1,105,825 and $984,938, respectively. For the fiscal year ended February 28, 2006, this amount reflects the amounts disclosed above in Item 4(b),(c),(d), plus $22,000 in fees billed to the Funds’ Service Affiliates for non-audit services that did not relate directly to the  operations and financial reporting of the Funds. For the fiscal year ended February 28, 2005, this amount reflects the amounts disclosed above in Item 4(b),(c),(d), plus $72,300 in fees billed to the Funds’ Service Affiliates for non-audit services that did not relate directly to the operations and financial reporting of the Funds.

(h)The Trust’s Audit Committee has considered whether the provision of non-audit services by registrant’s independent registered public accounting firm to the registrant’s Investment Advisor, and any entity controlling, controlled, or under common control with the Advisor that provided ongoing services to the registrant that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the registrant) was compatible with maintaining the independence of the independent registered public accounting firm as the registrant’s auditors.

*Includes information regarding all series of GMO Trust.

Item 5. Audit Committee of Listed Registrants.

Not applicable to this filing.

Item 6. Schedule of Investments.

The complete schedule of investments for each Covered Series of the registrant is included as part of the annual reports to shareholders filed under Item 1 of this Form N-CSR.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to this registrant.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to this registrant.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to this registrant.

Item 10. Submission of Matters to a Vote of Security Holders.

There were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees.

Item 11. Controls and Procedures.

(a)The registrant’s Principal Executive Officer and Principal Financial Officer have concluded as of a date within 90 days of the filing of this report, based on their evaluation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment

Company Act of 1940 (17 CFR 270.30a-3(c))) that the design and operation of such procedures are effective to provide reasonable assurance that information required to be disclosed by the registrant [with respect to the Covered Series] on Form N-CSR is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms.

(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Code of Ethics described in Item 2 is attached.

(a)(2) Certifications by the Principal Executive Officer and Principal Financial Officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) are attached hereto as EX–99.CERT.

(a)(3) Not applicable to this registrant

(b)Certifications by the Chief Executive Officer and Principal Financial Officer of the registrant  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) are attached hereto as EX-99.906 CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)	GMO Trust
By (Signature and Title):	/s/ Scott Eston
	Scott Eston, Chief Executive Officer
	Date:	May 8, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):	/s/ Scott Eston
	Scott Eston, Chief Executive Officer
	Date:	May 8, 2006
By (Signature and Title):	/s/ Susan Randall Harbert
	Susan Randall Harbert, Principal Financial Officer
	Date :	May 8, 2006