Filed pursuant to Rule 497(e)
GMO TRUST Supplement dated
OCTOBER 16, 1996 to
Prospectus dated
SEPTEMBER 30, 1996
Purchase Premiums and Redemption Fees Instituted for
Asset Allocation Funds
- --------------------------------------------------------------------------------
Effective October 16, 1996, each of the Asset Allocation Funds will
begin to charge purchase premiums and redemption fees for cash transactions.
This is being done to ensure that the costs of purchase premiums or redemption
fees paid to underlying Funds caused by shareholder transactions in the Asset
Allocation Funds is paid by the shareholders generating the transactions,
rather than by the other Asset Allocation Fund shareholders. This is
consistent with the purpose of all of the Trust's purchase premiums and
redemption fees.
Each of the Asset Allocation Funds invests in various other Funds with
different levels of purchase premiums and redemption fees, which reflect the
trading costs of different asset classes. Therefore, the purchase premium and
redemption fee of each Asset Allocation Fund will initially be computed as the
weighted average of the premiums and fees, respectively, of the underlying
Funds in which the Asset Allocation Fund is invested, based on actual
investments by each Asset Allocation Fund as of October 8, 1996. The amount of
purchase premium and redemption fee for each Asset Allocation Fund will
thereafter be adjusted approximately annually based on underlying Funds owned
by each Asset Allocation Fund during the prior year. The Manager may, but is
not obligated to, adjust the purchase premium and/or redemption fee for an
Asset Allocation Fund more frequently if the Manager believes in its sole
discretion that circumstances warrant.
As of October 16, 1996, the following purchase premiums and redemption
fees apply to the Asset Allocation Funds:
FUND PURCHASE PREMIUM(1) REDEMPTION FEE
---- ---------------- --------------
International Equity Allocation Fund 0.80% 0.10%
World Equity Allocation Fund 0.69% 0.09%
Global (U.S.+) Equity Allocation Fund 0.42% 0.05%
Global Balanced Allocation Fund 0.31% 0.03%
Attached hereto is a supplemental Schedule of Fees and Expenses table
relating to the Asset Allocation Funds, indicating the impact of the purchase
premium and redemption fee instituted for each Fund.
<TABLE>
<CAPTION>
Shareholder
GMO Fund Name Transaction Expenses Annual Operating Expenses
- ----------------------------- -------------------------------------------------------------------
Cash Purchase Redemption Inv.
Premium (as a Fees (as a Mgmt. Share-
percentage of percentage of Fees after holder Total
amount amount Fee Service Other Operating
invested)1 redeemed)1 Waiver9 Fee3 Expenses9 Expenses9
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Allocation Funds
International Equity Allocation
Fund
-----------------------------
Class I .80% .10% .00%18 .13%18 .05%12,18 .18%18
Class II .80% .10% .00%18 .07%18 .05%12,18 .12%18
Class III .80% .10% .00%18 .00%18 .05%12,18 .05%12,18
World Equity Allocation Fund
----------------------------
Class I .69% .09% .00%18 .13%18 .05%12,18 .18%18
Class II .69% .09% .00%18 .07%18 .05%12,18 .12%18
Class III .69% .09% .00%18 .00%18 .05%12,18 .05%12,18
Global (U.S.+) Equity
Allocation Fund
---------------
Class I .42% .05% .00%18 .13%18 .05%12,18 .18%18
Class II .42% .05% .00%18 .07%18 .05%12,18 .12%18
Class III .42% .05% .00%18 .00%18 .05%12,18 .05%12,18
Global Balanced Allocation
Fund
---------------------------
Class I .31% .03% .00%18 .13%18 .05%12,18 .18%18
Class II .31% .03% .00%18 .07%18 .05%12,18 .12%18
Class III .31% .03% .00%18 .00%18 .05%12,18 .05%12,18
</TABLE>
<TABLE>
<CAPTION>
Examples
-------------------------------------------------
You would pay the
following expenses on a
$1,000 investment
assuming 5% annual You would pay the
return with redemption following expenses on the
the end of each time same investment assuming
period: no redemption:
1 Yr. 3 Yr. 5 Yr. 10Yr 1 Yr. 3 Yr. 5 Yr. 10Yr.
------------------------------------------------
ASSET ALLOCATION FUNDS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Allocation
Fund
-----------------------------
Class I $11 $15 $10 $14
Class II $10 $13 $9 $12
Class III $10 $11 $9 $10
World Equity Allocation Fund
----------------------------
Class I $10 $14 $9 $13
Class II $9 $12 $8 $11
Class III $8 $10 $7 $9
Global (U.S.+) Equity
Allocation Fund
---------------
Class I $7 $11 $6 $10
Class II $6 $9 $5 $8
Class III $5 $6 $5 $6
Global Balanced Allocation
Fund
-----------------------------
Class I $5 $9 $5 $9
Class II $5 $7 $4 $7
Class III $4 $5 $4 $5
</TABLE>
Footnotes begin on page 13 of the Trust's Prospectus and are important
to understanding this table.
Unless otherwise noted, Annual Operating Expenses shown are based on actual
expenses for the year ended February 29, 1996.
The purpose of the foregoing tables is to assist in understanding the various
costs and expenses of each Fund that are borne by holders of Fund shares. THE
FIVE PERCENT ANNUAL RETURN AND EXPENSE NUMBERS USED ARE NOT REPRESENTATIONS OF
FUTURE PERFORMANCE OR EXPENSES, SUBJECT TO THE MANAGER'S UNDERTAKING TO WAIVE
ITS FEE AND/OR BEAR CERTAIN EXPENSES FOR EACH FUND AS DESCRIBED IN THE TABLES,
ACTUAL PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN. Where a
purchase premium and/or redemption fee is indicated as being charged by a Fund
in certain instances, the foregoing examples assume the payment of such purchase
premium and/or redemption fee even though such purchase premium and/or
redemption fee is not applicable in all cases. (See "Purchase of Shares" and
"Redemption of Shares" in the Trust's Prospectus).
