<PAGE> 1
Filing pursuant to
Rule 497(e)
GMO TRUST
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1998
As Amended July 24, 1998
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the GMO Trust Prospectus dated June 30, 1998,
as amended from time to time, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained from GMO Trust, 40 Rowes Wharf, Boston,
Massachusetts 02110.
<PAGE> 2
Table of Contents
Caption Page
- ------- ----
INVESTMENT OBJECTIVES AND POLICIES............................................1
MISCELLANEOUS INVESTMENT PRACTICES............................................1
MANAGEMENT OF THE TRUST.......................................................2
INVESTMENT ADVISORY AND OTHER SERVICES........................................4
PORTFOLIO TRANSACTIONS.......................................................12
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES.............................15
VOTING RIGHTS................................................................16
SHAREHOLDER AND TRUSTEE LIABILITY............................................17
BENEFICIAL OWNERS OF 5% OR MORE OF THE FUND'S SHARES.........................17
PERFORMANCE INFORMATION......................................................42
FINANCIAL STATEMENTS.........................................................45
SPECIMEN PRICE-MAKE-UP SHEET.................................................46
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<PAGE> 3
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each Fund are described in the
Prospectus. Unless otherwise indicated in the Prospectus or this Statement of
Additional Information, the investment objective and policies of the Funds may
be changed without shareholder approval.
MISCELLANEOUS INVESTMENT PRACTICES
Index Futures. As stated in the Prospectus under the heading
"Description and Risks of Fund Investments -- Futures and Options," many of the
Funds may purchase futures contracts on various securities indexes ("Index
Futures"). As indicated in the Prospectus, an Index Future is a contract to buy
or sell an integral number of units of the particular stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
value from time to time of the relevant index. Entering into a contract to buy
units is commonly referred to as buying or purchasing a contract or holding a
long position in the relevant index.
For example, if the value of a unit of a particular index were $1,000,
a contract to purchase 500 units would be worth $500,000 (500 units x $1,000).
The Index Futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the relevant index at the
expiration of the contract. For example, if a Fund enters into one futures
contract to buy 500 units of an index at a specified future date at a contract
price of $1,000 per unit and the index is at $1,010 on that future date, the
Fund will gain $5,000 (500 units x gain of $10).
Index Futures in which a Fund may invest typically can be traded
through all major commodity brokers, and trades are currently effected on the
exchanges described in the Prospectus. A Fund may close open positions on the
futures exchange on which Index Futures are then traded at any time up to and
including the expiration day. All positions which remain open at the close of
the last business day of the contract's life are required to settle on the next
business day (based upon the value of the relevant index on the expiration day)
with settlement made, in the case of S&P 500 Index Futures, with the Commodities
Clearing House. Because the specific procedures for trading foreign stock Index
Futures on futures exchanges are still under development, additional or
different margin requirements as well as settlement procedures may be applicable
to foreign stock Index Futures at the time a Fund purchases foreign stock Index
Futures.
The price of Index Futures may not correlate perfectly with movement in
the relevant index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the normal
relationship between the S&P 500 Index and futures markets. Secondly, the
deposit requirements in the futures market are less onerous than margin
<PAGE> 4
requirements in the securities market, and as a result the futures market may
attract more speculators than does the securities market. Increased
participation by speculators in the futures market may also cause temporary
price distortions. In addition, trading hours for foreign stock Index Futures
may not correspond perfectly to hours of trading on the foreign exchange to
which a particular foreign stock Index Future relates. This may result in a
disparity between the price of Index Futures and the value of the relevant index
due to the lack of continuous arbitrage between the Index Futures price and the
value of the underlying index.
MANAGEMENT OF THE TRUST
The Trustees and officers of GMO Trust (the "Trust") and their
principal occupations during the past five years are as follows:
R. JEREMY GRANTHAM* (59). President-Quantitative and Chairman of the
Trustees of the Trust. Member, Grantham, Mayo, Van Otterloo & Co. LLC
HARVEY R. MARGOLIS (55). Trustee of the Trust. Mathematics Professor,
Boston College.
JAY O. LIGHT (56). Trustee of the Trust. Professor of Business
Administration, Harvard University; Senior Associate Dean, Harvard
University (1988-1992).
EYK DEL MOL VAN OTTERLOO (61). President-International of the Trust.
Member, Grantham, Mayo, Van Otterloo & Co. LLC
RICHARD MAYO (56). President-Domestic Active of the Trust. Member,
Grantham, Mayo, Van Otterloo & Co. LLC
KINGSLEY DURANT (66). Vice President and Secretary of the Trust.
Member, Grantham, Mayo, Van Otterloo & Co. LLC
SUSAN RANDALL HARBERT (41). Secretary and Treasurer of the Trust.
Member, Grantham, Mayo, Van Otterloo & Co. LLC
WILLIAM R. ROYER, ESQ. (32). Vice President and Treasurer of the Trust.
General Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (January 1995 -
Present). Associate, Ropes & Gray, Boston, Massachusetts (September
1992 - January 1995).
JUI LAI (49). Secretary of the Trust. Member, Grantham, Mayo, Van
Otterloo & Co. LLC
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<PAGE> 5
ANN SPRUILL (44). Secretary of the Trust. Member, Grantham, Mayo, Van
Otterloo & Co. LLC
ALISON E. BAUR, ESQ. (34). Clerk of the Trust. Associate General
Counsel, Grantham, Mayo, Van Otterloo & Co. LLC (February 1997 -
Present). Attorney, Securities and Exchange Commission (April 1991 -
January 1997).
ROBERT V. BROKAW, JR. (54). Secretary of the Trust. Member, Grantham,
Mayo, Van Otterloo & Co. LLC
*Trustee is deemed to be an "interested person" of the Trust and Grantham, Mayo,
Van Otterloo & Co. LLC ("GMO" or the "Manager"), as defined by the 1940 Act.
The mailing address of each of the officers and Trustees is c/o GMO
Trust, 40 Rowes Wharf, Boston, Massachusetts 02110. Except as set forth below,
as of June 19, 1998, the Trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each class of shares of each Fund of
the Trust.
<TABLE>
<CAPTION>
AGGREGATE
FUND CLASS OWNERSHIP INTEREST
---- ----- ------------------
<S> <C> <C>
REIT Fund III 2.33%
Global Properties III 81.00%
Fund
Short-Term Income III 1.30%
Fund
Global Hedged III 2.13%
Equity Fund
Evolving Countries Fund III 3.37%
</TABLE>
Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such employers.
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<PAGE> 6
Other than as set forth in the table below, no Trustee or officer of
the Trust receives any direct compensation from the Trust or any series thereof:
<TABLE>
<CAPTION>
NAME OF PERSON, TOTAL ANNUAL COMPENSATION
POSITION FROM THE TRUST
--------------- -------------------------
<S> <C>
Harvey R. Margolis, Trustee $70,000
Jay O. Light, Trustee $70,000
</TABLE>
Messrs. Grantham, Mayo, Van Otterloo, Durant, Lai and Brokaw, and Mses.
Harbert and Spruill, as members of the Manager, will benefit from the management
fees paid by each Fund of the Trust.
INVESTMENT ADVISORY AND OTHER SERVICES
Management Contracts
As disclosed in the Prospectus under the heading "Management of the
Fund," under separate Management Contracts (each a "Management Contract")
between the Trust and the Manager, subject to such policies as the Trustees of
the Trust may determine, the Manager will furnish continuously an investment
program for each Fund and will make investment decisions on behalf of the Fund
and place all orders for the purchase and sale of portfolio securities. Subject
to the control of the Trustees, the Manager also manages, supervises and
conducts the other affairs and business of the Trust, furnishes office space and
equipment, provides bookkeeping and certain clerical services and pays all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Manager. As indicated under "Portfolio
Transactions--Brokerage and Research Services," the Trust's portfolio
transactions may be placed with broker-dealers which furnish the Manager, at no
cost, certain research, statistical and quotation services of value to the
Manager in advising the Trust or its other clients.
As is disclosed in the Prospectus, the Manager's compensation will be
reduced to the extent that any Fund's annual expenses incurred in the operation
of the Fund (including the management fee but excluding Shareholder Service
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; and, in the case of the Emerging Markets Fund, Emerging Country Debt Fund
and Global Hedged Equity Fund, also excluding custodial fees; and, in the case
of the Asset Allocation Funds, U.S. Sector Fund and Global Hedged Equity Fund,
also excluding expenses indirectly incurred by investment in other Funds of the
Trust) would exceed the percentage of the Fund's average daily net assets
described therein. Because the Manager's compensation is fixed at an annual rate
equal to this expense limitation, it is expected that the Manager will pay such
expenses (with the exceptions noted) as they arise. In addition, the Manager's
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<PAGE> 7
compensation under the Management Contract is subject to reduction to the extent
that in any year the expenses of the relevant Fund exceed the limits on
investment company expenses imposed by any statute or regulatory authority of
any jurisdiction in which shares of such Fund are qualified for offer and sale.
The term "expenses" is defined in the statutes or regulations of such
jurisdictions, and, generally speaking, excludes brokerage commissions, taxes,
interest and extraordinary expenses. No Fund is currently subject to any state
imposed limit on expenses.
Each Management Contract provides that the Manager shall not be subject
to any liability in connection with the performance of its services thereunder
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Each Management Contract was approved by the Trustees of the Trust
(including a majority of the Trustees who are not "interested persons" of the
Manager) and by the relevant Fund's sole shareholder in connection with the
organization of the Trust and the establishment of the Funds. Each Management
Contract will continue in effect for a period more than two years from the date
of its execution only so long as its continuance is approved at least annually
by (i) vote, cast in person at a meeting called for that purpose, of a majority
of those Trustees who are not "interested persons" of the Manager or the Trust,
and by (ii) the majority vote of either the full Board of Trustees or the vote
of a majority of the outstanding shares of the relevant Fund. Each Management
Contract automatically terminates on assignment, and is terminable on not more
than 60 days' notice by the Trust to the Manager. In addition, each Management
Contract may be terminated on not more than 60 days' written notice by the
Manager to the Trust.
In the last three fiscal years the Funds have paid the following
amounts as Management Fees to the Manager pursuant to the relevant Management
Contract:
<TABLE>
<CAPTION>
Gross Reduction Net
----- --------- ---
<S> <C> <C> <C>
U.S. CORE FUND
Year ended 2/28/98 $17,753,329 $ 7,220,779 $10,532,550
Year ended 2/28/97 $16,712,773 $ 5,742,268 $10,970,505
Year ended 2/29/96 $14,964,100 $ 2,052,651 $12,911,449
INTERNATIONAL CORE FUND
Year ended 2/28/98 $30,572,502 $12,093,211 $18,479,291
Year ended 2/28/97 $33,112,051 $11,195,222 $21,916,829
Year ended 2/29/96 $25,419,063 $ 4,915,283 $20,503,780
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C> <C> <C>
GROWTH FUND
Year ended 2/28/98 $1,008,998 $ 463,468 $ 545,530
Year ended 2/28/97 $1,637,804 $ 561,765 $1,076,039
Year ended 2/29/96 $1,685,025 $ 241,245 $1,443,780
SHORT-TERM INCOME FUND
Year ended 2/28/98 $ 117,159 $ 117,159 $ 0
Year ended 2/28/97 $ 69,134 $ 69,134 $ 0
Year ended 2/29/96 $ 21,431 $ 21,431 $ 0
JAPAN FUND
Year ended 2/28/98 $1,540,113 $ 803,953 $ 736,160
Year ended 2/28/97 $1,566,406 $ 742,507 $ 823,899
Year ended 2/29/96 $ 647,675 $ 125,662 $ 522,013
VALUE FUND
Year ended 2/28/98 $2,742,196 $1,134,088 $1,608,108
Year ended 2/28/97 $2,462,093 $ 871,498 $1,590,595
Year ended 2/29/96 $2,296,190 $ 463,260 $1,832,930
TOBACCO-FREE CORE FUND
Year ended 2/28/98 $ 394,815 $ 218,695 $ 176,120
Year ended 2/28/97 $ 291,746 $ 183,825 $ 107,921
Year ended 2/29/96 $ 284,306 $ 113,925 $ 170,381
FUNDAMENTAL VALUE FUND
Year ended 2/28/98 $1,425,989 $ 381,705 $1,044,284
Year ended 2/28/97 $1,627,950 $ 347,372 $1,280,578
Year ended 2/29/96 $1,496,155 $ 108,537 $1,387,618
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C> <C> <C>
SMALL CAP VALUE FUND
Year ended 2/28/98 $ 3,650,580 $ 1,603,440 $ 2,047,140
Year ended 2/28/97 $ 1,948,526 $ 761,954 $ 1,186,572
Year ended 2/29/96 $ 873,239 $ 226,684 $ 646,555
INTERNATIONAL SMALL COMPANIES FUND
Year ended 2/28/98 $ 2,912,080 $ 2,004,718 $ 907,362
Year ended 2/28/97 $ 2,889,159 $ 1,833,495 $ 1,055,664
Year ended 2/29/96 $ 2,467,267 $ 1,358,838 $ 1,108,429
U.S. SECTOR FUND
Year ended 2/28/98 $ 853,670 $ 635,351 $ 218,319
Year ended 2/28/97 $ 1,138,768 $ 434,930 $ 703,838
Year ended 2/29/96 $ 1,134,431 $ 169,840 $ 964,591
INTERNATIONAL BOND FUND
Year ended 2/28/98 $ 1,090,298 $ 692,754 $ 397,544
Year ended 2/28/97 $ 849,645 $ 493,567 $ 356,078
Year ended 2/29/96 $ 779,352 $ 257,658 $ 521,694
EMERGING MARKETS FUND
Year ended 2/28/98 $17,396,168 $ 3,619,369 $13,776,799
Year ended 2/28/97 $12,541,622 $ 2,222,584 $10,319,038
Year ended 2/29/96 $ 5,944,710 $ 90,073 $ 5,854,637
EMERGING COUNTRY DEBT FUND
Year ended 2/28/98 $ 2,823,080 $ 1,087,585 $ 1,735,495
Year ended 2/28/97 $ 3,190,658 $ 986,384 $ 2,204,274
Year ended 2/29/96 $ 2,504,503 $ 810,112 $ 1,694,391
GLOBAL HEDGED EQUITY FUND
Year ended 2/28/98 $ 1,509,937 $ 850,401 $ 659,536
Year ended 2/28/97 $ 2,168,233 $ 531,673 $ 1,636,560
Year ended 2/29/96 $ 2,071,406 $ 199,269 $ 1,872,137
</TABLE>
-7-
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
DOMESTIC BOND FUND
Year ended 2/28/98 $1,311,252 $ 932,631 $ 378,621
Year ended 2/28/97 $1,112,368 $ 744,230 $ 368,138
Year ended 2/29/96 $ 707,127 $ 158,391 $ 548,736
CURRENCY HEDGED INTERNATIONAL BOND FUND
Year ended 2/28/98 $1,895,291 $1,316,764 $ 578,527
Year ended 2/28/97 $1,782,864 $1,149,683 $ 633,181
Year ended 2/29/96 $1,163,131 $ 522,806 $ 610,325
GLOBAL BOND FUND
Year ended 2/28/98 $ 297,447 $ 297,447 $ 0
Year ended 2/28/97 $ 220,921 $ 220,921 $ 0
Commencement of
Operations
(12/28/95) - 2/29/96 $ 17,307 $ 17,307 $ 0
CURRENCY HEDGED INTERNATIONAL CORE FUND
Year ended 2/28/98 $4,457,931 $2,255,760 $2,202,171
Year ended 2/28/97 $3,841,815 $2,218,152 $1,623,663
Commencement of
Operations
(6/30/95) - 2/29/96 $1,097,558 $ 663,365 $ 464,193
GLOBAL PROPERTIES FUND
Year ended 2/28/98 $ 74,657 $ 74,657 $ 0
Commencement of
Operations
(12/20/96) - 2/28/97 $ 13,266 $ 13,266 $ 0
FOREIGN FUND
Year ended 2/28/98 $7,035,104 $2,369,507 $4,665,597
Commencement of
Operations
(6/28/96) - 2/28/97 $3,034,381 $1,267,971 $1,766,410
</TABLE>
-8-
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
REIT FUND
Year ended 2/28/98 $2,765,300 $ 961,297 $1,804,003
Commencement of
Operations
(5/31/96) - 2/28/97 $ 666,973 $ 286,384 $ 380,589
WORLD EQUITY ALLOCATION FUND
Year ended 2/28/98 $ 0 $ 0 $ 0
Commencement of
Operations
(6/28/96) - 2/28/97 $ 0 $ 0 $ 0
GLOBAL BALANCED ALLOCATION FUND
Year ended 2/28/98 $ 0 $ 0 $ 0
Commencement of
Operations
(7/29/96) - 2/28/97 $ 0 $ 0 $ 0
GLOBAL (U.S.+) EQUITY ALLOCATION FUND
Year ended 2/28/98 $ 0 $ 0 $ 0
Commencement of
Operations
(11/25/96) - 2/28/97 $ 0 $ 0 $ 0
INFLATION INDEXED BOND FUND
Commencement of
Operations
(3/31/97) - 2/28/98 $ 36,237 $ 36,237 $ 0
US BOND/GLOBAL ALPHA A FUND
Commencement of
Operations
(4/30/97) - 2/28/98 $ 571,318 $ 361,139 $ 210,179
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C> <C>
US BOND/GLOBAL ALPHA B FUND
Commencement of
Operations
(7/29/97) - 2/28/98 $ 865,631 $ 609,605 $ 256,026
EVOLVING COUNTRIES FUND
Commencement of
Operations
(8/29/97) - 2/28/98 $ 94,952 $ 77,826 $ 17,126
INTERNATIONAL EQUITY ALLOCATION FUND
Year Ended 2/28/98 $ 0 $ 0 $ 0
Commencement of
Operations
(10/11/96) - 2/28/97 $ 0 $ 0 $ 0
SMALL CAP GROWTH FUND
Year Ended 2/28/98 $1,537,995 $ 725,457 $ 812,538
Commencement of
Operations
(12/31/96) - 2/28/97 $ 124,256 $ 105,410 $ 18,846
</TABLE>
Custodial Arrangements. Investors Bank & Trust Company ("IBT"), 200
Clarendon Street, Boston, Massachusetts 02116, and Brown Brothers Harriman & Co.
("BBH"), 40 Water Street, Boston, Massachusetts 02109, serve as the Trust's
custodians on behalf of the Funds. As such, IBT or BBH holds in safekeeping
certificated securities and cash belonging to a Fund and, in such capacity, is
the registered owner of securities in book-entry form belonging to a Fund. Upon
instruction, IBT or BBH receives and delivers cash and securities of a Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. Each of IBT and
BBH also maintains certain accounts and records of the Trust and calculates the
total net asset value, total net income and net asset value per share of each
Fund on a daily basis. The Manager has voluntarily agreed with the Trust to
reduce its management fees and to bear certain expenses with respect to each
Fund until further notice to the extent that a Fund's total annual operating
expenses (excluding Shareholder Service 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; and, in the case of the Emerging Country Debt
Fund, Emerging Markets Fund and
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<PAGE> 13
Global Hedged Equity Fund, excluding custodial fees; and, in the case of the
Asset Allocation Funds, excluding expenses indirectly incurred by investment in
other Funds of the Trust) would otherwise exceed the percentage of that Fund's
daily net assets specified in the Prospectus ("Schedule of Fees and Expenses").
Therefore, so long as the Manager agrees so to reduce its fee and bear certain
expenses, total annual operating expenses (subject to such exclusions) of the
Fund will not exceed this stated limitation. Absent such agreement by the
Manager to waive its fees, management fees for each Fund and the annual
operating expenses for each Fund would be as stated in the Prospectus.
Shareholder Service Arrangements. As disclosed in the Prospectus,
pursuant to the terms of a single Servicing Agreement with each Fund of the
Trust, GMO provides direct client service, maintenance and reporting to
shareholders of the Funds. The Servicing Agreement was approved by the Trustees
of the Trust (including a majority of the Trustees who are not "interested
persons" of the Manager or the Trust). The Servicing Agreement will continue in
effect for a period more than one year from the date of its execution only so
long as its continuance is approved at least annually by (i) vote, cast in
person at a meeting called for the purpose, of a majority of those Trustees who
are not "interested persons" of the Manager or the Trust, and by (ii) the
majority vote of the full Board of Trustees. The Servicing Agreement
automatically terminates on assignment (except as specifically provided in the
Servicing Agreement) and is terminable by either party upon not more than 60
days' written notice to the other party.
The Trust entered into the Servicing Agreement with GMO on May 30,
1996. Pursuant to the terms the Servicing Agreement, each Fund paid GMO the
amounts set forth in the table below:
<TABLE>
<CAPTION>
March 30, 1996 March 1, 1997
through through
February 28, 1997 February 28, 1998
----------------- -----------------
<S> <C> <C>
U.S. Core Fund $3,597,900 $5,028,001
International Core Fund 4,894,560 6,088,152
Growth Fund 347,907 302,285
Short-Term Income Fund 36,264 70,313
Japan Fund 261,357 308,029
Value Fund 406,469 586,036
Tobacco-Free Core Fund 67,968 118,083
Fundamental Value Fund 244,167 284,344
Small Cap Value Fund 482,716 1,093,550
Small Cap Growth Fund 37,277 459,765
International Small Companies Fund 259,782 349,448
U.S. Sector Fund 266,594 150,583
</TABLE>
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<PAGE> 14
<TABLE>
<CAPTION>
March 30, 1996 March 1, 1997
through through
February 28, 1997 February 28, 1998
----------------- -----------------
<S> <C> <C>
International Bond Fund 244,354 407,680
Emerging Markets Fund 1,491,636 2,579,392
Emerging Country Debt Fund 722,035 836,348
Global Hedged Equity Fund 357,586 217,705
Domestic Bond Fund 549,733 790,254
Currency Hedged International Bond Fund 444,574 568,775
Global Bond Fund 74,374 133,633
Currency Hedged International Core Fund 595,691 864,408
Global Properties Fund 2,653 14,931
Foreign Fund 614,288 1,421,888
REIT Fund 133,395 552,026
World Equity Allocation Fund 6,619 11,172
Global Balanced Allocation Fund 4,623 36,399
Global (U.S.+) Equity Allocation Fund 0 1,099
International Equity Allocation Fund 1,962 13,569
Inflation Indexed Bond Fund -- 21,641
U.S. Bond/Global Alpha A Fund -- 213,529
U.S. Bond/Global Alpha B Fund -- 323,124
Evolving Countries Fund -- 17,804
</TABLE>
Independent Accountants. The Trust's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts annual audits of the Trust's financial statements,
assists in the preparation of each Fund's federal and state income tax returns,
consults with the Trust as to matters of accounting and federal and state income
taxation and provides assistance in connection with the preparation of various
Securities and Exchange Commission filings.
PORTFOLIO TRANSACTIONS
The purchase and sale of portfolio securities for each Fund and for the
other investment advisory clients of the Manager are made by the Manager with a
view to achieving their respective investment objectives. For example, a
particular security may be bought or sold for certain clients of the Manager
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more other clients are selling the security. In some instances,
therefore, one client may sell indirectly a particular security to another
client. It also happens that two or more clients may simultaneously buy or sell
the same security, in which event purchases or sales are effected on a pro rata,
rotating or other equitable basis so as to avoid any one account being preferred
over any other account.
Transactions involving the issuance of Fund shares for securities or
assets other than cash will be limited to a bona fide reorganization or
statutory merger and to other acquisitions of portfolio securities that meet all
of the following conditions: (a) such securities meet the
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<PAGE> 15
investment objectives and policies of the Fund; (b) such securities are acquired
for investment and not for resale; (c) such securities are liquid securities
which are not restricted as to transfer either by law or liquidity of market;
and (d) such securities have a value which is readily ascertainable as evidenced
by a listing on the American Stock Exchange, the New York Stock Exchange, NASDAQ
or a recognized foreign exchange.
Brokerage and Research Services. In placing orders for the portfolio
transactions of each Fund, the Manager will seek the best price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. The
determination of what may constitute best price and execution by a broker-dealer
in effecting a securities transaction involves a number of considerations,
including, without limitation, the overall net economic result to the Fund
(involving price paid or received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, availability of the broker
to stand ready to execute possibly difficult transactions in the future and the
financial strength and stability of the broker. Because of such factors, a
broker-dealer effecting a transaction may be paid a commission higher than that
charged by another broker-dealer. Most of the foregoing are judgmental
considerations.
Over-the-counter transactions often involve dealers acting for their
own account. It is the Manager's policy to place over-the-counter market orders
for the Domestic Funds with primary market makers unless better prices or
executions are available elsewhere.
Although the Manager does not consider the receipt of research services
as a factor in selecting brokers to effect portfolio transactions for a Fund,
the Manager will receive such services from brokers who are expected to handle a
substantial amount of the Funds' portfolio transactions. Research services may
include a wide variety of analyses, reviews and reports on such matters as
economic and political developments, industries, companies, securities and
portfolio strategy. The Manager uses such research in servicing other clients as
well as the Funds.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
and subject to such policies as the Trustees of the Trust may determine, the
Manager may pay an unaffiliated broker or dealer that provides "brokerage and
research services" (as defined in the Act) to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction.
During the three most recent fiscal years, the Trust paid, on behalf of
the Funds, the following amounts in brokerage commissions:
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<PAGE> 16
<TABLE>
<CAPTION>
1996 1997 1998 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
U.S. Core Fund $ 3,353,136 $ 4,664,903 $ 2,561,392 $10,579,431
Growth Fund 295,985 531,486 170,370 997,841
Value Fund 784,675 813,100 666,871 2,264,646
Short-Term Income Fund -- -- -- --
International Core Fund 1,888,442 9,469,695 7,059,863 18,418,000
Japan Fund 41,022 84,857 289,271 415,150
Tobacco-Free Core Fund 71,940 103,341 50,119 225,400
Fundamental Value Fund 270,800 295,379 441,597 1,007,776
International Small Companies 77,221 98,496 413,290 589,007
Fund
Bond Allocation Fund -- -- -- --
Small Cap Value Fund 678,406 879,092 903,916 2,461,414
U.S. Sector Fund 324,992 356,778 278,180 959,950
International Bond Fund 13,750 5,760 40,399 59,909
Emerging Markets Fund 3,199,810 5,114,325 7,790,713 16,104,848
Emerging Country Debt Fund 31,200 70,471 34,908 136,579
Global Hedged Equity Fund 415,040 594,924 244,119 1,254,083
Domestic Bond Fund 62,799 73,491 43,754 180,044
Currency Hedged International 1,800 7,523 27,976 37,299
Bond Fund
Currency Hedged International 264,754 1,280,998 1,202,454 2,748,206
Core Fund
Global Bond Fund 2,321 9,644 4,123 16,088
Global Properties Fund -- 3,456 19,731 23,187
Foreign Fund -- 492,537 1,294,686 1,787,223
REIT Fund -- 386,888 911,700 1,298,588
Inflation Indexed Bond Fund -- -- -- --
U.S. Bond/Global Alpha A Fund -- -- 20,476 20,476
U.S. Bond/Global Alpha B Fund -- -- 48,310 48,310
Evolving Countries Fund -- -- 153,610 153,610
Small Cap Growth Fund -- 36,918 880,229 917,147
World Equity Allocation Fund -- -- -- --
Global Balanced Allocation Fund -- -- -- --
Global (U.S.+) Equity Allocation -- -- -- --
Fund
International Equity Allocation Fund -- -- -- --
</TABLE>
-14-
<PAGE> 17
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust is organized as a Massachusetts business trust under the laws
of Massachusetts by an Agreement and Declaration of Trust ("Declaration of
Trust") dated June 24, 1985. A copy of the Declaration of Trust is on file with
the Secretary of The Commonwealth of Massachusetts. The fiscal year for each
Fund ends on February 28/29.
Pursuant to the Declaration of Trust, the Trustees have currently
authorized the issuance of an unlimited number of full and fractional shares of
thirty-seven series: U.S. Core Fund; Tobacco-Free Core Fund; Value Fund; Growth
Fund; U.S. Sector Fund; Small Cap Value Fund; Small Cap Growth Fund; Fundamental
Value Fund; REIT Fund; International Core Fund; Currency Hedged International
Core Fund; Foreign Fund; International Small Companies Fund; Japan Fund;
Emerging Markets Fund; Evolving Countries Fund; Global Properties Fund; Domestic
Bond Fund; U.S. Bond/Global Alpha A Fund; U.S. Bond/Global Alpha B Fund;
International Bond Fund; Currency Hedged International Bond Fund; Global Bond
Fund; Emerging Country Debt Fund; Short-term Income Fund; Global Hedged Equity
Fund; Inflation Indexed Bond Fund; International Equity Allocation Fund; World
Equity Allocation Fund; Global (U.S.+) Equity Allocation Fund; Global Balanced
Allocation Fund; International Core Plus Allocation Fund; Pelican Fund; Asia
Fund; Tax-Managed U.S. Core Fund; Tax-Managed International Fund; and
Tax-Managed Global Equities Allocation Fund. Interests in each portfolio (Fund)
are represented by shares of the corresponding series. Each share of each series
represents an equal proportionate interest, together with each other share, in
the corresponding Fund. The shares of such series do not have any preemptive
rights. Upon liquidation of a Fund, shareholders of the corresponding series are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders. The Declaration of Trust also permits the Trustees
to charge shareholders directly for custodial and transfer agency expenses, but
there is no present intention to make such charges.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to subdivide any series of shares into various sub-series or classes
of shares with such dividend preferences and other rights as the Trustees may
designate. This power is intended to allow the Trustees to provide for an
equitable allocation of the impact of any future regulatory requirements which
might affect various classes of shareholders differently. The Trustees have
currently authorized the establishment and designation of up to eight classes of
shares for each series of the Trust (except for the Pelican Fund): Class I
Shares, Class II Shares, Class III Shares, Class IV Shares, Class V Shares,
Class VI Shares, Class VII Shares and Class VIII Shares.
The Trustees may also, without shareholder approval, establish one or
more additional separate portfolios for investments in the Trust or merge two or
more existing portfolios (i.e., a new fund). Shareholders' investments in such a
portfolio would be evidenced by a separate series of shares.
-15-
<PAGE> 18
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust, however, may be terminated at any time by vote of at least
two-thirds of the outstanding shares of the Trust. While the Declaration of
Trust further provides that the Trustees may also terminate the Trust upon
written notice to the shareholders, the 1940 Act requires that the Trust receive
the authorization of a majority of its outstanding shares in order to change the
nature of its business so as to cease to be an investment company.
VOTING RIGHTS
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for fractional shares held) and
will vote (to the extent provided herein) in the election of Trustees and the
termination of the Trust and on other matters submitted to the vote of
shareholders. Shareholders vote by individual Fund on all matters except (i)
when required by the Investment Company Act of 1940, shares shall be voted in
the aggregate and not by individual Fund, and (ii) when the Trustees have
determined that the matter affects only the interests of one or more Funds, then
only shareholders of such affected Funds shall be entitled to vote thereon.
Shareholders of one Fund shall not be entitled to vote on matters exclusively
affecting another Fund, such matters including, without limitation, the adoption
of or change in the investment objectives, policies or restrictions of the other
Fund and the approval of the investment advisory contracts of the other Fund.
Shareholders of a particular class of shares do not have separate class voting
rights except with respect to matters that affect only that class of shares and
as otherwise required by law.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that in accordance with the 1940 Act (i) the Trust will
hold a shareholders' meeting for the election of Trustees at such time as less
than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of at least 1% of the outstanding shares
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees. Voting rights are not
cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except (i)
to change the Trust's name or to
-16-
<PAGE> 19
cure technical problems in the Declaration of Trust and (ii) to establish,
designate or modify new and existing series or sub-series of Trust shares or
other provisions relating to Trust shares in response to applicable laws or
regulations.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Trust
or the Trustees. The Declaration of Trust provides for indemnification out of
all the property of the relevant Fund for all loss and expense of any
shareholder of that Fund held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Fund of which he is or was a
shareholder would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The By-laws of the Trust provide for indemnification by the Trust of
the Trustees and the officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or the Trust
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
BENEFICIAL OWNERS OF 5% OR MORE OF THE FUND'S SHARES
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class II Shares of the U.S.
Core Fund as of June 1, 1998:
-17-
<PAGE> 20
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Huntington Trust Co. Attn: Michelle McCallister 29.10
FBO The Jewish Community P.O. Box 1558
Federation of Cleveland Employees Columbus, OH 43260
Ret Plan & Trust
Bost & Co. A/C BHEF1402002 Mutual Fund Operations 18.89
Brockton Hospital P.O. Box 3198
Pittsburgh, PA 15230
First Union National Bank TTEE Attn: Mutual Funds 15.85
FBO 1525 W. Wt. Harris Blvd. CMG
Gibbs Wire and Steel A/C Charlotte, NC 28288-1151
#95460000156
Bost & Co. A/C BHPF8002002 Mutual Fund Operations 8.64
Brockton Hospital P.O. Box 3198
Pittsburgh, PA 15230-3198
ICD--International Center for the Attn: Michael A. Kellman 7.00
Disabled Chief Financial Officer
340 East 24th Street
New York, NY 10010
Addison Illinois Police Pension Fund 131 W. Lake Street 5.49
Addison, IL 60101
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the U.S. Core Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
University of Rochester 276 Administration Bldg. 5.41
River Campus
Rochester, NY 14627
Bost & Co. A/C WFHF6206002 Attn: Mutual Funds Operations 5.07
FBO The Hewlett Foundation P.O. Box 3198
Pittsburgh, PA 15236
</TABLE>
-18-
<PAGE> 21
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class IV Shares of the U.S. Core Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
NRECA Investments Division Attn: Peter Morris 34.77
4301 Wilson Blvd.
RSI8-305
Arlington, VA 22203-1860
Employee Retirement Plan of 5918 Stoneridge Mall Road 17.90
Safeway Inc. Pleasanton, CA 94588-3229
World Bank Staff Ret Plan Dept. 11.31
Room A-12073
1818 H Street NW
Washington, DC 20433
Corning Retirement Master Trust Attn: Lindsay W. Brown 10.22
Director Investment Services
Corning Incorporated
One Riverfront Plaza IIQ-E2-34
Corning, NY 14831-0001
Duke University Long Term 2200 West Main Street 7.27
Endowment PO Suite 1000
Attn: Portfolio Accounting
Durham, NC 27705
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Growth Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Northern Trust Company, Attn: Mutual Funds 25.48
Trustee of the Aerospace P.O. Box 92956
Corporation Employees Chicago, IL 60675
Retirement Plan Trust
</TABLE>
-19-
<PAGE> 22
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Surdna Foundation, Inc. Attn: Mark De Venoge 34.10
330 Madison Avenue
30th Floor
New York, NY 10017-5001
Duke University Attn: Deborah Lane 18.05
Long Term Endowment PO 2200 West Main St.
Suite 1000
Durham, NC 27705
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Japan Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Collins EAFE Group Trust Attn: Performance Accounting 21.41
840 Newport Center Drive
Newport Beach, CA 92691
Public Service Electric & Gas Attention: Doug Hoerr 6.41
Company Master Retirement Trust 80 Park Plaza
P.O. Box 570
Newark, NJ 07102
Gordon Family Trust 1325 Airmotive Way 11.14
Suite 264
Reno, NV 89502
Yale University 230 Prospect St. 9.18
Attn: Theodore D. Seides
New Haven, CT 06511
BASF Corporation Pension Master Attn: Christopher P. Krauss 5.46
Trust 300 Continental Drive North
Mount Olive, NJ 07828
The Duke Endowment - AA Attn: Ms. Karen Rogers 5.11
Controller
100 North Tryon Street
Suite 3500
Charlotte, NC 28202
</TABLE>
-20-
<PAGE> 23
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Hershey Trust Company, P.O. Box 445 5.02
Trustee for Milton Hershey 100 Mansion Road East
School Hershey, PA 17033
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Short-Term Income Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Gezamelyk Mollenfonds c/o Eyk Van Otterloo 9.14
32 Foster Street
Marblehead, MA 01945
Gerald Grinstein & c/o Molly Pengra 5.06
Carolyn H. Grinstein Jt Ten Pengra Capital Mgt.
2 Union Square
601 Union St., #4100
Seattle, WA 98701
BEHE c/o Affida Bank 17.76
Attn: Mr. Chris Blangley
P.O. Box 5274
CH 8022
Zurich, Switzerland
Trust for Millipore Corporation Invested Employee Plans - STIF 17.27
80 Ashby Road
Bedford, MA 01730
Scott M. Spangler & Dean G. 5670 N. Echo Canyon Drive 12.84
Spangler Jt Ten Phoenix, AZ 85018
ICF International Cultural Fund c/o Affida Bank 9.51
Attn: Mr. Chris Blangley
P.O. Box 5274
CH 8022
Zurich, Switzerland
Beverly Hospital Corporation Attn: Priscilla Clay 6.48
Finance Department
85 Herrick Street
Beverly, MA 01915
</TABLE>
-21-
<PAGE> 24
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Value Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Leland Stanford Junior Stanford Management Company 6.12
University I 2770 Sand Hill Road
Menlo Park, CA 94025
Leland Stanford Junior Stanford Management Company 42.72
University II 2770 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Fundamental Value Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Berea College Attn: Perry Poynter 27.25
Associate Controller
Box 2306, CPO2306
Berea, KY 40404
Leland Stanford Junior Stanford Management Company 59.64
University II 2770 Sand Hill Road
Menlo Park, CA 94025
Princeton University TR Attn: John D. Sweeney 12.96
P.O. Box 35
Princeton, NJ 08544
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Small Cap Value Fund as of June 10, 1997:
-22-
<PAGE> 25
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
John D. & Catherine T. MacArthur Attn: Lawrence L. Landry 5.36
Foundation 140 South Dearborn
Suite 1100
Chicago, IL 60603
Bost & Co. A/C WFHF6202002 Attn: Mutual Funds Operations 5.63
FBO The Hewlett Foundation P.O. Box 3198
Pittsburgh, PA 15230
Marshstrorm & Co. SCV Attn: Jennifer S. Leung 5.58
State Street Bank & Trust
1 Enterprise Drive W6A
North Quincy, MA 02171
Yale University Attn: Theodore D. Seides 9.99
230 Prospect St.
New Haven, CT 06511
Bankers Trust Company TR Attn: Marshall Jones 14.71
GTE Service Corp Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the International Small Companies Fund as of
June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Yale University Attn: Theodore D. Seides 14.33
230 Prospect Street
New Haven, CT 06511
Bankers Trust Company TR Attn: Marshall Jones 7.07
GTE Service Corp Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
</TABLE>
-23-
<PAGE> 26
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Tobacco-Free Core Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Dewitt Wallace-Reader's Digest Attn: Rob D. Nagel 29.81
Fund, Inc. Two Park Avenue
23rd Floor
New York, NY 10016
Lila Wallace-Reader's Digest Fund, Attn: Rob D. Nagel 25.94
Inc. Two Park Avenue
23rd Floor
New York, NY 10016
Tufts Associated Health 353 Wyman Street 15.41
Maintenance Organization Inc. Waltham, MA 02254
Trustee of Columbia University in Columbia University 13.67
the City of New York--Global 975 Riverside Drive, Suite 401
New York, NY 10115
New York Academy of Medicine 2 East 103 Street 10.07
New York, NY 10029
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the U.S. Sector Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Regenstrief Foundation, Inc. 1001 West Tenth St. 73.02
Global Equity Fund Indianapolis, IN 46202
JHE Foundation Inc. Attn: Lisa A. Jabia 6.41
175 Jefferson St.
Fairfield, CT 06423
Retirement Plan for Employees of Attn: Mr. Thomas Poccia 5.62
Lenox Hill Hospital--Global AA 100 E. 77th Street
New York, NY 10021
</TABLE>
-24-
<PAGE> 27
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Herb Society of America, Inc. Attn: David Pauer 8.68
Executive Director
9019 Kirtland Chardon Road
Kirtland, OH 44094
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the International Bond Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Trustees of Princeton Attn: John D. Sweeney 11.86
University Int'l P.O. Box 35
Princeton, NY 08544
Saturn & Co. A/C 4600712 P.O. Box 9130 FPG90 19.86
c/o Investors Bank & Trust Co. Boston, MA 02117
TR FBO The John Hancock
Mutual Life Insurance Company
Pension Plan
The Andrew W. Mellon Foundation 140 E. 62nd Street 6.10
Attn: Kenneth J. Herr, Treasurer
New York, NY 10021
Children's Medical Center 1295 Boylston St. 5.79
Corporation Suite 300
Boston, MA 02215
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Emerging Markets Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Washington State Investment Board Attn: Kris Logan 11.30
Investment Accounting Controller
P.O. Box 40916
2424 Heritage Court SW
Olympia, WA 98504
</TABLE>
-25-
<PAGE> 28
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class IV Shares of the Emerging Markets Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bankers Trust Company TR Attn: Marshall Jones 16.72
GTE Service Corp Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
The Trustees of Princeton University Attn: John D. Sweeney 15.29
Int'l P.O. Box 35
Princeton, NJ 08544
Princeton University TR Attn: John D. Sweeney 10.62
P.O. Box 35
Princeton, NJ 08544
Regents of the University of Attn: Linda Berlin 8.52
Michigan EMF Investment Analyst
3003 South State St.
Wolverine Tower
10th Floor Room 10090
Ann Arbor, MI 48109-1283
Leland Stanford Junior University II- Stanford Management Company 7.85
AA 2770 Sand Hill Road
Menlo Park, CA 94025
Bost & Co. A/CNYXF1783862 Attn: Mutual Funds Operations 5.61
FBO Bell Atlantic-Int'l Equities P.O. Box 3198
Pittsburgh, PA 15230-3198
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Domestic Bond Fund as of June 1, 1998:
-26-
<PAGE> 29
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Edna McConnell Clark Attn: Laura Kielczewski 9.86
Foundation Asst. Financial Officer
250 Park Avenue
New York, NY 10177
Trust for Millipore Corporation 80 Ashby Road 8.49
Invested Employee Plans -- DBF Bedford, MA 01730
Schering Plough Retirement Trust Attn: Gary Karlin 7.50
Global -- AA One Giralda Farms
Madison, NJ 07940
GMO Global Balanced Allocation Attn: Tara H. Oliver 5.34
Fund c/o GMO
40 Rowes Wharf
Boston, MA 02110
Phillips Exeter Academy Attn: Joseph E. Fellows 5.11
20 Main Street
Exeter, NH 03833
John D. & Catherine T. MacArthur Attn: Lawrence L. Landry 9.56
Foundation 140 South Dearborn, Suite 1100
Chicago, IL 60603
Corning Retirement Master Trust II Attn: Mr. Lindsay W. Brown 13.07
One Riverfront Plaza
HQ-E2-34
Corning, NY 14831-0001
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class IV Shares of the Currency Hedged International Core Fund as of
June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Andrew W. Mellon Foundation Attn: Kenneth J. Herr 29.52
Treasurer
140 E. 62nd Street
New York, NY 10021
</TABLE>
-27-
<PAGE> 30
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bost & Co. A/CNVXF1783862 Attn: Mutual Funds Operations 28.43
FBO Bell Atlantic--Int'l Equities P.O. Box 3198
Pittsburgh, PA 15230-3198
Trustees of Columbia University in Columbia University 25.29
the City of New York--Global 475 Riverside Drive, Suite 401
New York, NY 10115
John D. & Catherine T. MacArthur Attn: Lawrence L. Landry 7.01
Foundation 140 South Dearborn, Suite 1100
Chicago, IL 60603
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class IV Shares of the Emerging Country Debt Fund as of June 1,
1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
San Francisco County & Retirement Attn: Richard Piket 40.06
System 1155 Market Street, 2nd Floor
San Francisco, CA 94103
State of Connecticut Retirement Plans Attn: Chief Investment Officer 22.06
and Trust Funds Office of the Treasurer
55 Elm Street
Hartford, CT 06106
Bankers Trust Company TR Attn: Marshall Jones 11.11
GTE Service Corp. Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
Bost & Co. A/C NYXF1783852 Attn: Mutual Funds Operations 6.23
FBO Bell Atlantic Dedicated ECDF P.O. Box 3198
Pittsburgh, PA 15230
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Emerging Country Debt Fund as of June 1,
1998:
-28-
<PAGE> 31
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Retirement Plan of Mobil Attn: Donald Hellyer 18.68
Corporation 3225 Gallows Road
Fairfax, VA 22037
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Global Hedged Equity Fund as of June 1,
1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bankers Trust Company TR Attn: Marshall Jones 29.00
GTE Service Corp. Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
Partners Healthcare System Partners Healthcare System, Inc. 13.89
Pooled Investment Accounts 101 Merrimac Street, 4th Floor
Boston, MA 02114
The Duke Endowment -- AA Attn: Ms. Karen Rogers 6.71
Controller
100 North Tryon St., Suite 3500
Charlotte, NC 28202
The Andrew W. Mellon Foundation 140 E. 62nd Street 5.07
Attn: Kenneth J. Herr, Treasurer
New York, NY 10021
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Currency Hedged International Core Fund as
of June 1, 1998:
-29-
<PAGE> 32
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Edna McConnell Clark Attn: Laura Kielczewski 12.83
Foundation Asst. Financial Officer
250 Park Avenue
New York, NY 10177-0026
Trustees of Phillips Academy Attn: Sally Blais 12.71
Investment Analyst
Phillips Academy
180 Main Street
Andover, MA 01810
Children's Medical Center 1295 Boylston Street 9.40
Corporation Suite 300
Boston, MA 02215
Arthur Andersen & Co. SC US Attn; John H. Greenwell 8.80
Profit Sharing and Retirement 225 North Michigan Ave. A168
Trust Chicago, IL 60601-7600
Boston Safe Deposit & Trust Co. c/o Richard A. Manka 6.72
TR FBO The Kroger Co Master The Kroger Company
Retirement Trust 1014 Vine Street
Cincinnati, OH 45202-1100
Lukens Inc. Master Trust Attn: Barbara L. Gasper 6.40
Treasurer
50 South First Avenue
Coatesville, PA 19320
Schering Plough Retirement Trust Attn: Gary Karlin 5.03
Global One Girlada Farms
Madison, NJ 07940
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Global Bond Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Catholic Bishop of Chicago Attn: John F. Benware 11.75
155 East Superior Street
Chicago, IL 60611
</TABLE>
-30-
<PAGE> 33
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The University of North Carolina at 302 South Building 31.89
Chapel Hill Foundation Investment Campus Box 1000
Fund, Inc., Global Fixed Income Chapel Hill, NC 27599
Account
Nazareth College of Rochester 4245 East Avenue 6.94
Fixed Income Rochester, NY 14618
Essex & Company Attn: Linda Wills, Trust Dept. 21.19
c/o First National in Palm Springs
255 South County Road
Palm Springs, FL 33450
Marine Midland Bank as agent for P.O. Box 1329 8.56
The John R. Oishei Foundation Attn: Mutual Funds
Buffalo, NY 14240
Bankers Trust Co. FBO Attn: Mike Bloehaum 5.14
Southcoast Health 174145 P.O. Box 9014
Church Street Station
New York, NY 10008
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class II Shares of the Foreign Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Trustees of Boston College Attn: Paul Haran 41.22
Associate Treasurer More 31D
140 Commonwealth Ave.
Chestnut Hill, MA 02167
Strafe & Co. for the Account of Attn: Carl E. Sealander 20.52
Owensbo Mercy Health System for P.O. Box 0160
Grantham Mayo Account Westerville, OH 43086-0160
3402815000
American Committee for the Attn: Mr. Henry Pavony 16.80
Weizmann Institute of Science Inc. 51 Madison Ave.
New York, NY 10010
</TABLE>
-31-
<PAGE> 34
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bob & Co c/o BankBoston--Trust Attn: Mutual Funds 45-02-93 8.39
IV P.O. Box 1809
Boston, MA 02105-1809
Wentworth Institute of Technology Attn: David Gilmore 7.13
550 Huntington Ave.
Boston, MA 02115
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Foreign Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
President and Fellows of Harvard c/o Harvard Management 15.71
College Company
600 Atlantic Avenue
Boston, MA 02210
Trustees of the University of Attn: Jon Scheinman 11.31
Pennsylvania Office of Investments
3451 Walnut St.
714 Franklin Building
Philadelphia, PA 19104-6205
University of Minnesota Attn: Gracie A. Davenport 7.92
Foundation 1300 S. 2nd St. Suite 200
Minneapolis, MN 55454-1029
Swarthmore College -- Foreign 500 College Ave. 6.73
Swarthmore, VA 19081-1397
Metropolitan Museum of Art Attn: William Magazine 8.19
1000 Fifth Ave.
New York, NY 10028
Colonial Williamsburg Endowment Attn: Ms. Jean Puckett 5.69
International P.O. Box 1776
Williamsburg, VA 23187
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class IV Shares of the Foreign Fund as of June 1, 1998:
-32-
<PAGE> 35
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Rector and Visitors of the Office of the Treasurer 39.21
University of Virginia P.O. Box 9012
Attn: Mr. Rob Walker Freer
Charlottesville, VA 22906
Princeton University TR Attn: John D. Sweeney 21.24
P.O. Box 35
Princeton, NJ 08544
Yale University 230 Prospect Street 20.47
Attn: Theodore D. Seides
New Haven, CT 06511
John D. & Catherine T. MacArthur Attn: Lawrence L. Landry 11.68
Foundation 140 South Dearborn, Suite 1100
Chicago, IL 60603
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the REIT Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Duke Endowment -- AA Attn: Ms. Karen Rogers 6.25
Controller
100 North Tryon Street
Suite 3500
Charlotte, NC 28202-4012
Bankers Trust Company TR Attn: Marshall Jones 14.92
GTE Service Corp. Pension Trust GTE Investment Management
One Stamford Forum
Stamford, Ct 06902
Bost & Co. A/C WFHF6202002 Attn: Mutual Funds Operations 5.69
FBO The Hewlett Foundation P.O. Box 3198
Pittsburgh, PA 15230
</TABLE>
-33-
<PAGE> 36
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the World Equity Allocation Fund as of June 1,
1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
RJR Nabisco Canada Master Trust Attn: Dan Porchak 44.70
Nabisco LTD 10 Parklawn Road
Canada M8Y3
Bridgewater College Business Office 13.17
402 E. College Street
Bridgewater, VA 22512
Melvin B. and Joan F. Lane 3000 Sand Hill Rd. 11.80
TR U/A DTD 09/14/93 Building 2
Melvin and Joan Lane Revocable Suite 215
Trust I Menlo Park, CA 94025
Longwood College Foundation, Attn: L. Darlene Selz 6.06
Inc. 201 High Street
Farmville, VA 23909-1895
Regenstrief Foundation Inc. Global 1001 West 10th St. 22.04
Equity Fund Indianapolis, IN 46202
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Global Balanced Allocation Fund as of June
1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Escuela Agricola Panamericana, Attn: Federico Fiatlos & 14.93
Inc. James S. Hughes
Controller
c/o Norwich Corporation
2150 Washington Street
Newton, MA 02162
Presbyterian Homes & Family 150 Linden Avenue 15.98
Services, Inc. Lynchburg, VA 24503
</TABLE>
-34-
<PAGE> 37
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Saturn & Co. c/o Investors Bank & Trust 13.53
FBO Providence Washington P.O. Box 9130 FPG 90
Insurance Boston, MA 02117
American Society of Hematology -- Attn: Martha Liggett 7.48
Unrestricted Account Executive Director
1200 19th St. NW
Suite 300
Washington, DC 20036
Appalachian Mountain Club Attn: Mr. Henry Isaacson 13.72
5 Joy Street
Boston, MA 02108
</TABLE>
The following chart sets forth the names, addresses and percentage ownership
of those shareholders owning beneficially 5% or more of the outstanding Class IV
Shares of the International Core Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Howard Hughes Medical Institute Attn: C.F. Wolfe 34.66
4000 Jones Bridge Road
Chevy Chase, MD 20815-6789
RJR Nabisco Defined Benefits c/o Wachovia Bank NA 15.38
Master Trust -- International Attn: Teresa Almond
Account Vice President
301 N. Main St., MC-NC31057
Winston-Salem, NC 27150-3099
Bost & Co. A/CNYXF1783862 Attn: Mutual Funds Operations 11.41
FBO Bell Atlantic--Int'l Equities P.O. Box 3198
Pittsburgh, PA 15230-3198
The Duke Endowment--AA Attn: Ms. Karen Rogers 8.04
Controller
100 North Tryon Street
Suite 3500
Charlotte, NC 28202-4012
</TABLE>
-35-
<PAGE> 38
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Employee Retirement Plan of 5918 Stoneridge Mall Road 7.74
Safeway Inc. Pleasanton, CA 94588-3229
Yale University 230 Prospect Street 5.74
Attn: Theodore D. Seides
New Haven, CT 06511
</TABLE>
The following chart sets forth the names, addresses and percentage ownership
of those shareholders owning beneficially 5% or more of the outstanding Class II
Shares of the International Core Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Louisa Stude Sarofim Attn: Nancy Head 55.42
1995 Charitable Trust 1001 Fannin, #4700
Houston, TX 77002
Bost & Co. A/C WERF1968002 Attn: Mutual Funds Operations 21.18
P.O. Box 3198
Pittsburgh, PA 15230-3198
Mary Lawrence Porter Attn: Nancy Head 9.53
Revocable 1994 Trust 1001 Fannin, #4700
Houston, TX 77002
Louisa Stude Sarofim Foundation Attn: Nancy Head 8.85
1001 Fannin, #4700
Houston, TX 77002
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Small Cap Growth Fund as of June 1, 1998:
-36-
<PAGE> 39
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bankers Trust Company TR Attn: Marshall Jones 21.30
GTE Service Corp. Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
John D. & Catherine T. Attn: Lawrence L. Landry 8.52
MacArthur Foundation 140 South Dearborn, Suite 1100
Chicago, IL 60603
Dockbridge & Co. Attn: Jennifer S. Leung 9.30
FBO PF Holdings II Inc. State Street Bank & Trust
1 Enterprise Drive
North Quincy, MA 02171
Bost & Co. A/C WFHF6202002 Attn: Mutual Funds Operations 8.38
FBO The Hewlett Foundation P.O. Box 3198
Pittsburgh, PA 15230-3198
The Duke Endowment--AA Attn: Ms. Karen Rogers 6.87
Controller
100 North Tryon Street
Suite 3500
Charlotte, NC 28202-4012
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Inflation Indexed Bond Fund as of June 1,
1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
GMO Global Balanced Allocation Attn: Tara H. Oliver 8.52
Fund c/o GMO
40 Rowes Wharf
Boston, MA 02110
The Andrew W. Mellon Foundation Attn: Kenneth J. Herr, 17.49
Treasurer
140 E. 62nd Street
New York, NY 10021
</TABLE>
-37-
<PAGE> 40
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Arthur Andersen & Co., SC US Attn: John H. Greenwell 12.27
Profit Sharing and Retirement 225 North Michigan Ave., A16B
Trust Chicago, IL 60601
Conrad N. Hilton Foundation 100 West Liberty Street 8.24
Suite 840
Reno, NV 89501
Phillips Exeter Academy Attn: Joseph E. Fellows 7.43
20 Main St.
Exeter, NH 03833
Schering Plough Retirement Attn: Gary Karlin 5.93
Trust--Global AA One Giralda Farms
Madison, NJ 07940
The Duke Endowment--AA Attn: Ms. Karen Rogers 14.60
Controller
100 North Tryon Street
Suite 3400
Charlotte, NC 28202-4012
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Evolving Countries Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Andrew W. Mellon Foundation Attn: Kenneth J. Herr, 25.06
Treasurer
140 E. 62nd St.
New York, NY 10021
Duke University Long-Term c/o Duke Management Company 19.95
(Endowment) Pool--Emerging 2200 W. Main St.
Suite 1000
Durham, NC 27705
</TABLE>
-38-
<PAGE> 41
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
The Andrew W. Mellon Foundation Attn: Kenneth J. Herr, 25.06
Treasurer
140 E. 62nd St.
New York, NY 10021
Brown Brothers Harriman & Co. Attn: Global Settlement 14.75
Cust. FBO GMO Global Hedged Harold Robinson
Equity Fund 40 Water St.
Boston, MA 02109
GMO International Equity c/o GMO 10.76
Allocation Fund Attn: Tara H. Oliver
40 Rowes Wharf
Boston, MA 02110
GMO Global Balanced c/o GMO 7.10
Allocation Fund Attn: Tara H. Oliver
40 Rowes Wharf
Boston, MA 02110
</TABLE>
The following chart sets forth the names, addresses and percentage ownership
of those shareholders owning beneficially 5% or more of the outstanding Class
III Shares of the International Equity Allocation Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Francis W. Hatch & S. Parker Attn: Lois B. Wetzell 10.48
Gilbert & Robert M. Pennoyer Sullivan & Cromwell
TR Trust U/I 12/11/39 FBO John 125 Broad Street
H.C. Merck New York, NY 10004-2498
Lawrence Memorial Association Attn: Peter Semenza 6.18
170 Governors Avenue
Medford, MA 02155
The Catholic Church Extension PO Box 1443 6.75
Society Chicago, IL 60690-1443
USA LaSalle National Bank as
Custodian
A/C # 037464302-362998502
</TABLE>
-39-
<PAGE> 42
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
S. Parker Gilbert & Robert M. Attn: Robert M. Pennoyer TR 5.24
Pennoyer TR, Trust U/ART 11 (G) Patterson, Belkapp, Webb &
FBO George W. Merck Tyler
1133 Avenue of the Americas
New York, NY 10036
MD CO FBO Memorial Drive c/o MDT Advisors, Inc. 18.54
Trust Attn: Kelly Corwin
125 Cambridge Park Dr.
Cambridge, MA 02140
The Raymond and Gertrude R. Suite 105 East Cooper River 6.29
Saltman Foundation Plaza
2400 McClellan Avenue
Pennsauken, NJ 08109
Juvenile Diabetes Foundation 120 Wall Street 8.67
International New York, NY 10005-3904
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the U.S. Bond/Global Alpha B Fund as of June 1,
1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Bankers Trust Company TR Attn: Marshall Jones 84.34
GTE Service Corp. Pension Trust GTE Investment Management
One Stamford Forum
Stamford, CT 06902
Bost & Co. A/CNYXF1783842 Attn: Mutual Funds Operations 15.66
FBO Bell Atlantic--Fixed Income P.O. Box 3198
Pittsburgh, PA 15230
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the Global (U.S.+) Equity Allocation Fund as of
June 1, 1998:
-40-
<PAGE> 43
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Milbank Foundation For Attn: Chris K. Olander 21.94
Rehabilitation Executive Director
60 East 42nd St., Room 1651
New York, NY 10165
Yale University TR Attn: Linda Rockhill 10.12
Scripps League Newspapers State Street Global Advisors
Education & Research Fund One International Place
Boston, MA 02110
Yale University TR Attn: Linda Rockhill 6.54
Laila & Thurston Twigg Smith State Street Global Advisors
Unitrust One International Place
Boston, MA 02110
Yale University TR Twigg-Smith Unitrust #2 8.87
U/A Trustee of Thurston & State Street Global Advisors
Sharon One International Place
Boston, MA 02110
John E. Andrus Memorial, Inc. Attn: Margaret Hackett 12.33
185 Old Broadway
Hastings-On-Hudson, NY 10706
</TABLE>
The following chart sets forth the names, addresses and percentage ownership
of those shareholders owning beneficially 5% or more of the outstanding Class
III Shares of the Global Properties Fund as of June 1, 1998:
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
Eyk Van Otterloo 32 Foster Street 70.78
Marblehead, MA 01945
Cormorant Fund c/o Jeremy Grantham 5.11
40 Rowes Wharf
Boston, MA 02210
</TABLE>
The following chart sets forth the names, addresses and percentage
ownership of those shareholders owning beneficially 5% or more of the
outstanding Class III Shares of the U.S. Bond/Global Alpha A Fund as of June 1,
1998:
-41-
<PAGE> 44
<TABLE>
<CAPTION>
Name Address % Ownership
---- ------- -----------
<S> <C> <C>
John D. & Catherine T. Attn: Lawrence L. Landry 20.60
MacArthur Foundation 140 South Dearborn, Suite 1100
Chicago, IL 60603
GMO Global Balanced Allocation Attn: Tara H. Oliver 10.25
Fund c/o Grantham Mayo Van Otterloo
& Co. LLC
40 Rowes Wharf
Boston, MA 02110
Corning Retirement Master Attn: Mr. Lindsay W. Brown 13.05
Trust II One Riverfront Plaza
HQ-E2-34
Corning, NY 14831
The Andrew W. Mellon Foundation 140 E. 62nd Street 11.71
Attn: Kenneth J. Herr, Treasurer
New York, NY 10021
Phillips Exeter Academy Attn: Joseph E. Fellows 10.36
20 Main St.
Exeter, NH 03833
Catholic Bishop of Chicago 155 East Superior St. 5.57
Attn: John F. Benware
Chicago, IL 60611
</TABLE>
PERFORMANCE INFORMATION
Each Fund may from time to time include its total return in
advertisements or in information furnished to present or prospective
shareholders.
Quotations of average annual total return for a Fund will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Fund or class over periods of one, three, five, and ten years
(or for such shorter or longer periods as shares of the Fund have been offered),
calculated pursuant to the following formula: P (1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years, and ERV = the ending redeemable value of a hypothetical
$1,000
-42-
<PAGE> 45
payment made at the beginning of the period). Except as noted below, all total
return figures reflect the deduction of a proportional share of Fund expenses on
an annual basis, and assume that (i) the maximum purchase premium is deducted
from the initial $1,000 payment, (ii) all dividends and distributions are
reinvested when paid and (iii) the maximum redemption fee is charged at the end
of the relevant period. Quotations of total return may also be shown for other
periods. The Funds may also, with respect to certain periods of less than one
year, provide total return information for that period that is unannualized. Any
such information would be accompanied by standardized total return information.
The table below sets forth the average annual total return for Class
III Shares of each Fund for the one, three, five and ten year periods ending
June 30, 1998 and for the period from the commencement of the Funds' operations
until June 30, 1998:
<TABLE>
<CAPTION>
Inception
Fund Inception Date 1 Year 3 Year 5 Year 10 Year to Date
(%) (%) (%) (%) (%)
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Core 9/19/85 30.76 29.37 23.45 19.15 19.14
U.S. Sector 12/31/92 22.70 25.29 21.41 N/A 21.19
Growth 12/30/88 30.91 29.45 23.16 N/A 20.22
Small Cap 12/31/96 21.51 N/A N/A N/A 23.34
Growth
Small Cap Value 12/31/91 20.38 22.93 19.08 N/A 19.98
Value 11/13/90 25.35 26.09 21.02 N/A 20.69
Fundamental 10/31/91 25.43 24.27 19.98 N/A 20.08
Value
International 3/31/87 9.95 10.59 11.48 11.50 10.87
Core
Currency Hedged 6/30/95 16.79 19.49 N/A N/A 19.49
International
Core
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
International 10/14/91 3.08 8.42 9.48 N/A 9.26
Small Companies
Japan 6/8/90 (32.59) (11.05) (4.81) N/A (3.63)
</TABLE>
-43-
<PAGE> 46
<TABLE>
<CAPTION>
Inception
Fund Inception Date 1 Year 3 Year 5 Year 10 Year to Date
(%) (%) (%) (%) (%)
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Emerging 12/9/93 (41.26) (8.37) N/A N/A (3.80)
Markets
Evolving 8/29/97 N/A N/A N/A N/A (37.47)
Countries
Foreign 8/31/84 5.80 13.79 14.46 12.36 18.55
Short-Term 4/18/90 5.86 6.09 5.50 N/A 6.22
Income
Domestic Bond 8/18/94 11.44 7.98 N/A N/A 8.88
Global Hedged 7/29/94 (5.52) 0.02 N/A N/A 1.20
Equity
Inflation Indexed 3/31/97 3.87 N/A N/A N/A 3.83
Bond
U.S. 4/30/97 11.73 N/A N/A N/A 12.32
Bond/Global
Alpha A
U.S. 7/29/97 N/A N/A N/A N/A 6.25
Bond/Global
Alpha B
International 12/22/93 4.14 8.24 N/A N/A 10.62
Bond
Emerging 4/19/94 2.94 36.41 N/A N/A 28.05
Country Debt
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
Currency Hedged 9/30/94 13.92 19.51 N/A N/A 18.75
International
Bond
Global Bond 12/28/95 8.55 N/A N/A N/A 8.68
International 10/11/96 (3.26) N/A N/A N/A 5.26
Equity Allocation
World Equity 10/22/96 3.71 N/A N/A N/A 11.63
Allocation
</TABLE>
-44-
<PAGE> 47
<TABLE>
<CAPTION>
Inception
Fund Inception Date 1 Year 3 Year 5 Year 10 Year to Date
(%) (%) (%) (%) (%)
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Global Equity 11/26/96 12.45 N/A N/A N/A 17.19
Allocation
Global Balanced 6/2/97 10.77 N/A N/A N/A 12.97
Allocation
REIT 5/31/96 3.63 N/A N/A N/A 17.71
Global Properties 12/20/96 (5.46) N/A N/A N/A (1.23)
- ------------------------- --------------------- --------------- -------------- ------------- ------------- --------------
</TABLE>
Each Fund may also from time to time advertise net return and gross
return data for each month and calendar quarter since the Fund's inception.
Monthly and quarterly return data is calculated by linking daily performance
for a fund (current net asset value divided by prior net asset value), and
includes reinvestment of all dividends and gains. Monthly and quarterly return
data does not reflect payment of any applicable purchase premiums or redemption
fees. All quotations of monthly and quarterly returns would be accompanied by
standardized total return information.
Quotations of a Fund's gross return do not reflect any reduction for
any Fund fees or expenses unless otherwise noted; if the gross return data
reflected the estimated fees and expenses of the Fund, the returns would be
lower than those shown. Quotations of gross return for a Fund for a particular
month or quarter will be calculated in accordance with the following formula:
Gross Return =
Net Return + (Total Annual Operating Expense Ratio) (# of days in relevant
period/365)
Information relating to a Fund's return for a particular month or calendar
quarter is provided to permit evaluation of the Fund's performance and
volatility in different market conditions, and should not be considered in
isolation.
Sample calculations of average annual total return and gross return for
the U.S. Core Fund have been attached as Appendix A to this Statement of
Additional Information.
FINANCIAL STATEMENTS
The Trust's audited financial statements for the fiscal year ended
February 28, 1998 included in the Trust's Annual Reports filed with the
Securities and Exchange Commission on May 8, 1998 pursuant to Section 30(d) of
the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder, are (with the exception of the financial statements relating to the
Pelican Fund and the GMO Asia Fund) hereby incorporated in this Statement of
Additional Information by reference.
-45-
<PAGE> 48
GMO TRUST
SPECIMEN PRICE-MAKE-UP SHEET
Following are computations of the total offering price per share for
each class of shares of each Fund of the Trust (except for the Pelican Fund and
the Asia Fund) offering shares of beneficial interest as of February 28, 1998,
in each case based upon their respective net asset values and shares of
beneficial interest outstanding at the close of business on February 28, 1998.
<TABLE>
<S> <C>
Core Fund-Class II
Net Assets at Value (Equivalent to $19.98 per share based on
848,657 shares of beneficial interest outstanding) $16,958,086
----------
Offering Price ($19.98 x 100/99.86)* $20.01
------
Core Fund-Class III
Net Assets at Value (Equivalent to $19.99 per share based on $2,317,103,212
--------------
115,934,929 shares of beneficial interest outstanding)
Offering Price ($19.99 x 100/99.86)* $20.02
------
Core Fund-Class IV
Net Assets at Value (Equivalent to $19.99 per share based on $1,370,534,843
--------------
68,573,281 shares of beneficial interest outstanding)
Offering Price ($19.99 x 100/99.86)* $20.02
------
International Core Fund-Class II
Net Assets at Value (Equivalent to $23.16 per share based on $12,500,387
-----------
539,724 shares of beneficial interest outstanding)
Offering Price ($23.16 x 100/99.40)* $23.30
------
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-46-
<PAGE> 49
<TABLE>
<S> <C>
International Core Fund-Class III
Net Assets at Value (Equivalent to $23.20 per share based on $3,046,509,668
--------------
131,331,157 shares of beneficial interest outstanding)
Offering Price ($23.20 x 100/99.40)* $23.34
------
International Core Fund-Class IV
Net Assets at Value (Equivalent to $23.19 per share based on $682,952,207
------------
29,449,788 shares of beneficial interest outstanding)
Offering Price ($23.19 x 100/99.40)* $23.33
------
Growth Fund-Class III
Net Assets at Value (Equivalent to $4.38 per share based on $202,923,494
------------
46,341,959 shares of beneficial interest outstanding)
Offering Price ($4.38 x 100/99.86)* $4.39
-----
Short-Term Income Fund-Class III
Net Assets at Value (Equivalent to $9.81 per share based on $37,376,752
-----------
3,810,783 shares of beneficial interest outstanding)
Offering Price $9.81
-----
Japan Fund-Class III
Net Assets at Value (Equivalent to $6.36 per share based on $149,152,493
------------
23,446,166 shares of beneficial interest outstanding)
Offering Price ($6.36 x 100/99.60)* $6.39
-----
Value Fund-Class III
Net Assets at Value (Equivalent to $14.33 per share based on 23, $332,103,322
------------
178,490 shares of beneficial interest outstanding)
Offering Price ($14.33 x 100/99.86)* $14.35
------
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-47-
<PAGE> 50
<TABLE>
<S> <C>
Tobacco-Free Core Fund-Class III
Net Assets at Value (Equivalent to $14.05 per share based on
7,114,000 shares of beneficial interest outstanding) $99,922,438
-----------
Offering Price ($14.05 x 100/99.86)* $14.07
-----
Small Cap Value Fund-Class III
Net Assets at Value (Equivalent to $18.28 per share based on
42,096,585 shares of beneficial interest outstanding) $769,612,286
------------
Offering Price ($18.28 x 100/99.50)* $18.31
-----
International Small Companies Fund-Class III Net Assets at Value (Equivalent to
$12.22 per share based on
19,163,810 shares of beneficial interest outstanding) $234,154,557
------------
Offering Price ($12.22 x 100/99.00)* $12.34
-----
Fundamental Value Fund-Class III
Net Assets at Value (Equivalent to $11.92 per share based on
10,655,373 shares of beneficial interest outstanding) $127,036,283
------------
Offering Price ($11.92 x 100/99.85)* $11.94
-----
U.S. Sector Fund-Class III
Net Assets at Value (Equivalent to $8.53 per share based on
8,299,546 shares of beneficial interest outstanding) $70,822,838
-----------
Offering Price ($8.53 x 100/99.73)* $8.55
-----
Emerging Markets Fund-Class III
Net Assets at Value (Equivalent to $9.56 per share based on
95,539,011 shares of beneficial interest outstanding) $913,615,199
------------
Offering Price ($9.56 x 100/98.40)* $9.72
-----
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-48-
<PAGE> 51
<TABLE>
<S> <C>
Emerging Markets Fund-Class IV
Net Assets at Value (Equivalent to $9.56 per share based on
70,302,469 shares of beneficial interest outstanding) $672,020,425
Offering Price ($9.56 x 100/98.40)* $9.72
International Bond Fund-Class III
Net Assets at Value (Equivalent to $10.45 per share based on
28,048,515 shares of beneficial interest outstanding) $293,022,142
Offering Price ($10.45 x 100/99.85)* $10.47
Emerging Country Debt Fund-Class III
Net Assets at Value (Equivalent to $11.64 per share based on
39,550,731 shares of beneficial interest outstanding) $460,386,606
Offering Price ($11.64 x 100/99.50)* $11.70
Emerging Country Debt Fund-Class IV
Net Assets at Value (Equivalent to $11.63 per share based on
26,699,294 shares of beneficial interest outstanding) $310,579,861
Offering Price ($11.63 x 100/99.50)* $11.69
Global Hedged Equity Fund-Class III
Net Assets at Value (Equivalent to $8.72 per share based on
19,571,340 shares of beneficial interest outstanding) $170,705,669
Offering Price ($8.72 x 100/99.63)* $8.75
Domestic Bond Fund-Class III
Net Assets at Value (Equivalent to $10.26 per share based on
42,034,709 shares of beneficial interest outstanding) $431,410,381
Offering Price $10.26
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-49-
<PAGE> 52
<TABLE>
<S> <C>
Currency Hedged International Core Fund-Class III
Net Assets at Value (Equivalent to $11.92 per share based on
17,425,016 shares of beneficial interest outstanding) $207,653,004
Offering Price ($11.92 x 100/99.40)* $11.99
Currency Hedged International Core Fund-Class IV
Net Assets at Value (Equivalent to $11.92 per share based on
30,435,120 shares of beneficial interest outstanding) $362,828,641
Offering Price ($11.92 x 100/99.40)* $11.99
Global Bond Fund-Class III
Net Assets at Value (Equivalent to $10.15 per share based on
10,349,491 shares of beneficial interest outstanding) $105,052,076
Offering Price ($10.15 x 100/99.85)* $10.17
Global Balanced Allocation Fund-Class III
Net Assets at Value (Equivalent to $11.87 per share based on
9,707,961 shares of beneficial interest outstanding) $115,279,566
Offering Price ($11.87 x 100/99.65)* $11.91
World Equity Allocation Fund-Class III
Net Assets at Value (Equivalent to $10.39 per share based on
4,904,301 shares of beneficial interest outstanding) $50,951,655
Offering Price ($10.39 x 100/99.34)* $10.46
REIT Fund-Class III
Net Assets at Value (Equivalent to $12.92 per share based on
29,015,600 shares of beneficial interest outstanding) $374,774,153
Offering Price ($12.92 x 100/99.50)* $12.98
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-50-
<PAGE> 53
<TABLE>
<S> <C>
Foreign Fund-Class II
Net Assets at Value (Equivalent to $12.09 per share based on
4,460,629 shares of beneficial interest outstanding) $53,949,208
Offering Price $12.09
Foreign Fund-Class III
Net Assets at Value (Equivalent to $12.10 per share based on
70,009,604 shares of beneficial interest outstanding) $847,427,349
Offering Price $12.10
Foreign Fund-Class IV
Net Assets at Value (Equivalent to $12.11 per share based on
18,152,694 shares of beneficial interest outstanding) $219,784,667
Offering Price $12.11
Global Properties Fund-Class III
Net Assets at Value (Equivalent to $10.14 per share based on
992,142 shares of beneficial interest outstanding) $10,061,059
Offering Price ($10.14 x 100/99.40)* $10.20
International Equity Allocation Fund-Class III Net Assets at Value (Equivalent
to $10.18 per share based on
8,435,792 shares of beneficial interest outstanding) $85,875,507
Offering Price ($10.18 x 100/99.20) $10.26
Global (U.S.+) Equity Allocation Fund-Class III Net Assets at Value (Equivalent
to $10.48 per share based on
4,301,488 shares of beneficial interest outstanding) $45,101,000
Offering Price ($10.48 x 100/99.53) $10.53
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-51-
<PAGE> 54
<TABLE>
<S> <C>
Inflation Indexed Bond Fund-Class III
Net Assets at Value (Equivalent to $10.04 per share based on
2,556,935 shares of beneficial interest outstanding) $25,660,077
Offering Price ($10.04 x 100/99.90)* $10.05
U.S. Bond/Global Alpha A Fund-Class III
Net Assets at Value (Equivalent to $10.60 per share based on
21,548,708 shares of beneficial interest outstanding) $228,386,026
Offering Price ($10.60 x 100/99.85)* $10.62
U.S. Bond/Global Alpha B Fund-Class III
Net Assets at Value (Equivalent to $10.14 per share based on
37,541,918 shares of beneficial interest outstanding) $380,604,581
Offering Price ($10.14 x 100/99.85)* $10.16
Evolving Countries Fund-Class III
Net Assets at Value (Equivalent to $8.61 per share based on
4,612,685 shares of beneficial interest outstanding) $39,698,352
Offering Price ($8.61 x 100/98.4)* $8.75
Small Cap Growth Fund-Class III
Net Assets at Value (Equivalent to $12.28 per share based on
32,547,633 shares of beneficial interest outstanding) $399,612,993
Offering Price ($12.28 x 100/99.50)* $12.34
Currency Hedged International Bond Fund-Class III
Net Assets at Value (Equivalent to $10.66 per share based on
30,095,080 shares of beneficial interest outstanding) $320,905,207
Offering Price ($10.66 x 100/99.85)* $10.68
</TABLE>
- --------
* Represents maximum offering price charged on certain cash purchases.
See "Purchase of Shares" in the Prospectus.
-52-
<PAGE> 55
Appendix A - Sample Performance Calculations - U.S. Core Fund
GMO U.S. Core Fund - Class III shares
A) Average Annual Total Return
P (1+T)(n)=ERV
P=Hypothetical initial payment of $1,000
T=Average annual total return
n=Number of years
ERV=Ending redeemable value for hypothetical $1,000 payment made
1 Year
P(1+T)(1)=ERV
$1,000 (1+30.76%)(1)=$1,307.60
3 Year
P(1+T)(3)=ERV
$1,000 (1+29.37%)(3)=$2,165.21
5 Year
P(1+T)(5)=ERV
$1,000 (1+23.45%)(5)=$2,867.18
10 Year
P(1+T)(10)=ERV
$1,000 (1+19.15%)(10)=$5,766.87
Since Inception
P(1+T)(12.7781)=ERV
$1,000 (1+19.14%)(12.7781)=$9,372.85
B) Gross Return
Gross Return = Net Return + Total Operating Expense Ratio (# of Days in
the Relevant Period/365)
Gross Return 2Q 1998 = 2.06% + 0.48% (91/365) = 2.18%
Gross Return April 1998 = 0.28% + 0.48%(30/365) = 0.32%
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<PAGE> 56
C) Annual Total Return Compounding of Periodic Returns shown
below:
(1.0073957866)*(1.1178378378)*(0.9872330097)*(1.1617338487)*
(1.0138292799)=30.94%
D) Annual Total Return
6/30/97 - 7/1/97
NAV End of Period + Dividend
---------------------------- - 1 X 100
NAV Beginning of Period
$18.50 + $3.975
----------------------------------------- - 1 X 100 = 0.73957866%
$22.31
7/1/97 - 10/1/97
NAV End of Period + Dividend
---------------------------- - 1 X 100
NAV Beginning of Period
$20.60 + $.08
-------------------------------------------- - 1 X 100 = 11.78378378%
$18.50
10/1/97 - 12/22/97
NAV End of Period + Dividend
---------------------------- - 1 X 100
NAV Beginning of Period
$18.11 + $2.227
----------------------------------------- - 1 X 100 = (1.27669903%)
$20.60
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<PAGE> 57
12/22/97 - 4/1/98
NAV End of Period + Dividend
---------------------------- - 1 X 100
NAV Beginning of Period
$20.97 + $.069
- ------------------------------------------------- - 1 X 100 = 16.17338487%
$18.11
4/1/98 - 6/30/98
NAV End of Period
----------------------- - 1 X 100
NAV Beginning of Period
$21.26
- ----------------------------------------------------- - 1 X 100 = 1.38292799%
$20.97
-55-
