<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF GMO TRUST AND THE SHAREHOLDERS OF
GMO FUNDAMENTAL VALUE FUND (A SERIES OF GMO TRUST)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of GMO Fundamental Value Fund at June
30, 2000, the results of its operations, the changes in its net assets and the
financial highlights for each of the periods indicated therein, in conformity
with accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at June 30, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 21, 2000
<PAGE>
GMO Fundamental Value Fund
(A Series of GMO Trust)
Schedule of Investments
(showing percentage of total net assets)
June 30, 2000
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE ($)
-----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 97.3%
CAPITAL GOODS -- 13.9%
2,500 Honeywell International Inc 84,219
1,000 Thomas & Betts Corp 19,125
---------
103,344
---------
COMMUNICATION SERVICES -- 3.4%
500 Bell Atlantic Corp 25,406
---------
CONSUMER CYCLICALS -- 16.4%
500 Black and Decker Corp 19,656
1,000 Block (H&R) Inc 32,375
1,000 Federated Department Stores Inc* 33,750
2,500 Toys R Us Inc* 36,406
---------
122,187
---------
CONSUMER STAPLES -- 28.3%
2,000 CVS Corp 80,000
1,000 Kimberly-Clark Corp 57,375
1,000 Kroger Co* 22,062
1,000 R.R. Donnelley and Sons 22,562
1,500 Sara Lee Corp 28,969
---------
210,968
---------
ENERGY -- 16.1%
500 Conoco Inc, Class B 12,281
2,500 Unocal Corp 82,813
1,000 USX - Marathon Group 25,063
---------
120,157
---------
FINANCIALS -- 4.6%
500 Bank of America Corp 21,500
500 Mack-Cali Realty Corp, REIT 12,844
---------
34,344
---------
HEALTH CARE -- 1.8%
1,000 Acuson Corp* 13,500
---------
TECHNOLOGY -- 12.8%
500 Eastman Kodak Co 29,750
500 IBM Corp 54,781
</TABLE>
See accompanying notes to the financial statements. 1
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
SCHEDULE OF INVESTMENTS -- (CONTINUED)
(SHOWING PERCENTAGE OF TOTAL NET ASSETS)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE ($)
-----------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- CONTINUED
1,000 Storage Technology Corp* 10,938
---------
95,469
---------
TOTAL COMMON STOCKS (COST $701,310) 725,375
---------
TOTAL INVESTMENTS -- 97.3%
(Cost $701,310) 725,375
Other Assets and Liabilities (net) -- 2.7% 20,152
---------
TOTAL NET ASSETS -- 100.0% $ 745,527
=========
NOTES TO THE SCHEDULE OF INVESTMENTS:
REIT - Real Estate Investment Trust
* Non-income producing security.
</TABLE>
2 See accompanying notes to the financial statements.
<PAGE>
GMO Fundamental Value Fund
(A Series of GMO Trust)
Statement of Assets and Liabilities -- June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $701,310) (Note 1) $725,375
Receivable for investments sold 221,311
Dividends and interest receivable 1,195
--------
Total assets 947,881
--------
LIABILITIES:
Payable for investments purchased 185,292
Due to custodian 3,514
Payable to affiliate for (Note 2):
Management fee 3,565
Shareholder service fee 94
Accrued expenses and other liabilities 9,889
--------
Total liabilities 202,354
--------
NET ASSETS $745,527
========
NET ASSETS CONSIST OF:
Paid-in capital $481,624
Accumulated net realized gain 239,838
Net unrealized appreciation 24,065
--------
$745,527
========
NET ASSETS ATTRIBUTABLE TO:
Class III shares $745,527
========
SHARES OUTSTANDING:
Class III 81,855
========
NET ASSET VALUE PER SHARE:
Class III $ 9.11
========
</TABLE>
See accompanying notes to the financial statements. 3
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 1, 2000 YEAR ENDED
THROUGH JUNE 30, 2000* FEBRUARY 29, 2000
------------------------------- --------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of withholding taxes of $0 and $8,352,
respectively) $ 4,322 $ 690,283
Interest (including securities lending income of $0
and $2,849, respectively) 742 62,000
------------- ----------------
Total income 5,064 752,283
------------- ----------------
EXPENSES:
Management fee (Note 2) 1,391 183,059
Audit fees 4,700 16,564
Custodian and transfer agent fees 2,042 11,063
Legal fees -- 1,071
Registration fees -- 2,012
Trustees fees (Note 2) -- 366
Miscellaneous 1,026 1,835
Fees waived or borne by Manager (Note 2) (7,768) (32,911)
------------- ----------------
1,391 183,059
Shareholder service fee (Note 2)
Class III 348 45,765
------------- ----------------
Net expenses 1,739 228,824
------------- ----------------
Net investment income 3,325 523,459
------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 115,907 21,350,704
Foreign currency, forward contracts and foreign
currency related transactions (482) (229)
------------- ----------------
Net realized gain 115,425 21,350,475
------------- ----------------
Change in net unrealized appreciation (depreciation)
on:
Investments 75,859 (11,811,730)
Foreign currency, forward contracts and foreign
currency related transactions 429 (498)
------------- ----------------
Net unrealized gain (loss) 76,288 (11,812,228)
------------- ----------------
Net realized and unrealized gain 191,713 9,538,247
------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 195,038 $ 10,061,706
============= ================
</TABLE>
* Change in fiscal year end. See Note 1.
4 See accompanying notes to the financial statements.
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 1, 2000 YEAR ENDED YEAR ENDED
THROUGH JUNE 30, 2000* FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------------------- -------------------- --------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 3,325 $ 523,459 $ 1,653,398
Net realized gain 115,425 21,350,475 28,697,755
Change in net unrealized appreciation
(depreciation) 76,288 (11,812,228) (26,005,231)
-------- ------------- -------------
Net increase in net assets from operations 195,038 10,061,706 4,345,922
-------- ------------- -------------
Distributions to shareholders from:
Net investment income
Class III -- (703,229) (1,820,272)
-------- ------------- -------------
Total distributions from net investment income -- (703,229) (1,820,272)
-------- ------------- -------------
In excess of net investment income
Class III -- (72,555) --
-------- ------------- -------------
Total distributions in excess of net
investment income -- (72,555) --
-------- ------------- -------------
Net realized gains
Class III -- (4,135,387) (43,849,538)
-------- ------------- -------------
Total distributions from net realized gains -- (4,135,387) (43,849,538)
-------- ------------- -------------
-- (4,911,171) (45,669,810)
-------- ------------- -------------
Net share transactions: (Note 5)
Class III -- (86,661,873) (3,650,568)
-------- ------------- -------------
Decrease in net assets resulting from net share
transactions -- (86,661,873) (3,650,568)
-------- ------------- -------------
Total increase (decrease) in net assets 195,038 (81,511,338) (44,974,456)
NET ASSETS:
Beginning of period 550,489 82,061,827 127,036,283
-------- ------------- -------------
End of period (including undistributed net
investment income of $0, distributions in
excess of net investment income of $239,226,
undistributed net investment income of
$179,770, respectively) $745,527 $ 550,489 $ 82,061,827
======== ============= =============
</TABLE>
* Change in fiscal year end. See Note 1.
See accompanying notes to the financial statements. 5
<PAGE>
GMO Fundamental Value Fund
(A Series of GMO Trust)
Financial Highlights
(For a Class III share outstanding throughout each period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 1, 2000 YEAR ENDED FEBRUARY 28/29,
THROUGH -------------------------------------------------------------
JUNE 30, 2000* 2000 1999 1998 1997 1996
--------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.73 $ 7.07 $ 11.92 $ 16.33 $ 15.04 $ 12.54
------- ------- ------- -------- -------- --------
Income from investment operations:
Net investment income 0.04+ 0.13+ 0.18 0.35 0.33 0.37
Net realized and unrealized gain 2.34 1.92 0.19 3.90 2.53 3.26
------- ------- ------- -------- -------- --------
Total from investment operations 2.38 2.05 0.37 4.25 2.86 3.63
------- ------- ------- -------- -------- --------
Less distributions to shareholders:
From net investment income -- (1.35) (0.20) (0.38) (0.32) (0.37)
In excess of net investment income -- (0.14) -- -- -- --
From net realized gains -- (0.90) (5.02) (8.28) (1.25) (0.76)
------- ------- ------- -------- -------- --------
Total distributions -- (2.39) (5.22) (8.66) (1.57) (1.13)
------- ------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.11 $ 6.73 $ 7.07 $ 11.92 $ 16.33 $ 15.04
======= ======= ======= ======== ======== ========
TOTAL RETURN(a) 35.36%** 33.16% 2.30% 30.43% 20.03% 29.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 746 $ 550 $82,062 $127,036 $232,583 $212,428
Net expenses to average daily net
assets 0.75%*** 0.75% 0.75% 0.75% 0.75% 0.75%
Net investment income to average daily
net assets 1.43%*** 1.72% 1.67% 1.84% 2.15% 2.61%
Portfolio turnover rate 388% 54% 34% 21% 25% 34%
Fees and expenses voluntarily waived
or borne by the Manager consisted of
the following per share amounts: $ 0.10 $ 0.01 $ 0.02 $ 0.04 $ 0.02 $ 0.01
</TABLE>
(a) Calculation excludes purchase premiums. The total returns would have been
lower had certain expenses not been waived during the periods shown.
+ Computed using average shares outstanding throughout the period.
* Change in fiscal year end. See Note 1.
** Not annualized.
*** Annualized.
6 See accompanying notes to the financial statements.
<PAGE>
GMO Fundamental Value Fund
(A Series of GMO Trust)
Notes to Financial Statements
June 30, 2000
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GMO Fundamental Value Fund (the "Fund") is a series of GMO Trust (the
"Trust"). The Fund is registered under the Investment Company Act of 1940,
as amended, as an open-end, non-diversified management investment company.
The Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC
(the "Manager" or "GMO"). The Trust was established as a Massachusetts
Business Trust under the laws of the Commonwealth of Massachusetts on
June 24, 1985. The Declaration of Trust permits the Trustees to create an
unlimited number of series ("Funds"), each of which issues a separate
series of shares, and to subdivide a series of shares into classes.
The Fund seeks long-term capital growth primarily through investment in
stocks of approximately 20-30 companies. The Fund's benchmark is the S&P
500 Index.
The Fund's year end has been changed from February 28 to June 30.
The following is a summary of significant accounting policies which are in
conformity with accounting principles generally accepted in the United
States and which are consistently followed by the Fund in the preparation
of its financial statements. The preparation of the financial statements in
accordance with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION
Portfolio securities listed on a securities exchange for which market
quotations are available are valued at the last sale price on each business
day, or if there is no such reported sale, at the most recent quoted bid
price. Unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price. Short-term
investments with a remaining maturity of sixty days or less are valued at
amortized cost which approximates market value. Securities for which
quotations are not readily available are valued at fair value as determined
in good faith by the Trustees or other persons acting at their direction.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with certain banks and
broker/dealers whereby the Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed upon price and date. The Fund, through its custodian, takes
possession of securities collateralizing the repurchase agreement. The
collateral is marked to market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund in the event of
default by the seller. Collateral for certain tri-party repurchase
agreements is held at the counterparty's custodian in a segregated account
for the benefit of the Fund and the counterparty. In connection with
transactions in repurchase agreements, if the seller defaults and the value
of the collateral declines or if the seller enters insolvency proceedings,
realization of collateral by the Fund may be delayed or limited.
SECURITY LENDING
The Fund may lend its securities to qualified brokers. The loans are
collateralized at all times with cash or securities with a market value at
least equal to the market value of the securities on loan. As
7
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
with other extensions of credit, the Fund may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of
the securities fail financially. The Fund receives compensation for lending
its securities. At June 30, 2000, the Fund had no securities on loan.
TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended. The
Fund intends to distribute substantially all of its net investment income
and net realized short-term and long-term capital gains, if any, after
giving effect to any available capital loss carryovers for U.S. federal
income tax purposes. Therefore, no provision for U.S. federal income or
excise tax is necessary. Taxes on foreign dividend income are withheld in
accordance with the applicable country's tax treaty with the United States.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund's policy is to declare and pay distributions from net investment
income quarterly, and from net realized short-term and long-term capital
gains at least annually. All distributions will be paid in shares of the
Fund, at net asset value, unless the shareholder elects to receive cash
distributions. Distributions to shareholders are recorded by the Fund on
the ex-dividend date.
Income dividends and capital gain distributions are determined in
accordance with U.S. federal income tax regulations which may differ from
accounting principles generally accepted in the United States. These
differences are primarily due to redesignation of distributions.
The following reclassification represents the amount necessary to report
the stated components of net assets on a tax basis, excluding certain
temporary differences, as of June 30, 2000. This reclassification has no
impact on net investment income, realized gain/loss or the net asset value
of the Fund and is primarily attributable to certain differences in the
computation of distributable income and capital gains under U.S. federal
tax rules versus accounting principles generally accepted in the United
States. The calculation of net investment income per share in the financial
highlights excludes these adjustments.
<TABLE>
<CAPTION>
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain Paid-in Capital
----------------- ----------------- ---------------
<S> <C> <C>
$235,901 $(235,901) $ --
</TABLE>
Distributions in excess of tax basis earnings and profits, if any, are
reported in the Fund's financial statements as a return of capital.
Differences in the recognition or classification of income for financial
statement and tax purposes which result in temporary over-distributions for
financial statement purposes are classified as distributions in excess of
net investment income or accumulated net realized gains.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on trade date. Dividend income, net
of applicable foreign withholding taxes, is recorded on the ex-dividend
date. Interest income is recorded on the accrual
8
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
basis and is adjusted for the accretion of discounts. In determining the
net gain or loss on securities sold, the cost of securities is determined
on the identified cost basis. Dividends representing a return of capital
are reflected as a reduction of cost.
EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
PURCHASES AND REDEMPTIONS OF FUND SHARES
Effective April 7, 2000, the Fund no longer charges a premium on cash
purchases of Fund shares. Prior to April 7, 2000, the premium on cash
purchases of Fund shares was .15% of the amount invested. For the period
ended June 30, 2000, the Fund received no purchase premiums.
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
GMO earns a management fee paid monthly at the annual rate of .60% of
average daily net assets. The Fund has adopted a Shareholder Service Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting, and other support. Pursuant to the
Shareholder Service Plan, the shareholder service fee is calculated based
on the average daily net assets at the annual rate of .15% for Class III
shares.
GMO has entered into a binding agreement effective until June 30, 2001 to
reimburse the Fund to the extent that the Fund's total annual operating
expenses (excluding brokerage commissions, certain other transaction costs
(including transfer taxes), shareholder service fees and extraordinary
expenses) exceed the management fee.
The Fund's portion of the fee paid by the Trust to the unaffiliated
Trustees for the period ended June 30, 2000 was $0. No remuneration is paid
to any trustee or officer who is affiliated with the Manager.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the period ended June 30, 2000, aggregated
$2,450,828 and $2,480,403, respectively.
At June 30, 2000 the cost for U.S. federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments were as
follows:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized Net Unrealized
Aggregate Cost Appreciation Depreciation Appreciation
-------------- ---------------- ---------------- --------------
<S> <C> <C> <C>
$708,950 $34,046 $(17,621) $16,425
</TABLE>
9
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A SERIES OF GMO TRUST)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 2000
--------------------------------------------------------------------------------
4. PRINCIPAL SHAREHOLDERS
At June 30, 2000, 100% of the outstanding shares of the Fund were held by
one shareholder. Investment activities of this shareholder could have a
material effect.
5. SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest (without par value). Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
For the period
March 1, 2000
through Year Ended Year Ended
June 30, 2000* February 29, 2000 February 28, 1999
---------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount
------- ------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class III:
Shares sold -- $-- 81,855 $ 500,376 2,272 $ 16,500
Shares issued to shareholders
in reinvestment of distributions -- -- 597,068 4,179,059 5,275,741 43,852,942
Shares repurchased -- -- (12,211,324) (91,341,308) (4,319,130) (47,520,010)
------ ------ ----------- ------------ ---------- ------------
Net increase (decrease) -- $-- (11,532,401) $(86,661,873) 958,883 $ (3,650,568)
====== ====== =========== ============ ========== ============
</TABLE>
* Change in fiscal year end. See Note 1.
10
<PAGE>
GMO FUNDAMENTAL VALUE FUND
(A Series of GMO Trust)
PORTFOLIO MANAGER
-----------------
Mr. Richard Mayo is responsible for the management of the GMO Fundamental
Value Fund. Mr. Mayo has been a portfolio manager with GMO since its founding
in 1977 and began his career in the late 1960's.
MANAGEMENT DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
------------------------------------------------------
For the four months ending June 30, 2000, the GMO Fundamental Value Fund
rose by 35.4%, while the S & P 500 rose 6.9%. During this period the
market experienced unprecedented volatility stimulated by investors' sober
reassessment of what technology companies were worth and the realization that
many of the new Internet companies did not have viable business models. We
avoided the major losses in the technology sector by having no investments in
the sector throughout most of the period - a radical bet. We were reacting
to valuation extremes.
Our preference was to hold some stocks (Washington Mutual and Toys R Us) that
were severely undervalued due to the selloff of non-tech stocks in January
and February and to have a position in REITs that hopefully would be good
performers in a difficult market environment. More importantly, we positioned
the Fund to benefit from the possible movement of aggressive growth investors
toward non-technology areas. This we thought required companies with stable
earnings, perceived double digit growth rates, and good valuation. Health
care was an obvious area. The major drug companies were a little too rich for
us, but good opportunities existed in Hospital Corp. of America, Tenet
Healthcare, and CVS which had been penalized as growth expectations declined
from 20% to 15%. Schering Plough was added during a major selloff at $35 and
sold at the mid $40's range. Also in this category are our longer-term
holdings like Kimberly Clark, which performed admirably in a turbulent market
and probably accounted for 25% of our gain relative to the market.
Important to results also was our energy position - about 15% of the
portfolio in March. We had been frustrated that investors were ignoring the
improving commodity pricing environment, particularly the surging natural gas
price. Patience was rewarded and this group produced 30% gains trough to
peak. We trimmed the position in early June and in August started adding
again. We have high conviction these stocks can provide good returns in a
difficult market.
I should also mention that we traded some stocks successfully - Kroger and
Staples for example - and ventured into the technology area after the 40%
decline seemed to run its course. We made 40% in Agency.com (it had declined
85%). We bought Motorola after it dropped 50%, traded IBM for a 10% gain, and
have recently added Compaq.
<PAGE>
To sum up, we greatly benefited from taking a major bet against technology
valuations and getting our sectors right - REITs, energy, and stable
growth (growth at a reasonable price). Also, volatility was an opportunity.
Producing comparable results going forward may be more difficult as the
"bifurcated market" has adjusted significantly though I think we are still
in a stock picker's market that is not limited to just technology.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
GMO FUNDAMENTAL VALUE FUND CLASS III SHARES AND THE S&P 500 INDEX
AS OF JUNE 30, 2000
[CHART]
Fundamental Value Fund-III
As of 6/30/00
<TABLE>
<CAPTION>
Date GMO Fundamental Value Fund S&P 500 Index
<S> <C> <C>
10/31/91 10000 10000
12/31/91 10352.826 10694.8968
3/31/92 10644.81008 10426.15042
6/30/92 10948.51897 10624.56885
9/30/92 11213.09722 10960.22423
12/31/92 11794.03232 11512.38516
3/31/93 13020.422 12015.25593
6/30/93 13625.02372 12073.61522
9/30/93 14148.95659 12384.9761
12/31/93 14443.45679 12672.75948
3/31/94 14114.4103 12191.43593
6/30/94 14069.08726 12242.51045
9/30/94 15090.28791 12841.30714
12/31/94 14957.92974 12839.54992
3/31/95 16385.50242 14089.67926
6/30/95 17644.9471 15434.7799
9/30/95 18869.32782 16661.25866
12/31/95 19532.29956 17664.3833
3/31/96 20777.7049 18612.53081
6/30/96 21409.85107 19447.78698
9/30/96 21644.69643 20048.8461
12/31/96 23984.03131 21720.1114
3/31/97 23878.10972 22302.43338
6/30/97 27016.29473 26195.97764
9/30/97 29928.41384 28158.27076
12/31/97 30878.75397 28966.6578
3/31/98 33690.83059 33006.54735
6/30/98 33937.24105 34096.43752
9/30/98 30548.0083 30704.67331
12/31/98 33999.23825 37243.64014
3/31/99 33392.94065 39099.41394
6/30/99 37461.24504 41855.68782
9/30/99 39507.46262 39241.59
12/31/99 46658.53399 45079.48818
3/31/00 53932.5482 46113.38753
6/30/00 59699.33369 44887.93027
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
1 Year 5 Year Inception
10/31/91
<S> <C> <C> <C>
Class III 59.36%* 27.57% 22.88%
</TABLE>
Performance shown is net of all fees after reimbursement from the manager.
Returns and net asset values of fund investments will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. The total returns would have been lower had certain expenses
not been reimbursed during the periods shown and do not include the effect of
taxes. Each performance figure assumes purchase at the beginning and
redemption at the end of the stated period. Effective April 7, 2000, the Fund
ceased charging a 15 bp subscription fee, and this performance information is
exclusive of that fee. Transaction fees are retained by the Fund to cover
trading costs.
* Since July 17, 1999, the Fund's net asset level has been less than
$1,000,000. Prior to that date, and during the period from July 17 to
November 3, 1999, the Fund had operating policies different from current
policies. These factors contributed to the Fund's outperforming its benchmark
during the period from July 17, 1999 to June 30, 2000. The Fund's
outperformance is not representative of the Fund's prior performance and is
not an indication of future performance.
Information is unaudited.
