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Gmo Trust – ‘N-30D’ for 8/31/97

As of: Thursday, 11/6/97 · For: 8/31/97 · Accession #: 950109-97-6637 · File #: 811-04347

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/06/97  Gmo Trust                         N-30D       8/31/97    1:1.3M                                   Donnelley R R & S… 01/FA

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Semi-Annual Reports                                  667   3.05M

Document Table of Contents

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			Alternative Formats (Word, et al.) Fund
1	1st Page - Filing Submission
480	Fund

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                                                                November 6, 1997

VIA EDGAR                                                                       

Securities and Exchange Commission                                              
Office of Filings, Information and Consumer Services                            
450 Fifth Street, NW                                                            
Washington, D.C. 20549                                                          

RE:  GMO Trust (the "Trust")                                                    
File No. 011-4347                                                     

Ladies and Gentlemen:                                                           

  Pursuant to Rule 30(b)(2)-1 under the Investment Company Act of 1940. As
Amended, we are transmitting via EDGAR the GMO Trust Semi-Annual Reports for the
period ended August 31, 1997. Please be advised that the above-referenced Fund's
financials for the aforementioned period are included in this document.         

If you  have any questions, please telephone the undersigned at (617) 
330-6027. Thank you for your assistance with this matter.                       

                                         Very truly yours,

                                         Donna M. McCarthy
                                       Account Manager

N-30D 2nd Page of 667 TOC 1st Previous Next ↓Bottom Just 2nd
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 3rd Page of 667 TOC 1st Previous Next ↓Bottom Just 3rd
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      STOCK AND EQUIVALENTS - 87.8%                                                                
                      Argentina - 4.0%                                                                             
            256,520   Alpargatas SA *                                                                      212,954 
            825,616   Atanor SA D Shares                                                                 1,197,383 
            305,440   Capex SA Class A (Voting)                                                          2,612,034 
          2,179,454   Central Costanera Class B (Voting)                                                 7,411,626 
          2,183,500   Central Puerto B Shares                                                            6,224,220 
          1,952,414   Cia Celulosa Argentina SA Class B *                                                  976,402 
          1,034,415   Ciadea SA (Bearer)                                                                 2,658,978 
            186,122   Fiplasto Class B                                                                     753,945 
          1,589,939   Garovaglio Y Zorraquin *                                                           6,440,541 
             93,000   Inversiones SA                                                                       409,282 
          1,080,459   Ledesma SA                                                                         1,296,810 
            459,598   Nobelza Piccardo                                                                   2,919,031 
            155,500   Perez Companc SA Class B                                                           1,241,138 
             67,983   Pirelli Cables Industria *                                                           142,793 
             79,358   Polledo *                                                                            119,061 
            264,950   Quimica Estrella Class B                                                             357,754 
             45,970   Quimica Estrella Preferred 10% (d)                                                    45,979 
            379,043   Rigolleau Christalerias Preferred *                                                  439,778 
          1,839,928   Siderca                                                                            5,769,328 
             78,800   Telecom Argentina SA ADR                                                           2,176,850 
          2,925,000   Transportadora De Gas Del Sur Class B                                              6,962,893 
            736,453   YPF SA ADR                                                                        23,980,751 
                                                                                                 ------------------
                                                                                                        74,349,531 
                                                                                                 ------------------
                      Brazil - 11.1%                                                                               
          6,531,000   Acos Villares SA Preferred                                                         1,465,288 
          2,300,000   Alpargatas de Sao Paulo                                                              104,237 
         35,870,000   Alpargatas de Sao Paulo Preferred                                                  1,609,223 
          1,557,000   Aracruz Cellulose Class B Preferred                                                3,165,330 
        148,940,000   Banco Nacional Preferred (c)                                                           1,364 
         25,040,000   Belgo Mineira Preferred (Registered)                                               1,699,143 
          4,400,000   Belgo Mineira (Registered)                                                           330,403 
        511,700,003   Bombril SA Preferred                                                               4,592,180 
          6,800,000   Brasmotor Preferred (Registered)                                                   1,282,784 
         21,500,000   Caemi Mineracao e Metalurgica SA Preferred                                         1,201,007 
        555,100,000   Cemig Preferred                                                                   24,908,333 
        143,400,000   Ceva Ceval Alimentos SA Preferred                                                  1,483,901 
         34,000,000   Cia Energentica Perna Class A Preferred *                                            435,897 
        162,100,000   Cia Energetica de Sao Paulo SA Preferred (Registered) *                           11,059,020 
         18,500,000   Cia Energetica de Sao Paulo SA *                                                   1,153,201 
        246,500,000   Cia Hering Preferred (Registered)                                                  3,724,588 
         14,900,000   Copel PNA                                                                            259,249 
         12,689,000   Copene-Petroquimica do Nordeste SA Class A Preferred                               4,961,724 
          1,637,000   Cosipa PN Class B *                                                                  929,432 
         67,233,771   Electrobras Class B Preferred (Registered)                                        30,599,986 
         17,900,000   Electrobras Common                                                                 7,622,253 
         49,000,000   Energetica Ceara Class A Preferred *                                                 228,846 
        113,950,000   Ericsson Telecomunicacoes Perferred                                                5,614,020 

             See accompanying notes to the financial statements.             1

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      Brazil - continued                                                                           
          2,000,000   Ericsson Telecomunicacoes Common                                                      84,249 
        660,000,000   Fertilizantes Fosfatados Preferred                                                 3,324,176 
        511,732,118   Gerdau SA Preferred                                                               10,028,450 
          1,336,261   Iochpe Maxion Preferred                                                              116,250 
        262,400,000   Iparanga Brasil De Petroleo Preferred                                              4,205,128 
         42,420,000   Mesbla Preferred (Registered) (d) *                                                  194,231 
        223,302,674   Metalurgica Gerdau Preferred                                                      10,019,992 
         12,598,589   Metalurgica Gerdau SA                                                                346,115 
        335,746,000   Olvebra Preferred *                                                                   33,821 
        205,500,000   Petrobras Distrib Preferred                                                        5,271,113 
         66,580,000   Petroleo Brasileiro SA Preferred                                                  16,279,176 
        583,800,000   Siderurgica de Tubarao Preferred Class B                                           9,783,462 
        271,810,000   Telecomunicacoes Brasileiras SA ORD                                               29,122,500 
          5,830,152   Unipar Preferred                                                                   2,082,197 
            600,740   Usiminas Preferred                                                                 6,106,423 
            673,000   Varig Preferred (Registered) *                                                     1,355,861 
                                                                                                 ------------------
                                                                                                       206,784,553 
                                                                                                 ------------------
                      Chile - 2.6%                                                                                 
            103,200   Banco Santiago Sponsored ADR                                                       2,586,450 
             22,000   Chile Fund Inc                                                                       534,875 
             88,600   Chilectra SA Sponsored ADR                                                         2,835,200 
            286,508   Chilgener ADR                                                                      7,807,343 
             47,000   Chilquinta Sponsored ADR                                                             752,000 
             94,200   Chilquinta Sponsored ADR 144A                                                      1,507,200 
            181,000   Compania de Telefones de Chile ADR                                                 5,441,313 
             14,200   Cristalerias de Chile SA ADR                                                         275,125 
             46,900   Embotelladora Andina ADR Class A                                                   1,151,981 
             46,900   Embotelladora Andina Class B ADR                                                   1,084,563 
            368,700   Empresa Natl de Electricidad ADR                                                   8,203,575 
            143,500   Enersis SA ADR                                                                     5,103,219 
          1,330,000   Five Arrows Chile Investment Trust Ltd                                             4,295,900 
            156,100   Maderas Y Sinteticos Soc ADR                                                       2,263,450 
             45,500   Soc Quinica Y Minera de Chile Sponsored ADR                                        2,747,063 
             71,400   Vina Concha Y Torosa Sponsored ADR                                                 1,936,725 
                                                                                                 ------------------
                                                                                                        48,525,982 
                                                                                                 ------------------
                      China - 0.8%                                                                                 
          6,466,000   Dongfang Electrical Machinery Class H                                              3,045,670 
            930,000   Guangdong Kelon Elec Holding H                                                     1,158,149 
          7,034,000   Harbin Power Equipment Class H                                                     2,337,405 
             59,650   Huaneng Power International ADR *                                                  1,409,231 
          1,465,800   Nanjing Posts & Telephone Class B *                                                  750,965 
          4,140,000   Northeast Electrical Transmission & Transformation Machinery                                 
                          Manufacturing Co Ltd Class H                                                   1,389,082 
          5,004,000   Qingling Motor Co Ltd Class H                                                      2,825,203 
             81,498   Shanghai Haixing Class B Rights *                                                        163 
            797,832   Shanghai Haixing Shipping Co Ltd Class B                                             588,800 
            760,000   Tianjin Bohai Chemical Industry (Group) Co Ltd Class H *                             240,289 
          2,190,000   Yizheng Chemical Fibre Co                                                          1,596,787 
                                                                                                 ------------------
                                                                                                        15,341,744 
                                                                                                 ------------------

2              See accompanying notes to the financial statements.              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      Colombia - 0.1%                                                                              
             26,200   Banco Ganadero SA Sponsored ADR                                                      949,750 
                                                                                                 ------------------

                      Czech Republic - 1.7%                                                                        
             20,983   AGB Podilovy Fond *                                                                  503,152 
             34,000   Alpha Effect                                                                         784,904 
             50,000   Cez 2                                                                              1,194,483 
             19,000   CKD Praha Holding AS *                                                               585,773 
             60,934   Czech Republic Fund Inc                                                              830,226 
              9,300   IF Bohatstvi *                                                                       252,647 
             38,397   IF Zivnobanka                                                                        543,284 
            212,249   IPS Praha                                                                          1,517,374 
            197,800   Komercni Bank AS GDR 144A                                                          4,005,450 
              8,600   Komercni Banka AS GDR                                                                174,150 
              9,800   Komercni Banka IF *                                                                  190,331 
              2,870   Leciva AS *                                                                          208,255 
              7,092   Metrostav AS                                                                         529,824 
             64,000   PF IKS KB Plus                                                                       371,273 
             31,000   PIF (Privat Inv Fond)                                                                421,078 
             62,300   Restitucni IF                                                                      1,659,057 
             16,624   Sepap AS *                                                                           616,016 
            111,231   Skoda Koncernplzen *                                                               2,919,023 
            367,188   SP Vseobecny *                                                                       929,701 
             27,366   Spif Cesky                                                                           322,807 
            212,476   Spif Vynosovy                                                                      1,193,045 
             17,000   Sporitelni Privatizacni *                                                            395,490 
             64,470   SPT Telecom AS *                                                                   8,102,199 
              1,926   Stavby Silnic A Zeleznic SA                                                           50,716 
             28,350   Synthesia *                                                                          193,386 
            441,700   Unipetrol (d) *                                                                    1,435,318 
             74,433   Zivnobanka Preferred                                                                 911,262 
                                                                                                 ------------------
                                                                                                        30,840,224 
                                                                                                 ------------------
                      Egypt - 1.0%                                                                                 
             84,000   Al Ahram Beverages Co GDR *                                                        2,142,000 
             23,000   Alexandria Cement                                                                    441,048 
             98,000   Ameriyah Cement Co                                                                 2,422,602 
             83,000   Commercial International Bank GDR                                                  2,079,150 
             43,990   Eastern Tobacco Co                                                                 1,113,343 
             14,800   Egyptian International Pharm Investment                                              958,211 
            117,800   Helwan Portland Cement Co                                                          2,446,135 
             41,750   Middle Egypt Flour Mills                                                             485,322 
            104,500   Misr International Bank Sae GDR 144A *                                             1,645,875 
             18,000   Suez Cement Co                                                                       376,633 
            122,881   Suez Cement Co GDR 144A                                                            2,562,069 
             60,250   Torrah Portland Cement                                                             1,595,792 
             28,935   Upper Egypt Flour Mills                                                              666,323 
                                                                                                 ------------------
                                                                                                        18,934,503 
                                                                                                 ------------------

See accompanying notes to the financial statements. 
                                                                             3

N-30D 6th Page of 667 TOC 1st Previous Next ↓Bottom Just 6th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      Greece - 2.7%                                                                                
            374,170   Aegek                                                                              1,876,731 
             99,445   Alpha Credit Bank (Registered)                                                     6,505,321 
            149,480   Alpha Leasing (Registered)                                                         3,590,350 
             32,730   Aluminum of Greece Common (Registered)                                             2,080,958 
             35,900   Aluminum of Greece Preferred 10.41%                                                2,211,494 
            673,470   Balkan Export *                                                                      442,462 
            236,900   Boutaris and Son Holdings *                                                          214,215 
            378,446   Commercial Bank of Greece (Registered)                                            15,091,856 
             75,740   Delta Dairy SA Common                                                              1,043,361 
                530   Delta Dairy SA Preferred                                                               5,008 
              8,940   Econ Viomihanies (d) *                                                                 7,200 
             41,267   Ergo Bank SA (Registered)                                                          2,412,380 
            105,144   Etba Leasing (Registered)                                                            958,184 
             87,500   Etma Rayon Manufacturing                                                             148,661 
            330,820   Hellenic Sugar Industry                                                            1,875,476 
             59,365   Ionian Bank (Registered) *                                                         1,164,821 
             15,020   Klonatex SA GDR                                                                      232,375 
            390,432   Michaniki SA Common (Registered)                                                   2,413,394 
             18,072   Michaniki SA Preferred (Registered)                                                   82,346 
            103,000   Naoussa Spinning Mills SA GDR                                                        360,178 
             33,432   National Bank of Greece (Registered) *                                             3,910,497 
              6,875   National Investment Bank for Industrial Development (Registered)                     369,115 
             33,900   National Mortgage Bank of Greece                                                   1,997,287 
             14,500   Petzetakis SA Common *                                                                66,582 
             26,750   Petzetakis SA Preferred *                                                             63,211 
             41,000   Strintzis Lines SA                                                                   128,021 
                                                                                                 ------------------
                                                                                                        49,251,484 
                                                                                                 ------------------
                      Hungary - 0.9%                                                                               
              3,280   Cofinec Sponsored GDR 144A *                                                          74,620 
             38,972   Danubus Hotel (Registered) *                                                       1,075,227 
             21,414   Egis Gyogysergyar                                                                  1,044,852 
          1,865,951   Fotex (Registered) *                                                               2,278,515 
             27,046   Graboplast (Registered)                                                            1,803,297 
              8,293   Matav (Registered) *                                                               3,516,766 
            100,000   Mol Magyar Olaj GDR 144A                                                           1,995,000 
             20,661   Pannonplast Muanyagipari                                                           1,013,389 
             24,226   Pick Szeged (Bearer)                                                               1,763,804 
              7,316   Richter Gedeon Vegyeszeti Gyar                                                       723,283 
             15,000   Tiszai Vegyi Kombinat GDR (Registered)                                               292,500 
             22,751   Zalakeramia AG                                                                       947,353 
             52,000   Zalakeramia Reszveny GDR 144A                                                        436,800 
                                                                                                 ------------------
                                                                                                        16,965,406 
                                                                                                 ------------------
                      India - 7.9%                                                                                 
             13,980   Arvind Mills Ltd                                                                      43,175 
            439,600   Ashok Leyland Ltd GDR                                                              2,406,810 
             25,000   Ashok Leyland Ltd GDR 144A                                                           136,875 
             50,000   Bajaj Auto GDR 144A                                                                1,237,500 


See accompanying notes to the financial statements. 
4                                                                               

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      India - continued                                                                            
            379,100   Ballarpur Industries                                                                 491,484 
            295,000   Bank of India *                                                                      496,539 
            460,300   Bombay Dyeing & Manufacturing Co Ltd GDR *                                         1,472,960 
            905,000   BSES Ltd                                                                           4,817,699 
            697,000   Cesc Ltd GDR                                                                         836,400 
            591,804   Core Healthcare Ltd GDR                                                              147,951 
             45,000   DCW Ltd GDR                                                                          112,500 
          1,002,000   Escorts                                                                            2,675,310 
             20,600   Excel Industries                                                                     123,413 
            255,520   Garden Silk Mills Ltd GDR                                                            319,400 
            373,000   Glaxo India Ltd                                                                    4,240,270 
             76,500   Grasim Industries                                                                    764,474 
          2,757,785   Great Eastern Shipping Co                                                          3,203,373 
             45,000   Great Eastern Shipping Co GDR 144A                                                   282,375 
            131,000   Great Eastern Shipping Co Ltd GDR                                                    822,025 
            114,300   Hindalco Industry GDR                                                              3,383,280 
              4,480   Hindustan Ciba Geigy                                                                 450,096 
            100,000   Hindustan Development Corp GDR                                                        20,000 
            494,000   Hindustan Development Corp GDR 144A                                                   98,800 
            513,000   Hindustan Petroleum                                                                6,827,291 
              6,000   Housing Development Finance                                                          571,594 
            469,770   India Cements GDR                                                                  1,526,753 
            600,000   India Fund Class B                                                                   963,349 
            186,300   India Fund Inc                                                                     1,548,619 
             17,900   Indian Hotels                                                                        304,000 
            270,100   Indian Petrochemical Co Ltd GDR                                                    2,836,050 
            135,000   Indian Rayon & Industries GDR                                                      1,451,250 
            250,000   Indo Gulf Fertilizer                                                                 340,628 
          1,265,000   Indo Gulf Fertilizers GDR                                                          1,834,250 
             90,000   Indo Gulf Fertilizers GDR 144A                                                       130,500 
            211,130   Industrial Credit & Investment GDR 144A                                            2,955,820 
            803,600   Industrial Development Bank of India                                               2,210,840 
            593,000   Industrial Finance Corp of India                                                     509,265 
          1,976,600   Industry Credit & Investment Corp                                                  4,842,208 
            699,912   ITC Ltd                                                                            9,588,390 
            100,000   Jain Irrigation Systems Ltd EDR                                                       10,000 
          2,630,900   Jaiprakash Industries Ltd                                                          1,079,009 
            201,000   JCT Ltd GDR Class S                                                                  301,500 
            325,000   JK Corp GDR (Registered)                                                              81,250 
            350,000   Kirloskar Cummins Ltd                                                              4,951,830 
            401,000   Larsen & Toubro                                                                    2,510,527 
            314,200   Larsen & Toubro GDR                                                                3,927,500 
              1,870   Madras Cement Ltd                                                                    417,572 
            283,000   Mahanagar Telephone                                                                1,912,373 
            227,000   Mahindra & Mahindra                                                                2,511,808 
          2,162,000   National Aluminum                                                                  2,588,687 
             50,000   NEPC Micon Ltd GDR 144A                                                                5,000 

See accompanying notes to the financial statements. 
                                                                             5

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares          Description                                                                      Value ($)   
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                      India - continued                                                                            
            262,500   NIIT                                                                               3,612,355 
          1,634,000   Oriental Bank of Commerce                                                          3,098,888 
             14,000   Parke Davis & Co Ltd                                                                  71,619 
             27,600   Raymond Woolens GDR                                                                  129,030 
          1,929,000   Reliance Industries                                                               17,564,360 
            680,800   Reliance Industries GDR (Registered)                                              13,360,700 
             83,000   Sanghi Polyesters GDR 144A (Registered) *                                             41,500 
             50,000   Sanghi Polyesters GDS 144A                                                            25,000 
            120,000   Siemens India                                                                        983,485 
            572,500   Siv Industries GDR                                                                   429,375 
             88,000   Smithkline Beecham Plc                                                               763,248 
            225,000   Southern Petrochem GDR 144A                                                          781,875 
            346,000   Southern Petrochem Industry Corp                                                     246,191 
            762,450   State Bank of India                                                                6,108,205 
             63,932   State Bank of India GDR 144A                                                       1,262,657 
             75,000   Steel Authority of India GDR                                                         540,000 
             54,000   Steel Authority of India GDR 144A                                                    388,800 
            313,000   Sterlite Industries Ltd                                                            2,071,159 
             46,000   Sterlite Industries Ltd GDR                                                          230,000 
            789,545   Tata Iron & Steel                                                                  3,933,599 
          1,359,500   Uti Masterplus 1991 Unit *                                                           690,415 
            736,600   Videocon International                                                               786,680 
            205,000   Videocon International Ltd GDR                                                       358,750 
             13,350   Videsh Sanchar Nigam GDR 144A                                                        197,246 
             25,000   Videsh Sanchar Nigam Ltd                                                             656,482 
              7,500   Videsh Sanchar Nigam Ltd GDR (Registered) *                                          110,813 
             95,150   Zuari Agrochemicals Rights 8/13/97                                                   298,571 
             95,150   Zuari Argochemicals Ltd                                                              324,762 
                                                                                                 ------------------
                                                                                                       146,386,337 
                                                                                                 ------------------
                      Indonesia - 0.0%                                                                             
            171,000   Ciputra Development New (Foreign Registered)                                          47,822 
            226,076   Indah Kiat Pulp & Paper (Foreign Registered) Warrants Exp 4/13/01 *                   17,243 
          1,834,000   Pakuwon Jati (Foreign Registered)                                                    512,898 
            200,000   Tambang Timah Persero (Foreign Registered)                                           264,407 
                 50   Ungul Indah Corp (Foreign Registered)                                                     51 
                                                                                                 ------------------
                                                                                                           842,421 
                                                                                                 ------------------
                      Israel - 1.1%                                                                                
          1,046,161   Bank Hapoalim                                                                      2,260,290 
            358,355   Clal Industries Ltd                                                                1,986,075 
             37,718   Elbit Medical Imaging Ltd                                                            293,684 
             33,200   Elbit Medical Imaging Ltd *                                                          259,375 
             90,998   Formula Systems Ltd *                                                              2,017,006 
          1,400,000   Israel Chemical Ltd                                                                1,730,605 
             24,950   Koor Industries                                                                    2,687,439 
             31,100   Koor Industries Ltd ADR                                                              666,706 
          3,568,650   Leumi Bank Le Israel                                                               5,628,306 
             59,300   Tadiran Ltd Sponsored ADR *                                                        2,049,556 
                                                                                                 ------------------
                                                                                                        19,579,042 
                                                                                                 ------------------

See accompanying notes to the financial statements  
6                                                                               

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Korea - 7.3%                                                                             
            3,224  ANAM Industrial Co                                                                56,201 
           89,570  ANAM Industrial Co Preferred 5.15                                                565,705 
           13,435  ANAM Industrial Ltd Preferred                                                     93,189 
          286,730  Cheil Industries                                                               3,170,710 
           47,431  Cheil Jedang Corp                                                              1,960,294 
           84,300  Choongnam Spinning *                                                           1,008,798 
           70,280  Chosun Brewery Co Ltd                                                          1,534,090 
           19,520  Chosun Brewery Co Ltd Preferred                                                  131,936 
           82,300  Coryo Securities Preferred *                                                     255,335 
           43,000  Dae Chang Industrial Co *                                                        948,144 
            5,760  Daelim Industrial Co Ltd                                                          50,420 
          675,970  Daewoo Corp                                                                    5,317,880 
          190,400  Daewoo Heavy Ind Ltd Preferred                                                   727,845 
          159,250  Daewoo Securities Ltd Preferred *                                              1,146,953 
           24,600  Daihan Investment and Finance Preferred                                           98,127 
          140,900  Daishin Securities Preferred *                                                   494,906 
          268,000  Dong Shin Construction                                                           504,820 
           55,900  Dongbu Construction Co Preferred                                                 306,598 
           59,700  Dongbu Steel Co                                                                  965,784 
          102,340  Dongbu Steel Preferred                                                           644,090 
          210,600  Dongsuh Securities Preferred                                                     784,062 
           12,000  Dongwon Securities Co                                                            146,260 
           33,500  Dongwon Securities Co Preferred                                                  167,036 
           24,800  Doosan Beverage Co Ltd                                                           769,418 
          175,000  Hanil Synthetic Fiber Industry Co Preferred *                                    298,615 
          360,690  Hanil Synthetic Fiber Industry Co *                                            1,438,763 
           61,500  Hanshin Construction Preferred *                                                  33,391 
          231,000  Hanshin Construction *                                                           273,873 
              984  Hansol Paper Manufacturing Ltd                                                    24,205 
           32,800  Hansol Paper Manufacturing Ltd Preferred                                         297,290 
           75,700  Hanwha Chemical Corp Preferred *                                                 201,308 
           39,050  Hanwha Chemical Corp *                                                           279,083 
          232,406  Hanwha Corp                                                                    2,400,027 
           10,840  Hanwha Corp Preferred                                                             49,726 
          198,200  Housing & Commercial Bank Korea                                                3,960,925 
          247,800  Housing & Commercial Bank Korea GDR                                            4,355,085 
            1,436  Hyosung T+C Co Ltd                                                                40,574 
            5,029  Hyundai Engineering & Construction GDR 144A                                       21,373 
          328,745  Hyundai Engineering & Construction GDR (Registered)                            1,397,166 
              110  Hyundai Engineering & Construction *                                               2,316 
          363,325  Hyundai Motor Service Co GDR 144A                                              2,770,353 
           53,123  Hyundai Motor Service Co Ltd                                                   1,035,972 
           63,700  Hyundai Motor Service Co Preferred                                               465,839 
            1,400  Jindo Corp                                                                        10,828 
           70,000  Jindo Corp Preferred                                                             162,105 
               50  Jinro Ltd Preferred                                                                  111 
           19,000  Kang Won Industrial Co                                                           218,947 

              See accompanying notes to the financial statements.              7

N-30D 10th Page of 667 TOC 1st Previous Next ↓Bottom Just 10th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Korea - continued                                                                        
           71,930  Kang Won Industrial Preferred (Non Voting)                                       294,893 
           61,746  Kolon Construction                                                               523,387 
           39,500  Kolon Construction Co Ltd Preferred                                              126,925 
           59,400  Kolon Industries Preferred                                                       355,413 
            7,861  Kolon International Corp                                                          50,432 
           21,200  Kolon International Corp Preferred                                                81,981 
           11,751  Kookmin Bank                                                                     183,179 
          183,152  Kookmin Bank GDR                                                               2,655,704 
            9,670  Korea Container Terminal                                                         621,452 
           64,000  Korea Electric Power Corp                                                      1,673,573 
           20,000  Korea Electric Power Sponsored ADR                                               326,250 
           32,175  Korea Long Term Credit Bank                                                      361,134 
           13,170  Korean Air Lines Preferred *                                                      82,908 
          213,840  Korean Air Lines *                                                             3,222,409 
          168,700  Kumho Construction & Engineering Co Ltd Preferred                                401,889 
          177,500  Kumho Petrochemical Preferred                                                    727,701 
           69,600  Kumho & Co Inc Preferred *                                                       184,315 
              600  Kun Sul Chemical Industry                                                         44,809 
          100,590  Kun Young Construction *                                                         120,374 
            8,008  Kyungbang Co Ltd                                                                 496,895 
           11,910  Kyungnam Wool Textile Preferred *                                                 49,883 
          122,400  LG Chemical Ltd Preferred                                                        840,864 
           17,746  LG Merchant Banking Corp                                                         186,800 
          306,000  LG Metals Corp                                                                 5,492,742 
           65,000  LG Securities Co Preferred                                                       374,515 
           12,130  Lotte Chilsung Beverage                                                        1,417,967 
           25,000  Mando Machinery Preferred                                                        332,410 
            6,440  Miwon Petrochemical Preferred *                                                   16,484 
           16,500  Monami Co Ltd *                                                                  486,316 
           37,400  Oriental Brewing Co Ltd Preferred *                                              239,940 
           67,728  Oriental Chemical Preferred                                                      525,314 
           34,520  Ottogi Foods                                                                   1,407,575 
           26,840  Pang Rim Spinning                                                              1,026,017 
          118,834  Pohang Iron & Steel                                                           10,254,025 
            3,480  Pusan Bank                                                                        20,244 
            7,440  Sam Whan Corp                                                                     98,925 
           31,000  Sam Whan Corp Preferred                                                          140,144 
              143  Sam Yang                                                                           3,201 
            7,170  Sam Yang Preferred                                                                50,051 
          194,100  Samho International *                                                            726,934 
           65,800  Sammi Corp Preferred *                                                            22,602 
              778  Samsung Display Devices                                                           41,078 
           49,310  Samsung Display Devices Preferred                                              1,202,017 
           24,700  Samsung Electro Mechanics Co Preferred                                           287,368 
          180,658  Samsung Electronics GDS (Non Voting)                                           4,651,944 
           51,094  Samsung Electronics Ltd                                                        5,431,193 
          490,323  Samsung Electronics Preferred (Non Voting)                                    20,748,405 

8             See accompanying notes to the financial statements.               

N-30D 11th Page of 667 TOC 1st Previous Next ↓Bottom Just 11th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Korea - continued                                                                        
           55,407  Seah Steel Corp                                                                1,258,552 
           41,922  Shin Sung Corp                                                                   250,835 
            4,785  Shin Wha Engineering & Construction Co                                            21,102 
           13,380  Shin Wha Engineering & Construction Co Preferred                                  44,328 
           86,161  Shinhan Bank                                                                     857,218 
           54,552  Shinsegae Department Store                                                     1,910,076 
           49,340  Shinwon Preferred                                                                262,418 
          101,300  Shinyoung Securities Preferred                                                   583,668 
           20,846  SK Telecom                                                                    15,567,631 
            9,700  SK Telecom Ltd Sponsored ADR                                                      87,300 
          156,540  Ssangyong Cement                                                               1,453,524 
           28,940  Ssangyong Investment Securities Co Preferred *                                    96,199 
           27,100  STC Corp Preferred (Non Voting) *                                                126,116 
           15,140  Sung Chang Enterprise Co *                                                       654,249 
           26,460  Sungwon Construction Preferred                                                   103,788 
           39,000  Sunkyong Industries Ltd Preferred *                                              211,745 
            1,170  Sunkyong Industries *                                                             20,483 
               86  Sunkyong Ltd                                                                       1,201 
           70,700  Sunkyong Securities Preferred 13.11% (Non Voting) *                              235,014 
            1,100  Taihan Textile Co Ltd *                                                          162,105 
          160,810  Tong Kook Spinning Co Ltd *                                                      734,113 
           59,060  Tong Yang Cement Corp Preferred                                                  365,812 
           22,700  Tong Yang Investment & Financial Preferred                                       100,609 
           42,000  Tong Yang Securities Co Preferred 77.36% *                                       130,305 
                                                                                           -----------------
                                                                                                135,435,448 
                                                                                           -----------------
                   Lebanon - 0.2%                                                                           
          121,508  Banq Libanaise GDR Class B *                                                   2,867,589 
           90,000  Solidere GDR (Registered) *                                                    1,518,750 
                                                                                           -----------------
                                                                                                  4,386,339 
                                                                                           -----------------
                   Malaysia - 3.7%                                                                          
          198,000  Affin Holdings Berhad                                                            228,187 
          383,000  AMMB Holdings Berhad                                                           1,366,215 
          243,666  Amsteel Corp Warrants Expires 5/19/00 *                                           71,040 
        3,132,000  Amsteel Corporation Berhad                                                     1,396,536 
          120,000  Arab Malaysia Finance Berhad                                                      28,400 
          429,000  Arab Malaysian Corp                                                              585,635 
          120,000  Arab Malaysian Finance (Foreign Registered)                                      113,188 
          255,000  Bandar Raya Development                                                          181,924 
        1,348,000  Berjaya Group                                                                    781,382 
          340,000  Berjaya Sports Toto                                                              932,945 
          841,000  Cement Industries of Malaysia Berhad                                           1,199,986 
          788,000  Cold Storage                                                                     708,132 
          125,000  Diversified Resources Berhad                                                     168,925 
          741,000  Edaran Otomobil Berhad                                                         2,668,667 
          536,000  Esso Malaysia Berhad                                                             955,994 
        3,382,000  Golden Hope Plantations Berhad                                                 4,454,426 
          895,000  Hicom Holdings Berhad                                                          1,215,641 

See accompanying notes to the financial statements. 

                                                                               9

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Malaysia - continued                                                                     
        1,277,000  Highlands and Lowlands Berhad                                                  1,265,831 
          188,000  Hong Leong Industries Berhad                                                     415,915 
        3,996,000  IGB Corp Berhad                                                                2,741,211 
        1,807,000  Kuala Lumpur Kepong Berhad                                                     3,687,755 
        2,164,000  Kumpulan Guthrie Berhad                                                        2,286,098 
          194,000  Landmark Berhad                                                                  125,097 
        2,543,000  Lion Land Berhad                                                               1,447,909 
        1,407,000  Malayan Cement Berhad                                                          1,718,031 
        5,159,000  Malayan United Industries Berhad                                               2,654,262 
          976,600  Malaysia Mining Corp Berhad                                                      837,421 
          242,000  Malaysian Airline Systems                                                        460,676 
        1,088,000  Malaysian International Ship (Alien Market)                                    2,239,067 
          897,000  Malaysian Tobacco Co Berhad                                                      839,928 
           13,000  MBF Capital Berhad                                                                12,217 
        2,154,000  Metroplex Berhad Warrants 11/04/98 *                                             531,943 
          270,000  Nestle Malaysia                                                                1,713,257 
          298,200  Oriental Holdings Berhad                                                       1,073,950 
          849,000  Perlis Plantations                                                             2,096,656 
          464,000  Perusahaan Otomobil                                                            1,352,770 
          116,000  Petronas Gas Berhad                                                              320,288 
          429,000  Public Bank Berhad (Alien Market)                                                403,176 
          686,000  Rothmans of Pall Mall Malaysia Berhad                                          5,529,412 
          362,000  Shell Refinery Co                                                                819,482 
        3,201,200  Sime Darby Berhad                                                              7,576,155 
        1,281,100  Sime UEP Properties Berhad                                                     1,713,699 
        5,620,000  TA Enterprise Berhad                                                           3,739,599 
          419,000  Tan Chong Motor Holdings Berhad                                                  442,641 
          926,000  Tractors Malaysia Holdings Berhad                                                740,038 
          133,600  UMW Holding Berhad Warrants 1/26/00 *                                            109,978 
          411,000  UMW Holdings Berhad                                                            1,106,620 
        3,818,000  Westmont Industries Berhad                                                     2,160,761 
                                                                                           -----------------
                                                                                                 69,219,066 
                                                                                           -----------------
                   Mexico - 14.6%                                                                           
        1,116,175  Alfa SA Class A                                                                8,551,746 
        3,992,000  Altos Hornos De Mexico *                                                      10,725,389 
          167,000  Cementos Mexicanos (Cemex) Class A (Registered)                                  815,786 
        3,475,000  Cemex SA Class B                                                              19,164,096 
        5,847,000  Cemex SA CPO                                                                  28,562,283 
          430,273  Cintra SA CPO Class A (Registered) *                                             439,178 
        1,291,000  Controladora Coml Mexicana Class B                                             1,324,358 
        3,331,480  Cydsa SA Class A                                                              10,064,247 
          622,000  Dina (Consorcio Grupo Dina)                                                      724,427 
          324,100  Empresas ICA Soc Controladora ADR                                              5,185,600 
           83,000  Grupo Celanese Mexicana Class B                                                  224,598 
        4,323,600  Grupo Financiero Banamex Class B                                              11,588,515 
          103,529  Grupo Financiero Banamex Class L                                                 268,837 
       57,326,000  Grupo Financiero Bancomer SA Class B                                          35,004,306 

See accompanying notes to the financial statements. 

10                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Mexico - continued                                                                       
          328,963  Grupo Financiero Bancomer SA Class L                                             169,154 
           95,181  Grupo Financiero Invermexico Class B *                                           121,133 
              700  Grupo Financiero Serfin SA de CV Class B *                                           297 
       25,693,320  Grupo Gigante SA Class B *                                                     9,578,433 
           70,600  Grupo Iusacell Sponsored ADR *                                                 1,085,475 
        3,067,000  Grupo Mexico Class B                                                          11,985,705 
           38,886  Grupo Mexico Class B Warrants 8/9/01 *                                           124,721 
          280,200  Grupo Mexico Desarollo Class B ADR *                                             175,125 
          584,800  Grupo Mexico Desarollo Class L ADR *                                             584,800 
           10,000  Grupo Posadas SA 144A GDR *                                                      143,977 
          679,000  Grupo Posadas SA Class L *                                                       471,346 
          660,000  Grupo Simec SA Class B *                                                         117,085 
        6,310,000  Grupo Situr SA de CV Class B                                                     251,459 
        2,282,900  Grupo Tribasa SA ADR *                                                        12,698,631 
           74,000  Grupo Tribasa SA *                                                               214,038 
        6,275,000  Herdez Class B                                                                 4,517,290 
          904,000  Hylsamex SA                                                                    6,531,019 
          973,340  International de Ceramic *                                                     1,864,348 
           10,000  Ispat International NV Class A (Registered) *                                    268,125 
          693,300  Telefonos de Mexico ADR Class L                                               31,805,138 
           39,000  Tolmex SA de Con Class B                                                         266,718 
          437,000  Transportation Maritima Mexicana SA Class A                                    2,370,665 
           25,000  Transportation Maritima Mexicana SA Class L                                      189,613 
          962,100  Tubos de Acero de Mexico SA *                                                 17,463,494 
            8,000  TV Azteca SA ADR *                                                               144,000 
        2,680,280  Vitro SA                                                                      11,818,178 
        1,765,400  Vitro SA ADR                                                                  22,729,525 
                                                                                           -----------------
                                                                                                270,332,858 
                                                                                           -----------------
                   Pakistan - 2.4%                                                                          
        1,452,000  Fauji Fertilizer                                                               3,228,301 
          697,910  Hub Power Co Ltd GDR                                                          20,064,913 
        4,983,000  Hub Power Co Ltd *                                                             5,921,079 
          910,000  Japan Power Generation Ltd *                                                     219,185 
          961,000  Karachi Electric Supply *                                                        528,224 
          720,000  Pakistan State Oil                                                             6,314,307 
        1,229,000  Pakistan Telcom Corp Ltd Class A                                               1,115,768 
            5,000  Pakistan Telecommnction GDR                                                      440,000 
        1,395,000  Southern Electric Power Co *                                                     465,236 
        5,139,500  Sui Northern Gas Pipelines *                                                   4,062,896 
        2,277,400  Sui Southern Gas Pipelines Ltd *                                               1,519,036 
                                                                                           -----------------
                                                                                                 43,878,945 
                                                                                           -----------------
                   Peru - 0.0%                                                                              
          100,218  Cervecerias                                                                       85,011 
               58  Milpo Minera T Shares                                                                569 
                                                                                           -----------------
                                                                                                     85,580 
                                                                                           -----------------

              See accompanying notes to the financial statements.             11

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares    Description                                                                   Value ($)  
------------------------------------------------------------------------------------------------------------
                                                                                                            
                   Poland - 2.0%                                                                            
           65,791  Agros Holdings Class C *                                                       1,874,468 
        1,513,000  Bank Inicjatyw Gospodarczych                                                   1,763,479 
           44,900  Bank Slaski SA                                                                 3,320,901 
           20,313  Budimex SA *                                                                     102,888 
           12,556  Debica Class A                                                                   348,703 
           63,240  Drosed *                                                                       1,219,391 
          433,540  Elektrim SA (Bearer)                                                           3,992,598 
           96,200  Elektrobudowa SA *                                                             1,522,699 
          145,345  Exbud SA *                                                                     1,731,717 
          141,078  Gorazdze                                                                       5,765,329 
        2,076,718  International UNP Holdings *                                                     299,151 
           12,100  Izolacja SA *                                                                    800,921 
           95,890  Jelfa *                                                                        2,042,121 
           84,060  Jutrzenka (Prezedsib Cukiernicze)                                              1,935,333 
          109,000  Kghm Polska Miedez SA GDR 144A *                                               1,330,890 
          275,200  Mostostal Export (Bearer)                                                        894,959 
           12,500  Mostostal Zabrze-Holding SA                                                       74,106 
           45,950  Polfa Kunto Class A *                                                          1,560,429 
          149,610  Polifarb Cieszyn (Bearer)                                                        835,293 
          226,170  Polifarb Wroclaw                                                                 904,745 
                2  Rafako SA (Raciborska Fabryka) *                                                       6 
           16,500  Relpol SA                                                                        560,328 
            5,230  Rolimpex SA                                                                       20,319 
          390,000  Sokolow                                                                          471,401 
          122,679  Stomil-Olsztyn SA                                                              1,232,174 
           50,900  Vistula                                                                          139,161 
          101,636  Wielkopolski                                                                     555,748 
           13,145  Wolczanka SA                                                                      66,581 
           20,200  Zaklady Piwowarski (Bearer)                                                    1,569,609 
                                                                                           -----------------
                                                                                                 36,935,448 
                                                                                           -----------------
                   Portugal - 3.1%                                                                          
           18,999  Atlantis Cristais de Alcobaca                                                    323,894 
          122,853  Banco Commercial Portugues (Registered)                                        2,283,995 
          311,540  Banco Espirito Santo e Commercial de Lisboa (Registered)                       7,672,559 
          343,800  Banco Totta & Acores (Registered)                                              6,190,357 
          338,400  BPI Sgps SA (Registered)                                                       6,665,398 
           15,400  Cel-Cat Fabrica Nacional de Condutores Electricos SA                             257,060 
           60,900  Cimpor Cimentos De Portugal SA (Registered)                                    1,466,506 
            6,600  CIN (Corp Ind Norte)                                                             384,687 
           36,800  Electricidade De Portugal *                                                      574,523 
          285,000  Empresa Fabril de Maquinas Electricas                                          2,269,456 
           40,000  Engil Sociedade Gestora                                                          480,955 
           15,900  Est Jeronimo Martins Filho Admin                                                 982,438 
           44,500  Fisipe Fibra Sint                                                                281,535 
           77,500  Inparsa Industrias Participacoes *                                             1,552,375 
          177,000  Lisnave Navais De Lisboa *                                                       390,384 
           61,300  Modelo Continente                                                              2,432,273 

See accompanying notes to the financial statements. 

12                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares       Description                                                                       Value ($)   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                  Portugal - continued                                                                          
          25,000  Mundial Confianca *                                                                   437,144 
         403,600  Portucel Industrial Empresa                                                         3,034,952 
         277,200  Portugal Telecom SA                                                                10,316,112 
          77,500  Portugal Telecom Sponsored ADR                                                      2,848,125 
           4,400  Salvador Caetano Industrias                                                           103,667 
         117,000  Semapa Society Investment                                                           2,638,775 
          80,750  Soares Da Costa                                                                       627,545 
          16,200  Soja De Portugal Sociedada Gest                                                       117,475 
          81,381  Somague                                                                               934,866 
          14,848  Sonae Industria                                                                       182,350 
          13,000  Sonae Industria Sociedade *                                                           159,654 
          62,000  Sonae Investimentos                                                                 2,314,142 
          18,000  Unicer-Uniao Cervjeira SA (Registered)                                                262,533 
                                                                                               -----------------
                                                                                                     58,185,735 
                                                                                               -----------------
                  Romania - 0.3%                                                                                
           4,500  Romanian Investment Fund (e)                                                        4,725,000 
                                                                                               -----------------

                  Russia - 11.1%                                                                                
           8,189  Chelabinsky Tube Work *                                                             1,080,948 
          17,100  Dalmoreproduct *                                                                      153,900 
          64,000  Electrocila *                                                                         902,400 
          28,221  Elisb *                                                                               400,738 
         672,700  Irkutskelectrosviaz *                                                               1,096,501 
         303,100  Irkutskenergo Ao Sponsored ADR *                                                    4,622,275 
             580  Irkutskenergo RDC *                                                                35,960,000 
       4,931,400  Irkutskenergo (Registered)                                                          1,518,871 
           2,000  Izhorskie Zavody Preferred *                                                           69,000 
          58,456  Izhorskie Zavody *                                                                  4,851,848 
         119,730  Kirovsky Plant *                                                                    1,544,517 
         110,000  Komineft *                                                                            580,800 
         100,800  Krasny Red Oct Preferred 144A *                                                     1,612,800 
         501,900  Lukoil Holding Preferred                                                            7,653,975 
             121  Lukoil Holding RDC 144A *                                                          13,461,250 
         102,675  Lukoil Holding Sponsored ADR ORD                                                    9,240,750 
         169,500  Lukoil Holding Sponsored ADR Preferred (Foreign Registered)                         5,254,500 
           4,500  Morgan Stanley Russia & New Europe Fund                                               139,500 
           2,339  Moscow City Telephone Network Preferred                                             2,806,800 
             600  Moscow City Telephone Network *                                                     1,500,000 
          10,000  Mosenergo AO Sponsored ADR 144A *                                                     450,000 
      10,000,000  New Century Holdings LP (e)                                                        23,035,000 
       1,832,525  Norilsk Nickel *                                                                   22,081,926 
         220,000  Norlisk Nickel Preferred                                                            1,760,000 
              30  Rostelekom Preferred 2.5                                                                   77 
         135,000  Russia Petroleum *                                                                  1,080,000 
          19,700  Seversky Tube Works ADR *                                                             667,556 
       4,085,000  St Petersburg Telephone                                                             9,068,700 
       1,834,100  St Petersburg Telephone Preferred                                                   2,017,510 

See accompanying notes to the financial statements. 

                                                                              13

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares       Description                                                                       Value ($)   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                  Russia - continued                                                                            
          85,000  Surgutneftegaz ADR                                                                  4,250,000 
          36,811  Tatneft Sponsored ADR 144A                                                          4,656,592 
          67,000  Torgoviy Dom Gum Sp ADR                                                               536,000 
      68,714,250  Unified Energy System                                                              27,279,557 
      17,200,000  Unified Energy Systems Preferred                                                    5,142,800 
       1,577,500  Uralmash Zavody (d) *                                                              10,096,000 
           6,000  Uralmash *                                                                            132,000 
                                                                                               -----------------
                                                                                                    206,705,091 
                                                                                               -----------------
                  South Africa - 3.6%                                                                           
         363,281  AECI Ltd                                                                            1,955,205 
              37  Amalgamated Bank of South Africa                                                          240 
           7,900  Anglo American Coal Corp                                                              459,704 
          73,103  Anglo American Industrial Ltd                                                       3,073,551 
         329,420  Avgold Ltd *                                                                          300,526 
      56,725,000  Consolidated Mining Corp *                                                          5,199,137 
         383,400  De Beers Centenary Link Units                                                      12,217,478 
           9,000  De Beers Consolidated Mines Ltd ADR                                                   288,563 
         335,300  Del Monte Royal Foods Ltd                                                             192,968 
         235,475  Driefontein Consolidated Ltd                                                        1,719,070 
          35,000  Driefontein Ltd Sponsored ADR                                                         262,500 
         379,592  Engen Ltd                                                                           2,022,765 
         211,100  Free State Cons Gold Mines                                                          1,068,661 
         120,000  Goldfields South Africa                                                             2,455,505 
          71,617  Impala Platinum Holdings Ltd                                                          793,794 
      11,132,896  ISCOR                                                                               6,857,949 
       1,973,100  Joel HJ Mining Co Ltd                                                               1,745,362 
          71,300  Kloof Gold Mining Co                                                                  376,143 
         564,700  Malbak Ltd                                                                            775,161 
         434,400  Murray & Roberts Holdings Ltd                                                       1,162,042 
       1,561,400  Oryx Gold Holdings Ltd *                                                            1,447,744 
          78,637  Polifin Ltd                                                                           150,519 
         164,000  Randgold Resources Ltd GDR 144A *                                                   2,255,000 
         323,500  Randgold & Exploration Co *                                                         1,137,749 
         811,228  Sappi Ltd                                                                           7,504,486 
         640,000  Sasol Ltd                                                                           8,526,058 
          75,000  St Helena Gold Mines                                                                  303,741 
         873,900  Sun International Ltd                                                                 558,819 
           9,500  Vaal Reefs Exploration & Mining                                                       473,836 
         163,935  Western Areas Gold Mining Co Ltd                                                    1,371,512 
          14,500  Western Deep Levels                                                                   347,703 
                                                                                               -----------------
                                                                                                     67,003,491 
                                                                                               -----------------
                  Sri Lanka - 0.2%                                                                              
         131,500  Aitken Spence & Co                                                                    399,258 
       4,269,926  Blue Diamonds Jewelry Ltd                                                             648,213 
          46,500  Development Finance Corp                                                              227,461 
         115,599  Hayleys Ltd                                                                           458,223 
         228,244  John Keells Holdings Ltd                                                            1,289,732 
         333,600  Lanka Walltile Ltd                                                                    149,117 
         304,000  National Development Bank                                                           1,415,265 
                                                                                               -----------------
                                                                                                      4,587,269 
                                                                                               -----------------

14            See accompanying notes to the financial statements.               

N-30D 17th Page of 667 TOC 1st Previous Next ↓Bottom Just 17th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares       Description                                                                       Value ($)   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                  Taiwan - 0.7%                                                                                 
         801,800  Ambassador Hotel                                                                      798,450 
         122,000  Cheng Loong Co *                                                                       79,861 
       3,089,022  Chia Hsin Flour *                                                                   1,457,390 
         684,000  Chia Hsin Livestock *                                                                 414,401 
             675  China Steel Corp                                                                          703 
         214,675  China Steel Corp GDR 144A                                                           4,336,435 
         252,740  Chung Hwa Pulp Corp                                                                   230,564 
       1,078,000  Chung Shing Textile *                                                                 465,432 
         348,390  Feng An Metal Industrial Co Ltd                                                       224,416 
         304,662  Formosa Chemicals and Fiber Co                                                        399,922 
         341,600  Formosan Rubber Group *                                                               472,198 
         941,000  International Commercial Bank of China                                              1,883,966 
             759  Li Peng *                                                                                 869 
         564,620  Taipei Business Bank                                                                  965,280 
         343,000  Taiwan Pulp and Paper Co *                                                            269,910 
          85,860  Universal Cement                                                                       51,719 
         616,000  Wan Yu Paper *                                                                        255,237 
         346,000  Yieh Loong Co *                                                                       169,868 
                                                                                               -----------------
                                                                                                     12,476,621 
                                                                                               -----------------
                  Thailand - 1.3%                                                                               
       2,851,500  Bangchak Petro (Foreign Registered)                                                   834,016 
         822,000  Bangkok Expressway Plc (Foreign Registered) *                                         697,221 
          74,800  Bangkok Insurance (Foreign Registered)                                              1,142,018 
       5,633,400  Bangkok Rubber Public Co Ltd (Foreign Registered) *                                   626,116 
         437,000  Bec World Public Co (Foreign Registered)                                            2,786,370 
         393,700  CP Feedmill Public Co Ltd (Foreign Registered)                                        898,175 
         227,600  GFPT Public Co Ltd (Foreign Registered)                                                36,613 
         372,500  Hana Microelectronic Plc (Foreign Registered)                                       1,830,360 
       1,324,850  International Broadcasting Plc (Foreign Registered) *                                 387,496 
          23,000  International Cosmetics Public Co Ltd (Foreign Registered)                             66,262 
           1,100  Karat Sanitaryware Plc (Foreign Registered) *                                             394 
         421,000  KR Precision Plc (Foreign Registered)                                               3,053,758 
       1,559,100  Krisda Mahanakorn Public Co Ltd (Foreign Registered) *                                132,243 
       2,675,400  National Petrochemical (Foreign Registered)                                         1,604,144 
         512,700  NTS Steel Group Pcl (Foreign Registered) *                                             19,494 
       5,985,750  Padaeng Industry Plc (Foreign Registered) *                                         1,505,629 
          75,000  Pranda Jewelry (Foreign Registered) *                                                  38,937 
          87,200  Prasit Development Public Co Ltd (Foreign Registered)                                  22,189 
       1,500,000  Ruam Pattana Fund (Registered)                                                        324,656 
       1,859,000  Ruang Khao Fund (Foreign Registered) *                                                315,361 
          32,400  Saha Pathana International Holdings Plc (Foreign Registered)                           59,702 
          70,000  Saha Pathanapibul (Foreign Registered)                                                110,559 
       2,511,300  Saha Union Public Co Ltd (Foreign Registered)                                       1,469,026 
         513,000  Siam Pulp & Paper (Foreign Registered)                                                705,206 
         201,512  Singer Thailand Plc (Foreign Registered)                                              341,846 
       3,108,050  Star Block Co Ltd (Foreign Registered) (d) *                                           45,453 
          24,000  Swedish Motor (Foreign Registered)                                                      8,775 

              See accompanying notes to the financial statements.             15

N-30D 18th Page of 667 TOC 1st Previous Next ↓Bottom Just 18th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares       Description                                                                       Value ($)   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                  Thailand - continued                                                                          
       1,581,150  Thai German Ceramics Industry (Foreign Registered) *                                  601,198 
       8,336,880  Thai Petrochemical (Foreign Registered)                                             2,621,277 
         112,700  Thai Plastic & Chemical (Foreign Registered)                                          270,295 
         378,600  Thai Telephone & Telecommunications (Foreign Registered) *                            119,039 
              70  Thailand International (Foreign Registered)                                           822,500 
                                                                                               -----------------
                                                                                                     23,496,328 
                                                                                               -----------------
                  Turkey - 2.1%                                                                                 
      17,500,000  Akal Tekstil                                                                          772,627 
      95,700,000  Aksigorta SA                                                                        5,852,425 
      12,912,000  Alcatel Teletas Telekomunikasyon                                                    3,042,921 
      26,713,000  Eczacibasi Ilac *                                                                   1,306,883 
      47,323,000  Eregli Demir ve Celik Fabrikalari                                                   7,764,349 
       2,519,000  Goodyear Lastikleri                                                                   931,794 
      46,100,000  Izmir Demir Celik *                                                                   536,334 
      30,307,870  Mardin Cimento                                                                        795,625 
      12,774,000  Netas Telekomunik *                                                                 3,391,462 
       4,015,000  Petkim                                                                              1,604,946 
      22,924,668  Petrol Ofisi                                                                        4,103,216 
       5,124,000  Raks Elektronik SA                                                                  1,192,268 
         125,300  Sabanci Holding GDR (Registered) *                                                  1,033,725 
      43,500,000  Tofas Otomobil Fab                                                                  2,413,639 
      35,320,000  Tupras Turkiye Petrol *                                                             2,950,182 
         288,000  Usas Ucak Servisi A.S.                                                                773,224 
                                                                                               -----------------
                                                                                                     38,465,620 
                                                                                               -----------------
                  Ukraine - 0.1%                                                                                
          25,000  Societe Generale Thalmann Ukrania Fund (e) *                                        2,525,000 
                                                                                               -----------------

                  Venezuela - 1.2%                                                                              
       1,257,051  Banco Provincial                                                                    2,453,399 
         564,370  Ceramica Carabobo Class A ADR                                                         620,807 
       1,987,332  Ceramica Carabobo Class B ADR                                                       2,345,052 
          85,300  Cia Anonima Tel De Ven Sponsored ADR                                                3,518,625 
       1,922,332  Electricidad De Caracas                                                             3,252,880 
          35,181  Mantex SA Class A Sponsored ADR                                                     1,407,240 
       1,203,000  Siderurgica Venezolana ADR                                                          6,231,540 
         349,950  Siderurgica Venezolana Sivensa Class A                                                186,593 
         112,545  Siderurgica Venezolana Sivensa Registered ADR B                                       573,980 
          75,490  Vencemos                                                                              177,713 
       1,159,454  Venepal SA Class A GDR 144A                                                         2,029,045 
         162,122  Venezolana de Cementos                                                                386,548 
           2,333  Venprcar CA GDS                                                                        14,278 
                                                                                               -----------------
                                                                                                     23,197,700 
                                                                                               -----------------

                  TOTAL STOCK AND EQUIVALENTS (Cost $1,532,457,490)                               1,630,392,516 
                                                                                               -----------------

16            See accompanying notes to the financial statements.               

N-30D 19th Page of 667 TOC 1st Previous Next ↓Bottom Just 19th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Shares/                                                                                                     
  Par Value ($)   Description                                                                       Value ($)   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                  EQUITY LINKED SECURITIES - 1.7%                                                               
                  Chile - 1.4%                                                                                  
       2,630,074  Chilean Equity Time Deposit due 4/15/98 (e)(f)                                      2,971,195 
       2,168,200  Chilean Equity Time Deposit due 4/16/98 (e)(f)                                      2,427,300 
       4,043,627  Chilean Equity Time Deposit due 4/17/98 (e)(f)                                      4,318,998 
       1,158,098  Chilean Equity Time Deposit due 4/17/98 (e)(f)                                      1,260,010 
       5,000,000  Chilean Equity Time Deposit due 5/8/98 (e)(f)                                       5,298,000 
      10,000,000  Chilean Equity Time Deposit due 6/19/98 (e)(f)                                      9,570,000 
                                                                                               -----------------
                                                                                                     25,845,503 
                                                                                               -----------------
                  Russia - 0.3%                                                                                 
               1  Renaissance Sber Note (e)(g) *                                                      5,579,636 
                                                                                               -----------------

                  TOTAL EQUITY LINKED SECURITIES (Cost $30,854,166)                                  31,425,139 
                                                                                               -----------------

                  CONVERTIBLE SECURITIES - 2.1%                                                                 
                  India - 0.3%                                                                                  
       3,092,000  Mahindra & Mahindra CV, 5.00% due 7/9/01 144A                                       3,184,760 
       1,500,000  Reliance Industries Convertible, 3.50% due 11/03/99                                 1,717,500 
                                                                                               -----------------
                                                                                                      4,902,260 
                                                                                               -----------------
                  Korea - 0.1%                                                                                  
       2,000,000  Daewoo Corp Convertible, 0.00% due 12/31/07                                         2,308,890 
         108,350  Hanbo Steel & General Construction Convertible, 3.375% due 01/31/99                   254,517 
                                                                                               -----------------
                                                                                                      2,563,407 
                                                                                               -----------------
                  Pakistan - 0.0%                                                                               
         500,000  Pakistan Telecom Convertible, 6.00% due 2/26/02                                       485,000 
                                                                                               -----------------

                  Portugal - 0.5%                                                                               
         125,700  Banco Commercial Portugues Preferred Class A                                        8,704,725 
                                                                                               -----------------

                  Russia - 0.7%                                                                                 
      10,800,000  Lukinter Fin Convertible, 3.50% due 5/6/02 144A                                    15,336,000 
                                                                                               -----------------

                  South Africa - 0.1%                                                                           
       1,100,000  Rangold Finance Convertible, 7.00% due 10/03/01                                     1,001,000 
                                                                                               -----------------

                  Thailand - 0.3%                                                                               
       5,730,000  Bangkok Bank Public Co Convertible, 3.25% due 3/3/04                                3,079,875 
         358,000  Bangkok Land Ltd Convertible, 4.50% due 10/13/03                                      125,300 
       1,814,000  MDX Public Co Ltd Convertible, 4.75% due 9/17/03                                      163,260 
       2,800,000  NTS Steel Group Convertible, 1.00% due 12/16/03                                       339,611 
         534,000  NTS Steel Group Convertible, 4.00% due 12/16/08                                        80,100 
       2,724,000  Sahaviriya Steel Convertible, 3.50% due 7/26/05                                     1,089,600 
         630,000  Somprasong Land Co Convertible, 3.88% due 1/21/04                                      63,000 
                                                                                               -----------------
                                                                                                      4,940,746 
                                                                                               -----------------
                  Venezuela - 0.1%                                                                              
       1,460,000  Global Investment Financial Corp, 11.00% due 3/19/01                                1,460,000 
                                                                                               -----------------

                  TOTAL CONVERTIBLE SECURITIES (Cost $45,022,094)                                    39,393,138 
                                                                                               -----------------

              See accompanying notes to the financial statements.             17

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


       Shares/                                                                                                
      Par Value        Description                                                               Value ($)    
--------------------------------------------------------------------------------------------------------------
                                                                                                              
                       SHORT-TERM INVESTMENTS - 8.4%                                                          
                       Cash Equivalents - 5.0%                                                                
          48,624,600   The Boston Global Investment Trust (b)                                      48,624,600 
$         45,400,000   Wachovia Bank Time Deposit, 5.43% due 9/2/97                                45,400,000 
                                                                                            ------------------
                                                                                                   94,024,600 
                                                                                            ------------------
                       U.S. Government - 3.4%                                                                 
$         63,600,000   U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                    62,437,674 
                                                                                            ------------------

                       TOTAL SHORT-TERM INVESTMENTS (Cost $156,406,766)                           156,462,274 
                                                                                            ------------------

                       TOTAL INVESTMENTS - 100.0%                                                             
                       (Cost $1,764,740,516)                                                    1,857,673,067 

                       Other Assets and Liabilities (net) -  (0.0%)                                  (574,486)
                                                                                            ------------------

                       TOTAL NET ASSETS - 100.0%                                          $     1,857,098,581 
                                                                                            ==================


Notes to the Schedule of Investments:       

ADR American Depositary Receipt             

GDR Global Depository Receipt               

GDS Global Depository Shares                

    (a) This security is held as collateral for open
futures contracts.                  

 (b) Represents investment of security lending
collateral (Note 1).                

(c) Bankrupt issuer.                        

(d) Valued by management (Note 1).          

   (e) Security is restricted as to public resale.
    The aggregate market value of restricted
     securities is $56,130,503 or 3.02% of net
assets.                             

   (f) A derivative security whose price is linked
      to the return on a basket of Chilean asset
investments.                        

   (g) A derivative security whose price is linked
to the return on a Russian basket of
securities.                         

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

                   *  Non-income producing security. A dividend has not been
                     declared for the twelve months ended August 31, 1997.

18            See accompanying notes to the financial statements.               

N-30D 21st Page of 667 TOC 1st Previous Next ↓Bottom Just 21st
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

             At August 31, 1997, industry sector diversification
         of the Fund's investments (excluding short-term
investments) was as follows:          

                                                                [Download Table]


Industry Sector                                     

                                                    
Utilities                                      12.2%
Metals and Mining                              11.2 
Oil and Gas                                    10.0 
Banking                                         9.8 
Miscellaneous                                   9.6 
Construction                                    9.1 
Telecommunications                              8.1 
Conglomerates                                   6.4 
Textiles                                        3.4 
Electronic Equipment                            3.2 
Consumer Goods                                  2.7 
Machinery                                       2.3 
Chemicals                                       2.1 
Financial Services                              1.9 
Automotive                                      1.8 
Food and Beverage                               1.8 
Paper and Allied Products                       1.1 
Transportation                                  1.0 
Real Estate                                     0.7 
Health Care                                     0.4 
Communications                                  0.4 
Services                                        0.3 
Retail Trade                                    0.2 
Computers                                       0.2 
Insurance                                       0.1 
                                           -------- 
                                              100.0%
                                           ======== 


              See accompanying notes to the financial statements.             19

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Assets and Liabilities - August 31, 1997 (Unaudited)                                       
--------------------------------------------------------------------------------------------------------
                                                                                                        
Assets:                                                                                                 
     Investments, at value (cost $1,764,740,516) (Note 1)                            $    1,857,673,067 
     Foreign currency, at value (cost $20,331,338) (Note 1)                                  20,301,930 
     Cash                                                                                     5,349,629 
     Receivable for investments sold                                                         43,183,486 
     Receivable for Fund shares sold                                                          8,500,000 
     Dividends and interest receivable                                                        5,755,811 
     Receivable for open forward foreign currency contracts (Notes 1 and 5)                   3,764,387 
     Receivable for open swap contracts (Notes 1 and 5)                                       5,267,459 
     Receivable for expenses waived or borne by Manager (Note 2)                                339,619 
                                                                                       -----------------

         Total assets                                                                     1,950,135,388 
                                                                                       -----------------

Liabilities:                                                                                            
     Payable for investments purchased                                                       34,780,514 
     Payable for Fund shares repurchased                                                      1,518,861 
     Payable for open forward foreign currency contracts (Notes 1 and 5)                      3,343,992 
     Written options outstanding, at value (premiums $1,479,681) (Note 5)                     1,138,596 
     Accrued capital gain taxes payable                                                         892,743 
     Payable upon return of securities loaned                                                48,624,600 
     Payable to affiliate for (Note 2):                                                                 
         Management fee                                                                       1,685,821 
         Shareholder service fee                                                                253,458 
     Accrued expenses                                                                           798,222 
                                                                                       -----------------

         Total liabilities                                                                   93,036,807 
                                                                                       -----------------

Net assets                                                                           $    1,857,098,581 
                                                                                       =================

Net assets consist of:                                                                                  
     Paid-in capital                                                                 $    1,610,877,014 
     Accumulated undistributed net investment income                                          8,738,768 
     Accumulated net realized gain                                                          138,645,144 
     Net unrealized appreciation                                                             98,837,655 
                                                                                       -----------------

                                                                                     $    1,857,098,581 
                                                                                       =================
Net assets attributable to:                                                                             
     Class I Shares                                                                  $        4,937,233 
                                                                                       =================
     Class III Shares                                                                $    1,852,161,348 
                                                                                       =================

Shares outstanding:                                                                                     
     Class I                                                                                    380,176 
                                                                                       =================
     Class III                                                                              142,323,805 
                                                                                       =================

Net asset value per share:                                                                              
     Class I                                                                         $            12.99 
                                                                                       =================
     Class III                                                                       $            13.01 
                                                                                       =================


20               See accompanying notes to the financial statements.            

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)                            
     ---------------------------------------------------------------------------------------------
                                                                                                  
Investment income:                                                                                
     Dividends (net of foreign tax expense of $1,504,941)                        $     22,460,903 
     Interest (including security lending income of $594,994)                           3,513,832 
                                                                                   ---------------

         Total income                                                                  25,974,735 
                                                                                   ---------------
Expenses:                                                                                         
     Management fee (Note 2)                                                            9,162,184 
     Custodian fees                                                                     1,712,212 
     Stamp duties and transfer taxes                                                      426,144 
     Legal fees                                                                            38,180 
     Audit fees                                                                            35,972 
     Transfer agent fees                                                                   23,828 
     Trustees fee (Note 2)                                                                  8,004 
     Miscellaneous                                                                        131,300 
     Fees waived or borne by Manager (Note 2)                                          (1,849,559)
                                                                                   ---------------
                                                                                        9,688,265 
     Shareholder service fee (Note 2)                                                             
         Class I                                                                            3,916 
         Class III                                                                      1,372,230 
                                                                                   ---------------

         Net expenses                                                                  11,064,411 
                                                                                   ---------------

            Net investment income                                                      14,910,324 
                                                                                   ---------------
Realized and unrealized gain (loss):                                                              
       Net realized gain (loss) on:                                                               
            Investments                                                               135,211,249 
            Closed swap contracts                                                       2,528,864 
            Foreign currency, forward contracts and foreign                                       
                currency related transactions                                           4,715,310 
                                                                                   ---------------
                Net realized gain                                                     142,455,423 
                                                                                   ---------------

         Change in net unrealized appreciation (depreciation) on:                                 
            Investments                                                               (45,356,227)
            Open swap contracts                                                         2,881,519 
            Written options                                                               341,085 
            Foreign currency, forward contracts and foreign                                       
                currency related transactions                                          (5,495,406)
                                                                                   ---------------
                Net unrealized loss                                                   (47,629,029)
                                                                                   ---------------

         Net realized and unrealized gain                                              94,826,394 
                                                                                   ---------------
Net increase in net assets resulting from operations                             $    109,736,718 
                                                                                   ===============


                See accompanying notes to the financial statements.           21

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Changes in Net Assets                                                                                                  
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                     Six Months Ended                               
                                                                                      August 31, 1997                 Year Ended    
                                                                                        (Unaudited)               February 28, 1997 
                                                                                   -----------------------   -----------------------
                                                                                                                                    
Increase (decrease) in net assets:                                                                                                  
Operations:                                                                                                                         
  Net investment income                                                           $            14,910,324    $           17,549,883 
  Net realized gain                                                                           142,455,423                47,250,695 
  Change in net unrealized appreciation (depreciation)                                        (47,629,029)              173,776,577 
                                                                                   ----------------------    ---------------------- 

  Net increase in net assets                                                                                                        
    resulting from operations                                                                 109,736,718               238,577,155 
                                                                                   ----------------------    ---------------------- 

Distributions to shareholders from:                                                                                                 
  Net investment income                                                                                                             
    Class I                                                                                        (27,559)                   --    
    Class II                                                                                          --                   (178,659)
    Class III                                                                                  (17,697,960)             (15,814,130)
                                                                                   -----------------------   ---------------------- 
    Total distributions from net investment income                                             (17,725,519)             (15,992,789)
                                                                                   -----------------------   ---------------------- 

  Net realized gains                                                                                                                
    Class I                                                                                        (32,080)                   --    
    Class III                                                                                  (20,601,532)                   --    
                                                                                   -----------------------    --------------------- 
    Total distributions from net realized gains                                                (20,633,612)                   --    
                                                                                   -----------------------    --------------------- 
                                                                                               (38,359,131)             (15,992,789)
                                                                                   -----------------------    --------------------- 
Net share transactions:  (Note 4)                                                                                                   
    Class I                                                                                      3,249,799                1,542,386 
    Class II                                                                                          --                 (2,994,394)
    Class III                                                                                   55,072,204              599,087,113 
                                                                                   -----------------------    --------------------- 
  Increase in net assets resulting from net share transactions                                  58,322,003              597,635,105 
                                                                                   -----------------------    --------------------- 

  Total increase in net assets                                                                 129,699,590              820,219,471 

Net assets:                                                                                                                         
  Beginning of period                                                                        1,727,398,991              907,179,520 
                                                                                   -----------------------    --------------------- 

  End of period (including accumulated undistributed                                                                                
    net investment income of $8,738,768 and                                                                                         
    $11,553,963, respectively)                                                    $          1,857,098,581   $        1,727,398,991 
                                                                                   =======================    ===================== 

See accompanying notes to the financial statements  

22                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                             Six Months Ended                                     
                                                              August 31, 1997               Period Ended          
                                                                (Unaudited)              February 28, 1997 *      
                                                           --------------------         --------------------      
                                                                                                                  
Net asset value, beginning of period                      $              12.48         $              10.86       
                                                           --------------------         --------------------      

Income (loss) from investment operations:                                                                         
  Net investment income                                                   0.10                         0.01       
  Net realized and unrealized gain (loss)                                 0.69                         1.61       
                                                           --------------------         --------------------      

    Total from investment operations                                      0.79                         1.62       
                                                           --------------------         --------------------      

Less distributions to shareholders from:                                                                          
  Net investment income                                                  (0.13)                   --              
  Net realized gains                                                     (0.15)                   --              
                                                           --------------------         --------------------      
    Total distributions                                                  (0.28)                   --              
                                                           --------------------         --------------------      

Net asset value, end of period                            $              12.99         $              12.48       
                                                           ====================         ====================      

Total Return (a)                                                          6.15%                       14.92%      

Ratios/Supplemental Data:                                                                                         

     Net assets, end of period (000's)                    $              4,937         $              1,748       
     Net expenses to average                                                                                      
            daily net assets                                              1.36% **(c)                  1.45% **(c)
     Net investment income to average                                                                             
            daily net assets                                              1.41% **                     0.77% **   
     Portfolio turnover rate                                                36%                          41%      
     Average broker commission rate per equity share (d)  $             0.0021         $             0.0004       
     Fees and expenses voluntarily waived or borne by                                                             
            the Manager consisted of the following per                                                            
            share amount:                                 $               0.01                           (b)      


*    Period from January 2, 1997 (commencement of operations) to February 28,   
1997.                                                                 
**   Annualized                                                                 
(a)  Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
(b)  Fees and expenses voluntarily waived or borne by the manager were less than
$0.01 per share.                                                      
(c)  Includes stamp duties and transfer taxes not waived or borne by the        
     Manager, which approximates .20% of average daily net assets for the period
   ended February 28, 1997, and .05% of average daily net assets for the six
months ended August 31, 1997.                                         
(d)  The average broker commission rate will vary depending on the markets in   
which trades are executed.                                            

              See accompanying notes to the financial statements.             23

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

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

                                                                [Download Table]

                                                      Period from November 29, 1996
                                                       (commencement of operations)
                                                         to February 4, 1997 (e)   
                                                              --------------       
                                                                                   
Net asset value, beginning of period                         $        10.77        
                                                              --------------       

Income (loss) from investment operations:                                          
  Net investment income                                                0.05        
  Net realized and unrealized gain (loss)                                          
   on investments                                                      1.07        
                                                              --------------       

    Total from investment operations                                   1.12        
                                                              --------------       

Less distributions to shareholders:                                                
  From net investment income                                          (0.07)       
                                                              --------------       

Net asset value, end of period                               $        11.82        
                                                              ==============       

Total Return (a)                                                     10.42%        

Ratios/Supplemental Data:                                                          

    Net assets, end of period (000's)                        $          -          
    Net expenses to average                                                        
         daily net assets                                             1.33%*(b)    
    Net investment income to average                                               
         daily net assets                                             6.14%*       
    Portfolio turnover rate                                             41%        
    Average broker commission rate (d)                       $       0.0004        
    Fees and expenses voluntarily waived or borne by                               
         the Manager consisted of the following per                                
         share amounts:                                                 (c)        

*        Annualized                                                             
(a)      Calculation excludes purchase premiums and redemption fees.            
The total returns would have been lower had certain expenses  
not been waived during the period shown.                      
(b)      Includes stamp duties and transfer taxes not waived or borne           
by the Manager, which approximates .07% of average daily net  
assets.                                                       
(c)      Fees and expenses voluntarily waived or borne by the Manager were less 
than $.01 per share.                                          
(d)      The average broker commission rate will vary depending on the markets  
in which trades are executed.                                 
(e)      All Class II shares of the Fund were exchanged for Class III shares    
on February 4, 1997.                                          

24            See accompanying notes to the financial statements.               

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                       Six Months Ended                  Year Ended February 28/29                  
                                                        August 31, 1997   -------------------------------------------------------   
                                                          (Unaudited)         1997             1996         1995         1994 *     
                                                       ----------------   ------------     -----------  -----------  ------------   
                                                                                                                                    
Net asset value, beginning of period                    $     12.49       $     10.54      $     9.52   $    12.13   $     10.00    
                                                        ------------      ------------     -----------  -----------  ------------   

Income (loss) from investment operations:                                                                                           
  Net investment income                                        0.11              0.13            0.10         0.05          0.02    
  Net realized and unrealized gain (loss)                      0.69              1.96            1.06        (2.37)         2.11    
                                                        ------------      ------------     -----------  -----------  ------------   

    Total from investment operations                           0.80              2.09            1.16        (2.32)         2.13    
                                                        ------------      ------------     -----------  -----------  ------------   

Less distributions to shareholders from:                                                                                            
  Net investment income                                       (0.13)            (0.14)          (0.01)       (0.07)        (0.00)(c)
  Net realized gains                                          (0.15)              --            (0.13)       (0.22)          --     
                                                        ------------      ------------     -----------  -----------  ------------   
     Total distributions                                      (0.28)            (0.14)          (0.14)       (0.29)        (0.00)   
                                                        ------------      ------------     -----------  -----------  ------------   

Net asset value, end of period                          $     13.01       $     12.49      $    10.54   $     9.52    $    12.13    
                                                        ============      ============     ===========  ===========   ===========   

Total Return (a)                                              6.31%            19.98%          12.24%      (19.51%)       21.35%    

Ratios/Supplemental Data:                                                                                                           

    Net assets, end of period (000's)                   $ 1,852,161       $ 1,725,651      $  907,180   $  384,259    $  114,409    
    Net expenses to average                                                                                                         
            daily net assets                                  1.21%**(e)        1.24%(e)        1.35%        1.58%         1.64%*   
    Net investment income to average                                                                                                
            daily net assets                                  1.63%**           1.40%           1.31%        0.85%         0.87%**  
    Portfolio turnover rate                                     36%               41%             35%          50%            2%    
    Average broker commission rate per equity share (b) $    0.0021            0.0004             N/A          N/A           N/A    
    Fees and expenses voluntarily waived or borne by                                                                                
       the Manager consisted of the following per                                                                                   
       share amounts:                                   $      0.01              0.02              (d)          --            (d)   

*      Period from December 9, 1993 (commencement of operations) to February 28,
1994.                                                             
**     Annualized.                                                              
(a)    Calculation excludes purchase premiums and redemption fees. The total    
       returns would have been lower had certain expenses not been waived during
the periods shown.                                                
(b)    For fiscal years beginning on or after September 1, 1995, a fund is      
     required to disclose its average commission rate per share for security
    trades on which commissions are charged. The average broker commission
   rate will vary depending on the markets in which trades are executed.
(c)    The per share income distribution was $ 0.004.                           
(d)    Fees and expenses voluntarily waived or borne by the Manager were less   
than $.01 per share.                                              
(e)    Includes stamp duties and transfer taxes not waived or borne by the      
       Manager, which approximates .06% of average daily net assets for the year
  ended February 28, 1997 and .05% for the six months ended August 31,
1997.                                                             

              See accompanying notes to the financial statements.             25

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1. Significant accounting policies                                              

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

   The Fund seeks long-term capital appreciation consistent with a prudent level
  of risk through investment in equity and equity-related securities traded in
the securities markets of newly industrializing countries in Asia, Latin  
America, the Middle East, Southern Europe, Eastern Europe and Africa.     

On June 1, 1996, the Fund began to offer three classes of shares: Class I,
 Class II and Class III. The principal economic difference among the classes
of shares is the level of shareholder service fee borne by the classes.   
Eligibility for and automatic conversion between the various classes of   
   shares is generally based on the total amount of assets invested with GMO, as
more fully described in the Trust's prospectus. Class III shares are the  
continuation of the Trust's shares that existed prior to June 1, 1996, and
 bear the same total operating expenses (after the voluntary expense waiver)
as those shares. At August 31, 1997, Class I and Class III are the only   
active classes of shares of the Fund.                                     

The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are    
consistently followed by the Fund in the preparation of its financial     
statements. The preparation of financial statements in accordance with    
generally accepted accounting principles requires management to make      
   estimates and assumptions that affect the reported amounts and disclosures in
 the financial statements. Actual results could differ from those estimates.

Portfolio valuation                                                       
Portfolio securities listed on a securities exchange for which market     
quotations are available are valued at the last quoted 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. Securities which
are primarily traded on foreign exchanges are generally valued at the     
preceding closing values of such securities on their respective exchanges,
and those values are then translated into U.S. dollars at the current     
   exchange rate. Short-term investments with a remaining maturity of sixty days
 or less are valued at amortized cost which approximates market value. Other
assets and securities for which no quotations are readily available are   
valued at fair value as determined in good faith by the Trustees.         

26                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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

Forward currency contracts                                                
The Fund may enter into forward currency contracts in connection with     
settling planned purchases or sales of securities or to hedge the currency
exposure associated with some or all of the Fund's portfolio securities. A
   forward currency contract is an agreement between two parties to buy and sell
a currency at a set price on a future date. The market value of a forward 
   currency contract fluctuates with changes in forward currency exchange rates.
   Forward currency contracts are marked to market daily and the change in value
is recorded by the Fund as an unrealized gain or loss. When a forward     
   currency contract is extinguished through delivery or offset by entering into
 another forward currency contract, the Fund records a realized gain or loss
  equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it was extinguished or   
 offset. These contracts may involve market risk in excess of the unrealized
  gain or loss reflected in the Fund's Statement of Assets and Liabilities. In
  addition, the Fund could be exposed to risk if the counterparties are unable
to meet the terms of the contracts or if the value of the currency changes
 unfavorably to the U.S. dollar. The U.S. dollar value of the currencies the
   Fund has committed to sell is shown under Note 5, and represents the currency
exposure the Fund has acquired or hedged through currency contracts as of 
August 31, 1997.                                                          

Swap agreements                                                           
The Fund may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
   instrument. The Fund may enter into swap agreements to manage its exposure to
   the equity markets. The Fund enters into equity swap agreements which involve
  a commitment by one party in the agreement to pay interest in exchange for a
   market linked return based on a notional amount. To the extent that the total
 return of the security or index underlying the transaction exceeds or falls
short of the offsetting interest rate obligation, the Fund will receive a 
payment from or make a payment to the counterparty, respectively. Equity  
   swaps are marked to market daily based upon quotations from market makers and
 the change, if any, is recorded as unrealized gain or loss in the Statement
   of Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations.     
Entering into these agreements involves, to varying degrees, elements of  
 credit and market risk in excess of the amounts recognized on the Statement
of Assets                                                                 

                                                                              27

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

and Liabilities. Such risks involve the possibility that there is         
no liquid market for these agreements, that the counterparty to the       
agreements may default on its obligation to perform or that there may be  
unfavorable changes in the price of the security or index underlying these
transactions. See Note 5 for a summary of all open swap agreements as of  
August 31, 1997.                                                          

Options                                                                   
  The Fund may write call and put options on securities it owns or in which it
   may invest. When the Fund writes a call or put option, an amount equal to the
   premium received is recorded as a liability and subsequently marked to market
to reflect the current value of the option written. Premiums received from
   writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or closed are offset against the 
   proceeds or amounts paid on the transaction to determine the realized gain or
loss. If a written put option is exercised, the premium reduces the cost  
basis of the securities purchased by the Fund. The Fund as a writer of an 
option has no control over whether the underlying securities may be sold  
(call) or purchased (put) and as a result bears the market risk of an     
unfavorable change in the price of the security underlying the written    
option. There is the risk the Fund may not be able to enter into a closing
 transaction because of an illiquid market. See Note 5 for a summary of open
written option contracts as of August 31, 1997.                           

The Fund may also purchase put and call options. The Fund pays a premium  
which is included in the Fund's Statement of Assets and Liabilities as an 
  investment and subsequently marked to market to reflect the current value of
the option. The risk associated with purchasing put and call options is   
limited to the premium paid.                                              

Security lending                                                          
  The Fund may lend its securities to certain 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 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
August 31, 1997, the Fund loaned securities having a market value of      
$43,386,900 collateralized by cash in the amount of $48,624,600, which was
invested in a short-term instrument.                                      

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 "Code").
The Fund intends to distribute substantially all of its taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise tax
is necessary. Taxes on foreign interest and dividend income have been     
withheld in accordance with the applicable country's tax treaty with the  
United States. Dividends received by shareholders of the Fund which are   
  derived from foreign source income and foreign taxes paid by the Fund are to
 be treated, to the extent allowable under the Code, as if received and paid
by the shareholders of the Fund.                                          

28                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Distributions to shareholders                                             
The Fund's policy is to declare and pay distributions from net investment 
  income semi-annually, 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. The Fund declares separate dividends from net investment   
income on each class of shares.                                           

Income distributions and capital gain distributions are determined in     
accordance with income tax regulations which may differ from generally    
   accepted accounting principles. 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 is 
recorded on the ex-dividend date, or when the Fund is informed of the ex- 
   dividend date, if later. Interest income is recorded on the accrual basis and
is adjusted for the accretion of discounts. In determining the net gain or
loss on securities sold, the cost of securities is determined on the      
identified cost basis.                                                    

Allocation of operating activity                                          
The majority of expenses of the Trust are directly identifiable to an     
individual Fund. Expenses which are not readily identifiable to a specific
   Fund are allocated in such manner as deemed equitable by the Trustees, taking
into consideration, among other things, the nature and type of expense and
the relative size of the Funds. Investment income, common expenses and    
realized and unrealized gains and losses are allocated pro-rata among the 
 classes based on the relative net assets of each class. Shareholder service
fees, which are directly attributable to a class of shares, are charged to
that class' operations.                                                   

Purchases and redemptions of Fund shares                                  
   The premium on cash purchases of Fund shares is 1.60% of the amount invested.
In the case of cash redemptions, the fee is .40% of the amount redeemed.  
   Effective June 1, 1996, the Manager will reduce such premium or fee only when
 any portion of a purchase is offset by a corresponding redemption occurring
on the same day. All purchase premiums and redemption fees are paid to and
  recorded as paid-in capital by the Fund. For the six months ended August 31,
1997, the Fund received $1,987,611 in purchase premiums and $287,896 in   
redemption fees. There is no premium for reinvested distributions.        

                                                                              29

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Investment risk                                                           
   Investments in emerging countries present certain risks that are not inherent
in many other securities. Many emerging countries present elements of     
  political and/or economic instability. Further, countries may impose various
   types of foreign currency regulations or controls which may impede the fund's
  ability to repatriate amounts it receives. The fund may acquire interests in
  securities in anticipation of improving conditions in the related countries.
These factors may result in significant volatility in the values of its   
holdings. The markets for emerging countries are relatively illiquid.     
Accordingly, the fund may not be able to realize in an actual sale amounts
approximating those used to value its holdings.                           

2. Fees and other transactions with affiliates                                  

GMO earns a management fee paid monthly at the annual rate of 1.00% of    
average daily net assets. Effective June 1, 1996, the Fund adopted a      
   Shareholder Services Plan under which the Fund pays GMO a shareholder service
   fee for client and shareholder service, reporting and other support. Pursuant
 to the Shareholder Services Plan, the shareholder service fee is calculated
based on the average daily net assets of each class at the annual rate of 
.28% for Class I shares, .22% for Class II shares and .15% for Class III  
shares.                                                                   

GMO has agreed to waive a portion of its fee and bear other expenses until
 further notice to the extent that the Fund's annual expenses (including the
management fee but excluding custody fees, brokerage commissions, certain 
other transaction costs (including stamp duties and transfer taxes),      
 shareholder service fees and extraordinary expenses) exceed .81% of average
  daily net assets. Prior to June 1, 1996, a similar waiver existed for annual
expenses exceeding 1.20%.                                                 

The Manager has entered into a Consulting Agreement with Dancing Elephant,
Ltd. (the "Consultant") with respect to the management of the portfolio.  
Payments made by the Manager to the Consultant will not affect the amounts
payable by the Fund to the Manager or the Fund's expense ratio.           

  The Fund's portion of the fee paid by the Trust to the unaffiliated Trustees
 during the six months ended August 31, 1997, was $8,004. No remuneration is
paid to any Trustee or officer who is affiliated with the Manager.        

30                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

3. Purchases and sales of securities                                            

   Cost of purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended August 31, 1997, aggregated         
$609,432,897 and $709,556,192, respectively.                              

At August 31, 1997, the cost for Federal income tax purposes and gross    
  unrealized appreciation and depreciation in value of investments held was as
follow:                                                                   

                                                                [Download Table]

                          Gross Unrealized    Gross Unrealized    Net Unrealized
    Aggregate Cost          Appreciation        Depreciation       Appreciation 
---------------------  --------------------  ------------------  ---------------
                                                                                
    $1,764,740,516            $329,931,776        $236,999,225       $92,932,551

4. 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:                                                   

                                                                [Download Table]


                                             Period from January 2, 1997 
                     Six Months Ended       (commencement of operations) 
                      August 31, 1997          to February 28, 1997      
                 ----------------------   -------------------------------
 Class I:          Shares       Amount        Shares           Amount    
                 ----------   ----------   ------------    --------------
                                                                         
 Shares sold        235,688   $ 3,190,477      140,068     $    1,542,386

 Shares issued to                                                        
 shareholders in                                                         
 reinvestment                                                            
 of distributions     4,420       59,322           -                 -   

 Shares                                                                  
 repurchased           -             -             -                 -   
                  ---------    ----------   ----------      -------------
Net increase        240,108   $ 3,249,799      140,068     $    1,542,386
                  =========    ==========   ==========      =============

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Share Transactions - continued                                            

                                                        [Enlarge/Download Table]


                                                      Period from November 29, 1996   
                                                      (commencement of operations)    
                                                          to February 28, 1997        

 Class II:                                            Shares                Amount    
                                                   ------------         ------------- 
                                                                                      
Shares sold                                           5,586,262        $   63,054,064 

Shares issued to shareholders in reinvestment of                                      
distributions                                            16,729               178,659 

Shares repurchased                                   (5,602,991)          (66,227,117)
                                                  -------------         ------------- 
Net decrease                                             -             $   (2,994,394)
                                                  =============         ============= 

                                                                [Download Table]

                          Six Months Ended                    Year Ended           
                          August 31, 1997                 February 28, 1997        
                  ------------------------------   --------------------------------
 Class III:           Shares           Amount          Shares            Amount    
                  --------------   -------------   -------------     ------------- 
                                                                                   
Shares sold         12,026,360   $   155,432,291     54,549,584     $ 626,535,006  

Shares issued to                                                                   
shareholders in                                                                    
reinvestment                                                                       
of distributions     2,242,086        30,156,055        759,519         8,422,271  

Shares                                                                             
repurchased        (10,059,786)     (130,516,142)    (3,248,382)      (35,870,164) 
                  ------------     -------------   ------------      ------------  
Net increase         4,208,660    $   55,072,204     52,060,721     $ 599,087,113  
                  ============     =============   ============      ============  

32                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

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5. Financial instruments                                                        

A summary of outstanding financial instruments at August 31, 1997 is as   
follows:                                                                  

Forward currency contracts                                                

                                                        [Enlarge/Download Table]


                                                                       Net Unrealized  
    Settlement                           Units of                       Appreciation   
       Date         Deliver/Receive      Currency        Value         (Depreciation)  
  --------------  -------------------  ------------  -------------   ------------------
                                                                                       
Buy                                                                                    
01/07/98          DEM                    82,105,000   $ 45,981,228  $    (3,343,992)   
                                                                     ===============   
Sale                                                                                   
01/07/98          DEM                    82,105,000   $ 45,996,219  $     3,764,387    
                                                                     ===============   

Swap agreements                                                           

                                                        [Enlarge/Download Table]


                                                                                 Unrealized   
  Notional      Expiration                                                      Appreciation  
   Amount          Date                        Description                     (Depreciation) 
------------  -------------  -----------------------------------------------   ---------------
                                                                                              
$  7,000,000     10/29/97     Agreement with Barclays Bank PLC dated          $        519,468
                              4/28/97 to receive (pay) the notional amount                    
                              multiplied by the return on the Chile IPSA                      
                              Index and to pay the notional amount                            
                              multiplied by 6 month LIBOR adjusted by a                       
                              specified spread.                                               

   2,000,000     10/30/97     Agreement with Barclays Bank PLC dated 5/1/97            121,111
                              to receive (pay) the notional amount                            
                              multiplied by the return on the Colombia IFC                    
                              Index and to pay the notional amount                            
                              multiplied by 6 month LIBOR adjusted by a                       
                              specified spread.                                               

                                                                              33

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Swap agreements - continued                                               

                                                        [Enlarge/Download Table]

                                                                                 Unrealized   
  Notional      Expiration                                                      Appreciation  
   Amount          Date                        Description                     (Depreciation) 
------------  -------------  -----------------------------------------------  --------------- 
                                                                                              
$ 10,000,002     01/09/98     Agreement with Union Bank of Switzerland        $      (315,343)
                              dated January 14, 1997 to receive (pay) the                     
                              notional amount multiplied by the change in                     
                              market value (including dividends) of                           
                              Telecomunicacoes Brasileiras ("Telebras")                       
                              Ordinary Shares and to pay (receive) the                        
                              notional amount multiplied by the change in                     
                              market value (including dividends) of                           
                              Telecomunicacoes Brasileiras ("Telebras") ADR                   
                              adjusted by a specified amount.                                 

   1,600,053     01/16/98     Agreement with Robert Fleming & Co. Limited             (57,207)
                              dated January 24, 1997 to receive (pay) the                     
                              notional amount multiplied by the change in                     
                              market value of State Bank of India common                      
                              stock and to pay the notional amount                            
                              multiplied by a fixed rate.                                     

  10,000,000     03/09/98     Agreement with Barclays Bank PLC dated                1,509,812 
                              3/13/97 to receive (pay) the notional amount                    
                              multiplied by the return on the Taiwan                          
                              Weighted Index and to pay the notional amount                   
                              multiplied by 6 month LIBOR adjusted by a                       
                              specified spread.                                               

  10,000,000     03/11/98     Agreement with Goldman Sachs dated 3/11/97 to         1,463,079 
                              receive (pay) the notional amount multiplied                    
                              by the return on the Taiwan Weighted Index                      
                              and to pay the notional amount multiplied by                    
                              12 month LIBOR adjusted by a specified spread.                  

34                                                                              

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GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Swap agreements - continued                                               

                                                        [Enlarge/Download Table]

                                                                                  Unrealized   
  Notional      Expiration                                                       Appreciation  
   Amount          Date                        Description                      (Depreciation) 
------------  -------------  -----------------------------------------------   --------------- 
                                                                                               
$  5,000,000     04/01/98     Agreement with Barclays Bank PLC dated 4/2/97   $        785,478 
                              to receive (pay) the notional amount                             
                              multiplied by the return on the Taiwan                           
                              Weighted Index and to pay the notional amount                    
                              multiplied by 6 month LIBOR adjusted by a                        
                              specified spread.                                                

  10,000,001     04/06/98     Agreement with Goldman Sachs dated 4/2/97 to           1,576,809 
                              receive (pay) the notional amount multiplied                     
                              by the return on the Taiwan Weighted Index                       
                              and to pay the notional amount multiplied by                     
                              12 month LIBOR adjusted by a specified spread.                   

   5,184,028     04/28/98     Agreement with Robert Fleming & Co. Limited               87,798 
                              dated 4/28/97 to receive (pay) the notional                      
                              amount multiplied by the return on a basket                      
                              of selected Indian securities (including                         
                              dividends) and to pay the notional amount                        
                              multiplied by a fixed rate.                                      

   4,004,212     06/27/98     Agreement with W.I. Carr dated 6/27/97 to               (500,189)
                              receive the notional amount multiplied by the                    
                              change in market value of Pohang Iron and                        
                              Steel common stock and to pay the notional                       
                              amount multiplied by 6 month LIBOR adjusted                      
                              by a specified spread.                                           

                                                                              35

N-30D 38th Page of 667 TOC 1st Previous Next ↓Bottom Just 38th
GMO Emerging Markets Fund                                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Swap agreements - continued                                               

                                                        [Enlarge/Download Table]

                                                                                 Unrealized  
  Notional      Expiration                                                      Appreciation 
   Amount          Date                        Description                     (Depreciation)
------------  -------------  -----------------------------------------------  ---------------
                                                                                             

$  4,004,599     06/27/98     Agreement with W.I. Carr dated 6/27/97 to       $        76,643
                              receive the notional amount multiplied by the                  
                              change in market value of SK Telecom common                    
                              stock and to pay the notional amount                           
                              multiplied by 6 month LIBOR adjusted by a                      
                              specified spread.                                              
                                                                               --------------
                                                 Net unrealized appreciation  $     5,267,459
                                                                               ==============

Written call option transactions                                                

                                                                [Download Table]

                                       Number                        
                                    of Contracts          Premiums   
                                 -----------------    ---------------
                                                                     
Outstanding, beginning of                                            
 period                                         -    $             - 

Options written                           348,065          1,479,681 

Options exercised                               -                  - 

Options expired                                 -                  - 
                                 -----------------    ---------------
Outstanding, end of period                348,065          1,479,681 
                                 =================    ===============

Summary of written call options outstanding                                     

                                                        [Enlarge/Download Table]


                                Number of         Exercise      Expiration                
                                Contracts          Price           Date           Value   
                            -----------------  -------------  --------------   -----------
                                                                                          
Unified Energy Systems ADR       243,161          $ 50.00        02/27/98     $    646,617

Lukoil ADR                       104,904          $120.00        02/27/98          491,979
                                                                               -----------
                                                                              $  1,138,596
                                                                               ===========

36                                                                              

N-30D 39th Page of 667 TOC 1st Previous Next ↓Bottom Just 39th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 40th Page of 667 TOC 1st Previous Next ↓Bottom Just 40th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]

            Shares       Description                                                     Value ($) 
---------------------------------------------------------------------------------------------------
                                                                                                   

                     STOCK AND EQUIVALENTS - 91.2%                                                 
                     Austria - 1.8%                                                                
               777   Allgemeine Baugesellschaft AG                                          60,720 
               888   Allgemeine Baugesellschaft AG Preferred 7.00%                          27,758 
             8,000   Austrian Airlines *                                                   188,816 
            11,700   Bank Austria AG (Participating Certificate)                           331,556 
               700   Bau Holding AG Preferred 2.42% (Non Voting)                            34,037 
             1,150   Brau Union AG                                                          64,560 
               200   BWT AG                                                                 33,895 
             2,800   Creditanstalt-Bankverein                                              171,955 
             1,200   Creditanstalt-Bankverein Preferred 1.65%                               58,719 
               100   EA-Generali AG                                                         23,562 
             1,100   EA-Generali AG Preferred 6.00%                                        114,615 
               600   EVN Energie-Versorgung Niederoesterreich AG                            71,753 
             2,300   Flughafen Wien AG                                                      88,961 
             5,500   Jenbacher Werke AG                                                    138,928 
               200   Lenzing AG *                                                           12,535 
               300   Leykam-Muerztaler Papier und Zellstoff AG *                             7,057 
               800   Miba Holding AG Class B Preferred 1.34%                                42,184 
             7,000   OEMV AG                                                               924,975 
             1,100   Oesterreichische Brau Beteiligungs AG                                  58,176 
             3,000   Oesterreichische Elektrizitaetswirtschafts AG                         204,082 
             7,200   Oesterreichische Laenderbank AG                                       358,055 
               700   Oesterreichische Laenderbank AG Preferred (Non Voting)                 26,799 
               110   Perlmooser Zementwerke AG                                               6,512 
            18,658   Radex-Heraklith AG                                                    720,196 
               300   RAS Versicherungs AG                                                   35,877 
             2,400   Steyr-Daimler-Puch AG                                                  71,232 
             1,942   Strabag Oesterreich AG                                                113,438 
             3,662   Universale Bau AG                                                     118,517 
             1,700   VA Technologie AG (Bearer)                                            311,929 
               200   Wiener Allianz Versicherungs AG                                        21,313 
                                                                                   ----------------
                                                                                         4,442,712 
                                                                                   ----------------
                     Canada - 7.3%                                                                 
             6,000   Abitibi Consolidated Inc                                              105,009 
             1,000   Agnico Eagle Mines Ltd                                                  8,751 
            57,200   Air Canada Inc                                                        449,048 
            36,000   Anderson Exploration Ltd                                              448,558 
             5,000   Avenor Inc                                                             93,630 
            26,800   BCE Mobile Communications                                             972,826 
             1,300   Biochem Pharma Inc                                                     33,707 
               700   Bombardier Inc Class A                                                 13,814 
            10,600   CAE Industries Inc                                                     81,306 
             1,400   Cambior Inc                                                            14,974 
            18,900   Cameco Corp                                                           655,432 
             6,600   Canadian Airlines Corp                                                 13,310 
            14,700   Canadian Hotel Inc                                                    726,821 
             3,100   Canadian Marconi Co                                                    45,212 
            39,800   Canadian Tire Corp Ltd Class A                                        746,725 


      See accompanying notes to the financial statements.                      1

N-30D 41st Page of 667 TOC 1st Previous Next ↓Bottom Just 41st
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


          Shares        Description                                                 Value ($) 
----------------------------------------------------------------------------------------------
                                                                                              
                   Canada - continued                                                         
           1,200   Canfor Corp                                                         12,964 
           3,400   CCL Industries Class B                                              41,629 
          31,900   Cominco Ltd                                                        827,109 
          92,400   Corel Corp                                                         539,047 
          15,700   Co-Steel Inc                                                       266,293 
           2,000   Cott Corp                                                           19,086 
          10,800   Dofasco Inc                                                        220,130 
          18,100   Dominion Textile Inc                                                97,771 
          43,400   Domtar Inc                                                         359,466 
           6,700   Donohue Inc Class A                                                152,487 
         126,000   Echo Bay Mines Ltd *                                               635,241 
           4,200   Edperbrascan Corp Class A Ltd (Voting Shares)                       71,389 
           8,600   Elan Energy Inc                                                     55,746 
             400   Extendicare (Voting Shares)                                          6,338 
           5,700   Fletcher Challenge Canada Class A                                   97,501 
          45,400   Gulf Canada Resources Ltd *                                        371,126 
           6,400   Hudsons Bay Co                                                     161,331 
             100   Inco Ltd Class VBN Shares                                            1,851 
          13,000   Inmet Mining Ltd                                                    73,031 
          13,900   International Comfort Products Corp                                110,123 
           5,500   International Forest Products A                                     37,236 
           6,000   IPL Energy Inc                                                     214,340 
          21,100   Ipsco Inc                                                          881,415 
           1,265   Laidlaw Inc                                                         18,495 
          18,300   Macmillan Bloedel Ltd                                              229,335 
           8,900   MDS Inc Class B                                                    185,891 
          33,400   Methanex Corp                                                      280,248 
          10,100   Mitel Corp                                                          70,197 
          15,300   Molson Co Ltd, Class A                                             280,997 
           2,900   Molson Co Ltd, Class B                                              52,739 
          14,500   Moore Corporation Ltd                                              291,368 
             800   Noma Industries Ltd Class A                                          2,881 
          92,500   Noranda Forest Inc                                                 626,238 
           8,500   Noranda Inc                                                        166,211 
           1,700   Norcen Energy Resource                                              40,956 
          39,800   Nova Scotia Power Inc                                              412,777 
         141,600   Numac Energy Inc                                                   673,096 
          15,800   Oshawa Group Ltd Class A                                           243,523 
           1,100   Pegasus Gold Inc *                                                   4,674 
          10,600   Power Corp of Canada Ltd                                           291,253 
           9,600   Provigo Inc                                                         52,548 
           7,100   Quebecor Inc Class B                                               132,443 
           7,600   Ranger Oil Ltd                                                      73,074 
           5,900   Repap Enterprises Inc *                                              1,020 
          21,200   Rio Algom Ltd                                                      492,420 
          10,000   Rogers Cantel MBL Class B (Registered)                             199,863 
          12,800   Rogers Communications Inc Class B                                   88,963 
         167,100   Royal Oak Mines                                                    304,486 

2             See accompanying notes to the financial statements.               

N-30D 42nd Page of 667 TOC 1st Previous Next ↓Bottom Just 42nd
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]


            Shares       Description                                  Value ($)
-------------------------------------------------------------------------------
                                                                               
                     Canada - continued                                        
            10,200   Sears Canada Inc                                   147,661
            10,700   Semi-Tech Class A *                                 26,818
             4,880   Slocan Forest Products Ltd                          41,649
             1,400   Southam Inc                                         25,712
               700   Spar Aerospace Ltd                                   5,521
            29,700   Stelco Inc Class A                                 252,411
            12,400   Suncor Energy Inc                                  388,937
             2,100   Teck Corp Class B                                   39,324
               100   Tele Metropole Inc Class B                           1,675
            27,400   Telus Corp                                         544,665
             6,700   Torstar Corp Class B                               214,495
             6,600   Total Petroleum North America                       65,361
            48,200   Transalta Corp                                     600,569
            25,600   TVX Gold Inc *                                     134,596
             8,300   United Dominion Industries Ltd                     225,665
            11,400   Westcoast Energy Inc                               217,991
             1,000   Weston (George) Ltd                                 67,593
                                                                  -------------
                                                                     17,878,112
                                                                  -------------
                     Denmark - 0.0%                                            
               800   Hafnia Holdings Class A (c)*                             1
                                                                  -------------

                     Finland - 0.4%                                            
            29,200   Kesko OY                                           377,129
            37,400   Partek OY                                          683,149
                                                                  -------------
                                                                      1,060,278
                                                                  -------------
                     France - 0.4%                                             
               120   Accor SA                                            18,003
               300   Bertrand Faure SA                                   14,640
               360   BIC SA                                              26,056
                25   Bongrain                                             8,862
               360   Bouygues                                            28,845
               400   Cap Gemini SA                                       24,400
               750   Casino Guichard-Perrachon                           37,342
               190   Castorama Dubois Investment                         22,335
                80   CGIP                                                22,422
                70   Clarins                                              8,413
               220   Club Mediterranee SA *                              17,646
                70   Comptoirs Modernes                                  31,495
               140   Eridania Beghin-Say SA                              18,234
               130   Essilor International                               32,192
             7,600   Euro Disney SCA (Bearer) *                          10,776
            10,400   Eurotunnel SA Units (Bearer) *                      12,088
                15   Fromageries Bel La Vache                            10,154
                31   Gaz Et Eaux                                         13,263
                30   Guyenne Et Gascogne                                 10,016
               250   Havas                                               15,287
               210   Hermes International                                17,553
               170   Imetal                                              23,767


             See accompanying notes to the financial statements.             3

N-30D 43rd Page of 667 TOC 1st Previous Next ↓Bottom Just 43rd
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


            Shares        Description                                             Value ($)
-------------------------------------------------------------------------------------------
                                                                                           
                     France - continued                                                    
             1,675   Lagardere Groupe                                                44,875
               150   Pathe SA                                                        28,044
               830   Pechiney SA Class A                                             35,907
               700   Pernod-Ricard                                                   32,718
               230   Primagaz                                                        19,528
                30   Sagem Applic Gen D Electric                                     14,675
               190   Salomon SA                                                      13,313
               130   Seb SA                                                          20,361
             1,030   Seita                                                           31,755
               220   Sidel (Bearer)                                                  15,959
                70   Sodexho Alliance                                                31,679
               120   Sylea (Bearer)                                                  10,683
               180   Technip SA (Compagnie Francaise)                                21,782
               700   Thomson CSF                                                     18,823
               280   TV Francaise                                                    22,851
             3,500   Usinor Sacilor                                                  60,762
               760   Worms et Compagnie SA                                           41,436
                                                                                -----------
                                                                                    888,940
                                                                                -----------
                     Germany - 2.8%                                                        
             2,100   AGIV AG *                                                       48,996
               200   Ava Allgemeine Handelsgesellschaft der Verbraucher AG *         54,218
               550   Bayerische Motorenwerke AG                                     391,079
             2,500   Berliner Kraft & Licht Class A                                  52,426
             2,400   Bilfinger & Berger                                              99,858
               150   Brau und Brunnen *                                              11,916
             7,600   Continental AG                                                 184,918
             3,000   Degussa AG                                                     146,655
               550   Deutsche Babcock & Wilcox *                                     34,983
               150   Didier-Werke AG                                                 11,082
               900   Douglas Holdings AG                                             31,447
               100   Draegerwerk AG Preferred                                         2,111
                50   Dyckerhoff AG                                                   17,499
                50   Dyckerhoff AG (Non Voting)                                      17,221
             2,000   FAG Kugelfischer                                                36,441
               150   Friedrich Grohe AG Preferred (Non Voting)                       41,663
             1,800   Friedrich Krupp AG                                             385,968
               150   GEA AG Preferred 3.13%                                          49,538
             3,355   Heidelberg Port-Zement                                         250,672
             1,100   Henkel KGAA Preferred                                           55,668
               850   Henkel KGAA (Bearer)                                            39,286
               100   Herlitz AG                                                       8,099
               150   Herlitz AG Preferred                                            11,374
             2,450   Hochtief AG                                                    115,685
               100   Holsten-Brauerei                                                22,220
               200   Holzmann (Philipp) *                                            60,551
               250   Ind-Werke Karl-Aug                                              61,106
               450   Karstadt AG                                                    155,737
               250   Kaufhalle AG *                                                  24,304


4                            See accompanying notes to the financial statements.

N-30D 44th Page of 667 TOC 1st Previous Next ↓Bottom Just 44th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]


     Shares      Description                                     Value ($)      
--------------------------------------------------------------------------------
                                                                                
                 Germany - continued                                            
         2,900   Klockner Humboldt Deutz *                               23,923 
           300   Klockner-Werke AG *                                     19,498 
         1,450   Kolbenschmidt *                                         22,151 
            50   Krones Preferred                                        19,471 
           250   Leirheit AG                                              8,846 
           550   Linde AG                                               371,219 
           150   Linotype Hell AG *                                       7,499 
        14,250   Lufthansa AG                                           286,560 
           800   MAN AG                                                 219,982 
           300   MAN AG Preferred                                        67,744 
         3,360   Metro AG                                               153,987 
           600   Metro AG Preferred                                      21,298 
           300   Papierwerke Waldhof                                     55,329 
         1,350   Phoenix AG                                              23,623 
           750   Preussag AG                                            211,024 
           150   Reutgerswerke AG *                                      23,748 
         6,100   Schering AG                                            595,378 
           300   Schmalbach-Lubeca                                       62,328 
           200   Strabag Bau AG *                                        15,688 
           100   TH Goldschmidt AG                                       32,608 
         1,850   Thyssen AG                                             426,492 
           100   Varta AG *                                              16,110 
         1,500   Viag AG                                                624,531 
           250   Villeroy and Boch AG *                                  40,136 
         1,000   Volkswagen AG                                          719,385 
           550   Volkswagen AG Preferred .79%                           296,364 
                                                                ----------------
                                                                      6,787,643 
                                                                ----------------
                 Hong Kong - 7.3%                                               
     2,856,000   Allied Properties Ltd                                  685,529 
       571,200   Allied Properties Warrants 7/3/00                       62,656 
       102,000   Amoy Properties Ltd                                    102,671 
       129,000   Asia Financial Holdings                                 72,000 
       245,000   Asia Standard International Group Ltd                  118,564 
       102,000   ASM Pacific Technology                                  73,713 
       250,000   Associated International Hotels                        174,216 
       256,000   Chinese Estates Holdings Ltd                           227,952 
       143,000   Cross Harbour Tunnel Co Ltd                            293,419 
       258,666   Dickson Concept International Ltd                      981,389 
        11,214   Evergo China Holdings                                    1,910 
       118,580   Furama Hotel Enterprises Ltd                           494,275 
       218,000   Grand Hotel Holdings Ltd Class A                        84,398 
       270,000   Great Eagle Holdings Ltd                               789,199 
       624,000   Hang Lung Development Co Ltd                         1,127,371 
       265,000   Henderson Investment Ltd                               280,423 
       126,300   Hongkong Aircraft Engineering Co Ltd                   415,621 
       245,000   Hysan Development Co Ltd                               711,382 
        13,000   IMC Holdings                                             6,207 
        84,000   Jardine International Motor Holdings Ltd                95,393 

             See accompanying notes to the financial statements.             5

N-30D 45th Page of 667 TOC 1st Previous Next ↓Bottom Just 45th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


                Shares         Description                                                     Value ($)    
------------------------------------------------------------------------------------------------------------
                                                                                                            
                            Hong Kong - continued                                                           
                  113,937   Jardine Strategic Warrants 5/02/98                                        50,132
                   26,400   Johnson Electric Holdings Ltd                                             59,280
                  106,800   Kowloon Motor Bus Co Ltd                                                 289,431
                  353,000   Kumagai Gumi Hong Kong Ltd                                               662,815
                  283,000   Kwong Sang Hong International Ltd                                        136,953
                  944,400   Lai Sun Development                                                      938,404
                  278,000   Lai Sun Garment International Ltd                                        335,437
                  189,544   Lai Sun Hotel International Warrants 4/30/99                              13,698
                  292,000   Liu Chong Hing Investment Ltd                                            408,853
                   80,620   Mandarin Oriental                                                         90,294
                1,134,000   Mingly Corp                                                              362,195
                  146,000   New Asia Realty & Trust A Shares                                         535,088
                  340,000   Oriental Press Group                                                     117,370
                   12,800   Oriental Press Group Warrants 10/2/98                                        496
                  667,000   Pacific Concord Holdings Ltd                                             406,707
                   35,100   Realty Development Corp Ltd Class A                                      134,983
                4,087,810   Regal Hotels International Ltd                                         1,120,996
                1,062,000   Ryoden Development                                                       599,594
                    9,200   Semi Tech Global Warrants 7/31/98                                          2,232
                   92,000   Semi Tech (Global) Co Ltd                                                138,315
                  132,000   Shell Electric Co Ltd                                                     74,100
                  112,000   Shun Tak Holdings Ltd                                                     63,234
                1,770,000   South China Morning Post Ltd                                           1,416,183
                   21,595   Stelux Holdings International                                              5,267
                    4,319   Stelux Holdings International Warrants 2/28/98                               206
                  460,000   Swire Pacific Ltd Class B                                                667,828
                  343,101   Tsim Sha Tsui Properties Ltd                                             717,284
                  162,000   Wing On Co                                                               186,063
                   20,000   Wing On International Holdings Ltd                                        36,134
                  163,500   Winsor Properties Holdings Ltd                                           261,634
                1,464,000   World Trade Centre Group Ltd                                             689,586
                  637,000   Yizheng Chemical Fibre Co                                                464,454
                                                                                             ---------------
                                                                                                  17,783,534
                                                                                             ---------------
                            Italy - 6.3%                                                                    
                  192,300   Alitalia Linee Aeree Italiane Class A *                                  116,317
                  118,000   Alitalia Linee Aeree Italiane Class B Preferred *                         55,961
                   31,400   Ansaldo Transporti SPA *                                                  33,438
                  355,000   Autostrade Concessioni e Costruzioni SPA Class B Preferred 6.39%         844,804
                   36,500   Banca Nazionale dell'Agricoltura SPA Preferred                            12,749
                1,064,200   Banca Nazionale dell'Agricoltura SPA (Non Convertible)                   366,881
                    3,120   Benetton Group SPA                                                        45,275
                    8,000   Bulgari SPA                                                               47,481
                   75,000   Caffaro SPA                                                               63,043
                   33,500   Cartiere Burgo SPA                                                       190,645
                  200,000   Cementir Cementerie del Tirreno SPA                                      137,445
                  172,900   Cia Italiana del Grandi Alberghi Cigahotels SPA *                         80,818
                   42,100   COFIDE SPA (Non Convertible) *                                             9,564
                  129,600   COFIDE SPA *                                                              43,207

6             See accompanying notes to the financial statements.               

N-30D 46th Page of 667 TOC 1st Previous Next ↓Bottom Just 46th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


         Shares       Description                                                            Value ($)     
-----------------------------------------------------------------------------------------------------------
                                                                                                           
                   Italy - continued                                                                       
           9,000   Cogefar Impresit Costruzioni Generali SPA *                                        5,960
         167,500   Comau Finanziaria SPA                                                            522,277
           5,000   Compart SA *                                                                       2,025
          37,500   Compart SPA *                                                                     17,848
           8,800   Danieli and Co SPA                                                                64,474
          38,000   Danieli and Co SPA (Non Convertible)                                             134,889
           5,100   Edison SPA                                                                        23,868
             250   Ericsson SPA                                                                       4,309
          22,000   Falck Acciaierie and Ferriere Lombarde                                            86,215
         240,900   Fiat SPA Preferred                                                               374,203
         337,700   Fiat SPA (Non Convertible)                                                       564,846
             700   Fila Holding SPA ADR                                                              21,394
         439,500   Finmeccanica SPA (Non Convertible) *                                             230,645
           2,500   Finmeccanica SPA *                                                                 1,761
         102,000   Fornara SPA (c)*                                                                   4,171
          51,780   Gemina SPA                                                                        18,233
          23,000   Gemina SPA Di Risp Convertible                                                    13,246
          75,833   Gilardini SPA                                                                    125,333
         213,400   Grassetto SPA (c)*                                                                     1
         207,000   Holding Di Partecipazione                                                         78,299
         466,020   HPI SPA                                                                          211,478
          29,300   IFI Istituto Finanziario Preferred 2.46%                                         333,653
          96,300   IFIL Finanziaria di Partecipazioni SPA                                           299,723
         108,400   IFIL Finanziaria di Partecipazioni SPA (Non Convertible)                         183,467
         100,400   Industriali Riunite SPA (Non Convertible) *                                       37,350
         170,200   Industriali Riunite SPA *                                                        120,156
             800   Industrie Natuzzi SPA ADR                                                         22,000
          33,500   Italcementi Fabbriche Riunite Cemento SPA                                        220,327
          53,000   Italcementi Fabbriche Riunite Cemento SPA (Non Convertible)                      128,383
         117,400   Italgas SPA                                                                      361,394
             400   Italmobiliare SPA                                                                  6,350
           4,400   Luxottica Group Sponsored ADR                                                    256,850
           4,000   Marzotto and Figli SPA                                                            38,905
          35,300   Mondadori Editore                                                                208,507
         190,000   Montedison SPA                                                                   115,465
         165,000   Montedison SPA (Non Convertible)                                                  81,530
         139,433   Montefibre SPA                                                                    81,567
          60,000   Montefibre SPA (Non Convertible)                                                  29,647
          24,320   Olivetti and Co SPA Preferred *                                                   20,747
         166,000   Olivetti and Co SPA (Non Convertible) *                                           57,040
         460,000   Olivetti SPA *                                                                   186,800
         319,560   Parmalat Finanziaria SPA                                                         496,390
           9,000   Permafin Finanziaria *                                                             2,515
          74,750   Pirelli and Co                                                                   109,108
          77,000   Pirelli and Co (Non Convertible)                                                  87,334
         110,000   Pirelli SPA                                                                      277,701
          31,000   Pirelli SPA (Non Convertible)                                                     43,312
          16,000   Recordati Industria Chimica e Farmaceutica SPA                                   119,861

              See accompanying notes to the financial statements.              7

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


      Shares      Description                                                            Value ($)    
------------------------------------------------------------------------------------------------------
                                                                                                      
               Italy - continued                                                                      
       75,500  Recordati Industria Chimica e Farmaceutica SPA (Non Convertible)                291,588
       30,000  Rinascente per l'Esercizio di Grandi Magazzini SPA                              183,336
      220,000  Rinascente per l'Esercizio di Grandi Magazzini SPA Preferred 5.59%              477,934
      140,000  Rinascente per l'Esercizio di Grandi Magazzini SPA (Non Convertible)            397,568
       19,500  Rinascente Warrants 12/31/99                                                     14,331
      167,000  SAFFA SPA *                                                                     280,751
        3,200  SAFILO SPA                                                                       71,971
        7,500  Saipem SPA                                                                       35,994
       11,700  Sasib SPA                                                                        34,421
       72,500  Seat SPA di Risp                                                                 17,788
       44,000  Sirti SPA                                                                       236,155
      355,200  SMI (Societa Metallurgica Italy) *                                              143,637
      115,000  Snia BPD SPA                                                                    109,990
      605,000  Snia BPD SPA (Non Convertible)                                                  418,864
       42,000  Sorin Biomedica SPA                                                             143,125
       39,000  Stefanel SPA *                                                                   59,584
       45,000  Telecom Italia Mobile SPA (Non Convertible)                                      75,396
      641,104  Telecom Italia SPA (Non Convertible)                                          2,268,454
        1,000  Unione Cementi Marchino Emiliane e di Augusta-Casale                              7,114
      584,774  Unione Cementi Marchino Emiliane e di Augusta-Casale (Non Convertible)        1,511,168
                                                                                         -------------
                                                                                            15,258,354
                                                                                         -------------
               Japan - 16.9%                                                                          
        3,000  Aida Engineering Ltd                                                             16,510
       27,000  Aisin Seiki Co Ltd                                                              368,110
        7,000  Ajinomoto Co Inc                                                                 64,012
       20,000  Alps Electric Co Ltd                                                            237,759
       35,000  Amada Co Ltd                                                                    237,426
        2,000  Amano Corp                                                                       17,790
        3,000  Anritsu Corp                                                                     44,393
      253,000  Aoki Corp *                                                                     151,434
        2,000  Aoki International                                                               26,436
        5,000  Aoyama Trading                                                                  134,675
       31,000  Asahi Breweries Ltd                                                             461,302
        6,000  Asahi Denka Kogyo                                                                32,422
        6,000  Asahi Optical Co                                                                 18,206
        1,000  Asatsu Inc                                                                       26,187
        8,000  Asics Corp *                                                                     12,836
       11,000  Atsugi Nylon Industrial                                                          25,971
        4,000  Bandai Co                                                                        86,458
        3,000  Bank of Kyoto Ltd                                                                16,710
       19,000  Bank of Yokohama Ltd                                                             80,871
        6,000  Banyu Pharmaceutical Co Ltd                                                     100,757
        2,000  Best Denki Co Ltd                                                                15,429
        6,000  Brother Industries Ltd                                                           20,949
       11,000  Canon Sales Co Inc                                                              223,127
       13,000  Casio Computer Co                                                               113,476
       14,000  Chiba Bank Ltd                                                                   73,323
        9,000  Chiyoda Corp *                                                                   24,990

8             See accompanying notes to the financial statements.               

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]


        Shares      Description                                    Value ($)    
--------------------------------------------------------------------------------
                                                                                
                 Japan - continued                                              
          2,000  Chudenko Corp                                            45,889
         23,000  Chugai Pharmaceutical Co Ltd                            193,117
          3,000  Chugoku Bank Ltd                                         44,393
         23,000  Citizen Watch Co                                        177,629
         68,000  Cosmo Oil Co Ltd                                        220,467
         28,800  CSK Corp                                                979,234
         46,000  Daicel Chemical Industries Ltd                          130,784
          8,000  Daido Steel Co Ltd                                       19,553
         17,000  Daiichi Seiyaku Co Ltd                                  289,717
          7,000  Daikin Industries Ltd                                    50,744
         33,000  Dainippon Ink & Chemicals Inc                           121,806
          5,000  Dainippon Pharmaceutical Co Ltd                          28,681
          4,000  Dainippon Screen Manufacturing Co Ltd                    37,576
          3,000  Daio Paper Corp                                          18,455
         14,800  Daito Trust Construction Co Ltd                         163,638
         23,000  Daiwa Bank Ltd                                          121,415
          8,000  Denki Kagaku Kogyo                                       15,629
          1,000  Denny's Japan Co Ltd                                     26,769
          2,000  Descente Ltd                                              7,648
          8,000  Eisai Co Ltd                                            152,299
          4,000  Ezaki Glico Co Ltd                                       30,094
          4,000  Fuji Electric Co                                         13,733
         37,000  Fuji Heavy Industries Ltd                               163,330
          8,000  Fujikara Ltd                                             67,171
        105,000  Fujisawa Pharmaceutical Co Ltd                        1,021,282
         34,000  Fujita Corp                                              29,113
          3,000  Fujitec Co                                               35,165
         60,000  Fujiya Co Ltd *                                         162,607
          1,000  Fukuoka City Bank Ltd                                     3,982
         24,000  Fukuyama Transporting Co Ltd                            119,711
         11,000  Furukawa Co Ltd                                          27,982
         41,000  Furukawa Electric Co Ltd                                231,773
        167,000  Gakken Co Ltd *                                         713,592
         40,000  General Sekiyu (KK)                                     232,771
         39,000  Godo Shusei Co Ltd                                      105,370
         30,000  Green Cross Corp                                        107,241
          7,000  Gunze Ltd                                                27,001
          5,000  Hankyu Department Stores Inc                             40,943
        207,000  Hanwa Co Ltd *                                          357,935
        175,000  Haseko Corp *                                           164,394
         19,000  Hazama-Gumi Ltd                                          24,640
          1,000  Heiwa Corp                                               17,957
          4,000  Higo Bank Ltd                                            28,265
          8,000  Hiroshima Bank Ltd                                       27,799
          8,000  Hitachi Cable Ltd                                        58,525
         50,600  Hitachi Ltd                                             466,922
         22,000  Hitachi Maxell Ltd                                      497,465
         10,000  Hitachi Metals Ltd                                       52,789

              See accompanying notes to the fiancial statements.               9

N-30D 49th Page of 667 TOC 1st Previous Next ↓Bottom Just 49th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]

       Shares      Description                              Value ($)           
--------------------------------------------------------------------------------
                                                                                
                 Japan - continued                                              
          7,000  Hokuetsu Paper Mills                             35,963        
          8,000  Hokuriku Bank Ltd                                24,740        
          6,000  Honen Corp                                       16,061        
          3,000  House Foods Corp                                 50,877        
         25,000  Hyogo Bank Ltd (c)*                                   2        
          8,000  INAX Corp                                        39,239        
         46,000  Intec Inc                                       523,901        
          7,000  Isetan Co Ltd                                    68,667        
         11,000  Ishihara Sangyo Kaisha *                         28,440        
         13,000  Itoham Foods Inc                                 54,468        
          7,000  Izumiya Co Ltd                                   67,504        
         25,000  Japan Airport Terminal Co Ltd                   263,946        
          3,000  Japan Radio Co                                   26,935        
        119,000  Japan Synthetic Rubber Co Ltd                   910,134        
          3,000  Japan Wool Textile                               17,957        
         11,000  JGC Corp                                         46,637        
         35,000  Joshin Denki Co Ltd                             249,938        
          2,000  Kaken Pharmaceutical Co Ltd                       8,330        
         23,000  Kamigumi Co Ltd                                 106,119        
          3,000  Kandenko Co                                      20,575        
          7,000  Kaneka Corp                                      43,528        
          4,000  Kansai Paint Co Ltd                              13,002        
          7,000  Kao Corp                                        103,583        
          3,000  Katokichi Co Ltd                                 48,632        
         38,000  Keihin Electric Express Railway Co Ltd          157,320        
         49,000  Keio Teito Electric Railway Co Ltd              211,821        
          7,000  Kikkoman Corp                                    39,571        
          9,000  Kinden Corp                                     124,948        
          2,000  Kissei Pharmaceutical Co Ltd                     36,578        
         16,000  Koito Manufacturing Co Ltd                      117,051        
         59,000  Kokusai Kogyo Co Ltd                            350,694        
          5,000  Kokuyo Co Ltd                                   119,295        
         34,000  Komatsu Ltd                                     211,140        
          4,000  Komori Corp                                      84,130        
         23,000  Konica Corp                                     132,696        
         58,000  Koyo Seiko Co Ltd                               398,753        
         44,000  Kumagai Gumi Co Ltd                              48,649        
        123,000  Kurabo Industries Ltd                           260,745        
         14,000  Kuraray Co                                      124,532        
        268,000  Kureha Chemical Industry Co Ltd                 893,408        
          4,000  Kyodo Printing Co Ltd                            28,598        
         15,000  Kyowa Hakko Kogyo Co Ltd                         87,913        
          1,000  Kyudenko Corp                                     6,667        
          3,000  Kyushu Matsushita Electric                       36,412        
         28,000  Lion Corp                                       108,006        

10            See accompanying notes to the financial statements.               

N-30D 50th Page of 667 TOC 1st Previous Next ↓Bottom Just 50th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]


    Shares      Description                                        Value ($)    
--------------------------------------------------------------------------------
                                                                                
             Japan - continued                                                  
      1,900  Mabuchi Motor Co                                          101,405  
     66,000  Maeda Corp                                                288,054  
     23,000  Maeda Road Construction                                   149,713  
     61,000  Makino Milling Machine Co Ltd                             424,449  
      9,000  Makita Corp                                               123,452  
     50,000  Marubeni Corp                                             181,644  
      3,000  Marudai Food Co Ltd                                        10,200  
      2,000  Maruichi Steel Tube                                        29,096  
     15,000  Matsushita Electric Works Ltd                             162,108  
     29,000  Matsushita Refrigeration Co                               150,437  
      7,000  Matsuzakaya Co Ltd                                         41,317  
    206,000  Mazda Motor Corp *                                        702,137  
      7,000  Meiji Seika Kaisha Ltd                                     31,831  
      9,000  Mercian Corp                                               42,048  
      3,000  Misawa Homes                                               14,166  
     32,000  Mitsubishi Gas Chemical Co Inc                            121,307  
        200  Mitsubishi Kasei Corp                                         524  
     37,000  Mitsubishi Materials Corp                                 117,807  
     80,000  Mitsubishi Oil Co Ltd *                                   279,325  
     10,000  Mitsubishi Paper Mills Ltd                                 26,187  
     20,000  Mitsubishi Rayon Co Ltd                                    76,149  
      6,000  Mitsubishi Steel Manufacturing *                           12,021  
      8,000  Mitsubishi Warehouse & Transportation Co Ltd               93,108  
     54,000  Mitsuboshi Belting Ltd                                    172,832  
     13,000  Mitsui Mining Co Ltd *                                     19,669  
     15,000  Mitsui Petrochemical Industries Ltd                        51,750  
     25,000  Mitsui Toatsu Chemicals Inc                                48,009  
     22,000  Mitsui Trust & Banking Co Ltd                             126,744  
      6,000  Mitsui-Soko Co Ltd                                         27,234  
      3,000  Mizuno Corp                                                15,014  
      5,000  Mori Seiki Co Ltd                                          61,934  
      2,000  MOS Food Services                                          30,094  
      3,000  Nagase & Co                                                18,854  
     60,000  Nagoya Railroad Co Ltd                                    221,964  
      2,000  Namco Ltd                                                  67,670  
     36,000  Nankai Electric Railway Co Ltd                            173,581  
      3,000  National House Industrial                                  39,155  
      6,000  NCR Japan Ltd                                              39,305  
     23,000  NGK Spark Plug Co                                         196,941  
     11,000  NHK Spring Co Ltd                                          37,859  
      3,000  Nichicon Corp                                              37,160  
    155,000  Nichiei Co Ltd                                            253,845  
     16,000  Nichii Co Ltd                                             182,226  
     17,000  Nihon Cement Co Ltd                                        50,594  
      8,000  Nippon Beet Sugar Manufacturing Co Ltd                     18,888  
    121,000  Nippon Chemi-Con Corp                                     563,305  
      5,000  Nippon Comsys                                              71,078  
      6,000  Nippon Denko Co Ltd                                        10,774  

               See accompanying to the financial statements.              11

N-30D 51st Page of 667 TOC 1st Previous Next ↓Bottom Just 51st
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]

    Shares        Description                                    Value ($)      
--------------------------------------------------------------------------------
                                                                                
                Japan - continued                                               
         8,000  Nippon Flour Mills Co Ltd                                22,479 
         3,000  Nippon Hodo Co                                           20,426 
        13,000  Nippon Kayaku Co Ltd                                     62,141 
        12,000  Nippon Light Metal                                       32,122 
         8,000  Nippon Meat Packers Inc                                  96,434 
        12,000  Nippon Metal Industry Co Ltd                             22,446 
       174,000  Nippon Oil Co Ltd                                       779,666 
         7,000  Nippon Paint Co                                          18,913 
        13,000  Nippon Piston Ring Co Ltd                                27,775 
        23,000  Nippon Sheet Glass Co Ltd                                59,082 
         7,000  Nippon Shokubai Corp                                     51,210 
        17,000  Nippon Suisan Kaisha Ltd *                               38,158 
         9,000  Nippon Synthetic Chemical                                19,079 
        14,000  Nippon Yakin Kogyo Co Ltd *                              19,786 
        27,000  Nishimatsu Construction                                 159,365 
        52,000  Nissan Fire & Marine Insurance Co Ltd                   229,113 
         7,000  Nisshin Flour Milling Co Ltd                             51,850 
         7,000  Nisshin Oil Mills Ltd                                    27,409 
        28,000  Nisshin Steel Co Ltd                                     58,193 
        48,000  Nisshinbo Industries Inc                                311,248 
        66,000  Nissho Iwai Corp                                        248,549 
         4,000  Nissin Food Products Co Ltd                              93,108 
        19,000  Nitto Boseki Co Ltd                                      56,073 
        59,000  Nitto Denko Corp                                      1,025,106 
        35,000  NSK Ltd                                                 181,270 
        13,000  NTN Corp                                                 60,520 
        17,000  Okamoto Industries Inc                                   53,704 
        17,000  Oki Electric Industry                                    60,770 
         8,000  Okumura Corp                                             44,892 
        16,000  Olympus Optical Co Ltd                                  114,124 
         3,000  Ono Pharmaceutical Co Ltd                                93,524 
        25,000  Onoda Cement Co Ltd                                      74,611 
        15,000  Onward Kashiyama Co Ltd                                 230,693 
        44,000  Pioneer Electronics Corp                                877,879 
         3,000  Q.P. Corp                                                24,940 
       385,000  Renown Inc *                                            662,524 
         2,000  Rinnai Corp                                              37,243 
        62,000  Royal Co Ltd                                          1,061,767 
        10,000  Ryobi Ltd                                                30,260 
         2,000  Ryosan Co                                                40,402 
        25,000  Sanden Corp                                             171,461 
        10,000  Sankyo Aluminum Industry Co Ltd                          20,783 
        35,000  Sanrio Co Ltd *                                         264,777 
        11,000  Sanwa Shutter Corp                                       85,044 
       145,000  Sanyo Securities Co Ltd *                               144,650 
        13,000  Sapporo Breweries Ltd                                    92,510 
        16,000  Seino Transportation Co Ltd                             159,614 
        72,000  Sekisui Chemical Co Ltd                                 610,525 

12            See accompanying notes to the financial statements.               

N-30D 52nd Page of 667 TOC 1st Previous Next ↓Bottom Just 52nd
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                                [Download Table]


        Shares       Description                                Value ($)      
-------------------------------------------------------------------------------
                                                                               
                  Japan - continued                                            
           6,000  Settsu Corp *                                          5,088 
           2,000  Shimachu Co                                           45,224 
           4,000  Shimano Inc                                           86,125 
          10,000  Shimazu Corp                                          43,478 
          44,000  Shionogi and Co Ltd                                  296,650 
          14,000  Shiseido Co Ltd                                      229,279 
          13,000  Shokusan Jutaku Sogo Co Ltd *                         12,536 
         134,000  Showa Denko                                          260,670 
           8,000  Showa Electric Wire & Cable                           20,151 
          40,000  Showa Shell Sekiyu                                   277,662 
           5,000  Skylark Co Ltd                                        69,416 
          10,000  Snow Brand Milk Products Co Ltd                       41,317 
          17,000  Stanley Electric Co Ltd                               73,065 
           3,000  Sumitomo Bakelite Co Ltd                              20,151 
           7,000  Sumitomo Coal Mining Co Ltd                           15,188 
           3,000  Sumitomo Forestry Co Ltd                              28,930 
          39,000  Sumitomo Osaka Cement Co Ltd                          75,867 
          22,000  Sumitomo Trust & Banking Co Ltd                      213,983 
           9,000  Sumitomo Warehouse Co Ltd                             43,919 
           6,000  SXL Corp Ltd                                          25,738 
          34,000  Taisei Corp                                          133,976 
          37,000  Taiyo Yuden Co Ltd                                   433,702 
           7,000  Takara Shuzo Co Ltd                                   40,677 
           6,000  Takara Standard Co                                    46,188 
           4,000  Tanabe Seiyaku Co Ltd                                 30,127 
          45,000  Teikoku Oil Co Ltd                                   172,458 
          16,000  The Japan Steel Works Ltd *                           22,213 
           9,000  Toagosei Chemical Industry Co Ltd                     23,718 
          64,000  Tobu Railway Co Ltd                                  260,171 
          18,000  Toda Corp                                            100,258 
           7,000  Toei Co Ltd                                           37,302 
             880  Toho Co Ltd                                          121,440 
           7,000  Toho Gas Co                                           14,257 
          13,000  Tokai Carbon Co Ltd                                   43,769 
           7,000  Tokuyama Corp                                         27,700 
          18,000  Tokyo Broadcasting System Inc                        303,766 
         113,000  Tokyo Construction Co Ltd                            147,485 
          90,000  Tokyo Electric Co Ltd                                323,967 
          17,000  Tokyo Ink Manufacturing Co Ltd                        52,008 
          43,000  Tokyo Rope Manufacturing Co Ltd                       94,729 
           8,000  Tokyo Sowa Bank Ltd *                                 26,602 
           8,000  Tokyo Steel Manufacturing Co                          65,242 
           5,000  Tokyo Style Co Ltd                                    59,024 
          13,000  Tokyotokeiba Co Ltd                                   30,260 
          84,000  Tokyu Corp                                           443,428 
          16,000  Tokyu Department Store Co Ltd                         39,904 
          35,000  Toppan Printing Co Ltd                               503,367 
          28,000  Toshiba Tungaloy Co Ltd                              105,911 


             See accompanying notes to the financial statements.            13

N-30D 53rd Page of 667 TOC 1st Previous Next ↓Bottom Just 53rd
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


       Shares            Description                                          Value ($)     
--------------------------------------------------------------------------------------------
                                                                                            
                     Japan - continued                                                      
            4,000    Tostem Corp                                                     83,465 
            7,000    Toto Ltd                                                        73,905 
           19,000    Toyo Engineering Corp                                           66,340 
            1,000    Toyo Exterior Co Ltd                                             9,893 
            5,000    Toyo Kanetsu (KK)                                                7,316 
            9,000    Toyo Seikan Kaisha Ltd                                         155,624 
            6,000    Toyo Suisan Kaisha                                              59,855 
           10,000    Toyo Trust & Banking Co Ltd                                     81,470 
            3,000    Tsubakimoto Chain                                               16,086 
            3,000    Tsugami Corp *                                                   6,135 
            4,000    Tsumura and Co                                                  30,892 
            4,000    Uniden Corp                                                     56,198 
            4,000    UNY Co Ltd                                                      73,489 
          193,000    Victor Co of Japan Ltd                                       2,342,506 
           10,000    Wacoal Corp                                                    115,554 
            4,000    Yakult Honsha Co Ltd                                            39,239 
            3,000    Yamaguchi Bank Ltd                                              42,148 
            9,000    Yamaha Corp                                                    139,164 
           10,000    Yamanouchi Pharmaceutical Co Ltd                               239,421 
            5,000    Yamatake Honeywell                                              86,873 
           27,000    Yamato Transport Co Ltd                                        325,464 
            6,000    Yamazaki Baking Co Ltd                                          82,800 
           19,000    Yasuda Trust and Banking Co Ltd                                 71,078 
            8,000    Yodogawa Steel Works                                            43,162 
            3,000    Yokogawa Bridge Corp                                            16,086 
           19,000    Yokogawa Electric Corp                                         125,414 
           13,000    Yokohama Rubber Co                                              37,285 
            4,000    Yoshitomi Pharmaceutical Industries Lt                          26,104 
                                                                        --------------------
                                                                                 41,138,893 
                                                                        --------------------
                     Malaysia - 1.1%                                                        
           18,000    Aluminum Co Malaysia                                            16,052 
           87,000    Amalgamated Steel Mills Berhad                                  38,793 
           28,000    Aokam Perdana Berhad *                                          15,654 
            8,000    Ayer Hitam Tin Dredging *                                        8,506 
          116,000    Berjaya Group                                                   67,241 
           69,000    Berjaya Industrial Berhad                                       32,897 
           73,000    Berjaya Leisure Berhad (d)                                     136,460 
            6,000    Boustead Holdings Berhad                                         9,600 
           21,000    Carlsberg Brew Malaysia                                         79,232 
           18,000    Cement Industries of Malaysia Berhad                            25,683 
           23,000    DMIB Berhad                                                     12,859 
           32,000    Ekran Berhad                                                    37,537 
           37,000    Esso Malaysia Berhad                                            65,992 
           20,000    Golden Plus Holdings                                            20,580 
           41,000    Guinness Anchor Berhad                                          70,314 
           15,000    Hong Leong Industries Berhad                                    33,185 
            4,000    Hume Industries Berhad                                           8,506 
           42,000    IJM Corp Berhad Class A                                         45,810 

14             See accompanying notes to the financial statements.              

N-30D 54th Page of 667 TOC 1st Previous Next ↓Bottom Just 54th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


     Shares           Description                                       Value ($)     
--------------------------------------------------------------------------------------
                                                                                      
                   Malaysia - continued                                               
         31,000    Innovest Berhad                                             77,620 
         67,000    IOI Corporation Berhad                                      60,209 
          4,000    Jaya Tiasa Holdings Berhad                                  10,701 
         42,000    Johan Holdings Berhad                                       23,481 
         57,000    Kedah Cement Berhad                                         56,697 
         16,000    Kelanamas Industries                                        14,378 
         50,000    Kemayan Corporation Berhad                                  36,700 
         16,000    Kian Joo Can Factory                                        47,745 
         30,000    Kulim Berhad                                                35,901 
         45,000    Land & General Berhad                                       33,802 
         57,000    Landmark Berhad                                             36,755 
         35,000    Leader Universal Holdings                                   33,733 
         56,250    Malayan Cement Berhad                                       68,685 
        114,000    Malayan United Industries Berhad                            58,652 
         18,000    Malayawata Steel                                            17,843 
         76,000    Malaysian Helicopter Berhad                                 37,798 
         38,000    Malaysian Mosaics                                           28,283 
         19,000    Malaysian Oxygen Berhad                                     72,989 
         29,000    Malaysian Pacific Industries                                79,077 
         44,000    Malaysian Plantations                                       26,561 
          4,000    Matsushita Electric                                         23,324 
        157,000    MBF Holdings Berhad                                         53,312 
        104,000    Mulpha International                                        44,589 
         23,000    Multi Purpose Holdings                                      17,908 
         24,000    New Straits Times                                          107,014 
         22,000    Oriental Holdings Berhad                                    79,232 
          3,000    OYL Industries Berhad                                       13,788 
        101,000    Pan Malaysia Cement                                         86,953 
         24,000    Perlis Plantations                                          59,269 
         92,000    Pernas International Hotel & Property                       47,649 
         45,000    Petronas Dagangan Berhad                                    63,282 
         28,000    Pilecon Engineering Berhad                                  25,066 
         35,000    PJ Development Holdings                                     17,767 
         73,000    Promet Berhad *                                             37,307 
         36,000    RJ Reynolds Berhad                                          59,269 
         24,000    Sarawak Enterprises Corp                                    17,781 
         33,000    Shell Refinery Co                                           74,704 
         36,000    Sime Darby                                                  39,024 
         23,000    Sistem Television Malaysia                                  36,920 
         24,000    Sungei Way Holdings                                         28,318 
         70,000    Tan Chong Motor Holdings Berhad                             73,950 
         64,000    Time Engineering Berhad                                     46,977 
         16,000    Tractors Malaysia Holdings Berhad                           12,787 
         28,000    UMW Holdings Berhad                                         75,390 
         19,000    Uniphone Telecommunications                                 10,753 
         32,000    Westmont Industries Berhad                                  18,110 
                                                                  --------------------
                                                                            2,752,954 
                                                                  --------------------

             See accompanying notes to the financial statements.            15

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


      Shares          Description                                                   Value ($)      
---------------------------------------------------------------------------------------------------
                                                                                                   
                    New Zealand - 0.2%                                                             
          36,700    Air New Zealand Ltd Class B                                             99,238 
           4,500    Ceramco Corp Ltd                                                         4,603 
         164,500    DB Group Ltd                                                           229,241 
          15,510    Fernz Corp Ltd                                                          49,078 
          42,500    Fletcher Challenge Ltd                                                  49,989 
          14,500    Independent Newspapers Ltd                                              75,543 
          25,300    Lion Nathan Ltd                                                         63,883 
           2,500    Steel and Tube Holdings Ltd                                             11,507 
                                                                               --------------------
                                                                                           583,082 
                                                                               --------------------
                    Norway - 0.0%                                                                  
             842    Bona Shipholding Ltd *                                                  10,619 
               1    SAS Norge ASA Class B                                                       14 
                                                                               --------------------
                                                                                            10,633 
                                                                               --------------------
                    Singapore - 2.4%                                                               
           4,200    Asia Food & Properties Ltd Warrants 7/12/02 *                            1,365 
       2,391,000    Chuan Hup Holdings Ltd                                               1,383,223 
          25,200    Fraser and Neave Ltd                                                   133,289 
         494,000    Hai Sun Hup Group Ltd                                                  316,813 
          16,500    Haw Paw Brothers International Ltd                                      31,636 
           1,650    Haw Paw Brothers International Ltd Warrants 7/18/2001 *                  1,222 
         145,000    Hotel Properties Ltd                                                   202,281 
         122,000    Inchcape Berhad                                                        407,339 
         226,437    Jardine Strategic Holdings Ltd                                         837,817 
          24,000    Natsteel Ltd                                                            65,375 
         170,000    Neptune Orient Lines Ltd                                               128,132 
          94,000    Parkway Holdings Ltd                                                   354,248 
          97,000    Prima Ltd                                                              287,312 
         223,000    Robinson and Co Ltd                                                  1,039,438 
          34,000    Straits Trading Co Ltd                                                  62,942 
         245,000    Times Publishing Ltd                                                   518,347 
          46,000    Wearne Brothers Ltd                                                    115,570 
                                                                               --------------------
                                                                                         5,886,349 
                                                                               --------------------
                    Spain - 4.2%                                                                   
          12,155    Acerinox SA                                                          2,004,380 
          36,403    Asturiana del Zinc SA *                                                793,764 
           9,300    Azucarera de Espana SA                                                 484,483 
          27,600    Banco Zaragozano SA                                                    713,465 
           1,125    Bodegas Y Bebidas SA                                                    45,213 
          15,650    Cristaleria Espanola SA                                              1,219,841 
          22,000    Empresa Nacional de Celulosa SA                                        392,159 
          40,400    Ercros SA *                                                             43,049 
         138,100    Espanola de Tubos por Extrusion SA *                                   400,593 
           3,500    Fabricacion de Automoviles Renault de Espana SA                         72,519 
           3,783    Grupo Anaya SA                                                          72,161 
          27,400    Grupo Duro Felguera SA *                                               342,432 
           1,010    Koipe SA                                                                67,829 
         275,820    Sarrio SA                                                            1,023,235 
          55,799    Tableros Defibras Class B                                              833,150 
         167,515    Uralita SA                                                           1,680,329 
                                                                               --------------------
                                                                                        10,188,602 
                                                                               --------------------

16             See accompanying notes to the financial statements.              

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


         Shares    Description                                               Value ($)      
--------------------------------------------------------------------------------------------
                                                                                            
                  Sweden - 5.6%                                                             
           4,057  Assi Doman                                                        123,504 
           8,400  Avesta Sheffield AB                                                79,710 
          37,400  Bilspedition AB Class B *                                         153,393 
          40,700  Celsius Industrier AB Class B                                     762,061 
           1,000  Custos AB Series Class B                                           21,271 
          11,742  Diligentia AB *                                                   147,318 
           3,800  Electrolux AB Class B                                             271,050 
          40,700  Enator AB                                                         668,747 
           1,600  Esselte AB Class A                                                 39,740 
           1,600  Esselte AB Class B                                                 41,371 
          21,400  Euroc Industri AB Class A                                         746,865 
           1,900  Granges AB                                                         28,557 
             593  Incentive AB Class A                                               54,836 
             897  Industrivarden AB Class A                                          52,557 
             952  Industrivarden AB Class C (Bearer)                                 55,173 
           2,100  Kinnevik Investment Class B                                        63,394 
          57,860  Marieberg Tidnings AB Class A                                   1,496,071 
          21,000  Mo Och Domsjo AB Class B                                          695,457 
           1,200  Perstorp AB Class B                                                21,552 
           2,200  PLM AB                                                             33,907 
         117,420  Skandinaviska Enskilda Banken Class A                           1,263,795 
          12,600  SKF AB Class B                                                    341,844 
           6,200  Ssab Swedish Steel Class A                                        128,723 
           2,000  Ssab Swedish Steel Class B                                         41,778 
         295,400  Stena Line AB Class B *                                         1,245,421 
          14,950  Stora Kopparberg Bergslags Class A                                238,029 
           7,150  Stora Kopparberg Bergslags Class B                                112,018 
           3,353  Svedala Industries                                                 72,604 
           5,600  Svenska Cellulosa Class B                                         124,469 
          40,600  Svenska Handelsbanken Class B                                   1,168,725 
           4,400  Svenska Kullagerfabriken AB                                       112,369 
          64,300  Sydkraft AB Class A                                             1,556,117 
          55,600  Sydkraft AB Class C                                             1,211,013 
          31,900  Trelleborg AB Class B                                             491,648 
           2,650  Volvo AB Class A                                                   67,677 
                                                                        --------------------
                                                                                 13,732,764 
                                                                        --------------------
                  Switzerland - 7.3%                                                        
             900  Adia SA (Bearer)                                                  307,469 
          30,100  Alberta Energy Ltd                                                669,877 
             500  Ascom Holding AG (Registered) *                                   128,365 
           2,840  Bobst SA (Registered)                                           2,200,734 
             500  Danzas Holding AG                                                  98,379 
             350  Elektrowatt AG (Bearer)                                           126,647 
             500  Hero Lenzburg (Registered)                                         62,329 
           1,050  Hilti AG, Schaan (Participating Certificate)                      721,674 
             550  Holderbank Financiere Glarus AG (Bearer)                          461,406 
           2,400  Holderbank Financiere Glarus AG (Registered)                      426,940 
           1,160  Kuoni Reisen Holdings AG (Registered)                           4,787,575 

              See accompanying notes to the financial statements.             17

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


      Shares        Description                                                        Value ($)     
-----------------------------------------------------------------------------------------------------
                                                                                                     
                  Switzerland - continued                                                            
             830  Magazine zum Globus (Participating Certificate) *                           595,634
             300  Magazine zum Globus (Registered) *                                          235,504
             586  Novartis AG (Bearer)                                                        837,115
           4,260  Saurer Group Holdings (Registered) *                                      3,134,611
             190  Schindler Holding AG (Participating Certificate)                            240,693
             270  Schindler Holding AG (Registered)                                           345,676
           1,216  Sika Finanz AG (Bearer)                                                     389,205
           3,300  SMH AG (Registered)                                                         434,723
             250  Societe Generale de Surveillance Holdings Ltd (Bearer)                      453,152
             750  Societe Generale de Surveillance Holdings Ltd (Registered)                  262,289
             175  Sulzer Gebrueder AG (Registered)                                            122,991
             950  Swiss Bank Corp (Registered) *                                              229,490
           2,150  Swissair AG (Participating Certificate) *                                   478,084
              90  Union Bank of Switzerland (Registered)                                       17,890
                                                                                  -------------------
                                                                                           17,768,452
                                                                                  -------------------
                  United Kingdom - 27.2%                                                             
         119,600  Allied Colloids                                                             221,123
         165,700  AMEC                                                                        381,600
          30,000  Anglian Water Plc                                                           378,285
          63,280  Argos Plc                                                                   637,830
         134,800  Arjo Wiggins Appleton Plc                                                   384,769
       1,187,000  ASDA Group                                                                2,772,110
          79,100  Associated British Foods                                                    664,513
          80,900  Astec (BSR)                                                                 167,941
         132,790  Barratt Development                                                         552,395
          22,060  Bass                                                                        295,160
          63,500  Beazer Holmes Plc                                                           173,271
         102,212  Berisford International                                                     250,309
          42,566  Betacomm Plc                                                                 31,065
         165,000  Blue Circle Industries                                                    1,027,572
          28,620  Boots Co                                                                    370,631
         212,700  British Steel                                                               596,775
         102,135  Bunzl Co                                                                    389,260
         595,125  Burton Group                                                              1,194,402
          26,375  Carlton Communications                                                      210,025
         332,600  Centrica Plc                                                                477,379
          27,700  Charter Plc (Registered)                                                    345,465
          89,100  Coats Viyella                                                               171,235
          55,848  Cobham Group Plc                                                            692,440
          89,502  Costain Group (d)                                                            65,319
          41,081  Dawson International                                                         49,303
         220,459  English China Clays Plc                                                     833,069
           6,200  First Leisure Plc                                                            30,568
          77,177  Grand Metropolitan                                                          709,064
         133,420  Greenalls Group Plc                                                       1,021,316
          16,609  Greycoat Plc                                                                 49,294
           8,536  Hammerson                                                                    64,373
         109,620  Hazlewood Foods                                                             238,228

18            See accompanying notes to the financial statements.               

N-30D 58th Page of 667 TOC 1st Previous Next ↓Bottom Just 58th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]


     Shares         Description                                              Value ($)     
-------------------------------------------------------------------------------------------
                                                                                           
                 United Kingdom - continued                                                
        449,176  Hillsdown Holdings                                              1,180,127 
         25,083  Hyder Plc                                                         339,675 
         12,618  Hyder Plc Cumulative Redem Preferred Shares                        22,101 
        207,644  Inchcape                                                          915,979 
      1,702,067  Ladbroke Group                                                  7,149,468 
         35,334  Laing (John)                                                      214,893 
          9,309  Laing (John) A (Non Voting)                                        56,766 
      1,395,817  Lasmo                                                           5,800,824 
         88,060  Lex Service                                                       632,674 
        210,687  London International                                              563,792 
      1,146,681  Lonrho                                                          2,296,714 
         52,634  Marley                                                             94,752 
         49,948  Meyer International                                               346,299 
        131,200  Mirror Group Plc                                                  431,944 
        175,023  National Grid Holdings Plc                                        753,912 
        200,497  Norcros Plc                                                       224,365 
        114,085  Northern Foods Plc *                                              403,350 
         44,480  Ocean Group                                                       405,774 
        211,300  Peninsular & Oriental Steam Navigation Co                       2,227,461 
        293,800  Pilkington *                                                      693,285 
         19,600  Powergen                                                          247,941 
        127,000  Racal Electronics                                                 462,400 
         24,400  Rank Group Plc                                                    140,085 
         92,634  Reckitt & Colman                                                1,430,226 
         38,300  Redland                                                           180,133 
        221,800  Rexam Plc                                                       1,062,959 
        666,902  Rolls-Royce                                                     2,530,901 
         61,150  Safeway Plc                                                       371,899 
         59,526  Sainsbury (J)                                                     416,084 
         54,000  Scottish Hydro-Electric Plc                                       390,594 
          5,074  Scottish & Newcastle Plc                                           59,578 
        354,500  Sears                                                             362,205 
         85,597  Securicor Plc                                                     365,100 
         33,440  Severn Trent Plc                                                  474,539 
         64,900  Siebe Plc                                                       1,131,489 
      7,828,760  Signet Group (e)                                                        - 
        412,040  Signet Group Plc                                                  210,498 
        110,825  Simon Engineering                                                  68,300 
         45,716  Southwest Water                                                   599,069 
         37,242  Storehouse Plc                                                    138,314 
        302,606  T & N                                                             787,680 
      1,399,864  Tarmac                                                          2,690,305 
        831,680  Taylor Woodrow Plc                                              2,508,803 
         65,300  Thames Water                                                      836,109 
        251,500  Tomkins Plc                                                     1,219,569 
        117,600  Transport Development Group                                       317,555 
        261,263  United Biscuits                                                   874,974 
        132,900  United Utilities                                                1,485,051 
            900  Vendome Luxury Group Plc Units                                      6,711 

              See accompanying notes to the financial statements.             19

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

                                                        [Enlarge/Download Table]

          Par Value/                                                                                         
           Shares         Description                                                          Value ($)     
------------------------------------------------------------------------------------------------------------ 
                                                                                                             
                       United Kingdom - continued                                                            
               96,926  Viglen Technology                                                             102,177 
               84,800  Waste Management International                                                341,071 
               96,400  Wessex Water Plc                                                              742,622 
              109,410  Whitbread Plc Class A                                                       1,431,063 
              128,180  Wilson (Connolly) Holdings                                                    359,636 
              622,535  Wimpey (George)                                                             1,342,804 
                5,368  Wolseley                                                                       38,741 
               45,900  Yorkshire Water Plc                                                           326,050 
                                                                                         ------------------- 
                                                                                                  66,253,479 
                                                                                         ------------------- 
                       TOTAL STOCK AND EQUIVALENTS (Cost $211,610,064)                           222,414,782 
                                                                                         ------------------- 
                       DEBT OBLIGATION - 0.1%                                                                
                       United Kingdom - 0.1%                                                                 
GBP           157,989  Viglen Tech Floating Rate Notes, 6.75% due 9/1/2000                           299,273 
                                                                                         ------------------- 
                       TOTAL DEBT OBLIGATION (Cost $178,828)                                         299,273 
                                                                                         ------------------- 
                       SHORT-TERM INVESTMENTS - 15.1%                                                        
                       Cash Equivalents - 12.9%                                                              
  $         8,500,000  First National Bank of Chicago Time Deposit, 5.44% due 9/2/97               8,500,000 
           13,827,112  The Boston Global Investment Trust (b)                                     13,827,112 
  $         9,000,000  Wachovia Bank Time Deposit, 5.43% due 9/2/97                                9,000,000 
                                                                                         ------------------- 
                                                                                                  31,327,112 
                                                                                         ------------------- 
                       U.S. Government - 2.2%                                                                
  $         5,550,000  U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                    5,448,571 
                                                                                         ------------------- 
                       TOTAL SHORT-TERM INVESTMENTS (Cost $36,773,122)                            36,775,683 
                                                                                         ------------------- 
                       TOTAL INVESTMENTS - 106.4%                                                            
                       (Cost $248,562,014)                                                       259,489,738 

                       Other Assets and Liabilities (net) - (6.4%)                               (15,604,241)
                                                                                         ------------------- 
                       TOTAL NET ASSETS - 100.0%                                       $         243,885,497 
                                                                                         =================== 

Notes to the Schedule of Investments:         

ADR American Depositary Receipt               

          (a) This security is held as collateral for open futures
contracts (Note 5).                   

          (b) Represents investment of security lending collateral
(Note 1).                             

(c) Bankrupt issuer.                          

(d) Valued by management (Note 1).            

          (e) Pending corporate action, quantification of rate per
share to be determined.               

*   Non-income producing security.            

20            See accompanying notes to the financial statements.               

N-30D 60th Page of 667 TOC 1st Previous Next ↓Bottom Just 60th
GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 - (Unaudited)                                                   

--------------------------------------------------------------------------------

          At August 31, 1997, industry sector diversification of the
Fund's equity investments was as follows:                                       

                                                                [Download Table]

Industry Sector                                               
                                                              
Services                                                13.0 %
Construction                                             9.9  
Machinery                                                8.0  
Retail Trade                                             5.8  
Consumer Goods                                           5.8  
Conglomerates                                            5.5  
Oil and Gas                                              5.3  
Transportation                                           4.0  
Metals and Mining                                        4.0  
Paper and Allied Products                                3.4  
Real Estate                                              3.2  
Utilities                                                3.1  
Communications                                           2.9  
Chemicals                                                2.5  
Banking                                                  2.4  
Health Care                                              2.4  
Food and Beverage                                        2.4  
Electronic Equipment                                     2.0  
Aerospace                                                2.0  
Telecommunications                                       2.0  
Automotive                                               1.6  
Textiles                                                 1.4  
Computers                                                0.5  
Financial Services                                       0.4  
Insurance                                                0.2  
Miscellaneous                                            6.3  
                                              --------------  
                                                       100.0 %
                                              ==============  

              See accompanying notes to the financial statements.             21

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

                                                                                                
Assets:                                                                                         
     Investments, at value (cost $248,562,014) (Note 1)                         $   259,489,738 
     Foreign currency, at value (cost $1,554,398) (Note 1)                            1,541,228 
     Cash                                                                                83,825 
     Receivable for investments sold                                                    324,360 
     Dividends and interest receivable                                                  279,562 
     Receivable for open forward foreign currency contracts (Notes 1 and 5)             895,617 
     Receivable for variation margin on open futures contracts (Notes 1 and 5)          445,590 
     Foreign withholding taxes receivable                                                93,963 
     Receivable for expenses waived or borne by Manager (Note 2)                        169,401 
                                                                                 -------------- 

         Total assets                                                               263,323,284 
                                                                                 -------------- 
Liabilities:                                                                                    
     Payable for open forward foreign currency contracts (Notes 1 and 5)              2,659,231 
     Payable upon return of securities loaned (Note 1)                               13,827,112 
     Payable for fund shares repurchased                                              1,072,232 
     Payable for investments purchased                                                1,429,542 
     Payable to affiliate for (Note 2):                                                         
         Management fee                                                                 262,754 
         Shareholder service fee                                                         31,530 
     Accrued expenses                                                                   155,386 
                                                                                 -------------- 

         Total liabilities                                                           19,437,787 
                                                                                 -------------- 
Net assets                                                                      $   243,885,497 
                                                                                 ===============
Net assets consist of:                                                                          
     Paid-in capital                                                            $   218,976,717 
     Accumulated undistributed net investment income                                  2,451,312 
     Accumulated net realized gain                                                   12,217,970 
     Net unrealized appreciation                                                     10,239,498 
                                                                                 -------------- 

                                                                                $   243,885,497 
                                                                                 ============== 

Net assets attributable to Class III Shares                                     $   243,885,497 
                                                                                 ============== 

Shares outstanding - Class III                                                       17,418,562 
                                                                                 ============== 

Net asset value per share - Class III                                           $         14.00 
                                                                                 ============== 

22            See accompanying notes to the financial statements.               

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]
                                                                                     
Investment income:                                                                   
     Dividends (net of foreign tax expense of $420,358)            $       3,340,334 
     Interest (including securities lending income of $59,745)               662,844 
                                                                     --------------- 
         Total income                                                      4,003,178 
                                                                     --------------- 
Expenses:                                                                            
     Management fee (Note 2)                                               1,481,188 
     Custodian fees                                                          145,176 
     Audit fees                                                               33,120 
     Transfer agent fees                                                      15,180 
     Stamp duties and transfer taxes                                           7,728 
     Legal fees                                                                5,246 
     Registration fees                                                         1,932 
     Trustees fee (Note 2)                                                     1,104 
     Miscellaneous                                                             1,380 
     Fees waived or borne by Manager (Note 2)                               (973,354)
                                                                     --------------- 
                                                                             718,700 
     Shareholder service fee - Class III (Note 2)                            177,748 
                                                                     --------------- 
         Net expenses                                                        896,448 
                                                                     --------------- 
            Net investment income                                          3,106,730 
                                                                     --------------- 
Realized and unrealized gain (loss):                                                 

         Net realized gain (loss) on:                                                
            Investments                                                   12,765,161 
            Closed futures contracts                                       2,530,067 
            Foreign currency, forward contracts and foreign                          
                currency related transactions                               (941,705)
                                                                     --------------- 
                Net realized gain                                         14,353,523 
                                                                     --------------- 
         Change in net unrealized appreciation (depreciation) on:                    
            Investments                                                   (6,686,748)
            Open futures contracts                                          (945,517)
            Foreign currency, forward contracts and foreign                          
                currency related transactions                             (1,555,434)
                                                                     --------------- 
                Net unrealized loss                                       (9,187,699)
                                                                     --------------- 
         Net realized and unrealized gain                                  5,165,824 
                                                                     --------------- 
Net increase in net assets resulting from operations               $       8,272,554 
                                                                     =============== 

              See accompanying notes to the financial statements.             23

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                Six Months Ended                      
                                                                 August 31, 1997      Year Ended      
                                                                   (Unaudited)      February 28, 1997 
                                                            ---------------------  -------------------
                                                                                                      
Increase (decrease) in net assets:                                                                    
Operations:                                                                                           
     Net investment income                                  $          3,106,730   $        4,054,564 
     Net realized gain (loss)                                         14,353,523           (6,729,282)
     Change in net unrealized appreciation (depreciation)             (9,187,699)          15,655,726 
                                                              ------------------     ---------------- 
     Net increase in net assets resulting from operations              8,272,554           12,981,008 
                                                              ------------------     ---------------- 
Distributions to shareholders from:                                                                   
     Net investment income - Class III                               -                     (1,160,606)
     Net realized gains - Class III                                  -                     (3,372,778)
     In excess of net realized gains - Class III                     -                        (30,591)
                                                              ------------------     ---------------- 
                                                                     -                     (4,563,975)
                                                              ------------------     ---------------- 
Net share transactions - Class III (Note 4)                              (39,861)           8,272,041 
                                                              ------------------     ---------------- 

     Total increase in net assets                                      8,232,693           16,689,074 
Net assets:                                                                                           
     Beginning of period                                             235,652,804          218,963,730 
                                                              ------------------     ---------------- 
     End of period (including accumulated undistributed                                               
       net investment income of $2,451,312 and                                                        
       distributions in excess of net investment income of                                            
       $655,418, respectively)                              $        243,885,497   $      235,652,804 
                                                              ==================     ================ 

24          See accompanying notes to the financial statements.                 

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                               Six Months Ended        Year Ended February 28/29,    
                                                                August 31, 1997      ------------------------------  
                                                                  (Unaudited)           1997                1996     
                                                                  -----------        -----------      -------------- 
                                                                                                                     
Net asset value, beginning of period                             $      13.46       $      12.95     $         11.95 
                                                                  -----------        -----------      -------------- 
Income (loss) from investment operations:                                                                            
  Net investment income                                                  0.18               0.23                0.18 
  Net realized and unrealized gain (loss)                                0.36               0.55                1.16 
                                                                  -----------        -----------      -------------- 
    Total from investment operations                                     0.54               0.78                1.34 
                                                                  -----------        -----------      -------------- 
Less distributions to shareholders from:                                                                             
  Net investment income                                                  -                 (0.07)              (0.17)
  In excess of net investment income                                                        -                  (0.02)
  Net realized gains                                                     -                 (0.20)              (0.15)
  In excess of net realized gains                                        -                 (0.00)                 -  
                                                                  -----------        -----------      -------------- 
     Total distributions                                                 -                 (0.27)              (0.34)
                                                                  -----------        -----------      -------------- 
Net asset value, end of period                                   $      14.00       $      13.46     $         12.95 
                                                                  ===========        ===========      ============== 
Total Return (a)                                                        4.01%              5.99%              11.43% 
Ratios/Supplemental Data:                                                                                            
          Net assets, end of period (000's)                      $    243,885       $    235,653     $       218,964 
          Net expenses to average                                                                                    
                daily net assets                                    0.76%*(c)           0.76%(c)            0.76%(c) 
          Net investment income to average                                                                           
                daily net assets                                       2.62%*              1.75%               1.84% 
          Portfolio turnover rate                                         18%                13%                 13% 
          Average broker commission rate per equity share (b)    $     0.0075        $    0.0015                 N/A 
          Fees and expenses voluntarily waived or borne by                                                           
                the Manager consisted of the following per                                                           
                share amounts:                                   $       0.06        $      0.10     $           0.07


                                                                            Year Ended February 28/29,               
                                                                 -------------------------------------------------   
                                                                     1995             1994                1993       
                                                                 -----------      -------------     --------------   
                                                                                                                     
Net asset value, beginning of period                           $       14.45     $         8.91    $          9.62   
                                                                 -----------      -------------     --------------   
Income (loss) from investment operations:                                                                            
  Net investment income                                                 0.18               0.15               0.35   
  Net realized and unrealized gain (loss)                              (1.52)              5.59              (0.68)  
                                                                 -----------      -------------     --------------   
    Total from investment operations                                   (1.34)              5.74              (0.33)  
                                                                 -----------      -------------     --------------   
Less distributions to shareholders from:                                                                             
  Net investment income                                                (0.20)             (0.12)             (0.38)  
  In excess of net investment income                                      -                  -                  -    
  Net realized gains                                                   (0.96)             (0.08)                -    
  In excess of net realized gains                                         -                  -                  -    
                                                                 -----------      -------------     --------------   
     Total distributions                                               (1.16)             (0.20)             (0.38)  
                                                                 -----------      -------------     --------------   
Net asset value, end of period                                  $      11.95     $        14.45    $          8.91   
                                                                 ===========      =============     ==============   
Total Return (a)                                                     (9.66%)             64.67%            (3.30%)   
Ratios/Supplemental Data:                                                                                            
          Net assets, end of period (000's)                     $    186,185     $      132,645    $        35,802   
          Net expenses to average                                                                                    
                daily net assets                                    0.76%(c)              0.75%              0.75%   
          Net investment income to average                                                                           
                daily net assets                                       1.45%              1.50%              4.02%   
          Portfolio turnover rate                                        58%                38%                20%   
          Average broker commission rate per equity share (b)            N/A                N/A                N/A   
          Fees and expenses voluntarily waived or borne by                                                           
                the Manager consisted of the following per                                                           
                share amounts:                                  $       0.08     $         0.09    $          0.09   

*       Annualized                                                              
(a)     Calculation excludes purchase premiums and redemption fees. The         
total returns would have been lower had certain expenses not    
been waived during the periods shown.                           
(b)     For fiscal years beginning on or after September 1, 1995, a fund        
is required to disclose its average commission rate per share   
for security trades on which commissions are charged. The       
average broker commission rate will vary depending on the       
markets in which trades are executed.                           
(c)     Includes stamp duties and taxes not waived or borne by the              
Manager, which approximate .01% of average daily net assets.    

              See accompanying notes to the financial statements.             25

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.    Significant accounting policies                                           

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

      The Fund seeks maximum total return through investment primarily in equity
  securities of small capitalization foreign companies traded on a major
stock exchange of a foreign country.                                

      On June 1, 1996, the Fund began to offer three classes of shares: Class I,
Class II and Class III. The principal economic difference among the 
  classes of shares is the level of shareholder service fee borne by the
 classes. Eligibility for and automatic conversion between the various
classes of shares is generally based on the total amount of assets  
 invested with GMO, as more fully described in the Trust's prospectus.
    Class III shares are the continuation of the Trust's shares that existed
    prior to June 1, 1996, and bear the same total operating expenses (after
    the voluntary expense waiver) as those shares. At August 31, 1997, Class
III was the only active class of shares of the Fund.                

      The following is a summary of significant accounting policies which are in
  conformity with generally accepted accounting principles and which are
 consistently followed by the Fund in the preparation of its financial
  statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those 
estimates.                                                          

Portfolio valuation                                                 
 Portfolio securities listed on a securities exchange for which market
     quotations are available are valued at the last quoted 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.   
    Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their  
respective exchanges, and those values are then translated into U.S.
dollars at the current exchange rate. Short-term investments with a 
 remaining maturity of sixty days or less are valued at amortized cost
     which approximates market value. Other assets and securities for which no
      quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                         

26                                                                              

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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

Forward currency contracts                                        
   The Fund may enter into forward currency contracts in connection with
planned purchases or sales of securities or to hedge the currency 
      exposure associated with some or all of the Fund's portfolio securities.
    A forward currency contract is an agreement between two parties to buy
      and sell a currency at a set price on a future date. The market value of
     a forward currency contract fluctuates with changes in forward currency
       exchange rates. Forward currency contracts are marked to market daily and
  the change in value is recorded by the Fund as an unrealized gain or
      loss. Realized gains or losses equal to the difference between the value
    of the contract at the time it was opened and the value at the time it
       was closed are recorded upon delivery or receipt of the currency or, if a
  forward currency contract is offset by entering into another forward
     currency contract with the same broker, upon settlement of the net gain
or loss. These contracts may involve market risk in excess of the 
     unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. In addition, the Fund could be exposed to risk if the
    counterparties are unable to meet the terms of the contracts or if the
    value of the currency changes unfavorably to the U.S. dollar. The U.S.
      dollar value of the currencies the Fund has committed to buy and sell is
   shown under Note 5, and represents the currency exposure the Fund has
  acquired or hedged through currency contracts as of August 31, 1997.

                                                                              27

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Futures contracts                                                 
The Fund may purchase or sell index futures contracts. Stock index
       futures contracts represent commitments for future delivery of cash based
     upon the level of a specified index of equity securities at a specified
     price at a given date. The Fund may use futures contracts to manage its
 exposure to the stock and currency markets. Buying futures tends to
increase the Fund's exposure to the underlying instrument. Selling
futures tends to decrease the Fund's exposure to the underlying   
    instrument or hedge other Fund instruments. Upon purchase of a futures
contract, the Fund is required to deposit with its custodian, in a
     segregated account in the name of the futures broker, an amount of cash
  or U.S. government obligations in accordance with the initial margin
     requirements of the broker or exchange. Futures contracts are marked to
     market daily and an appropriate payable or receivable for the change in
value ("variation margin") is recorded by the Fund. The payable or
    receivable is subsequently settled. Gains or losses are recognized but
       not considered realized until the contracts expire or are closed. Futures
  contracts involve, to varying degrees, risk of loss in excess of the
    variation margin disclosed in the Statement of Assets and Liabilities.
      Losses may arise from changes in the value of the underlying instrument,
if there is an illiquid secondary market for the contracts, or if 
       counterparties do not perform under the contract terms. Futures contracts
     are valued at the settlement price established each day by the board of
 trade or exchange on which they are traded. See Note 5 for all open
futures contracts held as of August 31, 1997.                     

Swap agreements                                                   
The Fund may invest in swap agreements. A swap is an agreement to 
      exchange the return generated by one instrument for the return generated
      by another instrument. The Fund may enter into swap agreements to manage
  its exposure to the equity markets. The Fund enters into equity swap
    agreements which involve a commitment by one party in the agreement to
     pay interest in exchange for a market linked return based on a notional
  amount. To the extent that the total return of the security or index
 underlying the transaction exceeds or falls short of the offsetting
      interest rate obligation, the Fund will receive a payment from or make a
   payment to the counterparty, respectively. Equity swaps are marked to
      market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss in the Statement of   
 Operations. Payments received or made at the end of the measurement
period are recorded as realized gain or loss in the Statement of  
      Operations. Entering into these agreements involves, to varying degrees,
       elements of credit and market risk in excess of the amounts recognized on
the Statement of Assets and Liabilities. Such risks involve the   
       possibility that there is no liquid market for these agreements, that the
     counterparty to the agreements may default on its obligation to perform
      or that there may be unfavorable changes in the price of the security or
     index underlying these transactions. There were no open swap agreements
as of August 31, 1997.                                            

28                                                                              

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Security lending                                                    
    The Fund may lend its securities to certain 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
   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 August 31, 1997, the Fund loaned securities
     having a market value of $13,484,347 collateralized by cash in the amount
of $13,827,112, which was invested in a short-term instrument.      

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
    "Code"). The Fund intends to distribute substantially all of its taxable
   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 federal income tax purposes. Therefore, no provision for
    federal income or excise tax is necessary. Taxes on foreign interest and
dividend income have been withheld in accordance with the applicable
country's tax treaty with the United States. Dividends received by  
     shareholders of the Fund which are derived from foreign source income and
     foreign taxes paid by the Fund are to be treated, to the extent allowable
    under the Code, as if received and paid by the shareholders of the Fund.

Distributions to shareholders                                       
     The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net   
investment income on each class of shares.                          

 Income distributions and capital gain distributions are determined in
  accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
 recorded on the ex-dividend date, or when the Fund is informed of the
  ex-dividend date, if later. Interest income is recorded on the accrual
     basis, and is adjusted for the accretion of discounts. In determining the
     net gain or loss on securities sold, the cost of securities is determined
on the identified cost basis.                                       

                                                                              29

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Allocation of operating activity                                    
 The majority of expenses of the Trust are directly identifiable to an
      individual Fund. Expenses which are not readily identifiable to a specific
  Fund are allocated in such manner as deemed equitable by the Trustees,
 taking into consideration, among other things, the nature and type of
 expense and the relative size of the Funds. Investment income, common
expenses and realized and unrealized gains and losses are allocated 
      pro-rata among the classes based on the relative net assets of each class.
   Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                      

Purchases and redemptions of Fund shares                            
The premium on cash purchases of Fund shares is 1.00% of the amount 
    invested. In the case of cash redemptions, the fee is .60% of the amount
     redeemed. Prior to June 1, 1996, the premium on cash purchases and fee on
   cash redemptions was 1.25% and .75% of the amount invested or redeemed,
   respectively. All purchase premiums and redemption fees are paid to and
    recorded as paid-in capital by the Fund. For the six months ended August
     31, 1997, the Fund received $229,673 in purchase premiums and $158,655 in
redemption fees. There is no premium for reinvested distributions.  

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

2.    Fees and other transactions with affiliates                               

  GMO earns a management fee paid monthly at the annual rate of 1.25% of
average daily net assets. Effective June 1, 1996, the Fund adopted a
 Shareholder Services Plan under which the Fund pays GMO a shareholder
service fee for client and shareholder service, reporting and other 
support. Pursuant to the Shareholder Services Plan, the shareholder 
   service fee is calculated based on the average daily net assets of each
  class at the annual rate of .28% for Class I shares, .22% for Class II
shares and .15% for Class III shares.                               

      GMO has agreed to waive a portion of its fee and bear other expenses until
   further notice to the extent that the Fund's annual expenses (including
 the management fee but excluding brokerage commissions, certain other
      transaction costs (including stamp duties and transfer taxes), shareholder
      service fees, and extraordinary expenses) exceed .60% of average daily net
assets. Prior to June 1, 1996, a similar waiver existed for annual  
 expenses exceeding .75%; thus, the net annual expense ratio after the
waiver for a Class III shareholder is unchanged.                    

30                                                                              

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

The Fund's portion of the fee paid by the Trust to the unaffiliated 
Trustees during the six months ended August 31, 1997, was $1,104. 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 six months ended August 31, 1997,   
aggregated $38,429,740 and $40,412,803, respectively.               

  At August 31, 1997, the cost for Federal income tax purposes and gross
     unrealized appreciation and depreciation in value of investments held was
as follows:                                                         

                                                                [Download Table]

                     Gross Unrealized     Gross Unrealized     Net Unrealized
Aggregate Cost        Appreciation          Depreciation        Appreciation 
--------------       ----------------     ----------------     --------------
                                                                             
 $248,562,014           $38,893,850          $27,966,126         $10,927,724 

4.    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:                                             

                                                        [Enlarge/Download Table]


                                          Six Months Ended                             Year Ended                 
Class III:                                 August 31, 1997                          February 28, 1997             
                               ----------------------------------------  -----------------------------------------
                                    Shares                 Amount             Shares                  Amount      
                               -----------------     ------------------  ------------------     ------------------
                                                                                                                  
Shares sold                          1,918,864       $     27,683,118           1,509,544       $     20,156,083  
Shares issued to shareholders                                                                                     
in reinvestment of                                                                                                
distributions                             -                      -                302,311              4,040,065  
Shares repurchased                  (2,009,194)           (27,722,979)         (1,205,784)           (15,924,107) 
                               -----------------     ------------------  ------------------     ------------------
Net increase/(decrease)                (90,330)      $        (39,861)            606,071       $      8,272,041  
                               =================     ==================  ==================     ==================

                                                                              31

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

5.      Financial instruments                                                   

       A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Forward currency contracts                                      

                                                        [Enlarge/Download Table]

                                                                                       Net Unrealized     
   Settlement                                Units of                                   Appreciation      
      Date           Deliver/Receive         Currency             Value                (Depreciation)     
----------------  ---------------------  -----------------  -------------------  -------------------------
                                                                                                          
   Buys                                                                                                   
     9/12/97              ATS                39,491,490      $     3,118,454      $        (208,546)      
    11/07/97              ATS                 8,240,994              653,019                (28,981)      
    12/05/97              AUD                 8,789,859            6,467,871                (46,373)      
    11/07/97              BEF               301,061,320            8,128,152               (294,324)      
    12/05/97              CAD                 2,579,424            1,867,440                (18,560)      
    11/07/97              DEM                 4,729,813            2,638,766               (140,860)      
    11/07/97              ESP             1,504,580,628            9,898,720               (460,623)      
    11/07/97              FRF                83,337,501           13,796,419               (534,280)      
    12/05/97              HKD                17,659,468            2,262,903                (12,268)      
     9/12/97              IEP                 1,595,930            2,370,860                (60,140)      
    11/07/97              NLG                 2,842,678            1,408,434                (55,566)      
     9/12/97              NOK                18,927,026            2,539,453               (167,547)      
    11/07/97              NOK                52,216,563            7,024,965               (269,690)      
    11/07/97              SEK               105,016,001           13,401,508               (192,612)      
                                                                                    ------------------    
                                                                                  $      (2,490,370)      
                                                                                    ==================    

   Sales                                                                                                  
     9/12/97              AUD                 2,320,727      $     1,705,378      $          94,622       
    12/05/97              AUD                 6,344,405            4,672,077                 97,168       
    11/07/97              CAD                 7,763,351            5,614,574                (19,568)      

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Forward currency contracts - continued                          

                                                        [Enlarge/Download Table]

                                                                                Net Unrealized   
   Settlement                               Units of                             Appreciation    
      Date          Deliver/Receive         Currency             Value          (Depreciation)   
---------------   ---------------------  ----------------   ----------------   ------------------
                                                                                                 
Sales - continued                                                                                
    11/07/97              CHF                 7,888,786    $     5,360,091    $        204,405   
    11/07/97              FRF                31,621,093          5,236,364             164,335   
     9/12/97              GBP                 5,156,051          8,360,595              70,405   
    11/07/97              GBP                 5,119,475          8,281,264            (149,293)  
    11/07/97              HKD                10,820,117          1,389,927               6,073   
    12/05/97              HKD               134,784,236         17,287,196              73,259   
    11/07/97              NOK                14,841,173          1,998,677              35,475   
     9/12/97              NZD                   877,561            560,881              45,119   
    11/07/97              SEK                68,950,680          8,808,437             104,756   
                                                                               ------------------
                                                                              $        726,756   
                                                                               ==================

Currency Abbreviations                                                          
ATS   Austrian Schilling              GBP   British Pound       
AUD   Australian Dollar               HKD   Hong Kong Dollar    
BEF   Belgian Franc                   IEP   Irish Punt          
CAD   Canadian Dollar                 NLG   Netherlands Guilder 
CHF   Swiss Franc                     NOK   Norwegian Kroner    
DEM   German Mark                     NZD   New Zealand Dollar  
ESP   Spanish Peseta                  SEK   Swedish Krona       
FRF   French Franc                                              

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GMO International Small Companies Fund                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

Futures Contracts                                                           

                                                        [Enlarge/Download Table]

                                                                                     Net Unrealized  
                                                                                      Appreciation   
 Number of Contracts        Type         Expiration Date       Contract Value        (Depreciation)  
----------------------  ------------  ---------------------   -----------------   -------------------
                                                                                                     
         Buys                                                                                        
          14              All-Ords        September 1997     $         659,867   $          (23,007) 
         128               CAC- 40        September 1997            11,695,320             (276,515) 
          90                GXU7          September 1997            19,623,364               98,797  
          19               MIB 30         September 1997             2,300,238             (107,889) 
          4                 TOPIX         September 1997               473,522              (28,265) 
          39                TXM 7         September 1997             4,866,398             (159,444) 
                                                                                  -------------------
                                                                                 $         (496,323) 
                                                                                  ===================

        Sells                                                                                        
          68              Hang Seng       September 1997     $       6,098,851   $          770,819  
          80                IBEX          September 1997             3,439,847              132,198  
         214              OMX INDEX       September 1997             6,599,125              492,132  
          30              FTSE 100        September 1997             5,867,680              196,645  
                                                                                  -------------------
                                                                                 $        1,591,794  
                                                                                  ===================

At August 31, 1997 the Fund had cash and/or securities to cover any margin      
requirements on open futures contracts.                                         

34                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                         Value ($)     
--------------------------------------------------------------------------------------------------
                                                                                                  
                STOCK AND EQUIVALENTS - 95.1%                                                     
                Australia - 5.0%                                                                  
      178,341   Adelaide Brighton Ltd                                                     248,212 
      421,300   Advance Property Fund                                                     467,230 
       75,400   Amalgamated Holdings Ltd                                                  384,874 
       83,000   Amcor Ltd                                                                 502,305 
    3,114,275   Australia and New Zealand Banking Group Ltd                            22,369,591 
      110,000   Australian Gas & Light                                                    692,366 
    1,175,334   Australian National Industries Ltd                                      1,346,630 
    3,467,667   Boral Ltd                                                              10,110,907 
      113,100   Broken Hill Proprietary Ltd                                             1,418,772 
    1,131,740   Burns Philp & Co Ltd                                                    1,986,583 
      263,569   Caltex Australia Ltd                                                      768,506 
       86,050   Capcount Property Trust                                                    58,775 
      239,800   Capital Property Trust                                                    394,511 
      421,800   Capral Aluminum Ltd                                                     1,347,591 
      133,900   Coca-Cola Amatil Ltd                                                    1,364,999 
    3,573,987   Coles Myer Ltd                                                         16,639,335 
      112,700   Comalco Ltd                                                               562,853 
      207,187   Commonwealth Bank of Australia                                          2,288,614 
      528,162   Consolidated Rutile Ltd *                                                 271,536 
      118,789   Cortecs International Ltd *                                               392,601 
       19,400   Coventry Group Ltd                                                         79,078 
       89,300   CRA Ltd                                                                 1,318,942 
       97,100   CSL Ltd                                                                   606,178 
    3,545,496   CSR Ltd                                                                12,551,230 
      751,600   Cultus Petroleum *                                                      1,854,762 
      326,191   Email Ltd                                                               1,003,802 
       99,253   Emperor Mines Ltd *                                                        70,709 
       54,382   Energy Resources of Australia Class A                                     213,684 
        3,900   Faulding (FH) & Co Ltd                                                     21,769 
      304,631   Foodland Associated                                                     2,171,360 
    3,213,772   Fosters Brewing Group Ltd                                               6,066,112 
       56,990   G E Crane Holdings Ltd                                                    596,452 
    1,036,428   General Property Trust Units                                            1,864,951 
    3,703,131   Goodman Fielder Ltd                                                     5,303,541 
      672,307   Hardie (James) Industries Ltd                                           2,286,182 
      138,151   HIH Winterthur International Holdings                                     330,776 
       81,300   Incitec Ltd                                                               355,279 
      176,000   Jupiters Ltd                                                              411,057 
       92,500   KLZ Ltd                                                                   197,016 
        6,200   Mayne Nickless Ltd                                                         35,427 
      120,780   Metal Manufactures Ltd                                                    248,379 
    2,349,679   MIM Holdings Ltd                                                        2,812,926 
      250,588   Mirvac Ltd                                                                530,048 
       59,994   Mount Leyshon Gold Mines                                                   72,703 

             See accompanying notes to the financial statements.             1

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Shares      Description                                                          Value ($)    
--------------------------------------------------------------------------------------------------
                                                                                                  
                Australia - continued                                                             
      482,870   National Australia Bank Ltd                                             6,702,769 
      260,800   National Mutual Property Trust                                            210,699 
    6,983,807   News Corp Ltd                                                          31,452,604 
    2,981,736   News Corp Ltd Preferred 1.19%                                          11,365,768 
      153,411   Normandy Mining Ltd                                                       185,910 
      303,639   North Broken Hill Peko Ltd                                              1,022,044 
    1,615,360   Pacific Dunlop Ltd                                                      4,152,404 
      126,600   Pasminco Ltd                                                              229,013 
    4,842,670   Pioneer International Ltd                                              16,289,681 
      400,221   PMP Communications Ltd                                                    961,191 
      121,600   Portman Mining Ltd                                                        283,110 
      903,679   Qantas Airways Ltd                                                      1,977,847 
        3,300   QBE Insurance Group Ltd                                                    17,887 
      535,682   QCT Resources Ltd                                                         625,556 
       22,692   QNI Ltd                                                                    34,166 
      147,607   Rothmans Holdings Ltd                                                     779,142 
    1,444,092   Santos Ltd                                                              6,862,169 
    1,513,239   Schroders Property                                                      2,489,532 
      228,069   Sea World Property Trust                                                  234,507 
       11,300   Seven Network Ltd                                                          45,646 
      145,640   Simsmetal Ltd                                                           1,069,653 
        3,400   Smith (Howard) Ltd                                                         31,092 
      381,800   Southcorp Holdings Ltd                                                  1,317,941 
      239,892   Stockland Trust Group                                                     599,042 
      115,600   Sydney Harbour Casinos Preferred *                                        157,070 
      155,484   Ticor Ltd *                                                                91,356 
       18,199   W H Soul Pattison & Co Ltd                                                588,115 
      296,148   Walker Corp                                                               252,307 
       37,500   Western Mining Corp Holdings Ltd                                          190,039 
       79,500   Westfarmers Ltd                                                           772,484 
    1,330,708   Westfield Trust Units                                                   2,492,213 
      671,691   Westpac Banking Corp                                                    3,892,322 
      173,200   Westpac Property Trust                                                    218,796 
       82,700   Woodside Petroleum Ltd                                                    662,055 
                                                                                ------------------
                                                                                      202,875,284 
                                                                                ------------------
                Austria - 1.2%                                                                    
       78,980   Austrian Airlines *                                                     1,864,081 
       47,014   Bank Austria AG (Participating Certificate)                             1,332,288 
       44,265   Bau Holding AG Preferred 2.42% (Non Voting)                             2,152,374 
       54,007   Brau Union AG                                                           3,031,924 
       80,638   Creditanstalt-Bankverein                                                4,952,174 
       60,861   Creditanstalt-Bankverein Preferred 1.65%                                2,978,086 
        6,426   EA-Generali AG                                                          1,514,124 
       33,029   EVN Energie-Versorgung Niederoesterreich AG                             3,949,886 
       59,556   OEMV AG                                                                 7,869,688 

2              See accompanying notes to the financial statements.              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------
                                                                                                       
                Austria - continued                                                                    
       20,516   Oesterreichische Brau Beteiligungs AG                                        1,085,036 
      101,814   Oesterreichische Elektrizitaetswirtschafts AG                                6,926,128 
      114,581   Oesterreichische Laenderbank AG                                              5,698,095 
       38,638   Oesterreichische Laenderbank AG Preferred (Non Voting)                       1,479,220 
       59,382   Radex-Heraklith AG                                                           2,292,135 
       11,248   RAS Versicherungs AG                                                         1,345,131 
       10,948   Wienerberger Baustoffindustrie AG                                            2,125,918 
                                                                                     ------------------
                                                                                            50,596,288 
                                                                                     ------------------
                Canada - 2.8%                                                                          
      115,319   Abitibi-Price Inc                                                            2,018,259 
       91,300   Anderson Exploration Ltd *                                                   1,137,592 
       46,400   Avenor Inc                                                                     868,883 
       51,500   BC Telecom Inc                                                               1,238,863 
      254,604   BCE Inc                                                                      7,215,721 
       42,400   Biochem Pharma Inc *                                                         1,099,355 
        3,100   Bombardier Inc Class A                                                          61,176 
      192,400   Bombardier Inc Class B                                                       3,734,510 
       37,500   Canadian Hotel Inc                                                           1,854,136 
        8,012   Canadian Imperial Bank of Commerce                                             207,448 
       18,900   Canadian Natural Resources *                                                   486,640 
      147,200   Canadian Tire Corp Ltd Class A                                               2,761,756 
       53,000   Canfor Corp                                                                    572,581 
      149,011   Cominco Ltd                                                                  3,863,586 
       16,500   Cott Corp                                                                      157,460 
      227,600   Dofasco Inc                                                                  4,639,044 
      396,418   Domtar Inc                                                                   3,283,379 
       88,700   Donohue Inc Class A                                                          2,018,740 
       83,400   Edperbrascan Corp Class A Ltd (Voting Shares)                                1,417,581 
        5,500   Extendicare (Voting Shares) *                                                   87,148 
      157,307   Fletcher Challenge Canada Ltd Class A                                        2,690,800 
      190,402   Gulf Canada Resources Ltd *                                                  1,556,457 
       17,900   Hollinger Inc                                                                  164,374 
       59,010   Hudsons Bay Co                                                               1,487,522 
      136,400   Imasco Ltd                                                                   3,875,530 
      110,107   Imperial Oil Ltd                                                             6,066,611 
      100,000   Inco Ltd                                                                     2,704,455 
      149,500   Inmet Mining Ltd *                                                             839,857 
      110,735   Laidlaw Inc                                                                  1,619,014 
      339,919   Macmillan Bloedel Ltd                                                        4,259,851 
       19,300   Magna International Class A                                                  1,278,836 
       49,400   MDS Inc Class B                                                              1,031,798 
      297,000   Methanex Corp *                                                              2,492,023 
       82,100   Molson Co Ltd, Class A                                                       1,507,832 
      118,000   Moore Corporation Ltd                                                        2,371,133 
      121,500   Newbridge Networks Corp *                                                    5,534,859 

             See accompanying notes to the financial statements.             3

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                   Value ($)         
------------------------------------------------------------------------------------------------
                                                                                                
                Canada - continued                                                              
       98,202   Norcen Energy Resource                                                2,365,845 
      420,100   Nova Corp of Alberta                                                  3,555,169 
      129,100   Nova Scotia Power Inc                                                 1,338,932 
       19,100   Pegasus Gold Inc *                                                       81,162 
       11,400   Potash Corp of Saskatchewan                                             844,460 
       57,000   Provigo Inc *                                                           312,003 
       39,800   Quebecor Inc Class B                                                    742,425 
       59,500   Ranger Oil Ltd                                                          572,095 
       66,100   Rogers Cantel Mobile Communications Class B *                         1,321,095 
      135,600   Seagram Ltd                                                           4,736,649 
        6,900   Slocan Forest Products Ltd                                               58,889 
        3,600   Southam Inc                                                              66,117 
        3,600   Spar Aerospace Ltd                                                       28,391 
       45,100   Suncor Energy Inc                                                     1,414,603 
       93,106   Teck Corp Class B                                                     1,743,495 
      119,500   Telus Corp                                                            2,375,455 
       42,900   Thomson Corp                                                            977,914 
       47,600   Total Petroleum North America                                           471,389 
      251,700   Transalta Corp                                                        3,136,166 
      184,100   Transcanada Pipelines Ltd                                             3,447,441 
       73,401   United Dominion Inds Ltd                                              1,995,670 
            1   Westaim Corp *                                                                5 
      181,100   Westcoast Energy Inc                                                  3,463,002 
       14,300   Weston George Ltd                                                       966,585 
                                                                              ------------------
                                                                                    114,219,767 
                                                                              ------------------
                Finland - 0.3%                                                                  
       13,000   Cultor OY Class 1                                                       659,606 
      341,000   Enso OY Class A                                                       2,988,524 
       22,638   Instrumentarium OY, Class A                                             760,183 
        7,891   Instrumentarium OY, Class B                                             232,949 
       41,100   Kesko OY                                                                530,822 
       37,100   Metra AB Class A                                                      1,115,759 
       16,800   Metra AB Class B                                                        468,053 
       76,000   Partek OY                                                             1,388,217 
      187,494   Rautaruukki OY                                                        1,857,678 
        2,000   Stockmann AB Class A                                                    110,703 
          700   Stockmann AB Class B                                                     36,938 
       90,100   Valmet OY                                                             1,306,640 
                                                                              ------------------
                                                                                     11,456,072 
                                                                              ------------------
                France - 8.8%                                                                   
       37,749   Accor SA                                                              5,663,439 
       11,947   Air Liquide L Shares                                                  1,829,818 
       58,431   Alcatel Alsthom Cie Generale d'Electricite SA                         7,167,202 
      300,591   Assurances Generales De France (Bearer)                              10,753,977 
      443,293   Banque Nationale de Paris                                            18,928,841 

4              See accompanying notes to the financial statements.              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                  Value ($)         
-----------------------------------------------------------------------------------------------
                                                                                               
                France - continued                                                             
       36,642   Bertrand Faure SA                                                    1,788,151 
       41,560   Bouygues                                                             3,330,007 
       14,554   Canal Plus                                                           2,349,084 
        2,085   Carrefour                                                            1,258,459 
       73,878   Casino Guichard-Perrachon                                            3,678,370 
       58,929   Cerus *                                                                340,040 
       17,628   CGIP                                                                 4,940,664 
      173,541   Cie Bancaire SA                                                     19,140,867 
       26,888   Ciments Francais                                                     1,006,277 
       18,016   Club Mediterranee SA *                                               1,445,023 
      136,499   Credit Commercial de France                                          6,767,002 
       53,837   Credit Local de France SA                                            4,650,991 
      159,043   Credit Lyonnais *                                                    8,600,462 
       33,582   Credit National                                                      1,993,161 
      287,130   Elf Aquitaine SA                                                    31,953,301 
          241   Elf Gabon                                                               55,308 
       13,772   Elf Sanofi SA                                                        1,323,729 
       50,158   Eridania Beghin-Say SA                                               6,532,820 
      660,500   Euro Disney SCA (Bearer) *                                             936,493 
    1,497,128   Eurotunnel SA Units (Bearer) *                                       1,740,129 
      159,353   Financiere de Paribas SA                                            10,992,217 
      113,942   FINEXTEL                                                             1,927,368 
      143,199   GAN (Group Assurances National) *                                    3,305,228 
        2,305   Gaz Et Eaux                                                            986,147 
       60,617   Generale Des Eaux                                                    6,775,752 
       24,647   Generale Des Eaux Warrants 5/2/2001 *                                   13,816 
       49,500   Groupe Danone                                                        7,377,463 
        5,158   Labinal SA                                                           1,233,056 
      324,474   Lafarge Coppee SA                                                   20,970,045 
       33,240   Lagardere Groupe                                                       890,528 
       70,478   Lyonnaise Des Eaux                                                   7,099,507 
      174,420   Michelin SA Class B                                                  9,805,823 
       53,266   Nord-Est                                                             1,049,425 
      140,507   Peugeot SA                                                          15,775,330 
        6,690   Pinault Printemps Redoute                                            2,858,871 
      128,430   Renault SA *                                                         3,260,773 
      542,468   Rhone Poulenc SA Class A                                            19,926,118 
      104,856   Saint-Gobain                                                        14,417,592 
       66,730   Seita                                                                2,057,293 
       79,180   SGS Thomson Microelectronics *                                       7,323,383 
       21,630   Societe Eurafrance                                                   8,201,962 
      212,770   Societe Generale Paris                                              26,449,358 
       85,516   Sommer Allibert                                                      3,038,282 
      138,511   SPIE Batignolles                                                     7,382,838 
       12,360   Synthelabo                                                           1,493,674 

            See accompanying notes to the financial statements.            5

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                     Value ($)         
--------------------------------------------------------------------------------------------------
                                                                                                  
                France - continued                                                                
       13,180   Technip SA (Compagnie Francaise)                                        1,594,942 
      110,983   Thomson CSF                                                             2,984,309 
      131,520   Total SA                                                               12,337,792 
      182,820   Usinor Sacilor                                                          3,173,843 
       21,622   Vallourec                                                               1,290,440 
       95,605   Worms et Compagnie SA                                                   5,212,526 
                                                                                ------------------
                                                                                      359,379,316 
                                                                                ------------------
                Germany - 8.0%                                                                    
       52,750   Adidas AG                                                               6,373,427 
      218,445   AGIV AG *                                                               5,096,625 
      376,250   Bankgesellschaft Berlin AG                                              9,238,258 
      581,600   BASF AG                                                                19,998,911 
      422,950   Bayer AG                                                               15,603,205 
      196,550   Bayerische Hypotheken und Wechsel - Bank AG                             7,206,233 
          850   Bayerische Motorenwerke AG                                                604,394 
      153,140   Berliner Kraft & Licht Class A                                          3,211,418 
      321,895   BHF Bank AG                                                             8,985,487 
        4,650   Brau und Brunnen *                                                        369,386 
      817,166   Continental AG                                                         19,882,716 
       34,936   Deutsche Babcock & Wilcox *                                             2,222,133 
        1,750   DLW AG *                                                                  179,749 
      365,900   Douglas Holdings AG                                                    12,785,107 
       38,440   Draegerwerk AG Preferred                                                  811,444 
      303,828   FAG Kugelfischer                                                        5,535,960 
       34,050   Fresenius AG Preferred .82 (Non Voting)                                 6,620,282 
       11,550   Friedrich Krupp AG                                                      2,476,627 
       28,750   Gerresheimer Glas AG                                                      367,331 
        6,537   Hamburgische Electricitaets-Werke AG                                    1,597,800 
       46,655   Heidelberg Port-Zement                                                  3,485,875 
      165,350   Henkel KGAA Preferred                                                   8,367,850 
       28,250   Hochtief AG                                                             1,333,917 
      394,563   Klockner Humboldt Deutz *                                               3,254,874 
       21,714   Klockner-Werke AG *                                                     1,411,292 
       17,000   Kolbenschmidt *                                                           259,701 
    2,464,550   Lufthansa AG                                                           49,560,709 
       23,400   MAN AG                                                                  6,434,464 
      435,172   Metallgesellschaft *                                                    9,790,554 
       97,800   Phoenix AG                                                              1,711,357 
        7,066   Porsche AG Preferred (Non Voting) .12%                                 10,205,594 
       11,050   Preussag AG                                                             3,109,088 
       69,550   Puma AG Preferred                                                       1,734,742 
      164,000   RWE Preferred                                                           6,331,695 
      172,609   Schering AG                                                            16,847,152 
       61,550   Schwarz Pharma AG                                                       4,523,548 
      274,950   Siemens AG                                                             16,908,016 

6              See accompanying notes to the financial statements.              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                       Value ($)        
---------------------------------------------------------------------------------------------------
                                                                                                   
                Germany - continued                                                                
      291,642   SKW Trostberg AG                                                         9,720,590 
        5,450   Strabag Bau AG *                                                           427,487 
        1,100   Suedzucker AG                                                              504,125 
       10,700   Thyssen AG                                                               2,466,739 
      240,200   Veba AG                                                                 13,076,466 
       52,850   Viag AG                                                                 22,004,319 
        5,274   Villeroy and Boch AG *                                                     846,699 
                                                                                 ------------------
                                                                                       323,483,346 
                                                                                 ------------------
                Hong Kong - 9.3%                                                                   
    1,990,000   Allied Group Ltd *                                                         558,556 
   18,490,000   Allied Properties Ltd                                                    4,438,173 
    3,617,200   Allied Properties Ltd Warrants 7/3/00 *                                    396,776 
   10,851,500   Amoy Properties Ltd                                                     10,922,919 
      418,000   ASM Pacific Technology                                                     302,078 
   13,322,000   Cathay Pacific Airways Ltd                                              21,661,789 
    3,470,500   Century City International                                               1,074,874 
      224,000   Champion Technology Holdings                                                63,595 
    1,241,600   Champion Technology Holdings Warrants 6/30/98 *                            201,886 
    2,287,000   Cheung Kong Holdings                                                    24,274,842 
    2,944,500   China Light & Power Co                                                  13,641,444 
    7,770,000   China Overseas Land & Investment Ltd                                     5,715,447 
    1,394,122   Chinese Estates Holdings Ltd                                             1,241,378 
    3,470,000   CP Pokphand Co                                                           1,130,694 
        4,000   Dah Sing Financial Services                                                 16,725 
    1,193,800   Dao Heng Bank                                                            5,083,933 
        1,129   Denway Investments *                                                           299 
      769,766   Dickson Concept International Ltd                                        2,920,521 
    3,341,300   Elec & Eltek International Holdings Ltd                                  1,142,656 
      276,100   Furama Hotel Enterprises Ltd                                             1,150,862 
    1,094,000   Gold Peak Industry                                                         656,485 
      293,200   Gold Peak Industry Warrants 12/31/25 * *                                    28,378 
    4,124,509   Great Eagle Holdings Ltd                                                12,055,766 
    1,452,700   Guoco Group                                                              5,642,827 
    9,756,700   Hang Lung Development Co Ltd                                            17,627,281 
      176,000   Harbour Centre Development Ltd                                             272,551 
   14,630,000   Henderson Investment Ltd                                                15,481,481 
    3,362,000   Henderson Land Development Co Ltd                                       27,875,661 
    2,263,280   HKR International Ltd                                                    2,891,531 
      648,700   Hong Kong Ferry Co Ltd                                                   1,268,268 
       65,186   Hong Kong Land Holdings                                                    188,388 
    1,299,600   Hongkong Aircraft Engineering Co Ltd                                     4,276,655 
    7,412,800   Hongkong Electric Holdings Ltd                                          25,972,063 
    1,223,000   Hysan Development Co Ltd                                                 3,551,103 
       26,000   Innovative International                                                     8,556 
      403,324   Jardine Strategic Warrants 5/02/98 *                                       177,463 

            See accompanying notes to the financial statements.            7

N-30D 82nd Page of 667 TOC 1st Previous Next ↓Bottom Just 82nd
GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                    Value ($)         
-------------------------------------------------------------------------------------------------
                                                                                                 
                Hong Kong - continued                                                            
       25,740   Johnson Electric Holdings Ltd                                             57,798 
    4,310,622   Kumagai Gumi Hong Kong Ltd                                             8,093,890 
    2,468,800   Lai Sun Development                                                    2,453,189 
      828,700   Lai Sun Garment International Ltd                                        999,916 
      585,855   Lai Sun Hotel International Warrants 4/30/99 *                            42,338 
       71,887   Leading Spirit Warrants 12/31/99 *                                        32,933 
      826,000   Liu Chong Hing Bank Ltd                                                2,201,174 
    1,386,000   Liu Chong Hing Investment Ltd                                          1,940,650 
    1,422,462   Mandarin Oriental                                                      1,593,157 
    1,589,800   New Asia Realty & Trust A Shares                                       5,826,600 
    3,738,467   New World Development Co Ltd                                          23,350,342 
    1,263,000   Oriental Press Group                                                     435,995 
      729,000   Oriental Press Group Warrants 10/2/98 *                                   28,223 
       18,000   Pacific Concord Holdings Ltd                                              10,976 
    4,120,000   Paul Y- ITC Construction Holdings Ltd                                  1,222,867 
      112,000   Realty Development Corp Ltd Class A                                      430,714 
   49,650,371   Regal Hotels International Ltd                                        13,615,568 
    1,172,000   Shanghai Petrochemical Co Class H                                        487,766 
      368,000   Shangri LA Asia                                                          377,546 
    1,219,000   Shaw Brothers Ltd                                                      1,211,292 
      449,000   Shell Electric Co Ltd                                                    252,052 
    7,983,000   Shun Tak Holdings Ltd                                                  4,507,114 
    9,975,000   South China Morning Post Ltd                                           7,981,030 
    2,791,000   Sun Hung Kai Properties Ltd                                           31,695,445 
    1,185,600   Sun Hung Kai & Co Ltd Warrants 2/18/00 *                                 325,126 
      595,000   Swire Pacific Ltd Class A                                              4,549,458 
    4,297,500   Swire Pacific Ltd Class B                                              6,239,112 
    1,235,907   Tai Cheung Holdings Ltd                                                  917,082 
       24,000   Texwinca Holdings Ltd                                                     17,499 
    3,936,000   Wharf Holdings Ltd                                                    14,247,619 
   11,974,800   Wheelock & Co Ltd                                                     24,879,892 
      165,804   Wing Lung Bank                                                         1,016,349 
      279,900   Winsor Industrial Corp Ltd                                                79,466 
      183,550   Winsor Properties Holdings Ltd                                           293,718 
       68,000   World Trade Centre Group Ltd                                              32,030 
    2,667,000   Yizheng Chemical Fibre Co                                              1,944,580 
    1,099,200   Yue Yuen Industrial Holdings                                           2,475,292 
                                                                               ------------------
                                                                                     379,779,702 
                                                                               ------------------
                Italy - 4.6%                                                                     
    2,363,166   Alitalia Linee Aeree Italiane Class A *                                1,429,411 
      197,000   Alleanza Assicurazioni SPA                                             1,644,739 
      886,500   Assicurazioni Generali SPA                                            18,729,884 
    2,349,222   Autostrade Concessioni e Costruzioni SPA Class B Preferred 6.39%       5,590,511 
      955,000   Banca Commerciale Italiana SPA                                         2,386,544 
      151,000   Banca Commerciale Italiana SPA (Non Convertible)                         301,022 

8              See accompanying notes to the financial statements.              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares     Description                                                              Value ($)     
-------------------------------------------------------------------------------------------------------
                                                                                                       
                Italy - continued                                                                      
    6,466,357   Banca di Roma *                                                              5,765,975 
    1,189,263   Banca Fideuram SPA                                                           4,120,227 
       80,400   Banca Popolare di Bergamo Credit                                             1,079,942 
      462,000   Banca Popolare di Milano                                                     2,471,760 
      199,200   Banca Toscana                                                                  442,364 
    1,934,650   Banco di Napoli di Risp *                                                      928,480 
      206,000   Bulgari SPA                                                                  1,222,635 
      461,300   Cartiere Burgo SPA                                                           2,625,213 
      715,500   Cementir SPA                                                                   491,709 
    1,348,343   COFIDE SPA *                                                                   449,523 
      154,250   Comau Finanziaria SPA                                                          480,962 
    1,552,500   Credito Italiano                                                             3,218,384 
    1,991,000   Credito Italiano (Non Convertible)                                           2,295,518 
    1,976,700   Dalmine SPA *                                                                  471,524 
       21,300   Edison SPA                                                                      99,683 
       44,150   Ericsson SPA                                                                   761,032 
      399,600   Falck Acciaierie and Ferriere Lombarde                                       1,565,986 
    1,965,200   Fiat SPA                                                                     6,049,499 
    3,072,700   Fiat SPA Preferred                                                           4,772,994 
    5,259,720   Fiat SPA (Non Convertible)                                                   8,797,542 
      310,000   Finmeccanica SPA *                                                             218,322 
    1,109,940   Gilardini SPA                                                                1,834,450 
      588,000   Grassetto SPA (c) *                                                                  3 
    3,691,570   HPI SPA *                                                                    1,675,218 
      754,900   IFI Istituto Finanziario Preferred 2.46%                                     8,596,412 
    1,999,850   IFIL Finanziaria di Partecipazioni SPA (Non Convertible)                     3,384,754 
    1,327,000   Industriali Riunite SPA (Non Convertible) *                                    493,657 
    1,876,100   Industriali Riunite SPA *                                                    1,324,465 
      815,500   Istituto Bancario San Paolo                                                  5,696,951 
      589,000   Istituto Mobilaire Italiano                                                  5,484,539 
    5,058,792   Istituto Nazionale Delle Assicurazioni                                       7,398,394 
      477,650   Italcementi Fabbriche Riunite Cemento SPA (Non Convertible)                  1,157,024 
       46,400   Italmobiliare SPA                                                              736,569 
       12,200   Luxottica Group Sponsored ADR                                                  712,175 
      441,500   Mediobanco SPA                                                               2,881,139 
   11,909,798   Montedison SPA                                                               7,237,717 
    2,706,400   Montedison SPA (Non Convertible)                                             1,337,287 
      987,067   Montefibre SPA                                                                 577,427 
    3,923,593   Parmalat Finanziaria SPA                                                     6,094,733 
      508,975   Pirelli and Co                                                                 742,922 
      195,500   RAS SPA                                                                      1,663,861 
       60,800   Rinascente per l'Esercizio di Grandi Magazzini SPA Preferred 5.59%             132,084 
       23,300   Rinascente per l'Esercizio di Grandi Magazzini SPA (Non Convertible)            66,167 
      214,700   SAFFA SPA *                                                                    360,942 
    3,208,072   SMI (Societa Metallurgica Italy) *                                           1,297,291 

            See accompanying notes to the financial statements.            9

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares      Description                                                                Value ($)    
-------------------------------------------------------------------------------------------------------  
                                                                                                         
                 Italy - continued                                                                       
       234,336   Stefanel SPA *                                                                  358,018 
     6,327,500   Telecom Italia Mobile SPA                                                    21,921,759 
       816,269   Telecom Italia Mobile SPA (Non Convertible)                                   1,367,630 
     2,598,220   Telecom Italia SPA di Risp                                                   15,465,024 
     1,896,266   Telecom Italia SPA di Risp (Non Convertible)                                  6,709,663 
        33,500   Toro Assicurazioni                                                              417,631 
                                                                                     --------------------
                                                                                             185,537,291 
                                                                                     --------------------
                 Japan - 15.7%                                                                           
        48,300   Advantest Corp                                                                4,416,826 
        42,000   Aiwa Co                                                                         813,534 
        98,000   Alps Electric Co Ltd                                                          1,165,018 
       400,000   Amada Co Ltd                                                                  2,713,443 
     1,418,000   Aoki Corp *                                                                     848,749 
       157,300   Aoyama Trading                                                                4,236,861 
       303,000   Asahi Breweries Ltd                                                           4,508,854 
       112,000   Asics Corp *                                                                    179,699 
        92,000   Bandai Co                                                                     1,988,528 
       320,000   Bank of Tokyo-Mitsubishi                                                      5,825,921 
       226,000   Banyu Pharmaceutical Co Ltd                                                   3,795,162 
       176,000   Canon Sales Co Inc                                                            3,570,039 
       155,000   Casio Computer Co                                                             1,352,980 
       106,100   Chubu Electric Power Co Inc                                                   1,781,711 
        10,000   Chudenko Corp                                                                   229,446 
       330,000   Chugai Pharmaceutical Co Ltd                                                  2,770,804 
        99,400   Chugoku Electric Power Co Inc                                                 1,611,356 
       318,000   Citizen Watch Co                                                              2,455,915 
       939,000   Cosmo Oil Co Ltd                                                              3,044,393 
        43,700   Credit Saison Co                                                              1,129,828 
       220,300   CSK Corp                                                                      7,490,456 
       715,000   Dai Ichi Kangyo Bank                                                          8,321,556 
     1,115,000   Daicel Chemical Industries Ltd                                                3,170,089 
       285,000   Daiichi Seiyaku Co Ltd                                                        4,857,012 
       116,000   Dainippon Pharmaceutical Co Ltd                                                 665,392 
       271,000   Dainippon Printing Co Ltd                                                     5,677,280 
       334,000   Dainippon Screen Manufacturing Co Ltd                                         3,137,584 
       288,800   Daito Trust Construction Co Ltd                                               3,193,150 
        90,000   Daiwa House Industry Co Ltd                                                   1,039,987 
       519,000   Daiwa Securities Co Ltd                                                       3,279,076 
       133,000   Denso Corp                                                                    2,874,719 
           913   East Japan Railway Co                                                         4,174,495 
       116,000   Eisai Co Ltd                                                                  2,208,330 
        89,000   Ezaki Glico Co Ltd                                                              669,590 
       112,400   Fanuc Co                                                                      4,316,967 
       196,000   Fuji Bank                                                                     2,395,212 
       936,000   Fuji Heavy Industries Ltd                                                     4,131,815 

10              See accompanying notes to the financial statements.             

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares      Description                                                         Value ($)  
----------------------------------------------------------------------------------------------- 
                                                                                                
                 Japan - continued                                                              
       286,900   Fuji Photo Film Co Ltd                                               11,066,722
       344,000   Fujikara Ltd                                                          2,888,353
       542,000   Fujisawa Pharmaceutical Co Ltd                                        5,271,760
     1,374,000   Fujitsu Ltd                                                          16,448,250
        29,000   Fukuyama Transporting Co Ltd                                            144,650
       193,000   Furukawa Electric Co Ltd                                              1,091,030
        84,000   Gakken Co Ltd *                                                         358,933
       105,000   General Sekiyu (KK)                                                     611,023
       374,000   Green Cross Corp                                                      1,336,936
       579,000   Hankyu Corp                                                           2,878,394
     1,011,000   Haseko Corp *                                                           949,730
       100,000   Heiwa Corp                                                            1,795,660
           300   Hirose Electric                                                          21,074
     2,268,300   Hitachi Ltd                                                          20,931,191
       106,000   Hitachi Maxell Ltd                                                    2,396,874
       252,000   Hitachi Metals Ltd                                                    1,330,285
       102,000   Hokkaido Electric Power                                               1,712,861
       303,000   Hokuriku Bank Ltd                                                       937,036
       151,000   House Foods Corp                                                      2,560,811
        21,000   Hoya Corp                                                               892,094
         6,000   Hyogo Bank Ltd (c) *                                                          1
       225,000   INAX Corp                                                             1,103,583
       332,000   Industrial Bank of Japan                                              4,581,594
        97,000   Intec Inc                                                             1,104,747
        95,000   Isuzu Motors Ltd                                                        268,518
       115,000   Ito-Yokado                                                            6,214,149
        18,000   Japan Airport Terminal Co Ltd                                           190,041
       366,000   Japan Energy Co Ltd                                                     648,084
       597,000   Japan Synthetic Rubber Co Ltd                                         4,565,966
         1,269   Japan Tobacco Inc                                                    10,222,471
       276,000   JGC Corp                                                              1,170,172
       157,000   Joshin Denki Co Ltd                                                   1,121,149
       155,000   Joyo Bank                                                               876,216
       379,000   Kamigumi Co Ltd                                                       1,748,649
       101,000   Kandenko Co                                                             692,701
       213,000   Kaneka Corp                                                           1,324,499
       179,200   Kansai Electric Power                                                 3,351,900
        42,000   Kansai Paint Co Ltd                                                     136,520
       465,000   Kao Corp                                                              6,880,871
        86,000   Keihin Electric Express Railway Co Ltd                                  356,040
       135,000   Kenwood Corp                                                            553,288
       129,000   Kikkoman Corp                                                           729,238
        56,000   Kinden Corp                                                             777,455
       417,000   Kinki Nippon Railway Co Ltd                                           2,353,837
       489,000   Kirin Brewery Co Ltd                                                  3,971,677

             See accompanying notes to the financial statements.            11

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares      Description                                                        Value ($)    
------------------------------------------------------------------------------------------------ 
                                                                                                 
                 Japan - continued                                                               
        83,000   Kissei Pharmaceutical Co Ltd                                           1,517,998
        25,000   Kokusai Denshin Denwa                                                  1,598,221
        96,000   Kokusai Electric                                                       1,691,911
        97,000   Kokusai Kogyo Co Ltd                                                     576,565
        79,000   Kokuyo Co Ltd                                                          1,884,862
        62,000   Komori Corp                                                            1,304,015
       414,000   Konica Corp                                                            2,388,528
       208,000   Koyo Seiko Co Ltd                                                      1,430,011
       442,000   Kubota Corp                                                            1,785,784
       628,000   Kumagai Gumi Co Ltd                                                      694,355
       465,000   Kurabo Industries Ltd                                                    985,743
        25,000   Kurita Water Industries Ltd                                              660,903
       105,000   Kyocera Corp                                                           6,633,968
        90,000   Kyowa Exeo Corp                                                          867,903
       331,000   Kyowa Hakko Kogyo Co Ltd                                               1,939,937
       182,300   Kyushu Electric Power Co Inc                                           2,970,388
           500   Long Term Credit Bank of Japan                                             2,482
        36,400   Mabuchi Motor Co                                                       1,942,705
       114,000   Makino Milling Machine Co Ltd                                            793,233
       130,000   Makita Corp                                                            1,783,172
       101,000   Matsushita Communications                                              3,299,776
       914,000   Matsushita Electric Industrial Co Ltd                                 16,868,235
        30,000   Matsushita Electric Works Ltd                                            324,217
        67,000   Matsushita Kotubuki                                                    2,188,960
       235,000   Mazda Motor Corp *                                                       800,981
       140,000   Meiji Seika Kaisha Ltd                                                   636,628
       225,000   Minolta Co Ltd                                                         1,290,631
       883,000   Mitsubishi Electric Corp                                               4,059,348
       640,000   Mitsubishi Gas Chemical Co Inc                                         2,426,137
       674,000   Mitsubishi Oil Co Ltd *                                                2,353,313
       395,000   Mitsubishi Paper Mills Ltd                                             1,034,375
       219,000   Mitsubishi Rayon Co Ltd                                                  833,835
       344,000   Mitsubishi Steel Manufacturing *                                         689,201
       459,000   Mitsui Engineering & Shipbuilding *                                      755,524
       463,000   Mitsui Fudosan Co Ltd *                                                5,388,644
       318,000   Mitsui Mining & Smelting Co Ltd                                        1,292,726
       989,000   Mitsui OSK Lines *                                                     1,743,021
         8,000   Mochida Pharmaceutical Co Ltd                                             59,855
        38,000   Murata Manufacturing Co Ltd                                            1,551,085
       100,000   Nagoya Railroad Co Ltd                                                   369,939
        27,900   Namco Ltd                                                                943,994
       131,000   National House Industrial                                              1,709,785
       937,000   NEC Corp                                                              10,515,837
       470,000   New Japan Securities Co Ltd *                                            898,662
       405,000   New Oji Paper Co Ltd                                                   2,053,787

12              See accompanying notes to the financial statements.             

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                           Value ($)
--------------------------------------------------------------------------------
                                                                                
                 Japan - continued                                              
       143,000   NGK Spark Plug Co                                     1,224,458
       107,000   Nichicon Corp                                         1,325,380
       231,000   Nichii Co Ltd                                         2,630,892
       179,000   Nichirei                                                611,597
       390,000   Nihon Cement Co Ltd                                   1,160,695
       941,000   Nikko Securities                                      4,451,151
        45,000   Nikon Corp                                              744,451
       128,000   Nintendo Co Ltd                                      10,577,105
       362,000   Nippon Carbon Co Ltd *                                  827,583
       143,000   Nippon Chemical                                         677,612
        74,000   Nippon Comsys                                         1,051,958
     1,384,000   Nippon Credit Bank                                    2,370,139
       264,000   Nippon Light Metal                                      706,692
       199,000   Nippon Meat Packers Inc                               2,398,786
     3,891,000   Nippon Oil Co Ltd                                    17,434,941
       359,000   Nippon Paper Industries                               2,083,149
       185,000   Nippon Shokubai Corp                                  1,353,396
       175,000   Nippon Soda Co Ltd                                    1,498,462
         4,725   Nippon Telegraph & Telephone                         44,386,483
         3,400   Nippon Television Network                             1,195,611
       221,000   Nishimatsu Construction                               1,304,431
     1,417,000   Nissan Motor Co Ltd                                   9,164,735
       383,000   Nisshinbo Industries Inc                              2,483,498
       937,000   Nissho Iwai Corp                                      3,528,647
        63,000   Nissin Food Products Co Ltd                           1,466,456
       349,000   Nitto Denko Corp                                      6,063,763
       301,000   Nomura Securities Co Ltd                              4,003,658
       171,000   Odakyu Electric Railway Co Ltd                          865,733
       631,000   Oki Electric Industry                                 2,255,632
       112,000   Okuma Corp                                              689,002
       254,000   Okumura Corp                                          1,425,306
       206,000   Olympus Optical Co Ltd                                1,469,349
       249,000   Omron Corp                                            4,636,794
        67,000   Ono Pharmaceutical Co Ltd                             2,088,702
       172,000   Onward Kashiyama Co Ltd                               2,645,274
       245,000   Pioneer Electronics Corp                              4,888,187
        24,000   Q.P. Corp                                               199,518
       942,000   Renown Inc *                                          1,621,033
       321,000   Ricoh Co Ltd                                          4,349,738
         6,000   Rohm Co Ltd                                             623,493
       164,000   Royal Co Ltd                                          2,808,546
        86,000   Sagami Railway Co Ltd                                   275,252
       284,000   Sakura Bank Ltd                                       1,676,282
       144,000   Sanden Corp                                             987,613
       100,000   Sankyo Co Ltd                                         3,042,647

              See accompanying notes to the financial statements.             13

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                       Value ($)    
--------------------------------------------------------------------------------
                                                                                
                 Japan - continued                                              
       143,000   Sanwa Bank Ltd                                        1,783,191
       163,000   Sapporo Breweries Ltd                                 1,159,930
        50,500   Secom Co Ltd                                          3,597,847
        10,400   Sega Enterprises                                        297,415
        61,000   Seino Transportation Co Ltd                             608,529
       146,000   Sekisui Chemical Co Ltd                               1,238,008
       398,000   Sharp Corp                                            4,003,492
       169,000   Shikoku Electric Power                                2,739,629
       108,000   Shin-Etsu Chemical Co Ltd                             2,765,317
       350,000   Shionogi and Co Ltd                                   2,359,714
       544,000   Shiseido Co Ltd                                       8,909,136
     1,633,000   Showa Denko                                           3,176,673
       372,000   Showa Shell Sekiyu                                    2,582,260
       121,000   Skylark Co Ltd                                        1,679,857
        97,000   Snow Brand Milk Products Co Ltd                         400,773
       187,000   Stanley Electric Co Ltd                                 803,716
       285,000   Sumitomo Bank                                         4,217,308
     1,000,000   Sumitomo Corp                                         8,313,243
         8,000   Sumitomo Forestry Co Ltd                                 77,147
       314,000   Sumitomo Heavy Industries Ltd                           991,936
       118,000   Taisho Pharmaceutical Co Ltd                          2,893,840
       147,000   Taiyo Yuden Co Ltd                                    1,723,086
        35,000   Takashimaya Co                                          389,891
       243,000   Takeda Chemical Industries Ltd                        6,484,579
       101,000   Takuma Corp                                           1,225,871
       240,000   Tanabe Seiyaku Co Ltd                                 1,807,632
           200   TDK Corp                                                 15,396
       189,000   Teijin Ltd                                              768,318
       220,000   Teikoku Oil Co Ltd                                      843,129
       191,000   Terumo Corp                                           3,493,225
         1,420   Toho Co Ltd                                             195,960
       191,600   Tohoku Electric Power Co Inc                          3,121,922
        51,000   Tokyo Broadcasting System Inc                           860,670
       481,000   Tokyo Construction Co Ltd                               627,791
       159,000   Tokyo Electric Co Ltd                                   572,342
         9,400   Tokyo Electric Power                                    179,732
       287,000   Tokyo Electron                                       15,627,650
       135,000   Tokyo Steel Manufacturing Co                          1,100,964
       100,000   Tokyo Style Co Ltd                                    1,180,481
       318,000   Tokyu Department Store Co Ltd                           793,083
       333,000   Toppan Printing Co Ltd                                4,789,176
     1,054,000   Toshiba Corp                                          5,835,597
        62,000   Tostem Corp                                           1,293,707
        48,000   Toyo Suisan Kaisha                                      478,843
       441,000   Toyo Trust & Banking Co Ltd                           3,592,817

14            See accompanying notes to the financial statements.               

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                 Value ($)          
--------------------------------------------------------------------------------
                                                                                
                 Japan - continued                                              
       210,000   Toyobo Co Ltd                                          415,496 
       133,000   Uniden Corp                                          1,868,568 
       124,000   Victor Co of Japan Ltd                               1,505,030 
       174,000   Wacoal Corp                                          2,010,641 
        63,000   Yakult Honsha Co Ltd                                   618,007 
       148,000   Yamaha Corp                                          2,288,470 
       170,000   Yamaha Motor Co                                      1,540,444 
       526,000   Yamaichi Securities Co Ltd                           1,031,973 
       305,000   Yamanouchi Pharmaceutical Co Ltd                     7,302,353 
       209,000   Yamato Transport Co Ltd                              2,519,328 
       115,000   Yamazaki Baking Co Ltd                               1,586,998 
       182,000   Yokogawa Electric Corp                               1,201,330 
        67,000   Yoshitomi Pharmaceutical Industries Lt                 437,235 
                                                             -------------------
                                                                    637,350,516 
                                                             -------------------
                 Malaysia - 2.3%                                                
       284,000   Aluminum Co of Malaysia                                253,267 
     1,156,000   Amalgamated Steel Mills Berhad                         515,452 
       319,000   AMMB Holdings Berhad                                 1,137,918 
       949,000   Arab Malaysian Finance (Foreign Registered)            895,130 
        27,000   Ayer Hitam Tin Dredging *                               28,709 
       138,000   Berjaya Group                                           79,993 
       961,000   Berjaya Leisure Berhad (d)                           1,796,416 
     1,537,300   Berjaya Sports Toto                                  4,218,282 
       324,000   Cement Industries of Malaysia Berhad                   462,302 
       201,000   DMIB Berhad                                            112,375 
       901,800   Edaran Otomobil Berhad                               3,247,779 
       888,000   Ekran Berhad                                         1,041,660 
       317,200   Esso Malaysia Berhad                                   565,749 
       143,400   Faber Group Berhad *                                    76,729 
       204,000   Golden Hope Plantations Berhad                         268,688 
       118,000   Guinness Anchor Berhad                                 202,367 
       115,000   Highlands and Lowlands Berhad                          113,994 
       314,400   Hong Leong Industries Berhad                           695,551 
     2,504,000   Hong Leong Properties Berhad                         1,820,779 
       429,600   IGB Corp Berhad                                        294,701 
     1,611,000   IOI Corporation Berhad                               1,447,717 
       342,000   Johan Holdings Berhad                                  191,206 
       999,000   Kedah Cement Berhad                                    993,689 
     1,418,058   Kuala Lumpur Kepong Berhad (Singapore)               2,587,663 
       659,000   Kumpulan Guthrie Berhad                                696,183 
        11,000   Magnum Corp Berhad                                      10,225 
       996,750   Malayan Cement Berhad                                1,217,091 
     1,219,000   Malayan United Industries Berhad                       627,165 
       307,000   Malayawata Steel                                       304,315 
       976,000   Malaysia Mining Corp Berhad                            716,271 

            See accompanying notes to the financial statements.             15

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                      Value ($)     
------------------------------------------------------------------------------- 
                                                                                
                 Malaysia - continued                                           
     1,662,000   Malaysian Airline Systems                            3,163,814 
       692,000   Malaysian Helicopter Berhad                            344,161 
     1,513,600   Malaysian International Ship (Alien Market)          3,114,937 
        44,000   Malaysian Mosaics                                       32,749 
       187,000   Malaysian Oxygen Berhad                                718,367 
       493,000   Malaysian Pacific Industries                         1,344,315 
        19,000   Malaysian Plantations                                   11,470 
     1,937,333   Malaysian Resources Corp                             1,561,562 
        66,100   Matsushita Electric                                    385,423 
     4,733,000   MBF Capital Berhad                                   4,448,095 
     1,222,000   MBF Holdings Berhad                                    414,948 
       339,000   Mulpha International                                   145,344 
       839,000   Multi Purpose Holdings                                 653,243 
        79,000   Nestle Malaysia                                        501,286 
       431,000   New Straits Times                                    1,921,797 
     1,239,500   Oriental Holdings Berhad                             4,463,986 
        66,000   OYL Industries Berhad                                  303,344 
     1,489,600   Pan Malaysia Cement                                  1,282,420 
       858,500   Perlis Plantations                                   2,120,117 
     2,731,000   Perusahaan Otomobil                                  7,962,099 
       609,600   Petronas Dagangan Berhad                               857,266 
     1,046,000   Petronas Gas Berhad                                  2,888,115 
     3,828,866   Public Bank Berhad (Alien Market)                    3,598,385 
     1,051,000   Rashid Hussain Berhad                                2,541,434 
     3,450,000   Renong Berhad                                        3,549,991 
     1,809,000   RHB Capital Berhad                                   3,102,384 
       312,000   RJ Reynolds Berhad                                     513,668 
       171,000   Rothmans of Pall Mall Malaysia Berhad                1,378,323 
     1,619,000   Sarawak Enterprises Corp                             1,199,465 
       504,400   Shell Refinery Co                                    1,141,842 
       228,000   Sime Darby                                             247,155 
     1,691,000   TA Enterprise Berhad                                 1,125,207 
     4,308,000   Tan Chong Motor Holdings Berhad                      4,551,068 
       240,000   Time Engineering Berhad                                176,162 
     1,438,000   UMW Holdings Berhad                                  3,871,823 
       117,000   Uniphone Telecommunications                             66,215 
       517,000   YTL Corp                                               826,349 
                                                            --------------------
                                                                     93,147,695 
                                                            --------------------
                 Netherlands - 0.0%                                             
            53   Fortis Amev NV                                           2,168 
        29,600   Schroders International Property Fund                   53,262 
                                                            --------------------
                                                                         55,430 
                                                            --------------------
                 New Zealand - 0.0%                                             
       182,791   Trans Tasman Properties *                              101,659 
                                                            --------------------

            See accompanying notes to the financial statements.           16

N-30D 91st Page of 667 TOC 1st Previous Next ↓Bottom Just 91st
GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares      Description                                                      Value ($)  
-------------------------------------------------------------------------------------------- 
                                                                                             
                 Norway - 1.2%                                                               
        89,805   Bergesen D Y AS Class A                                           2,409,676 
         9,765   Bona Shipholding Ltd *                                              123,148 
       131,074   Leif Hoegh and Co AS                                              2,796,030 
       718,140   Norsk Hydro AS                                                   39,020,446 
        50,540   Orkla-Borregaard AS Class A                                       3,586,898 
       100,634   SAS Norge ASA Class B                                             1,444,630 
                                                                         --------------------
                                                                                  49,380,828 
                                                                         --------------------
                 Singapore - 2.6%                                                            
       101,959   Asia Food & Properties Ltd Warrants 7/12/02 *                        33,137 
     1,359,461   Asia Food & Properties Ltd *                                        666,136 
     1,060,000   City Developments                                                 6,692,893 
       130,000   Creative Technology Ltd *                                         2,612,893 
     1,602,096   DBS Land Ltd                                                      4,109,840 
       721,000   Development Bank of Singapore (Foreign Registered)                7,627,107 
     1,144,309   First Capital Corp Ltd                                            2,557,200 
       565,577   Fraser and Neave Ltd                                              2,991,482 
     3,156,037   Hai Sun Hup Group Ltd                                             2,024,037 
     1,209,203   Haw Paw Brothers International Ltd                                2,318,472 
       139,475   Haw Paw Brothers International Ltd Warrants 7/18/2001 *             103,281 
       781,000   Highlands and Lowlands Berhad                                       795,200 
     1,372,104   Hotel Properties Ltd                                              1,914,142 
     3,227,421   Jardine Matheson Holdings Ltd                                    22,591,947 
     5,703,911   Jardine Strategic Holdings Ltd                                   21,104,471 
       358,712   Jurong Shipyard Ltd                                               1,589,005 
     1,126,000   Lum Chang Holdings Ltd                                              714,684 
       118,000   Marco Polo Developments Ltd                                         187,240 
       477,600   Metro Holdings Ltd                                                1,357,805 
     1,350,000   Natsteel Ltd                                                      3,677,355 
     3,224,556   Neptune Orient Lines Ltd                                          2,430,409 
       476,000   Parkway Holdings Ltd                                              1,793,851 
       345,508   Prima Ltd                                                         1,023,389 
       388,424   Robinson and Co Ltd                                               1,810,505 
       246,699   Shangri-La Hotel Ltd                                                603,495 
       369,000   Singapore Tech Industrial Corp                                      566,003 
        77,900   Singapore Technologies Aero (Foreign Registered)                    118,460 
     2,303,168   Straits Trading Co Ltd                                            4,263,716 
       416,000   Times Publishing Ltd                                                880,132 
       240,000   United Engineers                                                    277,686 
     6,592,960   United Industrial Corp Ltd                                        4,489,751 
       592,900   Wearne Brothers Ltd                                               1,489,600 
                                                                         --------------------
                                                                                 105,415,324 
                                                                         --------------------
                 Spain - 2.8%                                                                
       344,378   Argentaria Corporacion Bancaria de Espana SA                     17,147,546 
         3,500   Azucarera de Espana SA                                              182,332 
     2,031,237   Banco Bilbao Vizcaya SA                                          53,509,861 

              See accompanying notes to the financial statements.             17

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                          Value ($) 
--------------------------------------------------------------------------------
                                                                                
                 Spain - continued                                              
       537,804   Banco Central Hispanoamericano SA                   19,951,421 
         1,500   Dragados & Construcciones SA                            28,169 
     2,115,856   FENOSA SA                                           16,422,483 
        16,780   Iberdrola SA                                           188,738 
         4,030   Repsol SA                                              159,578 
       233,043   Telefonica de Espana SA                              6,054,857 
                                                             -------------------
                                                                    113,644,985 
                                                             -------------------
                 Sweden - 5.0%                                                  
       157,779   Assi Doman                                           4,803,136 
       471,200   Avesta Sheffield AB                                  4,471,357 
       463,200   Bilspedition AB Class B *                            1,899,775 
       146,031   Celsius Industrier AB Class B                        2,734,262 
       353,720   Electrolux AB Class B                               25,230,475 
       448,500   Ericsson LM Class B                                 18,737,605 
        94,388   Esselte AB Class A                                   2,344,386 
        47,200   Esselte AB Class B                                   1,220,438 
        76,217   Euroc Industri AB Class A                            2,659,991 
        95,669   Fastighets AB (Hufvudstaden) Class A *                 438,684 
       158,510   Granges AB *                                         2,382,410 
       102,200   Hennes and Mauritz AB Class B                        3,866,207 
        84,449   Hufvudstaden International *                            81,750 
         2,700   Kinnevik Investment Class B                             81,506 
       143,770   Marieberg Tidnings AB Class A                        3,717,424 
       746,000   Mo Och Domsjo AB Class B                            24,705,290 
       144,200   Nordbanken                                           4,591,801 
           260   Scancem AB Class B                                       8,958 
       365,508   Skandinaviska Enskilda Banken Class A                3,933,973 
       613,846   Skanska AB Class B                                  24,433,588 
       224,600   Sparbanken Sverige AB Class A                        4,891,968 
       274,300   Ssab Swedish Steel Class A                           5,694,967 
       439,873   Stena Line AB Class B *                              1,854,527 
     1,233,550   Stora Kopparberg Bergslags Class A                  19,640,139 
       298,350   Stora Kopparberg Bergslags Class B                   4,674,218 
       827,872   Svenska Cellulosa Class B                           18,400,788 
       291,489   Svenska Handelsbanken Class A                        8,984,943 
       421,800   Trelleborg AB Class B                                6,500,844 
                                                             -------------------
                                                                    202,985,410 
                                                             -------------------
                 Switzerland - 1.6%                                             
        99,105   Alberta Energy Ltd                                   2,205,585 
           120   Ascom Holding AG (Bearer) *                            162,447 
           383   Bobst SA (Registered)                                  296,789 
        30,300   CS Holdings (Registered)                             3,649,557 
         1,360   Elektrowatt AG (Bearer)                                492,113 
           450   Financiere Richemont AG Class A                        606,449 
         2,260   Hilti AG, Schaan (Participating Certificate)         1,553,317 

18            See accompanying notes to the financial statements.               

N-30D 93rd Page of 667 TOC 1st Previous Next ↓Bottom Just 93rd
GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares      Description                                                         Value ($)     
---------------------------------------------------------------------------------------------------
                                                                                                   
                 Switzerland - continued                                                           
         1,894   Holderbank Financiere Glarus AG (Bearer)                                1,588,915 
         8,460   Holderbank Financiere Glarus AG (Registered)                            1,504,963 
           225   Magazine zum Globus (Registered) *                                        176,628 
        27,470   Nestle AG (Registered)                                                 32,022,573 
         7,317   Novartis AG (Registered)                                               10,393,340 
           970   Rieter Holdings AG (Registered)                                           434,002 
           123   Roche Holdings (Participating Certificate)                              1,040,160 
           640   Sairgroup Namen AKT *                                                     760,298 
         2,270   Schweizerische Rueckversicherungsgesellschaft (Bearer)                  3,022,486 
           220   Sig Schweiz Industrie (Registered)                                        318,722 
           460   Sulzer Gebrueder AG (Registered)                                          323,291 
        12,000   Swiss Bank Corp (Registered) *                                          2,898,824 
         5,320   Zuerich Versicherungs Namen (Registered)                                1,935,784 
                                                                               --------------------
                                                                                        65,386,243 
                                                                               --------------------
                 United Kingdom - 23.9%                                                            
     1,232,700   Abbey National                                                         16,553,317 
     1,407,350   Allied Domecq Plc                                                      10,636,171 
       874,580   AMEC                                                                    2,014,119 
       536,400   Anglian Water Plc                                                       6,763,733 
     1,248,500   Arjo Wiggins Appleton Plc                                               3,563,678 
     8,292,062   ASDA Group                                                             19,365,215 
       267,740   Ashley (Laura) Holdings                                                   247,506 
       608,446   Associated British Foods                                                5,111,509 
       427,100   Bank of Scotland                                                        2,874,584 
     1,102,190   Barclays Bank Plc                                                      25,204,198 
     1,058,230   Barratt Development                                                     4,402,149 
     2,021,360   Bass *                                                                 27,045,494 
     2,786,500   BAT Industries                                                         23,341,388 
       987,300   Beazer Holmes Plc                                                       2,694,024 
       317,656   Betacomm Plc *                                                            231,829 
    15,427,398   BG Plc                                                                 67,304,215 
       326,800   Blue Circle Industries                                                  2,035,216 
       218,356   British Aerospace                                                       5,113,634 
     1,924,103   British Airways                                                        20,064,881 
     3,803,800   British Steel                                                          10,672,375 
     1,452,400   British Telecom Plc                                                     9,374,899 
     1,480,869   BTR                                                                     5,235,648 
     2,742,240   Burton Group                                                            5,503,614 
     3,344,593   Coats Viyella                                                           6,427,749 
       128,700   Commercial Union Plc                                                    1,544,570 
       595,497   Cookson Group *                                                         2,472,389 
       181,500   Costain Group (d) *                                                       132,461 
     1,352,553   Dawson International                                                    1,623,242 
        99,500   Electrocomponents Plc                                                     743,912 
     1,680,382   English China Clays Plc                                                 6,349,817 

             See accompanying notes to the financial statements.            19

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                            Value ($)
--------------------------------------------------------------------------------
                                                                                
                 United Kingdom - continued                                     
     1,058,000   Enterprise Oil                                       11,856,623
     2,395,400   Eurotunnel SA Units (Registered) *                    2,641,705
        64,840   Glaxo Wellcome Plc                                    1,298,695
       784,735   Greenalls Group Plc                                   6,007,065
     1,508,890   Harrisons & Crosfield                                 2,704,065
     1,494,123   Hillsdown Holdings                                    3,925,533
       291,680   HSBC Holdings                                         8,741,902
       272,985   Hyder Plc                                             3,696,771
       865,200   Imperial Chemical Industries Plc                     14,003,750
       610,320   Kingfisher                                            7,176,173
       134,473   Kwik Save Group                                         697,883
     7,262,850   Ladbroke Group                                       30,507,325
        75,546   Laing (John)                                            459,452
       477,100   Land Securities                                       6,925,159
     4,917,050   Lasmo                                                20,434,584
     1,063,725   Legal & General Group                                 7,806,300
     5,059,148   Lloyds TSB Group                                     59,239,567
       660,392   London International                                  1,767,189
     4,877,642   Lonrho                                                9,769,541
       241,740   Lucas Variety Plc                                       772,346
       383,260   Meggitt                                                 770,748
       428,100   Meyer International                                   2,968,101
     1,944,180   Mirror Group Plc                                      6,400,734
     4,220,590   National Power                                       38,947,782
       444,800   Next                                                  5,352,615
       868,700   Northern Foods Plc *                                  3,071,310
     1,762,400   Orange Plc *                                          6,373,921
     2,283,500   Peninsular & Oriental Steam Navigation Co            24,071,972
     5,693,932   Pilkington *                                         13,436,080
     1,648,274   Powergen                                             20,850,732
       765,800   Prudential Corp                                       7,576,044
     1,147,400   Railtrack Group Plc                                  14,375,092
        45,989   Reckitt & Colman                                        710,049
       722,479   Redland                                               3,397,978
     3,626,100   Rentokil Plc                                         12,702,547
     2,918,000   Reuters Holdings                                     29,624,902
       159,060   RMC Group                                             2,589,954
       844,036   Rolls-Royce                                           3,203,127
       741,000   Sainsbury (J)                                         5,179,559
        78,360   Schroders                                             2,405,069
     1,353,500   Scottish Hydro-Electric Plc                           9,790,174
     3,575,598   Scottish Power Plc                                   25,196,242
     7,112,700   Sears                                                 7,267,287
       762,182   Severn Trent Plc                                     10,815,934
       553,650   Shell Transport & Trading (Registered)                3,753,262
     1,787,824   Signet Group Plc *                                      913,341
    41,903,056   Signet Group * (e)                                          -  

20            See accompanying notes to the financial statements.               

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

       Par Value/                                                                                           
         Shares       Description                                                               Value ($)   
------------------------------------------------------------------------------------------------------------
                                                                                                            
                      United Kingdom - continued                                                            
          1,013,867   Simon Engineering                                                             624,830 
          5,705,038   Smithkline Beecham Plc                                                     49,407,980 
          1,301,945   Southern Electric Plc                                                       9,755,104 
          1,513,547   Storehouse Plc                                                              5,621,196 
          3,662,575   T & N                                                                       9,533,642 
          8,092,180   Tarmac                                                                     15,551,819 
          2,466,200   Taylor Woodrow Plc                                                          7,439,411 
              7,557   Tesco                                                                          50,127 
            785,600   Thames Water                                                               10,058,910 
            592,900   TI Group Plc                                                                5,663,619 
            206,770   Tomkins Plc                                                                 1,002,665 
            623,690   Unilever Plc                                                               17,286,543 
          2,057,475   United Biscuits                                                             6,890,519 
          2,129,450   United Utilities                                                           23,794,904 
            723,310   Viglen Technology *                                                           762,492 
          1,899,470   Vodafone Group Plc                                                          9,765,377 
            734,100   Waste Management International *                                            2,952,597 
            865,279   Wessex Water Plc                                                            6,665,720 
          1,215,500   Whitbread Plc Class A                                                      15,898,518 
          2,710,000   Wimpey (George)                                                             5,845,454 
          1,136,032   Yorkshire Water                                                             8,069,785 
                                                                                          ------------------
                                                                                                969,464,932 
                                                                                          ------------------
                      TOTAL STOCK AND EQUIVALENTS (Cost $3,723,403,747)                       3,864,260,088 
                                                                                          ------------------
                      DEBT OBLIGATION - 0.1%                                                                
                      United Kingdom - 0.1%                                                                 
GBP       1,178,995   Viglen Technology Floating Rate Note, 6.75% due 9/1/2000 (d)                2,233,326 
                                                                                          ------------------
                      TOTAL DEBT OBLIGATION (Cost $1,334,817)                                     2,233,326 
                                                                                          ------------------
                      SHORT-TERM INVESTMENTS - 11.6%                                                        
                      Cash Equivalents - 10.0%                                                              
      $ 162,900,000   Republic Bank of New York Time Deposit, 5.56% due 9/2/97                  162,900,000 
        243,948,417   The Boston Global Investment Trust (b)                                    243,948,417 
                                                                                          ------------------
                                                                                                406,848,417 
                                                                                          ------------------
                      U.S. Government - 1.6%                                                                
      $  64,500,000   U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                   63,321,226 
                                                                                          ------------------
                      TOTAL SHORT-TERM INVESTMENTS (Cost $470,128,875)                          470,169,643 
                                                                                          ------------------
                      TOTAL INVESTMENTS - 106.8%                                                            
                      (Cost $4,194,867,439)                                                   4,336,663,057 

                      Other Assets and Liabilities (net) -  (6.8%)                             (274,610,315)
                                                                                          ------------------
                      TOTAL NET ASSETS - 100.0%                                          $    4,062,052,742 
                                                                                          ==================

              See accompanying notes to the financial statements.             21

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

Notes to the Schedule of Investments:                 

ADR American Depositary Receipt                       

(a) All or a portion of this security is held as      
collateral for open futures contracts.        

(b) Represents investment of security lending         
collateral (Note 1).                          

(c) Bankrupt issuer.                                  

(d) Valued by management (Note 1).                    

(e) Pending corporate action, quantification of rate  
per share to be determined.                   

             *   Non-income producing security. A dividend has not been declared
for the twelve months ended August 31, 1997.  

22            See accompanying notes to the financial statements.               

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

At August 31, 1997, industry sector diversification   
of the Fund's equity investments was as follows:      

                                                                [Download Table]

Industry Sector                                
                                               

Banking                                   12.4%
Utilities                                  7.6 
Conglomerates                              6.6 
Services                                   6.6 
Consumer Goods                             5.9 
Real Estate                                5.4 
Construction                               5.0 
Oil and Gas                                4.7 
Transportation                             4.6 
Electronic Equipment                       4.1 
Health Care                                3.9 
Chemicals                                  3.4 
Telecommunications                         3.4 
Retail Trade                               3.2 
Machinery                                  2.9 
Food and Beverage                          2.8 
Paper and Allied Products                  2.6 
Automotive                                 2.3 
Metals and Mining                          1.9 
Communications                             1.8 
Insurance                                  1.8 
Financial Services                         1.5 
Computers                                  0.6 
Textiles                                   0.6 
Aerospace                                  0.6 
Miscellaneous                              3.8 
                                    ========== 
                                         100.0%
                                    ========== 

             See accompanying notes to the financial statements.              23

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Assets:                                                                                           
                                                                                                  
     Investments, at value (cost $4,194,867,439) (Note 1)                       $   4,336,663,057 
     Foreign currency, at value (cost $13,025,393) (Note 1)                            13,041,199 
     Cash                                                                                  21,864 
     Receivable for Fund shares sold                                                      240,975 
     Receivable for investments sold                                                  126,804,212 
     Dividends and interest receivable                                                 10,572,242 
     Foreign withholding taxes receivable                                               5,423,232 
     Receivable for variation margin on open futures contracts (Notes 1 and 5)         18,228,093 
     Receivable for open forward foreign currency contracts (Notes 1 and 5)            28,841,965 
     Receivable for expenses waived or borne by Manager (Note 2)                        1,051,188 
                                                                                 -----------------
         Total assets                                                               4,540,888,027 
                                                                                 -----------------

Liabilities:                                                                                      
     Payable upon return of securities loaned (Note 1)                                243,948,417 
     Payable for investments purchased                                                124,151,508 
     Payable for open swap contracts (Note 1)                                          16,735,992 
     Payable for open forward foreign currency contracts (Notes 1 and 5)               63,606,630 
     Payable for Fund shares repurchased                                               25,703,957 
     Payable to affiliate for (Note 2):                                                           
         Management fee                                                                 2,697,649 
         Shareholder service fee                                                          542,414 
     Accrued expenses                                                                   1,448,718 
                                                                                 -----------------
         Total liabilities                                                            478,835,285 
                                                                                 -----------------
Net assets                                                                      $   4,062,052,742 
                                                                                 =================
Net assets consist of:                                                                            
     Paid-in capital                                                            $   3,665,441,907 
     Accumulated undistributed net investment income                                   41,323,670 
     Accumulated undistributed net realized gain                                      222,536,269 
     Net unrealized appreciation                                                      132,750,896 
                                                                                 -----------------
                                                                                $   4,062,052,742 
                                                                                 =================
Net assets attributable to:                                                                       
     Class I Shares                                                             $       3,466,361 
                                                                                 =================
     Class II Shares                                                            $      40,429,382 
                                                                                 =================
     Class III Shares                                                           $   4,018,156,999 
                                                                                 =================

Shares outstanding:                                                                               
     Class I                                                                              141,965 
                                                                                 =================
     Class II                                                                           1,655,271 
                                                                                 =================
     Class III                                                                        164,337,155 
                                                                                 =================

Net asset value per share:                                                                        
     Class I                                                                    $           24.42 
                                                                                 =================
     Class II                                                                   $           24.42 
                                                                                 =================
     Class III                                                                  $           24.45 
                                                                                 =================

See accompanying notes to the financial statements. 

24                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Investment income:                                                                   
                                                                                     
     Dividends (net of foreign tax expense of $7,619,569)          $      72,836,835 
     Interest (including securities lending income of $1,308,291)          6,092,944 
                                                                    -----------------
         Total income                                                     78,929,779 
                                                                    -----------------
Expenses:                                                                            
     Management fee (Note 2)                                              16,233,860 
     Custodian fees                                                        1,586,080 
     Stamp duties and transfer taxes                                         340,952 
     Legal fees                                                               96,876 
     Audit fees                                                               39,928 
     Transfer agent fees                                                      29,164 
     Trustees fee (Note 2)                                                    19,688 
     Miscellaneous                                                            15,916 
     Fees waived or borne by Manager (Note 2)                             (6,333,133)
                                                                    -----------------
                                                                          12,029,331 
     Shareholder service fee (Note 2)                                                
         Class I                                                               4,084 
         Class II                                                             39,221 
         Class III                                                         3,217,843 
                                                                    -----------------

         Net expenses                                                     15,290,479 
                                                                    -----------------
             Net investment income                                        63,639,300 
                                                                    -----------------

Realized and unrealized gain (loss):                                                 
         Net realized gain (loss) on:                                                
             Investments                                                 249,312,819 
             Closed futures contracts                                    (32,853,672)
             Closed swap contracts                                        56,831,896 
             Foreign currency, forward contracts and foreign                         
                currency related transactions                            (40,323,188)
                                                                    -----------------
                Net realized gain                                        232,967,855 
                                                                    -----------------

         Change in net unrealized appreciation (depreciation) on:                    
             Investments                                                (152,191,345)
             Open futures contracts                                       45,991,544 
             Open swap contracts                                         (39,328,192)
             Foreign currency, forward contracts and foreign                         
                currency related transactions                             (6,541,625)
                                                                    -----------------
                Net unrealized loss                                     (152,069,618)
                                                                    -----------------
         Net realized and unrealized gain                                 80,898,237 
                                                                    -----------------
Net increase in net assets resulting from operations               $     144,537,537 
                                                                    =================

See accompanying notes to the financial statements. 

                                                                              25

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                                 Six Months Ended                           
                                                                  August 31, 1997            Year Ended     
                                                                    (Unaudited)          February 28, 1997  
                                                               ---------------------   ---------------------
                                                                                                            
Increase (decrease) in net assets:                                                                          
Operations:                                                                                                 
     Net investment income                                    $          63,639,300   $         103,049,778 
     Net realized gain                                                  232,967,855             231,885,655 
     Change in net unrealized appreciation (depreciation)              (152,069,618)            (42,361,514)
                                                               ---------------------   ---------------------

     Net increase in net assets resulting from                                                              
         operations                                                     144,537,537             292,573,919 
                                                               ---------------------   ---------------------

Distributions to shareholders from:                                                                         
     Net investment income                                                                                  
         Class I                                                            (27,297)                 (2,078)
         Class II                                                          (268,136)               (231,954)
         Class III                                                      (31,242,846)            (56,618,907)
                                                               ---------------------   ---------------------
         Total distributions from net investment income                 (31,538,279)            (56,852,939)
                                                               ---------------------   ---------------------

     Net realized gains                                                                                     
         Class I                                                            (75,824)                 (8,575)
         Class II                                                          (780,290)               (932,158)
         Class III                                                      (90,918,336)           (264,270,135)
                                                               ---------------------   ---------------------
         Total distributions from net realized gains                    (91,774,450)           (265,210,868)
                                                               ---------------------   ---------------------

Net share transactions:  (Note 4)                                                                           
         Class I                                                          3,181,300                 206,837 
         Class II                                                        15,183,268              25,522,151 
         Class III                                                     (235,983,925)           (275,828,032)
                                                               ---------------------   ---------------------
     Decrease in net assets from net fund share transactions           (217,619,357)           (250,099,044)
                                                               ---------------------   ---------------------

     Total decrease in net assets                                      (196,394,549)           (279,588,932)

Net assets:                                                                                                 
     Beginning of period                                              4,258,447,291           4,538,036,223 
                                                               ---------------------   ---------------------

     End of period (including accumulated undistributed                                                     
         net investment income of $41,323,670 and                                                           
         $9,222,649, respectively)                            $       4,062,052,742   $       4,258,447,291 
                                                               =====================   =====================

See accompanying notes to the financial statements. 

26                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                              Six Months Ended      Period from September 10, 1996
                                                               August 31, 1997        (commencement of operations)
                                                                 (Unaudited)              to February 28, 1997    
                                                             -----------------            ---------------------   
                                                                                                                  
Net asset value, beginning of period                        $            24.36              $          24.17      
                                                             ------------------              ----------------     

Income (loss) from investment operations:                                                                         
  Net investment income                                                   0.38(d)                       0.14      
  Net realized and unrealized gain (loss)                                 0.43                          1.38      
                                                             ------------------              ----------------     

    Total from investment operations                                      0.81                          1.52      
                                                             ------------------              ----------------     

Less distributions to shareholders:                                                                               
  From net investment income                                             (0.20)                        (0.26)     
  From net realized gains                                                (0.55)                        (1.07)     
                                                             ------------------              ----------------     

    Total distributions                                                  (0.75)                        (1.33)     
                                                             ------------------              ----------------     

Net asset value, end of period                              $            24.42              $          24.36      
                                                             ==================              ================     

Total Return (a)                                                         3.14%                         6.38%      

Ratios/Supplemental Data:                                                                                         

          Net assets, end of period (000's)                 $            3,466              $            208      
          Net expenses to average                                                                                 
               daily net assets                                          0.84%*(b)                     0.85%*(b)  
          Net investment income to average                                                                        
               daily net assets                                          2.97%*                        1.12%*     
          Portfolio turnover rate                                          42%                           97%      
          Average broker commission rate (c)                $           0.0066              $         0.0062      
          Fees and expenses voluntarily waived or borne by                                                        
               the Manager consisted of the following per                                                         
               share amounts:                               $             0.04              $           0.04      

*    Annualized                                                                 

(a)  Calculation excludes purchase premiums. The total returns would have been  
lower had certain expenses not been waived during the periods shown.  
(b)  Includes stamp duties and transfer taxes not waived or borne by the        
     Manager, which approximates .03% of average daily net assets for the period
  ended February 28, 1997 and .02% of average daily net assets for the six
months ended August 31, 1997.                                         
(c)  The average broker commission rate will vary depending on the markets in   
which trades are executed.                                            
(d)  Computed using average shares outstanding throughout the period.           

              See accompanying notes to the financial statements.             27

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                                Six Months Ended         Period from September 26, 1996
                                                                 August 31, 1997          (commencement of operations) 
                                                                  (Unaudited)                 to February 28, 1997     
                                                            ----------------------     --------------------------------
                                                                                                                       
Net asset value, beginning of period                          $            24.36                 $          24.60      
                                                               ------------------                 ----------------     

Income (loss) from investment operations:                                                                              
  Net investment income                                                     0.36(d)                          0.14      
  Net realized and unrealized gain (loss)                                   0.44                             0.96      
                                                               ------------------                 ----------------     

    Total from investment operations                                        0.80                             1.10      
                                                               ------------------                 ----------------     

Less distributions to shareholders:                                                                                    
  From net investment income                                               (0.19)                           (0.27)     
  From net realized gains                                                  (0.55)                           (1.07)     
                                                               ------------------                 ----------------     

    Total distributions                                                    (0.74)                           (1.34)     
                                                               ------------------                 ----------------     

Net asset value, end of period                                $             24.42                $          24.36      
                                                               ==================                 ================     

Total Return (a)                                                            3.18%                           4.51%      

Ratios/Supplemental Data:                                                                                              

          Net assets, end of period (000's)                   $            40,429                $         25,302      
          Net expenses to average                                                                                      
               daily net assets                                             0.78%*(b)                       0.80%*(b)  
          Net investment income to average                                                                             
               daily net assets                                             2.88%*                          0.98%*     
          Portfolio turnover rate                                             42%                             97%      
          Average broker commission rate (c)                  $            0.0066                $         0.0062      
          Fees and expenses voluntarily waived or borne by                                                             
               the Manager consisted of the following per                                                              
               share amounts:                                 $              0.04                $           0.05      

*    Annualized                                                                 

(a)  Calculation excludes purchase premiums. The total returns would have been  
lower had certain expenses not been waived during the periods shown.  
(b)  Includes stamp duties and transfer taxes not waived or borne by the        
     Manager, which approximates .04% of average daily net assets for the period
  ended February 28, 1997 and .02% of average daily net assets for the six
months ended August 31, 1997.                                         
(c)  The average broker commission rate will vary depending on the markets in   
which trades are executed.                                            
(d)  Computed using average shares outstanding throughout the period.           

28            See accompanying notes to the financial statements.               

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                              Six Months Ended               Year Ended February 28/29,          
                                               August 31, 1997   ------------------------------------------------
                                                (Unaudited)          1997              1996             1995     
                                              ----------------    ------------     -----------       ----------- 
                                                                                                                 
Net asset value, beginning of period         $          24.37    $      24.62     $     22.32       $     25.56  
                                              ----------------    ------------     -----------       ----------- 

Income (loss) from investment operations:                                                                        
  Net investment income                                  0.37 (d)        0.59            0.36              0.27  
  Net realized and unrealized gain (loss)                0.45            1.02            3.09             (1.57) 
                                              ----------------    ------------     -----------       ----------- 

    Total from investment operations                     0.82            1.61            3.45             (1.30) 
                                              ----------------    ------------     -----------       ----------- 

Less distributions to shareholders:                                                                              
  From net investment income                            (0.19)          (0.33)          (0.39)            (0.35) 
  From net realized gains                               (0.55)          (1.53)          (0.76)            (1.59) 
                                              ----------------    ------------     -----------       ----------- 

    Total distributions                                 (0.74)          (1.86)          (1.15)            (1.94) 
                                              ----------------    ------------     -----------       ----------- 

Net asset value, end of period               $          24.45    $      24.37     $     24.62       $     22.32  
                                              ================    ============     ===========       =========== 

Total Return (a)                                        3.18%           6.72%          15.72%            (5.31%) 

Ratios/Supplemental Data:                                                                                        

      Net assets, end of period (000's)      $      4,018,157    $  4,232,937     $ 4,538,036       $ 2,591,646  
      Net expenses to average                                                                                    
         daily net assets                               0.71%*(b)       0.71%(b)        0.71% (b)         0.70%  
      Net investment income to average                                                                           
         daily net assets                               2.94%*          2.34%           1.93%             1.48%  
      Portfolio turnover rate                             42%             97%             14%               53%  
      Average broker commission rate (c)     $         0.0066    $     0.0062             N/A               N/A  
      Fees and expenses voluntarily waived                                                                       
         or borne by the Manager consisted                                                                       
         of the following pershare amounts:  $           0.04    $       0.06     $      0.03       $      0.03  

                                                                [Download Table]


                                               Year Ended February 28/29,  
                                             ------------------------------
                                                1994                1993   
                                             ------------       ---------  
                                                                           
Net asset value, beginning of period         $     18.51       $   18.80   
                                              -----------       ---------  

Income (loss) from investment operations:                                  
  Net investment income                             0.29            0.29   
  Net realized and unrealized gain (loss)           7.44           (0.04)  
                                              -----------       ---------  

    Total from investment operations                7.73            0.25   
                                              -----------       ---------  

Less distributions to shareholders:                                        
  From net investment income                       (0.27)          (0.20)  
  From net realized gains                          (0.41)          (0.34)  
                                              -----------       ---------  

    Total distributions                            (0.68)          (0.54)  
                                              ----------        ---------  

Net asset value, end of period               $     25.56       $   18.51   
                                              ===========       =========  

Total Return (a)                                  42.10%           1.43%   

Ratios/Supplemental Data:                                                  

      Net assets, end of period (000's)      $ 2,286,431       $ 918,332   
      Net expenses to average                                              
         daily net assets                          0.71%(b)        0.70%   
      Net investment income to average                                     
         daily net assets                          1.48%           2.36%   
      Portfolio turnover rate                        23%             23%   
      Average broker commission rate (c)             N/A             N/A   
      Fees and expenses voluntarily waived                                 
         or borne by the Manager consisted                                 
         of the following pershare amounts:  $      0.03       $    0.03   

*    Annualized                                                                 

(a)  Calculation excludes purchase premiums. The total returns would have been  
lower had certain expenses not been waived during the periods shown.  
(b)  Includes stamp duties and transfer taxes not waived or borne by the        
Manager, which approximates .02% of average daily net assets.         
(c)  For fiscal years beginning on or after September 1, 1995, a fund is        
 required to disclose its average commission rate per share for security
     trades on which commissions are charged. The average broker commission rate
will vary depending on the markets in which trades are executed.      
(d)  Computed using average shares outstanding throughout the period.           

              See accompanying notes to the financial statements.             29

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

  The Fund seeks maximum total return through investment in a portfolio of
common stocks of non-U.S. issuers.                                    

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
as those shares.                                                      

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
provided by market- makers or estimates of market values obtained from
yield data relating to investments or securities with similar         
characteristics.                                                      

30                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

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

Futures contracts                                                     
   The Fund may purchase and sell stock index futures contracts. Stock index
   futures contracts represent commitments for future delivery of cash based
 upon the level of a specified index of equity securities at a specified
 price at a given date. The Fund may use futures contracts to manage its
exposure to the stock and currency markets. Buying futures tends to   
    increase the Fund's exposure to the underlying instrument. Selling futures
     tends to decrease the Fund's exposure to the underlying instrument or hedge
  other Fund instruments. Upon purchase of a futures contract, the Fund is
     required to deposit with its custodian, in a segregated account in the name
    of the futures broker, an amount of cash or U.S. government obligations in
    accordance with the initial margin requirements of the broker or exchange.
    Futures contracts are marked to market daily and an appropriate payable or
    receivable for the change in value ("variation margin") is recorded by the
  Fund. The payable or receivable is subsequently settled. Gains or losses
  are recognized but not considered realized until the contracts expire or
    are closed. Futures contracts involve, to varying degrees, risk of loss in
 excess of the variation margin disclosed in the Statement of Assets and
   Liabilities. Losses may arise from changes in the value of the underlying
    instrument, if there is an illiquid secondary market for the contracts, or
if counterparties do not perform under the contract terms. Futures    
  contracts are valued at the settlement price established each day by the
 board of trade or exchange on which they are traded. See Note 5 for all
open futures contracts held as of August 31, 1997.                    

                                                                              31

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

Forward currency contracts                                            
The Fund may enter into forward currency contracts in connection with 
    settling planned purchases or sales of securities or to hedge the currency
    exposure associated with some or all of the Fund's portfolio securities. A
  forward currency contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The market value of a
forward currency contract fluctuates with changes in forward currency 
   exchange rates. Forward currency contracts are marked to market daily and
    the change in value is recorded by the Fund as an unrealized gain or loss.
   Realized gains or losses equal to the difference between the value of the
    contract at the time it was opened and the value at the time it was closed
are recorded upon delivery or receipt of the currency or, if a forward
currency contract is offset by entering into another forward currency 
 contract with the same broker, upon settlement of the net gain or loss.
     These contracts may involve market risk in excess of the unrealized gain or
loss reflected in the Fund's Statement of Assets and Liabilities. In  
addition, the Fund could be exposed to risk if the counterparties are 
   unable to meet the terms of the contracts or if the value of the currency
changes unfavorably to the U.S. dollar. The U.S. dollar value of the  
    currencies the Fund has committed to buy or sell is shown under Note 5 and
  represents the currency exposure the Fund has acquired or hedged through
currency contracts as of August 31, 1997.                             

Swap agreements                                                       
    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
  to the equity markets. The Fund enters into equity swap agreements which
involve a commitment by one party in the agreement to pay interest in 
exchange for a market linked return based on a notional amount. To the
extent that the total return of the security or index underlying the  
transaction exceeds or falls short of the offsetting interest rate    
   obligation, the Fund will receive a payment from or make a payment to the
   counterparty, respectively. Equity swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
     obligation to perform or that there may be unfavorable changes in the price
  of the security or index underlying these transactions. See Note 5 for a
summary of the open swap agreement as of August 31, 1997.             

32                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Security lending                                                      
  The Fund may lend its securities to certain 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 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 August 31, 1997, the Fund loaned securities having a market
     value of $225,737,354 collateralized by cash in the amount of $243,948,417,
which was invested in a short-term instrument.                        

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
  "Code"). The Fund intends to distribute substantially all of its taxable
 net investment income and net realized short-term and long-term capital
    gains, if any, after giving effect to any available capital loss carryover
     for federal income tax purposes. Therefore, no provision for federal income
   or excise tax is necessary. Taxes on foreign interest and dividend income
   have been withheld in accordance with the applicable country's tax treaty
with the United States. Dividends received by shareholders of the Fund
    which are derived from foreign source income and foreign taxes paid by the
Fund are to be treated, to the extent allowable under the Code, as if 
received and paid by the shareholders of the Fund.                    

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date, or when the Fund is informed of the 
   ex-dividend date. Interest income is recorded on the accrual 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.                                                

                                                                              33

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .60% of the amount    
    invested. Prior to June 1, 1996, the premium on cash purchases was .75% of
     the amount invested. All purchase premiums are paid to and recorded as paid
    in capital by the Fund. For the six months ended August 31, 1997, the Fund
received $624,536 in purchase premiums. There is no premium for cash  
redemptions or reinvested distributions.                              

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

2.   Fees and other transactions with affiliates                                
  GMO receives a management fee paid monthly at the annual rate of .75% of
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

  GMO has agreed to waive a portion of its fee until further notice to the
  extent that the Fund's annual expenses (including the management fee but
     excluding brokerage commissions, certain other transaction costs (including
stamp duties and transfer taxes), shareholder service fees and        
   extraordinary expenses) exceed .54% of average daily net assets. Prior to
  June 1, 1996, a similar waiver existed for fees exceeding .69%; thus the
  net annual expense ratio after the waiver for a Class III shareholder is
unchanged.                                                            

34                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $19,688. No 
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

3.  Purchase and sales of securities                                            

Cost of purchases and proceeds from sales of securities, excluding    
     short-term investments, for the six months ended August 31, 1997 aggregated
$1,716,136,961 and $2,067,610,352, respectively.                      

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                                Gross Unrealized              Gross Unrealized              Net Unrealized        
     Aggregate Cost               Appreciation                  Depreciation                 Appreciation         
-------------------------  ----------------------------  ---------------------------  ----------------------------
                                                                                                                  
     $4,194,867,439               $416,311,147                  $274,515,529                 $141,795,618         


4.   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:                                                         

                                                        [Enlarge/Download Table]

                                                                            Period from September 10, 1996    
                                           Six Months Ended                  (commencement of operations)     
                                            August 31, 1997                       to February 28, 1997        
                              ----------------------------------------  --------------------------------------
 Class I:                           Shares               Amount               Shares               Amount     
                              -------------------  -------------------  -----------------    -----------------
                                                                                                              
Shares sold                              129,487   $        3,080,979              8,196     $        198,184 

Shares issued to                                                                                              
shareholders in reinvestment                                                                                  
of distributions                           4,031              103,121                440               10,653 
Shares repurchased                          (107)              (2,800)               (82)              (2,000)
                              -------------------  -------------------  -----------------    -----------------
Net increase                             133,411   $        3,181,300              8,554     $        206,837 
                              ===================  ===================  =================    =================

                                                                              35

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------
Share transactions - continued                                        

                                                        [Enlarge/Download Table]


                                                                                 Period from September 26,1996       
                                           Six Months Ended                       (commencement of operations)       
                                            August 31, 1997                             to February 28, 1997         
                              --------------------------------------------  -----------------------------------------
 Class II:                          Shares                 Amount                Shares                Amount        
                              -------------------   ----------------------  -----------------    --------------------
                                                                                                                     
Shares sold                              575,487  $            14,134,842            990,710   $          24,358,040 
Shares issued to                                                                                                     
shareholders in reinvestment                                                                                         
of distributions                          40,970                1,048,426             48,104               1,164,111 

Shares repurchased                             -                        -                                            
                                                                                           -                       - 
                              -------------------   ----------------------  -----------------    --------------------
Net increase                             616,457  $            15,183,268          1,038,814   $          25,522,151 
                              ===================   ======================  =================    ====================

                                           Six Months Ended                                Year Ended                
                                            August 31, 1997                            February 28, 1997             
                              --------------------------------------------  -----------------------------------------
 Class III:                         Shares                 Amount                Shares                Amount        
                              -------------------   ----------------------  -----------------    --------------------
                                                                                                                     
Shares sold                           13,419,025  $           342,145,965         26,694,331   $         662,148,445 
Shares issued to                                                                                                     
shareholders in reinvestment                                                                                         
of distributions                       4,282,384              109,671,851         12,151,121             296,116,351 

Shares repurchased                   (27,037,410)            (687,801,741)       (49,513,521)         (1,234,092,828)
                              -------------------   ----------------------  -----------------    --------------------
Net decrease                          (9,336,001)  $         (235,983,925)       (10,668,069)  $        (275,828,032)
                              ===================   ======================  =================    ====================

36                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------
5.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Forward currency contracts                                            

                                                        [Enlarge/Download Table]

                                                                                               Net Unrealized   
  Settlement                                                                                    Appreciation    
     Date             Deliver/Receive         Units of Currency              Value             (Depreciation)   
---------------  --------------------------  ---------------------    --------------------    ------------------
Buys                                                                                                            
                                                                                                                
       9/12/97              ATS                       565,890,380   $          44,685,653   $       (2,988,347) 
      11/07/97              ATS                       395,997,242              31,378,960           (1,252,040) 
      12/05/97              AUD                        51,986,058              38,253,071             (608,319) 
      11/07/97              BEF                     5,623,456,600             151,823,915           (4,851,481) 
       9/12/97              CAD                        24,469,942              17,630,414             (424,586) 
      12/05/97              CAD                        80,368,552              58,184,872             (524,128) 
      11/07/97              CHF                        90,188,819              61,237,822           (2,332,292) 
      11/07/97              ESP                    31,917,593,763             209,987,623           (9,317,610) 
      11/07/97              FIM                       362,155,407              67,101,023           (3,044,996) 
      11/07/97              GBP                         3,667,997               5,930,967             (145,033) 
      12/05/97              HKD                       445,961,992              57,146,041             (335,386) 
       9/12/97              IEP                        20,630,888              30,648,556             (777,444) 
      11/07/97              IEP                        37,215,060              55,233,973              (22,027) 
      11/07/97              ITL                    51,510,023,590              29,187,595             (969,616) 
      12/05/97              JPY                    32,732,008,994             275,688,658          (17,593,505) 
      11/07/97              NLG                       104,327,117              51,689,949           (2,123,051) 
       9/12/97              NOK                       882,361,588             118,387,084           (7,810,916) 
      11/07/97              NOK                       972,040,352             130,773,625           (5,347,048) 
      11/07/97              SEK                     1,052,288,500             134,286,702           (1,855,647) 
                                                                                              ------------------
                                                                                            $      (62,323,472) 
                                                                                              ==================

                                                                              37

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------
Forward currency contracts - continued                              

                                                        [Enlarge/Download Table]

                                                                                               Net Unrealized   
  Settlement                                                                                    Appreciation    
        Date          Deliver/Receive         Units of Currency              Value             (Depreciation)   
---------------  --------------------------  ---------------------    --------------------    ------------------
Sales                                                                                                           
                                                                                                                
       9/12/97              AUD                        95,633,939   $          70,276,271   $         3,899,229 
      12/05/97              AUD                       219,503,547             161,644,409             1,721,128 
      11/07/97              BEF                     2,142,471,090              57,909,580             3,112,097 
      11/07/97              CHF                        91,586,959              62,229,407            (1,070,108)
      11/07/97              ESP                     2,424,145,741              15,960,928               247,712 
      11/07/97              FIM                        19,973,671               3,704,568               150,609 
       9/12/97              GBP                       172,830,742             280,247,040             2,359,960 
      11/07/97              GBP                         9,606,169              15,538,938                96,062 
      10/09/97              HKD                     1,428,954,700             183,838,040               469,987 
      11/07/97              HKD                     1,040,295,141             133,633,871               657,228 
      12/05/97              HKD                       103,937,236              13,330,813                43,299 
      12/12/97              HKD                       913,202,000             117,081,349               535,662 
      12/05/97              JPY                    26,214,923,000             220,919,099            15,093,921 
      11/07/97              NOK                        75,837,000              10,213,050              (213,050)
      11/07/97              SEK                       243,180,870              31,066,311               455,071 
                                                                                              ------------------
                                                                                            $        27,558,807 
                                                                                              ==================

                                                                [Download Table]


Currency Abbreviations                                 
                                                       
 ATS       Austrian Schilling  IEP  Irish Pound        
 AUD       Australian Dollar   ITL  Italian Lira       
 BEF       Belgian Franc       JPY  Japanese Yen       
 CAD       Canadian Dollar     NLG  Netherlands Guilder
 CHF       Swiss Franc         NOK  Norwegian Kroner   
 ESP       Spanish Peseta      SEK  Swedish Krona      
 FIM       Finnish Markka                              
 GBP       British Pound                               
 HKD       Hong Kong Dollar                            

38                                                                              

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------
Futures contracts                                                     

                                                        [Enlarge/Download Table]

                                                                                                Net Unrealized    
   Number of                                                                                     Appreciation     
   Contracts       Type                      Expiration Date           Contract Value           (Depreciation)    
-----------------  ---------------------  ----------------------    ---------------------    ---------------------
Buys                                                                                                              
                                                                                                                  
             671   DAX                       September 1997       $          146,303,086   $           (3,265,243)
           1,352   MIB 30                    September 1997                  163,680,071               11,867,704 
             343   TOPIX                     September 1997                   40,604,539               (2,446,399)
           1,997   TSE 35                    September 1997                  249,184,522               (2,365,481)
                                                                                             ---------------------
                                                                                           $            3,790,581 
                                                                                             =====================

Sales                                                                                                             
                                                                                                                  
           3,867   ALL ORDS                  September 1997       $          182,264,592   $           10,936,827 
             767   FTSE 100 ID               September 1997                  150,017,029                  968,255 
           2,011   HANG SENG                 September 1997                  180,364,563               23,204,634 
             200   IBEX                      September 1997                    8,599,619                  307,600 
             372   MATIF CAC 40              September 1997                   33,989,350                2,108,762 
             660   OMX STOCK                 September 1997                   20,352,441                1,418,514 
                                                                                             ---------------------
                                                                                           $           38,944,592 
                                                                                             =====================

    At August 31, 1997 the Fund has cash and/or securities to cover any margin
requirements on open futures contracts.                                         

                                                                              39

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GMO International Core Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statement (Unaudited) - continued                            
--------------------------------------------------------------------------------
Swap agreement                                                            

                                                        [Enlarge/Download Table]

        Notional            Expiration                                                                  Unrealized      
         Amount                Date                            Description                             Depreciation     
-------------------------  --------------  -----------------------------------------------------   ---------------------
                                                                                                                        
CHF          241,069,567     08/06/98      Agreement with Swiss Bank Corporation dated 8/6/97                           
                                           to receive (pay) the notional amount multiplied by                           
                                           the return on the Swiss Market Index (including                              
                                           dividends) and to pay the notional amount                                    
                                           multiplied by 6 month CHF LIBOR adjusted by a                                
                                           specified spread.                                    $        (16,735,992)   
                                                                                                   =====================


40                                                                              

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Shares       Description                                  Value ($)     
--------------------------------------------------------------------------------
                                                                                
                     STOCK AND EQUIVALENTS - 92.5%                              
                     Automotive - 3.0%                                          
          42,000     Denso Corp                                         907,806 
         146,000     Fuji Heavy Industries Ltd                          644,493 
          41,000     Isuzu Motors Ltd                                   115,887 
          11,700     Mabuchi Motor Co                                   624,441 
         120,000     Mazda Motor Corp *                                 409,012 
          49,000     NGK Spark Plug Co                                  419,569 
         386,000     Nissan Motor Co Ltd                              2,496,533 
          46,000     Suzuki Motor Corp                                  435,947 
          54,000     Yamaha Motor Co                                    489,318 
                                                             -------------------
                                                                      6,543,006 
                                                             -------------------
                     Banking - 6.8%                                             
          16,000     Bandai Co                                          345,831 
          74,000     Bank of Fukuoka Ltd                                339,579 
         249,000     Bank of Tokyo-Mitsubishi                         4,533,295 
         258,000     Dai Ichi Kangyo Bank                             3,002,743 
          63,000     Fuji Bank                                          769,889 
          12,000     Hiroshima Bank Ltd                                  41,699 
          57,000     Hokkaido Bank Ltd                                   65,866 
          25,000     Hokkaido Takushoku Bank Ltd                         25,355 
         108,000     Industrial Bank of Japan                         1,490,398 
         432,000     Nippon Credit Bank                                 739,812 
          91,000     Sakura Bank Ltd                                    537,119 
          47,000     Sanwa Bank Ltd                                     586,084 
          92,000     Sumitomo Bank                                    1,361,377 
          96,000     Toyo Trust & Banking Co Ltd                        782,110 
          17,000     Yamaguchi Bank Ltd                                 238,840 
                                                             -------------------
                                                                     14,859,997 
                                                             -------------------
                     Chemicals - 3.0%                                           
         274,000     Daicel Chemical Industries Ltd                     779,017 
         194,000     Japan Synthetic Rubber Co Ltd                    1,483,748 
          72,000     Kaneka Corp                                        447,718 
          43,000     Kureha Chemical Industry Co Ltd                    143,345 
         215,000     Mitsubishi Gas Chemical Co Inc                     815,030 
          54,000     Nippon Carbon Co Ltd *                             123,452 
          56,000     Nippon Soda Chemical Co Ltd                        479,508 
          39,000     Sekisui Chemical Co Ltd                            330,701 
          34,000     Shin-Etsu Chemical Co Ltd                          870,563 
         451,000     Showa Denko                                        877,330 
          83,000     Tokyo Ink Manufacturing Co Ltd                     253,920 
                                                             -------------------
                                                                      6,604,332 
                                                             -------------------

              See accompanying notes to the financial statements.              1

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


       Shares        Description                              Value ($)        
-------------------------------------------------------------------------------
                                                                               
                     Computers and Office Equipment - 0.4%                     
          58,000     Casio Computer Co                                 506,277 
          48,000     NCR Japan Ltd                                     314,440 
                                                          ---------------------
                                                                       820,717 
                                                          ---------------------
                     Construction - 3.2%                                       
         496,000     Aoki Corp *                                       296,883 
           4,000     Chudenko Corp                                      91,778 
          28,300     Daito Trust Construction Co Ltd                   312,902 
          29,000     Daiwa House Industry Co Ltd                       335,107 
         225,000     Haseko Corp *                                     211,364 
          32,000     Hazama-Gumi Ltd                                    41,500 
          74,000     INAX Corp                                         362,956 
         114,000     Maeda Corp                                        497,548 
         171,000     Mitsui Engineering & Shipbuilding *               281,470 
          43,000     National House Industrial                         561,227 
          91,000     Nichiei Co Ltd                                    149,032 
          80,000     Okumura Corp                                      448,915 
         102,000     Penta Ocean Construction                          248,450 
           3,000     Sankyo Aluminum Industry Co Ltd                     6,235 
         225,000     Sato Kogyo Co Ltd                                 252,515 
          43,000     Sekisui House Ltd                                 407,515 
         149,000     Shokusan Jutaku Sogo Co Ltd *                     143,686 
         117,000     Sumitomo Heavy Industries Ltd                     369,607 
          72,000     Takara Standard Co                                554,261 
          30,000     Takuma Corp                                       364,120 
         143,000     Tokyo Construction Co Ltd                         186,641 
          20,000     Tostem Corp                                       417,325 
          13,000     Toto Ltd                                          137,252 
          23,000     Toyo Exterior Co Ltd                              227,534 
                                                          ---------------------
                                                                     6,905,823 
                                                          ---------------------
                     Consumer Goods - 6.4%                                     
         102,000     Citizen Watch Co                                  787,746 
          55,000     Ezaki Glico Co Ltd                                413,792 
          90,600     Fuji Photo Film Co Ltd                          3,494,754 
          34,000     Hitachi Maxell Ltd                                768,809 
         149,000     Kao Corp                                        2,204,838 
         117,000     Konica Corp                                       675,019 
          67,000     Minolta Co Ltd                                    384,321 
          14,000     Nikon Corp                                        231,607 
          40,500     Nintendo Co Ltd                                 3,346,662 
          66,000     Olympus Optical Co Ltd                            470,762 
          42,000     Victor Co of Japan Ltd                            509,768 


2           See accompanying notes to the financial statements.                 

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Shares       Description                           Value ($)            
--------------------------------------------------------------------------------
                                                                                
                     Consumer Goods - continued                                 
          59,000     Yakult Honsha Co Ltd                  $            578,768 
           2,000     Yamaha Corp                                         30,925 
                                                            --------------------
                                                                     13,897,771 
                                                            --------------------
                     Electric - 5.0%                                            
          31,000     Alps Electric Co Ltd                               368,526 
           1,500     Hirose Electric                                    105,370 
          17,000     Kinden Corp                                        236,013 
          31,000     Kokusai Electric                                   546,346 
         306,000     Matsushita Electric Industrial Co Ltd            5,647,352 
         285,000     Mitsubishi Electric Corp                         1,310,209 
         190,000     Oki Electric Industry                              679,192 
         128,000     Sharp Corp                                       1,287,555 
          77,000     Showa Electric Wire & Cable                        193,956 
          62,000     Stanley Electric Co Ltd                            266,473 
          48,000     Yokogawa Electric Corp                             316,834 
                                                            --------------------
                                                                     10,957,826 
                                                            --------------------
                     Electronics - 4.7%                                         
          14,900     Advantest Corp                                   1,362,541 
          20,000     Brother Industries Ltd                              69,831 
          36,200     Fanuc Co                                         1,390,340 
          70,000     Hosiden Corp *                                     657,578 
          60,000     Japan Aviation Electronics                         423,975 
          33,000     Kyocera Corp                                     2,084,961 
          22,000     Matsushita Kotubuki                                718,763 
          34,000     Nichicon Corp                                      421,149 
          18,000     Pioneer Electronics Corp                           359,132 
          21,000     Tokyo Electron                                   1,143,487 
         293,000     Toshiba Corp                                     1,622,230 
                                                            --------------------
                                                                     10,253,987 
                                                            --------------------
                     Financial Services - 2.3%                                  
         155,000     Daiwa Securities Co Ltd                            979,300 
         304,000     Nikko Securities                                 1,437,992 
          97,000     Nomura Securities Co Ltd                         1,290,215 
           3,700     Orix Corp                                          275,293 
         583,000     Yamaichi Securities Co Ltd                       1,143,802 
                                                            --------------------
                                                                      5,126,602 
                                                            --------------------
                     Food and Beverage - 5.0%                                   
          97,000     Asahi Breweries Ltd                              1,443,428 
           5,000     Denny's Japan Co Ltd                               133,843 
          70,000     House Foods Corp                                 1,187,131 
          37,000     Ito-Yokado                                       1,999,335 

              See accompanying notes to the financial statements.              3

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


         Shares       Description                                  Value ($)   
-------------------------------------------------------------------------------
                                                                               
                      Food and Beverage - continued                            
           90,000     Kikkoman Corp                                     508,771
          157,000     Kirin Brewery Co Ltd                            1,275,160
           57,000     Meiji Seika Kaisha Ltd                            259,199
           47,000     Mercian Corp                                      219,586
           75,000     Nichirei                                          256,256
           66,000     Nippon Meat Packers Inc                           795,577
          149,000     Nippon Suisan Kaisha Ltd *                        334,442
           20,000     Nissin Food Products Co Ltd                       465,542
           49,700     Q.P. Corp                                         413,168
           61,000     Sapporo Breweries Ltd                             434,084
           92,000     Snow Brand Milk Products Co Ltd                   380,115
           39,000     Takara Shuzo Co Ltd                               226,627
           19,000     Toyo Suisan Kaisha                                189,542
           23,000     Yamazaki Baking Co Ltd                            317,400
                                                              -----------------
                                                                     10,839,206
                                                              -----------------
                      Health Care - 3.7%                                       
           91,000     Daiichi Seiyaku Co Ltd                          1,550,835
           46,000     Eisai Co Ltd                                      875,717
            6,000     Hoya Corp                                         254,884
          119,000     Kyowa Hakko Kogyo Co Ltd                          697,440
           31,000     Sankyo Co Ltd                                     943,221
          139,000     Shionogi and Co Ltd                               937,144
          175,000     Shiseido Co Ltd                                 2,865,991
                                                              -----------------
                                                                      8,125,232
                                                              -----------------
                      Leisure - 0.2%                                           
           19,000     Heiwa Corp                                        341,176
           27,000     Tokyotokeiba Co Ltd                                62,848
                                                              -----------------
                                                                        404,024
                                                              -----------------
                      Machinery - 1.7%                                         
            8,000     Aida Engineering Ltd                               44,027
            4,000     Aisin Seiki Co Ltd                                 54,535
          129,000     Amada Co Ltd                                      875,085
          142,000     Kubota Corp                                       573,714
           36,000     Mori Seiki Co Ltd                                 445,922
           35,000     Okuma Corp                                        215,313
           17,000     Rinnai Corp                                       316,568
           47,000     Sanden Corp                                       322,346
          106,000     Toshiba Tungaloy Co Ltd                           400,948
           81,000     Tsubakimoto Chain                                 434,325
                                                              -----------------
                                                                      3,682,783
                                                              -----------------

4             See accompanying notes to the financial statements.               

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


       Shares        Description                                    Value ($)     
----------------------------------------------------------------------------------
                                                                                  
                     Metals and Mining - 2.2%                                     
          45,000     Fujikara Ltd                                         377,837 
          80,000     Hitachi Metals Ltd                                   422,313 
         194,000     Japan Metals & Chemicals *                           325,779 
         110,000     Mitsui Mining & Smelting Co Ltd                      447,169 
         127,000     Nachi Fujikoshi Co                                   292,452 
         123,000     Nippon Sheet Glass Co Ltd                            315,961 
         112,000     Nitto Denko Corp                                   1,945,964 
          63,000     NTN Corp                                             293,291 
          49,000     Tokyo Steel Manufacturing Co                         399,609 
                                                                ----------------- 
                                                                        4,820,375 
                                                                ----------------- 
                     Oil and Gas - 3.8%                                           
         301,000     Cosmo Oil Co Ltd                                     975,892 
          21,000     General Sekiyu (KK)                                  122,205 
         246,000     Mitsubishi Oil Co Ltd *                              858,924 
       1,138,000     Nippon Oil Co Ltd                                  5,099,194 
         119,600     Showa Shell Sekiyu                                   830,210 
          86,000     Teikoku Oil Co Ltd                                   329,587 
                                                                ----------------- 
                                                                        8,216,012 
                                                                ----------------- 
                     Paper and Allied Products - 1.0%                             
          77,000     Hokuetsu Paper Mills                                 395,594 
         129,000     New Oji Paper Co Ltd                                 654,169 
         114,000     Nippon Paper Industries                              661,501 
          49,000     Sumitomo Forestry Co Ltd                             472,525 
                                                                ----------------- 
                                                                        2,183,789 
                                                                ----------------- 
                     Pharmaceuticals - 5.6%                                       
          72,000     Banyu Pharmaceutical Co Ltd                        1,209,078 
         120,000     Chugai Pharmaceutical Co Ltd                       1,007,565 
          48,000     Dainippon Pharmaceutical Co Ltd                      275,335 
         177,000     Fujisawa Pharmaceutical Co Ltd                     1,721,589 
         109,000     Kaken Pharmaceutical Co Ltd                          453,978 
          14,000     Kissei Pharmaceutical Co Ltd                         256,048 
          21,000     Ono Pharmaceutical Co Ltd                            654,668 
          37,000     Taisho Pharmaceutical Co Ltd                         907,391 
          77,000     Takeda Chemical Industries Ltd                     2,054,784 
          90,000     Tanabe Seiyaku Co Ltd                                677,862 
          17,000     Terumo Corp                                          310,915 
          98,000     Yamanouchi Pharmaceutical Co Ltd                   2,346,316 
          62,000     Yoshitomi Pharmaceutical Industries Ltd              404,606 
                                                                ----------------- 
                                                                       12,280,135 
                                                                ----------------- 
                     Primary Processing - 0.0%                                    
          28,000     Nippon Yakin Kogyo Co Ltd *                           39,571 
                                                                ----------------- 

              See accompanying notes to the financial statements.              5

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


      Shares         Description                                      Value ($)     
------------------------------------------------------------------------------------
                                                                                    
                     Real Estate - 0.7%                                             
         137,000     Mitsui Fudosan Co Ltd *                              1,594,480 
           4,000     Tokyo Land Corp *                                       12,736 
                                                                  ----------------- 
                                                                          1,607,216 
                                                                  ----------------- 
                     Retail Trade - 1.3%                                            
          20,000     Aoyama Trading                                         538,698 
          26,000     Best Denki Co Ltd                                      200,582 
           6,200     Familymart                                             260,288 
          35,000     Hankyu Department Stores Inc                           286,599 
          49,000     Joshin Denki Co Ltd                                    349,913 
           1,000     Matsuzakaya Co Ltd                                       5,902 
          46,000     Nichii Co Ltd                                          523,901 
          72,000     Sanrio Co Ltd *                                        544,684 
          17,000     Takashimaya Co                                         189,376 
                                                                  ----------------- 
                                                                          2,899,943 
                                                                  ----------------- 
                     Services - 6.5%                                                
          57,000     Canon Sales Co Inc                                   1,156,206 
          68,100     CSK Corp                                             2,315,479 
         101,000     Dainippon Printing Co Ltd                            2,115,887 
          47,000     Hanwa Co Ltd *                                          81,270 
         122,000     Kamigumi Co Ltd                                        562,890 
          30,000     Kokusai Kogyo Co Ltd                                   178,319 
          26,000     Kokuyo Co Ltd                                          620,334 
          13,000     Kyodo Printing Co Ltd                                   92,942 
         348,000     Nissho Iwai Corp                                     1,310,533 
           7,000     Okamoto Industries Inc                                  22,113 
          16,000     Secom Co Ltd                                         1,139,912 
           6,100     Sega Enterprises                                       174,445 
          18,000     Seiko Corp                                             123,452 
         386,000     Sumitomo Corp                                        3,208,912 
          42,000     Sumitomo Warehouse Co Ltd                              204,955 
          66,000     Toppan Printing Co Ltd                                 949,206 
                                                                  ----------------- 
                                                                         14,256,855 
                                                                  ----------------- 
                     Technology - 8.1%                                              
          93,000     Dainippon Screen Manufacturing Co Ltd                  873,639 
         456,000     Fujitsu Ltd                                          5,458,808 
         439,000     Hitachi Ltd                                          4,050,960 
          32,000     Makita Corp                                            438,939 
          12,300     Murata Manufacturing Co Ltd                            502,062 
         300,000     NEC Corp                                             3,366,863 
          80,000     Omron Corp                                           1,489,733 
           2,000     Rohm Co Ltd                                            207,831 

6             See accompanying notes to the financial statements.               

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


        Shares        Description                                       Value ($)      
---------------------------------------------------------------------------------------
                                                                                       
                      Technology - continued                                           
           52,000     Taiyo Yuden Co Ltd                           $           609,527 
            7,900     TDK Corp                                                 608,147 
                                                                    ------------------ 
                                                                            17,606,509 
                                                                    ------------------ 
                      Telecommunications - 1.3%                                        
           95,000     Gakken Co Ltd *                                          405,936 
           25,000     Japan Radio Co                                           224,458 
           28,000     Matsushita Communications                                914,789 
            1,400     Nippon Television Network                                492,310 
           69,000     Nitsuko Corp                                             358,509 
           23,000     Tokyo Broadcasting System Inc                            388,145 
                                                                    ------------------ 
                                                                             2,784,147 
                                                                    ------------------ 
                      Textiles - 1.6%                                                  
          140,000     Kurabo Industries Ltd                                    296,783 
          123,000     Nisshinbo Industries Inc                                 797,573 
           44,000     Onward Kashiyama Co Ltd                                  676,698 
          323,000     Renown Inc *                                             555,832 
           91,000     Toyobo Co Ltd                                            180,048 
           95,000     Wacoal Corp                                            1,097,764 
                                                                    ------------------ 
                                                                             3,604,698 
                                                                    ------------------ 
                      Tobacco - 1.6%                                                   
              431     Japan Tobacco Inc                                      3,471,934 
                                                                    ------------------ 
                      Transportation - 3.8%                                            
              291     East Japan Railway Co                                  1,330,535 
           27,000     Fujita Kanko Inc                                         287,306 
           54,000     Fukuyama Transporting Co Ltd                             269,349 
          114,000     Hankyu Corp                                              566,730 
           19,000     Japan Airport Terminal Co Ltd                            200,599 
          238,000     Kawasaki Kisen *                                         362,075 
           44,000     Keihin Electric Express Railway Co Ltd                   182,160 
          162,000     Kinki Nippon Railway Co Ltd                              914,440 
           57,000     Nagoya Railroad Co Ltd                                   210,865 
           39,000     Nankai Electric Railway Co Ltd                           188,046 
           57,000     Nippon Express Co Ltd                                    376,241 
           62,000     Odakyu Electric Railway Co Ltd                           313,891 
           52,000     Royal Co Ltd                                             890,515 
           58,000     Sagami Railway Co Ltd                                    185,635 
           37,000     Seino Transportation Co Ltd                              369,108 
          112,000     Showa Line Ltd *                                          81,935 
           39,000     Skylark Co Ltd                                           541,442 
           54,000     Toei Co Ltd                                              287,755 
           67,000     Yamato Transport Co Ltd                                  807,632 
                                                                    ------------------ 
                                                                             8,366,259 
                                                                    ------------------ 

              See accompanying notes to the financial statements.              7

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


           Shares/                                                                                                  
          Par Value         Description                                                               Value ($)     
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
                            Utilities - 9.6%                                                                        
                 39,800     Chubu Electric Power Co Inc                                                     668,352 
                 32,300     Chugoku Electric Power Co Inc                                                   523,610 
                 38,600     Hokkaido Electric Power                                                         648,200 
                 64,300     Kansai Electric Power                                                         1,202,718 
                  8,000     Kokusai Denshin Denwa                                                           511,431 
                 73,300     Kyushu Electric Power Co Inc                                                  1,194,347 
                  1,511     Nippon Telegraph & Telephone                                                 14,194,280 
                 62,600     Shikoku Electric Power                                                        1,014,798 
                 62,400     Tohoku Electric Power Co Inc                                                  1,016,743 
                  3,000     Tokyo Electric Power                                                             57,361 
                                                                                                    --------------- 
                                                                                                         21,031,840 
                                                                                                    --------------- 

                            TOTAL STOCK AND EQUIVALENTS (Cost $218,914,327)                             202,190,589 
                                                                                                    --------------- 
                            SHORT-TERM INVESTMENTS - 13.2%                                                          
                            Cash Equivalents - 10.5%                                                                
$               600,000     First National Bank of Chicago Time Deposit, 5.44% due 9/2/97                   600,000 
             22,340,559     The Boston Global Investment Trust (b)                                       22,340,559 
                                                                                                    --------------- 
                                                                                                         22,940,559 
                                                                                                    --------------- 
                            U.S. Government - 2.7%                                                                  
$             6,000,000     U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                      5,890,347 
                                                                                                    --------------- 

                            TOTAL SHORT-TERM INVESTMENTS (Cost $28,828,709)                              28,830,906 
                                                                                                    --------------- 
                            TOTAL INVESTMENTS - 105.7%                                                              
                            (Cost $247,743,036)                                                         231,021,495 

                            Other Assets and Liabilities (net) -  -5.7%                                 (12,550,429)
                                                                                                    --------------- 

                            TOTAL NET ASSETS - 100.0%                                              $    218,471,066 
                                                                                                    =============== 

     Notes to the Schedule of Investments:

                (a) This security is held as collateral for open
futures contracts.      

             (b) Represents investment of security lending
collateral (Note 1).    

                 *   Non-income producing security. A dividend has
                     not been declared for the twelve months ended
August 31, 1997.        

8             See accompanying notes to the financial statements.               

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

                                                                [Download Table]


Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
--------------------------------------------------------------------------------
                                                                                
Assets:                                                                         
  Investments, at value (cost $247,743,036) (Note 1)           $    231,021,495 
  Foreign currency, at value (cost $9,615,424) (Note 1)               9,433,027 
  Cash                                                                  115,325 
  Receivable for investments sold                                       974,847 
  Receivable for Fund shares sold                                       369,449 
  Dividends and interest receivable                                      49,550 
  Receivable for expenses waived or borne by Manager (Note 2)            67,924 
                                                                ----------------

          Total assets                                              242,031,617 
                                                                ----------------
Liabilities:                                                                    
  Payable upon return of securities loaned (Note 1)                  22,340,559 
  Payable for Fund shares repurchased                                   292,158 
  Payable for variation margin on open futures                                  
     contracts (Notes 1 and 6)                                          652,023 
  Payable to affiliate for (Note 2):                                            
     Management fee                                                     148,552 
     Shareholder service fee                                             29,784 
  Accrued expenses                                                       97,475 
                                                                ----------------

     Total liabilities                                               23,560,551 
                                                                ----------------
Net assets                                                     $    218,471,066 
                                                                ================

Net assets consist of:                                                          
  Paid-in capital                                              $    252,324,705 
  Distributions in excess of net investment income                     (331,805)
  Accumulated net realized loss                                     (15,942,935)
  Net unrealized depreciation                                       (17,578,899)
                                                                ----------------

                                                               $    218,471,066 
                                                                ================

Net assets attributable to Class III Shares                    $    218,471,066 
                                                                ================

Shares outstanding - Class III                                       29,301,811 
                                                                ================

Net asset value per share - Class III                          $           7.46 
                                                                ================

                 See accompanying notes to the financial statements.           9

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Investment income:                                                                       
                                                                                         
     Dividends (net of foreign tax expense of $125,606)                 $        827,057 
     Interest (including securities lending income of $69,541)                   241,904 
                                                                          ---------------
         Total income                                                          1,068,961 
                                                                          ---------------
Expenses:                                                                                
     Management fee (Note 2)                                                     902,308 
     Custodian fees                                                              105,064 
     Audit fees                                                                   31,004 
     Transfer agent fees                                                          15,456 
     Stamp duties and transfer taxes                                               6,256 
     Legal fees                                                                    4,968 
     Trustees fee (Note 2)                                                         1,012 
     Miscellaneous                                                                   920 
     Fees waived or borne by Manager (Note 2)                                   (411,070)
                                                                          ---------------
                                                                                 655,918 
     Shareholder service fee - Class III (Note 2)                                180,468 
                                                                          ---------------
         Net expenses                                                            836,386 
                                                                          ---------------
            Net investment income                                                232,575 
                                                                          ---------------
Realized and unrealized gain (loss):                                                     
         Net realized gain (loss) on:                                                    
            Investments                                                      (16,950,926)
            Closed futures contracts                                           1,670,235 
            Foreign currency and foreign currency related                                
                  transactions                                                  (558,358)
                                                                          ---------------
                Net realized loss                                            (15,839,049)
                                                                          ---------------
         Change in net unrealized appreciation (depreciation) on:                        
            Investments                                                       30,462,095 
            Open futures contracts                                              (205,480)
            Foreign currency and foreign currency related transactions           425,513 
                                                                          ---------------
                Net unrealized gain                                           30,682,128 
                                                                          ---------------
         Net realized and unrealized gain                                     14,843,079 
                                                                          ---------------
Net increase in net assets resulting from operations                    $     15,075,654 
                                                                          ===============

10              See accompanying notes to the financial statements.             

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

                                                                           Six Months Ended                             
                                                                             August 31, 1997            Year Ended      
                                                                             (Unaudited)            February 28, 1997   
                                                                        -----------------------    ---------------------
                                                                                                                        
Increase (decrease) in net assets:                                                                                      
Operations:                                                                                                             
     Net investment income                                            $                232,575   $               23,994 
     Net realized loss                                                             (15,839,049)              (1,918,375)
     Change in net unrealized appreciation (depreciation)                           30,682,128              (46,708,941)
                                                                        ----------------------     -------------------- 

     Net increase (decrease) in net assets resulting from operations                15,075,654              (48,603,322)
                                                                        ----------------------     -------------------- 

Distributions to shareholders from:                                                                                     
     In excess of net investment income - Class III                                   -                         (36,409)
                                                                        ----------------------     -------------------- 

Net share transactions - Class III (Note 5)                                        (15,401,512)             141,329,696 
                                                                        ----------------------     -------------------- 

     Total increase (decrease) in net assets                                          (325,858)              92,689,965 

Net assets:                                                                                                             
     Beginning of period                                                           218,796,924              126,106,959 
                                                                        ----------------------     -------------------- 

     End of period (including distributions in excess of                                                                
         net investment income of $331,805 and                                                                          
         $564,380, respectively)                                      $            218,471,066   $          218,796,924 
                                                                        ======================    ===================== 

              See accompanying notes to the financial statements.             11

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                          Six Months Ended                                                
                                                          August 31, 1997             Year Ended February 28/29,          
                                                                                 -------------------------------------    
                                                           (Unaudited)                1997                   1996         
                                                          --------------         ----------------         ------------    
                                                                                                                          
Net asset value, beginning of period                    $           7.02     $               8.52     $           9.12    
                                                          --------------         ----------------         ------------    

Income (loss) from investment operations:                                                                                 
  Net investment income (loss)                                      0.01                        - (d)            (0.01)(d)
  Net realized and unrealized gain (loss)                           0.43                    (1.50)                0.79    
                                                          --------------         ----------------         ------------    

    Total from investment operations                                0.44                    (1.50)                0.78    
                                                          --------------         ----------------         ------------    

Less distributions to shareholders:                                                                                       
  From net investment income                                           -                        -                    -    
  In excess of net investment income                                   -                    (0.00)                   -    
  From net realized gains                                              -                        -                (1.38)   
                                                          --------------         ----------------         ------------    

    Total distributions                                                -                    (0.00)               (1.38)   
                                                          --------------         ----------------         ------------    

Net asset value, end of period                          $           7.46     $               7.02     $           8.52    
                                                          ==============         ================         ============    

Total Return (a)                                                    6.27%                  (17.69%)               8.29%   

Ratios/Supplemental Data:                                                                                                 

   Net assets, end of period (000's)                    $        218,471      $           218,797      $       126,107    
   Net expenses to average                                                                                                
          daily net assets                                          0.69%*                   0.70%(e)             0.92%   
   Net investment income (loss) to average                                                                                
          daily net assets                                          0.19%*                   0.01%               (0.13%)  
   Portfolio turnover rate                                            80%                       4%                  23%   
   Average broker commission rate per equity share (b)  $         0.0074      $            0.0066                  N/A    
   Fees and expenses voluntarily waived or borne by                                                                       
          the Manager consisted of the following per                                                                      
          share amounts:                                $           0.02      $              0.03      $          0.01    


                                                                       Year Ended February 28/29,                         
                                                         -------------------------------------------------------          
                                                              1995                 1994                 1993              
                                                         -------------         ------------         ------------          
                                                                                                                          
Net asset value, beginning of period                    $        11.13       $         7.37       $         7.73          
                                                          ------------         ------------         ------------          

Income (loss) from investment operations:                                                                                 
  Net investment income (loss)                                       -  (d)               -                 0.01          
  Net realized and unrealized gain (loss)                        (1.08)                3.94                (0.36)         
                                                          ------------         ------------         ------------          

    Total from investment operations                             (1.08)                3.94                (0.35)         
                                                          ------------         ------------         ------------          

Less distributions to shareholders:                                                                                       
  From net investment income                                         -                    -                (0.01)         
  In excess of net investment income                                 -                (0.01)                   -          
  From net realized gains                                        (0.93)               (0.17)                   -          
                                                          ------------         ------------         ------------          

    Total distributions                                          (0.93)               (0.18)               (0.01)         
                                                          ------------         ------------         ------------          

Net asset value, end of period                          $         9.12       $        11.13       $         7.37          
                                                          ============         ============         ============          

Total Return (a)                                                (10.62%)              53.95%               (4.49%)        

Ratios/Supplemental Data:                                                                                                 

   Net assets, end of period (000's)                    $       60,123       $      450,351       $      306,423          
   Net expenses to average                                                                                                
          daily net assets                                        0.83%                0.87%                0.88%         
   Net investment income (loss) to average                                                                                
          daily net assets                                       (0.02%)              (0.01%)               0.12%         
   Portfolio turnover rate                                          60%                   8%                  17%         
   Average broker commission rate per equity share (b)              N/A                  N/A                  N/A         
   Fees and expenses voluntarily waived or borne by                                                                       
          the Manager consisted of the following per                                                                      
          share amounts:                                                (c)  $         0.01       $         0.01          

*    Annualized                                                                 
(a)  Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
(b)  For fiscal years beginning on or after September 1, 1995, a fund is        
 required to disclose its average commission rate per share for security
trades on which commissions are charged.                              
(c)  Fees and expenses waived or borne by the Manager were less than $.01 per   
share.                                                                
(d)  Based on average month end shares outstanding.                             
(e)  Includes stamp duties and transfer taxes not waived or borne by the        
Manager, which approximates .01% of average daily net assets.         

12            See accompanying notes to the financial statements.               

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 

--------------------------------------------------------------------------------

1. Significant accounting policies                                              

  GMO Japan 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 into classes.                                                    

The Fund seeks maximum total return through investment in Japanese        
securities, primarily in common stocks of Japanese companies.             

On June 1, 1996, the Fund began to offer three classes of shares: Class I,
 Class II and Class III. The principal economic difference among the classes
of shares is the level of shareholder service fee borne by the classes.   
Eligibility for and automatic conversion between the various classes of   
   shares is generally based on the total amount of assets invested with GMO, as
more fully described in the Trust's prospectus. Class III shares are the  
continuation of the Trust's shares that existed prior to June 1, 1996, and
 bear the same total operating expenses (after the voluntary expense waiver)
 as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                       

The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are    
consistently followed by the Fund in the preparation of its financial     
statements. The preparation of financial statements in accordance with    
generally accepted accounting principles requires management to make      
   estimates and assumptions that affect the reported amounts and disclosures in
 the financial statements. Actual results could differ from those estimates.

Portfolio valuation                                                       

Portfolio securities listed on a securities exchange for which market     
quotations are available are valued at the last quoted 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. Securities which
are primarily traded on foreign exchanges are generally valued at the     
preceding closing values of such securities on their respective exchanges.
Those values are then translated into U.S. dollars at the current exchange
  rate. Short-term investments with a remaining maturity of sixty days or less
are valued at amortized cost which approximates market value. Other assets
and securities for which no quotations are readily available are valued at
fair value as determined in good faith by the Trustees.                   

                                                                              13

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------
Foreign currency translation                                                

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

Futures contracts                                                           

The Fund may purchase and sell Japanese futures contracts.  Japanese futures
contracts represent commitments for future delivery of cash based upon the  
level of a specified index of equity securities at a specified price at a   
 given date.  The Fund may use futures contracts to manage its exposure to the
stock and currency markets.  Buying futures tends to increase the Fund's    
 exposure to the underlying instrument.  Selling futures tends to decrease the
  Fund's exposure to the underlying instruments or hedge other Fund instruments.
 Upon purchase of a futures contract, the Fund is required to deposit with its
custodian, in a segregated account in the name of the futures broker, an    
amount of cash or U.S. government obligations in accordance with the initial
margin requirements of the broker or exchange.  Futures contracts are marked
 to market daily and an appropriate payable or receivable for the accumulation
  in commitment value ("variation margin") is recorded by the Fund.  The payable
  or receivable is subsequently settled.  Gains or losses are recognized but not
considered realized until the contracts expire or are closed.  Futures      
  contracts involve, to varying degrees, risk of loss in excess of the variation
  margin disclosed in the Statement of Assets and Liabilities.  Losses may arise
from changes in the value of the underlying instrument, if there is an      
illiquid secondary market for the contracts, or if counterparties do not    
perform under the contract terms.  Futures contracts are valued at the      
settlement price established each day by the board of trade or exchange on  
which they are traded.  See Note 6 for all open futures contracts held as of
August 31, 1997.                                                            

Security lending                                                            

 The Fund may lend its securities to certain 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 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
August 31, 1997, the Fund loaned securities having a market value of        
$21,108,748 collateralized by cash in the amount of $22,340,559, which was  
invested in a short-term instrument.                                        

14                                                                              

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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 taxable 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 federal income tax      
purposes.  Therefore, no provision for federal income or excise tax is      
necessary.  Taxes on foreign interest and dividend income have been withheld
  in accordance with the applicable country's tax treaty with the United States.
 Dividends received by shareholders of the Fund which are derived from foreign
source income and foreign taxes paid by the Fund are to be treated, to the  
extent allowable under the Code, as if received and paid by the shareholders
of the Fund.                                                                

Distributions to shareholders                                               
The Fund's present policy is to declare and pay distributions from net      
  investment income, if any, semi-annually, and from net realized short-term and
  long-term capital gains, if any, 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.  The Fund declares separate dividends from net
investment income on each class of shares.                                  

Income distributions and capital gain distributions are determined in       
accordance with income tax regulations which may differ from generally      
 accepted accounting principles. 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 is  
recorded on the ex-dividend date, or when the Fund is informed of the ex-   
  dividend date, if later.  Interest income is recorded on the accrual basis and
is adjusted for accretion of discounts.  In determining the net gain or loss
on securities sold, the cost of securities is determined on the identified  
cost basis.                                                                 

Allocation of operating activity                                            
The majority of expenses of the Trust are directly identifiable to an       
individual Fund.  Expenses which are not readily identifiable to a specific 
 Fund are allocated in such manner as deemed equitable by the Trustees, taking
  into consideration, among other things, the nature and type of expense and the
relative size of the Funds.  Investment income, common expenses and realized
  and unrealized gains and losses are allocated pro-rata among the classes based
on the net assets of each class.   Shareholder service fees, which are      
directly attributable to a class of shares, are charged to that class'      
operations.                                                                 

                                                                              15

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------
Purchases and redemptions of Fund shares                                  

  The premium on cash purchases of Fund shares is .40% of the amount invested.
In the case of cash redemptions, the fee is .61% of the amount redeemed.  
Prior to June 1, 1996, the redemption fee was .70% of the amount redeemed.
The Manager may waive such premium or fee to the extent that a transaction
  results in minimal brokerage and transaction costs to the Fund. All purchase
 premiums and redemption fees are paid to and recorded as paid-in capital by
  the Fund. For the six months ended August 31, 1997 the Fund received $67,293
in purchase premiums and no redemption fees. There is no premium for      
reinvested distributions.                                                 

Investment risk                                                           

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

2. Fees and other transactions with affiliates                                  

   GMO earns a management fee paid monthly at the annual rate of .75% of average
daily net assets. Effective June 1, 1996, the Fund adopted a Shareholder  
Services Plan under which the Fund pays GMO a shareholder service fee for 
  client and shareholder service, reporting and other support. Pursuant to the
   Shareholder Services Plan, the shareholder service fee is calculated based on
the average daily net assets of each class at the annual rate of .28% for 
Class I shares, .22% for Class II shares and .15% for Class III shares.   

GMO has agreed to waive a portion of its fee and bear other expenses until
further notice to the extent that the Fund's annual expenses (including   
   management fee but excluding brokerage commissions, certain other transaction
 costs (including stamp duties and transfer taxes), shareholder service fees
   and extraordinary expenses) exceed .54% of average daily net assets. Prior to
June 1, 1996, a similar waiver existed for annual expenses exceeding .69%;
thus, the net annual expense ratio after the waiver for a Class III       
  shareholder is unchanged. Additionally, effective March 14, 1996, the waiver
was adjusted to include custodian fees.                                   

  The Fund's portion of the fee paid by the Trust to the unaffiliated Trustees
 during the six months ended August 31, 1997, was $1,012. No remuneration is
paid to any Trustee or officer who is affiliated with the Manager.        

16                                                                              

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

3. Purchases and sales of securities                                            

   Cost of purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended August 31, 1997, aggregated         
$163,604,276 and $168,540,696, respectively.                              

At August 31, 1997, the cost for Federal income tax purposes and gross    
  unrealized appreciation and depreciation in value of investments held was as
follows:                                                                  

                                                                [Download Table]

                    Gross Unrealized    Gross Unrealized    Net Unrealized
  Aggregate Cost      Appreciation        Depreciation       Depreciation 
--------------------------------------------------------------------------
                                                                          
    $247,743,036          $7,866,513         $24,588,054       $16,721,541

4. Principal shareholders                                                       

At August 31, 1997, 26% of the outstanding shares of the Fund were held by
two shareholders, each holding in excess of 10% of the Fund's outstanding 
shares.                                                                   

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:                                                   

                                                        [Enlarge/Download Table]

Class III:                   Six Months Ended                      Year Ended            
                             August 31, 1997                    February 28, 1997        
                     --------------------------------  --------------------------------- 
                         Shares           Amount          Shares              Amount     
                     ------------    ----------------  --------------     -------------- 
                                                                                         
  Shares sold           3,585,003      $  28,036,213       22,172,884     $  188,630,734 
  Shares issued to                                                                       
   shareholders in                                                                       
   reinvestment of                                                                       
   distributions                -                  -            3,661             28,076 

  Shares repurchased   (5,462,917)       (43,437,725)      (5,789,470)       (47,329,114)
                      -----------      -------------   --------------     -------------- 
  Net increase /                                                                         
   (decrease)          (1,877,914)     $ (15,401,512)      16,387,075     $  141,329,696 
                      ===========      =============   ==============     ============== 

                                                                              17

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GMO Japan Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------
6. Financial instruments                                                        

   A summary of outstanding futures contracts purchased at August 31, 1997 is as
follows:                                                                  

                                                                [Download Table]

                                                                  Net      
Number of                                    Contract          Unrealized  
Contracts     Type     Expiration Date         Value          Depreciation 
---------   --------   ---------------   ---------------   ----------------
                                                                           
   76        TOPIX     September 1997    $     8,996,924   $        652,023
                                                           ================

 At August 31, 1997, the Fund had cash and/or securities to cover any margin
requirements on open futures contracts.                                   

18                                                                              

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares                                                                                          
       Par Value      Description                                                            Value ($)   
---------------------------------------------------------------------------------------------------------
                                                                                                         
                      MUTUAL FUNDS - 85.8%                                                               
                      United States - 85.8%                                                              
          3,165,732   GMO Core Fund (Class III shares)                                         61,098,623
            937,407   GMO Emerging Markets Fund (Class III shares)                             12,195,666
            984,000   GMO Evolving Countries Fund *                                             9,840,000
          2,504,696   GMO International Core Fund (Class III shares)                           61,239,812
            325,272   GMO International Small Companies Fund (Class III shares)                 4,553,804
            664,723   GMO REIT Fund (Class III shares)                                          8,880,703
            727,927   GMO Small Cap Growth Fund (Class III shares)                              9,099,081
            492,552   GMO Small Cap Value Fund (Class III shares)                               8,989,065
                                                                                         ----------------
                                                                                              175,896,754
                                                                                         ----------------
                      TOTAL MUTUAL FUNDS (Cost $179,478,318)                                  175,896,754
                                                                                         ----------------

                      STOCK AND EQUIVALENTS - 0.2%                                                       
                      France - 0.0%                                                                      
              1,000   FINEXTEL                                                                     16,915
                                                                                         ----------------

                      Hong Kong - 0.0%                                                                   
             11,700   Johnson Electric Holdings Ltd                                                26,272
                                                                                         ----------------

                      Malaysia - 0.0%                                                                    
              9,000   Malaysian Resources Corp                                                      7,254
                                                                                         ----------------

                      Sweden - 0.0%                                                                      
              2,839   Hufvudstaden International *                                                  2,748
                                                                                         ----------------

                      United Kingdom - 0.0%                                                              
              7,847   Betacomm Plc *                                                                5,727
              8,000   Costain Group (b) *                                                           5,838
             17,870   Viglen Technology *                                                          18,838
                                                                                         ----------------
                                                                                                   30,403
                                                                                         ----------------
                      United States - 0.2%                                                               
                953   Archer Daniels Midland                                                       20,659
              3,379   Bell Atlantic Corp                                                          244,555
                 97   Houston Industries Inc                                                        1,964
                700   Oracle Systems Corp *                                                        26,688
              1,300   Pennzoil Co                                                                 100,344
                                                                                         ----------------
                                                                                                  394,210
                                                                                         ----------------
                      TOTAL STOCK AND EQUIVALENTS (Cost $427,270)                                 477,802
                                                                                         ----------------

                      DEBT OBLIGATIONS - 4.9%                                                            
                      United Kingdom - 0.0%                                                              
GBP          29,128   Viglen Technology Floating Rate Note, 6.75% due 9/1/2000 (b)                 55,176
                                                                                         ----------------

                      U.S. Government - 2.4%                                                             
   $      5,000,000   U.S. Treasury Note, 5.50% due 11/15/98 (a)                                4,981,250
                                                                                         ----------------

                      U.S. Government Agency - 2.5%                                                      
   $      5,000,000   Student Loan Marketing Association, 6.05% due 10/26/09                    5,016,406
                                                                                         ----------------

                      TOTAL DEBT OBLIGATIONS (Cost $10,028,786)                                10,052,832
                                                                                         ----------------

              See accompanying notes to the financial statements.              1

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


       Par Value           Description                                                                Value ($)     
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
                           SHORT-TERM INVESTMENTS - 13.4%                                                           
                           Cash Equivalents - 10.3%                                                                 
      $       21,200,000   First National Bank of Chicago Time Deposit, 5.44% due 9/2/97                 21,200,000 
                                                                                                    --------------- 

                           U.S. Government - 3.1%                                                                   
      $        6,450,000   U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                       6,332,123 
                                                                                                    --------------- 

                           TOTAL SHORT-TERM INVESTMENTS (Cost $27,528,446)                               27,532,123 
                                                                                                    --------------- 

         Principal Amount                                                                                           
        (000's omitted)    CALL OPTION PURCHASED - 1.0%                                                             
                           United States - 1.0%                                                                     
      $          250,000   U.S. Treasury Bond 7.50%, Expires 10/7/99, Strike 102 (cost $2,656,250)        2,025,000 
                                                                                                    --------------- 

                           TOTAL INVESTMENTS - 105.3%                                                               
                           (Cost $220,119,070)                                                          215,984,511 

                           Other Assets and Liabilities (net) -  (5.3%)                                 (10,846,640)
                                                                                                    --------------- 

                           TOTAL NET ASSETS - 100.0%                                               $    205,137,871 
                                                                                                    =============== 

                           Notes to the Schedule of Investments:                                                    

                           GBP - British Pound                                                                      

                           (a) This security is held as collateral for open                                         
                               futures contracts.                                                                   

                           (b) Valued by management (Note 1).                                                       

                           *   Non-income producing security.  A dividend has not been declared for the twelve      
                               months ended August 31, 1997.                                                        

2             See accompanying notes to the financial statements.               

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                              
Assets:                                                                                       
     Investments, at value (cost $220,119,070) (Note 1)                      $    215,984,511 
     Foreign currency, at value (cost $362,501) (Note 1)                              355,878 
     Cash                                                                              20,375 
     Receivable for investments sold                                                1,552,882 
     Dividends and interest receivable                                                606,741 
     Receivable for open forward foreign currency contracts (Notes 1 and 6)         5,021,357 
     Foreign withholding taxes receivable                                             169,475 
     Receivable for expenses waived or borne by Manager (Note 2)                       63,231 
                                                                              --------------- 

         Total assets                                                             223,774,450 
                                                                              --------------- 

Liabilities:                                                                                  
     Payable for open swap contracts (Notes 1 and 6)                                   76,342 
     Payable for closed swap contracts (Note 1)                                     1,250,455 
     Payable for variation margin on open futures contracts (Notes 1 and 6)           209,787 
     Payable for investments purchased                                             10,592,022 
     Payable for Fund shares repurchased                                              895,143 
     Payable for open forward foreign currency contracts (Notes 1 and 6)            5,129,238 
     Payable to affiliate for (Note 2):                                                       
         Management fee                                                               129,028 
         Shareholder service fee                                                       22,152 
     Accrued expenses                                                                 332,412 
                                                                              --------------- 

         Total liabilities                                                         18,636,579 
                                                                              --------------- 

Net assets                                                                   $    205,137,871 
                                                                              =============== 

Net assets consist of:                                                                        
     Paid-in capital                                                         $    188,085,157 
     Accumulated undistributed net investment income                                2,838,201 
     Accumulated net realized gain                                                 20,574,089 
     Net unrealized depreciation                                                   (6,359,576)
                                                                              --------------- 

                                                                             $    205,137,871 
                                                                              =============== 

Net assets attributable to Class III Shares                                  $    205,137,871 
                                                                              =============== 

Shares outstanding - Class III                                                     19,156,768 
                                                                              =============== 

Net asset value per share - Class III                                        $          10.71 
                                                                              =============== 

              See accompanying notes to the financial statements.              3

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]
                                                                                               
Investment income:                                                                             
     Dividends (net of foreign tax expense of $275,699)                        $     3,273,742 
     Interest (including security lending income of $27,884)                         1,738,698 
                                                                                -------------- 
         Total income                                                                5,012,440 
                                                                                -------------- 
Expenses:                                                                                      
     Management fee (Note 2)                                                           893,937 
     Custodian fees                                                                    356,132 
     Audit fees                                                                         35,144 
     Stamp duties and transfer taxes                                                    27,324 
     Transfer agent fees                                                                14,444 
     Legal fees                                                                          6,900 
     Trustees fee (Note 2)                                                               1,380 
     Miscellaneous                                                                       1,196 
     Fees waived or borne by Manager (Note 2)                                         (288,840)
                                                                                -------------- 
                                                                                     1,047,617 
     Shareholder service fee - Class III (Note 2)                                      198,682 
                                                                                -------------- 

         Net expenses                                                                1,246,299 
                                                                                -------------- 

             Net investment income                                                   3,766,141 
                                                                                -------------- 

Realized and unrealized gain (loss):                                                           
         Net realized gain (loss) on:                                                          
             Investments                                                            40,851,946 
             Closed futures contracts                                              (17,405,082)
             Closed swap contracts                                                  (7,328,568)
             Foreign currency, forward contracts and foreign currency related                  
                 transactions                                                       (1,495,521)
                                                                                -------------- 
                    Net realized gain                                               14,622,775 
                                                                                -------------- 

         Change in net unrealized appreciation (depreciation) on:                              
             Investments                                                           (22,484,694)
             Open futures contracts                                                  1,115,634 
             Open swap contracts                                                     4,277,548 
             Foreign currency, forward contracts and foreign currency related                  
                 transactions                                                          443,066 
                                                                                -------------- 
                    Net unrealized loss                                            (16,648,446)
                                                                                -------------- 
         Net realized and unrealized loss                                           (2,025,671)
                                                                                -------------- 

Net increase in net assets resulting from operations                           $     1,740,470 
                                                                                ============== 

4             See accompanying notes to the financial statements.               

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                                          Six Months Ended                          
                                                                            August 31, 1997         Year Ended      
                                                                             (Unaudited)         February 28, 1997  
                                                                          -------------------   --------------------
                                                                                                                    
Increase (decrease) in net assets:                                                                                  
Operations:                                                                                                         
     Net investment income                                               $         3,766,141   $          6,639,580 
     Net realized gain                                                            14,622,775             21,603,070 
     Change in net unrealized appreciation (depreciation)                        (16,648,446)           (21,597,390)
                                                                          ------------------    ------------------- 

     Net increase in net assets resulting from operations                          1,740,470              6,645,260 
                                                                          ------------------    ------------------- 

Distributions to shareholders from:                                                                                 
     Net investment income - Class III                                                 -                 (5,664,462)
                                                                          ------------------    ------------------- 

     Net realized gains - Class III                                               (1,922,297)                -      
                                                                          ------------------    ------------------- 

                                                                                  (1,922,297)            (5,664,462)
                                                                          ------------------    ------------------- 

Net share transactions - Class III (Note 5)                                      (91,382,254)           (87,212,602)
                                                                          ------------------    ------------------- 

     Total decrease in net assets                                                (91,564,081)           (86,231,804)

Net assets:                                                                                                         
     Beginning of period                                                         296,701,952            382,933,756 
                                                                          ------------------    ------------------- 

     End of period (accumulated undistributed net investment income of                                              
     $2,838,201 and distributions in excess of net investment income of                                             
     $927,940, respectively)                                             $       205,137,871   $        296,701,952 
                                                                          ==================    =================== 


              See accompanying notes to the financial statements.              5

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------------------------------------------------   

                                                         Six Months Ended              Year Ended February 28/29,                  
                                                          August 31, 1997      --------------------------------------------------  
                                                           (Unaudited)               1997             1996              1995*      
                                                        ------------------     --------------     ------------     -------------   
                                                                                                                                   
Net asset value, beginning of period                     $           10.69     $        10.64     $      10.12     $       10.00   
                                                          ----------------      -------------      -----------      ------------   

Income from investment operations:                                                                                                 
  Net investment income                                               0.18               0.24             0.21              0.11   
  Net realized and unrealized gain (loss)                            (0.08)              0.01             0.55              0.08   
                                                          ----------------      -------------      -----------      ------------   

    Total from investment operations                                  0.10               0.25             0.76              0.19   
                                                          ----------------      -------------      -----------      ------------   

Less distributions to shareholders :                                                                                               
  From net investment income                                             -              (0.20)           (0.24)            (0.07)  
  From net realized gains                                            (0.08)                 -                -                 -   
                                                          ----------------      -------------      -----------      ------------   

Net asset value, end of period                           $           10.71     $        10.69     $      10.64     $       10.12   
                                                          ----------------      -------------      -----------      ------------   

Total Return (a)                                                     1.01%              2.34%             7.54%             1.92%  

Ratios/Supplemental Data:                                                                                                          

     Net assets, end of period (000's)                   $         205,138     $      296,702     $     382,934    $      214,638  
     Net expenses to average                                                                                                       
         daily net assets                                            0.91%**(c)         0.91%(c)          0.78%              0.92**
     Net investment income to average                                                                                              
         daily net assets                                            2.74%**            1.99%             2.44%              2.85**
     Portfolio turnover rate                                          103%               463%              214%              194%  
     Average broker commission rate (b)                  $          0.0104     $       0.0084               N/A               N/A  
     Fees and expenses voluntarily waived or borne by                                                                              
         the Manager consisted of the following per                                                                                
         share amounts:                                  $            0.01     $         0.02     $       0.005    $        0.006  

*    Period from July 29, 1994 (commencement of operations) to February 28,     
1995.                                                                 
**   Annualized                                                                 
(a)  Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
(b)  For fiscal years beginning on or after September 1, 1995, a fund is        
 required to disclose its average commission rate per share for security
     trades on which commissions are charged. The average broker commission rate
will vary depending on the markets in which trades are executed.      
(c)  Includes stamp duties and transfer taxes not waived or borne by the        
Manager, which approximates .02% of average daily net assets.         

6             See accompanying notes to the financial statements.               

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------
1. Significant accounting policies                                              

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

The Fund seeks total return consistent with minimal exposure to general   
 equity market risk, either directly or through investment in other Funds of
the Trust.                                                                

On June 1, 1996, the Fund began to offer three classes of shares: Class I,
 Class II and Class III. The principal economic difference among the classes
of shares is the level of shareholder service fee borne by the classes.   
Eligibility for and automatic conversion between the various classes of   
   shares is generally based on the total amount of assets invested with GMO, as
more fully outlined in the Trust's prospectus. Class III shares are the   
continuation of the Trust's shares that existed prior to June 1, 1996, and
 bore the same total operating expenses (after the voluntary expense waiver)
 as those shares. On August 20, 1997, the Fund revised its voluntary expense
waiver to include certain expenses incurred indirectly by the Fund through
investment in underlying Funds (See Note 2). At August 31, 1997, Class III
was the only active class of shares of the Fund.                          

The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are    
consistently followed by the Fund in the preparation of its financial     
statements. The preparation of financial statements in accordance with    
generally accepted accounting principles requires management to make      
   estimates and assumptions that affect the reported amounts and disclosures in
 the financial statements. Actual results could differ from those estimates.

Portfolio valuation                                                       
Portfolio securities listed on a securities exchange for which market     
quotations are available are valued at the last quoted 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. Securities which
are primarily traded on foreign exchanges are generally valued at the     
preceding closing values of such securities on their respective exchanges,
and those values are then translated into U.S. dollars at the current     
   exchange rate. Short-term investments with a remaining maturity of sixty days
 or less are valued at amortized cost which approximates market value. Other
assets and securities for which no quotations are readily available are   
valued at fair value as determined in good faith by the Trustees.         

                                                                               7

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

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

Futures contracts                                                         
  The Fund may purchase index futures contracts. Stock index futures contracts
 represent commitments for future delivery of cash based upon the level of a
specified index of equity securities at a specified price at a given date.
The Fund may use futures contracts to manage its exposure to the stock and
   currency markets. Buying futures tends to increase the Fund's exposure to the
  underlying instrument. Selling futures tends to decrease the Fund's exposure
 to the underlying instrument or hedge other Fund instruments. Upon purchase
   of a futures contract, the Fund is required to deposit with its custodian, in
  a segregated account in the name of the futures broker, an amount of cash or
U.S. government obligations in accordance with the initial margin         
requirements of the broker or exchange. Futures contracts are marked to   
   market daily and an appropriate payable or receivable for the change in value
("variation margin") is recorded by the Fund. The payable or receivable is
subsequently settled. Gains or losses are recognized but not considered   
   realized until the contracts expire or are closed. Futures contracts involve,
  to varying degrees, risk of loss in excess of the variation margin disclosed
   in the Statement of Assets and Liabilities. Losses may arise from the changes
  in the value of the underlying instrument, if there is an illiquid secondary
market for the contracts or if counterparties do not perform under the    
contract terms. Futures contracts are valued at the settlement price      
established each day by the board of trade or exchange on which they are  
   traded. See Note 6 for all open futures contracts held as of August 31, 1997.

8                                                                               

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Forward currency contracts                                                
The Fund may enter into forward currency contracts in connection with     
settling planned purchases or sales of securities or to hedge the currency
exposure associated with some or all of the Fund's portfolio securities. A
   forward currency contract is an agreement between two parties to buy and sell
a currency at a set price on a future date. The market value of a forward 
   currency contract fluctuates with changes in forward currency exchange rates.
   Forward currency contracts are marked to market daily and the change in value
is recorded by the Fund as an unrealized gain or loss. Realized gains or  
  losses equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed are recorded upon   
delivery or receipt of the currency or, if a forward currency contract is 
offset by entering into another forward currency contract with the same   
  broker, upon settlement of the net gain or loss. These contracts may involve
  market risk in excess of the unrealized gain or loss reflected in the Fund's
 Statement of Assets and Liabilities. In addition, the Fund could be exposed
 to risk if the counterparties are unable to meet the terms of the contracts
 or if the value of the currency changes unfavorably to the U.S. dollar. The
  U.S. dollar value of the currencies the Fund has committed to buy or sell is
   shown under Note 6 and represents the currency exposure the Fund has acquired
or hedged through currency contracts as of August 31, 1997.               

Options                                                                   
  The Fund may write call and put options on securities it owns or in which it
   may invest. When the Fund writes a call or put option, an amount equal to the
   premium received is recorded as a liability and subsequently marked to market
to reflect the current value of the option written. Premiums received from
   writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or closed are offset against the 
   proceeds or amounts paid on the transaction to determine the realized gain or
loss. If a written put option is exercised, the premium reduces the cost  
basis of the securities purchased by the Fund. The Fund as a writer of an 
option has no control over whether the underlying securities may be sold  
(call) or purchased (put) and as a result bears the market risk of an     
unfavorable change in the price of the security underlying the written    
option. There is the risk the Fund may not be able to enter into a closing
  transaction because of an illiquid market. As of August 31, 1997, there were
no outstanding written options.                                           

The Fund may also purchase put and call options. The Fund pays a premium  
which is included in the Fund's Statement of Assets and Liabilities as an 
  investment and subsequently marked to market to reflect the current value of
the option. The risk associated with purchasing put and call options is   
limited to the premium paid.                                              

                                                                               9

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Swap agreements                                                           
The Fund may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
   instrument. The Fund may enter into swap agreements to manage its exposure to
   the equity markets. The Fund enters into equity swap agreements which involve
  a commitment by one party in the agreement to pay interest in exchange for a
   market linked return based on a notional amount. To the extent that the total
 return of the security or index underlying the transaction exceeds or falls
short of the offsetting interest rate obligation, the Fund will receive a 
payment from or make a payment to the counterparty, respectively. Equity  
   swaps are marked to market daily based upon quotations from market makers and
 the change, if any, is recorded as unrealized gain or loss in the Statement
   of Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations.     
Entering into these agreements involves, to varying degrees, elements of  
 credit and market risk in excess of the amounts recognized on the Statement
 of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these agreements, that the counterparty to the       
agreements may default on its obligation to perform or that there may be  
unfavorable changes in the price of the security or index underlying these
 transactions. See Note 6 for a summary of open swap agreements as of August
31, 1997.                                                                 

Security lending                                                          
  The Fund may lend its securities to certain 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 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
August 31, 1997, 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 "Code").
The Fund intends to distribute substantially all of its taxable net       
   investment income and net realized short-term and long-term capital gains, if
  any, after giving effect to any available capital loss carryover for federal
   income tax purposes. Therefore, no provision for federal income or excise tax
is necessary. Taxes on foreign interest and dividend income have been     
withheld in accordance with the applicable country's tax treaty with the  
United States. Dividends received by shareholders of the Fund which are   
  derived from foreign source income and foreign taxes paid by the Fund are to
 be treated, to the extent allowable under the Code, as if received and paid
by the shareholders of the Fund.                                          

10                                                                              

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Distributions to shareholders                                             
The Fund's policy is to declare and pay distributions from net investment 
  income semi-annually, 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.                                                            

Income distributions and capital gain distributions are determined in     
accordance with income tax regulations which may differ from generally    
   accepted accounting principles. 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 is 
recorded on the ex-dividend date, or when the Fund is informed of the ex- 
   dividend date, if later. Interest income is recorded on the accrual basis and
is adjusted for the accretion of discounts. In determining the net gain or
loss on securities sold, the cost of securities is determined on the      
identified cost basis.                                                    

Allocation of operating activity                                          
The majority of expenses of the Trust are directly identifiable to an     
individual Fund. Expenses which are not readily identifiable to a specific
   Fund are allocated in such manner as deemed equitable by the Trustees, taking
into consideration, among other things, the nature and type of expense and
the relative size of the Funds. Investment income, common expenses and    
realized and unrealized gains and losses are allocated pro-rata among the 
 classes based on the relative net assets of each class. Shareholder service
fees, which are directly attributable to a class of shares, are charged to
that class' operations. In addition, the Fund will also incur fees and    
expenses indirectly as a shareholder in the underlying funds. Because the 
underlying funds have varied expense and fee levels and the Fund may own  
 different proportions of underlying funds at different times, the amount of
fees and expenses indirectly incurred by the fund will vary. (See Note 2).

Purchases and redemptions of Fund shares                                  
  The premium on cash purchases of Fund shares is .37% of the amount invested.
  Prior to June 30, 1997, the premium on cash purchases was .50% of the amount
invested. In the case of cash redemptions, the fee is 1.40% of the amount 
redeemed. The Manager may waive the fee on cash redemptions if it is not  
necessary to incur costs relating to the early termination of hedging     
transactions to meet redemption requests. All purchase premiums and       
  redemption fees are paid to and recorded as paid-in capital by the Fund. For
the six months ended August 31, 1997, the Fund received $2,320 in purchase
premiums and no redemption fees. There is no premium for reinvested       
distributions.                                                            

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Investment risk                                                           
There are certain additional risks involved in investing in foreign       
   securities that are not inherent in investments in domestic securities. These
risks may involve adverse political and economic developments and the     
possible imposition of currency exchange blockages or other foreign       
governmental laws or restrictions. In addition, the securities of some    
foreign companies and securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S. securities 
markets.                                                                  

2. Fees and other transactions with affiliates                                  
   GMO earns a management fee paid monthly at the annual rate of .65% of average
daily net assets. Effective June 1, 1996, the Fund adopted a Shareholder  
Services Plan under which the Fund pays GMO a shareholder service fee for 
  client and shareholder service, reporting and other support. Pursuant to the
   Shareholder Services Plan, the shareholder service fee is calculated based on
the average daily net assets of each class at the annual rate of .28% for 
 Class I shares, .22% for Class II shares and .15% for Class III shares. The
  Fund will always invest in the class of shares of each underlying Fund being
offered that bears the lowest shareholder service fee. Like the management
fee (as described below), the shareholder service fee of each class of the
Fund's shares will be waived (but not below zero) to the extent of the    
indirect shareholder service fees paid in connection with the Fund's      
investment in shares of underlying Funds.                                 

GMO has agreed to waive a portion of its fee (but not below zero) and bear
other expenses until further notice to the extent that the Fund's annual  
  expenses (including the management fee but excluding custody fees, brokerage
commissions, certain other transaction costs (including transfer taxes),  
 shareholder service fees and extraordinary expenses ("fund expenses")) plus
 the amount of fees and expenses (excluding shareholder service fee and fund
expenses (as defined above) incurred indirectly by the Fund through       
investment in underlying Funds) exceed .50% of average daily net assets.  
Because GMO will not waive the management fees below zero, and because the
amount of fees and expenses incurred indirectly by the Fund will vary, the
operating expenses (excluding shareholder service fees and fund expenses) 
incurred indirectly by the Fund through investment in underlying Funds may
exceed .50% of the Fund's average daily net assets.                       

  The Fund's portion of the fee paid by the Trust to the unaffiliated Trustees
 during the six months ended August 31, 1997, was $1,380. No remuneration is
paid to any Trustee or officer who is affiliated with the Manager.        

12                                                                              

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
3. Purchases and sales of securities                                            

For the six months ended August 31, 1997, cost of purchases and proceeds  
from sales of investments, other than short-term obligations, were as     
follows:                                                                  

                                                        [Enlarge/Download Table]

                                                      Purchases              Proceeds       
                                                --------------------   ---------------------
                                                                                            
U.S. Government securities                    $           -           $          313,850,234
Investments (non-U.S. Government securities)             238,528,428             316,306,799

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows                                                            

                                                                [Download Table]


                      Gross Unrealized      Gross Unrealized    Net Unrealized  
  Aggregate Cost        Appreciation          Depreciation       Depreciation   
------------------  --------------------  -------------------  -----------------
                                                                                
  $220,119,070            $358,453            $4,493,012          $4,134,559    

4. Principal shareholders                                                       

At August 31, 1997, 36% of the outstanding shares of the Fund were held by
two shareholders, each holding in excess of 10% of the Fund's outstanding 
shares.                                                                   

5. Share transactions                                                           

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

                                                        [Enlarge/Download Table]


                            Six Months Ended                    Year Ended                  
                             August 31, 1997                  February 28, 1997             
                    ---------------------------------  -------------------------------------
 Class III:              Shares            Amount           Shares              Amount      
                    ---------------   ---------------  ----------------   ----------------- 
                                                                                            
Shares sold                 43,712   $       464,823         2,716,101   $      28,751,811  

Shares issued to                                                                            
shareholders in                                                                             
reinvestment of                                                                             
distributions              177,828         1,865,419           335,863           3,585,825  

Shares repurchased      (8,825,361)      (93,712,496)      (11,267,323)       (119,550,238) 
                    ---------------   ---------------  ----------------   ----------------- 
Net decrease            (8,603,821)  $   (91,382,254)       (8,215,359)  $     (87,212,602) 
                    ===============   ===============  ================   ================= 

                                                                              13

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

6. Financial instruments                                                        

A summary of outstanding financial instruments at August 31, 1997 is as   
follows:                                                                  

Short futures contracts                                                   

                                                        [Enlarge/Download Table]


  Number of                                                           Net Unrealized  
  Contracts      Type      Expiration Date       Contract Value        Depreciation   
-------------  --------  -------------------   ------------------   ------------------
                                                                                      
    150        S&P 500     September 1997     $     67,732,500     $         2,027,242
                                                                    ==================

 At August 31, 1997, the Fund had cash and/or securities to cover any margin
requirements on open futures contracts.                                   

Forward currency contracts                                                

                                                        [Enlarge/Download Table]


                                                                                         Net Unrealized   
    Settlement                                                                            Appreciation    
      Date            Deliver/Receive     Units of Currency          Value              (Depreciation)    
-----------------  --------------------  --------------------   -------------------   --------------------
                                                                                                          
 Buys                                                                                                     
        9/12/97           ATS                 14,790,020       $     1,167,897       $        (78,103)    
       11/07/97           ATS                 72,812,206             5,769,665               (197,254)    
        9/12/97           AUD                  2,488,335             1,827,261                (14,480)    
       12/05/97           AUD                  9,458,570             6,959,931                (84,086)    
       11/07/97           BEF                 54,433,054             1,469,601                (42,866)    
        9/12/97           CAD                  3,247,299             2,339,655                (56,345)    
       12/05/97           CAD                  5,861,690             4,243,721                (34,262)    
       11/07/97           CHF                 30,915,832            20,991,718                108,956     
        9/12/97           DEM                  6,029,357             3,350,969                 71,292     
       11/07/97           DEM                 21,692,244            12,102,120               (345,077)    
        9/12/97           DKK                  1,782,883               260,193                  5,539     
       11/07/97           DKK                 27,917,301             4,087,522                 28,623     
       11/07/97           ESP              1,359,281,890             8,942,791               (359,395)    
       11/07/97           FIM                 17,968,183             3,329,188               (150,441)    
       11/07/97           FRF                 34,898,616             5,777,422               (100,678)    
        9/12/97           GBP                  3,919,479             6,353,076                 64,177     

14                                                                              

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

Forward currency contracts - continued                                    

                                                        [Enlarge/Download Table]


                                                                                         Net Unrealized   
    Settlement                                                                            Appreciation    
      Date            Deliver/Receive     Units of Currency          Value              (Depreciation)    
-----------------  --------------------  --------------------   -------------------   --------------------
                                                                                                          
Buys - continued                                                                                          
       11/07/97           GBP                 15,273,380       $    24,696,292       $         (10,899)   
       10/09/97           HKD                 50,351,750             6,474,194                  (1,499)   
       11/07/97           HKD                 19,245,236             2,470,241                   4,957    
       12/05/97           HKD                 45,917,947             5,883,974                  (6,556)   
        9/12/97           IEP                    485,147               720,718                 (18,282)   
       11/07/97           IEP                  1,298,678             1,927,476                 (42,579)   
        9/12/97           ITL              2,214,959,600             1,257,405                  25,037    
       11/07/97           ITL             12,787,994,480             7,246,178                (189,589)   
       12/05/97           JPY              1,856,227,594            15,634,265                (793,073)   
        9/12/97           MYR                  7,658,868             2,622,697                (135,367)   
       12/05/97           MYR                 14,223,463             4,814,984                (389,422)   
       11/07/97           NLG                 40,562,980            20,097,348                (245,201)   
        9/12/97           NOK                 39,441,209             5,291,855                (349,145)   
       11/07/97           NOK                 54,045,143             7,270,973                (106,160)   
        9/12/97           NZD                  1,362,682               870,226                  (5,024)   
       12/05/97           NZD                 16,180,452            10,276,704                (424,004)   
       11/07/97           SEK                 90,171,113            11,507,093                 (64,853)   
       12/05/97           SGD                 14,901,949             9,846,669                (138,081)   
                                                                                      ----------------    
                                                                                     $      (4,074,140)   
                                                                                      ================    
 Sales                                                                                                    

        9/12/97           ATS                 14,790,020             1,168,319                 (26,409)   
       11/07/97           ATS                 72,812,206             5,772,607                  20,310    
        9/12/97           AUD                  2,488,335             1,828,545                 101,456    
       12/05/97           AUD                  9,458,570             6,965,377                  83,549    
       11/07/97           BEF                 54,433,054             1,471,290                 (29,182)   
        9/12/97           CAD                  3,247,299             2,340,715                  (9,727)   
       12/05/97           CAD                  5,861,690             4,245,592                    (319)   
       11/07/97           CHF                 30,915,832            21,005,981                 346,989    

                                                                              15

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


Forward currency contracts - continued                                                                         

                                                                                              Net Unrealized   
        Settlement                                                                             Appreciation    
          Date             Deliver/Receive     Units of Currency          Value              (Depreciation)    
    -----------------   --------------------  --------------------   -------------------   --------------------
    Sales - continued                                                                                          
                                                                                                               
            9/12/97            DEM                  6,029,357       $     3,351,938       $         220,062    
           11/07/97            DEM                 21,692,244            12,105,857                 320,558    
            9/12/97            DKK                  1,782,883               260,277                  16,723    
           11/07/97            DKK                 27,917,301             4,089,518                 122,100    
           11/07/97            ESP              1,359,281,890             8,949,710                (174,171)   
           11/07/97            FIM                 17,968,183             3,332,605                 (32,163)   
           11/07/97            FRF                 34,898,616             5,779,113                 (13,626)   
            9/12/97            GBP                  3,919,479             6,355,481                  53,520    
           11/07/97            GBP                 15,273,380            24,706,219                 192,075    
           10/09/97            HKD                 50,351,750             6,477,859                  16,627    
           11/07/97            HKD                 19,245,236             2,472,198                  10,802    
           12/05/97            HKD                 45,917,947             5,889,358                  16,916    
            9/12/97            IEP                    485,147               722,054                 (17,864)   
           11/07/97            IEP                  1,298,678             1,931,242                 (35,370)   
            9/12/97            ITL              2,214,959,600             1,257,838                  58,162    
           11/07/97            ITL             12,787,994,480             7,249,252                     642    
           12/05/97            JPY              1,856,227,594            15,642,851               1,022,295    
            9/12/97            MYR                  7,658,868             2,628,254                 437,746    
           12/05/97            MYR                 14,223,463             4,828,442                 640,350    
           11/07/97            NLG                 40,562,980            20,103,075                  65,366    
            9/12/97            NOK                 39,441,209             5,296,505                (152,020)   
           11/07/97            NOK                 54,045,143             7,278,317                 (91,496)   
            9/12/97            NZD                  1,362,682               870,939                  70,061    
           12/05/97            NZD                 16,180,452            10,287,302                 362,837    
           11/07/97            SEK                 90,171,113            11,519,343                (164,170)   
           12/05/97            SGD                 14,901,949             9,869,712                 533,630    
                                                                                             --------------    
                                                                                             $    3,966,259    
                                                                                             ==============    

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

Currency Abbreviations                                                          

ATS       Austrian Schilling                HKD           Hong Kong Dollar    
AUD        Australian Dollar                IEP                Irish Pound    
BEF            Belgian Franc                ITL               Italian Lira    
CAD          Canadian Dollar                JPY               Japanese Yen    
CHF              Swiss Franc                MYR          Malaysian Ringgit    
DEM              German Mark                NLG        Netherlands Guilder    
DKK             Danish Krona                NOK           Norwegian Kroner    
ESP           Spanish Peseta                NZD         New Zealand Dollar    
FIM           Finnish Markka                SEK              Swedish Krona    
FRF             French Franc                SGD           Singapore Dollar    
GBP            British Pound                                                  

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GMO Global Hedged Equity Fund                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

Swap agreements                                                           

                                                        [Enlarge/Download Table]


                                                                                              Unrealized     
    Notional          Expiration                                                              Appreciation   
     Amount             Date                       Description                               (Depreciation)  
-------------------  ------------  ------------------------------------------------------   -----------------
                                                                                                             
   $   14,999,965    09/30/97      Agreement with Deutsche Bank AG dated September 30,     $        (556,923)
                                   1996 to pay (receive) the notional amount multiplied                      
                                   by the return on the EAFE Index (including                                
                                   dividends) and to receive the notional amount                             
                                   multiplied by 6 month LIBOR adjusted by a specified                       
                                   spread.                                                                   
     15,500,000      05/29/98      Agreement with Swiss Bank Corporation dated May 30,               369,924 
                                   1997 to pay (receive) the notional amount multiplied                      
                                   by the return on the EAFE Index (including                                
                                   dividends) and to receive the notional amount                             
                                   multiplied by 12 month LIBOR adjusted by a specified                      
                                   spread.                                                                   
     25,641,923      05/29/98      Agreement with Swiss Bank Corporation dated May 30,               110,657 
                                   1997 to pay (receive) the notional amount multiplied                      
                                   by the return on the EAFE X-Japan Index (including                        
                                   dividends) and to receive the notional amount                             
                                   multiplied by 12 month LIBOR adjusted by a specified                      
                                   spread.                                                                   
                                                                                           ----------------  
                                                            Net unrealized depreciation   $         (76,342) 
                                                                                           ================  

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


       Shares      Description                                           Value ($)       
-----------------------------------------------------------------------------------------
                                                                                         
                   REAL ESTATE INVESTMENT TRUSTS - 87.4%                                 
                   Canada - 11.1%                                                        
         13,700    Brookfield Properties Corp *                                  191,422 
         40,000    Burcon International Development Ltd 144A *                   420,613 
         10,000    Cambridge Shopping Centres Ltd                                101,192 
          2,500    Canadian Hotel Inc                                             15,125 
         10,000    Oxford Properties Group *                                     255,681 
          6,000    Trizec Hahn Corp (Sub-Voting)                                 135,375 
                                                                     ------------------- 
                                                                               1,119,408 
                                                                     ------------------- 
                   France - 8.6%                                                         
          2,665    Klepierre *                                                   347,103 
          1,357    Silic *                                                       179,651 
          9,430    Sophia SA *                                                   342,033 
                                                                     ------------------- 
                                                                                 868,787 
                                                                     ------------------- 
                   Japan - 9.1%                                                          
          8,000    Daibiru Corp *                                                 88,453 
          5,000    Hankyu Realty Co Ltd *                                         33,253 
         10,000    Heiwa Real Estate Co Ltd *                                     46,222 
          5,000    Keihanshin Real Estate *                                       28,431 
         26,000    Mitsubishi Real Estate Co Ltd *                               365,284 
         13,000    Mitsui Fudosan Co Ltd *                                       151,301 
          7,000    Sankei Building Co Ltd *                                       39,862 
         11,000    Sumitomo Realty and Development Co Ltd *                       87,696 
          6,000    Toc Co Ltd *                                                   65,342 
          5,000    Tokyo Rakutenchi *                                             16,419 
                                                                     ------------------- 
                                                                                 922,263 
                                                                     ------------------- 
                   Netherlands - 10.2%                                                   
         16,880    German City Estates NV (Bearer) *                             254,060 
         11,340    Nagron *                                                      320,091 
          5,700    Vastned (Offices) NV *                                        208,147 
          5,896    VIB NV *                                                      151,877 
          1,600    Wereldhave NV                                                  97,905 
                                                                     ------------------- 
                                                                               1,032,080 
                                                                     ------------------- 
                   New Zealand - 13.0%                                                   
      1,736,363    Trans Tasman Properties Ltd                                 1,032,272 
        500,000    Trans Tasman Properties *                                     278,074 
                                                                     ------------------- 
                                                                               1,310,346 
                                                                     ------------------- 
                   Sweden - 0.4%                                                         
          5,000    Castellum AB *                                                 40,759 
                                                                     ------------------- 
                   United Kingdom - 7.6%                                                 
        750,000    Hemingway Properties Plc *                                    474,373 
        150,000    Nursing Home Properties *                                     291,924 
                                                                     ------------------- 
                                                                                 766,297 
                                                                     ------------------- 
                   United States - 27.4%                                                 
          6,000    Arden Realty Group Inc                                        173,250 
          3,000    Associated Estates Realty Corp                                 68,063 

              See accompanying notes to the financial statements.              1

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


           Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------- 
                                                                                                               
                        United States - continued                                                              
               2,500    Avalon Properties                                                               70,156 
               4,500    Bedford Properties Investments Inc                                              92,250 
               3,000    Bradley Real Estate Inc                                                         56,250 
               2,500    Crescent Real Estate Equities                                                   79,063 
               2,000    Developers Diversified Realty Co                                                77,750 
               4,500    Eastgroup Properties Inc                                                        91,969 
               5,000    Equity Office Properties Trust                                                 145,938 
               2,000    Excel Reality Trust *                                                           59,250 
               5,000    Felcor Suite Hotels Inc                                                        190,000 
               2,500    First Industrial Realty Trust Inc *                                             77,188 
               3,000    Gables Residential Trust                                                        78,938 
               2,000    Glimcher Realty Trust                                                           41,250 
               1,000    HRE Properties                                                                  18,125 
               2,000    Lexington Corporate Properties                                                  29,625 
               2,500    MGI Properties                                                                  57,969 
               2,000    Mills Corp                                                                      53,000 
               3,000    Parkway Properties Inc *                                                        93,750 
               7,998    Patriot Amern Hospitality Preferred                                            194,951 
               5,000    Prentiss Properties Trust                                                      138,125 
               6,000    Reckson Associates Realty Corp *                                               144,750 
               2,500    Security Capital Atlantic Inc                                                   56,406 
               5,000    Security Capital Atlantic Rights 9/9/97 *                                           78 
               2,500    Security Capital Pacific Trust                                                  54,531 
               4,000    Shurgard Storage Centers Class A *                                             110,250 
               4,000    Simon DeBartolo Group Inc                                                      126,750 
               3,000    Smith Charles E Residential Realty                                              91,500 
               2,000    Starwood Lodging Trust Combined                                                 92,375 
               3,000    Sunstone Hotel Investors Inc                                                    45,188 
               5,000    Urban Shopping Centers Inc                                                     154,688 
                                                                                            ------------------ 
                                                                                                     2,763,376 
                                                                                            ------------------ 
                        TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $8,671,168)                        8,823,316 
                                                                                            ------------------ 
                        SHORT-TERM INVESTMENTS - 12.9%                                                         
        Par Value       Cash Equivalents - 12.9%                                                               
   $       1,300,000    First National Bank of Chicago Time Deposit, 5.44% due 9/2/97                1,300,000 
                                                                                            ------------------ 

                        TOTAL SHORT-TERM INVESTMENTS (Cost $1,300,000)                               1,300,000 
                                                                                            ------------------ 
                        TOTAL INVESTMENTS - 100.3%                                                             
                        (Cost $9,971,168)                                                           10,123,316 

                        Other Assets and Liabilities (net) -  (0.3%)                                   (33,553)
                                                                                            ------------------ 

                        TOTAL NET ASSETS - 100.0%                                         $         10,089,763 
                                                                                            ================== 

2             See accompanying notes to the financial statements.               

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

Notes to the Schedule of Investments:                                           

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

*    Non-income producing security. A dividend has not been declared for the    
twelve months ended August 31, 1997.                                  

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
--------------------------------------------------------------------------------

                                                                [Download Table]

                                                                        
Assets:                                                                 
     Investments, at value (cost $9,971,168) (Note 1)  $      10,123,316
     Foreign currency, at value (cost $191)                          187
     Cash                                                         41,274
     Dividends and interest receivable                             8,932
                                                         ---------------
         Total assets                                         10,173,709
                                                         ---------------

Liabilities:                                                            
     Payable for investments purchased                            15,643
     Payable to affiliate for (Note 2):                                 
         Management fee                                            6,445
         Shareholder service fee                                   1,289
     Accrued expenses                                             60,569
                                                         ---------------

         Total liabilities                                        83,946
                                                         ---------------

Net assets                                             $      10,089,763
                                                         ===============
Net assets consist of:                                                  
     Paid-in capital                                   $       9,716,059
     Accumulated undistributed net investment income             219,715
     Accumulated net realized gain                                 1,840
     Net unrealized appreciation                                 152,149
                                                         ---------------

                                                       $      10,089,763
                                                         ===============

Net assets attributable to Class III Shares            $      10,089,763
                                                         ===============

Shares outstanding - Class III                                   964,910
                                                         ===============

Net asset value per share - Class III                  $           10.46
                                                         ===============

4             See accompanying notes to the financial statements.               

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
---------------------------------------------------------------------------     

                                                        [Enlarge/Download Table]
                                                                                          
Investment income:                                                                        
     Dividends (net of foreign tax expense of $8,486)                $            144,061 
     Interest                                                                     137,398 
                                                                       ------------------ 
         Total income                                                             281,459 
                                                                       ------------------ 
Expenses:                                                                                 
     Management fee (Note 2)                                                       37,041 
     Custodian fees                                                                24,196 
     Audit fees                                                                    23,460 
     Transfer agent fees                                                           11,040 
     Stamp duties and transfer taxes                                                  368 
     Legal fees                                                                       184 
     Fees waived or borne by Manager (Note 2)                                     (42,092)
                                                                       ------------------ 
                                                                                   54,197 
     Shareholder service fee - Class III (Note 2)                                   7,408 
                                                                       ------------------ 

         Net expenses                                                              61,605 
                                                                       ------------------ 

            Net investment income                                                 219,854 
                                                                       ------------------ 
Realized and unrealized gain (loss):                                                      
         Net realized gain on foreign currency and foreign currency                       
            related transactions                                                    1,840 
                                                                       ------------------ 
         Change in net unrealized appreciation (depreciation) on:                         
            Investments                                                           196,233 
            Foreign currency, forward contracts and foreign                               
                currency related transactions                                           1 
                                                                       ------------------ 
                   Net unrealized gain                                            196,234 
                                                                       ------------------ 

         Net realized and unrealized gain                                         198,074 
                                                                       ------------------ 

Net increase in net assets resulting from operations                 $            417,928 
                                                                       ================== 

              See accompanying notes to the financial statements.              5

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
-------------------------------------------------------------------------       

                                                        [Enlarge/Download Table]


                                                                            Six Months Ended                             
                                                                             August 31, 1997            Period Ended     
                                                                               (Unaudited)            February 28, 1997 *
                                                                         -----------------------    ---------------------
                                                                                                                         
Increase (decrease) in net assets:                                                                                       
Operations:                                                                                                              
       Net investment income                                            $                 219,854   $             42,303 
       Net realized gain (loss)                                                             1,840                 (1,952)
       Change in net unrealized appreciation (depreciation)                               196,234                (44,085)
                                                                         ------------------------    ------------------- 

       Net increase (decrease) in net assets resulting from operations                    417,928                 (3,734)
                                                                         ------------------------    ------------------- 
Distributions to shareholders from:                                                                                      
       Net investment income - Class III                                                  (40,490)             -         
                                                                         ------------------------    ------------------- 

Net share transactions - Class III (Note 5)                                               247,970              9,468,089 
                                                                         ------------------------    ------------------- 
       Total increase in net assets                                                       625,408              9,464,355 

Net assets:                                                                                                              
       Beginning of period                                                              9,464,355          -             
                                                                         ------------------------    ------------------- 
       End of period (including accumulated undistributed                                                                
          net investment income of $219,715 and $40,351,                                                                 
          respectively)                                                 $              10,089,763    $          9,464,355
                                                                         ========================     ================== 

*  Period from December 20, 1996 (commencement of operations) to February       
28, 1997.                                                                 

6             See accompanying notes to the financial statements.               

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                         Six Months Ended                                 
                                                          August 31, 1997           Period Ended          
                                                           (Unaudited)            February 28, 1997 *     
                                                        -------------------       --------------------    
                                                                                                          
Net asset value, beginning of period                  $               10.06     $                10.00    
                                                        -------------------       --------------------    
Income from investment operations:                                                                        
    Net investment income                                              0.23                       0.04    
    Net realized and unrealized gain                                   0.21                       0.02 (c)
                                                        -------------------       --------------------    
       Total from investment operations                                0.44                       0.06    
                                                        -------------------       --------------------    
Less distributions to shareholders:                                                                       
    From net investment income                                        (0.04)                       -      
                                                        -------------------       --------------------    
Net asset value, end of period                        $               10.46      $               10.06    
                                                        ===================       ====================    

Total Return (a)                                                      4.40%                      0.60%    

Ratios/Supplemental Data:                                                                                 

    Net assets, end of period (000's)                 $              10,090      $               9,464    
    Net expenses to average                                                                               
       daily net assets                                               1.25% **                   1.98% ** 
    Net investment income to average                                                                      
       daily net assets                                               4.45% **                   2.39% ** 
    Portfolio turnover rate                                              0%                         0%    
    Average broker commission rate (b)                $              0.0137      $              0.0062    
    Fees and expenses voluntarily waived or borne by                                                      
       the Manager consisted of the following per                                                         
       share amounts:                                 $                0.04      $                0.05    

*      Period from December 20, 1996 (commencement of operations) to February   
28, 1997.                                                         
**     Annualized.                                                              
(a)    Calculation excludes purchase premiums and redemption fees. The total    
       returns would have been lower had certain expenses not been waived during
the periods shown.                                                
(b)    The average broker commission rate will vary depending on the markets in 
which trades are executed.                                        
(c)    The amount shown for a share outstanding does not correspond with the    
      aggregate net realized and unrealized gain (loss) on investments for the
period ended February 28, 1997 due to the timing of purchases and 
    redemptions of Fund shares in relation to fluctuating market values of
the investments of the Fund.                                      

             See accompanying notes to the financial statements.             7

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 

--------------------------------------------------------------------------------

1.  Significant accounting policies                                             

GMO Global Properties Fund (the "Fund"), which commenced operations on  
December 20, 1996, 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.                              

Prior to April 7, 1997, the offering of shares for the Fund was not     
registered under the Securities Act of 1933, as amended (the "Act"), but
rather was made privately by the Fund pursuant to the private placement 
exemption from registration provided by Section 4(2) of the Act and     
Regulation D thereunder.                                                

The Fund seeks long-term capital growth primarily through investment in 
  securities of issuers throughout the world which are engaged in or related
to the real estate industry or which own significant real estate assets.

  The Fund offers three classes of shares: Class I, Class II, and Class III.
    The principal economic difference between the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and    
automatic conversion between the various classes of shares is generally 
based on the total amount of assets invested with GMO, as more fully    
 outlined in the Trust's prospectus. At August 31, 1997, Class III was the
only active class of shares of the Fund.                                

  The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are  
consistently followed by the Fund in the preparation of its financial   
statements. The preparation of financial statements in accordance with  
generally accepted accounting principles requires management to make    
  estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those     
estimates.                                                              

Portfolio valuation                                                     
Portfolio securities listed on a securities exchange for which market   
 quotations are available are valued at the last quoted 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. Securities
   which are primarily traded on foreign exchanges are generally valued at the
  preceding closing values of such securities on their respective exchanges,
and those values are then translated into U.S. dollars at the current   
exchange rate. Short-term investments with a remaining maturity of sixty
  days or less are valued at amortized cost which approximates market value.
 Other assets and securities for which no quotations are readily available
are valued at fair value as determined in good faith by the Trustees.   

8                                                                               

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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

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
    "Code"). The Fund intends to distribute substantially all of its taxable net
  investment income and net realized short-term and long-term capital gains,
if any, after giving effect to any available capital loss carryover for 
  federal income tax purposes. Therefore, no provision for federal income or
   excise tax is necessary. Taxes on foreign interest and dividend income have
 been withheld in accordance with the applicable country's tax treaty with
   the United States. Dividends received by shareholders of the Fund which are
    derived from foreign source income and foreign taxes paid by the Fund are to
   be treated, to the extent allowable under the Code, as if received and paid
by the shareholders of the Fund.                                        

Distributions to shareholders                                           
 The Fund's policy is to declare and pay distributions from net investment
    income semi-annually, 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. The Fund declares separate dividends from net investment 
income on each class of shares.                                         

Income distributions and capital gain distributions are determined in   
accordance with income tax regulations which may differ from generally  
accepted accounting principles. 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.                                         

                                                                               9

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

The Fund's investments in REIT equity securities may at times result in the 
 Fund's receipt of cash in excess of its interest in the REIT's earnings.  The
  excess amount cannot be determined by the Fund at the time of receipt.  If the
Fund distributes amounts which are subsequently determined to exceed REIT   
earnings, such amounts would constitute a return of capital to Fund         
shareholders for federal income tax purposes.                               

Security transactions and related investment income                         
Security transactions are accounted for on trade date.  Dividend income is  
recorded on the ex-dividend date, or when the Fund is informed of the ex-   
  dividend date, if later.  Interest income is recorded on the accrual basis and
is adjusted for the 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.                                           

Allocation of operating activity                                            
The majority of expenses of the Trust are directly identifiable to an       
individual Fund.  Expenses which are not readily identifiable to a specific 
 Fund are allocated in such manner as deemed equitable by the Trustees, taking
  into consideration, among other things, the nature and type of expense and the
relative size of the Funds.  Investment income, common expenses and realized
  and unrealized gains and losses are allocated pro-rata among the classes based
  on the relative net assets of each class.  Shareholder service fees, which are
directly attributable to a class of shares, are charged to that class'      
operations.                                                                 

Purchases and redemptions of Fund shares                                    
The premium on cash purchases of Fund shares is .60% of the amount invested.
 In the case of cash redemptions, the fee is .30% of the amount redeemed.  The
Manager may waive such premiums to the extent that a transaction results in 
minimal brokerage and transaction costs to the Fund.  All purchase premiums 
 and redemption fees are pa id to and recorded as paid-in capital by the Fund.
  For the six months ended August 31, 1997, the Fund received $1,434 in purchase
premiums and no redemption fees.  There is no premium for reinvested        
distributions.                                                              

Investment risks                                                            
There are certain additional risks involved in investing in real-estate     
related securities rather than a more diversified portfolio of investments. 
Since the Fund's investments are concentrated in real-estate related        
securities, the value of its shares can be expected to change in light of   
factors affecting the real estate industry, including local or regional     
  economic conditions, changes in zoning laws, changes in real estate values and
  property taxes, and changes in interest rates.  The value of the Fund's shares
  may fluctuate more widely than the value of shares of a portfolio that invests
in a broader range of industries. Additionally, there are certain additional
risks involved in investing in foreign securities that are not inherent in  
  investments in domestic securities.  These risks may involve adverse political
and economic developments and the possible imposition of currency exchange  
blockages or other foreign governmental laws or restrictions.  In addition, 
the securities of some foreign companies and securities markets are less    
  liquid and at times more volatile than securities of comparable U.S. companies
and U.S. securities markets.                                                

10                                                                              

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

2.  Fees and other transactions with affiliates                                 

GMO earns a management fee paid monthly at the annual rate of .75% of   
  average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and  
shareholder service, reporting and other support. Pursuant to the       
  Shareholder Services Plan, the shareholder service fee is calculated based
    on the average daily net assets of each class at the annual rate of .28% for
Class I shares, .22% for Class II shares, and .15% for Class III shares.

  GMO has agreed to waive a portion of its fee and bear other expenses until
   further notice to the extent that the Fund's annual expenses (including the
 management fee but excluding custody fees, brokerage commissions, certain
other transaction costs (including stamp duties and transfer taxes),    
   shareholder service fees and extraordinary expenses) exceed .60% of average
daily net assets.                                                       

    No remuneration is paid to any Trustee or officer who is affiliated with the
Manager. For the six months ended August 31, 1997, the Fund incurred no 
Trustees fees.                                                          

3.  Purchases and sales of securities                                           

 Cost of purchases and proceeds from sales of securities, excluding short-
term investments, for the six months ended August 31, 1997, aggregated  
$5,275,698 and $0, respectively.                                        

At August 31, 1997, the cost for Federal income tax purposes and gross  
    unrealized appreciation and depreciation in value of investments held was as
follows:                                                                

                                                                [Download Table]

                        Gross Unrealized     Gross Unrealized    Net Unrealized 
    Aggregate Cost        Appreciation         Depreciation       Appreciation  
--------------------  ---------------------  ------------------  ---------------
                                                                                
      $9,971,168              $349,031            $196,883           $152,148   

4.  Principal shareholder                                                       

  At August 31, 1997, 71% of the outstanding shares of the Fund were held by
one shareholder, who is an affiliate of the Manager.                    

                                                                              11

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GMO Global Properties Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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:                                                 

                                                                [Download Table]

Class III:                                        Period from December 20, 1996 
                        Six Months Ended           (commencement of operations) 
                        August 31, 1997               to February 28, 1997      
                    -------------------------   --------------------------------
                      Shares        Amount         Shares            Amount     
                    ----------   ------------   -----------     ----------------
                                                                                
Shares sold             23,696   $    239,003       940,343     $      9,468,089
Shares issued to                                                                
shareholders                                                                    
in reinvestment                                                                 
of distributions           871          8,967          -                    -   
Shares                                                                          
repurchased               -              -             -                    -   
                    ----------   ------------   -----------     ----------------
Net increase            24,567   $    247,970       940,343     $      9,468,089
                    ==========   ============   ===========     ================

12                                                                              

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

     Shares          Description                                          Value ($)      
-----------------------------------------------------------------------------------------
                                                                                         
                     COMMON STOCKS - 83.4%                                               
                     Automotive - 1.3%                                                   
           10,000    Chrysler Corp                                               351,250 
           15,000    General Motors Corp                                         941,250 
           80,000    Mascotech Industries Inc                                  1,675,000 
                                                                     --------------------
                                                                               2,967,500 
                                                                     --------------------
                     Banking and Financial Services - 11.0%                              
           40,000    American Express Co                                       3,110,000 
          117,500    Block (HR) Inc                                            4,611,875 
           37,500    Chase Manhattan Corp                                      4,169,531 
           42,500    Citicorp                                                  5,424,063 
           25,000    First Chicago NBD Corp                                    1,793,750 
           10,000    Nationsbank Corp                                            593,750 
           10,000    PNC Bank Corp                                               432,500 
           42,500    Travelers Group Inc (The)                                 2,698,750 
            5,000    Wells Fargo Co                                            1,271,250 
                                                                     --------------------
                                                                              24,105,469 
                                                                     --------------------
                     Chemicals - 0.7%                                                    
           25,000    Albemarle Corp                                              614,063 
           10,000    Bayer A G                                                   375,000 
           25,000    Borden Chemical and Plastics LP                             260,938 
           10,000    Georgia Gulf Corp                                           287,500 
                                                                     --------------------
                                                                               1,537,501 
                                                                     --------------------
                     Computer and Office Equipment - 0.4%                                
           87,500    Intergraph Corp *                                           869,531 
                                                                     --------------------
                     Construction - 0.1%                                                 
           10,000    McDermott International Inc                                 322,500 
                                                                     --------------------
                     Consumer Goods - 3.7%                                               
           25,000    Black & Decker Corp                                         957,813 
           57,500    Eastman Kodak                                             3,759,063 
            5,000    Hasbro Inc                                                  134,375 
           35,000    Maytag Corp                                                 960,313 
          100,000    Safety Kleen                                              2,018,750 
           15,000    Scotts Company Class A *                                    420,000 
                                                                     --------------------
                                                                               8,250,314 
                                                                     --------------------
                     Electronic Equipment - 0.5%                                         
           50,000    International Rectifier Corp *                            1,140,625 
                                                                     --------------------
                     Environmental Control - 0.2%                                        
           35,000    Wheelabrator Technologies Inc                               549,063 
                                                                     --------------------
                     Food and Beverage - 2.8%                                            
           40,000    Anheuser-Busch Cos Inc                                    1,705,000 
           10,500    Archer Daniels Midland                                      227,063 
           15,000    Coors (Adolph) Co                                           553,125 

              See accompanying notes to the financial statements.              1

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares          Description                                Value ($)    
----------------------------------------------------------------------------
                                                                            
                    Food and Beverage - continued                           
          15,000    Darden Restaurants Inc                          150,938 
          40,000    Nestle SA ADR                                 2,331,392 
          12,500    Riviana Foods Inc                               221,875 
          25,000    RJR Nabisco Holdings Corp                       870,313 
           5,000    Sara Lee Corp                                   201,250 
                                                           -----------------
                                                                  6,260,956 
                                                           -----------------
                    Health Care - 1.3%                                      
          25,000    Baxter International Inc                      1,329,688 
          50,000    Beverly Enterprises Inc *                       815,625 
          50,000    Owens and Minor Holdings Co                     678,125 
           5,000    Quest Diagnostics Inc *                          93,438 
                                                           -----------------
                                                                  2,916,876 
                                                           -----------------
                    Insurance - 6.2%                                        
           5,000    Aetna Inc                                       477,165 
          25,000    Allstate Corp                                 1,826,563 
          20,000    Chartwell Re Corp                               685,000 
           7,500    Cigna Corp                                    1,375,313 
           7,500    Gallagher (Arthur J) and Co                     268,125 
         150,000    Reliance Group Holdings Inc                   1,837,500 
          50,000    Sedgwick Group ADR                              488,565 
         135,000    TIG Holdings Inc                              4,218,750 
           7,500    Transamerica Corp                               739,219 
          25,000    USF & G Corp                                    548,438 
          20,000    Washington National Corp                        590,000 
          60,000    Willis Corroon Group Plc ADR                    618,750 
                                                           -----------------
                                                                 13,673,388 
                                                           -----------------
                    Machinery - 1.2%                                        
          35,000    Cincinnati Milacron Inc                         901,250 
          25,000    Coltec Industries Inc *                         559,375 
           5,000    Cummins Engine Inc                              384,688 
          10,000    FMC Corp *                                      830,625 
                                                           -----------------
                                                                  2,675,938 
                                                           -----------------
                    Manufacturing - 10.1%                                   
          35,000    American Greetings Corp                       1,216,250 
          25,000    Clayton Homes Inc                               420,313 
          27,500    Corning Inc                                   1,454,063 
          32,500    General Electric Co                           2,031,250 
          50,000    Griffon Corp *                                  700,000 
          47,500    International Business Machines Corp          4,791,563 
          82,500    Owens Corning                                 3,346,406 
          30,000    Rockwell International Corp                   1,800,000 
          10,000    Tenneco Inc                                     485,625 
          37,500    United Technologies Corp                      2,927,344 
         115,000    Westinghouse Electric Corp                    2,961,250 
                                                           -----------------
                                                                 22,134,064 
                                                           -----------------

2             See accompanying notes to the financial statements.               

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares          Description                                    Value ($)      
----------------------------------------------------------------------------------
                                                                                  
                    Metals and Mining - 1.4%                                      
           5,000    Alcan Aluminum Ltd                                    174,688 
          50,000    Allegheny Teledyne Inc                              1,543,750 
          37,500    Amcol International Corp                              637,500 
          50,000    Boliden Ltd                                           262,921 
          20,600    Echo Bay Mines Ltd *                                  104,288 
           5,000    Pittston Minerals Group                                55,938 
          15,000    Placer Dome Inc                                       249,375 
           1,666    Westaim Corp *                                          8,220 
                                                                  ----------------
                                                                        3,036,680 
                                                                  ----------------
                    Oil and Gas - 7.6%                                            
          25,000    Amerada Hess Corp                                   1,453,125 
          15,000    Cabot Oil & Gas Corp, Class A                         347,813 
           5,000    Dresser Industries Inc                                208,750 
          30,000    Enron Oil & Gas Co                                    723,750 
          52,483    Enserch Exploration Inc *                             472,344 
          50,000    Lasmo Plc ADR                                         615,625 
          25,000    Mitchell Energy Class A                               621,875 
          40,000    Mitchell Energy Class B                             1,000,000 
          10,000    Mobil Corp                                            727,500 
          15,000    Monterey Resources Inc                                309,375 
         112,500    Occidental Petroleum Corp                           2,636,719 
          50,000    Santa Fe Energy Resources Inc *                       553,125 
          35,000    Union Texas Petroleum Holdings Inc                    815,938 
          45,000    Unocal Corp                                         1,757,813 
          92,500    USX - Marathon Group                                3,012,031 
          50,000    Westcoast Energy Inc                                  956,250 
          15,000    YPF SA ADR                                            488,438 
                                                                  ----------------
                                                                       16,700,471 
                                                                  ----------------
                    Paper and Allied Products - 0.6%                              
          20,000    Fort James Corp                                       840,000 
          10,000    Weyerhaeuser Co                                       577,500 
                                                                  ----------------
                                                                        1,417,500 
                                                                  ----------------
                    Pharmaceuticals - 1.5%                                        
          10,000    Allergan Inc                                          323,750 
           7,500    Glaxo Wellcome Plc ADR                                299,063 
          17,500    Lilly (Eli) and Co                                  1,830,938 
          25,000    Medpartners Inc *                                     534,375 
          10,000    Smithkline Beecham PLC                                433,125 
                                                                  ----------------
                                                                        3,421,251 
                                                                  ----------------
                    Primary Processing - 0.6%                                     
          11,500    Du Pont (E I) De Nemours & Co Inc                     716,594 
          20,000    Intermet Corp                                         346,250 
           5,000    LTV Corp                                               65,000 
          12,500    Tubos De Acero De Mexico SA ADR *                     225,000 
                                                                  ----------------
                                                                        1,352,844 
                                                                  ----------------
                    Printing and Publishing - 0.2%                                
          25,000    News Corp Ltd ADR                                     451,563 
                                                                  ----------------

              See accompanying notes to the financial statements.              3

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares          Description                                    Value ($)      
-----------------------------------------------------------------------------------
                                                                                   
                     Real Estate - 2.0%                                            
           25,000    Boston Properties Inc *                               745,313 
           10,000    Evans Withycombe Residential                          238,125 
           65,000    JP Realty Inc                                       1,600,625 
           50,000    Summit Properties Inc                                 996,875 
           37,500    Walden Residential Properties Inc                     895,313 
                                                                   ----------------
                                                                         4,476,251 
                                                                   ----------------
                     Refining - 0.6%                                               
           15,000    Ashland Inc                                           751,875 
            5,000    Imperial Oil Ltd                                      276,250 
           25,000    Quaker State Corp                                     387,500 
                                                                   ----------------
                                                                         1,415,625 
                                                                   ----------------
                     Retail Trade - 3.5%                                           
           37,500    Costco Co Inc *                                     1,352,344 
           75,000    Federated Department Stores *                       3,150,000 
           20,000    Toys R Us Inc *                                       691,250 
           75,000    Wal-Mart Stores Inc                                 2,662,500 
                                                                   ----------------
                                                                         7,856,094 
                                                                   ----------------
                     Services - 3.7%                                               
           37,500    Cordiant Plc ADR                                      210,938 
            5,000    Manpower Inc                                          213,438 
           35,000    Ogden Corp                                            811,563 
            2,500    Time Warner Inc                                       128,750 
          200,000    Waste Management Inc                                6,400,000 
           50,000    Waste Management International Plc *                  406,250 
                                                                   ----------------
                                                                         8,170,939 
                                                                   ----------------
                     Technology - 8.8%                                             
           25,000    Avnet Inc                                           1,729,688 
           85,000    Digital Equipment Corp *                            3,655,000 
           25,000    Information Resources Inc *                           450,000 
           30,000    Intel Corp                                          2,763,750 
          100,000    Storage Technology Corp *                           5,093,750 
          137,500    Tandem Computers Inc *                              4,728,281 
           12,500    Xerox Corp                                            943,750 
                                                                   ----------------
                                                                        19,364,219 
                                                                   ----------------
                     Telecommunications - 5.6%                                     
           10,000    AT&T Corp                                             390,000 
           50,000    Cox Communications Inc *                            1,353,125 
           87,500    GTE Corp                                            3,899,219 
           30,000    MCI Communications Corp                               855,000 
           12,500    SBC Communications Inc                                679,688 
           50,000    Tele-Communications Class A *                         875,000 
           35,000    US West Inc                                         1,253,438 
          150,000    US West Media Group *                               3,000,000 
                                                                   ----------------
                                                                        12,305,470 
                                                                   ----------------
                     Tobacco - 0.3%                                                
            5,000    Gallaher Group Plc                                     89,688 
           47,500    Imperial Tobacco Group Plc                            587,813 
                                                                   ----------------
                                                                           677,501 
                                                                   ----------------

4             See accompanying notes to the financial statements.               

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

     Shares          Description                                                         Value ($)    
------------------------------------------------------------------------------------------------------
                                                                                                      
                     Transportation - 2.0%                                                            
           10,000    AMR Corp *                                                             1,007,500 
           60,000    Canadian Pacific Ltd                                                   1,751,250 
            7,500    Delta Air Lines Inc                                                      648,750 
            5,000    Hunt (JB) Transportation Services Inc                                     83,125 
           15,000    Ryder System Inc                                                         535,313 
           10,000    Sabre Group Holdings Inc *                                               307,500 
                                                                                     -----------------
                                                                                            4,333,438 
                                                                                     -----------------
                     Utilities - 5.5%                                                                 
           25,000    Calpine Corp *                                                           462,500 
           10,000    CMS Energy Corp                                                          359,375 
           62,664    Duke Energy Co                                                         3,035,288 
           20,000    Energy Group Plc                                                         808,750 
           37,481    Houston Industries Inc                                                   758,990 
          100,000    Niagara Mohawk Power Corp *                                              893,750 
            5,000    Pacific Corp                                                             103,750 
           92,875    Texas Utilities                                                        3,239,016 
           25,000    TransCanada Pipeline Ltd                                                 468,750 
           90,000    Unicom Corp                                                            2,126,250 
                                                                                     -----------------
                                                                                           12,256,419 
                                                                                     -----------------

                     TOTAL COMMON STOCKS (Cost $115,468,639)                              184,639,990 
                                                                                     -----------------
                     PREFERRED STOCKS - 1.8%                                                          
                     Metals and Mining - 0.3%                                                         
           25,000    Freeport-McMoran Corp Preferred 0.00%                                    745,313 
                                                                                     -----------------
                     Oil and Gas - 0.2%                                                               
           22,500    Atlantic Richfield Co Convertible Preferred 9.00%                        534,375 
                                                                                     -----------------
                     Paper and Allied Products - 0.6%                                                 
           28,500    James River Corp Convertible Preferred 9.00%                           1,086,563 
                                                                                     -----------------
                     Primary Processing - 0.0%                                                        
              500    Armco Inc Convertible Preferred $3.625                                    25,063 
                                                                                     -----------------
                     Transportation - 0.7%                                                            
           16,500    Navistar International Corp Preferred $6.00                              987,938 
            7,500    US Airways Group Inc Convertible Preferred Series B $4.38                642,188 
                                                                                     -----------------
                                                                                            1,630,126 
                                                                                     -----------------

                     TOTAL PREFERRED STOCKS (Cost $3,101,093)                               4,021,440 
                                                                                     -----------------

              See accompanying notes to the financial statements.              5

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

    Par Value ($)    Description                                                                    Value ($)      
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                     DEBT OBLIGATIONS - 13.9%                                                                      
                     Banking and Financial Services - 0.9%                                                         
           99,101    Citicorp, Variable Rate Note, 6.50% due 5/1/04                                         99,655 
        1,000,000    General Motors Acceptance Corp, 5.50% due 12/15/01                                    955,310 
        1,000,000    Standard Credit Card Master Trust I, Variable Rate Note, 6.11% due 9/15/97          1,000,000 
                                                                                                  -----------------
                                                                                                         2,054,965 
                                                                                                  -----------------
                     Food and Beverage - 0.4%                                                                      
          250,000    Anheuser-Busch Cos Inc, 8.50% due 3/1/17                                              259,438 
          750,000    General Foods Corp, 7.00% due 6/15/11                                                 722,940 
                                                                                                  -----------------
                                                                                                           982,378 
                                                                                                  -----------------
                     Paper and Allied Products - 0.2%                                                              
          500,000    Georgia Pacific Corp, 9.75% due 1/15/18                                               521,705 
                                                                                                  -----------------
                     Real Estate - 0.8%                                                                            
        1,750,000    HMH Properties Inc, 9.50% due 5/15/05                                               1,824,375 
                                                                                                  -----------------
                     Technology - 1.7%                                                                             
        2,500,000    Digital Equipment Corp, 7.125% due 10/15/02                                         2,447,239 
        1,000,000    VLSI Technology Inc, 8.25% due 10/01/05                                             1,027,500 
                                                                                                  -----------------
                                                                                                         3,474,739 
                                                                                                  -----------------
                     Transportation - 0.9%                                                                         
        1,000,000    AMR Corp, 9.00% due 8/1/12                                                          1,146,780 
        1,000,000    United Air Lines Inc, 9.13% due 1/15/12                                             1,117,660 
                                                                                                  -----------------
                                                                                                         2,264,440 
                                                                                                  -----------------
                     U.S. Government - 8.9%                                                                        
        7,500,000    U.S. Treasury Note, 4.75% due 8/31/98                                               7,427,325 
        1,250,000    U.S. Treasury Note, 7.75% due 2/15/01                                               1,311,325 
        5,750,000    U.S. Treasury Bond, 11.13% due 8/15/03                                              7,107,518 
          750,000    U.S. Treasury Bond, 10.75% due 8/15/05                                                950,745 
        2,500,000    U.S. Treasury Bond, 7.25% due 5/15/16                                               2,653,125 
                                                                                                  -----------------
                                                                                                        19,450,038 
                                                                                                  -----------------
                     U.S. Government Agency - 0.1%                                                                 
          353,992    Federal Home Loan Mortgage Corp, 7.50% due 1/1/23,                                            
                              Series 146, Interest Only Strip                                              115,157 
                                                                                                  -----------------

                     TOTAL DEBT OBLIGATIONS (Cost $29,472,677)                                          30,687,797 
                                                                                                  -----------------
                     SHORT-TERM INVESTMENT                                                                         
        2,090,000    State Street Bank and Trust Co Repurchase Agreement,                                          
                     dated 8/29/97, due 9/2/97, with a maturity value of                                           
                     $2,090,929 and an effective yield of 4.00%,                                                   
                     collateralized by a U.S. Treasury Note, with a rate of                                        
                     7.50% due 11/15/16                                                                            
                     with an aggregate market value of $2,133,209 (Cost $2,090,000).                     2,090,000 
                                                                                                  -----------------

6             See accompanying notes to the financial statements.               

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

                                                                                             Value ($)      
------------------------------------------------------------------------------------------------------------
                                                                                                            
              TOTAL INVESTMENTS - 100.0%                                                                    
              (Cost $150,132,409)                                                               221,439,227 

              Other Assets and Liabilities (net)                                                     54,169 
                                                                                        --------------------

              TOTAL NET ASSETS - 100.0%                                               $         221,493,396 
                                                                                        ====================

Notes to the Schedule of Investments:               

ADR - American Depositary Receipt                   

            Variable Rate Notes - The rates shown on variable rate notes are
                the current interest rates at August 31, 1997, which are
             subject to change based on the terms of the security.

*     Non-income producing security.                

              See accompanying notes to the financial statements.              7

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Assets and Liabilities - August 31, 1997 (Unaudited)                        
-----------------------------------------------------------------------------------------
                                                                                         
Assets:                                                                                  
     Investments, at value (cost $150,132,409) (Note 1)                $     221,439,227 
     Cash                                                                          2,826 
     Dividends and interest receivable                                           785,173 
     Receivable for investments sold                                           3,123,032 
     Receivable for Fund shares sold                                              26,435 
     Receivable for expenses waived or borne by Manager (Note 2)                  12,066 
                                                                         ----------------

         Total assets                                                        225,388,759 
                                                                         ----------------

Liabilities:                                                                             
     Payable for investments purchased                                           209,695 
     Payable for Fund shares repurchased                                       3,292,898 
     Payable to affiliate for management fee (Note 2)                            318,578 
     Accrued expenses and other liabilities                                       74,192 
                                                                         ----------------

         Total liabilities                                                     3,895,363 
                                                                         ----------------

Net Assets (equivalent to $18.00 per share based                                         
     on 12,305,071 shares outstanding, unlimited shares authorized)    $     221,493,396 
                                                                         ================

Net Assets consist of:                                                                   
     Paid-in capital                                                   $     134,404,147 
     Accumulated undistributed net investment income                             772,490 
     Accumulated undistributed net realized gain                              15,009,941 
     Net unrealized appreciation                                              71,306,818 
                                                                         ----------------

         Net assets                                                    $     221,493,396 
                                                                         ================

8              See accompanying notes to the financial statements.              

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
--------------------------------------------------------------------------------

                                                                [Download Table]

Investment income:                                                              
                                                                                
     Dividends (net of withholding taxes of $25,093)           $      1,902,944 
     Interest                                                         1,113,925 
                                                                 ---------------
         Total income                                                 3,016,869 
                                                                 ---------------
Expenses:                                                                       
     Management fee (Note 2)                                            966,368 
     Custodian and transfer agent fees                                   84,916 
     Audit fees                                                          27,232 
     Registration fees                                                    6,164 
     Legal fees                                                           4,692 
     Trustees fee (Note 2)                                                  920 
     Miscellaneous                                                        2,742 
                                                                 ---------------
         Total expenses                                               1,093,034 

         Less: expenses waived or borne by Manager (Note 2)             (73,820)
                                                                 ---------------
         Net expenses                                                 1,019,214 
                                                                 ---------------
            Net investment income                                     1,997,655 
                                                                 ---------------
Realized and unrealized gain (loss):                                            
         Net realized gain on investments                            16,525,120 
         Change in net unrealized appreciation (depreciation)                   
            on investments                                           11,436,775 
                                                                 ---------------

            Net realized and unrealized gain                         27,961,895 
                                                                 ---------------

Net increase in net assets resulting from operations           $     29,959,550 
                                                                 ===============

              See accompanying notes to the financial statements.              9

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                             Six Months Ended                          
                                                              August 31, 1997         Year Ended       
                                                               (Unaudited)         February 28, 1997   
                                                           ---------------------  ---------------------
                                                                                                       
Increase (decrease) in net assets:                                                                     
Operations:                                                                                            
     Net investment income                                 $          1,997,655   $          3,995,498 
     Net realized gain                                               16,525,120              9,036,632 
     Change in net unrealized appreciation (depreciation)            11,436,775             19,894,742 
                                                           ---------------------  ---------------------

     Net increase in net assets resulting from operations            29,959,550             32,926,872 
                                                           ---------------------  ---------------------
Distributions to shareholders from:                                                                    
     Net investment income                                           (2,698,528)            (3,383,491)
     Net realized gains                                              (6,192,203)            (6,758,143)
                                                           ---------------------  ---------------------

                                                                     (8,890,731)           (10,141,634)
                                                           ---------------------  ---------------------
Fund share transactions:  (Note 5)                                                                     
     Proceeds from sale of shares                                    10,325,932             22,372,007 
     Net asset value of shares issued to shareholders                                                  
         in payment of distributions declared                         8,071,282              9,313,111 
     Cost of shares repurchased                                     (25,341,505)           (24,339,781)
                                                           ---------------------  ---------------------
     Net increase (decrease) in net assets resulting                                                   
         from Fund share transactions                                (6,944,291)             7,345,337 
                                                           ---------------------  ---------------------

     Total increase in net assets                                    14,124,528             30,130,575 

Net assets:                                                                                            
     Beginning of period                                            207,368,868            177,238,293 
                                                           ---------------------  ---------------------

     End of period (including accumulated undistributed                                                
         net investment income of $772,490 and                                                         
         $1,473,363, respectively)                         $        221,493,396   $        207,368,868 
                                                           =====================  =====================

10            See accompanying notes to the financial statements.               

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Financial Highlights                                                            
(For a share outstanding throughout each period)                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                              Six Months Ended                               
                                                              August 31, 1997    Year Ended February 28/29,  
                                                                               ------------------------------
                                                                                                             
                                                              (Unaudited)          1997             1996     
                                                              ------------     -------------     ------------

Net asset value, beginning of period                        $       16.31    $        14.52    $       11.99 
                                                              ------------     -------------     ------------

Income from investment operations:                                                                           
  Net investment income                                              0.17              0.33             0.31 
  Net realized and unrealized gain                                   2.25              2.27             3.04 
                                                              ------------     -------------     ------------

    Total from investment operations                                 2.42              2.60             3.35 
                                                              ------------     -------------     ------------

Less distributions to shareholders:                                                                          
  From net investment income                                        (0.22)            (0.27)           (0.29)
  From net realized gains                                           (0.51)            (0.54)           (0.53)
                                                              ------------     -------------     ------------

    Total distributions                                             (0.73)            (0.81)           (0.82)
                                                              ------------     -------------     ------------

Net asset value, end of period                              $       18.00   $         16.31   $        14.52 
                                                              ============     =============     ============

Total Return (a)                                                   15.00%            18.40%           28.54% 

Ratios/Supplemental Data:                                                                                    

         Net assets, end of period (000's)                  $    221,493     $     207,369     $    177,238  
         Net expenses to average                                                                             
             daily net assets                                      0.95%*            0.95%            1.05%  
         Net investment income to average                                                                    
             daily net assets                                      1.86%*            2.10%            2.42%  
         Portfolio turnover rate                                     15%               27%              32%  
         Average broker commission rate (b)                 $     0.0689    $       0.0556             N/A   
         Fees and expenses voluntarily waived or borne by                                                    
             the Manager consisted of the following per                                                      
             share amounts:                                 $       0.01   $          0.01     $        -    



                                                                    Year Ended February 28/29,               
                                                           ------------------------------------------------- 
                                                                                                             
                                                                  1995              1994             1993    
                                                              -----------     -------------     ------------ 

Net asset value, beginning of period                        $      12.08    $        11.37    $       10.70  
                                                              -----------     -------------     ------------ 

Income from investment operations:                                                                           
  Net investment income                                             0.37              0.29             0.36  
  Net realized and unrealized gain                                  0.46              1.40             1.06  
                                                              -----------     -------------     ------------ 

    Total from investment operations                                0.83              1.69             1.42  
                                                              -----------     -------------     ------------ 

Less distributions to shareholders:                                                                          
  From net investment income                                       (0.37)            (0.37)           (0.38) 
  From net realized gains                                          (0.55)            (0.61)           (0.37) 
                                                             -----------     -------------     ------------  

    Total distributions                                            (0.92)            (0.98)           (0.75) 
                                                             -----------     -------------     ------------  

Net asset value, end of period                              $      11.99    $        12.08   $        11.37  
                                                              ===========     =============     ============ 

Total Return (a)                                                   7.38%            15.14%           13.93%  

Ratios/Supplemental Data:                                                                                    

         Net assets, end of period (000's)                  $    117,920    $      101,165    $      85,401  
         Net expenses to average                                                                             
             daily net assets                                      1.10%             1.10%            1.10%  
         Net investment income to average                                                                    
             daily net assets                                      2.51%             2.42%            3.40%  
         Portfolio turnover rate                                     40%               49%              39%  
         Average broker commission rate (b)                          N/A               N/A              N/A  
         Fees and expenses voluntarily waived or borne by                                                    
             the Manager consisted of the following per                                                      
             share amounts:                                  $       -        $       0.01    $        0.01  

*            Annualized.                                                        
(a)          The total returns would have been lower had certain expenses not   
been waived during the periods shown.                 
(b)          For fiscal years beginning on or after September 1, 1995, a fund is
        required to disclose its average commission rate per share for
security trades on which commissions are charged.     

              See accompanying notes to the financial statements.             11

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

 The Fund seeks long-term capital growth primarily through investment in
equity securities.                                                    

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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 debt obligations with a remaining maturity of sixty days or less
    are valued at amortized cost which approximates market value. Other assets
    and securities for which no quotations are readily available are valued at
fair value as determined in good faith by the Trustees.               

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. 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.                                

12                                                                              

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
   tax is necessary. Taxes on foreign interest and dividend income have been
  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.                                                        

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
   differing treatments for amortization of discount on bonds. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
    accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis.        

Expenses                                                              
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
  Fund are allocated in such a manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds.                           

2.   Management fee and other transactions with affiliates                      

GMO earns a management fee paid monthly at the annual rate of .90% of 
    average daily net assets. GMO has agreed to waive a portion of its fee and
bear other expenses until further notice to the extent that the Fund's
annual expenses (including the management fee but excluding brokerage 
  commissions and transfer taxes) exceed .95% of average daily net assets.

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $920. No    
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

13

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Pelican Fund                                                                    
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                        [Enlarge/Download Table]

                                                     Purchases                Proceeds       
                                                --------------------    ---------------------
                                                                                             
U.S. Government securities                    $           2,762,813   $                    - 
Investments (non-U.S. Government securities)             27,890,243               45,292,785 

At August 31, 1997, the cost for Federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments held was as    
follows:                                                                        

                                                        [Enlarge/Download Table]

                                Gross Unrealized            Gross Unrealized          Net Unrealized     
    Aggregate Cost                Appreciation                 Depreciation             Appreciation     
-------------------------  ---------------------------  -------------------------  ----------------------
                                                                                                         
      $150,132,409                $73,115,887                  $1,809,069               $71,306,818      

4.   Principal shareholder                                                      

    At August 31, 1997, 38% of the outstanding shares of the Fund were held by
one shareholder.                                                      

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:                                               

                                                        [Enlarge/Download Table]

                                                   Six Months Ended          Year Ended    
                                                    August 31, 1997       February 28, 1997
                                               ------------------------  ------------------
                                                                                           
Shares sold                                            602,006                1,487,108    
Shares issued to shareholders in reinvestment                                              
   of distributions                                    462,817                  632,940    
Shares repurchased                                 (1,473,913)               (1,610,011)   
                                                ------------------       ------------------
Net increase/(decrease)                              (409,090)                  510,037    
Fund shares:                                                                               
  Beginning of period                               12,714,161               12,204,124    
                                                ------------------       ------------------
  End of period                                     12,305,071               12,714,161    
                                                ==================       ==================

14                                                                              

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 182nd Page of 667 TOC 1st Previous Next ↓Bottom Just 182nd
GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                             Value ($)      
---------------------------------------------------------------------------------------------
                                                                                             
                      STOCK AND EQUIVALENTS - 89.8%                                          
                      Argentina - 0.2%                                                       
            57,500    YPF SA ADR                                                   1,872,344 
                                                                          -------------------

                      Australia - 4.0%                                                       
           336,591    Australia and New Zealand Banking Group Ltd                  2,417,707 
           706,644    Boral Ltd                                                    2,060,409 
           486,000    Burswood Property Trust                                        538,984 
           219,100    Caltex Australia Ltd                                           638,844 
           178,264    Capral Aluminum Ltd                                            569,528 
         2,376,006    Crown Ltd *                                                  2,914,246 
           237,472    Dominion Mining Ltd Warrants 12/31/98 *                         21,801 
           494,945    Dominion Mining Ltd *                                          174,486 
           690,504    Email Ltd                                                    2,124,919 
           334,137    Energy Research Group Ltd                                      306,759 
           465,510    Foodland Associated                                          3,318,080 
         1,432,358    Goodman Fielder Ltd                                          2,051,391 
           312,500    Menzies Gold NL Rights 9/22/97 *                                   230 
         2,500,000    Menzies Gold NL * *                                            413,128 
         3,045,980    MIM Holdings Ltd                                             3,646,506 
           550,417    National Mutual Holdings                                       816,593 
           390,000    Oil Search Ltd                                                 945,237 
            54,000    Orogen Minerals Ltd GDR 144A                                 1,560,060 
         2,236,235    Pasminco Ltd                                                 4,045,238 
           587,001    Pioneer International Ltd                                    1,974,543 
           616,496    Rothmans Holdings Ltd                                        3,254,169 
           785,000    Sydney Harbour Casinos Preferred *                           1,066,605 
           834,448    Westpac Banking Corp                                         4,835,468 
           501,706    Wills (WD & HO) Holdings Ltd                                   678,000 
                                                                          -------------------
                                                                                  40,372,931 
                                                                          -------------------
                      Austria - 0.3%                                                         
            41,420    Bank Austria AG (Participating Certificate)                  1,173,765 
             4,613    Oesterreichische Brau Beteiligungs AG                          243,969 
             7,170    Radex-Heraklith AG                                             276,761 
             1,991    Universale Bau AG                                               64,436 
             3,932    VA Technologie AG (Bearer)                                     721,472 
             3,140    Wienerberger Baustoffindustrie AG                              609,735 
                                                                            -----------------
                                                                                   3,090,138 
                                                                            -----------------
                      Belgium - 2.5%                                                         
             1,942    Banque Bruxelles Lambert                                       453,099 
             1,109    Bekaert SA                                                     701,332 
            25,042    Cie Francois De Enterprises                                  7,412,863 
            14,200    Credit Commercial Dexia                                      1,360,388 
            19,173    Electrabel SA                                                3,771,653 
             6,397    Generale Banque NPV                                          2,397,154 
            17,305    GIB Holdings Ltd                                               866,181 
             5,032    Kredietbank NPV                                              1,872,104 
             2,713    Petrofina SA Bruxelles                                         969,189 
             9,616    Powerfin SA                                                  1,261,518 
             1,510    Royale Belge NPV                                               416,510 
            24,780    Solvay Et Cie                                                1,387,040 
               800    UCB Cap NPV                                                  2,495,156 
                                                                            -----------------
                                                                                  25,364,187 
                                                                            -----------------

              See accompanying notes to the financial statements.              1

N-30D 183rd Page of 667 TOC 1st Previous Next ↓Bottom Just 183rd
GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Brazil - 0.0%                                                                          
         6,439,529    Gerdau SA Preferred                                                            126,196 
         2,809,993    Metalurgica Gerdau Preferred                                                   126,089 
           158,537    Metalurgica Gerdau SA                                                            4,355 
                                                                                          -------------------
                                                                                                     256,640 
                                                                                          -------------------
                      Canada - 1.6%                                                                          
           136,620    Abitibi-Price Inc                                                            2,391,059 
           299,128    Air Canada Inc *                                                             2,348,299 
            29,693    Alliance Forest Preferred (d) *                                                702,521 
            10,200    Alliance Forest Products Inc *                                                 241,327 
            10,000    Avenor Inc                                                                     187,259 
            12,000    Boliden Ltd Installment Receipt 144A *                                          63,092 
           283,000    Boliden Ltd *                                                                1,487,918 
            36,700    Burcon International Development Ltd 144A *                                    385,912 
            50,000    Burcon International Development Ltd *                                         525,766 
           113,149    Cambridge Shopping Centres Ltd                                               1,144,977 
            33,500    Canfor Corp                                                                    361,914 
            15,711    Elan Energy Inc *                                                              101,840 
           101,500    Iamgold (International African Mining Gold) *                                  427,653 
           116,600    KAP Resources Ltd Warrants 8/3/00 *                                             92,376 
           220,100    KAP Resources Ltd *                                                            412,157 
           200,000    Meridian Gold Inc Installment Receipt 144A *                                   893,082 
           633,600    Semi-Tech Class A *                                                          1,588,050 
            37,800    St Laurent Paperboard *                                                        643,862 
            43,000    Suzy Shier (Non Voting)                                                        322,086 
            99,000    Tembec Inc Class A *                                                           926,933 
            23,140    Trizec Hahn Corp (Sub-Voting)                                                  524,981 
                                                                                          -------------------
                                                                                                  15,773,064 
                                                                                          -------------------
                      Chile - 0.0%                                                                           
           141,751    Five Arrows Chile Investment Trust Ltd                                         457,856 
            27,821    Five Arrows Chile Warrants 5/31/99 *                                            12,241 
                                                                                          -------------------
                                                                                                     470,097 
                                                                                          -------------------
                      Denmark - 0.0%                                                                         
            12,300    Alm Brand AS Class B                                                           373,238 
                                                                                          -------------------

                      France - 6.8%                                                                          
             9,350    Accor SA                                                                     1,402,770 
            34,245    Alcatel Alsthom Cie Generale d'Electricite SA                                4,200,524 
            17,136    Axa SA                                                                       1,093,336 
             4,788    AXA UAP                                                                         13,143 
            31,216    Banque Nationale de Paris                                                    1,332,939 
            46,100    BIC SA                                                                       3,336,559 
            13,896    Bouygues                                                                     1,113,421 
             4,080    Cap Gemini SA                                                                  248,883 
             7,793    CGIP                                                                         2,184,173 
             5,278    Chargeurs International SA                                                     313,260 
             5,943    Christian Dior                                                                 837,732 
             2,600    Cie Bancaire SA                                                                286,769 
            12,983    Club Mediterranee SA *                                                       1,041,337 
             3,200    Colas SA                                                                       423,114 
             6,890    Credit Local de France SA                                                      595,229 

2             See accompanying notes to the financial statements.               

N-30D 184th Page of 667 TOC 1st Previous Next ↓Bottom Just 184th
GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                Value ($)      
------------------------------------------------------------------------------------------------
                                                                                                
                      France - continued                                                        
            16,505    Credit Lyonnais *                                                 892,530 
             7,679    Dollfus-Mieg and Cie *                                            143,566 
           107,505    Elf Aquitaine SA                                               11,963,709 
             2,871    Elf Gabon                                                         658,879 
             3,304    Eridania Beghin-Say SA                                            430,329 
            17,926    Financiere de Paribas SA                                        1,236,541 
             1,739    Gaz Et Eaux                                                       743,996 
            11,174    Generale Des Eaux                                               1,249,027 
            11,021    Generale Des Eaux Warrants 5/2/2001 *                               6,178 
             7,038    Group Axime *                                                     734,491 
             6,744    Groupe Andre *                                                    620,419 
            14,288    Groupe Danone                                                   2,129,479 
             1,035    Guyenne Et Gascogne                                               345,540 
             4,389    Labinal SA                                                      1,049,221 
            12,000    Lafarge Coppee SA                                                 775,534 
            36,617    Lagardere Groupe                                                  981,001 
            45,816    Lyonnaise Des Eaux                                              4,615,213 
            23,010    Michelin SA Class B                                             1,293,613 
             4,318    Pathe SA                                                          807,289 
            25,523    Pechiney SA Class A                                             1,104,152 
             6,970    Pernod-Ricard                                                     325,776 
            18,403    Peugeot SA                                                      2,066,185 
            51,312    Rhone Poulenc SA Class A                                        1,884,810 
             6,796    Saint-Gobain                                                      934,443 
            55,294    Seita                                                           1,704,720 
            16,483    Sidel (Bearer)                                                  1,195,700 
            18,605    Societe Generale Paris                                          2,312,780 
            15,100    Sommer Allibert                                                   536,485 
            35,100    SPIE Batignolles                                                1,870,881 
             4,196    Strafor Facom                                                     289,165 
             6,000    Sylea (Bearer)                                                    534,169 
            46,206    Thomson CSF                                                     1,242,469 
            30,104    Total SA                                                        2,824,034 
             2,700    TV Francaise                                                      220,345 
             9,260    Vallourec                                                         552,654 
             6,835    Worms et Compagnie SA                                             372,654 
                                                                                ----------------
                                                                                     69,071,166 
                                                                                ----------------
                      Germany - 6.5%                                                            
           126,500    Bankgesellschaft Berlin AG                                      3,106,019 
            66,500    BASF AG                                                         2,286,671 
            61,990    Bayer AG                                                        2,286,896 
           135,000    Bayerishe Hypotheken und Wechsel-Bank AG                        2,272,311 
            26,800    Brau und Brunnen *                                              2,128,934 
           139,500    Commerzbank AG                                                  4,851,096 
           133,310    Continental AG                                                  3,243,606 
            26,500    Daimler-Benz                                                    1,987,334 
           220,000    Deutsche Telekom AG                                             4,399,633 
           169,140    Dresdner Bank                                                   6,736,849 
             3,641    Dyckerhoff AG (Non Voting)                                      1,254,018 
             9,800    Holzmann (Philipp) *                                            2,966,975 

              See accompanying notes to the financial statements.              3

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------

                                                                                                             
                                                                                                             
                      Germany - continued                                                                    
             3,331    Kolnische Rueckversicherungs Gesellschaft Preferred                          2,812,610 
             9,945    Kolnische Rueckversicherungs Gesellschaft (Registered)                       8,563,036 
            25,272    Metro AG Preferred Class I                                                     897,081 
           123,000    Pfeiffer Vacuum Tech Sponsored ADR *                                         3,490,125 
             5,500    Rheinmetall Berlin AG                                                          977,696 
               604    Rheinmetall Berlin AG Preferred (Non Voting) 5.60%                              97,639 
           131,860    RWE Preferred                                                                5,090,837 
             5,150    Villeroy and Boch AG *                                                         826,792 
             2,100    Volkswagen AG                                                                1,510,707 
             4,000    Volkswagen AG Preferred .79%                                                 2,155,376 
             4,500    Volkswagen AG Warrants 10/27/98 *                                            1,787,351 
                                                                                          -------------------
                                                                                                  65,729,592 
                                                                                          -------------------
                      Greece - 0.0%                                                                          
            27,350    Greek Progress Fund                                                            239,582 
                                                                                          -------------------

                      Hong Kong - 3.9%                                                                       
         1,132,400    Amoy Properties Ltd                                                          1,139,853 
         2,255,052    Dairy Farm International                                                     1,894,244 
           496,327    Great Eagle Holdings Ltd                                                     1,450,743 
         1,844,800    Hang Lung Development Co Ltd                                                 3,332,972 
            49,128    Hang Lung Development Co Ltd Warrants 10/31/97 *                                 3,297 
         1,310,641    Hong Kong Land Holdings                                                      3,787,752 
           656,900    Hysan Development Co Ltd                                                     1,907,375 
            28,345    Hysan Development Co Ltd Warrants 4/30/98 *                                     12,437 
           302,000    Jardine International Motor Holdings Ltd                                       342,960 
           403,000    Jardine Strategic Preferred                                                    485,615 
           135,133    Jardine Strategic Warrants 5/02/98 *                                            59,459 
           729,000    Kumagai Gumi Hong Kong Ltd                                                   1,368,815 
         1,590,000    Lai Sun Development                                                          1,579,946 
         1,250,000    Lai Sun Garment International Ltd                                            1,508,259 
         1,025,266    Liu Chong Hing Bank Ltd                                                      2,732,190 
         1,103,000    National Mutual Asia Ltd                                                       896,748 
            70,000    Orient Overseas International Ltd                                               46,974 
         7,004,073    Regal Hotels International Ltd                                               1,920,719 
         1,695,655    Semi Tech (Global) Co Ltd                                                    2,549,281 
           160,248    Semi Tech (Global) Co Ltd Warrants 7/31/98 *                                    38,878 
           562,000    Swire Pacific Ltd Class A                                                    4,297,135 
         1,369,500    Swire Pacific Ltd Class B                                                    1,988,240 
         1,106,500    Wharf Holdings Ltd                                                           4,005,333 
           638,000    Wheelock & Co Ltd                                                            1,325,565 
           183,912    Wing On Co                                                                     211,229 
           758,486    Winsor Industrial Corp Ltd                                                     215,340 
           429,243    Winsor Properties Holdings Ltd                                                 686,877 
                                                                                          -------------------
                                                                                                  39,788,236 
                                                                                          -------------------
                      Hungary - 0.0%                                                                         
            96,327    Fotex (Registered) *                                                           117,625 
                                                                                          -------------------

                      India - 0.2%                                                                           
           157,150    India Fund Class A                                                             708,527 
            40,000    India Liberalisation *                                                         353,200 
            59,007    Mahindra & Mahindra GDR 144A (d)                                               672,680 
            11,000    Morgan Stanley India Fund Inc *                                                118,250 
                                                                                          -------------------
                                                                                                   1,852,657 
                                                                                          -------------------


See accompanying notes to the financial statements. 

4                                                                               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Indonesia - 0.2%                                                                       
         1,685,198    Bank Dagang Nasional Industries (Foreign Registered)                           357,034 
           240,744    Bank Dagang Nasional Warrants 2/14/00 (Foreign Registered) *                    14,281 
           130,000    Bunas Finance Indonesia                                                         88,136 
           603,500    Daya Guna Samudera (Foreign Registered)                                        818,305 
         1,073,668    Dharmal Sakit Sejatera (Foreign Registered)                                    418,549 
           204,137    Dharmala Intiland (Foreign Registered)                                         183,377 
           350,000    Komatsu Indonesia (Foreign Registered)                                         109,746 
                                                                                          -------------------
                                                                                                   1,989,428 
                                                                                          -------------------
                      Israel - 0.0%                                                                          
            39,500    Koor Industries Ltd ADR                                                        254,281 
                                                                                          -------------------

                      Italy - 3.4%                                                                           
            26,000    Aeroporti Di Roma *                                                            214,266 
            78,457    Assicurazioni Generali SPA                                                   1,657,632 
           515,792    Banca Commerciale Italiana SPA                                               1,288,964 
            59,948    Banca di Legano SPA                                                            196,285 
           236,958    Banca Toscana                                                                  526,213 
           513,583    Banco Ambrosiano Veneto SPA (Non Convertible)                                1,125,930 
           207,500    Comau Finanziaria SPA                                                          646,999 
         1,234,464    Credito Italiano                                                             2,559,085 
           163,232    Danieli and Co SPA (Non Convertible)                                           579,427 
           246,322    ENI SPA                                                                      1,378,011 
            29,972    Ericsson SPA                                                                   516,640 
           146,530    Falck Acciaierie and Ferriere Lombarde                                         574,234 
           331,490    Fiat SPA                                                                     1,020,430 
           413,552    Fiat SPA Preferred                                                             642,393 
            29,074    Fiat SPA (Non Convertible)                                                      48,630 
           221,428    Gilardini SPA                                                                  365,965 
            39,570    IFI Istituto Finanziario Preferred 2.46%                                       450,603 
           172,607    IFIL Finanziaria di Partecipazioni SPA (Non Convertible)                       292,138 
           627,004    Industriali Riunite SPA *                                                      442,644 
           215,693    Istituto Mobilaire Italiano                                                  2,008,449 
           160,238    Italcementi Fabbriche Riunite Cemento SPA (Non Convertible)                    388,149 
           223,315    Italgas SPA                                                                    687,433 
            74,642    Mediaset SPA                                                                   328,336 
            42,000    Mediobanco SPA                                                                 274,083 
         1,383,702    Montedison SPA                                                                 840,891 
           975,630    Montedison SPA (Non Convertible)                                               482,079 
           210,955    Montefibre SPA                                                                 123,407 
           456,107    Olivetti and Co SPA * *                                                        185,219 
            46,000    Pagnossin SPA                                                                  194,638 
            84,930    RAS SPA                                                                        722,822 
            73,200    Rinascente per l'Esercizio di Grandi Magazzini SPA                             447,339 
           117,157    SAI di Risp                                                                    355,988 
           719,880    Seat SPA di Risp *                                                             176,627 
           713,947    Seat SPA *                                                                     266,407 
           127,537    Sirti SPA                                                                      684,513 
         1,341,241    Telecom Italia Mobile SPA (Non Convertible)                                  2,247,203 
           741,724    Telecom Italia SPA di Risp                                                   4,414,861 
           833,885    Telecom Italia SPA di Risp (Non Convertible)                                 2,950,581 

              See accompanying notes to the financial statements.              5

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Italy - continued                                                                      
            54,563    Toro Assicurazioni                                                             680,215 
            68,306    Unione Cementi Marchino Emiliane e di Augusta-Casale                           485,904 
           134,857    Unione Cementi Marchino Emiliane e di Augusta-Casale (Non Convertible)         348,496 
                                                                                              ---------------
                                                                                                  33,820,129 
                                                                                              ---------------
                      Japan - 22.0%                                                                          
            28,000    Advantest Corp                                                               2,560,479 
            54,000    Aisin Seiki Co Ltd                                                             736,221 
            52,200    AJL Peps Trust Exchange                                                        796,050 
            40,300    Akita Bank                                                                     237,867 
            75,000    Arisawa Manufacturing                                                        1,034,999 
           226,000    Asahi Breweries Ltd                                                          3,363,039 
            56,000    Banyu Pharmaceutical Co Ltd                                                    940,394 
           313,000    Bridgestone Corp                                                             6,947,460 
           196,000    Canon Inc                                                                    5,425,887 
                24    Chubu Electric Power Co Inc                                                        403 
             4,000    Chudenko Corp                                                                   91,778 
            39,758    Chugoku Electric Power Co Inc                                                  644,510 
            31,800    Circle K Japan Co Ltd                                                        1,596,741 
            33,300    Credit Saison Co                                                               860,944 
            83,000    Daiichi Seiyaku Co Ltd                                                       1,414,498 
           170,000    Daikin Industries Ltd                                                        1,232,355 
           239,000    Dainippon Ink & Chemicals Inc                                                  882,168 
           148,000    Dainippon Printing Co Ltd                                                    3,100,507 
               444    East Japan Railway Co                                                        2,030,094 
            30,100    Exedy Corp                                                                     242,472 
            52,400    Ezaki Glico Co Ltd                                                             394,231 
           104,000    Familymart                                                                   4,366,115 
                54    Fuji International Finance Preferred ADS 144A, .25% due 2/1/02               1,393,881 
           160,000    Fuji Photo Film Co Ltd                                                       6,171,752 
            89,000    Fujitec Co                                                                   1,043,229 
           414,000    Fujitsu Ltd                                                                  4,956,023 
            46,000    Gunma Bank Ltd                                                                 401,530 
           137,000    Hitachi Cable Ltd                                                            1,002,245 
            60,000    Hitachi Credit Corp                                                          1,142,240 
           696,000    Hitachi Ltd                                                                  6,422,479 
            46,312    Hokkaido Electric Power                                                        777,706 
           291,000    Honda Motor Co Ltd                                                           8,999,252 
            15,000    Hoya Corp                                                                      637,210 
               156    Japan Tobacco Inc                                                            1,256,663 
            40,000    Jusco Co                                                                     1,070,746 
            84,350    Kansai Electric Power                                                        1,577,750 
           245,000    Kao Corp                                                                     3,625,405 
           229,000    Kawasaki Heavy Industry                                                        896,658 
            23,000    Kirin Beverage                                                                 372,849 
            50,400    Kurita Water Industries Ltd                                                  1,332,380 
            21,000    Kyudenko Corp                                                                  140,012 
            72,133    Kyushu Electric Power Co Inc                                                 1,175,332 
           126,000    Marui Co Ltd                                                                 2,000,665 
            54,000    Maruichi Steel Tube                                                            785,602 
           545,000    Matsushita Electric Industrial Co Ltd                                       10,058,193 

6             See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Japan - continued                                                                      
           225,000    Matsushita Electric Works Ltd                                                2,431,624 
           447,000    Minebea Co Ltd                                                               4,459,224 
           275,000    Minolta Co Ltd                                                               1,577,438 
           150,000    Mitsubishi Corp                                                              1,483,914 
           446,000    Mitsui & Co                                                                  3,648,383 
            23,000    Murata Manufacturing Co Ltd                                                    938,815 
            34,700    Namco Ltd                                                                    1,174,071 
           203,000    NEC Corp                                                                     2,278,244 
            35,350    Nichido Fire & Marine Insurance Co Ltd                                         234,805 
            88,000    Nichii Co Ltd                                                                1,002,245 
            33,400    Nintendo Co Ltd                                                              2,759,963 
            21,000    Nippon Broadcasting System                                                   1,555,491 
            77,700    Nippon Electric Glass Co                                                     1,065,799 
           215,000    Nippon Meat Packers Inc                                                      2,591,654 
           480,000    Nissho Iwai Corp                                                             1,807,632 
           214,000    Obayashi Corp                                                                1,295,137 
            34,000    Omron Corp                                                                     633,137 
           101,000    Onward Kashiyama Co Ltd                                                      1,553,329 
            58,000    Orix Corp                                                                    4,315,404 
            28,400    Paris Miki Inc                                                                 552,465 
           352,000    Ricoh Co Ltd                                                                 4,769,806 
            40,000    Rinnai Corp                                                                    744,867 
            65,000    Rohm Co Ltd                                                                  6,754,510 
                 9    Sakura Finance Preferred .75% 144A                                             453,965 
           102,000    Sanden Corp                                                                    699,559 
            66,900    Sankyo Co Ltd                                                                2,035,531 
           164,000    Sekisui Chemical Co Ltd                                                      1,390,639 
            25,000    Shimachu Co                                                                    565,301 
           162,750    Shin-Etsu Chemical Co Ltd                                                    4,167,179 
           140,000    Shiseido Co Ltd                                                              2,292,792 
            33,000    Sho Bond Construction Co                                                       685,843 
             1,400    Shohkoh Fund & Co                                                              407,349 
            75,000    Showa Corp                                                                     563,638 
            37,800    SMC                                                                          3,173,830 
           101,600    Sony Corp                                                                    8,868,568 
           114,000    Sumitomo Electric                                                            1,724,811 
           262,000    Sumitomo Realty and Development Co Ltd *                                     2,088,769 
           356,000    Suzuki Motor Corp                                                            3,373,847 
            46,000    Tachi-S Co Ltd                                                                 447,419 
            85,000    Taisho Pharmaceutical Co Ltd                                                 2,084,546 
           123,000    Taiyo Yuden Co Ltd                                                           1,441,766 
           285,000    Takeda Chemical Industries Ltd                                               7,605,370 
           105,000    Tanabe Seiyaku Co Ltd                                                          790,839 
            99,000    TDK Corp                                                                     7,621,082 
           217,000    Terumo Corp                                                                  3,968,742 
               450    Toagosei Chemical Industry Co Ltd                                                1,186 
            74,000    Toda Corp                                                                      412,171 
                14    Tohoku Electric Power Co Inc                                                       228 
            28,000    Tokyo Broadcasting System Inc                                                  472,525 
                60    Tokyo Electric Power                                                             1,147 

              See accompanying notes to the financial statements.              7

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Japan - continued                                                                      
            77,200    Tokyo Electron                                                               4,203,674 
            80,000    Tokyo Seimitsu Co Ltd                                                        2,028,431 
            68,000    Toppan Printing Co Ltd                                                         977,970 
            50,500    Tsubaki Nakashima Co Ltd                                                       316,963 
            30,000    Unicharm Corp                                                                1,017,541 
            92,000    UNY Co Ltd                                                                   1,690,249 
            42,000    Wacoal Corp                                                                    485,327 
               354    West Japan Railway Co                                                        1,221,299 
           177,000    Yamanouchi Pharmaceutical Co Ltd                                             4,237,759 
            81,000    Yamatake Honeywell                                                           1,407,349 
            96,000    Yamato Kogyo Co                                                                837,975 
                                                                                          -------------------
                                                                                                 221,530,150 
                                                                                          -------------------
                      Korea - 1.3%                                                                           
           121,500    Bank of Pusan                                                                  706,787 
               390    Daehan Flour Mill                                                               37,596 
           114,350    Daewoo Corp                                                                    899,596 
            22,000    Daewoo Securities Ltd Preferred 15.98% *                                       158,449 
               829    Daewoo Securities *                                                             13,319 
               100    Dong Yang Dragon Fund *                                                      1,100,000 
             9,860    Dongkuk Steel Mill                                                             219,597 
            67,310    Dongwon Securities Co Preferred                                                335,618 
            15,310    Halla Climate Control Corp                                                     435,975 
            32,641    Hana Bank Sponsored GDR (d)                                                    326,410 
             1,500    Hankook Tire Manufacturing Co Ltd                                               59,668 
            14,490    Hansol Paper Manufacturing Ltd                                                 356,430 
           147,376    Hanwha Corp                                                                  1,521,933 
            41,000    Hyundai Motor Service Co GDR 144A (d)                                          312,625 
            68,540    Jinro Ltd Preferred                                                            151,889 
             6,795    Kookmin Bank                                                                   105,923 
           100,000    Korea Exchange Bank                                                            570,637 
           159,000    Korea First Bank                                                               632,477 
                68    Korea Trust *                                                                  238,000 
            16,000    Kyungki Bank *                                                                  70,914 
           158,230    Kyungnam Bank                                                                1,376,294 
            10,000    LG Cable & Machinery Ltd                                                       162,881 
            30,000    LG Securities Co Preferred                                                     172,853 
             2,580    Pohang Iron & Steel                                                            222,625 
           122,300    Samsung Corp                                                                 1,504,188 
            68,036    Samsung Heavy Industries Co Ltd *                                              814,170 
            72,000    Seoul Bank *                                                                   248,111 
            27,940    Shinhan Bank                                                                   277,976 
             1,040    Shinyoung Securities Preferred                                                   5,992 
             6,746    Sindoricom Co Ltd                                                              352,033 
               130    SK Telecom                                                                      97,083 
             6,300    Ssangyong Investment Securities Co Preferred 59.90% *                           20,942 
                                                                                          -------------------
                                                                                                  13,508,991 
                                                                                          -------------------
                      Mexico - 0.4%                                                                          
            40,238    Cifra SA                                                                        76,865 
           329,000    Cifra SA De Class C                                                            583,648 
            30,000    Desc SA De CV Sponsored ADR *                                                  997,500 

8             See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Mexico - continued                                                                     
            15,000    Desc Sociedad De Formento Class C                                              124,373 
           357,000    Empaques Ponderosa Class B *                                                   270,768 
           109,000    Grupo Financiero Banamex Class B                                               292,152 
             8,868    Grupo Financiero Banamex Class L                                                23,028 
           569,562    Grupo Financiero Bancomer SA Class B                                           347,785 
            21,085    Grupo Financiero Bancomer SA Class L                                            10,842 
             1,496    Grupo Mexico Desarollo Class B ADR *                                               935 
             1,496    Grupo Mexico Desarollo Class L ADR *                                             1,496 
            28,600    Grupo Televisa                                                                 483,101 
            61,333    Mexico Fund                                                                  1,203,660 
                                                                                          -------------------
                                                                                                   4,416,153 
                                                                                          -------------------
                      Netherlands - 5.8%                                                                     
           135,280    ABN Amro Holdings NV                                                         2,663,610 
            42,642    Aegon NV                                                                     3,177,449 
            27,461    Akzo Nobel NV                                                                4,271,365 
           586,358    ASM International NV *                                                       7,695,949 
            13,161    Bam Groep                                                                      753,375 
            10,000    Cap Volmac Group NV                                                            323,225 
            30,822    De Boer Unigro NV                                                            1,026,665 
            61,636    Dordtsche Petroleum                                                          3,151,072 
            90,660    Elsevier NV                                                                  1,377,941 
            25,000    Endemol Entertainment *                                                        579,832 
            23,439    Fugro NV                                                                       803,874 
            29,331    Gist Brocades NV                                                               839,497 
            54,225    Hal Trust Class B                                                              998,096 
            60,274    Hal Trust (Participating Certificate)                                        1,109,438 
            33,449    Heidemij Holdings NV                                                           353,233 
            40,500    Hunter Douglas NV                                                            1,700,782 
            24,644    ING Groep NV                                                                 1,076,263 
            11,500    Internatio-Muller                                                              369,439 
            42,226    Kon Bolswessanen                                                               708,473 
            15,637    Koninklijke NV                                                                 337,209 
            15,588    Koninklijke Pakhoed                                                            534,613 
            64,081    Koninklijke PTT Nederland                                                    2,279,967 
            75,537    Kononklijke Volker Wessels                                                   2,236,532 
                82    Moeara Enim Petroleum                                                        1,901,848 
            20,560    Nedlloyd                                                                       610,779 
             9,220    Nutricia Ver Bedrijven                                                       1,433,196 
            98,883    Philips Electronics                                                          7,060,806 
            24,778    Philips NV ADR                                                               1,774,724 
            13,917    Roto Smeets D Boer                                                             596,801 
            49,468    Royal Dutch Petroleum                                                        2,519,232 
             5,941    Unilever NV                                                                  1,204,940 
            13,402    Van Ommeren (Koninklijke) (Participating Certificate)                          551,569 
            16,452    Vendex International                                                           826,477 
            27,761    Wereldhave NV                                                                1,698,716 
                                                                                          -------------------
                                                                                                  58,546,987 
                                                                                          -------------------
                      New Zealand - 1.9%                                                                     
               324    Air New Zealand Ltd Class B                                                        876 
         1,303,036    Brierley Investment Ltd                                                      1,116,174 
           896,561    Carter Holt Harvey Ltd                                                       1,856,930 

                See accompanying notes to financial statements.                9

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      New Zealand - continued                                                                
            38,750    DB Group Ltd                                                                    54,001 
           311,727    Fisher and Paykel Industries Ltd                                             1,046,175 
           292,975    Fletcher Challenge Buildings                                                   820,305 
           316,511    Fletcher Challenge Energy                                                    1,116,860 
         1,212,246    Fletcher Challenge Ltd                                                       1,425,868 
           586,821    Fletcher Challenge Paper                                                     1,185,396 
           362,307    Lion Nathan Ltd                                                                914,839 
         1,731,203    Progressive Enterprise *                                                     2,014,142 
         2,586,505    Sovereign Assurance                                                          4,133,558 
         6,589,327    Trans Tasman Properties *                                                    3,664,638 
           485,082    Wrightson Ltd                                                                  282,181 
                                                                                          -------------------
                                                                                                  19,631,943 
                                                                                          -------------------
                      Norway - 0.9%                                                                          
             7,907    Bolig OG Naeringsk                                                             207,920 
             1,090    Bona Shipholding Ltd *                                                          13,746 
           139,700    Den Norske Bank AS Class A                                                     571,642 
            23,100    Dyno Industrier AS                                                             573,339 
            25,900    Elkem AS Class A                                                               462,146 
            24,400    Fokus Bank                                                                     191,502 
             9,594    Hafslund ASA B Shares                                                           48,912 
            14,050    Kvaerner Industrier AS                                                         750,218 
            15,395    Leif Hoegh and Co AS                                                           328,401 
            30,000    Norsk Data AS Class B ADR (b) *                                                    300 
            34,916    Norsk Hydro AS                                                               1,897,176 
             5,400    Norske Skogindustrier AS Class A                                               200,679 
            24,594    Nycomed ASA B Shares                                                           450,391 
            17,100    Orkla-Borregaard AS Class A                                                  1,213,612 
             8,300    Orkla-Borregaard AS Class B (Non Voting)                                       538,954 
            37,900    Schibsted AS                                                                   645,760 
            15,200    Storli A                                                                       330,359 
            83,000    Uni Storebrand AS *                                                            546,749 
            27,000    Unitor AS                                                                      380,348 
                                                                                          -------------------
                                                                                                   9,352,154 
                                                                                          -------------------
                      Philippines - 0.0%                                                                     
           400,000    Pilipino Telephone                                                             126,316 
                                                                                          -------------------

                      Poland - 0.1%                                                                          
            40,000    Bank Handlowy W Warszawie *                                                    504,209 
                                                                                          -------------------

                      Russia - 0.6%                                                                          
         9,215,000    Irkutskenergo                                                                2,838,220 
            74,228    Mosenergo AO Sponsored ADR 144A (d) *                                        3,340,260 
                                                                                          -------------------
                                                                                                   6,178,480 
                                                                                          -------------------
                      Singapore - 0.3%                                                                       
           285,400    Jardine Matheson Holdings Ltd                                                1,997,800 
           280,205    Jardine Strategic Holdings Ltd                                               1,036,759 
                                                                                          -------------------
                                                                                                   3,034,559 
                                                                                          -------------------
                      South Africa - 0.4%                                                                    
            61,000    Barlow Ltd                                                                     718,374 
           185,197    Housewares Group *                                                              41,054 
            29,000    New South Africa Fund Inc                                                      445,875 

10            See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      South Africa - continued                                                               
           755,908    NSA International Inc *                                                      2,175,159 
           151,244    NSA Investments Ltd Warrants 9/27/97 *                                         280,470 
         1,109,100    Sun International Ltd                                                          709,219 
                                                                                          -------------------
                                                                                                   4,370,151 
                                                                                          -------------------
                      Spain - 4.6%                                                                           
             4,560    Acerinox SA                                                                    751,952 
            16,000    Argentaria Corporacion Bancaria de Espana SA                                   796,685 
           266,322    Banco Bilbao Vizcaya SA                                                      7,015,850 
             3,217    Banco Central Hispanoamericano SA                                              119,344 
            11,945    Banco Popular (Registered)                                                   2,676,881 
           162,723    Banco Santander SA (Registered)                                              4,538,220 
            37,806    Bankinter SA                                                                 1,922,255 
            13,956    Corporacion Mapfre (Registered)                                                771,100 
            16,000    Ebro Agricolas Compania de Alimentacion SA                                     283,628 
           214,548    Endesa                                                                       4,332,450 
           261,917    FENOSA SA                                                                    2,032,902 
            20,816    General Aguas de Barcelona SA                                                  757,170 
            47,861    Hidroelec Cantabrico                                                         1,807,026 
           429,443    Iberdrola SA                                                                 4,830,280 
            11,405    Inmobilana Metropolitan Vasco Central SA                                       404,348 
               516    Inmobilana Metropolitan Vasco Central SA *                                      18,084 
            49,000    Midesa                                                                         617,214 
            57,410    Repsol SA                                                                    2,273,289 
            93,767    Sevillana de Electricidad                                                      835,719 
           352,988    Telefonica de Espana SA                                                      9,171,233 
            33,458    Vallehermoso SA                                                                777,965 
                                                                                          -------------------
                                                                                                  46,733,595 
                                                                                          -------------------
                      Sweden - 0.1%                                                                          
            98,000    Castellum AB *                                                                 798,884 
                                                                                          -------------------

                      Switzerland - 3.3%                                                                     
             1,330    Ascom Holding AG (Bearer) *                                                  1,800,458 
               125    Baloise Holdings *                                                             325,966 
             1,586    Banque Cantonale Vaudoise (Bearer)                                             395,418 
             2,186    Belimo Automation AG                                                           640,753 
               360    Bobst SA (Bearer)                                                              555,507 
             5,500    Ciba Spec Chem Holdings (Registered) *                                         476,231 
            49,741    CS Holdings (Registered)                                                     5,991,175 
             7,000    Feldschloesschen Huerlimann Warrants 12/15/98 *                                 18,396 
             3,500    Feldschloesschen Huerlimann (Participating Certificates)                       398,572 
               365    Fischer (George) AG (Bearer)                                                   506,162 
               255    Flughafen Immobilien Ges                                                       347,091 
             2,099    Forbo Holdings AG (Registered)                                                 872,668 
             1,193    Hero AG (Bearer)                                                               618,989 
               777    Holderbank Financiere Glarus AG (Bearer)                                       651,841 
             3,274    Jelmoli (Registered)                                                           509,615 
             3,300    Kraftwerk Laufenberg (Bearer)                                                  589,266 
               750    Liechtenstein Global Trust AG                                                  407,837 

             See accompanying notes to the financial statements.            11

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      Switzerland - continued                                                                
             2,048    Merkur Holding AG (Registered)                                                 427,802 
               415    Motor Columbus (Bearer)                                                        788,585 
             2,401    Nestle AG (Registered)                                                       2,798,915 
             3,583    Novartis AG (Registered)                                                     5,089,427 
               154    Roche Holdings (Participating Certificate)                                   1,302,315 
               335    Sairgroup Namen AKT *                                                          397,968 
             1,000    Schweizerische Rueckversicherungsgesellschaft (Bearer)                       1,331,492 
             2,289    SMH AG (Bearer)                                                              1,281,735 
             2,200    Sulzer Gebrueder AG (Registered)                                             1,546,174 
             2,305    Sulzer Medica AG *                                                             601,082 
             1,962    Swiss Bank Corp (Registered) *                                                 473,958 
               161    Swiss Insurance Co                                                             324,376 
             3,599    Zuerich Versicherungs Namen (Registered)                                     1,309,565 
                                                                                          -------------------
                                                                                                  32,779,339 
                                                                                          -------------------
                                                                                          -------------------
                      Taiwan - 0.5%                                                                          
            22,526    Baring Taiwan Fund Ltd *                                                       354,785 
               208    Formosa Fund IDR *                                                           2,932,800 
            43,000    Formosa Growth Fund *                                                        1,128,750 
            15,700    R O C Taiwan Fund                                                              204,100 
            42,052    Tuntex Distinct Corp GDR 144A (d) *                                            231,286 
                                                                                          -------------------
                                                                                                   4,851,721 
                                                                                          -------------------
                      Thailand - 0.3%                                                                        
           301,300    Bank of Ayudhya Plc (Foreign Registered)                                       467,064 
           428,900    First Bangkok City (Foreign Registered)                                        307,343 
           645,900    Jasmine International Public Co (Foreign Registered)                           505,347 
             9,000    Telecomasia Sponsored GDR 144A (d) *                                           104,202 
           462,200    Telecomasia (Foreign Registered) *                                             405,557 
           487,700    Thai Telephone & Telecommunications (Foreign Registered) *                     153,342 
           204,800    Total Access Communication                                                     819,200 
           122,800    United Communication Industries (Foreign Registered)                           395,841 
                                                                                          -------------------
                                                                                                   3,157,896 
                                                                                          -------------------
                      United Kingdom - 17.7%                                                                 
           161,272    Allied Domecq Plc                                                            1,218,827 
           465,630    Allied Irish Banks Plc *                                                     3,934,377 
           310,976    Anglian Water Plc                                                            3,921,250 
         2,088,281    ASDA Group                                                                   4,876,955 
           442,838    BAA                                                                          3,971,617 
           432,056    Bank of Scotland                                                             2,907,940 
           104,531    Barclays Bank Plc                                                            2,390,350 
            75,000    Bass *                                                                       1,003,489 
           399,188    BAT Industries                                                               3,343,837 
           557,684    Berkley Group                                                                6,783,389 
           119,028    Betacomm Plc *                                                                  86,868 
           919,527    BG Plc                                                                       4,011,567 
           440,000    Billiton Plc *                                                               1,712,621 
           409,953    BPB Industries Plc                                                           2,253,881 
           581,232    British Airways                                                              6,061,188 
           748,619    British Petroleum                                                           10,465,631 
           100,000    British Sky Broadcasting Plc                                                   707,105 

12            See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

         Shares       Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      United Kingdom - continued                                                             
           575,750    British Steel                                                                1,615,390 
         1,967,530    British Telecom Plc                                                         12,699,942 
         1,050,000    BTR                                                                          3,712,300 
           641,375    Capital Shopping Centres *                                                   4,004,701 
           408,800    Caradon                                                                      1,359,133 
           519,527    Centrica Plc *                                                                 745,674 
           174,780    Commercial Union Plc                                                         2,097,591 
           300,000    Cookson Group *                                                              1,245,542 
           380,267    Costain Group (c) *                                                            277,523 
           234,287    Energy Group Plc                                                             2,370,992 
           180,000    First Russian Frontiers Trust Plc *                                          4,670,784 
            38,000    First Russian Frontiers Warrants 2001 *                                        677,912 
            68,927    Flextech Plc *                                                                 684,129 
            84,013    General Accident                                                             1,235,808 
           350,000    General Electric                                                             2,168,347 
           407,251    Glaxo Wellcome Plc                                                           8,156,924 
           494,116    Grand Metropolitan                                                           4,539,689 
           210,586    Great Portland Estates Plc                                                     706,964 
           223,079    Great Universal Stores Plc                                                   2,268,420 
           207,098    Guardian Royal                                                                 910,212 
           166,008    Hanson Plc                                                                     794,234 
            83,636    Hanson Plc Warrants 9/30/97 *                                                      327 
           873,094    Hillsdown Holdings                                                           2,293,894 
            83,469    HSBC Holdings                                                                2,599,104 
            79,909    Hyder Plc                                                                    1,082,130 
           157,839    Hyder Plc Cumulative Redemption Preferred Shares                               276,462 
           223,071    Imperial Chemical Industries Plc                                             3,610,530 
           132,816    Imperial Tobacco Group Plc                                                     824,986 
           431,065    Ladbroke Group                                                               1,810,672 
             2,128    Lloyds TSB Group                                                                24,918 
           735,537    Marley                                                                       1,324,112 
           361,140    Mirror Group Plc                                                             1,188,965 
           216,000    National Power                                                               1,993,257 
           230,940    National Westminster Bank                                                    2,955,109 
           275,000    Norwich Union Plc *                                                          1,511,923 
           221,504    Peninsular & Oriental Steam Navigation Co                                    2,335,029 
           134,894    Powergen                                                                     1,706,415 
         2,148,935    Raglan Property Plc                                                            801,583 
           331,830    Railtrack Group Plc                                                          4,157,301 
            98,000    Reckitt & Colman                                                             1,513,075 
           673,843    Royal & Sun Alliance Insurance                                               5,464,193 
           279,023    Safeway Plc                                                                  1,696,948 
           500,000    Scottish Power Plc                                                           3,523,361 
         1,174,447    Sears                                                                        1,199,972 
           234,593    Severn Trent Plc                                                             3,329,051 
           246,940    Severn Trent Plc Class B                                                       128,156 
           100,000    Smith (WH) Group *                                                             614,662 
           235,171    Standard Chartered                                                           3,157,995 
           485,000    Sun Life & Province Holding                                                  3,055,836 
           769,207    T & N                                                                        2,002,237 

              See accompanying notes to the financial statements.             13

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

        Shares/                                                                                              
       Par Value      Description                                                             Value ($)      
-------------------------------------------------------------------------------------------------------------
                                                                                                             
                      United Kingdom - continued                                                             
           202,185    Tarmac                                                                         388,566 
           200,000    Tate & Lyle                                                                  1,328,254 
           200,225    Taylor Woodrow Plc                                                             603,988 
           188,228    TC Group Plc                                                                   323,584 
           203,196    Thames Water                                                                 2,601,744 
            17,600    United Utilities                                                               196,666 
           271,030    Viglen Technology *                                                            285,712 
                                                                                          -------------------
                                                                                                 178,503,820 
                                                                                          -------------------

                      TOTAL STOCK AND EQUIVALENTS (Cost $811,180,674)                            908,460,683 
                                                                                          -------------------

                      CONVERTIBLE BONDS - 0.5%                                                               
                      Hong Kong - 0.1%                                                                       
 HKD       810,000    Sino Land Co, 5.00% due 2/26/01 144A                                           761,400 
                                                                                          -------------------

                      Italy - 0.0%                                                                           
 ITL   425,000,000    Mediobanca (Banc Credito Finanz), 4.00% due 12/31/97                           239,498 
                                                                                          -------------------
                                                                                          -------------------

                      Japan - 0.1%                                                                           
 JPY   145,000,000    STB Cayman Capital Ltd. Convertible, .50% due 10/01/07                       1,310,895 
                                                                                          -------------------

                      Mexico - 0.0%                                                                          
  $        870,000    Grupo Financiero Invermexico, 7.50% due 6/16/01                                313,200 
                                                                                          -------------------

                      New Zealand - 0.1%                                                                     
 NZD       978,881    Brierley Investment, 9.00% due 6/30/98                                         782,187 
                                                                                          -------------------

                      Singapore - 0.2%                                                                       
 SGD     1,750,000    Keppel Corp 2.0% due 8/12/02 144A                                            1,662,500 
                                                                                          -------------------

                      TOTAL CONVERTIBLE BONDS (Cost $5,259,673)                                    5,069,680 
                                                                                          -------------------

                      DEBT OBLIGATIONS - 0.1%                                                                
                      United Kingdom - 0.1%                                                                  
 GBP       441,779    Viglen Technology Floating Rate Note, 6.75% due 9/1/2000 (c)                   836,845 
                                                                                          -------------------

                      TOTAL DEBT OBLIGATIONS (Cost $541,150)                                         836,845 
                                                                                          -------------------

                      SHORT-TERM INVESTMENTS - 14.9%                                                         
                      Cash Equivalents - 14.9%                                                               
  $     50,000,000    First National Bank of Chicago Time Deposit, 5.44% due 9/2/97               50,000,000 
        67,133,952    The Boston Global Investment Trust (a)                                      67,133,952 
  $     33,200,000    Wachovia Bank Time Deposit, 5.43% due 9/2/97                                33,200,000 
                                                                                          -------------------
                                                                                                 150,333,952 
                                                                                          -------------------

                      TOTAL SHORT-TERM INVESTMENTS (Cost $150,333,952)                           150,333,952 
                                                                                          -------------------

                      TOTAL INVESTMENTS - 105.4%                                                             
                      (Cost $967,315,449)                                                      1,064,701,160 

                      Other Assets and Liabilities (net) -  (5.6%)                               (56,290,212)
                                                                                          -------------------

                      TOTAL NET ASSETS - 100.0%                                         $      1,008,410,948 
                                                                                          ===================

14            See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

 Notes to the Schedule of Investments:

ADR    American Depositary Receipt  
GDR    Global Depository Receipt    
   IDR    International Depository Receipt

GBP    British Pound                
HKD    Hong Kong Dollar             
ITL    Italian Lira                 
JPY    Japanese Yen                 
NZD    New Zealand Dollar           
SGD    Singapore Dollar             

            (a)    Represents investment of security lending
collateral (Note 1).  

(b)    Bankrupt issuer.             

 (c)    Valued by management (Note 1).

                  (d)    Security is restricted as to public resale. The
                            aggregate market value of restricted securities is
            $5,689,984 or 5.64% of net assets.

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

                    *      Non-income producing security. A dividend has not
                          been declared for the twelve months ended August
31, 1997.             

             See accompanying notes to the financial statements.            15

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

At August 31, 1997, industry sector diversification       
of the Fund's investments (excluding short-term           
investments) was as follows:                              

                                                                [Download Table]

                                                      Percentage of
Industry Sector                                         Net Assets 
                                                                   
Banking                                                   11.4%    
Consumer Goods                                             8.1     
Electronic Equipment                                       6.3     
Conglomerates                                              5.8     
Construction                                               5.4     
Oil and Gas                                                5.3     
Machinery                                                  5.1     
Insurance                                                  5.0     
Retail Trade                                               4.9     
Utilities                                                  4.7     
Telecommunications                                         4.5     
Services                                                   4.4     
Health Care                                                4.2     
Chemicals                                                  3.7     
Automotive                                                 2.7     
Real Estate                                                2.5     
Metals and Mining                                          2.2     
Transportation                                             2.2     
Computers                                                  1.9     
Food and Beverage                                          1.9     
Paper and Allied Products                                  1.4     
Financial Services                                         1.1     
Communications                                             0.9     
Textiles                                                   0.6     
Aerospace                                                  0.3     
Miscellaneous                                              3.5     
                                                          -----    
                                                           100 %   
                                                          =====    

16              See accompanying notes to financial statements.                 

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

                                                                [Download Table]


Statement of Assets and Liabilities - August 31, 1997 (Unaudited)                   
------------------------------------------------------------------------------------
                                                                                    
Assets:                                                                             
    Investments, at value (cost $967,315,449) (Note 1)              $ 1,064,701,160 
    Foreign currency, at value (cost $6,224,651) (Note 1)                 6,243,836 
    Cash                                                                      6,697 
    Receivable for investments sold                                       2,228,392 
    Receivable for Fund shares sold                                      17,181,418 
    Dividends and interest receivable                                     2,560,206 
    Foreign withholding taxes receivable                                    937,829 
    Receivable for expenses waived or borne by Manager (Note 2)             214,546 
                                                                      --------------

      Total assets                                                    1,094,074,084 
                                                                      --------------

Liabilities:                                                                        
    Payable upon return of securities loaned (Note 1)                    67,133,952 
    Payable for investments purchased                                     7,538,121 
    Payable for Fund shares repurchased                                  10,000,000 
    Payable to affiliate for (Note 2):                                              
      Management fee                                                        648,490 
      Shareholder service fee                                               132,632 
    Accrued expenses                                                        209,941 
                                                                      --------------

      Total liabilities                                                  85,663,136 
                                                                      --------------

Net assets                                                          $ 1,008,410,948 
                                                                      ==============

Net assets consist of:                                                              
    Paid-in capital                                                 $   902,934,496 
    Undistributed net investment income                                   8,642,725 
    Accumulated net realized loss                                          (563,919)
    Net unrealized appreciation                                          97,397,646 
                                                                      --------------

                                                                    $ 1,008,410,948 
                                                                      ==============
Net assets attributable to:                                                         
    Class I Shares                                                  $    12,529,788 
                                                                      ==============
    Class II Shares                                                 $    24,270,797 
                                                                      ==============
    Class III Shares                                                $   971,610,363 
                                                                      ==============

Shares outstanding:                                                                 
    Class I                                                               1,067,893 
                                                                      ==============
    Class II                                                              2,067,776 
                                                                      ==============
    Class III                                                            82,738,491 
                                                                      ==============

Net asset value per share:                                                          
    Class I                                                         $         11.73 
                                                                      ==============
    Class II                                                        $         11.74 
                                                                      ==============
    Class III                                                       $         11.74 
                                                                      ==============

             See accompanying notes to the financial statements.            17

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

                                                                [Download Table]


Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)        
------------------------------------------------------------------------------
                                                                              
Investment income:                                                            
    Dividends (net of foreign tax expense of $1,427,559)       $   12,762,869 
    Interest (including security lending income of $196,930)        2,079,402 
                                                                 -------------
      Total income                                                 14,842,271 
                                                                 -------------

Expenses:                                                                     
    Management fee (Note 2)                                         3,161,700 
    Custodian fees                                                    293,848 
    Audit fees                                                         33,120 
    Stamp duties and transfer taxes                                    32,568 
    Transfer agent fees                                                32,384 
    Legal fees                                                         15,640 
    Registration fees                                                   4,048 
    Trustees fee (Note 2)                                               3,220 
    Miscellaneous                                                       2,811 
    Fees waived or borne by Manager (Note 2)                       (1,016,991)
                                                                 -------------
                                                                    2,562,348 
    Shareholder service fee (Note 2)                                          
      Class I                                                          11,736 
      Class II                                                         26,358 
      Class III                                                       608,081 
                                                                 -------------

      Net expenses                                                  3,208,523 
                                                                 -------------

         Net investment income                                     11,633,748 
                                                                 -------------

Realized and unrealized gain (loss):                                          
     Net realized gain (loss) on:                                             
         Investments                                                2,403,470 
         Foreign currency, forward contracts and foreign currency             
           related transactions                                      (103,764)
                                                                 -------------
           Net realized gain                                        2,299,706 
                                                                 -------------

      Change in net unrealized appreciation (depreciation) on:                
         Investments                                               55,175,266 
         Foreign currency, forward contracts and foreign currency             
           related transactions                                         4,537 
                                                                 -------------
           Net unrealized gain                                     55,179,803 
                                                                 -------------

      Net realized and unrealized gain                             57,479,509 
                                                                 -------------
Net increase in net assets resulting from operations           $   69,113,257 
                                                                 =============

18            See accompanying notes to the financial statements.               

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]

Statement of Changes in Net Assets                                                                                 
-------------------------------------------------------------------------------------------------------------------

                                                                         Six Months Ended                          
Increase (decrease) in net assets:                                        August 31, 1997         Period Ended     
Operations:                                                                 (Unaudited)        February 28, 1997 * 
                                                                       --------------------   ---------------------
                                                                                                                   
      Net investment income                                           $         11,633,748   $           4,998,592 
      Net realized gain (loss)                                                   2,299,706              (3,379,420)
      Change in net unrealized appreciation (depreciation)                      55,179,803              42,217,843 
                                                                       --------------------   ---------------------

      Net increase in net assets resulting from operations                      69,113,257              43,837,015 
                                                                       --------------------   ---------------------

Distributions to shareholders from:                                                                                
      Net investment income                                                                                        
         Class I                                                                   (34,608)                (32,692)
         Class II                                                                  (80,383)                (86,399)
         Class III                                                              (2,799,758)             (4,439,981)
                                                                       --------------------   ---------------------
         Total distributions from net investment income                         (2,914,749)             (4,559,072)
                                                                       --------------------   ---------------------

Net share transactions:  (Note 5)                                                                                  
         Class I                                                                 7,235,586               4,554,323 
         Class II                                                                   80,383              21,186,399 
         Class III                                                             236,219,746             633,658,060 
                                                                       --------------------   ---------------------
      Increase in net assets resulting from net share transactions             243,535,715             659,398,782 
                                                                       --------------------   ---------------------

      Total increase in net assets                                             309,734,223             698,676,725 

Net assets:                                                                                                        
      Beginning of period                                                      698,676,725                       - 
                                                                       --------------------   ---------------------

      End of period (including undistributed net investment                                                        
         income of $8,642,725 and distributions in excess of          $      1,008,410,948   $         698,676,725 
         net investment income of $76,274, respectively)               ====================   =====================

*  Period from June 28, 1996 (commencement of operations) to February 28, 1997. 

              See accompanying notes to the financial statements.             19

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                             Six Months Ended                                 
                                                              August 31, 1997              Period Ended       
                                                                (Unaudited)             February 28, 1997 *   
                                                            ------------------         ------------------     
                                                                                                              
Net asset value, beginning of period                      $              10.65       $               9.88     
                                                            ------------------         ------------------     

Income from investment operations:                                                                            
  Net investment income                                                   0.16(d)                    0.06     
  Net realized and unrealized gain                                        0.96                       0.78     
                                                            ------------------         ------------------     

         Total from investment operations                                 1.12                       0.84     
                                                            ------------------         ------------------     

Less distributions to shareholders from:                                                                      
     Net investment income                                               (0.04)                     (0.07)    
                                                            ------------------         ------------------     

Net asset value, end of period                            $              11.73       $              10.65     
                                                            ==================         ==================     

Total Return (a)                                                        10.50%                      8.53%     

Ratios/Supplemental Data:                                                                                     

     Net assets, end of period (000's)                    $             12,530       $              4,891     
     Net expenses to average                                                                                  
         daily net assets                                                0.89%**(b)                 0.89%**(b)
     Net investment income to average                                                                         
         daily net assets                                                2.59%**                    0.98%**   
     Portfolio turnover rate                                                9%                        13%     
     Average broker commission rate per equity share (c)  $             0.0146       $             0.0204     
     Fees and expenses voluntarily waived or borne by                                                         
         the Manager consisted of the following per                                                           
         share amounts:                                   $               0.01       $               0.02     

*    Period from July 10, 1996 (commencement of operations) to February 28,1997.

**   Annualized.                                                                

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

(b)  Includes stamp duties and transfer taxes not waived or borne by the        
Manager, which approximates .01% of average daily net assets.         

(c)  The average broker commission rate will vary depending on the markets in   
which trades are executed.                                            

(d)  Computed using average shares outstanding throughout the period.           

20              See accompanying notes to the financial statements.             

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                            Six Months Ended                             
                                                            August 31, 1997          Period Ended        
                                                              (Unaudited)         February 28, 1997 *    
                                                           ----------------      -------------------     
                                                                                                         
Net asset value, beginning of period                      $          10.65      $             10.02      
                                                           ----------------      -------------------     

Income from investment operations:                                                                       
  Net investment income                                               0.16(d)                  0.06      
  Net realized and unrealized gain                                    0.97                     0.65      
                                                           ----------------      -------------------     

         Total from investment operations                             1.13                     0.71      
                                                           ----------------      -------------------     

Less distributions to shareholders from:                                                                 
     Net investment income                                           (0.04)                   (0.08)     
                                                           ----------------      -------------------     

Net asset value, end of period                            $          11.74      $             10.65      
                                                           ================      ===================     

Total Return (a)                                                     10.59%                    7.08%     

Ratios/Supplemental Data:                                                                                

     Net assets, end of period (000's)                    $         24,271      $            21,957      
     Net expenses to average                                                                             
         daily net assets                                             0.83%**(b)               0.84%**(b)
     Net investment income to average                                                                    
         daily net assets                                             2.75%**                  0.83%**   
     Portfolio turnover rate                                             9%                      13%     
     Average broker commission rate per equity share (c)  $         0.0146      $            0.0204      
     Fees and expenses voluntarily waived or borne by                                                    
         the Manager consisted of the following per                                                      
         share amounts:                                   $           0.01      $              0.02      

*       Period from September 30, 1996 (commencement of operations) to February 
28, 1997.                                                       
**      Annualized.                                                             
(a)     The total returns would have been lower had certain expenses not been   
waived during the periods shown.                                
(b)     Includes stamp duties and transfer taxes not waived or borne by the     
    Manager, which approximates .02% of average daily net assets for the
       period ended February 28, 1997 and .01% of average daily net assets for
the six months ended August 31, 1997.                           
(c)     The average broker commission rate will vary depending on the markets in
which trades are executed.                                      
(d)     Computed using average shares outstanding throughout the period.        

              See accompanying notes to the financial statements.             21

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                            Six Months Ended                              
                                                            August 31, 1997          Period Ended         
                                                             (Unaudited)          February 28, 1997 *     
                                                           ----------------       -------------------     
                                                                                                          
Net asset value, beginning of period                      $          10.66       $             10.00      
                                                           ----------------       -------------------     
Income from investment operations:                                                                        
  Net investment income                                               0.16(d)                   0.08      
  Net realized and unrealized gain                                    0.96                      0.66      
                                                           ----------------       -------------------     
         Total from investment operations                             1.12                      0.74      
                                                           ----------------       -------------------     
Less distributions to shareholders from:                                                                  
     Net investment income                                           (0.04)                    (0.08)     
                                                           ----------------       -------------------     

Net asset value, end of period                            $          11.74       $             10.66      
                                                           ================       ===================     
Total Return (a)                                                     10.50%                     7.37%     

Ratios/Supplemental Data:                                                                                 

     Net assets, end of period (000's)                    $        971,610       $           671,829      
     Net expenses to average                                                                              
         daily net assets                                             0.76%**(b)                0.76%**(b)
     Net investment income to average                                                                     
         daily net assets                                             2.76%**                   1.24%**   
     Portfolio turnover rate                                             9%                       13%     
     Average broker commission rate per equity share (c)  $           0.0146     $            0.0204      
     Fees and expenses voluntarily waived or borne by                                                     
         the Manager consisted of the following per                                                       
         share amounts:                                   $           0.01       $              0.02      

*       Period from June 28, 1996 (commencement of operations) to February 28,  
1997.                                                           
**      Annualized.                                                             
(a)     The total returns would have been lower had certain expenses not been   
waived during the periods shown.                                
(b)     Includes stamp duties and transfer taxes not waived or borne by the     
Manager, which approximates .01% of average daily net assets.   
(c)     The average broker commission rate will vary depending on the markets in
which trades are executed.                                      
(d)     Computed using average shares outstanding throughout the period.        

22              See accompanying notes to the financial statements.             

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited)                                      
August 31, 1997                                                                 
--------------------------------------------------------------------------------
1.   Significant accounting policies                                            

   GMO Foreign Fund (the "Fund") is a series of GMO Trust (the "Trust"). The
     Fund is registered under the Investment Company Act of 1940, as amended, as
 an open-end, non-diversified management investment company. The Fund is
advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the    
    "Manager" or "GMO"). The Trust was established as a Massachusetts Business
     Trust under the laws of the Commonwealth of Massachusetts on June 24, 1985.
     The Declaration of Trust permits the Trustees 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 commenced operations on June 28, 1996 subsequent to a transaction
    involving the reorganization of the GMO International Equities Pool of The
    Common Fund for Nonprofit Organizations (the "GMO Pool"). The GMO Pool was
    discontinued and its net assets distributed pro rata to the unitholders of
the GMO Pool as a liquidating distribution. Such net assets were      
immediately thereafter transferred by the unitholders to the Fund in  
     exchange for shares of the Fund. The portfolio of the Fund on June 28, 1996
was the same as the portfolio of the GMO Pool prior to the transfer.  

    The Fund seeks maximum total return through investment primarily in equity
securities of non-U.S. issuers.                                       

    The Fund offers three classes of shares: Class I, Class II, and Class III.
The principal economic difference between the classes of shares is the
    level of shareholder service fee borne by the classes. Eligibility for and
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
outlined in the Trust's prospectus.                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

                                                                              23

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------
Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

     Certain investments in securities held by the Fund were valued on the basis
  of a price provided by a principal market maker. These prices may differ
from the value that would have been used had a broader market for the 
   securities existed and the differences could be material to the financial
statements.                                                           

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

Forward currency contracts                                            
The Fund may enter into forward currency contracts in connection with 
    settling planned purchases or sales of securities or to hedge the currency
    exposure associated with some or all of the Fund's portfolio securities. A
  forward currency contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The market value of a
forward currency contract fluctuates with changes in forward currency 
   exchange rates. Forward currency contracts are marked to market daily and
    the change in value is recorded by the Fund as an unrealized gain or loss.
   Realized gains or losses equal to the difference between the value of the
    contract at the time it was opened and the value at the time it was closed
are recorded upon delivery or receipt of the currency or, if a forward
currency contract is offset by entering into another forward currency 
 contract with the same broker, upon settlement of the net gain or loss.
     These contracts may involve market risk in excess of the unrealized gain or
loss reflected in the Fund's Statement of Assets and Liabilities. In  
addition, the Fund could be exposed to risk if the counterparties are 
   unable to meet the terms of the contracts or if the value of the currency
changes unfavorably to the U.S. dollar. There were no open            

24                                                                              

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------
forward currency contracts as of August 31, 1997.                     

Security lending                                                      
  The Fund may lend its securities to certain 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 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 August 31, 1997 the Fund loaned securities having a market
   value of $63,419,189 collateralized by cash in the amount of $67,133,952,
which was invested in a short-term instrument.                        

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
  "Code"). The Fund intends to distribute substantially all of its taxable
 net investment income and net realized short-term and long-term capital
    gains, if any, after giving effect to any available capital loss carryover
     for federal income tax purposes. Therefore, no provision for federal income
   or excise tax is necessary. Taxes on foreign interest and dividend income
   have been withheld in accordance with the applicable country's tax treaty
with the United States. Dividends received by shareholders of the Fund
    which are derived from foreign source income and foreign taxes paid by the
Fund are to be treated, to the extent allowable under the Code, as if 
received and paid by the shareholders of the Fund.                    

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date, or when the Fund is informed of the 
ex-dividend date, if later. Interest income is recorded on the accrual
  basis and is adjusted for the accretion of discounts. In determining the
   net gain or loss on securities sold, the cost of securities is determined
on the identified cost basis.                                         

                                                                              25

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------
Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .75% of 
    average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting and other support. Pursuant to the     
   Shareholder Service Plan, the shareholder service fee is calculated based
  on the average daily net assets of each class at the annual rate of .28%
for Class I shares, .22% for Class II shares, and .15% for Class III  
shares.                                                               

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including stamp duties and transfer taxes), shareholder
   service fees and extraordinary expenses) exceed .60% of average daily net
assets.                                                               

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $3,220. No  
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

26                                                                              

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           

--------------------------------------------------------------------------------

3.   Purchases and sales of securities                                          

Cost of purchases and proceeds from sales of securities, excluding    
     short-term investments, for the six months ended August 31, 1997 aggregated
$288,367,798 and $71,222,310, respectively.                           

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]

                      Gross Unrealized      Gross Unrealized      Net Unrealized  
  Aggregate Cost        Appreciation          Depreciation         Appreciation   
------------------  --------------------  --------------------  ------------------
                                                                                  
    $967,315,449        $131,334,221          $33,948,510          $97,385,711    

4.   Principal shareholder                                                      

    At August 31, 1997, 12% of the outstanding shares of the Fund were held by
one shareholder.                                                      

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:                                               

                                                        [Enlarge/Download Table]

                                                                  Period from July 10, 1996      
                               Six Months Ended                 (commencement of operations)     
 Class I:                      August 31, 1997                      to February 28, 1997         
                    --------------------------------------  -------------------------------------
                        Shares               Amount             Shares               Amount      
                    ----------------     -----------------  --------------     ------------------
                                                                                                 
Shares sold                 605,992    $        7,201,878         455,993    $       4,521,631   

Shares issued to                                                                                 
shareholders in                                                                                  
reinvestment of                                                                                  
distributions                 2,874                34,608           3,119               32,692   
Shares repurchased             (85)                 (900)           -                   -        
                    ----------------     -----------------  --------------     ----------------  
Net increase                608,781    $        7,235,586         459,112    $       4,554,323   
                    ================     =================  ==============     ================  

                                                                              27

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GMO Foreign Fund                                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------
Share transactions - continued                                          

                                                        [Enlarge/Download Table]


                                                                 Period from September 30, 1996    
                                Six Months Ended                  (commencement of operations)     
Class II:                       August 31, 1997                       to February 28, 1997         
                    ---------------------------------------  --------------------------------------
                          Shares                Amount            Shares                Amount     
                    ----------------     ------------------  ---------------     ------------------
                                                                                                   
Shares sold                       -    $            -             2,052,856      $      21,100,000 

Shares issued to                                                                                   
shareholders in                                                                                    
reinvestment of                                                                                    
distributions                 6,676                 80,383            8,244                 86,399 

Shares repurchased                -                      -                -                      - 
                    ----------------     ------------------  ---------------     ------------------
Net increase                  6,676    $            80,383        2,061,100     $       21,186,399 
                    ================     ==================  ===============     ==================

                                                                    Period from June 28, 1996      
                               Six Months Ended                   (commencement of operations)     
Class III:                     August 31, 1997                       to February 28, 1997          
                    ---------------------------------------  --------------------------------------
                         Shares                Amount            Shares                Amount      
                    ----------------     ------------------  ---------------     ------------------
                                                                                                   
Shares sold              21,514,444     $      257,949,654       64,118,750     $      644,703,588 
Shares issued to                                                                                   
shareholders in                                                                                    
reinvestment of                                                                                    
distributions                89,884              1,082,206          167,499              1,757,065 

Shares repurchased       (1,918,301)           (22,812,114)      (1,233,785)           (12,802,593)
                    ----------------     ------------------  ---------------     ------------------
Net increase             19,686,027     $      236,219,746       63,052,464     $      633,658,060 
                    ================     ==================  ===============     ==================

28                                                                              

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 211th Page of 667 TOC 1st Previous Next ↓Bottom Just 211th
GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares     Description                                       Value ($)    
-----------------------------------------------------------------------------
                                                                             
              STOCK AND EQUIVALENTS - 93.6%                                  
              Australia - 4.1%                                               
      80,300  Advance Property Fund                                    89,054
      12,100  Amalgamated Holdings Ltd                                 61,764
      16,500  Amcor Ltd                                                99,856
     369,832  Australia and New Zealand Banking Group Ltd           2,656,474
      21,400  Australian Gas & Light                                  134,697
     156,708  Australian National Industries Ltd                      179,547
     431,109  Boral Ltd                                             1,257,013
      21,500  Broken Hill Proprietary Ltd                             269,705
     139,229  Burns Philp & Co Ltd                                    244,394
      42,600  Capcount Property Trust                                  29,097
      40,500  Capital Property Trust                                   66,629
      80,800  Capral Aluminum Ltd                                     258,145
      26,100  Coca-Cola Amatil Ltd                                    266,068
     521,098  Coles Myer Ltd                                        2,426,065
      22,200  Comalco Ltd                                             110,873
      39,056  Commonwealth Bank of Australia                          431,418
      78,496  Consolidated Rutile Ltd *                                40,356
       2,900  Coventry Group Ltd                                       11,821
      16,500  CRA Ltd                                                 243,702
      18,200  CSL Ltd                                                 113,619
     466,263  CSR Ltd                                               1,650,594
     141,300  Cultus Petroleum *                                      348,693
      17,000  Email Ltd                                                52,315
      57,290  Foodland Associated                                     408,354
     169,629  Fosters Brewing Group Ltd                               320,181
       2,410  G E Crane Holdings Ltd                                   25,223
     463,827  Goodman Fielder Ltd                                     664,283
      83,000  Hardie (James) Industries Ltd                           282,242
      13,300  Incitec Ltd                                              58,121
      28,700  Jupiters Ltd                                             67,030
     175,700  MIM Holdings Ltd                                        210,340
      47,700  Mirvac Ltd                                              100,896
      91,266  National Australia Bank Ltd                           1,266,873
      68,430  National Consolidated Ltd                                40,207
      53,900  National Mutual Property Trust                           43,546
     783,203  News Corp Ltd                                         3,527,270
     372,983  News Corp Ltd Preferred 1.19%                         1,421,735
      24,115  Normandy Mining Ltd                                      29,224
      58,349  North Broken Hill Peko Ltd                              196,402
      46,800  Pacific Dunlop Ltd                                      120,303
      18,700  Pasminco Ltd                                             33,827
     622,752  Pioneer International Ltd                             2,094,801
      51,674  PMP Communications Ltd                                  124,103
      17,200  Portman Mining Ltd                                       40,045
      43,600  Qantas Airways Ltd                                       95,426
     156,535  QCT Resources Ltd                                       182,798
      38,869  Rothmans Holdings Ltd                                   205,170
     141,604  Santos Ltd                                              672,887

              See accompanying notes to the financial statements.              1

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares    Description                                                           Value ($)    
--------------------------------------------------------------------------------------------------
                                                                                                  
               Australia - continued                                                              
      199,197  Schroders Property                                           $              327,713
       42,245  Sea World Property Trust                                                     43,438
       27,651  Simsmetal Ltd                                                               203,083
       72,700  Southcorp Holdings Ltd                                                      250,954
       19,500  Sydney Harbour Casinos Preferred *                                           26,495
        3,749  W H Soul Pattison & Co Ltd                                                  121,152
       15,800  Westfarmers Ltd                                                             153,525
      224,365  Westfield Trust Units                                                       420,201
       62,950  Westpac Banking Corp                                                        364,783
       12,800  Wills (WD & HO) Holdings Ltd                                                 17,298
       15,600  Woodside Petroleum Ltd                                                      124,886
                                                                             ---------------------
                                                                                        25,326,714
                                                                             ---------------------
               Austria - 0.7%                                                                     
           86  Bau Holding AG Preferred 2.42% (Non Voting)                                   4,182
        5,058  Brau Union AG                                                               283,953
        3,040  Creditanstalt-Bankverein                                                    186,694
          118  Creditanstalt-Bankverein Preferred 1.65%                                      5,774
           26  EA-Generali AG                                                                6,126
        3,200  EVN Energie-Versorgung Niederoesterreich AG                                 382,683
       17,012  Lenzing AG *                                                              1,066,234
       25,893  Leykam-Muerztaler Papier und Zellstoff AG *                                 609,081
        4,518  OEMV AG                                                                     597,005
        1,649  Oesterreichische Brau Beteiligungs AG                                        87,211
        9,785  Oesterreichische Elektrizitaetswirtschafts AG                               665,647
       11,004  Oesterreichische Laenderbank AG                                             547,227
          454  Wienerberger Baustoffindustrie AG                                            88,159
                                                                             ---------------------
                                                                                         4,529,976
                                                                             ---------------------
               Canada - 4.1%                                                                      
       10,798  Abitibi-Price Inc                                                           188,982
       50,561  Agrium Inc                                                                  611,779
       21,000  Air Canada Inc *                                                            164,860
       14,400  Anderson Exploration Ltd *                                                  179,423
       12,500  BC Telecom Inc                                                              300,695
       58,196  BCE Inc                                                                   1,649,330
       11,700  Biochem Pharma Inc *                                                        303,360
       45,900  Bombardier Inc Class B                                                      890,925
       49,600  CAE Industries Inc                                                          380,453
        2,500  Canadian Hotel Inc                                                          123,609
       48,700  Canadian Marconi Co                                                         710,271
       22,600  Canadian Tire Corp Ltd Class A                                              424,020
       27,189  Cominco Ltd                                                                 704,962
       21,900  Corel Corp *                                                                127,761
        8,400  Co-Steel Inc                                                                142,475
       34,300  Cott Corp                                                                   327,325
       22,600  Dofasco Inc                                                                 460,643
      153,232  Dominion Textile Inc                                                        827,714
       15,000  Edperbrascan Corp Class A Ltd (Voting Shares)                               254,961
       23,693  Fletcher Challenge Canada Ltd Class A                                       405,278
       37,998  Gulf Canada Resources Ltd *                                                 310,618

2             See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares    Description                                               Value ($)     
---------------------------------------------------------------------------------------
                                                                                       
               Canada - continued                                                      
       34,500  Imasco Ltd                                             $         980,248
       22,893  Imperial Oil Ltd                                               1,261,345
       23,100  Inco Ltd                                                         624,729
        9,500  Ipsco Inc                                                        396,845
       18,500  Laidlaw Inc                                                      270,482
       89,081  Macmillan Bloedel Ltd                                          1,116,360
        5,500  Magna International Class A                                      364,435
       22,200  Methanex Corp *                                                  186,273
       12,200  Molson Co Ltd, Class A                                           224,063
       16,600  Moore Corporation Ltd                                            333,566
       28,200  Newbridge Networks Corp *                                      1,284,634
       45,600  Noranda Forest Inc                                               308,718
       14,898  Norcen Energy Resource                                           358,917
      114,500  Nova Corp of Alberta                                             968,976
       22,600  Nova Scotia Power Inc                                            234,391
        6,700  Potash Corp of Saskatchewan                                      496,305
       22,800  Quebecor Inc Class B                                             425,309
       15,900  Rogers Cantel Mobile Communications Class B *                    317,782
       26,500  Seagram Ltd                                                      925,673
       10,600  Suncor Energy Inc                                                332,479
       17,794  Teck Corp Class B                                                333,209
       31,200  Telus Corp                                                       620,202
       17,200  Thomson Corp                                                     392,078
       42,400  Transalta Corp                                                   528,301
       46,600  Transcanada Pipelines Ltd                                        872,628
       14,899  United Dominion Inds Ltd                                         405,083
       30,000  Westcoast Energy Inc                                             573,661
        4,100  Weston George Ltd                                                277,133
                                                                       ----------------
                                                                             24,903,269
                                                                       ----------------
               Finland - 0.2%                                                          
        7,000  Amer Group Class A *                                             135,611
        1,500  Cultor OY Class 1                                                 76,108
       43,000  Enso OY Class A                                                  376,852
        3,100  Instrumentarium OY, Class A                                      104,098
        5,800  Metra AB Class B                                                 161,590
       10,500  Partek OY                                                        191,793
       22,603  Rautaruukki OY                                                   223,949
        8,900  Valmet OY                                                        129,069
                                                                       ----------------
                                                                              1,399,070
                                                                       ----------------
               France - 8.3%                                                           
        5,365  Accor SA                                                         804,905
        1,668  Air Liquide L Shares                                             255,473
        8,053  Alcatel Alsthom Cie Generale d'Electricite SA                    987,789
       44,200  Assurances Generales De France (Bearer)                        1,581,304
        2,625  Axa SA                                                           167,484
       65,029  Banque Nationale de Paris                                      2,776,772
        4,300  Bertrand Faure SA                                                209,843
        5,280  Bouygues                                                         423,062
        1,750  Canal Plus                                                       282,458

              See accompanying notes to the financial statements.              3

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


      Shares    Description                                      Value ($)    
------------------------------------------------------------------------------
                                                                              
                France - continued                                            
           300  Carrefour                                      $       181,073
        10,625  Casino Guichard-Perrachon                              529,017
        27,059  Cerus *                                                156,140
         2,890  CGIP                                                   809,991
        22,683  Cie Bancaire SA                                      2,501,843
             1  Colas SA                                                   132
        18,680  Credit Commercial de France                            926,070
        10,310  Credit Local de France SA                              890,683
        21,936  Credit Lyonnais *                                    1,186,218
         4,807  Credit National                                        285,305
        40,040  Elf Aquitaine SA                                     4,455,857
         3,593  Elf Sanofi SA                                          345,350
         8,344  Eridania Beghin-Say SA                               1,086,763
       413,900  Eurotunnel SA Units (Bearer) *                         481,081
        22,062  Financiere de Paribas SA                             1,521,843
        17,843  FINEXTEL                                               301,820
        19,835  GAN (Group Assurances National) *                      457,819
         7,520  Generale Des Eaux                                      840,584
         3,420  Generale Des Eaux Warrants 5/2/2001 *                    1,917
         7,480  Groupe Danone                                        1,114,817
         3,630  GTM-Entrepose                                          201,683
           822  Havas Advertising                                       92,696
           802  Labinal SA                                             191,724
        44,693  Lafarge Coppee SA                                    2,888,411
        13,887  Lyonnaise Des Eaux                                   1,398,888
        16,800  Metaleurop SA *                                        227,121
        24,053  Michelin SA Class B                                  1,352,250
        19,220  Peugeot SA                                           2,157,913
           880  Pinault Printemps Redoute                              376,055
        17,350  Renault SA *                                           440,508
        75,185  Rhone Poulenc SA Class A                             2,761,721
        15,290  Saint-Gobain                                         2,102,359
         8,110  Seita                                                  250,032
        10,940  SGS Thomson Microelectronics *                       1,011,844
         3,000  Societe Eurafrance                                   1,137,581
        28,897  Societe Generale Paris                               3,592,175
         6,850  Sommer Allibert                                        243,372
        19,619  SPIE Batignolles                                     1,045,721
         1,220  Synthelabo                                             147,434
         1,860  Technip SA (Compagnie Francaise)                       225,083
        17,067  Thomson CSF                                            458,928
        17,980  Total SA                                             1,686,690
        30,700  Usinor Sacilor                                         532,967
         1,090  Valeo                                                   65,592
        10,623  Worms et Compagnie SA                                  579,182
                                                                --------------
                                                                    50,731,343
                                                                --------------
                Germany - 6.1%                                                
         6,450  Adidas AG                                              779,310
        31,605  AGIV AG *                                              737,389

4             See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares    Description                                              Value ($)              
-----------------------------------------------------------------------------------------------
                                                                                               
               Germany - continued                                                             
       46,600  Bankgesellschaft Berlin AG                            $        1,144,194        
       65,800  BASF AG                                                        2,262,600        
       54,900  Bayer AG                                                       2,025,336        
       28,800  Bayerische Hypotheken und Wechsel - Bank AG                    1,055,912        
          500  Bayerische Vereinsbank                                            26,026        
          950  Beiresdorf AG (Bearer)                                            38,472        
       18,430  Berliner Kraft & Licht Class A                                   386,486        
       38,700  BHF Bank AG                                                    1,080,285        
       11,150  Bilfinger & Berger                                               463,925        
       23,400  Bremer Vulkan Verbund AG *                                        31,717        
       99,990  Continental AG                                                 2,432,887        
        1,950  Deutsche Babcock & Wilcox *                                      124,031        
       43,550  Douglas Holdings AG                                            1,521,704        
          300  Escada AG                                                         43,663        
       12,181  FAG Kugelfischer                                                 221,946        
        4,200  Fresenius AG Preferred .82 (Non Voting)                          816,599        
          300  Friedrich Grohe AG Preferred (Non Voting)                         83,326        
        3,650  Friedrich Krupp AG                                               782,657        
       10,600  Gerresheimer Glas AG                                             135,433        
          750  Hamburgische Electricitaets-Werke AG                             183,318        
        8,155  Heidelberg Port-Zement                                           609,309        
       20,750  Henkel KGAA Preferred                                          1,050,093        
       52,296  Klockner Humboldt Deutz *                                        431,406        
          393  Klockner-Werke AG *                                               25,543        
          100  Krones Preferred                                                  38,941        
      264,255  Lufthansa AG                                                   5,314,019        
          400  MAN AG                                                           109,991        
          350  MAN AG Preferred                                                  79,035        
       46,990  Metallgesellschaft *                                           1,057,187        
          400  Philips Kommunikations Industrie AG                              112,257        
          200  Phoenix AG                                                         3,500        
          846  Porsche AG Preferred (Non Voting)                              1,221,898        
        2,200  Preussag AG                                                      619,004        
        8,300  Puma AG Preferred                                                207,022        
       20,150  RWE Preferred                                                    777,949        
       20,600  Schering AG                                                    2,010,621        
        7,750  Schwarz Pharma AG                                                569,578        
       31,700  Siemens AG                                                     1,949,388        
       13,150  SKW Trostberg AG                                                 438,297        
          350  Strabag Bau AG *                                                  27,453        
        1,200  Thyssen AG                                                       276,644        
       18,900  Veba AG                                                        1,028,914        
        6,400  Viag AG                                                        2,664,667        
          400  Walter Bau AG                                                     57,773        
          150  Wella AG                                                          94,159        
                                                                       ----------------        
                                                                             37,151,864        
                                                                       ----------------        
               Hong Kong - 9.2%                                                                
    2,516,000  Allied Properties Ltd                                            603,918        
      472,400  Allied Properties Ltd Warrants 7/3/00 *                           51,818        

              See accompanying notes to the financial statements.              5

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Shares    Description                                                       Value ($)    
---------------------------------------------------------------------------------------------
                                                                                             
               Hong Kong - continued                                                         
    1,488,000  Amoy Properties Ltd                                           $      1,497,793
    1,927,000  Cathay Pacific Airways Ltd                                           3,133,333
      377,500  Century City International                                             116,918
      145,600  Champion Technology Holdings Warrants 6/30/98 *                         23,675
      346,000  Cheung Kong Holdings                                                 3,672,538
      616,000  China Light & Power Co                                               2,853,839
    1,030,000  China Overseas Land & Investment Ltd                                   757,646
      181,500  Dao Heng Bank                                                          772,938
          133  Dickson Concept International Ltd                                          505
    4,230,000  Elec & Eltek International Holdings Ltd                              1,446,574
       63,800  Furama Hotel Enterprises Ltd                                           265,936
        9,400  Gold Peak Industry Warrants 12/31/25 * *                                   910
      684,281  Great Eagle Holdings Ltd                                             2,000,124
      237,700  Guoco Group                                                            923,315
    1,390,300  Hang Lung Development Co Ltd                                         2,511,834
       32,300  Hang Seng Bank                                                         389,734
    2,086,000  Henderson Investment Ltd                                             2,207,407
      491,000  Henderson Land Development Co Ltd                                    4,071,074
      314,880  HKR International Ltd                                                  402,286
      487,000  Hong Kong Ferry Co Ltd                                                 952,129
      169,100  Hongkong Aircraft Engineering Co Ltd                                   556,465
    1,095,500  Hongkong Electric Holdings Ltd                                       3,838,279
      164,600  Hysan Development Co Ltd                                               477,933
        1,000  Innovative International                                                   329
      616,127  Kumagai Gumi Hong Kong Ltd                                           1,156,878
      346,000  Lai Sun Development                                                    343,812
      161,400  Lai Sun Garment International Ltd                                      194,746
       71,049  Lai Sun Hotel International Warrants 4/30/99 *                           5,135
      250,000  Lane Crawford International Ltd Class B                                 30,972
       96,000  Laws International Holdings Ltd                                         22,919
        7,466  Leading Spirit Warrants 12/31/99 *                                       3,420
       19,900  Liu Chong Hing Bank Ltd                                                 53,031
      148,000  Liu Chong Hing Investment Ltd                                          207,227
      193,600  New Asia Realty & Trust A Shares                                       709,542
      588,815  New World Development Co Ltd                                         3,677,719
        1,000  Oriental Press Group                                                       345
       65,300  Oriental Press Group Warrants 10/2/98 *                                  2,528
      148,000  Paul Y- ITC Construction Holdings Ltd                                   43,928
       18,100  Realty Development Corp Ltd Class A                                     69,606
    7,428,000  Regal Hotels International Ltd                                       2,036,973
      530,000  Shanghai Petrochemical Co Class H                                      220,577
      129,900  Shaw Brothers Ltd                                                      129,079
    1,124,000  Shun Tak Holdings Ltd                                                  634,598
    1,531,972  South China Morning Post Ltd                                         1,225,736
      399,000  Sun Hung Kai Properties Ltd                                          4,531,165
      134,600  Sun Hung Kai & Co Ltd Warrants 2/18/00 *                                36,911
       82,500  Swire Pacific Ltd Class A                                              630,807
      630,000  Swire Pacific Ltd Class B                                              914,634
      170,500  Tai Cheung Holdings Ltd                                                126,516

6             See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


   Shares     Description                                                                  Value ($)            
----------------------------------------------------------------------------------------------------------------
                                                                                                                
              Hong Kong - continued                                                                             
     660,000  Wharf Holdings Ltd                                                      $        2,389,082        
   1,655,200  Wheelock & Co Ltd                                                                3,438,988        
      43,880  Wing Lung Bank                                                                     268,977        
      31,800  Yue Yuen Industrial Holdings                                                        71,611        
                                                                                        ----------------        
                                                                                              56,706,712        
                                                                                        ----------------        
              Italy - 4.3%                                                                                      
     241,366  Alitalia Linee Aeree Italiane Class A *                                            145,995        
      28,000  Alleanza Assicurazioni SPA                                                         233,770        
     134,500  Assicurazioni Generali SPA                                                       2,841,703        
     270,169  Autostrade Concessioni e Costruzioni SPA Class B Preferred 6.39%                   642,929        
     145,000  Banca Commerciale Italiana SPA                                                     362,355        
     897,017  Banca di Roma *                                                                    799,860        
     225,718  Banca Fideuram SPA                                                                 782,005        
      11,500  Banca Popolare di Bergamo Credit                                                   154,469        
      32,000  Banca Popolare di Milano                                                           171,204        
      31,000  Banco Ambrosiano Veneto SPA (Non Convertible)                                       67,961        
     187,997  Banco di Napoli di Risp *                                                           90,224        
      27,000  Bulgari SPA                                                                        160,248        
      49,900  Cartiere Burgo SPA                                                                 283,976        
     143,000  COFIDE SPA *                                                                        47,675        
     532,500  Credito Italiano                                                                 1,103,890        
     264,000  Credito Italiano (Non Convertible)                                                 304,378        
       1,000  Edison SPA                                                                           4,680        
      90,500  Editoriale L'Espresso SPA                                                          323,819        
     269,700  Fiat SPA                                                                           830,221        
     208,500  Fiat SPA Preferred                                                                 323,875        
     597,270  Fiat SPA (Non Convertible)                                                         999,009        
      90,000  Finmeccanica SPA *                                                                  63,384        
     515,480  HPI SPA *                                                                          233,923        
     106,000  IFI Istituto Finanziario Preferred 2.46%                                         1,207,073        
     212,900  IFIL Finanziaria di Partecipazioni SPA (Non Convertible)                           360,334        
     184,700  Industriali Riunite SPA (Non Convertible) *                                         68,710        
     210,700  Industriali Riunite SPA *                                                          148,747        
     117,000  Istituto Bancario San Paolo                                                        817,343        
      82,750  Istituto Mobilaire Italiano                                                        770,536        
     706,892  Istituto Nazionale Delle Assicurazioni                                           1,033,817        
      48,750  Italcementi Fabbriche Riunite Cemento SPA (Non Convertible)                        118,088        
       6,800  Italmobiliare SPA                                                                  107,945        
       1,750  Luxottica Group Sponsored ADR                                                      102,156        
      59,000  Mediobanco SPA                                                                     385,022        
      62,500  Merloni Elettrodomestici SPA                                                       222,567        
   1,664,200  Montedison SPA                                                                   1,011,353        
     135,000  Montedison SPA (Non Convertible)                                                    66,706        
     151,333  Montefibre SPA                                                                      88,529        
     187,136  Olivetti and Co SPA * *                                                             75,994        
      80,535  Parmalat Finanziaria SPA                                                           125,100        
   2,063,769  Permafin Finanziaria *                                                             576,686        
     352,200  Pirelli SPA (Non Convertible)                                                      492,082        
      29,500  RAS SPA                                                                            251,069        

              See accompanying notes to the financial statements.              7

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GMO Currency Hedged International Core Fund                                     

(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


 Shares      Description                                                                  Value ($)    
-------------------------------------------------------------------------------------------------------
                                                                                                       
             Italy - continued                                                                         
     15,000  RAS SPA (Non Convertible)                                                 $         74,544
     24,650  Sirti SPA                                                                          132,301
     46,240  SMI (Societa Metallurgica Italy) *                                                  18,699
    277,500  Sopaf SPA *                                                                        223,802
     47,149  Stefanel SPA *                                                                      72,034
    747,500  Telecom Italia Mobile SPA                                                        2,589,730
    110,146  Telecom Italia Mobile SPA (Non Convertible)                                        184,546
    511,500  Telecom Italia SPA di Risp                                                       3,044,530
    237,936  Telecom Italia SPA di Risp (Non Convertible)                                       841,902
     74,500  Unione Cementi Marchino Emiliane e di Augusta-Casale (Non Convertible)             192,522
                                                                                         --------------
                                                                                             26,376,020
                                                                                         --------------
             Japan - 14.2%                                                                             
      9,100  Advantest Corp                                                                     832,156
     45,000  Amada Co Ltd                                                                       305,262
    227,000  Aoki Corp *                                                                        135,872
      7,000  Aoyama Trading                                                                     188,544
      4,600  Arabian Oil Co Ltd                                                                 129,637
     35,000  Asahi Breweries Ltd                                                                520,825
     11,000  Bandai Co                                                                          237,759
     29,000  Bank of Fukuoka Ltd                                                                133,078
     58,000  Bank of Tokyo-Mitsubishi                                                         1,055,948
     22,000  Banyu Pharmaceutical Co Ltd                                                        369,441
     51,000  Brother Industries Ltd                                                             178,070
     24,000  Canon Sales Co Inc                                                                 486,824
     37,000  Casio Computer Co                                                                  322,970
     13,600  Chubu Electric Power Co Inc                                                        228,381
      9,000  Chudenko Corp                                                                      206,501
     58,000  Chugai Pharmaceutical Co Ltd                                                       486,990
     27,000  Chugoku Bank Ltd                                                                   399,535
     13,100  Chugoku Electric Power Co Inc                                                      212,362
     42,000  Citizen Watch Co                                                                   324,366
    126,000  Cosmo Oil Co Ltd                                                                   408,513
     31,800  CSK Corp                                                                         1,081,237
     99,000  Dai Ichi Kangyo Bank                                                             1,152,215
    123,000  Daicel Chemical Industries Ltd                                                     349,705
     25,000  Daiichi Seiyaku Co Ltd                                                             426,054
     36,000  Dainippon Pharmaceutical Co Ltd                                                    206,501
     43,000  Dainippon Printing Co Ltd                                                          900,823
     44,000  Dainippon Screen Manufacturing Co Ltd                                              413,334
     98,000  Daishowa Paper Manufacturing *                                                     536,886
     19,500  Daito Trust Construction Co Ltd                                                    215,604
     64,000  Daiwa Securities Co Ltd                                                            404,356
     21,000  Denso Corp                                                                         453,903
        121  East Japan Railway Co                                                              553,246
     27,000  Eisai Co Ltd                                                                       514,008
     43,000  Ezaki Glico Co Ltd                                                                 323,510
      2,200  Familymart                                                                          92,360
     14,700  Fanuc Co                                                                           564,586
     26,000  Fuji Bank                                                                          317,732

8             See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     

(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


  Shares      Description                                    Value ($)    
--------------------------------------------------------------------------
                                                                          
              Japan - continued                                           
     122,000  Fuji Heavy Industries Ltd                    $       538,549
      37,800  Fuji Photo Film Co Ltd                             1,458,076
      49,000  Fujikara Ltd                                         411,422
      25,000  Fujisawa Pharmaceutical Co Ltd                       243,162
      33,000  Fukuyama Transporting Co Ltd                         164,602
      69,000  Gakken Co Ltd *                                      294,838
      49,000  General Sekiyu (KK)                                  285,144
      77,000  Hankyu Corp                                          382,792
     198,000  Haseko Corp *                                        186,001
      16,000  Heiwa Corp                                           287,306
      64,000  Hino Motors                                          278,261
     180,000  Hitachi Ltd                                        1,660,986
      14,000  Hitachi Maxell Ltd                                   316,568
      62,000  Hitachi Metals Ltd                                   327,292
      22,200  Hokkaido Electric Power                              372,799
      33,000  House Foods Corp                                     559,648
       2,000  Hoya Corp                                             84,961
      33,000  INAX Corp                                            161,859
      31,000  Industrial Bank of Japan                             427,800
      25,000  Intec Inc                                            284,729
      75,000  Itochu Corp                                          309,876
      34,000  Itoham Foods Inc                                     142,456
      16,000  Ito-Yokado                                           864,577
       9,000  Japan Airport Terminal Co Ltd                         95,020
     142,000  Japan Energy Co Ltd                                  251,442
      43,000  Japan Radio Co                                       386,067
      87,000  Japan Synthetic Rubber Co Ltd                        665,392
         397  Japan Tobacco Inc                                  3,198,046
      50,000  Kamigumi Co Ltd                                      230,693
      28,000  Kandenko Co                                          192,036
      44,000  Kaneka Corp                                          273,606
     129,000  Kankaku Securities Co Ltd *                          143,703
      31,400  Kansai Electric Power                                587,331
      61,000  Kao Corp                                             902,652
      10,000  Katokichi Co Ltd                                     162,108
      74,000  Keio Teito Electric Railway Co Ltd                   319,894
      52,000  Kikkoman Corp                                        293,956
      19,000  Kinden Corp                                          263,779
      65,000  Kirin Brewery Co Ltd                                 527,933
      14,000  Kissei Pharmaceutical Co Ltd                         256,048
       3,000  Kokusai Denshin Denwa                                191,787
      26,000  Kokusai Electric                                     458,226
       4,000  Kokusai Kogyo Co Ltd                                  23,776
       8,000  Kokuyo Co Ltd                                        190,872
      60,000  Konica Corp                                          346,163
      27,000  Koyo Seiko Co Ltd                                    185,626
      59,000  Kubota Corp                                          238,374
      64,000  Kurabo Industries Ltd                                135,672
      13,000  Kyocera Corp                                         821,348

              See accompanying notes to the financial statements.              9

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Shares      Description                                              Value ($)    
--------------------------------------------------------------------------------------
                                                                                      
                Japan - continued                                                     
        57,000  Kyowa Hakko Kogyo Co Ltd                             $         334,068
        30,100  Kyushu Electric Power Co Inc                                   490,448
        26,000  Kyushu Matsushita Electric                                     315,571
        88,000  Lion Corp                                                      339,446
         4,800  Mabuchi Motor Co                                               256,181
        57,000  Maeda Corp                                                     248,774
        20,000  Maeda Road Construction                                        130,185
        17,000  Makita Corp                                                    233,187
       141,000  Marudai Food Co Ltd                                            479,416
        15,000  Matsushita Communications                                      490,066
        16,000  Matsushita Kotubuki                                            522,737
        48,000  Meiji Seika Kaisha Ltd                                         218,273
        35,000  Minolta Co Ltd                                                 200,765
       118,000  Mitsubishi Electric Corp                                       542,472
        60,000  Mitsubishi Gas Chemical Co Inc                                 227,450
       121,000  Mitsubishi Oil Co Ltd *                                        422,479
        10,000  Mitsubishi Warehouse & Transportation Co Ltd                   116,385
        87,000  Mitsui Fudosan Co Ltd *                                      1,012,553
        32,000  Mitsui Petrochemical Industries Ltd                            110,400
         5,000  Murata Manufacturing Co Ltd                                    204,090
        19,000  National House Industrial                                      247,984
       123,000  NEC Corp                                                     1,380,414
        53,000  New Oji Paper Co Ltd                                           268,767
        23,000  NGK Spark Plug Co                                              196,941
        15,000  Nichicon Corp                                                  185,801
        30,000  Nichii Co Ltd                                                  341,674
        59,000  Nichirei                                                       201,588
       127,000  Nikko Securities                                               600,740
         6,000  Nikon Corp                                                      99,260
        17,400  Nintendo Co Ltd                                              1,437,825
        79,000  Nippon Carbon Co Ltd *                                         180,605
        29,000  Nippon Chemi-Con Corp                                          135,007
       186,000  Nippon Credit Bank                                             318,530
         9,000  Nippon Electric Glass Co                                       123,452
        26,000  Nippon Express Co Ltd                                          171,619
        48,000  Nippon Hodo Co                                                 326,810
        38,000  Nippon Meat Packers Inc                                        458,060
       248,000  Nippon Oil Co Ltd                                            1,111,248
        47,000  Nippon Paper Industries                                        272,724
           619  Nippon Telegraph & Telephone                                 5,814,864
         1,700  Nippon Television Network                                      597,805
        39,000  Nishimatsu Construction                                        230,194
        56,000  Nisshinbo Industries Inc                                       363,123
       132,000  Nissho Iwai Corp                                               497,099
         8,000  Nissin Food Products Co Ltd                                    186,217
        51,000  Nitto Denko Corp                                               886,109
        39,000  Nomura Securities Co Ltd                                       518,746
        80,000  Oki Electric Industry                                          285,976
        27,000  Olympus Optical Co Ltd                                         192,585

10            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares      Description                                     Value ($)    
----------------------------------------------------------------------------
                                                                            
               Japan - continued                                            
       32,000  Omron Corp                                    $       595,893
        9,000  Ono Pharmaceutical Co Ltd                             280,572
       31,000  Onward Kashiyama Co Ltd                               476,765
        3,300  Orix Corp                                             245,532
       32,000  Pioneer Electronics Corp                              638,457
       29,000  Q.P. Corp                                             241,084
      146,000  Renown Inc *                                          251,243
        9,000  Rinnai Corp                                           167,595
        1,000  Rohm Co Ltd                                           103,916
       21,000  Royal Co Ltd                                          359,631
        8,000  Ryosan Co                                             161,609
       98,000  Sagami Railway Co Ltd                                 313,659
       38,000  Sakura Bank Ltd                                       224,291
       22,000  Sanden Corp                                           150,885
       12,000  Sankyo Co Ltd                                         365,118
       40,000  Sanwa Bank Ltd                                        498,795
       17,000  Sanwa Shutter Corp                                    131,432
       30,000  Sapporo Breweries Ltd                                 213,484
        6,500  Secom Co Ltd                                          463,089
       50,000  Seino Transportation Co Ltd                           498,795
       33,000  Sekisui House Ltd                                     312,744
       34,000  Sharp Corp                                            342,007
       25,700  Shikoku Electric Power                                416,618
       15,000  Shin-Etsu Chemical Co Ltd                             384,072
       81,000  Shionogi and Co Ltd                                   546,105
       72,000  Shiseido Co Ltd                                     1,179,150
      213,000  Showa Denko                                           414,349
       49,000  Showa Shell Sekiyu                                    340,136
       16,000  Skylark Co Ltd                                        222,130
       58,000  Snow Brand Milk Products Co Ltd                       239,638
       99,000  Stanley Electric Co Ltd                               425,497
       37,000  Sumitomo Bank                                         547,510
      310,000  Sumitomo Complete Corp                              2,577,105
       52,000  Sumitomo Heavy Industries Ltd                         164,270
       22,000  Suzuki Motor Corp                                     208,496
       16,000  Taisho Pharmaceutical Co Ltd                          392,385
       15,000  Taiyo Yuden Co Ltd                                    175,825
       32,000  Takeda Chemical Industries Ltd                        853,936
       25,000  Takuma Corp                                           303,433
       50,000  Tanabe Seiyaku Co Ltd                                 376,590
          700  TDK Corp                                               53,886
       68,000  Teikoku Oil Co Ltd                                    260,604
       26,000  Terumo Corp                                           475,518
       25,600  Tohoku Electric Power Co Inc                          417,125
       18,000  Tokai Bank Ltd                                        157,120
        2,000  Tokyo Broadcasting System Inc                          33,752
       53,000  Tokyo Electric Co Ltd                                 190,781
        1,100  Tokyo Electric Power                                   21,033
        9,000  Tokyo Electron                                        490,066

              See accompanying notes to the financial statements.             11

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


   Shares      Description                                              Value ($)    
-------------------------------------------------------------------------------------
                                                                                     
               Japan - continued                                                     
       67,000  Tokyo Steel Manufacturing Co                            $      546,405
       38,000  Toppan Printing Co Ltd                                         546,513
       78,000  Toshiba Corp                                                   431,856
        8,000  Tostem Corp                                                    166,930
       25,000  Toyo Suisan Kaisha                                             249,397
       58,000  Toyo Trust & Banking Co Ltd                                    472,525
      137,000  Toyobo Co Ltd                                                  271,062
       21,000  Tsumura and Co                                                 162,183
       19,000  Victor Co of Japan Ltd                                         230,609
       19,000  Wacoal Corp                                                    219,553
       37,000  Yakult Honsha Co Ltd                                           362,956
       18,000  Yamaha Corp                                                    278,327
       22,000  Yamaha Motor Co                                                199,352
       70,000  Yamaichi Securities Co Ltd                                     137,335
       40,000  Yamanouchi Pharmaceutical Co Ltd                               957,686
       27,000  Yamato Transport Co Ltd                                        325,464
       30,000  Yamazaki Baking Co Ltd                                         414,000
       62,000  Yasuda Trust and Banking Co Ltd                                231,940
       52,000  Yoshitomi Pharmaceutical Industries Ltd                        339,347
                                                                        -------------
                                                                           87,028,227
                                                                        -------------
               Malaysia - 3.0%                                                       
      235,500  AMMB Holdings Berhad                                           840,062
      285,500  Arab Malaysian Finance (Foreign Registered)                    269,293
       93,000  Berjaya Leisure Berhad (c)                                     173,847
      317,700  Berjaya Sports Toto                                            871,754
      125,700  Carlsberg Brew Malaysia                                        474,258
      219,500  Edaran Otomobil Berhad                                         790,516
      308,000  Ekran Berhad                                                   361,297
      230,000  Highlands and Lowlands Berhad                                  227,988
      623,000  Hong Leong Properties Berhad                                   453,013
      122,300  IGB Corp Berhad                                                 83,896
      365,000  IOI Corporation Berhad                                         328,006
       74,300  Kedah Cement Berhad                                             73,905
      131,900  Kumpulan Guthrie Berhad                                        139,342
      141,550  Malayan Cement Berhad                                          172,841
      115,000  Malayan United Industries Berhad                                59,167
      103,840  Malaysia Mining Corp Berhad                                     76,207
      296,000  Malaysian Airline Systems                                      563,471
      305,500  Malaysian International Ship (Alien Market)                    628,709
       77,000  Malaysian Pacific Industries                                   209,964
      681,600  Malaysian Resources Corp                                       549,395
    1,035,000  MBF Capital Berhad                                             972,698
       92,000  New Straits Times                                              410,221
      294,800  Oriental Holdings Berhad                                     1,061,705
       22,000  OYL Industries Berhad                                          101,115
      330,500  Pan Malaysia Cement                                            284,533
      114,300  Perlis Plantations                                             282,271
      565,000  Perusahaan Otomobil                                          1,647,230
      128,100  Petronas Dagangan Berhad                                       180,144

12            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


  Shares      Description                                                     Value ($)    
-------------------------------------------------------------------------------------------
                                                                                           
              Malaysia - continued                                                         
     269,300  Petronas Gas Berhad                                           $       743,565
     729,232  Public Bank Berhad (Alien Market)                                     685,336
     204,000  Rashid Hussain Berhad                                                 493,295
     542,000  Renong Berhad                                                         557,709
     427,000  RHB Capital Berhad                                                    732,293
      74,000  Rothmans of Pall Mall Malaysia Berhad                                 596,467
     227,000  Sarawak Enterprises Corp                                              168,177
       8,000  Shell Refinery Co                                                      18,110
     250,000  TA Enterprise Berhad                                                  166,352
     920,400  Tan Chong Motor Holdings Berhad                                       972,331
     282,000  UMW Holdings Berhad                                                   759,287
     218,000  YTL Corp                                                              348,441
                                                                              -------------
                                                                                 18,528,211
                                                                              -------------
              Netherlands - 0.0%                                                           
          51  Fortis Amev NV                                                          2,086
       7,075  Schroders International Property Fund                                  12,731
                                                                              -------------
                                                                                     14,817
                                                                              -------------
              Norway - 0.6%                                                                
         449  Bona Shipholding Ltd *                                                  5,662
      62,550  Norsk Hydro AS                                                      3,398,681
                                                                              -------------
                                                                                  3,404,343
                                                                              -------------
              Singapore - 2.6%                                                             
     113,800  Asia Food & Properties Ltd Warrants 7/12/02 *                          36,985
   1,517,333  Asia Food & Properties Ltd *                                          743,493
     243,900  City Developments                                                   1,539,997
      95,000  Creative Technology Ltd *                                           1,909,421
     105,000  DBS Land Ltd                                                          269,355
     282,900  Development Bank of Singapore (Foreign Registered)                  2,992,661
      40,000  First Capital Corp Ltd                                                 89,388
      59,984  Hai Sun Hup Group Ltd                                                  38,469
       6,564  Haw Paw Brothers International Ltd                                     12,586
       9,500  Haw Paw Brothers International Ltd Warrants 7/18/2001 *                 7,035
      10,495  Highlands and Lowlands Berhad                                          10,686
     259,708  Inchcape Berhad                                                       867,124
     669,441  Jardine Matheson Holdings Ltd                                       4,686,087
     226,500  Jardine Strategic Holdings Ltd                                        838,050
     114,000  Marco Polo Developments Ltd                                           180,867
     184,000  Natsteel Ltd                                                          501,210
      42,500  Neptune Orient Lines Ltd                                               32,033
      89,900  Parkway Holdings Ltd                                                  338,797
       5,000  Robinson and Co Ltd                                                    23,306
     125,000  Singapore Tech Industrial Corp                                        191,736
      70,900  Singapore Technologies Aero (Foreign Registered)                      107,815
     267,000  Straits Trading Co Ltd                                                494,281
                                                                              -------------
                                                                                 15,911,382
                                                                              -------------
              Spain - 2.6%                                                                 
      41,782  Argentaria Corporacion Bancaria de Espana SA                        2,080,443
     227,013  Banco Bilbao Vizcaya SA                                             5,980,314
      59,436  Banco Central Hispanoamericano SA                                   2,204,953

              See accompanying notes to the financial statements.             13

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


  Shares      Description                                                   Value ($)     
------------------------------------------------------------------------------------------
                                                                                          
              Spain - continued                                                           
       1,787  Fabricacion de Automoviles Renault de Espana SA            $          37,026
     252,397  FENOSA SA                                                          1,959,011
     110,196  Iberdrola SA                                                       1,239,460
         670  Koipe SA                                                              44,996
      74,858  Telefonica de Espana SA                                            1,944,939
       2,700  Telefonica de Espana SA ADR                                          209,925
                                                                           ---------------
                                                                                15,701,067
                                                                           ---------------
              Sweden - 5.8%                                                               
      36,934  Assi Doman                                                         1,124,351
      73,200  Avesta Sheffield AB                                                  694,617
      11,701  Celsius Industrier AB Class B                                        219,088
      63,000  Electrolux AB Class B                                              4,493,724
      55,500  Ericsson LM Class B                                                2,318,700
      31,250  Granges AB *                                                         469,688
      16,625  Hufvudstaden International *                                          16,094
      40,600  Kinnevik Investment Class B                                        1,225,610
      49,100  Marieberg Tidnings AB Class A                                      1,269,566
     132,800  Mo Och Domsjo AB Class B                                           4,397,939
      29,200  Nordbanken                                                           929,824
     120,605  Skanska AB Class B                                                 4,800,574
      41,900  Sparbanken Sverige AB Class A                                        912,616
      60,600  Ssab Swedish Steel Class A                                         1,258,166
     195,300  Stora Kopparberg Bergslags Class A                                 3,109,496
      48,100  Stora Kopparberg Bergslags Class B                                   753,578
     136,100  Svenska Cellulosa Class B                                          3,025,042
      74,460  Svenska Handelsbanken Class A                                      2,295,177
       1,712  Sydkraft AB Class A                                                   41,432
      92,700  Trelleborg AB Class B                                              1,428,706
      31,050  Volvo AB Class B                                                     798,897
                                                                           ---------------
                                                                                35,582,885
                                                                           ---------------
              Switzerland - 3.1%                                                          
       4,295  Alberta Energy Ltd                                                    95,585
          30  Ascom Holding AG (Bearer) *                                           40,612
         250  Bobst SA (Registered)                                                193,727
       8,700  CS Holdings (Registered)                                           1,047,893
         635  Elektrowatt AG (Bearer)                                              229,773
         120  Financiere Richemont AG Class A                                      161,720
         910  Hilti AG, Schaan (Participating Certificate)                         625,451
         556  Holderbank Financiere Glarus AG (Bearer)                             466,440
       3,670  Holderbank Financiere Glarus AG (Registered)                         652,862
       7,840  Nestle AG (Registered)                                             9,139,315
       2,093  Novartis AG (Registered)                                           2,972,975
         270  Rieter Holdings AG (Registered)                                      120,805
          35  Roche Holdings (Participating Certificate)                           295,981
         180  Sairgroup Namen AKT *                                                213,834
         650  Schweizerische Rueckversicherungsgesellschaft (Bearer)               865,470
          70  Sig Schweiz Industrie (Registered)                                   101,412
         140  Sulzer Gebrueder AG (Registered)                                      98,393
       3,450  Swiss Bank Corp (Registered) *                                       833,412
       2,080  Zuerich Versicherungs Namen (Registered)                             756,848
                                                                           ---------------
                                                                                18,912,508
                                                                           ---------------

14            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


      Shares     Description                                      Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 United Kingdom - 24.7%                                         
        136,200  Abbey National                                       1,828,962 
        207,600  Allied Domecq Plc                                    1,568,955 
        155,590  AMEC                                                   358,317 
         63,900  Anglian Water Plc                                      805,747 
              1  Argos Plc                                                   10 
      2,337,138  ASDA Group                                           5,458,133 
         27,600  Associated British Foods                               231,866 
        216,100  Bank of Scotland                                     1,454,455 
        112,100  Barclays Bank Plc                                    2,563,433 
        165,590  Barratt Development                                    688,841 
         72,480  Bass *                                                 969,772 
        418,800  BAT Industries                                       3,508,119 
         24,391  Betacomm Plc *                                          17,801 
      2,092,494  BG Plc                                               9,128,802 
        135,700  Blue Circle Industries                                 845,101 
         81,531  Booker Plc                                             413,870 
         80,455  British Aerospace                                    1,884,159 
        408,281  British Airways                                      4,257,625 
        323,200  British Steel                                          906,807 
        214,900  British Telecom Plc                                  1,387,129 
        224,750  BTR                                                    794,609 
        162,320  Burton Group                                           325,773 
        358,182  Coats Viyella                                          688,366 
         50,300  Commercial Union Plc                                   603,666 
             86  Costain Group (c) *                                         63 
        303,700  Courtaulds Textiles Plc                              1,617,996 
         68,700  Electrocomponents Plc                                  513,635 
        384,690  FKI                                                  1,179,153 
          9,050  Glaxo Wellcome Plc                                     181,265 
        110,756  Greenalls Group Plc                                    847,826 
              1  Hanson Plc                                                   5 
      1,074,312  Hazlewood Foods                                      2,334,708 
        150,744  Hillsdown Holdings                                     396,052 
         43,320  HSBC Holdings                                        1,298,338 
        106,360  Imperial Chemical Industries Plc                     1,721,497 
         88,277  Kingfisher                                           1,037,965 
        733,291  Ladbroke Group                                       3,080,161 
         70,800  Land Securities                                      1,027,670 
        572,500  Lasmo                                                2,379,231 
        156,575  Legal & General Group                                1,149,048 
        139,215  Lex Service                                          1,000,200 
        743,800  Lloyds TSB Group                                     8,709,449 
        802,603  Lonrho                                               1,607,552 
        214,011  Marley                                                 385,262 
         58,600  Meyer International                                    406,285 
        729,393  National Power                                       6,730,869 
         33,800  Next                                                   406,741 
      1,817,485  Norcros Plc                                          2,033,842 
        136,600  Northern Foods Plc *                                   482,953 

              See accompanying notes to the financial statements.             15

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Shares       Description                                                             Value ($)      
--------------------------------------------------------------------------------------------------------
                                                                                                        
                 United Kingdom - continued                                                             
         53,290  Ocean Group                                                         $          486,145 
        333,800  Peninsular & Oriental Steam Navigation Co                                    3,518,819 
        870,137  Pilkington *                                                                 2,053,279 
        289,759  Powergen                                                                     3,665,463 
        120,200  Prudential Corp                                                              1,189,136 
        170,000  Railtrack Group Plc                                                          2,129,829 
         47,673  Reckitt & Colman                                                               736,049 
        100,610  Redland                                                                        473,191 
        534,100  Rentokil Plc                                                                 1,870,999 
        430,600  Reuters Holdings                                                             4,371,653 
         70,460  RMC Group                                                                    1,147,291 
        122,254  Safeway Plc                                                                    743,518 
        110,200  Sainsbury (J)                                                                  770,293 
         28,740  Schroders                                                                      882,104 
        139,016  Scottish Hydro-Electric Plc                                                  1,005,534 
        536,442  Scottish Power Plc                                                           3,780,157 
        798,712  Sears                                                                          816,071 
         92,815  Severn Trent Plc                                                             1,317,114 
         97,700  Severn Trent Plc Class B                                                        50,704 
         53,520  Shell Transport & Trading (Registered)                                         362,819 
      1,505,328  Smithkline Beecham Plc                                                      13,036,761 
        193,789  Southern Electric Plc                                                        1,452,006 
         30,900  Southwest Water                                                                404,918 
         67,630  Storehouse Plc                                                                 251,173 
        179,500  T & N                                                                          467,237 
      1,222,840  Tarmac                                                                       2,350,094 
        432,766  Taylor Woodrow Plc                                                           1,305,459 
        163,300  Thames Water                                                                 2,090,911 
        544,415  Transport Development Group                                                  1,470,082 
         92,108  Unilever Plc                                                                 2,552,917 
        221,452  United Biscuits                                                                741,647 
        330,200  United Utilities                                                             3,689,722 
         55,540  Viglen Technology *                                                             58,549 
        456,630  Vodafone Group Plc                                                           2,347,583 
        137,800  Waste Management International *                                               554,240 
        165,350  Whitbread Plc Class A                                                        2,162,748 
        777,669  Wilson (Connolly) Holdings                                                   2,181,917 
        278,175  Wimpey (George)                                                                600,022 
        126,788  Yorkshire Water                                                                900,637 
                                                                                       -----------------
                                                                                            151,206,875 
                                                                                       -----------------

                 TOTAL STOCK AND EQUIVALENTS (Cost $571,949,727)                            573,415,283 
                                                                                        ----------------

Par Value        DEBT OBLIGATIONS - 0.0%                                                                
                 United Kingdom - 0.0%                                                                  
         90,530  Viglen Technology Floating Rate Note, 6.75% due 9/1/2000 (c)                   171,488 
                                                                                       -----------------

                 TOTAL DEBT OBLIGATIONS (Cost $99,516)                                          171,488 
                                                                                       -----------------

16            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Shares/                                                                                               
       Par Value ($)    Description                                                              Value ($)     
---------------------------------------------------------------------------------------------------------------
                                                                                                               
                        SHORT-TERM INVESTMENTS - 9.5%                                                          
                        Cash Equivalents - 7.5%                                                                
$           26,400,000  First National Bank of Chicago Time Deposit, 5.44% due 9/2/97               26,400,000 
            19,807,665  The Boston Global Investment Trust (b)                                      19,807,665 
                                                                                                 --------------
                                                                                                    46,207,665 
                                                                                                 --------------
                        U.S. Government - 2.0%                                                                 
$           12,450,000  U.S. Treasury Bill, 5.56% due 1/8/98 (a)                                    12,222,469 
                                                                                                 --------------

                        TOTAL SHORT-TERM INVESTMENTS (Cost $58,425,102)                             58,430,134 
                                                                                                 --------------

                        TOTAL INVESTMENTS - 103.1%                                                             
                        (Cost $630,474,345)                                                        632,016,905 

                        Other Assets and Liabilities (net) -  (3.1%)                               (18,833,044)
                                                                                                 --------------

                        TOTAL NET ASSETS - 100.0%                                              $   613,183,861 
                                                                                                 ==============

Notes to the Schedule of Investments:     

ADR  American Depositary Receipt          
GBP  British Pounds                       

              (a) This security is held as collateral for open futures
contracts.                        

              (b) Represents investment of security lending collateral
(Note 1).                         

(c) Valued by management (Note 1).        

                *   Non-income producing security. A dividend has not been
                   declared for the twelve months ended August 31, 1997.

              See accompanying notes to the financial statements.             17

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

                                                                [Download Table]
At August 31, 1997, industry sector diversification of      
the Fund's equity investments was as follows:               

Industry Sector                                             

                                                            
Banking                                               12.0 %
Utilities                                              7.9  
Consumer Goods                                         7.0  
Conglomerates                                          6.4  
Services                                               5.9  
Construction                                           5.6  
Real Estate                                            5.4  
Health Care                                            4.7  
Transportation                                         4.5  
Electronic Equipment                                   4.2  
Telecommunications                                     3.6  
Oil and Gas                                            3.5  
Chemicals                                              3.1  
Retail Trade                                           3.0  
Paper and Allied Products                              2.8  
Food and Beverage                                      2.6  
Machinery                                              2.5  
Automotive                                             2.2  
Insurance                                              1.9  
Metals and Mining                                      1.8  
Communications                                         1.7  
Financial Services                                     1.7  
Textiles                                               0.9  
Aerospace                                              0.8  
Computers                                              0.1  
Miscellaneous                                          4.2  
                                                    ------  
                                                     100.0% 
                                                    ======  


18            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities - August 31, 1997 (Unaudited)               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                   
Assets:                                                                                            
     Investments, at value (cost $630,474,345) (Note 1)                         $      632,016,905 
     Foreign currency, at value (cost $956,483) (Note 1)                                   963,317 
     Cash                                                                                   27,969 
     Dividends and interest receivable                                                   1,275,198 
     Foreign withholding taxes receivable                                                  675,572 
     Receivable for variation margin on open futures contracts (Notes 1 and 6)           2,237,170 
     Receivable for open forward foreign currency contracts (Notes 1 and 6)             24,241,832 
     Receivable for expenses waived or borne by Manager (Note 2)                           206,121 
                                                                                 ------------------

         Total assets                                                                  661,644,084 
                                                                                 ------------------

Liabilities:                                                                                       
     Payable for investments purchased                                                      70,977 
     Payable for open forward foreign currency contracts (Notes 1 and 6)                16,258,710 
     Payable upon return of securities loaned (Note 1)                                  19,807,665 
     Payable for Fund shares repurchased                                                10,644,708 
     Payable for open swap contracts (Notes 1 and 6)                                       707,741 
     Payable to affiliate for (Note 2):                                                            
         Management fee                                                                    394,480 
         Shareholder service fee                                                            78,896 
     Accrued expenses                                                                      497,046 
                                                                                 ------------------

         Total liabilities                                                              48,460,223 
                                                                                 ------------------

Net assets                                                                      $      613,183,861 
                                                                                 ==================

Net assets consist of:                                                                             
     Paid-in capital                                                            $      549,585,695 
     Accumulated undistributed net investment income                                    39,102,896 
     Accumulated undistributed net realized gain                                        10,331,400 
     Net unrealized appreciation                                                        14,163,870 
                                                                                 ------------------

                                                                                $      613,183,861 
                                                                                 ==================

Net assets attributable to Class III Shares                                     $      613,183,861 
                                                                                 ==================

Shares outstanding - Class III                                                          48,855,437 
                                                                                 ==================

Net asset value per share - Class III                                           $            12.55 
                                                                                 ==================

               See accompanying notes to the financial statements.          19

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Statement of Operations - Six Months Ended August 31, 1997 (Unaudited)          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                       
Investment income:                                                                     
     Dividends (net of foreign tax expense of $1,065,527)             $      9,427,808 
     Interest (including securities lending income of $145,260)              1,073,570 
                                                                       ----------------
         Total income                                                       10,501,378 
                                                                       ----------------

Expenses:                                                                              
     Management fee (Note 2)                                                 2,260,433 
     Custodian fees                                                            532,588 
     Stamp duties and transfer taxes                                            66,148 
     Audit fees                                                                 35,144 
     Transfer agent fees                                                        14,904 
     Legal fees                                                                 13,524 
     Trustees fee (Note 2)                                                       2,760 
     Miscellaneous                                                               2,116 
     Fees waived or borne by Manager (Note 2)                               (1,233,957)
                                                                       ----------------
                                                                             1,693,660 

     Shareholder service fee - Class III (Note 2)                              452,086 
                                                                       ----------------

         Net expenses                                                        2,145,746 
                                                                       ----------------

            Net investment income                                            8,355,632 
                                                                       ----------------

Realized and unrealized gain (loss):                                                   
         Net realized gain (loss) on:                                                  
            Investments                                                     27,086,891 
            Closed futures contracts                                        (1,597,520)
            Closed swap contracts                                              (90,724)
            Foreign currency, forward contracts and foreign currency                   
                related transactions                                        13,354,113 
                                                                       ----------------
                Net realized gain                                           38,752,760 
                                                                       ----------------

         Change in net unrealized appreciation (depreciation) on:                      
            Investments                                                    (22,350,792)
            Open futures contracts                                           6,785,593 
            Open swap contracts                                               (707,741)
            Foreign currency, forward contracts and foreign currency                   
                related transactions                                         6,574,343 
                                                                       ----------------
                Net unrealized loss                                         (9,698,597)
                                                                       ----------------

         Net realized and unrealized gain                                   29,054,163 
                                                                       ----------------
Net increase in net assets resulting from operations                  $     37,409,795 
                                                                       ================

20                See accompanying notes to the financial statements.           

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                                Six Months Ended                          
                                                                 August 31, 1997          Year Ended      
Increase (decrease) in net assets:                                 (Unaudited)        February 28, 1997   
                                                              ---------------------  ---------------------
                                                                                                          
Operations:                                                                                               
       Net investment income                                 $           8,355,632  $          11,550,285 
       Net realized gain                                                38,752,760             56,218,667 
       Change in net unrealized appreciation (depreciation)             (9,698,597)            11,580,140 
                                                              ---------------------  ---------------------

       Net increase in net assets resulting from operations             37,409,795             79,349,092 
                                                              ---------------------  ---------------------

Distributions to shareholders from:                                                                       
       Net investment income - Class III                                  (740,074)           (12,206,199)
       Net realized gains - Class III                                  (43,272,559)           (18,177,235)
                                                              ---------------------  ---------------------
                                                                       (44,012,633)           (30,383,434)
                                                              ---------------------  ---------------------

Net share transactions - Class III (Note 5)                             38,687,614            124,906,849 
                                                              ---------------------  ---------------------

       Total increase in net assets                                     32,084,776            173,872,507 

Net assets:                                                                                               
       Beginning of period                                             581,099,085            407,226,578 
                                                              ---------------------  ---------------------

       End of period (including accumulated undistributed                                                 
          net investment income of $39,102,896 and                                                        
          $31,487,338, respectively)                         $         613,183,861  $         581,099,085 
                                                              =====================  =====================

                See accompanying notes to the financial statements.         21

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                              Six Months Ended                                                 
                                                               August 31, 1997           Year Ended            Period Ended    
                                                                (Unaudited)           February 28, 1997      February 29, 1996*
                                                            -----------------         ----------------       ----------------  
                                                                                                                               
Net asset value, beginning of period                      $             12.68       $            11.54     $            10.00  
                                                            -----------------         ----------------       ----------------  

Income from investment operations:                                                                                             
  Net investment income                                                  0.13                     0.22                   0.23  
  Net realized and unrealized gain                                       0.75                     1.63                   1.44  
                                                            -----------------         ----------------       ----------------  

         Total from investment operations                                0.88                     1.85                   1.67  
                                                            -----------------         ----------------       ----------------  

Less distributions to shareholders from:                                                                                       
     Net investment income                                              (0.02)                   (0.28)                 (0.06) 
     Net realized gains                                                 (0.99)                   (0.43)                 (0.07) 
                                                            -----------------         ----------------       ----------------  

         Total distributions                                            (1.01)                   (0.71)                 (0.13) 
                                                            ------------------        ----------------       ----------------  

Net asset value, end of period                            $             12.55       $            12.68     $            11.54  
                                                            =================         ================       ================  

Total Return (a)                                                        6.74%                   16.55%                  16.66% 

Ratios/Supplemental Data:                                                                                                      

     Net assets, end of period (000's)                    $           613,184       $          581,099     $          407,227  
     Net expenses to average                                                                                                   
         daily net assets                                               0.71%**(c)               0.72%(c)               0.69%**

     Net investment income to average                                                                                          
         daily net assets                                               2.77%**                  2.25%                  1.89%**

     Portfolio turnover rate                                              64%                      84%                     7%  

     Average broker commission rate per equity share (b)  $            0.0081       $          0.0067                     N/A  
     Fees and expenses voluntarily waived or borne by                                                                          
         the Manager consisted of the following per                                                                            
         share amounts:                                   $              0.02       $            0.04      $             0.05  

*    Period from June 30, 1995 (commencement of operations) to February 29,     
1996.                                                                 

**   Annualized.                                                                

(a)  Calculation excludes purchase premiums. The total returns would have been  
lower had certain expenses not been waived during the periods shown.  

(b)  For fiscal years beginning on or after September 1, 1995, a fund is        
 required to disclose its average commission rate per share for security
     trades on which commissions are charged. The average broker commission rate
will vary depending on the markets in which trades are executed.      

(c)  Includes stamp duties and transfer taxes not waived or borne by the        
   Manager, which approximates .03% of average daily net assets for the year
  ended February 28, 1997 and .02% of average daily net assets for the six
months ended August 31, 1997.                                         

22             See accompanying notes to the financial statements.              

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited)                                      
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

     GMO Currency Hedged International Core Fund (the "Fund") is a series of GMO
  Trust (the "Trust"). The Fund is registered under the Investment Company
Act of 1940, as amended, as an open-end, 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 into classes.

  The Fund seeks maximum total return through investment in a portfolio of
common stocks of non-U.S. issuers and through management of the Fund's
foreign currency positions.                                           

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
     as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

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

Futures contracts                                                     
    The Fund may use futures contracts to manage its exposure to the stock and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
   change in value ("variation margin") is recorded by the Fund. The payable
   or receivable is subsequently settled. Gains or losses are recognized but
   not considered realized until the contracts expire or are closed. Futures
contracts involve, to varying degrees, risk of loss in excess of the  
variation margin disclosed in the Statement of Assets and Liabilities.
     Losses may arise from changes in the value of the underlying instrument, if
there is an illiquid secondary market for the contracts, or if        
   counterparties do not perform under the contract terms. Futures contracts
 are valued at the settlement price established each day by the board of
trade or exchange on which they are traded.                           
See Note 6 for all open futures contracts held as of August 31, 1997. 

24                                                                              

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

Forward currency contracts                                            
The Fund may enter into forward currency contracts and forward cross  
   currency contracts in connection with settling planned purchases or sales
     of securities or to hedge the currency exposure associated with some or all
of the Fund's portfolio securities. A forward currency contract is an 
    agreement between two parties to buy and sell a currency at a set price on
   a future date. The market value of a forward currency contract fluctuates
     with changes in forward currency exchange rates. Forward currency contracts
    are marked to market daily and the change in value is recorded by the Fund
as an unrealized gain or loss. Realized gains or losses equal to the  
    difference between the value of the contract at the time it was opened and
   the value at the time it was closed are recorded upon delivery or receipt
  of the currency or, if a forward currency contract is offset by entering
into another forward currency contract with the same broker, upon     
     settlement of the net gain or loss. These contracts may involve market risk
    in excess of the unrealized gain or loss reflected in the Fund's Statement
   of Assets and Liabilities. In addition, the Fund could be exposed to risk
   if the counterparties are unable to meet the terms of the contracts or if
    the value of the currency changes unfavorably to the U.S. dollar. The U.S.
 dollar value of the currencies the Fund has committed to buy or sell is
shown under Note 6 and represents the currency exposure the Fund has  
acquired or hedged through currency contracts as of August 31, 1997.  

Swap agreements                                                       
    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
  to the equity markets. The Fund enters into equity swap agreements which
involve a commitment by one party in the agreement to pay interest in 
exchange for a market linked return based on a notional amount. To the
extent that the total return of the security or index underlying the  
transaction exceeds or falls short of the offsetting interest rate    
   obligation, the Fund will receive a payment from or make a payment to the
   counterparty, respectively. Equity swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
     obligation to perform or that there may be unfavorable changes in the price
  of the security or index underlying these transactions. See Note 6 for a
summary of the open swap agreement as of August 31, 1997.             

                                                                              25

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - continued                           
--------------------------------------------------------------------------------

Security lending                                                      
  The Fund may lend its securities to certain 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 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 August 31, 1997, the Fund loaned securities having a market
   value of $18,462,608 collateralized by cash in the amount of $19,807,665,
which was invested in a short-term instrument.                        

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
   tax is necessary. Taxes on foreign interest and dividend income have been
  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 semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date, or when the Fund is informed of the 
ex-dividend date, if later. Interest income is recorded on the accrual
  basis and is adjusted for the accretion of discounts. In determining the
   net gain or loss on securities sold, the cost of securities is determined
on the identified cost basis.                                         

26                                                                              

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
  Fund are allocated in such a manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .60% of the amount    
    invested. Prior to June 1, 1996, the premium on cash purchases was .75% of
the amount invested. All purchase premiums are paid to and recorded as
    paid-in capital by the Fund. For the six months ended August 31, 1997, the
  Fund received $55,841 in purchase premiums. There is no premium for cash
redemptions or reinvested distributions.                              

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .75% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including stamp duties and transfer taxes), shareholder
   service fees and extraordinary expenses) exceed .54% of average daily net
     assets. Prior to June 1, 1996, a similar waiver existed for annual expenses
   exceeding .69%; thus, the net annual expense ratio after the waiver for a
Class III shareholder is unchanged.                                   

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $2,760. No  
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

                                                                              27

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

3.   Purchases and sales of securities                                          

Cost of purchases and proceeds from sales of securities, excluding    
short-term investments, for the six months ended August 31, 1997,     
aggregated $377,171,931 and $358,175,500, respectively.               

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]
                                                                                                                      
                                     Gross Unrealized             Gross Unrealized              Net Unrealized        
       Aggregate Cost                  Appreciation                 Depreciation                 Appreciation         
-----------------------------  -----------------------------  --------------------------  ----------------------------
        $630,474,345                   $42,097,068                   $40,554,508                  $1,542,560          

4.   Principal shareholders                                                     

    At August 31, 1997, 43% of the outstanding shares of the Fund were held by
     three shareholders, each holding in excess of 10% of the outstanding shares
of the Fund.                                                          

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:                                               

                                                        [Enlarge/Download Table]


 Class III:                   Six Months Ended                            Year Ended                 
                               August 31, 1997                         February 28, 1997             
                    ---------------------------------------  ----------------------------------------
                        Shares               Amount              Shares                Amount        
                    ------------------   ------------------  ------------------   -------------------
                                                                                                     
Shares sold                 6,488,946   $       99,389,052          16,351,665   $       195,574,666 
Shares issued to                                                                                     
shareholders in                                                                                      
reinvestment of                                                                                      
distributions               3,439,944           43,824,889           2,179,223            26,037,897 

Shares repurchased         (6,884,580)        (104,526,327)         (7,998,316)          (96,705,714)
                    ------------------   ------------------  ------------------   -------------------
Net increase                3,044,310   $       38,687,614          10,532,572   $       124,906,849 
                    ==================   ==================  ==================   ===================

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

A summary of outstanding financial instruments at August 31, 1997 is as follows:

Forward currency contracts                                            

                                                        [Enlarge/Download Table]


   Settlement                                                                            Net Unrealized   
     Date             Deliver/Receive        Units of Currency         Value              Depreciation    
-----------------  -----------------------  --------------------  -------------------  -------------------
Buys                                                                                                      
                                                                                                          
    9/12/97                ATS                       95,470,410  $         7,538,841  $         (504,159) 
    11/07/97               ATS                      419,075,859           33,207,717          (1,354,845) 
    12/05/97               AUD                        3,303,719            2,430,986             (61,009) 
    11/07/97               BEF                      737,760,487           19,918,298            (731,053) 
    12/05/97               CAD                       31,744,991           22,982,599            (272,918) 
    11/07/97               CHF                       24,998,000           16,966,745            (184,237) 
    11/07/97               DEM                       76,358,281           42,600,346          (1,302,016) 
    11/07/97               DKK                        5,186,232              759,344             (22,893) 
    11/07/97               ESP                    2,726,762,754           17,939,524            (843,281) 
    11/07/97               FIM                       49,423,287            9,157,265            (295,931) 
    11/07/97               GBP                       24,913,592           40,284,033            (849,616) 
    12/05/97               HKD                       89,351,874           11,449,644             (74,021) 
    9/12/97                IEP                        4,084,031            6,067,100            (153,901) 
    11/07/97               IEP                       10,813,299           16,048,919            (171,971) 
    11/07/97               ITL                   35,064,965,576           19,869,181            (660,057) 
    12/05/97               JPY                    1,874,956,260           15,792,009          (1,127,516) 
    9/12/97                MYR                       11,835,524            4,052,948            (685,052) 
    12/05/97               MYR                        6,559,122            2,220,420            (374,580) 
    11/07/97               NLG                       24,663,704           12,219,887            (110,672) 
    9/12/97                NOK                       93,523,420           12,548,104            (827,896) 
    11/07/97               NOK                      196,918,957           26,492,528            (954,581) 
    12/05/97               NZD                       22,205,633           14,103,482          (1,172,883) 
    11/07/97               SEK                      285,694,075           36,458,552            (629,970) 
    12/05/97               SGD                        4,215,450            2,785,417            (210,426) 
                                                                                       -------------------
                                                                                      $      (13,575,484) 
                                                                                       ===================

                                                                              29

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

Forward currency contracts - continued                                

                                                        [Enlarge/Download Table]

                                                                                              Net Unrealized  
   Settlement                                                                                  Appreciation   
     Date                Deliver/Receive        Units of Currency            Value            (Depreciation)  
-----------------  --------------------------  --------------------  ---------------------  ------------------
Sales                                                                                                         
                                                                                                              
    11/07/97                  ATS                      413,053,753  $          32,747,217  $        1,152,662 
    9/12/97                   AUD                       12,369,475              9,089,666             504,334 
    12/05/97                  AUD                       56,701,753             41,755,687             592,553 
    11/07/97                  BEF                      734,491,953             19,852,833           1,066,904 
    9/12/97                   CAD                        1,295,667                933,941              22,059 
    12/05/97                  CAD                       15,843,985             11,475,717             135,685 
    11/07/97                  CHF                       95,787,346             65,083,389             811,996 
    9/12/97                   DEM                       31,026,209             17,248,590           1,132,410 
    11/07/97                  DEM                      154,972,054             86,485,732          (2,683,226)
    9/12/97                   DKK                       12,615,344              1,841,671             118,329 
    11/07/97                  DKK                       88,389,173             12,947,854             573,245 
    11/07/97                  ESP                      214,456,980              1,412,016              46,646 
    11/07/97                  FIM                        5,500,000              1,020,099              42,292 
    11/07/97                  FRF                      246,082,631             40,750,591           1,249,079 
    9/12/97                   GBP                       19,411,482             31,475,941             265,059 
    11/07/97                  GBP                      111,986,763            181,149,788             869,083 
    11/07/97                  HKD                       13,517,395              1,736,413               7,587 
    12/05/97                  HKD                      559,701,085             71,786,307             314,749 
    11/07/97                  IEP                        7,272,525             10,814,851             189,207 
    9/12/97                   ITL                    3,531,143,800              2,005,277              92,723 
    11/07/97                  ITL                   61,056,934,630             34,611,924             905,149 
    12/05/97                  JPY                   15,832,284,835            133,422,253           3,270,660 
    12/05/97                  MYR                      107,449,497             36,475,902           5,860,328 
    11/07/97                  NLG                       63,263,484             31,353,480           1,070,035 
    11/07/97                  NOK                       54,694,151              7,365,720             165,203 
    9/12/97                   NZD                        6,180,581              3,950,229             317,771 
    12/05/97                  NZD                       30,857,391             19,618,692           1,223,822 

30                                                                              

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

Forward currency contracts - continued                            

                                                        [Enlarge/Download Table]


   Settlement                                                                                Net Unrealized  
     Date                Deliver/Receive        Units of Currency          Value              Appreciation   
-----------------  --------------------------  --------------------  --------------------  ------------------
                                                                                                             
Sales - continued                                                                                            
    11/07/97                  SEK                      320,472,261  $         40,940,272  $          485,670 
    12/05/97                  SGD                       44,547,073            29,503,978           1,756,592 
                                                                                           ------------------
                                                                                          $       21,558,606 
                                                                                           ==================

                                                                [Download Table]


Currency Abbreviations                                                        
                                                                              
 ATS       Austrian Schilling                   GBP        British Pound      
 AUD       Australian Dollar                    HKD        Hong Kong Dollar   
 BEF       Belgian Franc                        IEP        Irish Pound        
 CAD       Canadian Dollar                      ITL        Italian Lira       
 CHF       Swiss Franc                          JPY        Japanese Yen       
 DEM       German Mark                          MYR        Malaysian Ringgit  
 DKK       Danish Krona                         NLG        Netherlands Guilder
 ESP       Spanish Peseta                       NOK        Norwegian Kroner   
 FIM       Finnish Markka                       NZD        New Zealand Dollar 
 FRF       French Franc                         SEK        Swedish Krona      
                                                SGD        Singapore Dollar   


                                                                              31

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GMO Currency Hedged International Core Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements  (Unaudited) - continued                          
--------------------------------------------------------------------------------

Futures Contracts                                                               

                                                        [Enlarge/Download Table]


Number of                                                                                 Net Unrealized   
Contracts               Type                Expiration Date         Contract Value         Appreciation    
--------------  ----------------------  --------------------------------------------   --------------------
                                                                                                           
 Buys                                                                                                      
         146    DAX                         September 1997      $        31,833,458   $            229,315 
         213    MIB 30                      September 1997               25,786,875              2,079,398 
         138    TOPIX                       September 1997               16,336,520                964,863 
         145    TSE 35                      September 1997               18,093,017                215,289 
                                                                                       --------------------
                                                                                      $          1,128,561 
                                                                                       ====================
Sales                                                                                                      
          386   ALL ORDS                    September 1997      $        18,193,466   $          1,107,260 
           87   FTSE 100 ID                 September 1997               17,016,273                269,640 
          237   HANG SENG                   September 1997               21,256,291              2,643,646 
            4   IBEX 35                     September 1997                  171,992                  6,350 
           19   MATIF CAC 40                September 1997                1,736,015                 80,438 
          271   OMX STOCK                   September 1997                8,356,836                682,688 
                                                                                       --------------------
                                                                                      $          4,250,742 
                                                                                       ====================

At August 31, 1997, the Fund has cash and/or securities to cover any margin     
requirements on open futures contracts.                                         

Swap agreement                                                            

                                                        [Enlarge/Download Table]


        Notional           Expiration                                                                 Unrealized     
        Amount                Date                            Description                            Depreciation    
------------------------ ---------------  ----------------------------------------------------     ------------------
                                                                                                                     
CHF         251,264,052     08/06/98      Agreement with Swiss Bank Corporation dated 8/6/97                         
                                          to receive (pay) the notional amount multiplied by                         
                                          the return on the Swiss Market Index (including                            
                                          dividends) and to pay the notional amount                                  
                                          multiplied by 6 month CHF LIBOR adjusted by a                              
                                          specified spread.                                     $           (707,741)
                                                                                                   ==================


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GMO Evolving Countries Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Assets and Liabilities - August 31, 1997 (Unaudited)*                   
----------------------------------------------------------------------------------   
                                                                                     
Assets:                                                                              
     Receivable for Fund shares sold                            $      18,703,000    
     Receivable for expenses waived or borne by Manager                     1,216    
                                                                  ----------------   
         Total assets                                                  18,704,216    
                                                                  ----------------   

Liabilities:                                                                         
     Payable to affiliate for:                                                       
         Management fee                                                       820    
         Shareholder service fee                                              154    
     Accrued expenses                                                       4,104    
                                                                  ----------------   

         Total liabilities                                                  5,078    
                                                                  ----------------   

Net assets                                                      $      18,699,138    
                                                                  ================   

Net assets consist of:                                                               
     Paid-in capital                                            $      18,703,000    
     Accumulated undistributed net investment income                       (3,862)   
                                                                  ----------------   
                                                                $      18,699,138    
                                                                  ================   

Net assets attributable to Class III Shares                     $      18,699,138    
                                                                  ================   

Shares outstanding - Class III                                          1,840,375    
                                                                  ================   

Net asset value per share - Class III                           $            10.16 **
                                                                  ================   

*    The Fund commenced operations on August 29, 1997. This statement reflects  
   the capital stock activity for that date and expense accruals for the two
day period ended August 31, 1997.                                     

**   The variance between the subscription price and net asset value per share  
     is attributable to the purchase premium earned by the Fund and that not yet
offset by investment transactions.                                    

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


   Par Value      Description                                                       Value ($)
---------------------------------------------------------------------------------------------
                                                                                             
                  DEBT OBLIGATIONS -- 92.8%                                                  

                  Asset Backed Securities -- 53.3%                                           

   $  563,228     Americredit Automobile Receivables Trust Series 96-B                       
                     Class A, 6.50%, due 1/12/02                                      565,428
    3,498,324     Banc One Student Loan Trust 94-A Class A2, Variable Rate,                  
                     1 mo. LIBOR + .30%, 5.95%, due 10/25/16                        3,512,317
    4,940,000     Brazos Student Loan Finance Corp. Series 96-A4, Variable                   
                     Rate, 3 mo. U.S. Treasury Bill + .50%, 5.94%, due 12/01/02     4,933,053
    2,500,000     Chevy Chase Master Credit Card Trust Series 96-A, Variable                 
                     Rate, 1 mo. LIBOR + .15%, 5.80%, due 2/15/05                   2,500,391
      463,100     Dilmun Capital Corp, Variable Rate, 6 mo. LIBOR + .88%,                    
                     6.86%, due 11/15/03                                              464,026
    5,000,000     First Chicago Master Trust II 95-0, Variable Rate, 1 mo.                   
                     LIBOR + .23%, 5.88%, due 2/15/04                               5,018,750
    1,000,000     National Premier Finance 95-2,  144A, 6.21%, due 6/01/99            993,000
    5,500,000     National Premier Finance IX 96-1A, 7.20%, due 7/01/00             5,582,500
    2,000,000     Navistar Financial Dealer Note Master Trust 95-1 Class A,                  
                     Variable Rate, 1 mo. LIBOR + .30%, 5.94%, due 8/25/07          2,011,563
      500,000     Premier Auto Trust 94-4 Certificates, 6.85%, due 5/02/99            505,750
    4,155,502     Signet Student Loan Trust Series 96-A Class A-1, Variable                  
                     Rate, 1 mo. LIBOR + .09%, 5.72%, due 1/25/05                   4,155,502
    2,000,000     Starvest CBO-1 Class A, Variable Rate 6 mo. LIBOR + .19%                   
                     144A, 6.00%, due 7/30/11                                       1,988,648
                                                                                  -----------
                                                                                   32,230,928
                                                                                  -----------

                  Structured Notes -- 6.2%                                                   

      750,000     Federal Home Loan Bank, Variable Rate, ((.50 * 10YR CMT) +                 
                     1.25%), 4.55%, due 3/16/98                                       743,250
    1,000,000     Federal National Mortgage Association, Variable Rate,                      
                     ((.50 * 2YR CMT) + 1.80%), 4.81%, due 3/10/98                    993,000
    2,000,000     Student Loan Marketing Association, Variable Rate, (10.25% -               
                     5YR DM SWAP), 6.06%, due 3/23/98                               1,996,000
                                                                                  -----------
                                                                                    3,732,250
                                                                                  -----------

                  U.S. Government -- 15.4%                                                   

    9,000,000     U.S. Treasury Note, 7.75%, due 11/30/99                           9,320,625
                                                                                  -----------

                  U.S. Government Agency -- 17.9%                                            

      350,000     Agency for International Development Floater (Support of                   
                     Botswana), Variable Rate, 6 mo. U.S. Treasury Bill +                    
                     .40%, 5.88%, due 10/01/12                                        347,813
    2,250,000     Agency for International Development Floater (Support of                   
                     C.A.B.E.I.), Variable Rate, 6 mo. U.S. Treasury Bill +                  
                     .40%, 5.85%, due 10/01/12                                      2,244,375

              See accompanying notes to the financial statements.            1

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

   Par Value      Description                                                       Value ($) 
--------------------------------------------------------------------------------------------- 
                                                                                              
                  U.S. Government Agency -- continued                                         

   $2,416,832     Agency for International Development Floater (Support of                    
                     Honduras), Variable Rate, 3 mo. U.S. Treasury Bill x                     
                     117%, 5.94%, due 10/01/11                                      2,416,832 
      101,836     Agency for International Development Floater (Support of                    
                     Peru), Variable Rate, 6 mo. U.S. Treasury Bill + .35%,                   
                     5.68%, due 5/01/14                                               101,263 
    5,670,048     Small Business Administration Pool #502320, Variable Rate,                  
                     Prime - 2.18%, 6.31%, due 8/25/18                              5,698,399 
                                                                                  ----------- 
                                                                                   10,808,682 
                                                                                  ----------- 
                  TOTAL DEBT OBLIGATIONS  (COST  $56,082,658)                      56,092,485 
                                                                                  ----------- 
                  SHORT-TERM INVESTMENTS -- 9.7%                                              

                  Repurchase Agreements -- 9.7%                                               

    2,947,813     Prudential Securities, Inc. Repurchase Agreement, dated                     
                  8/29/97, due 9/2/97, with a maturity value of $2,949,447 and                
                  an effective yield of 4.99%, collateralized by a U.S.                       
                  Government Agency Obligation with a rate of 6.811%, with a                  
                  maturity date of 3/1/35 and a market value of $3,006,780          2,947,813 

    2,947,813     Salomon Brothers Repurchase Agreement, dated 8/29/97, due                   
                  9/2/97, with a maturity value of $2,949,467 and an effective                
                  yield of 5.05%, collateralized by U.S. Treasury Obligations                 
                  with rates ranging from 5.00% to 6.75%, with maturity dates                 
                  ranging from 2/15/99 to 8/15/26 and with an aggregate market                
                  value of $3,015,363.                                              2,947,813 
                                                                                  ----------- 
                  TOTAL SHORT-TERM INVESTMENTS  (COST  $5,895,626)                  5,895,626 
                                                                                  ----------- 
                  TOTAL INVESTMENTS -- 102.5%                                                 
                  (COST $61,978,284)                                               61,988,111 

                  Other Assets and Liabilities (net)-- (2.5)%                      (1,534,665)
                                                                                  ----------- 
                  TOTAL NET ASSETS-- 100%                                         $60,453,446 
                                                                                  =========== 
                  Notes to the Schedule of Investments:                                       

                  CMT - Constant Maturity Treasury Index                                      
                  DM SWAP - 5 year Deutsche Mark Constant Maturity Swap Rate                  

                  Variable rates - The rates shown on variable rate notes are                 
                  the current interest rates at August 31, 1997, which are                    
                  subject to change based on the terms of the security.                       

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

2             See accompanying notes to the financial statements.               

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                            
Assets:                                                                     
   Investments, at value (cost $61,978,284) (Note 1)            $61,988,111 
   Cash                                                           1,974,496 
   Receivable for investments sold                                   60,000 
   Interest receivable                                              615,726 
   Receivable for expenses waived or borne by Manager (Note 2)        9,051 
                                                                ----------- 

       Total assets                                              64,647,384 
                                                                ----------- 

Liabilities:                                                                
   Payable for investments purchased                              4,161,439 
   Payable to affiliate for (Note 2):                                       
      Management fee                                                 11,209 
      Shareholder service fee                                         6,726 
   Accrued expenses                                                  14,564 
                                                                ----------- 

       Total liabilities                                          4,193,938 
                                                                ----------- 

Net assets                                                      $60,453,446 
                                                                =========== 

Net assets consist of:                                                      
   Paid-in-capital                                              $59,929,593 
   Accumulated undistributed net investment income                  539,921 
   Accumulated undistributed net realized loss                      (25,895)
   Net unrealized appreciation                                        9,827 
                                                                =========== 
                                                                $60,453,446 
                                                                =========== 

Shares outstanding                                                6,147,369 
                                                                =========== 

Net asset value per share                                       $      9.83 
                                                                =========== 

          See accompanying notes to the financial statements.                3

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                   
Investment Income:                                                                 
   Interest                                                              1,376,656 
                                                                        ---------- 

Expenses:                                                                          
   Management fee (Note 2)                                                  57,957 
   Audit fees                                                               12,594 
   Custodian and transfer agent fees                                         3,373 
   Legal fees                                                                  913 
   Registration fees                                                           786 
   Trustees fees (Note 2)                                                      179 
   Miscellaneous                                                               270 
   Fees waived or borne by Manager (Note 2)                                (64,479)
                                                                        ---------- 
                                                                            11,593 
   Shareholder service fee (Note 2)                                         34,774 
                                                                        ---------- 
       Net expenses                                                         46,367 
                                                                        ---------- 

          Net investment income                                          1,330,289 
                                                                        ---------- 

Realized and unrealized gain (loss):                                               
   Net realized loss on investments                                         (8,001)
                                                                        ---------- 

   Change in net unrealized appreciation (depreciation) on investments      62,684 
                                                                        ---------- 

       Net realized and unrealized gain                                     54,683 
                                                                        ---------- 

Net increase in net assets resulting from operations                    $1,384,972 
                                                                        ========== 

4             See accompanying notes to the financial statements.               

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                           Six Months Ended                   
                                                           August 31, 1997      Year Ended    
                                                             (Unaudited)     February 28, 1997
                                                           ---------------   -----------------
                                                                                              
Increase (decrease) in net assets:                                                            
Operations:                                                                                   
   Net investment income                                     $1,330,289         $ 1,624,987   
   Net realized gain (loss)                                      (8,001)             76,160   
   Change in net unrealized appreciation (depreciation)          62,684             (75,627)  
                                                            ------------        ------------  
   Net increase in net assets resulting from operations       1,384,972           1,625,520   
                                                            ------------        ------------  

Distributions to shareholders from:                                                           
   Net investment income                                     (1,118,549)         (1,442,981)  
                                                            ------------        ------------  
                                                             (1,118,549)         (1,442,981)  
                                                            ------------        ------------  
Fund share transactions: (Note 5)                                                             
   Proceeds from sale of shares                              32,141,959          94,033,050   
   Net asset value of shares issued to shareholders in                                        
      payment of distributions declared                         782,800           1,044,258   
   Cost of shares repurchased                               (13,674,673)        (65,388,935)  
                                                            ------------        ------------  

   Net increase in net assets resulting from Fund share                                       
      transactions                                           19,250,086          29,688,373   
                                                            ------------        ------------  

      Total increase in net assets                           19,516,509          29,870,912   

Net assets:                                                                                   
   Beginning of period                                       40,936,937          11,066,025   
                                                            ------------        ------------  

   End of period (including accumulated undistributed net                                     
      investment income of $539,921 and $328,181,                                             
      respectively)                                         $60,453,446         $40,936,937   
                                                            ============        ============  

          See accompanying notes to the financial statements.                5

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Financial Highlights                                                            
(For a share outstanding throughout each period)                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                Six Months Ended            Year Ended February 28/29,           
                                August 31, 1997   -----------------------------------------------
                                  (Unaudited)      1997      1996      1995     1994      1993   
                                  -----------     --------  --------  -------  --------  --------
                                                                                                 
Net asset value, beginning                                                                       
   of period                       $  9.78        $  9.77   $  9.56   $ 9.79   $ 10.05   $ 10.11 
                                   --------       --------  --------  -------  --------  --------

Income from investment operations:                                                               
   Net investment income              0.24           0.47      0.57     0.63      0.44      0.44 
   Net realized and                                                                              
      unrealized gain (loss)          0.04           0.06      0.20    (0.28)    (0.09)     0.30 
                                   --------       --------  --------  -------  --------  --------

      Total from investment                                                                      
      operations                      0.28           0.53      0.77     0.35      0.35      0.76 
                                   --------       --------  --------  -------  --------  --------

Less distributions to shareholders:                                                              
   From net investment income        (0.23)         (0.52)    (0.56)   (0.58)    (0.46)    (0.38)
   From net realized gains              --             --        --       --     (0.15)    (0.44)
                                   --------       --------  --------  -------  --------  --------

      Total distributions            (0.23)         (0.52)    (0.56)   (0.58)    (0.61)    (0.82)
                                   --------       --------  --------  -------  --------  --------
Net asset value,                                                                                 
   end of period                   $  9.83        $  9.78   $  9.77   $ 9.56   $  9.79   $ 10.05 
                                   ========       ========  ========  =======  ========  ========

Total Return/(a)/                     2.90%          5.62%     8.32%    3.78%     3.54%     8.25%

Ratios/Supplemental Data:                                                                        
   Net assets, end of period                                                                     
      (000's)                      $60,453        $40,937   $11,066   $8,193   $ 8,095   $10,499 
   Net expenses to average                                                                       
      daily net assets                0.20%*         0.20%     0.25%    0.25%     0.25%     0.25%
   Net investment income to                                                                      
      average daily net                                                                          
      assets                          5.74%*         5.88%     6.49%    5.02%     4.35%     4.94%
   Portfolio turnover rate               9%           287%      139%     335%      243%      649%
   Fees and expenses                                                                             
      voluntarily waived or                                                                      
      borne by the Manager                                                                       
      consisted of the                                                                           
      following per share                                                                        
      amounts:                     $  0.01        $  0.03   $  0.03   $ 0.02   $  0.02   $  0.03 

/(a)/ The total returns would have been lower had certain expenses not been     
waived during the periods shown.                                    
*   Annualized.                                                             

6                      See accompanying notes to the financial statements.      

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

GMO Short Term Income 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.                                                     

The Fund seeks current income to the extent consistent with the       
    preservation of capital and liquidity through investment in a portfolio of
high quality short-term instruments.                                  

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

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. In connection with transactions in repurchase  
     agreements, if the seller defaults, the value of the collateral declines or
   if the seller enters insolvency proceedings, realization of collateral by
the Fund may be delayed or limited.                                   

Indexed securities                                                    

  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
or other financial indicators. The Fund uses indexed                  

                                                                               7

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

 securities to increase or decrease its exposure to different underlying
     instruments and to gain exposure to markets that may be difficult to invest
     in through conventional securities. Indexed securities may be more volatile
     than their underlying instruments, but any loss is limited to the amount of
the original investment.                                              

Security lending                                                      

  The Fund may lend its securities to certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, 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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

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.                                                        

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual basis and is adjusted for the accretion of    
     discounts and amortization of premiums. In determining the net gain or loss
    on securities sold, the cost of securities is determined on the identified
cost basis.                                                           

Expenses                                                              

The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds.                           

8                                                                               

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .25% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
    fee is calculated based on the average daily net assets of the Fund at the
annual rate of .15%.                                                  

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .05% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .20%;
thus, the net annual expense ratio after the waiver is unchanged.     

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $179. No     
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                        [Enlarge/Download Table]

                                                     Purchases                Proceeds       
                                                ---------------------   ---------------------
                                                                                             
U.S. Government securities                    $          -            $      2,012,813       
Investments (non-U.S. Government securities)         22,011,715              2,180,159       

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                           Gross Unrealized        Gross Unrealized        Net Unrealized     
    Aggregate Cost           Appreciation            Depreciation           Appreciation      
-----------------------  ----------------------  ---------------------- ----------------------
                                                                                              
     $61,978,284                $57,633                 $47,806                $9,827         

4.   Principal shareholders                                                     

    At August 31, 1997, 36% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

                                                                               9

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GMO Short-Term Income Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                                [Download Table]


                                  Six Months Ended        Year Ended      
                                   August 31, 1997     February 28, 1997  
                                  ------------------  --------------------
                                                                          
Shares sold                           3,284,450            9,668,234      
Shares issued to shareholders in                                          
   reinvestment of distributions         80,638              108,123      
Shares repurchased                   (1,405,525)          (6,721,285)     
                                  ------------------  --------------------
Net increase                          1,959,563            3,055,072      

Fund shares:                                                              
   Beginning of period                4,187,806            1,132,734      
                                  ------------------  --------------------
   End of period                      6,147,369            4,187,806      
                                  ==================  ====================

10                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               DEBT OBLIGATIONS -- 90.9%                                                           

                               Argentina -- 0.3%                                                                   
USD            1,000,000       Republic of Argentina Par Bond,                                                     
                                   Variable Rate, Step Up, 5.50%, due 3/31/23                          736,875     
                                                                                               ---------------     

                               Australia -- 1.9%                                                                   
GBP            2,000,000       Commonwealth Bank Australia Series EMTN, 8.13%, due 12/07/06          3,350,639     
AUD            2,620,000       Queensland Treasury Corp., 8.00%, due 9/14/07                         2,107,207     
                                                                                               ---------------     
                                                                                                     5,457,846     
                                                                                               ---------------     
                               Austria -- 2.0%                                                                     
CAD            7,000,000       Autobahn Schnell, 8.50%, due 3/03/03                                  5,661,505     
                                                                                               ---------------     
                               Brazil -- 0.3%                                                                      
USD            1,135,141       Brazil Capitalization Bond, PIK, 8.00%, due 4/15/14                     925,140     
                                                                                               ---------------     
                               Bulgaria -- 1.3%                                                                    
USD            1,000,000       Bulgaria Discount Bond Series B,                                                    
                                   Variable Rate, 6 mo. LIBOR + 1.31%, 7.19%, due 7/28/24              781,250     
USD            5,000,000       Bulgaria Discount Bond, Series B Strips, Basket 2, due 7/28/24          550,300     
USD           15,000,000       Bulgaria Discount Strips, due 7/28/24                                 2,284,350     
                                                                                               ---------------     
                                                                                                     3,615,900     
                                                                                               ---------------     
                               Canada -- 4.3%                                                                      
CAD              750,000       Government of Canada, 10.25%, due 3/15/14                               749,892     
CAD            5,000,000       Government of Canada Real Return, 4.25%, due 12/01/21                 3,969,103     
CAD            3,000,000       Government of Canada Real Return, 4.25%, due 12/01/26                 2,246,014     
CAD            2,000,000       Province of British Columbia, 7.88%, due 11/30/23                     1,613,252     
CAD            5,000,000       Societe Quebec D'Ass D'Eaux, 8.13%, due 8/11/03                       3,953,907     
                                                                                               ---------------     
                                                                                                    12,532,168     
                                                                                               ---------------     
                               Cayman Islands -- 0.5%                                                              
CAD            2,000,000       Government of Canada (Cayman), 7.25%, due 6/01/08                     1,536,910     
                                                                                               ---------------     
                               Denmark -- 4.1%                                                                     
DKK           78,200,000       Kingdom of Denmark Bullet, 7.00%, due 11/15/07                       11,994,789     
                                                                                               ---------------     
                               Ecuador -- 0.4%                                                                     
USD            2,000,000       Republic of Ecuador Par Bond,                                                       
                                   Variable Rate, Step up, 3.50%, due 2/28/25                        1,047,500     
                                                                                               ---------------     

              See accompanying notes to the financial statements.              1

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               France -- 6.7%                                                                      
FRF           14,000,000       Auxiliare Credit Foncier, 10.00%, due 4/20/01                         2,680,900     
SEK           10,000,000       Credit Foncier, 6.50%, due 2/22/99                                    1,289,645     
ECU            2,000,000       Credit Foncier, 8.38%, due 3/17/04                                    2,447,844     
ECU            7,000,000       Government of France, 8.25%, due 4/25/22                              9,110,328     
ECU            3,000,000       Societe Nationale des Chemins de Fer, 9.38%, due 3/12/01              3,709,451     
                                                                                               ---------------     
                                                                                                    19,238,168     
                                                                                               ---------------     
                               Germany -- 3.9%                                                                     
DEM            2,200,000       Bundesrepublic Deutschland, 6.00%, due 9/15/03                        1,278,302     
DEM            1,000,000       Bundesrepublic Deutschland, 6.00%, due 6/20/16                          541,884     
ESP          250,000,000       Deutsche Ausgleichsbank, 8.60%, due 5/22/03                           1,838,453     
GBP            2,000,000       KFW International Finance, 10.63%, due 9/03/01                        3,579,313     
ESP          280,000,000       KFW International Finance, 8.60%, due 5/20/03                         2,059,988     
DEM            1,300,000       Treuhandanstalt, 7.12%, due 1/29/03                                     791,468     
DEM            2,000,000       Treuhandanstalt, 6.25%, due 3/04/04                                   1,171,537     
                                                                                               ---------------     
                                                                                                    11,260,945     
                                                                                               ---------------     
                               Greece -- 0.9%                                                                      
GRD          750,000,000       Hellenic Republic,                                                                  
                                   Variable Rate, 12 mo. GTB + 1.50%, 14.20%, due 9/30/03            2,699,481     
                                                                                               ---------------     
                               Italy -- 0.7%                                                                       
ITL        1,550,000,000       BTPS, 8.50%, due 8/01/04                                                967,658     
ITL        1,700,000,000       BTPS, 9.00%, due 11/01/23                                             1,152,061     
                                                                                               ---------------     
                                                                                                     2,119,719     
                                                                                               ---------------     
                               Japan -- 6.7%                                                                       
GBP            2,000,000       Export Import Bank of Japan, 10.75%, due 5/15/01                      3,569,582     
JPY          400,000,000       Japan Development Bank, 6.50%, due 9/20/01                            4,008,646     
GBP            2,000,000       Japan Finance Corp Municipal Enterprises, 9.13%, due 2/16/05          3,532,280     
USD            1,030,000       Japan Highway Public Corporation, 7.63%, due 9/22/04                  1,086,135     
GBP            4,000,000       Kobe City, 9.50%, due 10/20/04                                        7,187,818     
                                                                                               ---------------     
                                                                                                    19,384,461     
                                                                                               ---------------     
                               Jordan -- 0.2%                                                                      
USD            1,000,000       Hashemite Kingdom of Jordan Par Bond,                                               
                                   Variable Rate, Step up 144A, 4.00%, due 12/23/23                    690,000     
                                                                                               ---------------     
                               Mexico -- 0.7%                                                                      
FRF           15,000,000       Mexico Par Bond, 6.63%, due 12/31/19                                  2,111,326     
                                                                                               ---------------     
                               New Zealand -- 1.7%                                                                 
NZD            7,800,000       New Zealand Index Linked Bond, 4.50%, due 2/15/16                     4,764,246     
                                                                                               ---------------     

2                See accompanying notes to the financial statements.            

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Norway -- 0.3%                                                                      
SEK            6,300,000       A/S Eksportfinans, 7.50%, due 8/16/01                                   845,537     
                                                                                               ----------------    
                               Supra National -- 5.0%                                                              
JPY          175,000,000       Asian Development Bank, 5.00%, due 2/05/03                            1,707,228     
ITL        5,000,000,000       European Investment Bank, 12.20%, due 2/18/03                         3,545,455     
CAD              700,000       European Investment Bank, 8.50%, due 8/30/05                            577,746     
GBP            1,755,000       European Investment Bank, 8.75%, due 8/25/17                          3,251,851     
GBP            2,000,000       International Bank Recon and Development, 11.50%, due                               
                                   11/09/03                                                          3,915,025     
SEK           10,000,000       International Finance Corp, 10.63%, due 9/20/99                       1,401,732     
                                                                                               ----------------    
                                                                                                    14,399,037     
                                                                                               ----------------    
                               Sweden -- 8.9%                                                                      
SEK            4,000,000       AB Spintab, 8.50%, due 12/19/01                                         552,490     
SEK           20,000,000       Government of Sweden Index Linked Bond, 4.00%, due 12/01/20           2,569,609     
SEK          181,300,000       Kingdom of Sweden, 6.00%, due 2/09/05                                22,561,470     
                                                                                               ----------------    
                                                                                                    25,683,569     
                                                                                               ----------------    
                               United Kingdom -- 1.4%                                                              
GBP            2,000,000       Guaranteed Export Financial Corp, 12.88%, due 9/29/02                 3,971,788     
                                                                                               ----------------    
                               United States -- 38.4%                                                              

                               Asset Backed Securities -- 34.3%                                                    
USD            4,590,245       AFC Home Equity Loan Trust Series 97-1 Class A,                                     
                                   Variable Rate, 1 mo. LIBOR + .22%, 5.87%, due 3/25/27             4,587,376     
USD            5,000,000       Augusta Funding Series 96-F2,                                                       
                                   Variable Rate, LIBOR + .30%  144A, 6.05%, due 4/15/06             5,000,000     
USD            5,000,000       Big Flower Receivables Master Trust 96-2 Class A,                                   
                                   Variable Rate, LIBOR + .25%  144A, 5.65%, due 4/25/03             5,000,000     
USD            6,000,000       Circuit City Credit Card Master Trust 96-1 Class A,                                 
                                   Variable Rate, LIBOR + .17%, 5.85%, due 10/15/06                  6,000,000     
USD            3,833,887       CS First Boston Mortgage Securities Corp., Series 96-1 Class                        
                                   A1, Variable Rate, 3 mo. LIBOR + .23%, 5.98%, due 7/28/29         3,836,187     
USD            1,500,000       First International Funding Co,                                                     
                                   Variable Rate, 3 mo. LIBOR + .55%, 6.36%, due 6/03/98             1,506,450     
USD            5,000,000       First USA Credit Card Master Trust 94-4 Class A,                                    
                                   Variable Rate, 1 mo. LIBOR + .37%, 6.00%, due 8/15/03             5,041,406     
USD            9,000,000       National Premier Finance 95-2, 144A, 6.21%, due 6/01/99               8,937,000     
USD            5,000,000       National Premier Finance IX 96-1A, 7.20%, due 7/01/00                 5,075,000     

              See accompanying notes to the financial statements.              3

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                           Value ($)     
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Asset Backed Securities -- continued                                                
USD           18,000,000       Navistar Financial Dealer Note Master Trust 97-1 Class A,                           
                                   Variable Rate, 1 mo. LIBOR + .15%, 5.78%, due 8/25/03            18,005,400     
USD           10,000,000       Northstar CBO Series 97-1 Class A2, 6.62%, due 7/15/09               10,297,000     
USD           10,000,000       Rhino CBO Series 97-1 Class A-2, 144A, 6.33%, due 9/15/09            10,049,900     
USD            5,966,000       SMS Student Loan Trust 94-A Certificates,                                           
                                   Variable Rate, 1 mo. LIBOR + .70%, 6.35%, due 7/26/21             5,986,881     
USD            5,000,000       Society Student Loan Trust 93-A Class B,                                            
                                   Variable Rate, 1 mo. LIBOR + .75%, 6.44%, due 7/25/03             5,007,813     
USD            5,000,000       Starvest CBO-1 Class A,                                                             
                                   Variable Rate, 6 mo. LIBOR + .19% 144A, 6.00%, due 7/30/11        4,971,620     
                                                                                               ----------------    
                                                                                                    99,302,033     
                                                                                               ----------------    
                               Structured Notes -- 0.4%                                                            
USD            1,000,000       Bankers Trust Medium Term Note, 17.10%, due 10/14/97/(a)/             1,094,400     
                                                                                               ----------------    
                               U.S. Government Agency -- 3.7%                                                      
USD            2,900,198       Agency for International Development Floater (Support of                            
                                   Honduras), Variable Rate, 3 mo. U.S. Treasury Bill x                            
                                   1.17%, 5.94%, due 10/01/11                                        2,900,198     
USD            1,000,000       Agency for International Development Floater (Support of India),                    
                                   Variable Rate, 3 mo. LIBOR + .10%, 5.47%, due 2/01/27             1,003,438     
USD            1,961,401       Agency for International Development Floater (Support of                            
                                   Morocco), Variable Rate, 6 mo. U.S. Treasury Bill +                             
                                   .45%, 5.78%, due 11/15/14                                         1,954,046     
USD              333,333       Agency for International Development Floater (Support of Peru),                     
                                   Variable Rate, 6 mo. U.S. Treasury Bill + .35%, 5.68%,                          
                                   due 2/01/02                                                         331,458     
USD            3,680,037       Agency for International Development Floater (Support of Peru),                     
                                   Variable Rate, 6 mo. U.S. Treasury Bill + .35%, 5.68%,                          
                                   due 5/01/14                                                       3,659,337     
USD              953,219       National Oceanic & Atmospheric Administration Floater,                              
                                   Variable Rate, 6 mo. LIBOR + .50%, 5.88%, due 6/15/08               953,814     
                                                                                               ----------------    
                                                                                                    10,802,291     
                                                                                               ----------------    

                               Total United States                                                 111,198,724     
                                                                                               ----------------    
                               Venezuela -- 0.3%                                                                   
USD            1,000,000       Republic of Venezuela Discount Bond Series B,                                       
                                   Variable Rate, 6 mo. LIBOR + .81%, 6.81%, due 3/31/20               903,750     
                                                                                               ----------------    

                               TOTAL DEBT OBLIGATIONS (COST $262,256,816)                          262,779,384     
                                                                                               ----------------    

4              See accompanying notes to the financial statements.              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               LOAN ASSIGNMENTS -- 0.4%                                                            

                               Ivory Coast -- 0.4%                                                                 
FRF           15,000,000       Ivory Coast Credit Agreement (Assignment with Banque                                
                                   Paribas, J.P. Morgan, Bank of America, Chase Manhattan                          
                                   and Salomon)*                                                     1,298,327     
                                                                                               ---------------     

                               TOTAL LOAN ASSIGNMENTS (COST $585,502)                                1,298,327     
                                                                                               ---------------     
                               LOAN PARTICIPATIONS -- 0.4%                                                         

                               Russia -- 0.4%                                                                      
ECU            1,000,000       Russia Vnesheconombank Loan Agreement (Participation with                           
                                   Bank of America)*                                                 1,129,165     
                                                                                               ---------------     

                               TOTAL LOAN PARTICIPATIONS (COST $397,643)                             1,129,165     
                                                                                               ---------------     

              Shares                                                                                               
-------------------------------                                                                                    
                                                                                                                   
                               PREFERRED STOCKS -- 1.7%                                                            

                               United States -- 1.7%                                                               
                   5,000       Bear Stearns Managed Income Securities Plus Fund                      4,949,850     
                                                                                               ---------------     

                               TOTAL PREFERRED STOCKS (COST $4,933,793)                              4,949,850     
                                                                                               ---------------     


         Principal Amount                                                                                          
-------------------------------                                                                                    
                                                                                                                   
                               CALL OPTIONS PURCHASED -- 3.7%                                                      

                               Cross Currency Options -- 2.6%                                                      
DEM          233,600,000       DEM Call/BEF Put, Expires 10/08/97, Strike 20.50                        973,224     
ECU          109,700,000       ECU Call/DEM Put, Expires 1/21/98, Strike 1.9450                      1,234,201     
ECU           89,000,000       ECU Call/DEM Put, Expires 10/30/97, Strike 1.918                      2,158,166     
ECU          123,600,000       ECU Call/DEM Put, Expires 12/15/97 Knock Out 1.9225,                                
                               Strike 1.91                                                           3,280,701     
                                                                                               ---------------     
                                                                                                     7,646,292     
                                                                                               ---------------     

              See accompanying notes to the financial statements.              5

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


          Principal Amount     Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Options on Bonds -- 0.3%                                                            
USD            6,500,000       Brazil Discount Bond, Expires 11/07/97, Strike 80.00                    378,333     
SEK          175,000,000       Sweden Government Bond, Expires 10/24/97, Strike 95.484                 461,851     
                                                                                               ---------------     
                                                                                                       840,184     
                                                                                               ---------------     
                               Options on Currency -- 0.8%                                                         
USD           44,800,000       British Pound, Expires 11/06/97, Strike 1.6325                          990,080     
USD           13,000,000       German Mark, Expires 2/09/98, Strike 1.61                             1,270,100     
                                                                                               ---------------     
                                                                                                     2,260,180     
                                                                                               ---------------     
                               TOTAL CALL OPTIONS PURCHASED                                                        
                               (COST $9,022,217)                                                    10,746,656     
                                                                                               ---------------     
                               PUT OPTIONS PURCHASED -- 1.2%                                                       

                               Cross Currency Options -- 1.2%                                                      
DEM           55,800,000       DEM Put/ITL Call, Expires 1/21/98, Strike 950                            15,498     
DEM          118,400,000       DEM Put/ITL Call, Expires 9/18/97 Knock Out 1050,                                   
                               Strike 1030                                                           3,308,255     
USD            2,000,000       TRL Put/USD, DEM Basket Call, Expires 12/15/97, Strike 400               24,000     
USD              782,986       TRL Put/USD, DEM Basket Call, Expires 12/15/97, Strike 425                3,500     
                                                                                               ---------------     
                                                                                                     3,351,253     
                                                                                               ---------------     
                               Options on Currency -- 0.0%                                                         
USD            5,000,000       Czech Koruna, Expires 10/02/97, Strike 29.56                                 --     
USD           12,500,000       Czech Koruna, Expires 10/02/97, Strike 29.69                                 --     
USD           13,000,000       German Mark, Expires 2/09/98, Strike 1.61                                36,400     
                                                                                               ---------------     
                                                                                                        36,400     
                                                                                               ---------------     
                               TOTAL PUT OPTIONS PURCHASED                                                         
                               (COST $2,523,268)                                                     3,387,653     
                                                                                               ---------------     


              Shares                                                                                               
------------------------------                                                                                     
                                                                                                                   
                               RIGHTS AND WARRANTS -- 0.0%                                                         

                               Mexico -- 0.0%                                                                      
               1,740,000       United Mexican States Warrants, Expires 6/30/03 **                           --     
                                                                                               ---------------     

6              See accompanying notes to the financial statements.              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


                Shares         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Venezuela -- 0.0%                                                                   
                  19,280       Republic of Venezuela Recovery Warrants, Expires 04/15/20**                  --     
                                                                                               ---------------     

                               TOTAL RIGHTS AND WARRANTS (COST $0)                                          --     
                                                                                               ---------------     


             Par Value                                                                                             
------------------------------                                                                                     
                                                                                                                   
                               SHORT-TERM INVESTMENTS -- 2.9%                                                      

                               Cash Equivalents -- 1.4%                                                            
USD            3,719,171       BankBoston Eurodollar Time Deposit, 5.7875% due 9/02/97/(b)/          3,719,171     
USD               84,645       First Union National Bank of North Carolina Eurodollar Time                         
                               Deposit, 5.5625% due 9/02/97/(b)/                                        84,645     
USD              253,934       Harris Bank and Trust Eurodollar Time Deposit, 5.625% due                           
                               9/02/97/(b)/                                                            253,934     
                                                                                               ---------------     
                                                                                                     4,057,750     
                                                                                               ---------------     
                               Repurchase Agreement -- 0.3%                                                        
USD              779,815       Salomon Brothers Repurchase Agreement, dated 8/29/97, due                           
                               9/2/97, with a maturity value of $780,252 and an effective                          
                               yield of 5.05%, collateralized by U.S. Treasury Obligations                         
                               with rates ranging from 5.00% to 6.75%, with maturity dates                         
                               ranging from 2/15/99 to 8/15/26 and with an aggregate                               
                               market value of $797,684.                                               779,815     
                                                                                               ---------------     
                               U.S. Government -- 1.2%                                                             
USD              500,000       U.S. Treasury Bill, 5.31%, due 1/08/98/(c)/                             490,951     
USD            3,000,000       U.S. Treasury Bill, 5.33% due 1/15/98/(c)/                            2,945,064     
                                                                                               ---------------     
                                                                                                     3,436,015     
                                                                                               ---------------     
                               TOTAL SHORT-TERM INVESTMENTS                                                        
                               (COST $8,268,579)                                                     8,273,580     
                                                                                               ---------------     
                               TOTAL INVESTMENTS -- 101.2%                                                         
                               (COST $287,987,818)                                                 292,564,615     

                               Other Assets and Liabilities (net) -- (1.2)%                         (3,328,451)    
                                                                                               ---------------     

                               TOTAL NET ASSETS -- 100%                                        $   289,236,164     
                                                                                               ===============     

              See accompanying notes to the financial statements.              7

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

------------------------------------------------------------------------------- 

                   Notes to the Schedule of Investments:

       GTB - Greek Treasury Bill

    PIK -- Payment In Kind

                           Knock Out -- Option will expire if underlying
                       security reaches Knock Out price.

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

                              Variable and Step up rates -- The rates shown on
                             variable and step up rate notes are the
                                current interest rates at August 31, 1997,
                              which are subject to change based on the
            terms of the security.

                                                                [Download Table]

Currency Abbreviations                                                      
                                                                            
AUD - Australian Dollar                           GBP - British Pound       
BEF - Belgian Franc                               GRD - Greek Drachma       
CAD - Canadian Dollar                             ITL - Italian Lira        
CHF - Swiss Franc                                 JPY - Japanese Yen        
DEM - German Mark                                 NLG - Netherlands Guilder 
DKK - Danish Krone                                NZD - New Zealand Dollar  
ECU - European Currency Unit                      SEK - Swedish Krona       
ESP - Spanish Peseta                              THB - Thailand Baht       
FRF - French Franc                                TRL - Turkish Lira        
                                                  USD - United States Dollar

            /(a)/Principal is linked to the value of the Brazilian
               Capitalization Bond and the Brazilian IDU Bond.
              Restricted as to public resale. At the date of
                        aquisition, this security was valued at cost. There were
                        no outstanding unrestricted securities of the same class
as those held.                  
                /(b)/Represents investments of security lending collateral
(Note 1).                       
                  /(c)/All or a portion of this security is held as collateral
for open futures contracts.     
                    *   Non-performing.  Borrower not currently paying interest.
**  Non-income producing security.      

8              See accompanying notes to the financial statements.              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)                                                
------------------------------------------------------------------------------------------------------------------

                                                                                                                  
Assets:                                                                                                           
       Investments, at value (cost $287,987,818) (Note 1)                                        $   292,564,615  
       Foreign currency, at value (cost $873,294) (Note 1)                                               816,801  
       Receivable for investments sold                                                                 4,595,664  
       Interest receivable                                                                             6,811,212  
       Receivable for variation margin on open futures contracts (Notes 1 and 6)                         387,095  
       Receivable for open forward foreign currency contracts (Notes 1 and 6)                          7,816,416  
       Receivable for expenses waived or borne by Manager (Note 2)                                        51,527  
                                                                                                 ---------------  
        Total assets                                                                                 313,043,330  
                                                                                                 ---------------  

Liabilities:                                                                                                      
       Payable for investments purchased                                                               2,806,892  
       Payable upon return of securities loaned (Note 1)                                               4,057,750  
       Written options outstanding, at value (premiums $1,356,004) (Notes 1 and 6)                     1,432,145  
       Payable for open forward foreign currency contracts (Notes 1 and 6)                            14,973,036  
       Payable for Fund shares repurchased                                                                74,458  
       Payable to affiliate for (Note 2):                                                                         
        Management fee                                                                                    89,332  
        Shareholder service fee                                                                           33,536  
       Accrued expenses                                                                                   52,487  
       Payable for open swap contracts (Note 1 and 6)                                                    285,931  
       Miscellaneous payable                                                                               1,599  
                                                                                                 ---------------  

        Total liabilities                                                                             23,807,166  
                                                                                                 ---------------  

Net assets                                                                                       $   289,236,164  
                                                                                                 ===============  
Net assets consist of:                                                                                            
       Paid-in-capital                                                                           $   276,062,601  
       Accumulated undistributed net investment income                                                13,209,617  
       Accumulated undistributed net realized gain                                                     3,080,496  
       Net unrealized depreciation                                                                    (3,116,550) 
                                                                                                 ---------------  

                                                                                                 $   289,236,164  
                                                                                                 ===============  
Net assets attributable to:                                                                                       
       Class III shares                                                                          $   289,236,164  
                                                                                                 ===============  
Shares outstanding:                                                                                               
       Class III                                                                                      26,571,560  
                                                                                                 ===============  
Net asset value per share:                                                                                        
       Class III                                                                                 $         10.89  
                                                                                                 ===============  

             See accompanying notes to the financial statements.               9

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)                                           
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
Investment Income:                                                                                                
       Interest (including securities lending income of $865)                                       $   8,271,620 
       Dividends                                                                                          165,875 
                                                                                                    ------------- 

         Total income                                                                                   8,437,495 
                                                                                                    ------------- 
Expenses:                                                                                                         
       Management fee (Note 2)                                                                            501,193 
       Custodian and transfer agent fees                                                                   81,795 
       Audit fees                                                                                          34,733 
       Legal fees                                                                                           5,308 
       Registration fees                                                                                    2,394 
       Trustees fees (Note 2)                                                                               1,347 
       Miscellaneous                                                                                        1,034 
       Fees waived or borne by Manager (Note 2)                                                          (314,558)
                                                                                                    ------------- 
                                                                                                          313,246 
       Shareholder service fee (Note 2)                                                                           
         Class III                                                                                        187,959 
                                                                                                    ------------- 
         Net expenses                                                                                     501,205 
                                                                                                    ------------- 

           Net investment income                                                                       7,936,290  
                                                                                                    ------------- 
Realized and unrealized gain (loss):                                                                              
       Net realized gain (loss) on:                                                                               
         Investments                                                                                      995,304 
         Closed futures contracts                                                                       2,458,802 
         Closed swap contracts                                                                            316,606 
         Foreign currency, forward contracts and foreign currency related transactions                  1,193,521 
                                                                                                    ------------- 
            Net realized gain                                                                           4,964,233 
                                                                                                    ------------- 
       Change in net unrealized appreciation (depreciation) on:                                                   
         Investments                                                                                   (6,512,782)
         Open futures contracts                                                                           909,501 
         Open swap contracts                                                                             (285,931)
         Written options                                                                                 (202,891)
         Foreign currency, forward contracts and foreign currency related transactions                 (1,993,249)
                                                                                                    ------------- 

            Net unrealized loss                                                                        (8,085,352)
                                                                                                    ------------- 
         Net realized and unrealized loss                                                              (3,121,119)
                                                                                                    ------------- 

Net increase in net assets resulting from operations                                                $   4,815,171 
                                                                                                    ============= 

10              See accompanying notes to the financial statements.             

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                                       Six Months Ended                   
                                                                       August 31, 1997      Year Ended    
                                                                         (Unaudited)     February 28, 1997
                                                                       ----------------  -----------------
                                                                                                          
Increase (decrease) in net assets:                                                                        
Operations:                                                                                               
       Net investment income                                             $  7,936,290       $ 14,716,597  
       Net realized gain                                                    4,964,233         15,665,683  
       Change in net unrealized appreciation (depreciation)                (8,085,352)        (7,800,186) 
                                                                         ------------       ------------  

       Net increase in net assets resulting from operations                 4,815,171         22,582,094  
                                                                         ------------       ------------  
Distributions to shareholders from:                                                                       
       Net investment income                                                                              
        Class III                                                                  --        (15,718,077) 
                                                                         ------------       ------------  
        Total distributions from net investment income                             --        (15,718,077) 
                                                                         ------------       ------------  
       Net realized gains                                                                                 
        Class III                                                          (2,670,095)       (10,685,120) 
                                                                         ------------       ------------  
        Total distributions from net realized gains                        (2,670,095)       (10,685,120) 
                                                                         ------------       ------------  
       In excess of net realized gains                                                                    
        Class III                                                                  --         (2,935,300) 
                                                                         ------------       ------------  
        Total distributions in excess of net realized gains                        --         (2,935,300) 
                                                                         ------------       ------------  

                                                                           (2,670,095)       (29,338,497) 
                                                                         ------------       ------------  
       Net share transactions: (Note 5)                                                                   
        Class III                                                          51,307,965         48,619,210  
                                                                         ------------       ------------  
       Increase in net assets resulting from net share transactions        51,307,965         48,619,210  
                                                                         ------------       ------------  

       Total increase in net assets                                        53,453,041         41,862,807  

Net assets:                                                                                               
       Beginning of period                                                235,783,123        193,920,316  
                                                                         ------------       ------------  

       End of period (including accumulated undistributed net                                             
       investment income of $13,209,617 and $5,273,327, respectively)    $289,236,164       $235,783,123  
                                                                         ============       ============  

             See accompanying notes to the financial statements.              11

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                             Six Months Ended            Year Ended February 28/29,              
                                              August 31, 1997  ------------------------------------------------  
                                               (Unaudited)        1997         1996         1995       1994*     
                                               -----------     ---------    ---------    ---------    --------   
                                                                                                                 

Net asset value, beginning of period            $   10.78      $   10.92    $    9.64    $    9.96    $  10.00   
                                                ---------      ---------    ---------    ---------    --------   

Income from investment operations:                                                                               
       Net investment income                         0.26           0.71         0.62         0.98        0.08   
       Net realized and unrealized gain                                                                          
       (loss)                                       (0.04)          0.65         1.55        (0.21)      (0.12)  
                                                ---------      ---------    ---------    ---------    --------   

       Total from investment operations              0.22           1.36         2.17         0.77        0.77   
                                                ---------      ---------    ---------    ---------    --------   

Less distributions to shareholders:                                                                              
       From net investment income                      --          (0.81)       (0.59)       (0.75)         --   
       From net realized gains                      (0.11)         (0.54)       (0.30)       (0.34)         --   
       In excess of net realized gains                 --          (0.15)          --           --          --   
                                                ---------      ---------    ---------    ---------    --------   

       Total distributions                          (0.11)         (1.50)       (0.89)       (1.09)         --   
                                                ---------      ---------    ---------    ---------    --------   
Net asset value, end of period                  $   10.89      $   10.78    $   10.92    $    9.64    $   9.96   
                                                =========      =========    =========    =========    ========   

Total Return /a)/                                    2.00%         12.39%       22.72%        8.23%      (0.40)% 

Ratios/Supplemental Data:                                                                                        
       Net assets, end of period (000's)        $ 289,236      $ 235,783    $ 193,920    $ 151,189    $ 39,450   
       Net expenses to average daily net                                                                         
       assets                                        0.40%**        0.40%        0.40%        0.40%       0.40%**
       Net investment income to average daily                                                                    
       net assets                                    6.33%**        6.93%        8.17%        7.51%       5.34%**
       Portfolio turnover rate                         53%            95%          99%         141%         14%  
       Fees and expenses voluntarily waived                                                                      
       or borne by the Manager consisted of                                                                      
       the following per share amounts:         $    0.01      $    0.02    $    0.01    $    0.02    $   0.02   

*     For the period from December 22, 1993 (commencement of operations) to     
February 28, 1994.                                                  
**    Annualized.                                                               
/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.

12              See accompanying notes to the financial statements.             

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.    Significant accounting policies                                           

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

 The Fund seeks high total return by investing primarily in investment
    grade bonds denominated in various currencies including U.S. dollars and
   multicurrency units. The Fund generally seeks to provide a total return
   greater than that provided by the international fixed income securities
market.                                                             

      On June 1, 1996, the Fund began to offer three classes of shares: Class I,
Class II and Class III. The principal economic difference among the 
  classes of shares is the level of shareholder service fee borne by the
 classes. Eligibility for and automatic conversion between the various
classes of shares is generally based on the total amount of assets  
      invested with GMO, as more fully outlined in the Trust's prospectus. Class
    III shares are the continuation of the Trust's shares that existed prior
  to June 1, 1996, and bear the same total operating expenses (after the
    voluntary expense waiver) as those shares. At August 31, 1997, Class III
was the only active class of shares of the Fund.                    

      The following is a summary of significant accounting policies which are in
  conformity with generally accepted accounting principles and which are
 consistently followed by the Fund in the preparation of its financial
  statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those 
estimates.                                                          

Portfolio valuation                                                 
 Portfolio securities listed on a securities exchange for which market
     quotations are available are valued at the last quoted 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.   
    Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their  
respective exchanges, and those values are then translated into U.S.
dollars at the current exchange rate. Short-term investments with a 
 remaining maturity of sixty days or less are valued at amortized cost
     which approximates market value. Other assets and securities for which no
      quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                         

     Securities may be valued by independent pricing services which use prices
 provided by market-makers or estimates of market values obtained from
yield data relating to investments or securities with similar       
characteristics.                                                    

                                                                              13

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

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

Futures contracts                                                   
     The Fund may use futures contracts to manage its exposure to the bond and
     currency markets. Buying futures tends to increase the Fund's exposure to
   the underlying instrument. Selling futures tends to decrease the Fund's
  exposure to the underlying instrument or hedge other Fund instruments.
     Upon purchase of a futures contract, the Fund is required to deposit with
     its custodian, in a segregated account in the name of the futures broker,
   an amount of cash or U.S. government obligations in accordance with the
    initial margin requirements of the broker or exchange. Futures contracts
   are marked to market daily and an appropriate payable or receivable for
      the change in value ("variation margin") is recorded by the Fund. Gains or
 losses are recognized but not considered realized until the contracts
     expire or are closed. Futures contracts involve, to varying degrees, risk
   of loss in excess of the variation margin disclosed in the Statement of
     Assets and Liabilities. Losses may arise from the changes in the value of
   the underlying instrument, if there is an illiquid secondary market for
 the contracts, or if counterparties do not perform under the contract
   terms. Futures contracts are valued at the settlement price established
    each day by the board of trade or exchange on which they are traded. See
Note 6 for all open futures contracts held as of August 31, 1997.   

Forward currency contracts                                          
The Fund may enter into forward currency contracts and forward cross
     currency contracts in connection with settling planned purchases or sales
   of securities or to hedge the currency exposure associated with some or
     all of the Fund's portfolio securities. A forward currency contract is an
      agreement between two parties to buy and sell a currency at a set price on
     a future date. The market value of a forward currency contract fluctuates
with changes in forward currency exchange rates. Forward currency   
    contracts are marked to market daily and the change in value is recorded
     by the Fund as an unrealized gain or loss. Realized gains or losses equal
  to the difference between the value of the contract at the time it was
     opened and the value at the time it was closed are recorded upon delivery
      or receipt of the currency or, if a forward currency contract is offset by
      entering into another forward currency contract with the same broker, upon
  settlement of the net gain or loss. These contracts may involve market
 risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. In addition, the Fund could be 
     exposed to risk if the counterparties are unable to meet the terms of the
     contracts or if the value of the currency changes unfavorably to the U.S.
dollar. The U.S. dollar value of the currencies                     

14                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

      the Fund has committed to buy or sell is shown under Note 6 and represents
  the currency exposure the Fund has acquired or hedged through currency
contracts as of August 31, 1997.                                    

Options                                                             
     The Fund may write call and put options on securities it owns or in which
     it may invest. When the Fund writes a call or put option, an amount equal
      to the premium received is recorded as a liability and subsequently marked
  to market to reflect the current value of the option written. Premiums
     received from writing options which expire are treated as realized gains.
    Premiums received from writing options which are exercised or closed are
offset against the proceeds or amounts paid on the transaction to   
      determine the realized gain or loss. The Fund as a writer of an option has
   no control over whether the underlying securities may be sold (call) or
   purchased (put) and as a result bears the market risk of an unfavorable
    change in the price of the security underlying the written option. There
    is the risk the Fund may not be able to enter into a closing transaction
   because of an illiquid market. See Note 6 for a summary of open written
option contracts as of August 31, 1997.                             

    The Fund may also purchase put and call options. The Fund pays a premium
     which is included in the Fund's Statement of Assets and Liabilities as an
     investment and subsequently marked to market to reflect the current value
      of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                        

Loan agreements                                                     
 The Fund may invest in direct debt instruments which are interests in
      amounts owed by a corporate, governmental, or other borrower to lenders or
     lending syndicates. The Fund's investments in loans may be in the form of
    participations in loans or assignments of all or a portion of loans from
    third parties. A loan is often administered by a bank or other financial
  institution (the lender) that acts as agent for all holders. The agent
  administers the terms of the loan, as specified in the loan agreement.
     When investing in a loan participation, the Fund has the right to receive
     payments of principal, interest and any fees to which it is entitled only
   from the lender selling the loan agreement and only upon receipt by the
    lender of payments from the borrower. The Fund generally has no right to
      enforce compliance with the terms of the loan agreement with the borrower.
As a result, the Fund may be subject to the credit risk of both the 
     borrower and the lender that is selling the loan agreement. When the Fund
    purchases assignments from lenders it acquires direct rights against the
      borrower on the loan. Direct indebtedness of emerging countries involves a
    risk that the governmental entities responsible for the repayment of the
  debt may be unable or unwilling to pay the principal and interest when
due.                                                                

Indexed securities                                                  
    The Fund may invest in indexed securities whose redemption values and/or
     coupons are linked to the prices of other securities, securities indices,
or other financial indicators. The Fund uses indexed securities to  
     increase or decrease its exposure to different underlying instruments and
  to gain exposure to markets that may be difficult to invest in through
 conventional securities. Indexed securities may be more volatile than
      their underlying instruments, but any loss is limited to the amount of the
original investment.                                                

                                                                              15

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                     
      The Fund may invest in swap agreements. A swap is an agreement to exchange
      the return generated by one instrument for the return generated by another
      instrument. The Fund may enter into swap agreements to manage its exposure
  to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their  
   respective commitments to pay or receive interest, e.g., an exchange of
     floating rate payments for fixed rate payments with respect to a notional
     amount of principal. Interest rate swaps are marked to market daily based
     upon quotations from market makers and the change, if any, is recorded as
     unrealized gain or loss in the Statement of Operations. Payments received
      or made at the end of the measurement period are recorded as realized gain
  or loss in the Statement of Operations. Entering into these agreements
      involves, to varying degrees, elements of credit and market risk in excess
      of the amounts recognized on the Statement of Assets and Liabilities. Such
  risks involve the possibility that there is no liquid market for these
  agreements, that the counterparty to the agreements may default on its
  obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap
agreements as of August 31, 1997.                                   

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. 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 certain member firms of the New York
  Stock Exchange. 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 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 fail financially. The Fund receives compensation for
  lending its securities. At August 31, 1997, the Fund loaned securities
     having a market value of $4,005,956, collateralized by cash in the amount
of $4,057,750 which was invested in short-term instruments.         

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 taxable 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 federal
     income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                   

16                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Distributions to shareholders                                       
     The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net   
investment income on each class of shares.                          

 Income distributions and capital gain distributions are determined in
  accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual 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.      

Allocation of operating activity                                    
 The majority of expenses of the Trust are directly identifiable to an
      individual Fund. Expenses which are not readily identifiable to a specific
    Fund are allocated in such a manner as deemed equitable by the Trustees,
 taking into consideration, among other things, the nature and type of
 expense and the relative size of the Funds. Investment income, common
expenses and realized and unrealized gains and losses are allocated 
      pro-rata among the classes based on the relative net assets of each class.
   Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                      

Purchases and redemptions of Fund shares                            
The premium on cash purchases of Fund shares is .15% of the amount  
  invested. Effective June 1, 1996, the Manager will reduce such premium
only when any portion of a purchase is offset by a corresponding    
   redemption occurring on the same day. All purchase premiums are paid to
 and recorded as paid-in capital by the Fund. For the six months ended
     August 31, 1997, the Fund received $75,270 in purchase premiums. There is
no premium for cash redemptions, reinvested distributions or in-kind
transactions.                                                       

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

                                                                              17

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

2.    Fees and other transactions with affiliates                               

 GMO earns a management fee paid monthly at the annual rate of .40% of
average daily net assets. Effective June 1, 1996, the Fund adopted a
 Shareholder Services Plan under which the Fund pays GMO a shareholder
service fee for client and shareholder service, reporting and other 
support. Pursuant to the Shareholder Services Plan, the shareholder 
   service fee is calculated based on the average daily net assets of each
  class at the annual rate of .28% for Class I shares, .22% for Class II
shares and .15% for Class III shares.                               

      GMO has agreed to waive a portion of its fee and bear other expenses until
   further notice to the extent that the Fund's annual expenses (including
 the management fee but excluding brokerage commissions, certain other
      transaction costs (including transfer taxes), shareholder service fees and
     extraordinary expenses) exceed .25% of average daily net assets. Prior to
      June 1, 1996, a similar waiver existed for annual expenses exceeding .40%;
thus the net annual expense ratio after the waiver for a Class III  
shareholder is unchanged.                                           

The Fund's portion of the fee paid by the Trust to the unaffiliated 
Trustees during the six months ended August 31, 1997, was $1,347. No
     remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                            

3.    Purchases and sales of securities                                         

    For the six months ended August 31, 1997, cost of purchases and proceeds
 from sales of investments, other than short-term obligations, were as
follows:                                                            

                                                        [Enlarge/Download Table]

                                                       Purchases                  Proceeds      
                                                 ----------------------     --------------------
                                                                                                
U.S. Government securities                    $              8,426,671   $            7,888,918 
Investments (non-U.S. Government securities)               167,240,709              109,778,082 

 At August 31,1997, the cost for Federal income tax purposes and gross
     unrealized appreciation and depreciation in value of investments held was
as follows:                                                         

                                                        [Enlarge/Download Table]

                                  Gross Unrealized            Gross Unrealized            Net Unrealized     
      Aggregate Cost                Appreciation                Depreciation               Appreciation      
---------------------------  ---------------------------  --------------------------  -----------------------
                                                                                                             
      $ 287,987,818                 $10,990,956                  $6,414,159                 $4,576,797       

18                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

4.    Principal shareholders                                                    

      At August 31, 1997, 33% of the outstanding shares of the Fund were held by
     two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                             

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:                                             

                                                        [Enlarge/Download Table]

                                               Six Months Ended                                  Year Ended             
                                               August 31, 1997                               February 28, 1997          
                                  -------------------------------------------  -----------------------------------------
Class III:                              Shares                  Amount               Shares               Amount        
                                  -------------------     -------------------  ------------------   --------------------
                                                                                                                        
Shares sold                           7,081,890         $     77,125,119            9,398,594     $      108,940,870    
Shares issued to shareholders in                                                                                        
  reinvestment of distributions         242,142                2,644,188            2,130,615             23,653,871    
Shares repurchased                   (2,625,983)             (28,461,342)          (7,421,298)           (83,975,531)   
                                  -------------------     -------------------  ------------------   --------------------
Net increase                          4,698,049         $     51,307,965            4,107,911     $       48,619,210    
                                  ===================     ===================  ==================   ====================

6.    Financial instruments                                                     

   A summary of outstanding financial instruments at August 31, l997 is as
follows:                                                                        

Forward currency contracts                                          

                                                        [Enlarge/Download Table]

                                                                                  Net Unrealized    
 Settlement                               Units of                                 Appreciation     
    Date          Deliver/Receive         Currency                Value           (Depreciation)    
--------------  --------------------  --------------------  -----------------  ---------------------
                                                                                                    
    Buys                                                                                            

  09/26/97              CAD                    29,900,000   $     21,570,276   $          (44,666)  
  09/02/97              DEM                     4,172,890          2,318,643                 3,419  
  09/05/97              DEM                   455,100,000        252,925,229           (7,799,937)  
  09/22/97              DEM                    29,200,000         15,134,048                51,875  
  10/17/97              GBP                    20,200,000         32,691,867               138,410  
  09/22/97              ITL                17,513,852,250          9,939,075               198,092  
  10/09/97              JPY                10,190,000,000         85,215,964           (5,828,428)  
                                                                               ---------------------
                                                                               $      (13,281,235)  
                                                                               =====================

                                                                              19

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Notes to Financial Statements (Unaudited) -- (Continued)                                                           
August 31, 1997                                                                                                    
-----------------------------------------------------------------------------------------------------------------  

     Forward currency contracts -- continued                                                                       
                                                                                                 Net Unrealized    
      Settlement                                      Units of                                    Appreciation     
         Date             Deliver/Receive             Currency                Value              (Depreciation)    
     --------------     --------------------     --------------------    -----------------    ---------------------
         Sales                                                                                                     
                                                                                                                   
       11/28/97                 AUD                        3,400,000  $         2,502,821  $                41,059 
       09/26/97                 CAD                       45,600,000           32,896,475                  213,080 
       09/05/97                 DEM                      249,600,000          138,717,067                2,926,185 
       09/22/97                 DEM                       17,900,000            9,959,539                (218,556) 
       10/17/97                 GBP                       22,200,000           35,928,686                  201,861 
       09/22/97                 ITL                   28,602,096,000           16,231,630                 (36,660) 
       10/09/97                 JPY                    3,230,000,000           27,011,537                  772,714 
       09/23/97                 NZD                        7,600,000            4,850,637                  294,563 
       03/23/98                 THB                      200,000,000            5,463,983                1,468,426 
       06/22/98                 THB                      100,000,000            2,703,433                  703,722 
                                                                                              ---------------------
                                                                                           $             6,366,394 
                                                                                              =====================

                                                        [Enlarge/Download Table]

 Forward cross currency contracts                                                                                 
                                                                                                 Net Unrealized   
 Settlement                                                                                       Appreciation    
    Date                Deliver/Units of Currency            Receive/In Exchange For             (Depreciation)   
--------------     ------------------------------------  ---------------------------------     -------------------
                                                                                                                  
  10/10/97               BEF               536,765,280       DEM               26,000,000   $               4,327 
  11/13/97               CHF                 9,473,700       DEM               16,700,000                (17,649) 
  09/02/97               DEM                 1,337,914       DKK                5,095,446                     129 
  09/02/97               DEM                 2,834,976       SEK               12,346,319                 (3,393) 
  09/19/97               DEM                10,600,000       NLG               11,936,702                   1,522 
  09/22/97               DEM                41,600,000       ITL           41,235,305,000                 254,759 
  10/10/97               DEM                87,000,000       BEF            1,796,281,750                 (9,553) 
  10/23/97               DEM                35,600,000       ESP            3,017,368,800                   5,934 
  10/27/97               DEM               109,059,510       ECU               55,300,000               (286,223) 
  11/07/97               DEM                11,900,000       FRF               40,115,582                   2,273 
  11/13/97               DEM                 7,100,000       CHF                5,823,917                 (3,679) 
  11/14/97               DEM                50,000,000       DKK              190,462,500                 (8,050) 
  11/21/97               DEM                16,000,000       SEK               69,962,310                     517 
  11/14/97               DKK               189,496,870       DEM               49,700,000                (17,958) 
  10/23/97               ESP               584,737,000       DEM                6,900,000                   (557) 
  11/07/97               FRF               141,317,893       DEM               41,900,000                (19,695) 
  09/22/97               ITL            89,090,143,500       DEM               89,700,000               (648,538) 
  09/19/97               NLG                18,456,232       DEM               16,400,000                   3,513 
  11/21/97               SEK               211,417,360       DEM               48,300,000                (29,494) 
  10/27/97               ECU               111,100,000       DEM              219,024,414                 530,036 
                                                                                               -------------------
                                                                                            $           (241,779) 
                                                                                               ===================

20                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Notes to Financial Statements (Unaudited) -- (Continued)                                                                     
August 31, 1997                                                                                                              
------------------------------------------------------------------------------------------------------------------           

      Futures contracts                                                                                                      

                                                                                                           Net Unrealized    
     Number of                                                                       Contract Value         Appreciation     
     Contracts                       Type                      Expiration Date                             (Depreciation)    
   ---------------  ---------------------------------------  --------------------   ------------------   --------------------
                                                                                                                             
         Buys                                                                                                                

         79         Australian Government Bond 3 yr            September 1997    $          6,986,895 $              143,636 
         74         Australian Government Bond 10 yr           September 1997               7,753,442                302,802 
         5          MATIF FRF Bond                             September 1997                 529,047                    790 
        153         German Government Bond                      December 1997              21,524,498               (37,975) 
         85         Italian Government Bond 10 yr               December 1997              10,429,048                  9,975 
         10         Japanese Government Bond 10 yr              December 1997              10,655,332                 24,965 
        107         MATIF ECU Bond                             September 1997              11,678,938                267,527 
         1          U.S. Treasury Bond 30 yr                    December 1997                 113,125                    399 
        254         U.K. Gilt                                  September 1997              24,145,209               (11,642) 
         70         U.K. Gilt                                   December 1997               6,479,941                (8,558) 
                                                                                                         --------------------
                                                                                                      $              691,919 
                                                                                                         ====================


         Sales                                                                                                               
                                                                                                                             
         8          Canadian Government Bond 10 yr             September 1997    $            692,160 $                (896) 
        182         Spanish Government Bond 10 yr              September 1997              14,709,829              (348,308) 
        162         Swiss Government Bond                      September 1997              13,542,480               (15,571) 
        113         Swiss Government Bond                       December 1997               8,972,972                 11,543 
        100         U.S. Treasury Bill 3 Month                  December 1997              23,732,500               (81,000) 
        124         U.S. Treasury Note 10 yr                   September 1997              13,519,875              (239,555) 
         71         U.S. Treasury Note 10 yr                    December 1997               7,716,813                  1,624 
         72         U.S. Treasury Bond 30 yr                    December 1997               8,118,000               (29,790) 
                                                                                                         --------------------
                                                                                                      $            (701,953) 
                                                                                                         ====================

 At August 31, 1997, the Fund has sufficient cash and/or securities to
cover any commitments or margin on these contracts.                 

                                                                              21

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Notes to Financial Statements (Unaudited) -- (Continued)                                                               
August 31, 1997                                                                                                        
------------------------------------------------------------------------------------------------------------------     

      Written option transactions                                                                                      
                                                  Puts                                        Calls                    

                               Principal Amount                                Principal Amount                        
                                      of                                              of                               
                                   Contracts                                       Contracts                           
                                (000's omitted)            Premiums              (000's omitted)          Premiums     
                              --------------------   ----------------------------------------------   -----------------
                                                                                                                       
Outstanding, beginning                                                                                                 
of period                   $            13,000    $             646,750                    13,000  $          553,800 
Options written                           8,000                   40,000                     9,091             155,454 
Options exercised                        (8,000)                 (40,000)                       --                  -- 
                              --------------------   ---------------------    ---------------------   -----------------
Outstanding, end                                                                                                       
           of period        $            13,000    $            646,750                     22,091  $          709,254 
                              ====================   =====================    =====================   =================

                                                        [Enlarge/Download Table]


      Summary of written options outstanding                                                                     

                               Principal Amount                                                                  
                                      of                                                                         
                                   Contracts                                 Expiration                          
                                 (000's omitted)      Exercise Price            Date                 Value       
                              ---------------------  -----------------  ---------------------   -----------------
                                                                                                                 
Calls                                                                                                            

Japanese Yen                $               13,000       117 JPY              2/09/98         $          422,500 
Thai Baht                                    9,091        33 THB              10/16/97                   584,545 

Puts                                                                                                             

Japanese Yen                                13,000       117 JPY              2/09/98                    425,100 
                                                                                                -----------------
                                                                                              $        1,432,145 
                                                                                                =================

22                                                                              

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GMO International Bond Fund                                                     
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Notes to Financial Statements (Unaudited) -- (Continued)                                                                    
August 31, 1997                                                                                                             
------------------------------------------------------------------------------------------------------------------          

      Swap agreements                                                                                                       

                                                                                                           Net Unrealized   
                              Expiration                                                                    Appreciation    
     Notional Amount             Date                               Description                            (Depreciation)   
--------------------------  ---------------  -----------------------------------------------------------  ------------------
                                                                                                                            
TRL 267,500,000,000            5/14/99       Agreement with Bank of America dated 5/29/97 to receive             $(313,117) 
                                             the notional amount multiplied by the change in market                         
                                             value (including accrued interest) of Turkey Index Linked                      
                                             Bond and to pay the notional amount multiplied by 3 month                      
                                             LIBOR adjusted by a specified spread.                                          

TRL 110,000,000,000            6/04/99       Agreement with Bank of America dated 6/23/97 to receive                 27,186 
                                             the notional amount multiplied by the change in market                         
                                             value (including accrued interest) of Turkey Index Linked                      
                                             Bond and to pay the notional amount multiplied by 3 month                      
                                             LIBOR adjusted by a specified spread.                                          

                                                                                                          ------------------
                                                                            Net unrealized depreciation          $(285,931) 
                                                                                                          ==================

See Notes to the Schedule of Investments for definitions of currency
abbreviations.                                                                  

                                                                              23

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Par Value     Description                                       Value ($)    
--------------------------------------------------------------------------------
                                                                                
                 DEBT OBLIGATIONS -- 88.9%                                      

                 Asset Backed Securities -- 35.2%                               

  $ 5,000,000    Augusta Funding Series 96-F2,                                  
                    Variable Rate, LIBOR + .30%  144A, 6.05%,                   
                    due 4/15/06                                     5,000,000   
   11,887,168    Augusta Funding VI Series 96-A3,  144A, 7.38%,                 
                    due 4/15/13                                    12,023,276   
   17,000,000    Bombardier Receivables Master Trust I 97-1                     
                    Class A, Variable Rate, 1 mo. LIBOR + .12%,                 
                    5.80%, due 4/15/04                             17,010,625   
    9,590,000    Brazos Student Loan Finance Corp. Series 96-A4,                
                    Variable Rate, 3 mo. U.S. Treasury Bill +                   
                    .50%, 5.94%, due 12/01/02                       9,576,514   
    3,833,887    CS First Boston Mortgage Securities Corp.,                     
                    Series 96-1 Class A1, Variable Rate,                        
                    3 mo. LIBOR + .23%, 5.98%, due 7/28/29          3,836,187   
    4,167,900    Dilmun Capital Corp,                                           
                    Variable Rate, 6 mo. LIBOR + .88%, 6.86%,                   
                    due 11/15/03                                    4,176,236   
   15,000,000    First Deposit Master Trust Series 96-1A,                       
                    Variable Rate, 1 mo. LIBOR +.17%, 5.82%,                    
                    due 8/15/07                                    15,037,500   
    9,500,000    First Union Master Credit Card Trust 96-1                      
                    Class A, Variable Rate, 1 mo. LIBOR + .17%,                 
                    5.82%, due 9/15/03                              9,511,875   
    7,500,000    First USA Credit Card Master Trust 94-4 Class A,               
                    Variable Rate, 1 mo. LIBOR + .37%, 6.00%,                   
                    due 8/15/03                                     7,562,109   
   10,050,000    Keycorp Student Loan Trust 94-B Certificates,                  
                    Variable Rate, 1 mo. LIBOR + .73%, 6.42%,                   
                    due 11/25/21                                   10,050,000   
   11,224,915    Keystone Auto Grantor Trust Series 1996-A                      
                    Class A, 144A, 6.60%, due 12/15/02             11,359,613   
    6,000,000    National Premier Finance 95-2, 144A, 6.21%,                    
                    due 6/01/99                                     5,958,000   
   14,000,000    National Premier Finance IX 96-1A, 7.20%, due                  
                    7/01/00                                        14,210,000   
    6,000,000    Navistar Financial Dealer Note Master Trust                    
                    95-1 Class A, Variable Rate, 1 mo. LIBOR +                  
                    .30%, 5.94%, due 8/25/07                        6,034,688   
    3,343,135    New York City Tax Lien Series 96-1 Class B,                    
                    144A, 6.91%, due 5/25/05                        3,368,208   
    5,000,000    Northstar CBO Series 97-1 Class A2, 6.62%, due                 
                    7/15/09                                         5,148,500   
    3,500,000    Premier Auto Trust 94-4 Certificates, 6.85%,                   
                    due 5/02/99                                     3,540,250   
    2,102,134    Resolution Trust Corp 94-C1 Class A1,                          
                    Variable Rate, 1 mo. LIBOR + .45%, 6.08%,                   
                    due 6/25/26                                     2,101,477   
    2,481,329    Resolution Trust Corp 94-C1 Class A3,                          
                    Variable Rate, 1 mo. LIBOR + .55%, 6.18%,                   
                    due 6/25/26                                     2,488,308   
    2,637,000    SMS Student Loan Trust 94-B Certificates,                      
                    Variable Rate, 1 mo. LIBOR + .75%, 6.38%,                   
                    due 10/25/23                                    2,637,000   
    4,932,000    SMS Student Loan Trust 95-A Certificates,                      
                    Variable Rate, 1 mo. LIBOR + .65%, 6.28%,                   
                    due 4/25/25                                     4,925,835   
    5,888,000    Society Student Loan Trust 93-A Class B,                       
                    Variable Rate, 1 mo. LIBOR + .75%, 6.44%,                   
                    due 7/25/03                                     5,897,200   

              See accompanying notes to the financial statements.              1

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Par Value     Description                                       Value ($)    
--------------------------------------------------------------------------------
                                                                                
                 Asset Backed Securities -- continued                           

  $ 2,617,126    UCFC Home Equity Loan 95-B2 Class A8,                          
                    Variable Rate, 1 mo. LIBOR + .45%, 6.14%,                   
                    due 10/10/26                                     2,619,743  
                                                                   -----------  
                                                                   164,073,144  
                                                                   -----------  

                 Foreign Government Obligation -- 2.0%                          

   25,000,000    Bulgaria Discount Strips, due 7/28/24               3,807,250  
   39,794,675    Republic of Albania Par Bond, Zero Coupon, due                 
                    8/31/25                                          5,421,627  
                                                                   -----------  
                                                                     9,228,877  
                                                                   -----------  

                 Structured Notes -- 7.0%                                       

    3,000,000    Federal Home Loan Bank, 4.90%, due 2/23/98          2,970,000  
    3,550,000    Federal Home Loan Bank,                                        
                    Variable Rate, (10 YR CMT + 2.55% - 3 mo.                   
                    LIBOR), 3.06%, due 7/28/98                       3,443,500  
    2,500,000    Federal National Mortgage Association,                         
                    Variable Rate, ((.50 * 10 YR CMT) + 1.50%),                 
                    4.67%, due 2/25/98                               2,480,000  
    1,250,000    Federal National Mortgage Association,                         
                    Variable Rate, ((.50 * 2 YR CMT) + 1.80%),                  
                    4.81%, due 3/10/98                               1,241,250  
   22,500,000    Student Loan Marketing Association,                            
                    Variable Rate, (10.25% - 5 YR DM SWAP),                     
                    6.06%, due 3/23/98                              22,455,000  
                                                                   -----------  
                                                                    32,589,750  
                                                                   -----------  

                 U.S. Government -- 13.7%                                       

   28,000,000    U.S. Treasury Bond, 6.25%, due 8/15/23/(a)/        26,495,000  
   29,365,000    U.S. Treasury Inflation Indexed Note, 3.41%,                   
                    due 1/15/07                                     29,224,361  
    8,400,000    U.S. Treasury Note, 6.38%, due 8/15/02              8,455,121  
                                                                   -----------  
                                                                    64,174,482  
                                                                   -----------  

                 U.S. Government Agency -- 31.0%                                

    8,750,000    Agency for International Development Floater                   
                    (Support of Jamaica),                                       
                    Variable Rate, 6 mo. LIBOR + .30%, 6.32%,                   
                    due 12/01/14                                     8,771,875  
   15,000,000    Agency for International Development Floater                   
                    (Support of Morocco), Variable Rate, 6 mo.                  
                    LIBOR + .15%, 6.15%, due 10/29/26               15,042,188  
   20,000,000    Agency for International Development Floater                   
                    (Support of Morocco), Variable Rate, 6 mo.                  
                    LIBOR - .015%, 5.99%, due 2/01/25               19,575,000  
   25,000,000    Agency for International Development Floater                   
                    (Support of Portugal),                                      
                    Variable Rate, 6 mo. LIBOR, 7.00%, due                      
                    1/01/21                                         24,765,625  
   10,425,000    Agency for International Development Floater                   
                    (Support of Sri Lanka),                                     
                    Variable Rate, 6 mo. LIBOR + .20%, 5.93%,                   
                    due 6/15/12                                     10,464,094  
   10,633,333    Agency for International Development Floater                   
                    (Support of Zimbabwe),                                      
                    Variable Rate, 3 mo. U.S. Treasury Bill x                   
                    115%, 5.09%, due 1/01/12                        10,633,333  

2             See accompanying notes to the financial statements.               

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Par Value    Description                                        Value ($)    
--------------------------------------------------------------------------------
                                                                                
                U.S. Government Agency -- continued                             

  $10,000,000   Agency for International Development Floater                    
                    (Support of India),                                         
                    Variable Rate, 3 mo. LIBOR + .10%, 5.47%,                   
                    due 2/01/27                                    10,034,375   
   15,000,000    Federal National Mortgage Association, 5.19%,                  
                    due 7/20/98                                    14,962,500   
    5,000,000    Federal National Mortgage Association, 6.73%,                  
                    due 11/04/02                                    4,940,000   
   25,000,000    Small Business Administration, 7.35%, due                      
                    8/10/06                                        25,400,000   
                                                                  -----------   
                                                                  144,588,990   
                                                                  -----------   

                 TOTAL DEBT OBLIGATIONS (COST $412,850,506)       414,655,243   
                                                                  -----------   

    Shares                                                                      
---------------                                                                 
                                                                                
                 PREFERRED STOCKS -- 6.3%                                       

                 Preferred Stocks -- 6.3%                                       

       10,000    Bear Stearns Managed Income Securities                         
                    Plus Fund                                       9,899,700   
       20,000    Home Ownership Funding 2 Preferred 144A,                       
                    13.338%                                        19,769,400   
                                                                  -----------   
                                                                   29,669,100   
                                                                  -----------   

                 TOTAL PREFERRED STOCKS (COST $29,706,361)         29,669,100   
                                                                  -----------   

   Par Value                                                                    
---------------                                                                 
                                                                                
                 SHORT-TERM INVESTMENTS -- 9.1%                                 

                 Cash Equivalents -- 0.1%                                       

  $   588,000    BankBoston Eurodollar Time Deposit, 5.7875%                    
                 due 9/2/97/(b)/                                      588,000   
                                                                  -----------   

                 Repurchase Agreements -- 9.0%                                  

   22,310,000    Morgan Stanley Repurchase Agreement dated                      
                 8/29/97, due 9/2/97, with a maturity value of                  
                 $22,324,346 and an effective yield of 5.788%,                  
                 collateralized by the following debt                           
                 obligations having an aggregate market value                   
                 of $26,977,022/(b)/:                                           
                       Household Bank FSB, 0.00% due 6/2/99                     
                       Household Finance Corp, 0.00% due 4/3/01    22,310,000   

   19,427,524    Salomon Brothers Repurchase Agreement, dated                   
                 8/29/97, due 9/2/97, with a maturity value of                  
                 $19,438,425 and an effective yield of 5.05%,                   
                 collateralized by U.S. Treasury Obligations with               
                 rates ranging from 5.00% to 6.75%, with maturity               
                 dates ranging from 2/15/99 to 8/15/26 and with                 
                 an aggregate market value of $19,872,706          19,427,524   
                                                                  -----------   
                                                                   41,737,524   
                                                                  -----------   

            See accompanying notes to the financial statements.              3

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

                                                                  Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 TOTAL SHORT-TERM INVESTMENTS  (COST                            
                 $42,325,524)                                      42,325,524   
                                                                 ------------   

                 TOTAL INVESTMENTS -- 104.3%                                    
                 (Cost $484,882,391)                              486,649,867   

                 Other Assets and Liabilities (net) -- (4.3)%     (20,020,567)  
                                                                 ------------   

                 TOTAL NET ASSETS -- 100%                        $466,629,300   
                                                                 ============   

Notes to the Schedule of Investments:                 

CMT - Constant Maturity Treasury Index        
            DM SWAP - 5 Year Deutsche Mark Constant Maturity Swap Rate

             Variable rates -- The rates shown on variable notes are the
                 current interest rates at August 31, 1997, which are subject to
change based on the terms of the security.    

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

             /(a)/ All or a portion of this security is held as collateral for
open futures contracts.                 
       /(b)/ Represents investments of security lending collateral
(Note 1).                               

4             See accompanying notes to the financial statements.               

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Assets:                                                                       
   Investments, at value (cost $484,882,391) (Note 1)             $486,649,867
   Receivable for investments sold                                     115,000
   Dividends and interest receivable                                 4,250,345
   Receivable for open swap contracts (Notes 1 and 6)                1,013,143
   Receivable for expenses waived or borne by Manager (Note 2)          77,627
   Receivable for Fund shares sold                                      26,000
                                                                  ------------

      Total assets                                                 492,131,982
                                                                  ------------

Liabilities:                                                                  
   Payable upon return of securities loaned (Note 1)                22,898,000
   Payable for Fund shares repurchased                               2,007,286
   Payable to affiliate for (Note 2):                                         
     Management fee                                                     91,772
     Shareholder service fee                                            55,388
   Accrued expenses                                                     47,081
   Payable for variation margin on open futures contracts                     
     (Notes 1 and 6)                                                   403,155
                                                                  ------------

      Total liabilities                                             25,502,682
                                                                  ------------

Net assets                                                        $466,629,300
                                                                  ============

Net assets consist of:                                                        
   Paid-in-capital                                                $453,891,440
   Accumulated undistributed net investment income                   5,375,717
   Accumulated undistributed net realized gain                       3,002,552
   Net unrealized appreciation                                       4,359,591
                                                                  ------------
                                                                  $466,629,300
                                                                  ============

Net assets attributable to:                                                   
   Class I shares                                                 $  2,867,997
                                                                  ============
   Class III shares                                               $463,761,303
                                                                  ============

Shares outstanding:                                                           
   Class I                                                             278,778
                                                                  ============
   Class III                                                        44,982,628
                                                                  ============

Net asset value per share:                                                    
   Class I                                                        $      10.29
                                                                  ============
   Class III                                                      $      10.31
                                                                  ============

              See accompanying notes to the financial statements.              5

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                
Investment Income:                                                              
   Interest (including securities lending income of $60,626)        $18,120,165 
   Dividends                                                          1,270,608 
                                                                    ----------- 

      Total income                                                   19,390,773 
                                                                    ----------- 

Expenses:                                                                       
   Management fee (Note 2)                                              736,458 
   Custodian and transfer agent fees                                     48,494 
   Audit fees                                                            21,832 
   Legal fees                                                            14,651 
   Registration fees                                                      9,946 
   Trustees fees (Note 2)                                                 2,895 
   Miscellaneous                                                          2,607 
   Fees waived or borne by Manager (Note 2)                            (542,282)
                                                                    ----------- 
                                                                        294,601 
   Shareholder service fee (Note 2)                                             
      Class I                                                             4,600 
      Class III                                                         439,411 
                                                                    ----------- 
      Net expenses                                                      738,612 
                                                                    ----------- 

        Net investment income                                        18,652,161 
                                                                    ----------- 

Realized and unrealized gain (loss):                                            
   Net realized gain (loss) on:                                                 
      Investments                                                       409,418 
      Closed futures contracts                                        1,912,319 
      Closed swap contracts                                           1,182,479 
                                                                    ----------- 

        Net realized gain                                             3,504,216 
                                                                    ----------- 

   Change in net unrealized appreciation (depreciation) on:                     
      Investments                                                     2,094,081 
      Open futures contracts                                          4,467,113 
      Open swap contracts                                               134,344 
      Written options                                                    (9,375)
                                                                    ----------- 

        Net unrealized gain                                           6,686,163 
                                                                    ----------- 

      Net realized and unrealized gain                               10,190,379 
                                                                    ----------- 

Net increase in net assets resulting from operations                $28,842,540 
                                                                    =========== 

6             See accompanying notes to the financial statements.               

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                            Six Months Ended                   
                                                            August 31, 1997      Year Ended    
                                                              (Unaudited)     February 28, 1997
                                                            ----------------  -----------------
                                                                                               
Increase (decrease) in net assets:                                                             
Operations:                                                                                    
   Net investment income                                    $  18,652,161       $ 27,372,630   
   Net realized gain                                            3,504,216            984,536   
   Change in net unrealized appreciation (depreciation)         6,686,163         (3,180,642)  
                                                            -------------       ------------   
   Net increase in net assets resulting from operations        28,842,540         25,176,524   
                                                            -------------       ------------   

Distributions to shareholders from:                                                            
   Net investment income                                                                       
       Class I                                                    (98,560)           (17,070)  
       Class III                                              (18,881,356)       (25,071,527)  
                                                            -------------       ------------   
       Total distributions from net investment income         (18,979,916)       (25,088,597)  
                                                            -------------       ------------   
   Net realized gains                                                                          
       Class I                                                        (63)            (1,958)  
       Class III                                                  (12,496)        (3,491,659)  
                                                            -------------       ------------   
       Total distributions from net realized gains                (12,559)        (3,493,617)  
                                                            -------------       ------------   
   In excess of net realized gains                                                             
       Class I                                                         --               (878)  
       Class III                                                       --         (1,566,602)  
                                                            -------------       ------------   
       Total distributions in excess of net realized gains             --         (1,567,480)  
                                                            -------------       ------------   

                                                              (18,992,475)       (30,149,694)  
                                                            -------------       ------------   
   Net share transactions: (Note 5)                                                            
       Class I                                                   (798,506)         3,600,624   
       Class III                                             (116,914,899)       264,915,841   
                                                            -------------       ------------   
   Increase (decrease) in net assets resulting from net                                        
      share transactions                                     (117,713,405)       268,516,465   
                                                            -------------       ------------   

      Total increase (decrease) in net assets                (107,863,340)       263,543,295   

Net assets:                                                                                    
   Beginning of period                                        574,492,640        310,949,345   
                                                            -------------       ------------   

   End of period (including accumulated undistributed net                                      
      investment income of $5,375,717 and $5,703,472,                                          
      respectively)                                         $ 466,629,300       $574,492,640   
                                                            =============       ============   

              See accompanying notes to the financial statements.              7

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                    Six Months             Period from         
                                                       Ended            September 10, 1996     
                                                  August 31, 1997  (commencement of operations)
                                                    (Unaudited)        to February 28, 1997    
                                                  ---------------  ----------------------------
                                                                                               
Net asset value, beginning of period                   $10.16                $10.01            
                                                       ------                ------            

Income from investment operations:                                                             
   Net investment income                                 0.33+                 0.36            
   Net realized and unrealized gain                      0.10                  0.13            
                                                       ------                ------            

      Total from investment operations                   0.43                  0.49            
                                                       ------                ------            

Less distributions to shareholders:                                                            
   From net investment income                           (0.30)                (0.29)           
   From net realized gains                               0.00                 (0.03)           
   In excess of net realized gains                       0.00                 (0.02)           
                                                       ------                ------            

      Total distributions                               (0.30)                (0.34)           
                                                       ------                ------            
Net asset value, end of period                         $10.29                $10.16            
                                                       ======                ======            

Total Return/(a)/                                        4.37%                 4.93%           

Ratios/Supplemental Data:                                                                      
   Net assets, end of period (000's)                   $2,868                $3,630            
   Net expenses to average daily net assets              0.38%*                0.38%*          
   Net investment income to average daily net                                                  
      assets                                             6.14%*                5.83%*          
   Portfolio turnover rate                                 29%                   25%           
   Fees and expenses voluntarily waived or borne                                               
      by the Manager consisted of the following                                                
      per share amounts:                               $ 0.01                $ 0.01            

*   Annualized.                                                             
+   Computed using average shares outstanding throughout the period.        
/(a)/ The total returns would have been lower had certain expenses not been     
waived during the periods shown.                                    

8             See accompanying notes to the financial statements.               

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                               Six Months Ended   Year Ended February 28/29,     
                                               August 31, 1997  -------------------------------  
                                                 (Unaudited)       1997       1996      1995*    
                                                 -----------    ---------  ---------  ---------  
                                                                                                 
Net asset value, beginning of period               $  10.18     $  10.40   $  10.13   $  10.00   
                                                   --------     --------   --------   --------   

Income from investment operations:                                                               
   Net investment income                               0.34+        0.58       0.66       0.24   
   Net realized and unrealized gain (loss)             0.10        (0.09)      0.58       0.07   
                                                   --------     --------   --------   --------   

      Total from investment operations                 0.44         0.49       1.24       0.31   
                                                   --------     --------   --------   --------   

Less distributions to shareholders:                                                              
   From net investment income                         (0.31)       (0.60)     (0.60)     (0.18)  
   From net realized gains                             0.00        (0.08)     (0.37)      0.00   
   In excess of net realized gains                     0.00        (0.03)      0.00       0.00   
                                                   --------     --------   --------   --------   

      Total distributions                             (0.31)       (0.71)     (0.97)     (0.18)  
                                                   --------     --------   --------   --------   
Net asset value, end of period                     $  10.31     $  10.18   $  10.40   $  10.13   
                                                   ========     ========   ========   ========   

Total Return /(a)/                                     4.41%        4.93%     12.50%      3.16%  

Ratios/Supplemental Data:                                                                        
   Net assets, end of period (000's)               $463,761     $570,862   $310,949   $209,377   
   Net expenses to average daily net assets            0.25%**      0.25%      0.25%      0.25%**
   Net investment income to average daily net                                                    
      assets                                           6.33%**      6.15%      6.52%      6.96%**
   Portfolio turnover rate                               29%          25%        70%        65%  
   Fees and expenses voluntarily waived or                                                       
      borne by the Manager consisted of the                                                      
      following per share amounts:                 $   0.01     $   0.02   $   0.01   $   0.01   

*   For the period from August 18, 1994 (commencement of operations) to     
February 28, 1995.                                                  
**  Annualized.                                                             
+   Computed using average shares outstanding throughout the period.        
/(a)/ The total returns would have been lower had certain expenses not been     
waived during the periods shown.                                    

              See accompanying notes to the financial statements.              9

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

The Fund seeks high total return through investment in U.S. government
 securities and other investment grade bonds denominated in U.S. dollars
   while generally maintaining a portfolio duration of approximately four to
six years (excluding short-term investments).                         

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
     as more fully described in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
  as those shares. At August 31, 1997, Class I and Class III were the only
active classes of shares of the Fund.                                 

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

Futures contracts                                                     

The Fund may use futures contracts to manage its exposure to the bond 
markets. Buying futures tends to increase the Fund's exposure to the  
underlying instrument. Selling futures tends to decrease the Fund's   
 exposure to the underlying instruments or hedge other Fund instruments.
Upon purchase of a                                                    

10                                                                              

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    futures contract, the Fund is required to deposit with its custodian, in a
    segregated account in the name of the futures broker, an amount of cash or
U.S. government obligations in accordance with the initial margin     
 requirements of the broker or exchange. Futures contracts are marked to
 market daily and an appropriate payable or receivable for the change in
value ("variation margin") is recorded by the Fund. The payable or    
     receivable is liquidated on the following business day. Gains or losses are
  recognized but not considered realized until the contracts expire or are
closed. Futures contracts involve, to varying degrees, risk of loss in
 excess of the variation margin disclosed in the Statement of Assets and
   Liabilities. Losses may arise from changes in the value of the underlying
    instrument, if there is an illiquid secondary market for the contracts, or
if counterparties do not perform under the contract terms. Futures    
  contracts are valued at the settlement price established each day by the
 board of trade or exchange on which they are traded. See Note 6 for all
open futures contracts held as of August 31, 1997.                    

Options                                                               

   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
the realized gain or loss. If a written put option is exercised, the  
     premium reduces the cost basis of the securities purchased by the Fund. The
  Fund as a writer of an option has no control over whether the underlying
    securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the security     
   underlying the written option. There is the risk the Fund may not be able
to enter into a closing transaction because of an illiquid market. At 
August 31, 1997, the Fund had no written option contracts outstanding.

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. In connection with transactions in repurchase  
     agreements, if the seller defaults, the value of the collateral declines or
   if the seller enters insolvency proceedings, realization of collateral by
the Fund may be delayed or limited.                                   

Indexed securities                                                    

The Fund may also invest in indexed securities whose redemption values
 and/or coupons are linked to the prices of other securities, securities
     indices, or other financial indicators. The Fund uses indexed securities to
   increase or decrease its exposure to different underlying instruments and
to gain exposure to markets that may be difficult to invest in through
     conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the  
original investment.                                                  

                                                                              11

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Security lending                                                      

  The Fund may lend its securities to certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $26,308,295, collateralized by
cash in the amount of $22,898,000 which was invested in short-term    
instruments.                                                          

Swap agreements                                                       

    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their    
 respective commitments to pay or receive interest, e.g., an exchange of
   floating rate payments for fixed rate payments with respect to a notional
   amount of principal. Interest rate swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap  
agreements as of August 31, 1997.                                     

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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.                                       

12                                                                              

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Security transactions and related investment income                   

   Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis and is adjusted for the accretion of    
     discounts. In determining the net gain or loss on securities sold, the cost
of securities is determined on the identified cost basis.             

Allocation of operating activity                                      

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .25% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .10% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .25%;
thus, the net annual expense ratio after the waiver for a Class III   
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $2,895. No  
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                                [Download Table]

                                        Purchases             Proceeds     
                                   ------------------    ------------------
                                                                           
U.S. Government securities          $     95,264,539      $    178,541,336 
Investments (non-U.S. Government                                           
securities)                               65,086,943           101,453,619 

                                                                              13

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]


                            Gross Unrealized        Gross Unrealized        Net Unrealized    
    Aggregate Cost            Appreciation            Depreciation           Appreciation     
-----------------------  -----------------------  ----------------------  --------------------
                                                                                              
     $484,882,391              $2,628,722               $861,246              $1,767,476      

4.   Principal shareholders                                                     

    At August 31, 1997, 42% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]

                                                                           Period from September 10, 1996     
                                            Six Months Ended               (commencement of operations) to    
                                            August 31, 1997                       February 28, 1997           
                                   -----------------------------------  --------------------------------------
Class I:                                Shares              Amount           Shares               Amount      
                                   ----------------    ---------------  -----------------    -----------------
                                                                                                              
Shares sold                             41,339         $   423,471           385,608         $   3,888,618    
Shares issued to shareholders in                                                                              
    reinvestment of distributions        9,850              98,623             1,967                19,906    
Shares repurchased                    (129,670)         (1,320,600)          (30,316)             (307,900)   
                                   ----------------    ---------------  -----------------    -----------------
Net increase/(decrease)                (78,481)        $  (798,506)          357,259         $   3,600,624    
                                   ================    ===============  =================    =================



                                            Six Months Ended                         Year Ended               
                                            August 31, 1997                      February 28, 1997            
                                   -----------------------------------  ------------------------------------- 
Class III:                              Shares              Amount           Shares              Amount       
                                   ----------------    ---------------  ----------------    ----------------- 
                                                                                                              
Shares sold                           11,782,835       $  119,660,867       26,591,731       $   269,419,204  
Shares issued to shareholders in                                                                              
    reinvestment of distributions      1,575,174           15,815,384        2,531,335            25,549,376  
Shares repurchased                   (24,440,175)        (252,391,150)      (2,947,048)          (30,052,739) 
                                   ----------------    ---------------  -----------------    -----------------
Net increase/(decrease)              (11,082,166)      $ (116,914,899)      26,176,018       $   264,915,841  
                                   ================    ===============  ================    ================= 

14                                                                              

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GMO Domestic Bond Fund                                                          
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Long futures contracts                                                

                                                        [Enlarge/Download Table]


                                                                                        Net Unrealized  
    Number of                                                                            Appreciation   
    Contracts                   Type               Expiration Date    Contract Value    (Depreciation)  
------------------  -----------------------------  -----------------  ----------------  ----------------
                                                                                                        
       268               U.S. Treasury Bond         September 1997      $30,317,500       $1,191,177    
       38                U.S. Treasury Bond         December 1997         4,284,500            6,809    
       500           U.S. Treasury Note 10 yr.      September 1997       54,515,625        1,251,344    
       150           U.S. Treasury Note 10 yr.      December 1997        16,303,125          (26,344)   
       462            U.S. Treasury Note 5 yr.      December 1997        49,174,125           34,785    
                                                                                        ----------------
                                                                                          $2,457,771    
                                                                                        ================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on these contracts.                         

Written put option transactions                                       

                                                                [Download Table]

                                   Principal Amount                         
                                     of Contracts                           
                                    (000's omitted)          Premiums       
                                  --------------------  --------------------
                                                                            
Outstanding, beginning of period        $30,000               $126,563      
Options written                          30,000                150,000      
Options exercised                       (30,000)              (150,000)     
Options expired                         (30,000)              (126,563)     
                                  --------------------  --------------------
Outstanding, end of period                 -                     -          
                                  ====================  ====================

Swap agreement                                                        

                                                        [Enlarge/Download Table]

                                                                                 Net Unrealized  
 Notional Amount     Expiration Date                Description                   Appreciation   
------------------  ------------------ ---------------------------------------  -----------------
                                                                                                 
   $50,000,000           5/21/98       Agreement with Morgan Guaranty Trust           $134,344   
                                       Company dated 4/21/97 to receive the                      
                                       notional amount multiplied by the                         
                                       return on the Lehman Brothers                             
                                       Treasury Index and to pay the                             
                                       notional amount multiplied by 3 month                     
                                       LIBOR adjusted by a specified spread.                     
                                                                                -----------------
                                                                                      $134,344   
                                                                                =================

                                                                              15

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               DEBT OBLIGATIONS -- 80.0%                                                           

                               Argentina -- 0.2%                                                                   
USD            1,000,000       Republic of Argentina Par Bond,                                                     
                                   Variable Rate, Step Up, 5.50%, due 3/31/23                          736,875     
                                                                                               ----------------    

                               Australia -- 4.1%                                                                   
GBP            6,700,000       Commonwealth Bank Australia Series EMTN, 8.13%, due                                 
                                 12/07/06                                                           11,224,640     
AUD            2,620,000       Queensland Treasury Corp., 8.00%, due 9/14/07                         2,107,207     
                                                                                               ----------------    
                                                                                                    13,331,847     
                                                                                               ----------------    

                               Austria -- 1.1%                                                                     
SEK           25,000,000       Oesterreich Kontrollbank, 9.25%, due 7/15/99                          3,405,299     
                                                                                               ----------------    

                               Brazil -- 1.0%                                                                      
USD            3,972,611       Brazil Capitalization Bond, PIK, 8.00%, due 4/15/14                   3,237,677     
                                                                                               ----------------    

                               Bulgaria -- 1.2%                                                                    
USD           10,000,000       Bulgaria Discount Bond, Series B Strips, Basket 2, due                1,100,600     
                                   7/28/24                                                                         
USD           15,000,000       Bulgaria Discount Strips, due 7/28/24                                 2,284,350     
USD            1,000,000       Bulgaria FLIRB Series B,                                                            
                                   Variable Rate, Step up, 2.75%, due 7/28/12                          617,500     
                                                                                               ----------------    
                                                                                                     4,002,450     
                                                                                               ----------------    

                               Canada -- 5.5%                                                                      
CAD            3,750,000       Government of Canada, 10.25%, due 3/15/14                             3,749,460     
CAD            8,000,000       Government of Canada Real Return, 4.25%, due 12/01/21                 6,350,565     
CAD            5,000,000       Government of Canada Real Return, 4.25%, due 12/01/26                 3,743,356     
CAD            5,000,000       Province of Quebec, 7.50%, due 12/01/03                               3,892,690     
                                                                                               ----------------    
                                                                                                    17,736,071     
                                                                                               ----------------    

                               Cayman Islands -- 1.0%                                                              
CAD            4,000,000       Government of Canada (Cayman), 7.25%, due 6/01/08                     3,073,821     
                                                                                               ----------------    

                               Denmark -- 4.1%                                                                     
DKK           85,300,000       Kingdom of Denmark Bullet, 7.00%, due 11/15/07                       13,083,830     
                                                                                               ----------------    

                               Ecuador -- 0.1%                                                                     
USD              523,723       Republic of Ecuador PDI (Registered), PIK, Variable Rate, 6                         
                                   mo. LIBOR + .81%, 6.69%, due 2/27/15                                368,243     
                                                                                               ----------------    

 See accompanying notes to the financial statements.

                                                                               1

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - Continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               France -- 11.2%                                                                     
FRF           21,000,000       Auxiliare Credit Foncier, 10.00%, due 4/20/01                         4,021,350     
FRF           30,000,000       Auxiliare Credit Foncier, 6.25%, due 3/28/03                          5,146,319     
SEK           30,000,000       Credit Foncier, 6.50%, due 2/22/99                                    3,868,934     
ECU           11,000,000       Government of France, 8.25%, due 4/25/22                             14,316,230     
ECU            7,000,000       Societe Nationale des Chemins de Fer, 9.38%, due 3/12/01              8,655,385     
                                                                                               ----------------    
                                                                                                    36,008,218     
                                                                                               ----------------    

                               Germany -- 3.1%                                                                     
DEM            1,350,000       Bundesobligation, 6.50%, due 3/15/00                                    790,412     
DEM            2,200,000       Bundesrepublic Deutschland, 6.00%, due 9/15/03                        1,278,302     
DEM            1,000,000       Bundesrepublic Deutschland, 6.00%, due 6/20/16                          541,884     
ESP          320,000,000       Deutsche Ausgleichsbank, 8.60%, due 5/22/03                           2,353,220     
GBP            2,000,000       KFW International Finance, 10.63%, due 9/03/01                        3,579,313     
DEM            2,450,000       Treuhandanstalt, 6.25%, due 3/04/04                                   1,435,132     
                                                                                               ----------------    
                                                                                                     9,978,263     
                                                                                               ----------------    

                               Greece -- 1.1%                                                                      
GRD        1,000,000,000       Hellenic Republic,                                                                  
                                   Variable Rate, 12 mo. GTB + 1.50%, 14.20%, due 9/30/03            3,599,308     
                                                                                               ----------------    

                               Italy -- 0.7%                                                                       
ITL        1,550,000,000       BTPS, 8.50%, due 8/01/04                                                967,658     
ITL        1,700,000,000       BTPS, 9.00%, due 11/01/23                                             1,152,061     
                                                                                               ----------------    
                                                                                                     2,119,719     
                                                                                               ----------------    

                               Japan -- 6.5%                                                                       
GBP            2,300,000       Export Import Bank of Japan, 10.75%, due 5/15/01                      4,105,019     
USD              800,000       Japan Development Bank, 6.88%, due 12/16/99                             811,600     
GBP            3,000,000       Japan Finance Corp Municipal Enterprises, 9.13%, due 2/16/05          5,298,421     
GBP            6,000,000       Kobe City, 9.50%, due 10/20/04                                       10,781,726     
                                                                                               ----------------    
                                                                                                    20,996,766     
                                                                                               ----------------    

                               Jordan -- 0.2%                                                                      
USD            1,000,000       Hashemite Kingdom of Jordan Par Bond,                                               
                                   Variable Rate, Step up, 4.00%, due 12/23/23 144A                    690,000     
                                                                                               ----------------    

                               Mexico -- 1.9%                                                                      
FRF           44,500,000       Mexico Par Bond, 6.63%, due 12/31/19                                  6,263,602     
                                                                                               ----------------    

                               New Zealand -- 1.6%                                                                 
NZD            8,200,000       New Zealand Index Linked Bond, 4.50%, due 2/15/16                     5,008,566     
                                                                                               ----------------    

2               See accompanying notes to the financial statements.             

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments - Continued                                             
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Norway -- 0.6%                                                                      
SEK           13,700,000       A/S Eksportfinans, 7.50%, due 8/16/01                                 1,838,707     
                                                                                               ----------------    

                               Supra National -- 7.7%                                                              
JPY          440,000,000       Asian Development Bank, 5.00%, due 2/05/03                            4,292,460     
CAD              700,000       European Investment Bank, 8.50%, due 8/30/05                            577,746     
ESP          821,900,000       European Investment Bank, 10.35%, due 12/20/05                        6,706,354     
GBP            1,755,000       European Investment Bank, 8.75%, due 8/25/17                          3,251,851     
JPY          200,000,000       International Bank Recon and Development, 6.75%, due 6/18/01          2,001,829     
GBP            3,000,000       International Bank Recon and Development, 11.50%, due 11/09/03        5,872,538     
SEK           15,000,000       International Finance Corp, 10.63%, due 9/20/99                       2,102,598     
                                                                                               ----------------    
                                                                                                    24,805,376     
                                                                                               ----------------    

                               Sweden -- 4.0%                                                                      
SEK            4,000,000       AB Spintab, 8.50%, due 12/19/01                                         552,490     
SEK           35,000,000       Government of Sweden Index Linked Bond, 4.00%, due 12/01/20           4,496,816     
SEK           61,400,000       Kingdom of Sweden, 6.00%, due 2/09/05                                 7,640,785     
                                                                                               ----------------    
                                                                                                    12,690,091     
                                                                                               ----------------    

                               United States -- 22.5%                                                              

                               Asset Backed Securities -- 19.0%                                                    
USD            4,590,245       AFC Home Equity Loan Trust Series 97-1 Class A,                                     
                                   Variable Rate, 1 mo. LIBOR + .22%, 5.87%, due 3/25/27             4,587,376     
USD            3,000,000       Augusta Funding VI Series 96-A3, 144A, 7.38%, due 4/15/13             3,034,350     
USD                   87       Banc One Student Loan Trust 94-A Class A2,                                          
                                   Variable Rate, 1 mo. LIBOR + .30%, 5.95%, due 10/25/16                   87     
USD            5,000,000       Big Flower Receivables Master Trust 96-2 Class A,                                   
                                   Variable Rate, LIBOR + .25% 144A, 5.65%, due 4/25/03              5,000,000     
USD            3,833,887       CS First Boston Mortgage Securities Corp., Series 96-1 Class                        
                               A1, Variable Rate, 3 mo. LIBOR + .23%, 5.98%, due 7/28/29                           
USD            4,000,000       First Chicago Master Trust II 95-0,                                   3,836,187     
                                   Variable Rate, 1 mo. LIBOR + .23%, 5.88%, due 2/15/04             4,015,000     
USD            1,950,000       Keycorp Student Loan Trust 94-B Certificates,                                       
                                   Variable Rate, 1 mo. LIBOR + .73%, 6.42%, due 11/25/21            1,950,000     
USD            9,000,000       National Premier Finance 95-2, 6.21%, due 6/01/99 144A                8,937,000     
USD            6,500,000       National Premier Finance IX 96-1A, 7.20%, due 7/01/00                 6,597,500     
USD            8,000,000       Navistar Financial Dealer Note Master Trust 95-1 Class A,                           
                                   Variable Rate, 1 mo. LIBOR + .30%, 5.94%, due 8/25/07             8,046,250     

              See accompanying notes to the financial statements.            3

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Asset Backed Securities -- continued                                                
USD            1,253,676       New York City Tax Lien Series 96-1 Class B, 6.91%, due                              
                                   5/25/05 144A                                                      1,263,078     
USD            5,000,000       Rhino CBO Series 97-1 Class A-2, 6.33%, due 9/15/09 144A              5,024,950     
USD            5,000,000       Student Loan Marketing Association Series 96-4 Class A2,                            
                                   Variable Rate, 3 mo. LIBOR +.64%, 5.95%, due 7/25/09              5,016,406     
USD            3,465,000       TMS Auto Grantor Trust Series 96-1 Class CTFS, 7.10%, due                           
                                   12/20/02                                                          3,560,288     
                                                                                               ----------------    
                                                                                                    60,868,472     
                                                                                               ----------------    

                               Structured Notes -- 0.7%                                                            
USD            2,000,000       Bankers Trust Medium Term Note, 17.10%, due 10/14/97/(a)/             2,188,800     
                                                                                               ----------------    

                               U.S. Government Agency -- 2.8%                                                      
USD            1,650,000       Agency for International Development Floater (Support of                            
                                   Belize), Variable Rate, 6 mo. U.S. Treasury Bill +                              
                                   .50%, 5.83%, due 1/01/14                                          1,645,875     
USD            2,416,667       Agency for International Development Floater (Support of                            
                                   Zimbabwe), Variable Rate, 3 mo. U.S. Treasury Bill x                            
                                   115%, 5.09%, due 1/01/12                                          2,416,667     
USD            5,000,000       Agency for International Development Floater (Support of India),                    
                                   Variable Rate, 3 mo. LIBOR + .10%, 5.47%, due 2/01/27             5,017,188     
                                                                                               ----------------    
                                                                                                     9,079,730     
                                                                                               ----------------    

                               Total United States                                                  72,137,002     
                                                                                               ----------------    

                               Venezuela -- 0.6%                                                                   
USD            2,000,000       Republic of Venezuela Discount Bond Series A,                                       
                                   Variable Rate, 6 mo. LIBOR + .81%, 6.81%, due 3/31/20             1,807,500     
                                                                                               ----------------    

                               TOTAL DEBT OBLIGATIONS (COST $255,159,698)                          256,919,231     
                                                                                               ----------------    

                               LOAN PARTICIPATIONS -- 1.1%                                                         

                               Russia -- 1.1%                                                                      
ECU            1,000,000       Russia Vnesheconombank Loan Agreement (Participation with                           
                                   Bank of America)*                                                 1,129,165     
FRF           14,991,267       Russia Vnesheconombank Loan Agreement (Participation with                           
                                   Banque Paribas, Chase Manhattan, Bank of America,                               
                                   Lehman Brothers and J.P. Morgan)*                                 2,554,979     
                                                                                               ----------------    
                                                                                                     3,684,144     
                                                                                               ----------------    

                               TOTAL LOAN PARTICIPATIONS                                                           
                               (COST $1,101,243)                                                     3,684,144     
                                                                                               ----------------    

4               See accompanying notes to the financial statements.             

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


              Shares           Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   

                               PREFERRED STOCKS -- 3.1%                                                            

                               United States -- 3.1%                                                               
                  10,000       Bear Stearns Managed Income Securities Plus Fund                      9,899,700     
                                                                                               ----------------    

                               TOTAL PREFERRED STOCKS  (COST  $9,778,893)                            9,899,700     
                                                                                               ----------------    

         Principal Amount                                                                                          
--------------------------------                                                                                   

                               CALL OPTIONS PURCHASED -- 6.1%                                                      
                                                                                                                   
                               Cross Currency Options -- 4.3%                                                      
DEM          477,100,000       DEM Call/BEF Put, Expires 10/08/97, Strike 20.50                      1,987,694     
ECU          143,200,000       ECU Call/DEM Put, Expires 1/21/98, Strike 1.9450                      1,611,099     
ECU          176,200,000       ECU Call/DEM Put, Expires 10/30/97, Strike 1.918                      4,272,684     
ECU          218,500,000       ECU Call/DEM Put, Expires 12/15/97 Knock Out 1.9225, Strike                         
                               1.91                                                                  5,799,621     
                                                                                               ----------------    
                                                                                                    13,671,098     
                                                                                               ----------------    

                               Options on Bonds -- 0.4%                                                            
USD            8,500,000       Brazil Discount Bond, Expires 11/07/97, Strike 80.00                    494,743     
SEK          340,000,000       Sweden Government Bond, Expires 10/24/97, Strike 95.484                 897,311     
                                                                                               ----------------    
                                                                                                     1,392,054     
                                                                                               ----------------    

                               Options on Currency -- 1.4%                                                         
USD           89,100,000       British Pound, Expires 11/06/97, Strike 1.6325                        1,969,110     
USD           25,000,000       German Mark, Expires 2/09/98, Strike 1.61                             2,442,500     
                                                                                               ----------------    
                                                                                                     4,411,610     
                                                                                               ----------------    
                               TOTAL CALL OPTIONS PURCHASED                                                        
                               (COST  $15,985,452)                                                  19,474,762     
                                                                                               ----------------    

                               PUT OPTIONS PURCHASED -- 2.1%                                                       

                               Cross Currency Options -- 2.1%                                                      
DEM          112,000,000       DEM Put/ITL Call, Expires 1/21/98, Strike 950                            31,108     
DEM          237,600,000       DEM Put/ITL Call, Expires 9/18/97 Knock Out 1050, Strike                            
                               1030                                                                  6,638,862     
USD            3,700,000       TRL Put/USD, DEM Basket Call, Expires 12/15/97, Strike 400               44,400     


               See accompanying notes to the financial statements.             5

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Principal Amount      Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   

                               Cross Currency Options -- continued                                                 
USD            1,448,524       TRL Put/USD, DEM Basket Call, Expires 12/15/97, Strike 425                6,475     
                                                                                               ----------------    
                                                                                                     6,720,845     
                                                                                               ----------------    
                               Options on Currency -- 0.0%                                                         
USD           10,000,000       Czech Koruna, Expires 10/02/97, Strike 29.56                                 --     
USD           25,000,000       Czech Koruna, Expires 10/02/97, Strike 29.69                                 --     
USD           25,000,000       German Mark, Expires 2/09/98, Strike 1.61                                70,000     
                                                                                               ----------------    
                                                                                                        70,000     
                                                                                               ----------------    
                               TOTAL PUT OPTIONS PURCHASED                                                         
                               (COST $5,015,726)                                                     6,790,845     
                                                                                               ----------------    


           Par Value/                                                                                              
             Shares                                                                                                
------------------------------                                                                                     
                                                                                                                   
                               RIGHTS AND WARRANTS -- 0.0%                                                         

                               Mexico -- 0.0%                                                                      
               9,849,000       United Mexican States Warrants, Expires 6/30/03 **                           --     
                                                                                               ----------------    

                               Venezuela -- 0.0%                                                                   
                  19,280       Republic of Venezuela Recovery Warrants, Expires 04/15/20 **                 --     
                                                                                               ----------------    

                               TOTAL RIGHTS AND WARRANTS (COST $0)                                          --     
                                                                                               ----------------    

                               SHORT-TERM INVESTMENTS -- 3.9%                                                      

                               Cash Equivalents -- 1.9%                                                            
USD              451,240       BankBoston Eurodollar Time Deposit, 5.7875% due 9/2/97/(b)/             451,240     
USD              124,065       First Union National Bank of North Carolina Eurodollar Time                         
                               Deposit, 5.5625% due 9/2/97/(b)/                                        124,065     
USD              372,195       Harris Bank and Trust Eurodollar Time Deposit, 5.625% due                           
                               9/2/97/(b)/                                                             372,195     
               4,000,000       Janus Money Market Fund Institutional Shares/(b)/                     4,000,000     
USD            1,000,000       Prudential Securities Group Inc Master Note, 5.8875% due                            
                               9/2/97/(b)/                                                           1,000,000     
                                                                                               ----------------    
                                                                                                     5,947,500     
                                                                                               ----------------    

6              See accompanying notes to the financial statements.              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


             Par Value         Description                                                        Value ($)        
-------------------------------------------------------------------------------------------------------------------
                                                                                                                   
                               Repurchase Agreement -- 0.2%                                                        
USD              697,556       Salomon Brothers Repurchase Agreement, dated 8/29/97, due                           
                               9/2/97, with a maturity value of $697,948 and an effective                          
                               yield of 5.05%, collateralized by U.S. Treasury Obligations                         
                               with rates ranging from 5.00% to 6.75%, with maturity dates                         
                               ranging from 2/15/99 to 8/15/26 and with an aggregate                               
                               market value of $713,541.                                               697,556     
                                                                                               ----------------    

                               U.S. Government -- 1.8%                                                             
USD            6,000,000       U.S. Treasury Bill, 5.33% due 1/15/98/(c)/                            5,890,128     
                                                                                               ----------------    

                               TOTAL SHORT-TERM INVESTMENTS                                                        
                               (COST $12,525,133)                                                   12,535,184     
                                                                                               ----------------    

                               TOTAL INVESTMENTS -- 96.3%                                                          
                               (COST $299,566,145)                                                 309,303,866     

                               Other Assets and Liabilities (net) -- 3.7%                           11,853,085     
                                                                                               ----------------    

                               TOTAL NET ASSETS -- 100%                                        $   321,156,951     
                                                                                               ================    

                               Notes to the Schedule of Investments:                                               

                               FLIRB -- Front Loaded Interest Reduction Bond                                       

                               GTB -- Greek Treasury Bill                                                          

                               PDI -- Past Due Interest                                                            

                               PIK -- Payment In Kind                                                              

                               Knock Out -- Option will expire if underlying                                       
                                   security reaches Knock Out price.                                               

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


               See accompanying notes to the financial statements.             7

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

Notes to the Schedule of Investments -- continued       
     Variable and step up rates -- The rates shown on variable and
      step up rate notes are the current interest rates at
           August 31, 1997, which are subject to change based on the
terms of the security.                        

                                                                [Download Table]
Currency Abbreviations                                          
                                                                
AUD - Australian Dollar               GBP - British Pound       
BEF - Belgian Franc                   ITL - Italian Lira        
CAD - Canadian Dollar                 JPY - Japanese Yen        
CHF - Swiss Franc                     NLG - Netherlands Guilder 
DEM - German Mark                     NZD - New Zealand Dollar  
DKK - Danish Krone                    SEK - Swedish Krona       
ECU - European Currency Unit          THB - Thailand Baht       
ESP - Spanish Peseta                  TRL - Turkish Lira        
FRF - French Franc                    USD - United States Dollar

      /(a)/ Principal is linked to the value of the Brazilian Capitalization
            Bond and the Brazilian IDU Bond. Restricted as to public resale.
         At the date of acquisition, this security was valued at cost.
         There were no outstanding unrestricted securities of the same
class as those held.                                

     /(b)/ Represents investments of security lending collateral (Note 1).

      /(c)/ All or a portion of this security is held as collateral for open
futures contracts.                                  

*    Non-performing. Borrower not currently paying interest.  

**   Non-income producing security.                           

8              See accompanying notes to the financial statements.              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]
                                                                                              
Assets:                                                                                       
   Investments, at value (cost $299,566,145) (Note 1)                            $ 309,303,866
   Foreign currency, at value (cost $1,868,949) (Note 1)                             1,885,124
   Receivable for investments sold                                                   2,007,441
   Interest receivable                                                               7,459,953
   Receivable for variation margin on open futures contracts (Notes 1 and 6)           754,202
   Receivable for open forward foreign currency contracts (Notes 1 and 6)           20,769,423
   Receivable for expenses waived or borne by Manager (Note 2)                          93,865
   Miscellaneous receivable                                                              1,598
                                                                                 -------------
       Total assets                                                                342,275,472
                                                                                 -------------
Liabilities:                                                                                  
   Payable for investments purchased                                                   138,777
   Payable upon return of securities loaned (Note 1)                                 5,947,500
   Written options outstanding, at value (premiums $2,526,387) (Notes 1 and 6)       2,448,364
   Payable for Fund shares repurchased                                                   1,084
   Payable to affiliate for (Note 2):                                                         
      Management fee                                                                   134,846
      Shareholder service fee                                                           40,690
   Accrued expenses                                                                     70,993
   Payable for open forward foreign currency exchange contracts (Notes 1 and 6)     11,794,895
   Payable for open swap contracts (Note 1 and 6)                                      528,972
   Miscellaneous payable                                                                12,400
                                                                                 -------------
       Total liabilities                                                            21,118,521
                                                                                 -------------
Net assets                                                                       $ 321,156,951
                                                                                 =============
Net assets consist of:                                                                        
   Paid-in-capital                                                               $ 271,609,205
   Accumulated undistributed net investment income                                   1,909,542
   Accumulated undistributed net realized gain                                      29,543,527
   Net unrealized appreciation                                                      18,094,677
                                                                                 -------------
                                                                                 $ 321,156,951
                                                                                 =============
Net assets attributable to:                                                                   
   Class I shares                                                                $   1,307,175
                                                                                 =============
   Class III shares                                                              $ 319,849,776
                                                                                 =============
Shares outstanding:                                                                           
   Class I                                                                             109,508
                                                                                 =============
   Class III                                                                        26,768,992
                                                                                 =============
Net asset value per share:                                                                    
   Class I                                                                       $       11.94
                                                                                 =============
   Class III                                                                     $       11.95
                                                                                 =============

             See accompanying notes to the financial statements.             9

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]
                                                                                                     
Investment Income:                                                                                   
    Interest (including securities lending income of $9,438)                           $  14,566,857 
    Dividends                                                                                331,750 
                                                                                       ------------- 

        Total income                                                                      14,898,607 
                                                                                       ------------- 
Expenses:                                                                                            
    Management fee (Note 2)                                                                1,106,286 
    Custodian and transfer agent fees                                                        144,123 
    Audit fees                                                                                34,906 
    Legal fees                                                                                11,050 
    Registration fees                                                                         10,003 
    Trustees fees (Note 2)                                                                     2,967 
    Miscellaneous                                                                              1,983 
    Fees waived or borne by Manager (Note 2)                                                (758,175)
                                                                                       ------------- 
                                                                                             553,143 
    Shareholder service fee (Note 2)                                                                 
        Class I                                                                                1,697 
        Class III                                                                            331,081 
                                                                                       ------------- 
        Net expenses                                                                         885,921 
                                                                                       ------------- 

            Net investment income                                                         14,012,686 
                                                                                       ------------- 

Realized and unrealized gain (loss):                                                                 
    Net realized gain (loss) on:                                                                     
        Investments                                                                        1,006,459 
        Closed futures contracts                                                           5,415,129 
        Closed swap contracts                                                                585,721 
        Foreign currency, forward contracts and foreign currency related transactions     33,513,595 
                                                                                       ------------- 

            Net realized gain                                                             40,520,904 
                                                                                       ------------- 
    Change in net unrealized appreciation (depreciation) on:                                         
        Investments                                                                      (11,551,954)
        Open futures contracts                                                             1,671,822 
        Open swap contracts                                                                 (528,972)
        Written options                                                                     (165,727)
        Foreign currency, forward contracts and foreign currency related transactions    (13,869,424)
                                                                                       ------------- 

            Net unrealized loss                                                          (24,444,255)
                                                                                       ------------- 

        Net realized and unrealized gain                                                  16,076,649 
                                                                                       ------------- 

Net increase in net assets resulting from operations                                   $  30,089,335 
                                                                                       ============= 

10            See accompanying notes to the financial statements.               

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

                                                                               Six Months Ended                          
                                                                               August 31, 1997           Year Ended      
                                                                                 (Unaudited)         February 28, 1997   
                                                                             ---------------------  ---------------------
                                                                                                                         
Increase (decrease) in net assets:                                                                                       
Operations:                                                                                                              
    Net investment income                                                     $      14,012,686       $     24,438,613   
    Net realized gain                                                                40,520,904             37,539,759   
    Change in net unrealized appreciation (depreciation)                            (24,444,255)            19,999,551   
                                                                              -----------------       ----------------   
    Net increase in net assets resulting from operations                             30,089,335             81,977,923   
                                                                              -----------------       ----------------   
Distributions to shareholders from:                                                                                      
    Net investment income                                                                                                
         Class I                                                                        (11,527)                    --   
         Class III                                                                   (4,396,337)           (20,376,190)  
                                                                              -----------------       ----------------   
         Total distributions from net investment income                              (4,407,864)           (20,376,190)  
                                                                              -----------------       ----------------   
    Net realized gains                                                                                                   
         Class I                                                                        (85,437)                    --   
         Class III                                                                  (32,584,613)           (15,129,774)  
                                                                              -----------------       ----------------   
         Total distributions from net realized gains                                (32,670,050)           (15,129,774)  
                                                                              -----------------       ----------------   

                                                                                    (37,077,914)           (50,212,717)  
                                                                              -----------------       ----------------   
    Net share transactions: (Note 5)                                                                                     
         Class I                                                                        162,204              1,123,429   
         Class III                                                                 (142,157,896)           201,090,729   
                                                                              -----------------       ----------------   
    Increase (decrease) in net assets resulting from net share transactions        (141,995,692)           202,214,158   
                                                                              -----------------       ----------------   

        Total increase (decrease) in net assets                                    (148,984,271)           233,979,364   

Net assets:                                                                                                              
    Beginning of period                                                             470,141,222            236,161,858   
                                                                              -----------------       ----------------   
    End of period (including accumulated undistributed net investment                                                    
        income and distributions in excess of net investment income of                                                   
        $1,909,542 and ($7,695,280), respectively)                            $     321,156,951       $    470,141,222   
                                                                              =================       ================   


            See accompanying notes to the financial statements.             11

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                             Six Months Ended     Period from January 2, 1997  
                                                              August 31, 1997    (commencement of operations)  
                                                                (Unaudited)          to February 28, 1997      
                                                             ------------------  ------------------------------
                                                                                                               
Net asset value, beginning of period                              $ 12.16                   $ 11.75            
                                                                  -------                   -------            

Income from investment operations:                                                                             
    Net investment income                                            0.37+                     0.11            
    Net realized and unrealized gain                                 0.41                      0.30            
                                                                  -------                   -------            

       Total from investment operations                              0.78                      0.41            
                                                                  -------                   -------            

Less distributions to shareholders:                                                                            
    From net investment income                                      (0.12)                       --            
    From net realized gains                                         (0.88)                       --            
                                                                  -------                   -------            

       Total distributions                                          (1.00)                       --            
                                                                  -------                   -------            
Net asset value, end of period                                    $ 11.94                   $ 12.16            
                                                                  =======                   =======            

Total Return/(a)/                                                    6.69%                     3.49%           

Ratios/Supplemental Data:                                                                                      
    Net assets, end of period (000's)                             $ 1,307                   $ 1,162            
    Net expenses to average daily net assets                         0.53%*                    0.53%*          
    Net investment income to average daily net assets                6.15%*                    5.91%*          
    Portfolio turnover rate                                            57%                       90%           
    Fees and expenses voluntarily waived or borne by the                                                       
       Manager consisted of the following per share amounts:      $  0.02                   $  0.01            

*   Annualized.                                                                 
+   Computed using average shares outstanding throughout the period.            
(a) Calculation excludes purchase premiums.  The total returns would have been  
lower had certain expenses not been waived during the periods shown.    

12             See accompanying notes to the financial statements.              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                       Six Months Ended      Year Ended February 28/29,        
                                                        August 31, 1997  ------------------------------------  
                                                          (Unaudited)       1997         1996        1995*     
                                                          ------------   ----------   ----------   ----------  
                                                                                                               
Net asset value, beginning of period                       $   12.16     $   10.92    $    9.99    $   10.00   
                                                           ----------    ----------   ----------   ----------  

Income from investment operations:                                                                             
    Net investment income                                       0.39+         0.66         1.05         0.24   
    Net realized and unrealized gain (loss)                     0.40          2.07         1.62        (0.09)  
                                                           ----------    ----------   ----------   ----------  
       Total from investment operations                         0.79          2.73         2.67         0.15   
                                                           ----------    ----------   ----------   ----------  
Less distributions to shareholders:                                                                            
    From net investment income                                 (0.12)        (0.60)       (1.04)       (0.16)  
    From net realized gains                                    (0.88)        (0.45)       (0.42)          --   
    In excess of net realized gains                               --         (0.44)       (0.28)          --   
                                                           ----------    ----------   ----------   ----------  

       Total distributions                                     (1.00)        (1.49)       (1.74)       (0.16)  
                                                           ----------    ----------   ----------   ----------  
Net asset value, end of period                             $   11.95     $   12.16    $   10.92    $    9.99   
                                                           ==========    ==========   ==========   ==========  

Total Return /(a)/                                              6.78%        25.57%       27.36%        1.49%  

Ratios/Supplemental Data:                                                                                      
    Net assets, end of period (000's)                      $ 319,850     $ 468,979    $ 236,162    $ 238,664   
    Net expenses to average daily net assets                    0.40%**       0.40%        0.40%        0.40%**
    Net investment income to average daily net assets           6.33%**       6.86%        8.54%        8.46%**
    Portfolio turnover rate                                       57%           90%          85%          64%  
    Fees and expenses voluntarily waived or borne by                                                           
       the Manager consisted of the following per                                                              
       share amounts:                                      $    0.02     $    0.03    $    0.03    $    0.01   


*   Period from September 30, 1994 (commencement of operations) to February 28, 
1995.                                                                   
**  Annualized.                                                                 
+   Computed using average shares outstanding throughout the period.            
(a) Calculation excludes purchase premiums.  The total returns would have been  
lower had certain expenses not been waived during the periods shown.    

            See accompanying notes to the financial statements.             13

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

1.   Significant accounting policies                                            

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

     The Fund seeks high total return by investing primarily in investment grade
bonds denominated in various currencies including U.S. dollars and    
    multicurrency units, while generally attempting to hedge substantially all
   of its foreign currency risk. The Fund generally seeks to provide a total
return greater than that provided by the international fixed income   
securities market.                                                    

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
  as those shares. At August 31, 1997, Class I and Class III were the only
active classes of shares of the Fund.                                 

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

14                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

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

Futures contracts                                                     
   The Fund may use futures contracts to manage its exposure to the bond and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
change in value ("variation margin") is recorded by the Fund. Gains or
losses are recognized but not considered realized until the contracts 
   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from the changes in the value of
     the underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

Forward currency contracts                                            
The Fund may enter into forward currency contracts and forward cross  
   currency contracts in connection with settling planned purchases or sales
     of securities or to hedge the currency exposure associated with some or all
of the Fund's portfolio securities. A forward currency contract is an 
    agreement between two parties to buy and sell a currency at a set price on
   a future date. The market value of a forward currency contract fluctuates
     with changes in forward currency exchange rates. Forward currency contracts
    are marked to market daily and the change in value is recorded by the Fund
as an unrealized gain or loss. Realized gains or losses equal to the  
    difference between the value of the contract at the time it was opened and
   the value at the time it was closed are recorded upon delivery or receipt
  of the currency or, if a forward currency contract is offset by entering
into another forward currency contract with the same broker, upon     
     settlement of the net gain or loss. These contracts may involve market risk
    in excess of the unrealized gain or loss reflected in the Fund's Statement
   of Assets and Liabilities. In addition, the Fund could be exposed to risk
   if the counterparties are unable to meet the terms of the contracts or if
    the value of the currency changes unfavorably to the U.S. dollar. The U.S.
 dollar value of the currencies the Fund has committed to buy or sell is
shown under Note 6 and represents the currency exposure the Fund has  
acquired or hedged through currency contracts as of August 31, 1997.  

                                                                              15

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Options                                                               
   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
     the realized gain or loss. The Fund as a writer of an option has no control
over whether the underlying securities may be sold (call) or purchased
     (put) and as a result bears the market risk of an unfavorable change in the
    price of the security underlying the written option. There is the risk the
Fund may not be able to enter into a closing transaction because of an
 illiquid market. See Note 6 for all open written option contracts as of
August 31, 1997.                                                      

  The Fund may also purchase put and call options. The Fund pays a premium
   which is included in the Fund's Statement of Assets and Liabilities as an
   investment and subsequently marked to market to reflect the current value
    of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                          

Loan agreements                                                       
The Fund may invest in direct debt instruments which are interests in 
    amounts owed by a corporate, governmental, or other borrower to lenders or
   lending syndicates. The Fund's investments in loans may be in the form of
  participations in loans or assignments of all or a portion of loans from
  third parties. A loan is often administered by a bank or other financial
institution (the lender) that acts as agent for all holders. The agent
     administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, the Fund has the right to receive  
   payments of principal, interest and any fees to which it is entitled only
 from the lender selling the loan agreement and only upon receipt by the
  lender of payments from the borrower. The Fund generally has no right to
    enforce compliance with the terms of the loan agreement with the borrower.
As a result, the Fund may be subject to the credit risk of both the   
   borrower and the lender that is selling the loan agreement. When the Fund
  purchases assignments from lenders it acquires direct rights against the
    borrower on the loan. Direct indebtedness of emerging countries involves a
  risk that the governmental entities responsible for the repayment of the
     debt may be unable or unwilling to pay the principal and interest when due.

Indexed securities                                                    
  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
     or other financial indicators. The Fund uses indexed securities to increase
  or decrease its exposure to different underlying instruments and to gain
     exposure to markets that may be difficult to invest in through conventional
   securities. Indexed securities may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original    
investment.                                                           

Swap agreements                                                       
    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their    
respective                                                            

16                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

    commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of 
principal. Interest rate swaps are marked to market daily based upon  
quotations from market makers and the change, if any, is recorded as  
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap  
agreements as of August 31, 1997.                                     

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. 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 certain member firms of the New York
Stock Exchange. 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 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 fail financially. The Fund receives compensation for
lending its securities. At August 31, 1997, the Fund loaned securities
   having a market value of $5,886,912, collateralized by cash in the amount
of $5,947,500, which was invested in short-term instruments.          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

                                                                              17

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual 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.             

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
  Fund are allocated in such a manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .15% of the amount    
     invested. Effective June 1, 1996, the Manager will reduce such premium only
when any portion of a purchase is offset by a corresponding redemption
   occurring on the same day. All purchase premiums are paid to and recorded
   as paid-in capital by the Fund. For the six months ended August 31, 1997,
 the Fund received $39,494 in purchase premiums. There is no premium for
cash redemptions, reinvested distributions or in-kind transactions.   

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

18                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .50% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .25% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .40%;
thus the net annual expense ratio after the waiver for a Class III    
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $2,967. No  
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                        [Enlarge/Download Table]

                                                      Purchases              Proceeds     
                                                 -------------------    ------------------
                                                                                          
U.S. Government securities                    $         17,855,370   $         34,411,524 
Investments (non-U.S. Government securities)           192,726,800            297,085,135 

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                            Gross Unrealized        Gross Unrealized        Net Unrealized    
    Aggregate Cost            Appreciation            Depreciation           Appreciation     
-----------------------  -----------------------  ----------------------  --------------------
                                                                                              
    $ 299,566,145             $ 19,621,481             $ 9,883,760            $ 9,737,721     

4.   Principal shareholders                                                     

    At August 31, 1997, 34% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]

                                                                         Period from January 2, 1997     
                                         Six Months Ended              (commencement of operations) to   
                                          August 31, 1997                     February 28, 1997          
                                  --------------------------------   ------------------------------------
Class I:                             Shares            Amount             Shares               Amount    
                                  -------------     --------------   ----------------     ---------------
                                                                                                         
Shares sold                           5,519      $      65,240           95,601       $     1,123,429    
Shares issued to shareholders in                                                                         
 reinvestment of distributions        8,388             96,964             --                   --       
Shares repurchased                     --                --                --                   --       
                                  -------------     --------------   ----------------     ---------------
Net increase                         13,907      $     162,204           95,601       $     1,123,429    
                                  =============     ==============   ================     ===============

                                         Six Months Ended                        Year Ended              
                                          August 31, 1997                     February 28, 1997          
                                  --------------------------------   ------------------------------------
Class III:                             Shares            Amount           Shares               Amount    
                                  -------------     --------------   ----------------     ---------------
                                                                                                         
Shares sold                          4,171,473   $     51,255,549       20,865,195    $    251,713,393   
Shares issued to shareholders in                                                                         
 reinvestment of distributions       3,069,510         35,514,234        3,723,568          43,606,382   
Shares repurchased                 (19,030,568)      (228,927,679)      (7,658,494)        (94,229,046)  
                                  --------------    ---------------   ---------------     ---------------
Net increase (decrease)            (11,789,585)  $   (142,157,896)      16,930,269    $    201,090,729   
                                  ==============    ===============   ===============     ===============

20                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

6.   Financial instruments                                                      

       A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Forward currency contracts                                            

                                                        [Enlarge/Download Table]

  Settlement                                                                       Appreciation    
     Date         Deliver/Receive     Units of Currency            Value          (Depreciation)   
---------------  ------------------  ---------------------    ---------------   -------------------
                                                                                                   
     Buys                                                                                          

   09/26/97             CAD                    54,600,000   $     39,389,200   $          (56,332) 
   09/05/97             DEM                   325,900,000        181,121,363           (1,458,419) 
   09/19/97             DEM                    69,800,000         38,828,730           (1,860,991) 
   09/22/97             DEM                   270,300,000        150,394,598           (5,623,305) 
   10/17/97             GBP                    45,500,000         73,637,622               660,054 
   09/22/97             ITL                50,240,819,250         28,511,560              (62,822) 
   10/09/97             JPY                 4,850,000,000         40,559,119           (1,942,622) 
                                                                                -------------------
                                                                               $      (10,344,437) 
                                                                                ===================
    Sales                                                                                          

   11/28/97             AUD                    12,900,000   $      9,495,998   $           155,782 
   09/26/97             CAD                    97,000,000         67,812,909               498,625 
   09/02/97             CHF                     1,905,856          1,284,806               (4,677) 
   09/02/97             DEM                        69,407             35,566                  (57) 
   09/05/97             DEM                   416,000,000        231,195,112             6,012,064 
   09/22/97             DEM                    51,000,000         28,376,339               158,043 
   10/17/97             GBP                    59,800,000         96,780,874             1,795,807 
   09/22/97             ITL               269,404,004,000        152,886,211             3,130,678 
   10/09/97             JPY                 6,190,000,000         51,765,144             1,556,024 
   09/19/97             NLG                    78,551,524         38,813,780             1,875,942 
   09/23/97             NZD                    12,700,000          8,105,670               445,490 
   03/23/98             THB                   280,000,000          7,649,577             2,055,796 
   06/22/98             THB                   140,000,000          3,784,807               985,210 
                                                                                -------------------
                                                                               $        18,664,727 
                                                                                ===================

                                                                              21

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

     Forward cross currency contracts                                                                

                                                                                  Net Unrealized     
 Settlement                                                                        Appreciation      
    Date          Deliver/Units of Currency    Receive/In Exchange For            (Depreciation)     
--------------    --------------------------  ---------------------------     -----------------------
                                                                                                     
  10/10/97          BEF         619,384,800     DEM           30,000,000   $                   3,907 
  11/13/97          CHF          15,783,134     DEM           19,200,000                    (13,138) 
  09/02/97          DEM             232,681     DKK              896,164                          22 
  09/19/97          DEM          95,100,000     NLG          107,037,911                    (13,316) 
  09/22/97          DEM          39,700,000     ITL       39,358,339,000                     246,743 
  10/10/97          DEM         196,200,000     BEF        4,052,671,420                      25,567 
  10/23/97          DEM          56,500,000     ESP        4,788,385,350                       6,679 
  10/27/97          DEM         157,500,940     ECU           80,100,000                   (153,710) 
  11/07/97          DEM         102,600,000     FRF          345,516,608                    (39,012) 
  11/13/97          DEM           7,700,000     CHF            6,316,079                     (3,990) 
  11/14/97          DEM          52,300,000     DKK          199,232,690                     (7,114) 
  11/21/97          DEM          20,000,000     SEK           87,455,370                         963 
  11/14/97          DKK         274,521,280     DEM           72,000,000                    (25,818) 
  10/23/97          ESP       5,407,205,000     DEM           63,800,000                     (8,486) 
  11/07/97          FRF         504,208,185     DEM          149,500,000                    (67,499) 
  09/22/97          ITL      35,045,200,000     DEM           35,000,000                   (414,117) 
  09/19/97          NLG          78,767,500     DEM           70,000,000                      19,489 
  09/02/97          SEK           1,315,591     DEM              302,088                         259 
  11/21/97          SEK         248,223,528     DEM           56,700,000                    (39,470) 
  10/27/97          ECU         341,800,000     DEM          672,943,920                   1,136,279 
                                                                              -----------------------
                                                                           $                 654,238 
                                                                              =======================

22                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

Futures contracts                                                                                           

                                                                                            Net Unrealized  
    Number of                                                            Contract Value      Appreciation   
    Contracts                  Type                   Expiration Date                       (Depreciation)  
   -------------  ---------------------------------  ------------------  ---------------   -----------------
                                                                                                            
       Buys                                                                                                 

       145        Australian Government Bond 3 yr     September 1997   $     12,824,014 $           263,601 
        69        Australian Government Bond 10 yr    September 1997          7,252,420             336,925 
       159        German Government Bond               December 1997         22,366,739            (40,938) 
       107        Italian Government Bond 10 yr        December 1997         13,128,456              12,682 
        11        Japanese Government Bond             December 1997         11,614,998             (8,053) 
       109        MATIF ECU Bond                      September 1997         11,894,884             270,186 
       215        U.K. Gilt                           September 1997         20,608,190              58,355 
        60        U.K. Gilt                            December 1997          5,550,434            (10,339) 
                                                                                           =================
                                                                                        $           882,419 
                                                                                           =================
      Sales                                                                                                 

       120        Euro Dollar                         September 1997   $     28,279,500 $            12,600 
        5         Canadian Government Bond            September 1997            430,358                 955 
       107        MATIF FRF Bond                      September 1997         11,917,366           (100,526) 
       280        Spanish Government Bond 10 yr       September 1997         22,648,290           (555,210) 
       177        Swiss Government Bond               September 1997         14,848,699            (21,180) 
       130        Swiss Government Bond                December 1997         10,322,610              14,728 
       118        U.S. Treasury Bond                   December 1997         13,304,500            (48,948) 
        29        U.S. Treasury Note 10 yr            September 1997          3,161,906                9751 
        16        U.S. Treasury Note 10 yr             December 1997          1,739,000                 318 
        60        U.S. Treasury Bill 90 day           September 1997         14,239,500            (48,450) 
                                                                                           =================
                                                                                        $         (735,962) 
                                                                                           =================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on these contracts.                         

                                                                              23

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

     Written option transactions                                                                   
                                         Puts                                 Calls                
                             Principal                                                             
                             Amount of                          Principal Amount                   
                             Contracts                            of Contracts                     
                           (000's omitted)       Premiums        (000's omitted)       Premiums    
                          -----------------   ---------------   ------------------  ---------------
                                                                                                   
Outstanding, beginning                                                                             
of period               $          25,000   $     1,243,750   $            25,000 $      1,065,000 
Options written                    18,000            90,000                12,727          217,637 
Options exercised                 (18,000)          (90,000)                   --               -- 
                          -----------------   ---------------   ------------------  ---------------
Outstanding, end                                                                                   
         of period      $          25,000   $     1,243,750   $            37,727 $      1,282,637 
                          =================   ===============   ==================  ===============

     Summary of written options outstanding                                                        

                               Principal                                                           
                               Amount of                                                           
                               Contracts                             Expiration                    
                             (000's omitted)      Premiums              Date             Value     
                            -----------------   --------------    -----------------  --------------
                                                                                                   
     Calls                                                                                         
     Japanese Yen           $         25,000       117 JPY            2/09/98      $       812,500 
     Thai Baht                        12,727       33 THB             10/16/97             818,364 

     Puts                                                                                          
     Japanese Yen                     25,000       117 JPY            2/09/98              817,500 
                                                                                     --------------
                                                                                   $     2,448,364 
                                                                                     ==============

24                                                                              

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GMO Currency Hedged International Bond Fund                                     
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Swap agreements                                                                                       
                                                                                        Net Unrealized
                       Expiration                                                       Appreciation  
   Notional Amount        Date                         Description                      (Depreciation)
---------------------- ------------  -------------------------------------------------  --------------
                                                                                                      
TRL 494,875,000,000      5/14/99     Agreement with Bank of America dated 5/29/97 to       $(579,266) 
                                     receive the notional amount multiplied by the                    
                                     change in market value (including accrued                        
                                     interest) of Turkey Index Linked Bond and to                     
                                     pay the notional amount multiplied by 3 month                    
                                     LIBOR adjusted by a specified spread.                            

TRL 203,500,000,000      6/04/99     Agreement with Bank of America dated 6/23/97 to           50,294 
                                     receive the notional amount multiplied by the                    
                                     change in market value (including accrued                        
                                     interest) of Turkey Index Linked Bond and to                     
                                     pay the notional amount multiplied by 3 month                    
                                     LIBOR adjusted by a specified spread.                            

                                                                                        --------------
                                                          Net unrealized depreciation      $(528,972) 
                                                                                        ==============


See Notes to the Schedule of Investments for definitions of currency            
abbreviations.                                                                  

                                                                              25

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value    Description                                    Value($)    
--------------------------------------------------------------------------------
                                                                                
                     DEBT OBLIGATIONS -- 89.1%                                  

                     Brazil -- 0.9%                                             
USD       851,029    Brazil Capitalization Bond, PIK, 8.00%, due                
                        4/15/14                                         693,588 
                                                                   ------------ 
                     Bulgaria -- 0.6%                                           
USD     2,000,000    Bulgaria Discount Bond, Series B Strips,                   
                        Basket 2, due 7/28/24                           220,120 
USD       500,000    Bulgaria FLIRB Series B, Variable Rate,                    
                        Step up, 2.75%, due 7/28/12                     308,750 
                                                                   ------------ 
                                                                        528,870 
                                                                   ------------ 

                     Canada -- 2.0%                                             
CAD     2,000,000    Government of Canada Real Return, 4.25%,                   
                        due 12/01/21                                  1,587,641 
                                                                   ------------ 

                     Denmark -- 3.6%                                            
DKK    19,000,000    Kingdom of Denmark Bullet, 7.00%, due                      
                        11/15/07                                      2,914,335 
                                                                   ------------ 

                     Ecuador -- 0.3%                                            
USD       500,000    Republic of Ecuador Par Bond, Variable Rate,               
                        Step up, 3.50%, due 2/28/25                     261,875 
                                                                   ------------ 

                     France -- 8.2%                                             
FRF    23,650,000    Credit Foncier, 6.50%, due 10/13/08              4,023,873 
ECU     1,000,000    Government of France, 8.25%, due 4/25/22         1,301,475 
ECU     1,000,000    Societe Nationale des Chemins de Fer,                      
                        9.38%, due 3/12/01                            1,236,484 
                                                                   ------------ 
                                                                      6,561,832 
                                                                   ------------ 

                     Germany -- 0.9%                                            
ESP   100,000,000    Deutsche Ausgleichsbank, 8.60%, due 5/22/03        735,381 
                                                                   ------------ 

                     Greece -- 1.1%                                             
GRD   250,000,000    Hellenic Republic, Variable Rate, 12 mo.                   
                        GTB + 1.50%, 14.20%, due 9/30/03                899,827 
                                                                   ------------ 

                     Jordan -- 0.4%                                             
USD       500,000    Hashemite Kingdom of Jordan Par Bond, Variable             
                        Rate, Step up  144A, 4.00%, due 12/23/23        345,000 
                                                                   ------------ 

                     Mexico -- 0.9%                                             
FRF     5,000,000    Mexico Par Bond, 6.63%, due 12/31/19               703,775 
                                                                   ------------ 

                     New Zealand -- 2.7%                                        
NZD     3,500,000    New Zealand Index Linked Bond, 4.50%, due                  
                        2/15/16                                       2,137,803 
                                                                   ------------ 

              See accompanying notes to the financial statements.              1

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par                                                                      
       Value         Description                                    Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                     Nigeria -- 0.4%                                             
USD       500,000    Central Bank of Nigeria Par Bond,                           
                        Variable Rate, Step up, 6.25%, due                       
                        11/15/20                                      355,000    
                                                                 ------------    

                     Supra National -- 3.5%                                      
JPY    85,000,000    Asian Development Bank, 5.00%, due 2/05/03       829,225    
GBP     1,000,000    International Bank Recon and Development,                   
                        11.50%, due 11/09/03                        1,957,513    
                                                                 ------------    
                                                                    2,786,738    
                                                                 ------------    

                     Sweden -- 6.9%                                              
SEK     5,000,000    Government of Sweden Index Linked Bond,                     
                        4.00%, due 12/01/20                           642,402    
SEK    39,500,000    Kingdom of Sweden, 6.00%, due 2/09/05          4,915,488    
                                                                 ------------    
                                                                    5,557,890    
                                                                 ------------    

                     United States -- 56.1%                                      

                     Asset Backed Securities -- 37.6%                            
USD       918,049    AFC Home Equity Loan Trust Series 97-1                      
                        Class A, Variable Rate, 1 mo.                            
                        LIBOR + .22%, 5.87%, due 3/25/27              917,475    
USD     5,000,000    Augusta Funding Series 96-F2,                               
                        Variable Rate, LIBOR + .30%, 6.05%,                      
                        due 4/15/06, 144A                           5,000,000    
USD       320,744    BCI Home Equity Loan 94-1 Class A1,                         
                        Variable Rate, 1 mo. LIBOR + .24%,                       
                        5.93%, due 3/29/44                            320,744    
USD     3,000,000    Eagle Pier Corp BV,                                         
                        Variable Rate, 6 mo. LIBOR + .25%,                       
                        6.22%, due 10/03/01                         3,016,500    
USD     2,000,000    First Chicago Master Trust II 95-0,                         
                        Variable Rate, 1 mo. LIBOR + .23%,                       
                        5.88%, due 2/15/04                          2,007,500    
USD     5,000,000    First Union Master Credit Card Trust 96-1                   
                        Class A, Variable Rate, 1 mo.                            
                        LIBOR + .17%, 5.82%, due 9/15/03            5,006,251    
USD     4,000,000    National Premier Finance 95-2, 6.21%, due                   
                        6/01/99, 144A                               3,972,000    
USD     2,000,000    National Premier Finance IX 96-1A, 7.20%,                   
                        due 7/01/00                                 2,030,000    
USD     5,000,000    Rhino CBO Series 97-1 Class A-2, 6.33%, due                 
                        9/15/09, 144A                               5,024,951    
USD     3,000,000    Starvest CBO-1 Class A,                                     
                        Variable Rate, 6 mo. LIBOR + .19%,                       
                        6.00%, due 7/30/11, 144A                    2,982,972    
                                                                 ------------    
                                                                   30,278,393    
                                                                 ------------    

                     Structured Notes -- 8.7%                                    
USD     2,750,000    Federal Home Loan Bank,                                     
                        Variable Rate, ((.50 * 10YR CMT) +                       
                        1.25%), 4.55%, due 3/16/98                  2,725,250    
USD     5,000,000    Federal Home Loan Bank,                                     
                        Variable Rate, (10.00% - 6 mo. LIBOR),                   
                        4.19%, due 9/22/03                          4,285,000    
                                                                 ------------    
                                                                    7,010,250    
                                                                 ------------    


2               See accompanying notes to the financial statements.             

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


          Par                                                                    
         Value       Description                                    Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                     U.S. Government -- 2.6%                                     
USD     1,000,000    U.S. Treasury Note, 6.88%, due 8/31/99(a)      1,016,875    
USD     1,000,000    U.S. Treasury Note, 9.25%, due 8/15/98         1,031,250    
                                                                -------------    
                                                                    2,048,125    
                                                                -------------    

                     U.S. Government Agency -- 7.2%                              
USD     4,000,000    Agency for International Development                        
                        Floater (Support of India),                              
                        Variable Rate, 3 mo. LIBOR + .10%,                       
                        5.47%, due 2/01/27                          4,013,750    
USD     1,787,000    Ship Co 668, Series A, 8.50%, due 5/11/02      1,787,894    
                                                                -------------    
                                                                    5,801,644    
                                                                -------------    

                     Total United States                           45,138,412    
                                                                -------------    

                     Venezuela -- 0.6%                                           
USD      500,000     Republic of Venezuela Discount Bond Series                  
                        A, Variable Rate, 6 mo. LIBOR + .81%,                    
                        6.81%, due 3/31/20                            451,875    
                                                                -------------    

                     TOTAL DEBT OBLIGATIONS (COST $72,732,392)     71,659,842    
                                                                -------------    



     Principal Amount                                                            
-----------------------                                                          
                                                                                 
                     CALL OPTIONS PURCHASED -- 4.4%                              

                     Cross Currency Options -- 3.1%                              
DEM     79,600,000   DEM Call/BEF Put, Expires 10/08/97, Strike                  
                     20.50                                            331,630    
ECU     32,400,000   ECU Call/DEM Put, Expires 1/21/98, Strike                   
                     1.9450                                           364,522    
ECU     31,200,000   ECU Call/DEM Put, Expires 10/30/97, Strike                  
                     1.918                                            756,571    
ECU     38,800,000   ECU Call/DEM Put, Expires 12/15/97 Knock                    
                     Out 1.9225, Strike 1.91                        1,029,864    
                                                                -------------    
                                                                    2,482,587    
                                                                -------------    

                     Options on Bonds -- 0.4%                                    
USD     2,500,000    Brazil Discount Bond, Expires 11/07/97,                     
                     Strike 80.00                                     145,513    
SEK     60,000,000   Sweden Government Bond, Expires 10/24/97,                   
                     Strike 95.484                                    158,349    
                                                                -------------    
                                                                      303,862    
                                                                -------------    

                     Options on Currency -- 0.9%                                 
USD     15,500,000   British Pound, Expires 11/06/97, Strike                     
                     1.6325                                           342,550    
USD     4,000,000    German Mark, Expires 2/09/98, Strike 1.61        390,800    
                                                                -------------    
                                                                      733,350    
                                                                -------------    

                     TOTAL CALL OPTIONS PURCHASED                                
                     (COST $2,964,118)                              3,519,799    
                                                                -------------    


              See accompanying notes to the financial statements.              3

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


  Principal Amount   Description                                     Value($)   
--------------------------------------------------------------------------------
                                                                                
                     PUT OPTIONS PURCHASED -- 1.3%                              

                     Cross Currency Options -- 1.3%                             
DEM     17,400,000   DEM Put/ITL Call, Expires 1/21/98, Strike 950        4,833 
DEM     37,500,000   DEM Put/ITL Call, Expires 9/18/97 Knock Out                
                     1050, Strike 1030                                1,047,800 
USD        700,000   TRL Put/USD, DEM Basket Call, Expires 12/15/97,            
                     Strike 400                                           8,400 
USD        274,045   TRL Put/USD, DEM Basket Call, Expires 12/15/97,            
                     Strike 425                                           1,225 
                                                                     ---------- 
                                                                      1,062,258 
                                                                     ---------- 

                     Options on Currency -- 0.0%                                
USD      2,000,000   Czech Koruna, Expires 10/02/97, Strike 29.56            -- 
USD      5,000,000   Czech Koruna, Expires 10/02/97, Strike 29.69            -- 
USD      4,000,000   German Mark, Expires 2/09/98, Strike 1.61           11,200 
                                                                     ---------- 
                                                                         11,200 
                                                                     ---------- 

                     TOTAL PUT OPTIONS PURCHASED  (COST $834,436)     1,073,458 
                                                                     ---------- 

         Shares                                                                 
---------------------                                                           
                     RIGHTS AND WARRANTS -- 0.0%                                

                     Mexico -- 0.0%                                             
           870,000   United Mexican States Warrants, Expires 6/30/03*        -- 
                                                                     ---------- 

                     TOTAL RIGHTS AND WARRANTS (COST $0)                     -- 
                                                                     ---------- 

        Par Value                                                               
---------------------                                                           
                     SHORT-TERM INVESTMENTS -- 6.0%                             

                     Cash Equivalents -- 0.3%                                   
USD        248,388   BankBoston Eurodollar Time Deposit, 5.7875%                
                     due 9/02/97/(b)/                                   248,388 
USD          5,653   First Union National Bank of North Carolina                
                     Eurodollar Time Deposit, 5.5625% due 9/02/97/(b)/    5,653 
USD         16,959   Harris Bank and Trust Eurodollar Time Deposit,             
                     5.625% due 9/02/97/(b)/                             16,959 
                                                                     ---------- 
                                                                        271,000 
                                                                     ---------- 

4             See accompanying notes to the financial statements.               

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


       Par Value     Description                                    Value($)    
--------------------------------------------------------------------------------
                                                                                
                     Repurchase Agreements -- 5.7%                              
USD       548,000    Prudential Securities, Inc. Repurchase                     
                     Agreement, dated 8/29/97, due 9/02/97, with                
                     a maturity value of $548,304 and an                        
                     effective yield of 4.99%, collateralized by                
                     a U.S. Government Agency Obligation with a                 
                     rate of 6.811%, with a maturity date of                    
                     3/01/35 and a market value of $558,962.            548,000 

USD     4,030,793    Salomon Brothers Repurchase Agreement,                     
                     dated 8/29/97, due 9/02/97, with a maturity                
                     value of $4,033,055 and an effective yield                 
                     of 5.05%, collateralized by U.S. Treasury                  
                     Obligations with rates ranging from 5.00%                  
                     to 6.75%, with maturity dates ranging from                 
                     2/15/99 to 8/15/26 and with an aggregate                   
                     market value of $4,123,159.                      4,030,793 
                                                                    ----------- 
                                                                      4,578,793 
                                                                    ----------- 

                     TOTAL SHORT-TERM INVESTMENTS                               
                     (COST $4,849,793)                                4,849,793 
                                                                    ----------- 

                     TOTAL INVESTMENTS -- 100.8%                                
                     (Cost $81,380,739)                              81,102,892 

                     Other Assets and Liabilities (net) -- (0.8)%      (665,808)
                                                                    ----------- 

                     TOTAL NET ASSETS-- 100%                        $80,437,084 
                                                                    =========== 

                     Notes to the Schedule of Investments:                      

                     GTB - Greek Treasury Bill                                  

                     PIK - Payment In Kind                                      

                     CMT - Constant Maturity Treasury Index                     

                     Knock Out - Option will expire if underlying               
                        security reaches knock out price.                       

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

              See accompanying notes to the financial statements.              5

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------
           Notes to the Schedule of Investments -- Continued
                  Variable and Step up rates - The rates shown on variable
                        and step up rate notes are the current interest rates at
                     August 31, 1997, which are subject to change based on
the terms of the security.      

                                                                [Download Table]


Currency Abbreviations                                  
                                                        
AUD - Australian Dollar       GBP - British Pound       
BEF - Belgian Franc           GRD - Greek Drachma       
CAD - Canadian Dollar         ITL - Italian Lira        
CHF - Swiss Franc             JPY - Japanese Yen        
DEM - German Mark             NLG - Netherlands Guilder 
DKK - Danish Krone            NZD - New Zealand Dollar  
ECU - European Currency Unit  SEK - Swedish Krona       
ESP - Spanish Peseta          THB - Thailand Baht       
FRF - French Franc            TRL - Turkish Lira        
                              USD - United States Dollar

             /(a)/ All or a portion of this security is held as collateral for
open futures contracts.                 
       /(b)/ Represents investments of security lending collateral
(Note 1).                               
* Non-income producing security.            

6             See accompanying notes to the financial statements.               

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)                                           
-------------------------------------------------------------------------------------------------------------
                                                                                                             
Assets:                                                                                                      
     Investments, at value (cost $81,380,739) (Note 1)                                        $  81,102,892  
     Cash                                                                                             4,080  
     Foreign currency, at value (cost $392,704) (Note 1)                                            342,254  
     Interest receivable                                                                          1,347,041  
     Receivable for open forward foreign currency contracts (Notes 1 and 6)                       2,312,207  
     Receivable for expenses waived or borne by Manager (Note 2)                                     28,210  
                                                                                              -------------  

      Total assets                                                                               85,136,684  
                                                                                              -------------  

Liabilities:                                                                                                 
     Payable for investments purchased                                                              335,520  
     Payable upon return of securities loaned (Note 1)                                              271,000  
     Written options outstanding, at value (premiums $416,037) (Notes 1 and 6)                      436,164  
     Payable for open forward foreign currency contracts (Notes 1 and 6)                          3,385,055  
     Payable to affiliate for (Note 2):                                                                      
        Management fee                                                                               22,179  
        Shareholder service fee                                                                      10,120  
     Accrued expenses                                                                                40,591  
     Payable for open swap contracts (Note 1 and 6)                                                 100,076  
     Payable for variation margin on open futures contracts (Notes 1 and 6)                          98,895  
                                                                                              -------------  

      Total liabilities                                                                           4,699,600  
                                                                                              -------------  

Net assets                                                                                    $  80,437,084  
                                                                                              =============  

Net assets consist of:                                                                                       
     Paid-in-capital                                                                          $  76,740,939  
     Accumulated undistributed net investment income                                              2,722,095  
     Accumulated undistributed net realized gain                                                  2,287,272  
     Net unrealized depreciation                                                                 (1,313,222) 
                                                                                              -------------  
                                                                                              $  80,437,084  
                                                                                              =============  

Net assets attributable to:                                                                                  
     Class I shares                                                                           $   5,909,080  
                                                                                              =============  
     Class III shares                                                                         $  74,528,004  
                                                                                              =============  
Shares outstanding:                                                                                          

     Class I                                                                                        565,863  
                                                                                              =============  
     Class III                                                                                    7,122,992  
                                                                                              =============  
Net asset value per share:                                                                                   

     Class I                                                                                  $       10.44  
                                                                                              =============  
     Class III                                                                                $       10.46  
                                                                                              =============  


               See accompanying notes to the financial statements.             7

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                
Investment Income:                                                              
      Interest                                                      $ 2,463,065 
                                                                    ----------- 

Expenses:                                                                       
      Management fee (Note 2)                                           138,014 
      Custodian and transfer agent fees                                  41,125 
      Audit fees                                                         34,872 
      Registration fees                                                   6,447 
      Legal fees                                                          1,732 
      Trustees fees (Note 2)                                                449 
      Miscellaneous                                                         849 
      Fees waived or borne by Manager (Note 2)                         (148,566)
                                                                    ----------- 
                                                                         74,922 
      Shareholder service fee (Note 2)                                          
       Class I                                                            7,276 
       Class III                                                         55,251 
                                                                    ----------- 
       Net expenses                                                     137,449 
                                                                    ----------- 

          Net investment income                                       2,325,616 
                                                                    ----------- 

Realized and unrealized gain (loss):                                            
      Net realized gain (loss) on:                                              
       Investments                                                     (332,790)
       Closed futures contracts                                       1,111,803 
       Closed swap contracts                                            110,812 
       Foreign currency, forward contracts and foreign currency                 
        related transactions                                          1,337,321 
                                                                    ----------- 

          Net realized gain                                           2,227,146 
                                                                    ----------- 
      Change in net unrealized appreciation (depreciation) on:                  
       Investments                                                   (1,056,859)
       Open futures contracts                                           602,897 
       Open swap contracts                                             (100,076)
       Written options                                                  (59,127)
       Foreign currency, forward contracts and foreign currency                 
        related transactions                                           (719,349)
                                                                    ----------- 

          Net unrealized loss                                        (1,332,514)
                                                                    ----------- 

       Net realized and unrealized gain                                 894,632 
                                                                    ----------- 

Net increase in net assets resulting from operations                $ 3,220,248 
                                                                    =========== 

8             See accompanying notes to the financial statements.               

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

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                                                              Six Months Ended                   
                                                              August 31, 1997      Year Ended    
                                                                (Unaudited)     February 28, 1997
                                                              ----------------  -----------------
                                                                                                 
Increase (decrease) in net assets:                                                               
Operations:                                                                                      
      Net investment income                                     $ 2,325,616        $ 3,974,892   
      Net realized gain                                           2,227,146          3,056,295   
      Change in net unrealized appreciation (depreciation)       (1,332,514)           364,425   
                                                                -----------        -----------   
      Net increase in net assets resulting from operations        3,220,248          7,395,612   
                                                                -----------        -----------   
Distributions to shareholders from:                                                              
      Net investment income                                                                      
       Class I                                                      (58,480)                --   
       Class III                                                   (740,209)        (3,484,400)  
                                                                -----------        -----------   
       Total distributions from net investment income              (798,689)         3,484,400   
                                                                -----------        -----------   
      Net realized gains                                                                         
       Class III                                                         --         (2,181,543)  
                                                                -----------        -----------   
       Total distributions from net realized gains                       --         (2,181,543)  
                                                                -----------        -----------   
      In excess of net realized gains                                                            
                                                                   (798,689)         5,665,943   
                                                                -----------        -----------   
      Net share transactions: (Note 5)                                                           
       Class I                                                    5,051,786            654,817   
       Class III                                                  1,549,429         37,957,406   
                                                                -----------        -----------   
      Increase in net assets resulting from net share                                            
       transactions                                               6,601,215         38,612,223   
                                                                -----------        -----------   

      Total increase in net assets                                9,022,774         40,341,892   

Net assets:                                                                                      
      Beginning of period                                        71,414,310         31,072,418   
                                                                -----------        -----------   
      End of period (including accumulated undistributed net                                     
       investment income of $2,722,095 and $1,195,168,                                           
       respectively)                                            $80,437,084        $71,414,310   
                                                                ===========        ===========   

              See accompanying notes to the financial statements.              9

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                            Six Months Ended   Period from January 6, 1997
                                                            August 31, 1997   (commencement of operations)
                                                              (Unaudited)         to February 28, 1997    
                                                            ----------------  ----------------------------
                                                                                                          
Net asset value, beginning of period                             $10.15                 $10.29            
                                                                 -------                -------           

Income from investment operations:                                                                        
      Net investment income                                        0.29+                  0.09            
      Net realized and unrealized gain (loss)                      0.11                  (0.23)           
                                                                 -------                -------           

      Total from investment operations                             0.40                  (0.14)           
                                                                 -------                -------           

Less distributions to shareholders:                                                                       
      From net investment income                                  (0.11)                    --            
                                                                 -------                -------           

      Total distributions                                         (0.11)                    --            
                                                                 -------                -------           
Net asset value, end of period                                   $10.44                 $10.15            
                                                                 =======                =======           

Total Return /(a)/                                                 3.94%                 (1.36)%          

Ratios/Supplemental Data:                                                                                 
      Net assets, end of period (000's)                          $5,909                 $  646            
      Net expenses to average daily net assets                     0.47%*                 0.47%*          
      Net investment income to average daily net assets            5.74%*                 6.05%*          
      Portfolio turnover rate                                        39%                    72%           
      Fees and expenses voluntarily waived or borne by the                                                
           Manager consisted of the following per share                                                   
           amounts:                                              $ 0.02                 $ 0.01            

*  Annualized.                                                                  
+  Computed using average shares outstanding throughout the period.             
(a)Calculation excludes purchase premiums. The total returns would have been    
lower had certain expenses not been waived during the periods shown.      

10              See accompanying notes to the financial statements.             

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                                    Six Months Ended      Year Ended        
                                                                    August 31, 1997      February 28/29,    
                                                                                      --------------------  
                                                                      (Unaudited)       1997       1996 *   
                                                                      -----------     --------    --------  
                                                                                                            
Net asset value, beginning of period                                   $ 10.16        $  9.89     $ 10.00   
                                                                       --------       --------    --------  

Income from investment operations:                                                                          
      Net investment income                                               0.30           0.61        0.05   
      Net realized and unrealized gain (loss)                             0.11           0.59       (0.16)  
                                                                       --------       --------    --------  

      Total from investment operations                                    0.41           1.20       (0.11)  
                                                                       --------       --------    --------  

Less distributions to shareholders:                                                                         
      From net investment income                                         (0.11)         (0.57)         --   
      From net realized gains                                               --          (0.36)         --   
                                                                       --------       --------    --------  

      Total distributions                                                (0.11)         (0.93)         --   
                                                                       --------       --------    --------  
Net asset value, end of period                                         $ 10.46        $ 10.16     $  9.89   
                                                                       ========       ========    ========  

Total Return/(a)/                                                         4.02%         12.01%      (1.10)% 

Ratios/Supplemental Data:                                                                                   
      Net assets, end of period (000's)                                $74,528        $70,768     $31,072   
      Net expenses to average daily net assets                            0.34%**        0.34%       0.34%**
      Net investment income to average daily net assets                   5.91%**        6.31%       6.16%**
      Portfolio turnover rate                                               39%            72%          0%  
      Fees and expenses voluntarily waived or borne by the Manager                                          
          consisted of the following per share amounts:                $  0.02        $  0.04     $  0.01   

*  Period from December 28, 1995 (commencement of operations) to February 29,   
1996.                                                                     
** Annualized.                                                                  
(a)Calculation excludes purchase premiums. The total returns would have been    
lower had certain expenses not been waived during the periods shown.      

              See accompanying notes to the financial statements.             11

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------
1.   Significant accounting policies                                            

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

     The Fund seeks high total return by investing primarily in investment grade
bonds denominated in various currencies including U.S. dollars and    
 multicurrency units. The Fund generally seeks to provide a total return
  greater than that provided by the global fixed income securities market.

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
    as those shares. As of August 31,1997, Class I and Class III were the only
active classes of shares of the Fund.                                 

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
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Foreign currency translation                                          

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

Futures contracts                                                     

   The Fund may use futures contracts to manage its exposure to the bond and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
change in value ("variation margin") is recorded by the Fund. Gains or
losses are recognized but not considered realized until the contracts 
   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from the changes in the value of
     the underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

Forward currency contracts                                            

The Fund may enter into forward currency contracts and forward cross  
   currency contracts in connection with settling planned purchases or sales
     of securities or to hedge the currency exposure associated with some or all
of the Fund's portfolio securities. A forward currency contract is an 
    agreement between two parties to buy and sell a currency at a set price on
   a future date. The market value of a forward currency contract fluctuates
     with changes in forward currency exchange rates. Forward currency contracts
    are marked to market daily and the change in value is recorded by the Fund
as an unrealized gain or loss. Realized gains or losses equal to the  
    difference between the value of the contract at the time it was opened and
   the value at the time it was closed are recorded upon delivery or receipt
  of the currency or, if a forward currency contract is offset by entering
into another forward currency contract with the same broker, upon     
     settlement of the net gain or loss. These contracts may involve market risk
    in excess of the unrealized gain or loss reflected in the Fund's Statement
   of Assets and Liabilities. In addition, the Fund could be exposed to risk
   if the counterparties are unable to meet the terms of the contracts or if
the value of the currency changes unfavorably to the U.S. dollar.     
The U.S. dollar value of the currencies                               

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    the Fund has committed to buy or sell is shown under Note 6 and represents
the currency exposure the Fund has acquired or hedged through currency
contracts as of August 31, 1997.                                      

Options                                                               

   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
     the realized gain or loss. The Fund as a writer of an option has no control
over whether the underlying securities may be sold (call) or purchased
     (put) and as a result bears the market risk of an unfavorable change in the
    price of the security underlying the written option. There is the risk the
Fund may not be able to enter into a closing transaction because of an
 illiquid market. See Note 6 for all open written option contracts as of
August 31, 1997.                                                      

  The Fund may also purchase put and call options. The Fund pays a premium
   which is included in the Fund's Statement of Assets and Liabilities as an
   investment and subsequently marked to market to reflect the current value
    of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                          

Indexed securities                                                    

  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
     or other financial indicators. The Fund uses indexed securities to increase
  or decrease its exposure to different underlying instruments and to gain
     exposure to markets that may be difficult to invest in through conventional
   securities. Indexed securities may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original    
investment.                                                           

Swap agreements                                                       

    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their    
 respective commitments to pay or receive interest, e.g., an exchange of
   floating rate payments for fixed rate payments with respect to a notional
   amount of principal. Interest rate swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap  
agreements as of August 31, 1997.                                     

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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. 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 certain member firms of the New York
Stock Exchange. 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 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 fail financially. The Fund receives compensation for
lending its securities. At August 31, 1997, the Fund loaned securities
    having a market value of $265,625, collateralized by cash in the amount of
$271,000, which was invested in short-term instruments.               

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         

   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual 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.             

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Allocation of operating activity                                      

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

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .15% of the amount    
     invested. Effective June 1, 1996, the Manager will reduce such premium only
when any portion of a purchase is offset by a corresponding redemption
   occurring on the same day. All purchase premiums are paid to and recorded
   as paid-in capital by the Fund. For the six months ended August 31, 1997,
 the Fund received $16,621 in purchase premiums. There is no premium for
cash redemptions, reinvested distributions or in-kind transactions.   

Investment risk                                                       

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .35% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .19% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .34%;
thus the net annual expense ratio after the waiver for a Class III    
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $449. No    
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                        [Enlarge/Download Table]


                                                   Purchases            Proceeds     
                                              -------------------  ------------------
                                                                                     
U.S. Government securities                     $    3,967,860       $    4,085,459   
Investments (non-U.S. Government securities)       31,651,582           22,280,116   


At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]


                        Gross Unrealized       Gross Unrealized        Net Unrealized    
   Aggregate Cost         Appreciation           Depreciation           Depreciation     
--------------------- ---------------------  ---------------------  ---------------------
                                                                                         
    $ 81,380,739           $ 1,978,554            $ 2,256,401             $ 277,847      


4.   Principal shareholders                                                     

    At August 31, 1997, 86% of the outstanding shares of the Fund were held by
    four shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]


                                                                       Period from January 6, 1997     
                                        Six Months Ended             (commencement of operations) to   
                                         August 31, 1997                    February 28, 1997          
                                 --------------------------------  ------------------------------------
Class I:                              Shares            Amount          Shares              Amount     
                                 --------------    --------------  ----------------    ----------------
                                                                                                       
Shares sold                           496,553        $ 4,993,306         63,643         $    654,817   
Shares issued to shareholders                                                                          
   in reinvestment of distributions     5,667             58,480            -                   -      
Shares repurchased                      -                  -                -                   -      
                                 --------------    --------------  ----------------    ----------------
Net increase                          502,220        $ 5,051,786         63,643         $    654,817   
                                 ==============    ==============  ================    ================


                                                                              17

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Share transactions - continued                                        

                                                        [Enlarge/Download Table]


                                        Six Months Ended                       Year Ended              
                                         August 31, 1997                    February 28, 1997          
                                 --------------------------------  ------------------------------------
Class III:                            Shares            Amount          Shares              Amount     
                                 --------------    --------------  ----------------    ----------------
                                                                                                       
Shares sold                          594,764         $ 6,087,036       4,047,314         $ 40,339,699  

Shares issued to shareholders in                                                                       
  reinvestment of distributions       45,819             473,766         435,009            4,467,251  
Shares repurchased                  (480,956)         (5,011,373)       (662,011)          (6,849,544) 
                                 --------------    --------------  ----------------    ----------------
Net increase                         159,627         $ 1,549,429       3,820,312         $ 37,957,406  
                                 ==============    ==============  ================    ================


6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Forward currency contracts                                            

                                                        [Enlarge/Download Table]


                                                                     Net Unrealized  
Settlement                         Units of                           Appreciation   
   Date      Deliver/Receive       Currency            Value         (Depreciation)  
-----------  -----------------  ----------------    ------------     ----------------
                                                                                     
Buys                                                                                 
09/26/97           CAD                9,700,000  $    6,997,715   $         (26,759) 
09/02/97           DEM                  604,481         335,876                  495 
09/05/97           DEM              106,100,000      58,965,869          (1,809,010) 
10/17/97           GBP                9,100,000      14,727,524            (124,906) 
10/09/97           JPY            2,000,000,000      16,725,410          (1,114,858) 
                                                                     ----------------
                                                                  $      (3,075,038) 
                                                                     ================

Sales                                                                                
11/28/97           AUD                  900,000  $      662,512   $           10,868 
09/26/97           CAD               10,800,000       7,791,270               34,917 
09/05/97           DEM               71,000,000      39,458,781            1,003,165 
10/17/97           GBP                6,200,000      10,034,137               30,000 
10/09/97           JPY              950,000,000       7,944,570              225,991 
09/23/97           NZD                3,400,000       2,170,022              144,378 
03/23/98           THB               60,000,000       1,639,195              440,528 
06/22/98           THB               30,000,000         811,030              211,117 
                                                                     ----------------
                                                                  $        2,100,964 
                                                                     ================


18                                                                              

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Forward cross currency contracts                                      

                                                        [Enlarge/Download Table]


                                                                         Net Unrealized 
 Settlement                                                               Appreciation  
    Date       Deliver/Units of Currency     Receive/In Exchange For     (Depreciation) 
------------  ---------------------------  --------------------------   ----------------
                                                                                        
 11/07/97         FRF          78,920,129      DEM         23,400,000  $        (10,662)
 11/14/97         DKK          56,048,335      DEM         14,700,000            (5,306)
 10/23/97         ESP         372,888,900      DEM          4,400,000              (443)
 10/10/97         DEM          17,100,000      BEF        353,261,230              3,489
 09/02/97         DEM             323,681      DKK            886,164                 22
 09/22/97         ITL      39,178,056,000      DEM         39,500,000          (255,812)
 09/02/97         DEM           4,971,800      SEK         21,735,449                 98
 11/21/97         SEK          45,962,704      DEM         10,500,000            (6,719)
 11/13/97         CHF           3,866,230      DEM          4,700,000            (5,018)
 09/22/97         DEM          16,200,000      ITL     15,977,404,000             53,483
 10/27/97         ECU          31,300,000      DEM         61,703,610            148,456
 09/19/97         DEM           3,500,000      NLG          3,941,197                420
 10/23/97         DEM          10,000,000      ESP        847,560,450              1,568
 10/10/97         BEF          30,955,500      DEM          1,500,000                566
 11/07/97         DEM           4,000,000      FRF         13,484,858                868
 11/13/97         DEM           2,000,000      CHF          1,640,540            (1,036)
 10/27/97         DEM           8,484,285      ECU          4,300,000           (24,526)
 09/19/97         NLG           9,340,654      DEM          8,300,000              1,778
                                                                          --------------
                                                                       $        (98,774)
                                                                          ==============


                                                                              19

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Futures contracts                                                     

                                                        [Enlarge/Download Table]


                                                                                    Net Unrealized  
 Number of                                                            Contract       Appreciation   
 Contracts                  Type                 Expiration Date       Value        (Depreciation)  
------------  ---------------------------------  ----------------   -------------   ----------------
                                                                                                    
   Buys                                                                                             

    25        Australian Government Bond 3 yr.   September 1997  $     2,157,794  $          54,692 
    19        Australian Government Bond 10 yr   September 1997        1,950,999             98,947 
    23        Canadian Government Bond           September 1997        1,983,118             75,237 
    16        German Government Bond             December 1997         2,250,861             (3,883)
    16        Italian Government Bond 10 yr.     December 1997         1,958,488              1,863 
     4        Japanese Government Bond           September 1997        4,246,737                635 
    49        MATIF ECU Bond                     September 1997        5,173,501            122,535 
    92        U.S. Treasury Bond 30 yr.          September 1997       10,407,500            375,437 
    11        U.S. Treasury Bond 30 yr.          December 1997         1,240,250              1,668 
    87        U.K. Gilt                          September 1997        8,077,765             20,402 
    24        U.K. Gilt                          December 1997         2,221,051             (3,982)
                                                                                     -------------- 
                                                                                   $        743,551 
                                                                                     ============== 



   Sales                                                                                            
                                                                                                    
    15        Eurodollar                         September 1997  $     3,534,938  $          (1,425)
    75        FRF MATIF Bond                     September 1997        8,017,476           (110,932)
     4        Japanese Government Bond           September 1997        4,243,744           (204,613)
     4        Japanese Government Bond           December 1997         4,221,132               (695)
    63        Spanish Government Bond 10 yr.     September 1997        4,840,512           (123,106)
    76        Swiss Government Bond              September 1997        6,094,428             (1,355)
    11        U.S. Treasury Note 10 yr.          September 1997        1,199,344              3,699 
     7        U.S. Treasury Note 10 yr.          December 1997           760,813                354 
                                                                                    ----------------
                                                                                  $        (438,073)
                                                                                    ================


     At August 31, 1997, the Fund has cash and/or securities to cover any margin
requirements on open futures contracts.                               

20                                                                              

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Written option transactions                                           

                                                        [Enlarge/Download Table]


                                         Puts                                 Calls                

                             Principal                                                             
                             Amount of                          Principal Amount                   
                             Contracts                            of Contracts                     
                           (000's omitted)       Premiums        (000's omitted)       Premiums    
                          -----------------   ---------------   ------------------  ---------------
                                                                                                   
Outstanding, beginning                                                                             
  of period             $      4,000             $199,000     $       4,000       $    170,400     
Options written                4,000               20,000             2,727              46,637    
Options exercised             (4,000)             (20,000)             --                 --       
Options expired                  --                 --                 --                 --       
                          -----------------   ---------------   ------------------  ---------------
Outstanding, end                                                                                   
         of period      $      4,000             $199,000     $       6,727       $    217,037     
                          =================   ===============   ==================  ===============


Summary of written options outstanding                                

                                                        [Enlarge/Download Table]


                 Principal                                                           
                 Amount of                                                           
                 Contracts                           Expiration                      
               (000's omitted)   Exercise Price         Date               Value     
              -----------------  ---------------  ------------------   --------------
                                                                                     
Calls                                                                                
Japanese Yen  $     4,000           117 JPY            2/09/98       $    130,000    
Thai Baht           2,727            33 THB           10/16/97             75,364    

Puts                                                                                 
Japanese Yen        4,000           117 JPY            2/09/98            130,800    
                                                                       --------------
                                                                     $    436,164    
                                                                       ==============


                                                                              21

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GMO Global Bond Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                       

                                                        [Enlarge/Download Table]


                                                                                               Net       
                                                                                            Unrealized   
                        Expiration                                                         Appreciation  
   Notional Amount         Date                         Description                       (Depreciation) 
---------------------- ------------- ---------------------------------------------------  ---------------
                                                                                                         
TRL 93,625,000,000       5/14/99     Agreement with Bank of America dated 5/29/97 to          $(109,591) 
                                     receive the notional amount multiplied by the                       
                                     change in market value (including accrued                           
                                     interest) of Turkey Index Linked Bond and to pay                    
                                     the notional amount multiplied by 3 month LIBOR                     
                                     adjusted by a specified spread.                                     

TRL 38,500,000,000       6/04/99     Agreement with Bank of America dated 6/23/97 to               9,515 
                                     receive the notional amount multiplied by the                       
                                     change in market value (including accrued                           
                                     interest) of Turkey Index Linked Bond and to pay                    
                                     the notional amount multiplied by 3 month LIBOR                     
                                     adjusted by a specified spread.                                     

                                                                                          ---------------
                                                            Net unrealized depreciation       $(100,076) 
                                                                                          ===============


See Notes to the Schedule of Investments for definitions of currency  
abbreviations.                                                                  

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value   Description                                     Value ($)   
--------------------------------------------------------------------------------
                                                                                
                    DEBT OBLIGATIONS -- 99.3%                                   

                    New Zealand -- 3.3%                                         
NZD     1,000,000   New Zealand Indexed Linked Bond, 4.50%, due                 
                    2/15/16                                            610,801  
                                                                   -----------  

                    United States -- 96.0%                                      
                    U.S. Government -- 96.0%                                    
USD    17,618,000   U.S. Treasury Inflation Indexed Note,                       
                    3.375%, due 1/15/07                             17,533,622  
                                                                   -----------  

                    Total United States                             17,533,622  
                                                                   -----------  

                    TOTAL DEBT OBLIGATIONS  (COST $18,093,975)      18,144,423  
                                                                   -----------  

                    SHORT-TERM INVESTMENTS -- 0.5%                              

                    Repurchase Agreements -- 0.5%                               
USD        91,026   Salomon Brothers Repurchase Agreement, dated                
                    8/29/97, due 9/2/97, with a maturity value                  
                    of $91,077 and an effective yield of 5.05%,                 
                    collateralized by U.S. Treasury Obligations                 
                    with rates ranging from 5.00% to 6.75%, with                
                    maturity dates ranging from 2/15/99 to                      
                    8/15/26 and with an aggregate market value                  
                    of $93,112.                                         91,026  
                                                                   -----------  

                    TOTAL SHORT-TERM INVESTMENTS (COST                          
                    $91,026)                                            91,026  
                                                                   -----------  

                    TOTAL INVESTMENTS -- 99.8%                                  
                    (Cost $18,185,001)                              18,235,449  

                    Other Assets and Liabilities (net) -- 0.2%          34,204  
                                                                   -----------  

                    TOTAL NET ASSETS -- 100%                       $18,269,653  
                                                                   ===========  

                    Currency Abbreviations                                      
                    NZD - New Zealand Dollar                                    
                    USD - United States Dollar                                  

              See accompanying notes to the financial statements.              1

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

                                                                [Download Table]


Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------
                                                                                

Assets:                                                                         
   Investments, at value (cost $18,185,001) (Note 1)               $18,235,449  
   Dividends and interest receivable                                    75,815  
   Receivable for open forward foreign currency contracts                       
     (Notes 1 and 6)                                                    11,032  
   Receivable for expenses waived or borne by Manager (Note 2)          12,525  
                                                                   -----------  

      Total assets                                                  18,334,821  
                                                                   -----------  

Liabilities:                                                                    
   Payable to affiliate for (Note 2):                                           
     Management fee                                                      2,996  
     Shareholder service fee                                             1,771  
   Accrued expenses                                                     60,401  
                                                                   -----------  

      Total liabilities                                                 65,168  
                                                                   -----------  

Net assets                                                         $18,269,653  
                                                                   ===========  

Net assets consist of:                                                          
   Paid-in-capital                                                 $18,090,519  
   Accumulated undistributed net investment income                     118,480  
   Accumulated undistributed net realized loss                            (813) 
   Net unrealized appreciation                                          61,467  
                                                                   -----------  
                                                                   $18,269,653  
                                                                   ===========  

Net assets attributable to:                                                     
   Class III shares                                                $18,269,653  
                                                                   ===========  

Shares outstanding:                                                             
   Class III                                                         1,786,832  
                                                                   ===========  

Net asset value per share:                                                      
   Class III                                                       $     10.22  
                                                                   ===========  

2             See accompanying notes to the financial statements.               

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

                                                                [Download Table]

Statement of Operations --                                                      
   Period from March 31, 1997 (commencement of operations) to August 31, 1997   
(Unaudited)                                                                     
--------------------------------------------------------------------------------
                                                                                
Investment Income:                                                              
   Interest                                                            127,503  
                                                                     ---------  
Expenses:                                                                       
   Custodian and transfer agent fees                                    43,593  
   Audit fees                                                           16,682  
   Management fee (Note 2)                                               9,023  
   Registration fees                                                     1,511  
   Legal fees                                                            1,180  
   Trustees fees (Note 2)                                                  236  
   Miscellaneous                                                           384  
   Fees waived or borne by Manager (Note 2)                            (68,974) 
                                                                     ---------  
                                                                         3,635  
   Shareholder service fee (Note 2)                                             
      Class III                                                          5,388  
                                                                     ---------  
      Net expenses                                                       9,023  
                                                                     ---------  
        Net investment income                                          118,480  
                                                                     ---------  

Realized and unrealized gain (loss):                                            
   Net realized gain (loss) on:                                                 
      Investments                                                        4,126  
      Foreign currency, forward contracts and foreign currency                  
      related transactions                                              (4,939) 
                                                                     ---------  

        Net realized loss                                                 (813) 
                                                                     ---------  

   Change in net unrealized appreciation (depreciation) on:                     
      Investments                                                       50,448  
      Foreign currency, forward contracts and foreign currency                  
      related transactions                                              11,019  
                                                                     ---------  

        Net unrealized gain                                             61,467  
                                                                     ---------  

      Net realized and unrealized gain                                  60,654  
                                                                     ---------  

Net increase in net assets resulting from operations                 $ 179,134  
                                                                     =========  

              See accompanying notes to the financial statements.              3

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                                [Download Table]


                                                     Period from March 31, 1997 
                                                    (commencement of operations)
                                                         to August 31, 1997     
                                                            (Unaudited)         
                                                    ----------------------------
                                                                                
Increase (decrease) in net assets:                                              
Operations:                                                                     
   Net investment income                                      $   118,480       
   Net realized loss                                                 (813)      
   Change in net unrealized appreciation                                        
     (depreciation)                                                61,467       
                                                              -----------       

   Net increase in net assets resulting from                                    
     operations                                                   179,134       
                                                              -----------       

   Net share transactions: (Note 5)                                             
      Class I                                                          --       
      Class II                                                         --       
      Class III                                                18,090,519       
                                                              -----------       
   Increase in net assets resulting from net                                    
     share transactions                                        18,090,519       
                                                              -----------       

     Total increase in net assets                              18,269,653       

Net assets:                                                                     
   Beginning of period                                                 --       
                                                              -----------       

   End of period (including accumulated undistributed                           
     net investment income of $118,480)                       $18,269,653       
                                                              ===========       

4             See accompanying notes to the financial statements.               

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

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

                                                                [Download Table]


                                                       Period from March 31, 1997 
                                                      (commencement of operations)
                                                           to August 31, 1997     
                                                              (Unaudited)         
                                                          ---------------------   
                                                                                  
Net asset value, beginning of period                            $10.00            
                                                                -------           

Income from investment operations:                                                
   Net investment income                                          0.14+           
   Net realized and unrealized gain                               0.08            
                                                                -------           

     Total from investment operations                             0.22            
                                                                -------           
Net asset value, end of period                                  $10.22            
                                                                =======           

Total Return /(a)/                                                2.20%           

Ratios/Supplemental Data:                                                         
   Net assets, end of period (000's)                           $18,270            
   Net expenses to average daily net assets                       0.25%*          
   Net investment income to average daily net assets              3.28%*          
   Portfolio turnover rate                                           7%           
   Fees and expenses voluntarily waived or borne                                  
     by the Manager consisted of the following per                                
     share amount:                                              $ 0.08            

+   Computed using average shares outstanding throughout the period.            
(a) Calculation excludes purchase premiums and redemption fees. The total return
    would have been lower had certain expenses not been waived during the period
shown.                                                                  
*   Annualized.                                                                 

              See accompanying notes to the financial statements.              5

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.  Significant accounting policies                                             

   GMO Inflation Indexed Bond Fund (the "Fund"), which commenced operations on
March 31, 1997, 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 maximum total return by investing primarily in foreign and
U.S. government bonds that are indexed or otherwise linked to general   
measures of inflation in the country of issue.                          

  The Fund offers three classes of shares: Class I, Class II, and Class III.
  The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and    
automatic conversion between the various classes of shares is generally 
based on the total amount of assets invested with GMO, as more fully    
 outlined in the Trust's prospectus. At August 31, 1997, Class III was the
only active class of shares of the fund.                                

  The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are  
consistently followed by the Fund in the preparation of its financial   
  statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make    
  estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those     
estimates.                                                              

Portfolio valuation                                                     
Portfolio securities listed on a securities exchange for which market   
 quotations are available are valued at the last quoted 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. Other assets and securities
 for which no quotations are readily available are valued at fair value as
determined in good faith by the Trustees.                               

 Securities may be valued by independent pricing services which use prices
   provided by market-makers or estimates of market values obtained from yield
data relating to investments or securities with similar characteristics.

Foreign currency translation                                            
The accounting records of the Fund are maintained in U.S. dollars. The  
   market values of foreign securities, currency holdings and other assets and
   liabilities are translated to U.S. dollars based on the prevailing exchange
rates each business day. Income and expenses denominated in foreign     
currencies are translated at prevailing exchange rates when accrued or  
    incurred. The Fund does not isolate realized and unrealized gains and losses
attributable to changes in exchange rates from gains and losses that    

6                                                                               

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    arise from changes in the market value of investments. Such fluctuations are
  included with net realized and unrealized gain or loss on investments. Net
realized gains and losses on foreign currency transactions represent net
exchange gains and losses on disposition of foreign currencies, currency
gains and losses realized between the trade and settlement dates on     
    securities transactions, and the difference between the amount of investment
 income and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid.               

Forward currency contracts                                              
The Fund may enter into forward currency contracts and forward cross    
    currency contracts in connection with settling planned purchases or sales of
   securities or to hedge the currency exposure associated with some or all of
    the Fund's portfolio securities. A forward currency contract is an agreement
 between two parties to buy and sell a currency at a set price on a future
date. The market value of a forward currency contract fluctuates with   
  changes in forward currency exchange rates. Forward currency contracts are
    marked to market daily and the change in value is recorded by the Fund as an
 unrealized gain or loss. Realized gains or losses equal to the difference
    between the value of the contract at the time it was opened and the value at
    the time it was closed are recorded upon delivery or receipt of the currency
or, if a forward currency contract is offset by entering into another   
  forward currency contract with the same broker, upon settlement of the net
gain or loss. These contracts may involve market risk in excess of the  
unrealized gain or loss reflected in the Fund's Statement of Assets and 
Liabilities. In addition, the Fund could be exposed to risk if the      
    counterparties are unable to meet the terms of the contracts or if the value
of the currency changes unfavorably to the U.S. dollar. The U.S. dollar 
    value of the currencies the Fund has committed to buy or sell is shown under
   Note 6 and represents the currency exposure the Fund has acquired or hedged
through currency contracts as of August 31, 1997.                       

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund had no
securities on loan.                                                     

                                                                           7

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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 taxable 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 federal
 income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                       

Distributions to shareholders                                           
 The Fund's policy is to declare and pay distributions from net investment
    income semi-annually, 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. The Fund declares separate dividends from net investment 
income on each class of shares.                                         

Income distributions and capital gain distributions are determined in   
accordance with income tax regulations which may differ from generally  
accepted accounting principles. 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. Interest income is
recorded on the accrual 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. The difference
between original principal and the inflation component of principal is  
included in unrealized gain or loss.                                    

Allocation of operating activity                                        
The majority of expenses of the Trust are directly identifiable to an   
  individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,  
taking into consideration, among other things, the nature and type of   
expense and the relative size of the Funds. Investment income, common   
    expenses and realized and unrealized gains and losses are allocated pro-rata
among the classes based on the relative net assets of each class.       
Shareholder service fees, which are directly attributable to a class of 
shares, are charged to that class' operations.                          

Purchases and redemptions of Fund shares                                
   The premium on cash purchases and fee on redemptions of Fund shares is .10%
of the amount invested. The manager will reduce such premium or fee only
when any portion of a purchase or redemption is offset by corresponding 
   redemption or purchase occurring on the same day. All purchase premiums are
 paid to and recorded as paid-in capital by the Fund. For the period ended
   August 31, 1997, the Fund received $18,891 in purchase premiums and $801 in
    redemption fees. There is no premium for reinvested distributions or in-kind
transactions.                                                           

8                                                                               

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

2.  Fees and other transactions with affiliates                                 

GMO earns a management fee paid monthly at the annual rate of .25% of   
  average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and  
shareholder service, reporting, and other support. Pursuant to the      
  Shareholder Services Plan, the shareholder service fee is calculated based
    on the average daily net assets of each class at the annual rate of .28% for
Class I shares, .22% for Class II shares, and .15% for Class III shares.

  GMO has agreed to waive a portion of its fee and bear other expenses until
   further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other       
  transaction costs (including transfer taxes), shareholder service fees and
extraordinary expenses) exceed .10% of average daily net assets.        

    The Fund's portion of the fee paid by the Trust to the unaffiliated Trustees
    during the period ended August 31, 1997 was $236. No remuneration is paid to
any Trustee or officer who is affiliated with the Manager.              

3.  Purchases and sales of securities                                           

For the period from March 31 to August 31, 1997, cost of purchases and  
   proceeds from sales of investments, other than short-term obligations, were
as follows:                                                             

                                                                [Download Table]


                                                    Purchases          Proceeds   
                                                 ---------------    --------------
                                                                                  
U.S. Government securities                    $     18,058,988    $     583,454   
Investments (non-U.S. Government securities)           614,298            -       


At August 31, 1997, the cost for Federal income tax purposes and gross  
    unrealized appreciation and depreciation in value of investments held was as
follows:                                                                

                                                                [Download Table]

                     Gross Unrealized    Gross Unrealized    Net Unrealized  
  Aggregate Cost       Appreciation        Depreciation       Appreciation   
------------------- -------------------- ------------------  ----------------
                                                                             
   $18,185,001            $53,962             $3,514             $50,448     

4.  Principal shareholders                                                      

  At August 31, 1997, 52% of the outstanding shares of the Fund were held by
 two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                                 

                                                                           9

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GMO Inflation Indexed Bond Fund                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                                 

                                                                [Download Table]


                                                Period from            
                                        March 31, 1997 (commencement of
Class III:                              operations) to August 31, 1997 
                                       --------------------------------
                                         Shares              Amount    
                                       ------------       -------------
                                                                       
Shares sold                              1,866,277      $   18,891,131 
Shares issued to shareholders in                                       
  reinvestment of distributions                  -                   - 
Shares repurchased                         (79,445)           (800,612)
                                       ------------       -------------
Net increase                             1,786,832      $   18,090,519 
                                       ============       =============

6.  Financial Instruments                                               

A summary of outstanding financial instruments at August 31, 1997 is as 
follows:                                                                

Forward currency contracts                                              

                                                                [Download Table]

                                                                        Net     
    Settlement                            Units of                  Unrealized  
       Date              Deliver          Currency       Value      Appreciation
------------------- ------------------- -------------  -----------  ------------
                                                                                
      Sales                                                                     

     9/23/97               NZD            900,000       $574,418      $11,032   
                                                                    ============

   At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on these contracts.                           

10                                                                              

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 356th Page of 667 TOC 1st Previous Next ↓Bottom Just 356th
GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 COMMON STOCKS -- 91.5%                                         

                 Advertising -- 0.0%                                            
      12,500     Interpublic Group Inc                                609,375   
                                                                -------------   

                 Aerospace -- 0.9%                                              
     370,100     Raytheon Co                                       20,355,500   
      58,600     Textron Inc                                        3,651,513   
     168,700     TRW Inc                                            8,793,488   
                                                                -------------   
                                                                   32,800,501   
                                                                -------------   

                 Automotive -- 1.6%                                             
       9,700     Bandag Inc                                           517,131   
      42,200     Chrysler Corp                                      1,482,275   
      19,900     Eaton Corp                                         1,792,244   
     599,300     Ford Motor Co                                     25,769,900   
     275,400     General Motors Corp                               17,281,350   
     114,100     Genuine Parts Co                                   3,522,838   
      82,600     Goodyear Tire & Rubber Co                          5,090,225   
                                                                -------------   
                                                                   55,455,963   
                                                                -------------   

                 Banking and Financial Services -- 11.9%                        
     281,600     Ahmanson (HF) & Co                                14,291,200   
     137,200     Amsouth Bancorp                                    5,770,975   
     181,800     Bank of New York Inc                               8,112,825   
     351,900     BankBoston Corp                                   29,251,687   
     159,900     Bankers Trust New York Corp                       16,589,625   
     411,300     Barnett Banks Inc                                 28,019,812   
     242,999     Bear Stearns Inc                                   9,613,648   
      83,900     Beneficial Corp                                    6,004,094   
      25,900     Charles Schwab & Co Inc                            1,099,131   
     487,308     Chase Manhattan Corp                              54,182,557   
      65,700     Citicorp                                           8,384,963   
       6,250     Comdisco Inc                                         169,922   
     114,300     Countrywide Credit Industry Inc                    3,850,481   
      58,700     Donaldson Lufkin & Jenrette                        3,485,313   
     175,100     Edwards (AG) Inc                                   6,960,225   
     168,800     Fleet Financial Group Inc                         10,877,050   
      90,500     Franklin Resources Inc                             7,002,438   
       6,400     Golden West Financial Corp                           526,800   
     132,500     Greenpoint Financial Corp                          8,157,031   
       6,000     Household International Inc                          665,625   
     193,900     Lehman Brothers Holding Inc                        8,507,363   

              See accompanying notes to the financial statements.              1

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Banking and Financial Services -- continued                    
     372,200     Merrill Lynch                                     22,890,300   
      15,200     MGIC Investment Corp                                 764,750   
      82,200     Morgan Jersey Co Inc                               8,815,950   
     545,412     Morgan Stanley Dean Witter Discover & Co          26,247,953   
     210,100     Paine Webber Group Inc                             8,075,719   
     605,200     PNC Bank Corp                                     26,174,900   
     166,400     Providian Financial Corp                           6,198,400   
       5,300     Republic New York Corp                               567,431   
     268,600     Salomon Inc                                       16,082,425   
      20,700     SLM Holding Corp                                   2,804,850   
      88,200     Summit Bancorp                                     5,236,875   
     118,700     Synovus Financial Corp                             3,108,456   
     543,373     Travelers Group Inc                               34,504,185   
     355,170     Washington Mutual Inc                             21,265,804   
                                                                 -------------  
                                                                  414,260,763   
                                                                 -------------  
                 Chemicals -- 0.8%                                              
      97,900     Eastman Chemical Co                                5,855,644   
     145,300     Great Lakes Chemical Corp                          6,756,450   
      66,100     Lubrizol Corp                                      2,896,006   
     211,900     Union Carbide Corp                                10,873,119   
                                                                 -------------  
                                                                   26,381,219   
                                                                 -------------  

                 Computer and Office Equipment -- 3.7%                          
   1,229,050     Compaq Computer Corp                              80,502,774   
     294,100     EMC Corp *                                        15,091,006   
      48,200     Gateway 2000 Inc                                   1,885,825   
     490,800     Micron Technology Inc *                           21,871,275   
      31,400     Pitney Bowes Inc                                   2,398,175   
      10,700     Sterling Software Inc                                367,144   
     121,300     Western Digital Corp                               5,837,563   
                                                                 -------------  
                                                                  127,953,762   
                                                                 -------------  

                 Construction -- 0.1%                                           
      43,400     Georgia-Pacific Corp                               3,960,250   
                                                                 -------------  

                 Consumer Goods -- 3.7%                                         
     200,600     Callaway Golf Co                                   6,757,713   
      79,100     Clorox Co                                         10,381,875   
      38,200     Colgate-Palmolive Co                               2,397,050   
     275,400     Eastman Kodak Co                                  18,004,275   
     443,600     Fortune Brands Inc                                15,248,750   

2               See accompanying notes to financial statements.                 

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                      Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 Consumer Goods -- continued                                    
      42,700     Hasbro Inc                                         1,147,563   
      71,200     Jones Apparel Group Inc                            3,573,350   
      89,000     Liz Claiborne Inc                                  3,966,063   
      96,500     Moore Corp Ltd                                     1,911,906   
     175,100     Newell Co                                          6,894,563   
      14,300     Nike Inc, Class B                                    763,263   
     276,700     Procter and Gamble Co                             36,818,393   
     170,700     Reebok International Ltd                           7,500,131   
     104,900     Sunbeam Corp                                       4,615,600   
     120,800     VF Corp                                           10,675,700   
                                                                 -------------  
                                                                  130,656,195   
                                                                 -------------  

                 Electronic Equipment -- 0.8%                                   
      13,200     Arrow Electronics Inc *                              810,975   
      51,300     Cooper Industries Inc                              2,734,931   
      17,400     Harris Corp Inc                                    1,515,975   
       5,000     Hubbell Inc, Class B                                 229,375   
      41,800     Litton Industries *                                2,084,775   
     183,900     Motorola Inc                                      13,493,663   
      61,100     Texas Instruments                                  6,942,488   
                                                                 -------------  
                                                                   27,812,182   
                                                                 -------------  

                 Environmental Control -- 0.1%                                  
     201,700     Wheelabrator Technology Inc                        3,164,169   
                                                                 -------------  

                 Food and Beverage -- 6.8%                                      
     696,500     Anheuser Busch Cos Inc                            29,688,312   
   1,041,768     Archer Daniels Midland Co                         22,528,228   
     111,700     Campbell Soup Co                                   5,180,088   
     691,800     Coca Cola Co                                      39,648,787   
     401,300     Coca Cola Enterprises Inc                         11,035,750   
     375,200     CPC International Inc                             33,439,699   
      40,550     Dean Foods Co                                      1,799,406   
     353,300     Heinz (HJ) Co                                     14,706,113   
       1,000     Hormel (Geo A) and Co                                 29,750   
     190,800     IBP Inc                                            4,376,475   
      66,400     RJR Nabisco Holdings Corp                          2,311,550   
     649,700     Sara Lee Corp                                     26,150,425   
     290,100     Seagrams Co Ltd                                   10,135,369   
     153,600     Unilever NV ADR                                   30,911,999   
      13,900     Universal Foods Corp                                 539,494   
     175,600     Whitman Corp                                       4,302,200   

             See accompanying notes to the financial statements.             3

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments--(Continued)                                            
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares       Description                                      Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 Food and Beverage -- continued                                 
      18,100     Wrigley (William Jr) Co                            1,312,250   
                                                                -------------   
                                                                  238,095,895   
                                                                -------------   

                 Health Care -- 1.6%                                            
      19,400     Becton Dickinson & Co                                929,988   
     119,600     Columbia HCA Healthcare Corp                       3,774,875   
      51,000     Hillenbrand Industries Inc                         2,240,813   
     215,200     Johnson & Johnson                                 12,199,150   
     169,100     Mallinckrodt Inc                                   6,151,013   
      55,300     McKesson Corp                                      5,180,919   
     295,900     Pharmacia & Upjohn Inc                            10,079,094   
     379,750     Tenet Healthcare Corp *                           10,348,188   
     113,800     United States Surgical Corp                        3,748,288   
      32,400     Wellpoint Health Network *                         1,761,750   
                                                                -------------   
                                                                   56,414,078   
                                                                -------------   

                 Insurance -- 4.2%                                              
     182,800     AFLAC Corp                                        10,065,425   
      73,500     AMBAC Inc                                          5,939,719   
      20,100     CNA Financial Corp *                               2,280,094   
     551,900     Conseco Inc                                       23,731,700   
     174,500     Lincoln National Corp                             11,680,594   
     194,000     Loews Corp                                        19,775,875   
      78,200     MBIA Inc                                           8,856,150   
      89,400     Old Republic International Corp                    3,212,813   
     107,700     Progressive Corp                                  10,662,300   
      50,000     Reliastar Financial Corp                           3,737,500   
     209,200     Safeco Corp                                       10,276,950   
     194,800     Saint Paul Cos Inc                                14,293,450   
     188,200     Torchmark Corp                                     7,092,788   
     107,809     Transamerica Corp                                 10,625,925   
      41,700     Transatlantic Holding Inc                          2,947,669   
                                                                -------------   
                                                                  145,178,952   
                                                                -------------   

                 Machinery -- 1.4%                                              
     403,800     Applied Materials Inc *                           38,108,624   
      71,200     Cummins Engine Inc                                 5,477,950   
      47,400     FMC Corp *                                         3,937,163   
                                                                -------------   
                                                                   47,523,737   
                                                                -------------   

4             See accompanying notes to the financial statements.               

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments--(Continued)                                            
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares       Description                                      Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 Manufacturing -- 5.5%                                          
     232,500     Corning Inc                                       12,293,438   
     990,300     General Electric Co                               61,893,749   
      42,800     Gillette Co                                        3,544,375   
     615,400     IBM Corp                                          62,078,474   
     179,000     International Game Technology                      3,580,000   
      88,800     Leggett & Platt Inc                                3,818,400   
     171,500     Minnesota Mining And Manufacturing Co             15,413,563   
     111,100     Owens Illinois Inc *                               3,867,669   
     105,500     Temple Inland Inc                                  6,804,750   
     202,900     Tyco International Ltd *                          15,914,969   
      38,600     United Technologies Corp                           3,013,213   
                                                                -------------   
                                                                  192,222,600   
                                                                -------------   

                 Metals and Mining -- 0.1%                                      
      59,800     Phelps Dodge Corp                                  4,810,163   
                                                                -------------   

                 Oil and Gas -- 7.5%                                            
     209,400     Apache Corp                                        8,310,563   
     433,000     Atlantic Richfield Co                             32,474,999   
      46,500     Burlington Resources Inc                           2,354,063   
     184,400     Chevron Corp                                      14,279,475   
      61,200     Columbia Natural Gas Systems Inc                   4,039,200   
     117,100     El Paso Natural Gas Co                             6,586,875   
         200     Ensco International Inc                               12,700   
     870,800     Exxon Corp                                        53,282,074   
       2,100     FINA Inc, Class A                                    138,600   
      52,500     Mobil Corp                                         3,819,375   
     147,700     Occidental Petroleum Corp                          3,461,719   
      53,200     Oryx Energy Co *                                   1,406,475   
      65,900     Pennzoil Co                                        5,086,656   
     389,200     Phillips Petroleum Co                             18,511,325   
     272,000     Schlumberger Ltd                                  20,723,000   
     199,600     Sonat Inc                                          9,942,575   
     235,800     Texaco Inc                                        27,175,950   
     342,700     Union Pacific Resources Group                      8,567,500   
     490,800     Unocal Corp                                       19,171,875   
     670,500     USX - Marathon Group                              21,833,156   
                                                                -------------   
                                                                  261,178,155   
                                                                -------------   

                 Paper and Allied Products -- 1.3%                              
      75,500     Champion International Corp                        4,468,656   
      76,900     Fort James Corp                                    3,229,800   

              See accompanying notes to the financial statements.              5

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Paper and Allied Products -- continued                         
     298,900     International Paper Co                            15,766,975   
      92,900     Mead Corp                                          6,590,094   
      79,000     Sonoco Products Co                                 2,572,438   
     183,200     Westvaco Corp                                      6,205,900   
      69,600     Willamette Industries Inc                          5,550,600   
                                                                 -------------  
                                                                   44,384,463   
                                                                 -------------  

                 Pharmaceuticals -- 7.5%                                        
   1,190,800     Abbott Laboratories                               71,373,574   
      97,200     Allergan Inc                                       3,146,850   
      87,240     American Home Products Corp                        6,281,280   
   1,080,400     Bristol Myers Squibb Co                           82,110,399   
      71,600     Lilly (Eli) & Co                                   7,491,150   
     420,700     Merck & Co Inc                                    38,625,518   
      87,500     Pfizer Inc                                         4,845,313   
     343,500     Schering Plough Corp                              16,488,000   
     250,200     Warner Lambert Co                                 31,791,037   
                                                                 -------------  
                                                                  262,153,121   
                                                                 -------------  

                 Primary Materials -- 0.1%                                      
      46,400     Rubbermaid Inc                                     1,160,000   
      37,400     Vulcan Materials Co                                3,286,525   
                                                                 -------------  
                                                                    4,446,525   
                                                                 -------------  

                 Primary Processing -- 0.3%                                     
      66,800     Du Pont (EI) De Nemours & Co                       4,162,475   
     129,700     USX-US Steel Group Inc                             4,555,713   
                                                                 -------------  
                                                                    8,718,188   
                                                                 -------------  

                 Refining -- 0.8%                                               
      23,300     Murphy Oil Corp                                    1,250,919   
     415,700     Royal Dutch Petroleum                             21,096,775   
     182,600     Tosco Corp                                         6,037,213   
                                                                 -------------  
                                                                   28,384,907   
                                                                 -------------  

                 Retail Trade -- 4.5%                                           
     474,800     Albertsons Inc                                    16,321,250   
     556,900     American Stores Co                                13,191,569   
     564,500     Costco Cos Inc *                                  20,357,281   
     356,700     Dayton Hudson Corp                                20,331,900   
       4,900     DG Corp                                              203,044   
      54,800     Dillards Department Stores Inc                     2,192,000   

6             See accompanying notes to the financial statements.               

N-30D 362nd Page of 667 TOC 1st Previous Next ↓Bottom Just 362nd
GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                        Value ($)      
-----------------------------------------------------------------------------------
                                                                                   
                 Retail Trade -- continued                                         
     163,300     Fruit of the Loom Inc *                            4,368,275      
   1,600,000     Kmart Corp *                                      22,200,000      
     277,000     Limited Inc                                        6,301,750      
      29,600     Penney (JC) Co Inc                                 1,776,000      
     139,800     Rite Aid Corp                                      6,998,738      
     239,870     Safeway Inc *                                     12,218,353      
      98,600     TJX Cos Inc                                        2,711,500      
      68,900     Toys R Us Inc *                                    2,381,356      
     686,600     Wal Mart Stores Inc                               24,374,300      
                                                                 -------------     
                                                                  155,927,316      
                                                                 -------------     

                 Services -- 0.3%                                                  
      14,900     BHC Communications Inc, Class A                    1,828,975      
      65,900     Disney Walt Co                                     5,061,944      
       5,000     Fleming Cos Inc                                       94,375      
     126,300     Supervalu Inc                                      4,957,275      
                                                                 -------------     
                                                                   11,942,569      
                                                                 -------------     

                Technology -- 10.6%                                                
    343,900     Advanced Micro Devices Inc *                       12,874,756      
     96,800     Avnet Inc                                           6,697,350      
     43,700     Cisco Systems Inc *                                 3,293,888      
    596,800     Dell Computer Corp                                 48,974,899      
     43,000     Grainger (WW) Inc                                   3,818,938      
  1,413,600     Intel Corp                                        130,227,899      
    804,500     Microsoft Corp                                    106,344,843      
    109,150     Oracle Corp                                         4,161,344      
    260,600     Seagate Technology Corp                             9,951,663      
    262,500     Storage Technology Corp *                          13,371,094      
    128,000     Teradyne Inc *                                      7,128,000      
    323,200     Xerox Corp                                         24,401,600      
                                                                 -------------     
                                                                  371,246,274      
                                                                 -------------     

                Telecommunications -- 4.8%                                         
  1,442,400     AT & T Corp                                        56,253,599      
    278,958     Bell Atlantic Corp                                 20,189,556      
     17,700     Bellsouth Corp                                        778,800      
     72,200     Cincinnati Bell Inc                                 1,944,888      
    242,500     GTE Corp                                           10,806,406      
    868,300     MCI Communications Corp                            24,746,550      
    175,601     SBC Communications                                  9,548,295      

              See accompanying notes to the financial statements.              7

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Telecommunications -- continued                                

     841,800     Sprint Corp                                        39,564,599  
     152,000     US West Inc                                         5,443,500  
                                                                 -------------  
                                                                   169,276,193  
                                                                 -------------  

                 Tobacco -- 1.1%                                                

     873,600     Philip Morris Cos Inc                              38,110,799  
                                                                 -------------  

                 Transportation -- 1.8%                                         

     410,300     Burlington Northern Santa Fe Railroad Co           37,619,380  
     149,700     CSX Corp                                            8,560,969  
     174,600     Federal Express Corp                               11,599,988  
      79,900     Ryder System Inc                                    2,851,431  
      53,100     UAL Corp *                                          4,045,556  
                                                                 -------------  
                                                                    64,677,324  
                                                                 -------------  

                 Utilities -- 7.7%                                              

     434,600     AES Corp                                           16,080,200  
     207,300     Allegheny Power System Inc                          6,024,656  
     305,900     American Electric Power Inc                        13,364,006  
     460,200     Baltimore Gas and Electric Co                      12,425,400  
     143,400     Carolina Power and Light Co                         4,839,750  
      42,300     Central & South West Corp                             875,081  
     396,300     Cinergy Corp                                       13,102,669  
     133,724     Citizens Utilities, Class B                         1,119,939  
     178,700     CMS Energy Corp                                     6,422,031  
     131,800     Coastal Corp                                        7,611,450  
     286,000     Dominion Resources Inc                             10,296,000  
     209,100     DPL Inc                                             4,953,056  
     154,200     DQE Inc                                             4,895,850  
     275,200     Duke Power Co                                      13,330,000  
     739,300     Edison International                               17,835,613  
      23,800     Enova Corp                                            571,200  
     730,700     Entergy Corp                                       18,130,494  
     218,900     Florida Progress Corp                               7,045,844  
     909,498     Houston Industries Inc                             18,417,327  
     207,900     Illinova Corp                                       4,781,700  
      93,600     LG&E Energy Corp                                    2,117,700  
     246,100     Long Island Lighting Co                             6,075,594  
      77,600     New Century Energies Inc *                          3,133,100  
      94,000     Nipsco Industries Inc                               3,836,375  
      78,100     Northern States Power Co                            3,758,563  
       7,800     Ohio Edison Co                                        171,600  

8           See accompanying notes to the financial statements.                 

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


  Par Value($)/                                                                 
     Shares         Description                                        Value ($)
--------------------------------------------------------------------------------
                                                                                
                    Utilities -- continued                                      

     428,300        Pacificorp                                         8,887,225
      99,100        PG & E Corp                                        2,297,881
     150,700        Potomac Electric Power Co                          3,419,006
      47,100        PP & L Resources Inc                               1,033,256
     102,800        Scana Corp                                         2,480,050
   1,436,100        Southern Co                                       30,247,855
     143,300        Teco Energy Inc                                    3,448,156
     355,800        Texas Utilities Co                                12,408,525
     139,800        Wisconsin Energy Corp                              3,573,638
                                                                   -------------
                                                                     269,010,790
                                                                   -------------
                    TOTAL COMMON STOCKS  (COST  $2,577,016,015)    3,196,756,428
                                                                   -------------
                    SHORT-TERM INVESTMENTS -- 15.6%                             

                    Cash Equivalents -- 6.5%                                    

 $48,364,924        BankBoston Eurodollar Time Deposit, 5.7875%                 
                    due 9/2/97/(a)/                                   48,364,924
  $5,196,064        First Union National Bank of North Carolina                 
                    Eurodollar Time Deposit, 5.5625% due                        
                    9/2/97/(a)/                                        5,196,064
 $14,188,190        Harris Bank and Trust Eurodollar Time                       
                    Deposit, 5.625% due 9/2/97/(a)/                   14,188,190

 107,444,941        Merrimac Cash Fund Premium Class/(a)/            107,444,941
 $51,000,000        Prudential Securities Group Inc Master Note,                
                    5.8875% due 9/2/97/(a)/                           51,000,000
                                                                   -------------
                                                                     226,194,119
                                                                   -------------
                    U.S. Government -- 0.4%                                     

 $12,700,000        U.S. Treasury Bill, 5.22% due 11/28/97/(b)/       12,543,765
                                                                   -------------
                    Repurchase Agreements -- 8.7%                               

$175,040,721        Salomon Brothers Repurchase Agreement, dated                
                    8/29/97, due 9/2/97, with a maturity value of               
                    $175,138,938 and an effective yield of 5.05%,               
                    collateralized by U.S. Treasury Obligations                 
                    with rates ranging from 5.00% to 6.75%, with                
                    maturity dates ranging from 2/15/99 to                      
                    8/15/26 and with an aggregate market value of               
                    $179,051,781.                                    175,040,721

$129,578,425        Prudential Securities, Inc. Repurchase                      
                    Agreement, dated 8/29/97, due 9/2/97, with a                
                    maturity value of $129,650,269 and an                       
                    effective yield of 4.99%, collateralized by                 
                    U.S. Government and Agency Obligations with                 
                    rates ranging from 5.337% to 8.000%, with                   
                    maturity dates ranging from 5/31/99 to 1/1/35               
                    and an aggregate market value of $132,170,434.   129,578,425
                                                                   -------------
                                                                     304,619,146
                                                                   -------------

              See accompanying notes to the financial statements.              9

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


                                                                               Value ($)   
-------------------------------------------------------------------------------------------
                                                                                           

                 TOTAL SHORT-TERM INVESTMENTS                                              
                 (COST  $543,350,758)                                      $  543,357,030  
                                                                           --------------  

                 TOTAL INVESTMENTS -- 107.1%                                               
                 (COST $3,120,366,773)                                      3,740,113,458  

                 Other Assets and Liabilities (net) -- (7.1)%                (247,130,754) 
                                                                           --------------  

                 TOTAL NET ASSETS -- 100%                                  $3,492,982,704  
                                                                           ==============  

Notes to the Schedule of Investments:                 

ADR - American Depositary Receipt                     

* Non-income producing security.                          

   /(a)/ Represents investments of security lending collateral (Note 1).

     /(b)/ Security has been segregated to cover margin requirements on open
financial futures contracts.                          

10            See accompanying notes to the financial statements.               

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              

Assets:                                                                       
   Investments, at value (cost $3,120,366,773) (Note 1)         $3,740,113,458
   Receivable for investments sold                                  37,361,942
   Dividends and interest receivable                                 6,005,726
   Receivable for open swap contracts (Notes 1 and 6)                4,110,228
   Receivable for variation margin on open futures contracts                  
     (Notes 1 and 6)                                                   894,043
   Receivable for expenses waived or borne by Manager (Note 2)         597,191
   Receivable for Fund shares sold                                   4,230,538
   Miscellaneous receivable                                              5,931
                                                                --------------

      Total assets                                               3,793,319,057
                                                                --------------

Liabilities:                                                                  
   Payable for investments purchased                                60,838,426
   Payable upon return of securities loaned (Note 1)               226,194,119
   Payable for Fund shares repurchased                              11,215,936
   Payable to affiliate for (Note 2):                                         
     Management fee                                                  1,439,773
     Shareholder service fee                                           414,956
   Accrued expenses                                                    233,143
                                                                --------------

      Total liabilities                                            300,336,353
                                                                --------------

Net assets                                                      $3,492,982,704
                                                                ==============

Net assets consist of:                                                        
   Paid-in-capital                                              $2,600,901,234
   Accumulated undistributed net investment income                   9,554,200
   Accumulated undistributed net realized gain                     264,935,429
   Net unrealized appreciation                                     617,591,841
                                                                --------------
                                                                $3,492,982,704
                                                                ==============

Net assets attributable to:                                                   
   Class I shares                                               $   12,304,728
                                                                ==============
   Class II shares                                              $   39,157,489
                                                                ==============
   Class III shares                                             $3,441,520,487
                                                                ==============

Shares outstanding:                                                           
   Class I                                                             637,713
                                                                ==============
   Class II                                                          2,030,993
                                                                ==============
   Class III                                                       178,331,768
                                                                ==============

Net asset value per share:                                                    
   Class I                                                      $        19.30
                                                                ==============
   Class II                                                     $        19.28
                                                                ==============
   Class III                                                    $        19.30
                                                                ==============

             See accompanying notes to the financial statements.            11

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Investment Income:                                                             
   Dividends (net of withholding taxes of $3,793)                 $ 29,429,375 
   Interest (including securities lending income of $29,155)         6,852,294 
                                                                  ------------ 

      Total income                                                  36,281,669 
                                                                  ------------ 

Expenses:                                                                      
   Management fee (Note 2)                                           8,440,695 
   Custodian and transfer agent fees                                   239,637 
   Legal fees                                                           71,562 
   Audit fees                                                           29,078 
   Trustees fees (Note 2)                                               16,604 
   Miscellaneous                                                        10,342 
   Fees waived or borne by Manager (Note 2)                         (3,502,338)
                                                                  ------------ 
                                                                     5,305,580 
   Shareholder service fee (Note 2)                                            
      Class I                                                           14,445 
      Class II                                                          71,143 
      Class III                                                      2,355,128 
                                                                  ------------ 
      Net expenses                                                   7,746,296 
                                                                  ------------ 

        Net investment income                                       28,535,373 
                                                                  ------------ 

Realized and unrealized gain (loss):                                           
   Net realized gain (loss) on:                                                
      Investments                                                  238,777,934 
      Closed futures contracts                                      29,185,386 
      Closed swap contracts                                         (7,698,505)
                                                                  ------------ 

        Net realized gain                                          260,264,815 
                                                                  ------------ 

   Change in net unrealized appreciation (depreciation) on:                    
      Investments                                                  210,513,756 
      Open futures contracts                                        (4,894,098)
      Open swap contracts                                           10,037,664 
                                                                  ------------ 

        Net unrealized gain                                        215,657,322 
                                                                  ------------ 

      Net realized and unrealized gain                             475,922,137 
                                                                  ------------ 

Net increase in net assets resulting from operations              $504,457,510 
                                                                  ============ 

12            See accompanying notes to the financial statements.               

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                           Six Months                         
                                                              Ended                           
                                                         August 31, 1997        Year Ended    
                                                           (Unaudited)      February  28, 1997
                                                         ----------------  -------------------
                                                                                              
Increase (decrease) in net assets:                                                            
Operations:                                                                                   
   Net investment income                                  $ 28,535,373        $  56,560,600   
   Net realized gain                                       260,264,815          857,162,171   
   Change in net unrealized appreciation (depreciation)    215,657,322         (272,499,847)  
                                                         -------------       --------------   
   Net increase in net assets resulting from operations    504,457,510          641,222,924   
                                                         -------------       --------------   
Distributions to shareholders from:                                                           
   Net investment income                                                                      
       Class I                                                 (74,956)             (60,981)  
       Class II                                               (513,250)            (622,038)  
       Class III                                           (23,771,559)         (60,383,941)  
                                                         -------------       --------------   
       Total distributions from net investment income      (24,359,765)         (61,066,960)  
                                                         -------------       --------------   
   Net realized gains                                                                         
       Class I                                              (1,989,360)            (574,148)  
       Class II                                            (12,616,955)          (6,542,685)  
       Class III                                          (555,275,629)        (430,596,024)  
                                                         -------------       --------------   
       Total distributions from net realized gains        (569,881,944)        (437,712,857)  
                                                         -------------       --------------   
                                                          (594,241,709)        (498,779,817)  
                                                         -------------       --------------   
   Net share transactions: (Note 5)                                                           
       Class I                                               3,642,439            8,598,090   
       Class II                                            (24,586,852)          65,659,589   
       Class III                                           478,499,701         (270,803,491)  
                                                         -------------       --------------   
   Increase (decrease) in net assets resulting from net                                       
      share transactions                                   457,555,288         (196,545,812)  
                                                         -------------       --------------   
      Total increase (decrease) in net assets              367,771,089          (54,102,705)  

Net assets:                                                                                   
   Beginning of period                                   3,125,211,615        3,179,314,320   
                                                         -------------       --------------   
   End of period (including accumulated undistributed                                         
      net investment income of $9,554,200 and                                                 
      $5,378,592, respectively)                          $3,492,982,704      $3,125,211,615   
                                                         ==============      ==============   

             See accompanying notes to the financial statements.              13

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                      Six Months                                 
                                                         Ended       Period from July 2, 1996    
                                                    August 31, 1997  (commencement of operations)
                                                      (Unaudited)      to February 28, 1997      
                                                    ---------------- --------------------------  
                                                                                                 
Net asset value, beginning of period                    $20.12                $ 18.97            
                                                        ------                -------            
Income from investment operations:                                                               
   Net investment income                                  0.17+                  0.20            
   Net realized and unrealized gain                       3.06                   2.88            
                                                        ------                -------            
      Total from investment operations                    3.23                   3.08            
                                                        ------                -------            
Less distributions to shareholders:                                                              
   From net investment income                            (0.15)                 (0.19)           
   From net realized gains                               (3.90)                 (1.74)           
                                                        ------                -------            
      Total distributions                                (4.05)                 (1.93)           
                                                        ------                -------            
Net asset value, end of period                          $19.30                $ 20.12            
                                                        ======                =======            

Total Return /(a)/                                       17.02%                 16.84%           

Ratios/Supplemental Data:                                                                        
   Net assets, end of period (000's)                   $12,305                $ 9,104            
   Net expenses to average daily net assets               0.61%*                 0.61%*          
   Net investment income to average daily net assets      1.65%*                 1.55%*          
   Portfolio turnover rate                                  31%                   107%           
   Average broker commission rate per equity share     $0.0301                $0.0297            
   Fees and expenses voluntarily waived or borne                                                 
      by the Manager consisted of the following                                                  
      per share amounts:                                $ 0.02                $  0.02            

+   Computed using average shares outstanding throughout the period.            
(a) Calculation excludes purchase premiums. The total returns would have been   
lower had certain expenses not been waived during the periods shown.    
*   Annualized.                                                                 

14                     See accompanying notes to the financial statements.      

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                      Six Months Ended   Period from June 7, 1996  
                                                      August 31, 1997  (commencement of operations)
                                                        (Unaudited)        to February 28, 1997    
                                                      ---------------- ----------------------------
                                                                                                   
Net asset value, beginning of period                     $ 20.10                $ 20.12            
                                                         -------                -------            

Income from investment operations:                                                                 
   Net investment income                                    0.17+                  0.25            
   Net realized and unrealized gain                         3.07                   2.92            
                                                         -------                -------            

      Total from investment operations                      3.24                   3.17            
                                                         -------                -------            

Less distributions to shareholders:                                                                
   From net investment income                              (0.16)                 (0.30)           
   From net realized gains                                 (3.90)                 (2.89)           
                                                         -------                -------            

      Total distributions                                  (4.06)                 (3.19)           
                                                         -------                -------            
Net asset value, end of period                           $ 19.28                $ 20.10            
                                                         =======                =======            

Total Return/(a)/                                          17.00%                 17.46%           

Ratios/Supplemental Data:                                                                          
   Net assets, end of period (000's)                     $39,157                $64,763            
   Net expenses to average daily net assets                 0.55%*                 0.55%*          
   Net investment income to average daily net assets        1.68%*                 1.63%*          
   Portfolio turnover rate                                    31%                   107%           
   Average broker commission rate per equity share       $0.0301                $0.0297            
   Fees and expenses voluntarily waived or borne                                                   
      by the Manager consisted of the following          $  0.02                $  0.03            
      per share amounts:                                                                           

+  Computed using average shares outstanding throughout the period.         
/(a)/Calculation excludes purchase premiums. The total returns would have been  
lower had certain expenses not been waived during the periods shown.  
*  Annualized.                                                              

             See accompanying notes to the financial statements.              15

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                            Six Months                                                            
                              Ended                                                               
                            August 31,                                                            
                               1997                    Year Ended February 28/29,                 
                                        ----------------------------------------------------------
                            (Unaudited)    1997        1996        1995        1994        1993   
                            ----------- ----------  ----------  ----------  ----------  ----------
                                                                                                  
Net asset value,                                                                                  
   beginning of period      $   20.12   $   19.46   $   15.45   $   15.78   $   15.73   $   15.96 
                            ----------  ----------  ----------  ----------  ----------  ----------

Income from investment operations:                                                                
   Net investment income         0.18+       0.36        0.41        0.41        0.42        0.45 
   Net realized and                                                                               
      unrealized gain            3.06        3.58        5.49        0.66        1.59        1.13 
                            ----------  ----------  ----------  ----------  ----------  ----------

      Total from                                                                                  
      investment                                                                                  
      operations                3.24        3.94        5.90        1.07        2.01        1.58  
                            ----------  ----------  ----------  ----------  ----------  ----------

Less distributions to shareholders:                                                               
   From net investment                                                                            
      income                    (0.16)      (0.39)      (0.42)      (0.39)      (0.43)      (0.46)
   From net realized                                                                              
      gains                     (3.90)      (2.89)      (1.47)      (1.01)      (1.53)      (1.35)
                            ----------  ----------  ----------  ----------  ----------  ----------

      Total distributions       (4.06)      (3.28)      (1.89)      (1.40)      (1.96)      (1.81)
                            ----------  ----------  ----------  ----------  ----------  ----------
Net asset value, end                                                                              
   of period                $   19.30   $   20.12   $   19.46   $   15.45   $   15.78   $   15.73 
                            ==========  ==========  ==========  ==========  ==========  ==========

Total Return /(a)/              17.07%      22.05%      39.08%       7.45%      13.36%      10.57%

Ratios/Supplemental Data:                                                                         
   Net assets, end of                                                                             
      period (000's)       $3,441,520  $3,051,344  $3,179,314  $2,309,248  $1,942,005  $1,892,955 
   Net expenses to                                                                                
      average daily                                                                               
      net assets                 0.48%*      0.48%       0.48%       0.48%       0.48%       0.49%
   Net investment income                                                                          
      to average daily           1.78%*      1.78%       2.25%       2.63%       2.56%       2.79%
      net assets                                                                                  
   Portfolio turnover rate         31%        107%         77%         99%         40%         54%
   Average broker                                                                                 
      commission rate per                                                                         
      equity share /(b)/   $   0.0301   $  0.0297         N/A         N/A         N/A         N/A 
   Fees and expenses                                                                              
      voluntarily waived                                                                          
      or borne by the                                                                             
      Manager consisted                                                                           
      of the following                                                                            
      per share amounts:   $     0.02   $    0.04   $    0.01   $    0.01   $    0.01   $    0.01 

*     Annualized.                                                               
+     Computed using average shares outstanding throughout the period.          
/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            

16                     See accompanying notes to the financial statements.      

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

     GMO Core Fund (the "Fund") is a series of GMO Trust (the "Trust"). The Fund
   is registered under the Investment Company Act of 1940, as amended, as an
  open-end, diversified management investment company. The Fund is advised
 and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or
   "GMO"). The Trust was established as a Massachusetts Business Trust under
the laws of the Commonwealth of Massachusetts on June 24, 1985. The   
    Declaration of Trust permits the Trustees 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 a total return greater than that of the Standard & Poor's
  500 Stock Index through investment of substantially all of its assets in
   common stocks chosen from the Wilshire 5000 Index and primarily in common
stocks chosen from among the 1,200 companies with the largest equity  
capitalization whose securities are listed on a United States national
  securities exchange, and/or shares of other domestic equity funds of the
trust.                                                                

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
Class II, and Class III. The principal economic difference among the  
classes of shares is the level of shareholder service fee borne by the
classes. Eligibility for and automatic conversion between the various 
     classes of shares is generally based on the total amount of assets invested
with GMO, as more fully outlined in the Trust's prospectus. Class III 
 shares are the continuation of the Trust's shares that existed prior to
June 1, 1996, and bear the same total operating expenses (after the   
voluntary expense waiver) as those shares.                            

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     

The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S.             

                                                                              17

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   government obligations in accordance with the initial margin requirements
     of the broker or exchange. Futures contracts are marked to market daily and
  an appropriate payable or receivable for the change in value ("variation
   margin") is recorded by the Fund. The payable or receivable is liquidated
on the following business day. Gains or losses are recognized but not 
considered realized until the contracts expire or are closed. Futures 
contracts involve, to varying degrees, risk of loss in excess of the  
variation margin disclosed in the Statement of Assets and Liabilities.
     Losses may arise from changes in the value of the underlying instrument, if
there is an illiquid secondary market for the contracts, or if        
   counterparties do not perform under the contract terms. Futures contracts
 are valued at the settlement price established each day by the board of
     trade or exchange on which they are traded. See Note 6 for all open futures
contracts held as of August 31, 1997.                                 

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
    loaned securities having a market value of $217,592,899, collateralized by
cash in the amount of $226,194,119, which was invested in short-term  
instruments.                                                          

Swap agreements                                                       

The Fund may enter into swap agreements to manage its exposure to the 
    equity markets. A swap is an agreement to exchange the return generated by
 one instrument for the return generated by another instrument. The Fund
    enters into equity swap agreements which involve a commitment by one party
 in the agreement to pay interest in exchange for a market linked return
based on a notional amount. To the extent that the total return of the
    security or index underlying the transaction exceeds or falls short of the
   offsetting interest rate obligation, the Fund will receive a payment from
or make a payment to the counterparty, respectively. Equity swaps are 
 marked to market daily based upon quotations from market makers and the
    change, if any, is recorded as unrealized gain or loss in the Statement of
    Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations. 
  Entering into these agreements involves, to varying degrees, elements of
     credit and market risk in excess of the amounts recognized on the Statement
     of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these                                            

18                                                                              

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

agreements, that the counterparty to the agreements may default on its
obligation to perform, or that there may be unfavorable changes in the
  price of the security or index underlying these transactions. See Note 6
for a summary of all open swap agreements as of August 31, 1997.      

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      

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

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .14% of the amount    
    invested. Prior to June 1, 1996, the premium on cash purchases was .17% of
the amount invested. All purchase premiums are paid to                

                                                                              19

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

and recorded as paid-in capital by the Fund. For the six months ended 
    August 31, 1997, the Fund received $196,853 in purchase premiums. There is
no premium for cash redemptions, reinvested distributions or in-kind  
transactions.                                                         

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .525% of
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .33% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .48%;
thus, the net annual expense ratio after the waiver for a Class III   
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $16,604. 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 six months ended August 31, 1997,     
aggregated $908,055,570 and $1,154,788,973, respectively.             

At August 31, 1997, the cost for Federal income tax purposes and gross
     unrealized appreciation and deprecation in value of investments held was as
follows:                                                              

                                                        [Enlarge/Download Table]


                           Gross Unrealized         Gross Unrealized        Net Unrealized    
    Aggregate Cost           Appreciation             Depreciation           Appreciation     
----------------------  ----------------------  ----------------------  ----------------------
                                                                                              
   $3,120,366,773            $ 647,227,901            $ 27,481,216         $ 619,746,685      

4.   Principal shareholder                                                      

    At August 31, 1997, 10% of the outstanding shares of the Fund were held by
one shareholder.                                                      

20                                                                              

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]


                                                                       Period from July 2, 1996     
                                        Six Months Ended             (commencement of operations)   
 Class I:                                August 31, 1997                 to February 28, 1997       
                                 --------------------------------  ---------------------------------
                                     Shares            Amount         Shares             Amount     
                                 --------------    --------------  --------------    ---------------
                                                                                                    
Shares sold                           76,715       $   1,635,079         422,178      $  8,023,942  
Shares issued to shareholders in                                                                    
 reinvestment of distribution        108,520           2,007,960          30,330           574,148  
Shares repurchased                       (30)               (600)             --                --  
                                 --------------    --------------  --------------    ---------------
Net increase                         185,205       $   3,642,439         452,508       $ 8,598,090  
                                 ==============    ==============  ==============    ===============


                                                                      Period from June 7, 1996      
                                        Six Months Ended            (commencement of operations)    
Class II:                               August 31, 1997                 to February 28, 1997        
                                 --------------------------------  ---------------------------------
                                     Shares            Amount         Shares             Amount     
                                 --------------    --------------  --------------    ---------------
                                                                                                    
Shares sold                               --       $         --        2,843,284      $  58,494,866 
Shares issued to shareholders in                                                                    
 reinvestment of distributions       709,887         13,117,185          378,119          7,164,723 
Shares repurchased                (1,900,297)       (37,704,037)              --                 -- 
                                 --------------    --------------  --------------    ---------------
Net increase (decrease)           (1,190,410)      $(24,586,852)       3,221,403      $  65,659,589 
                                 ==============    ==============  ==============    ===============



                                         Six Months Ended                     Year Ended            
 Class III:                              August 31, 1997                  February 28, 1997         
                                  -------------------------------  ---------------------------------
                                     Shares            Amount         Shares             Amount     
                                 --------------    --------------  --------------    ---------------
                                                                                                    
 Shares sold                        17,473,181     $ 343,374,583     15,209,862      $  294,136,127 
 Shares issued to shareholders in                                                                   
  reinvestment of distributions     30,676,388       567,872,589     25,657,273         468,161,533 
 Shares repurchased                (21,493,483)     (432,747,471)   (51,595,821)     (1,033,101,151)
                                 --------------    --------------  --------------    ---------------
 Net increase (decrease)            26,656,086     $ 478,499,701    (11,725,686)     $ (270,803,491)
                                 ==============    ==============  ==============    ===============

                                                                              21

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Long futures contracts                                                

                                                        [Enlarge/Download Table]


  Number of                                                                Net Unrealized  
  Contracts           Type         Expiration Date       Contract Value     Depreciation   
---------------  ---------------  -------------------  ------------------  ----------------
                                                                                           
        545         S&P 500         September 1997        $   246,094,750    $  6,265,072  
                                                                           ================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                  

Swap agreements                                                       

                                                        [Enlarge/Download Table]

                                                                                    Unrealized    
    Notional Amount      Expiration                                                Appreciation   
   Fund/Counterparty        Date                     Description                  (Depreciation)  
  ---------------------  ------------  -----------------------------------------  ----------------
                                                                                                  
$     106,169,066/         9/11/97     Agreement with Morgan Stanley Capital      $    6,217,894  
      102,378,940                      Services, Inc. dated September 9, 1996                     
                                       to pay (receive) the notional amount                       
                                       multiplied by the return on the                            
                                       Standard & Poor's 500 Index (including                     
                                       dividends) less the notional amount                        
                                       multiplied by 6 month LIBOR adjusted                       
                                       by a specified spread and to receive                       
                                       (pay) the change in market value of a                      
                                       basket of selected securities                              
                                       (including dividends) less the                             
                                       counterparty's notional amount                             
                                       multiplied by 6 month LIBOR adjusted                       
                                       by a specified spread .                                    

      15,380,772/          10/2/97     Agreement with Morgan Stanley Capital            770,708   
      14,350,837                       Services, Inc. dated 8/20/97 to pay                        
                                       (receive) the notional amount                              
                                       multiplied by the return on the                            
                                       Standard & Poor's 500 Index (including                     
                                       dividends) less the notional amount                        
                                       multiplied by LIBOR adjusted by a                          
                                       specified spread and to receive (pay)                      
                                       the counterparty's notional amount                         
                                       multiplied by the return on the                            
                                       Russell 2000 Index (including                              
                                       dividends) less the notional amount                        
                                       multiplied by LIBOR adjusted by a                          
                                       specified spread.                                          

22                                                                              

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements -- (Continued)                                        

                                                        [Enlarge/Download Table]


                                                                                  Unrealized    
  Notional Amount      Expiration                                                Appreciation   
 Fund/Counterparty        Date                     Description                  (Depreciation)  
---------------------  ------------  -----------------------------------------  ----------------
                                                                                                
$     27,853,318/         10/7/97    Agreement with Morgan Stanley Capital      $     579,432   
      24,427,455                     Services, Inc. dated December 30, 1996                     
                                     to pay (receive) the notional amount                       
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread and to receive                       
                                     (pay) the counterparty's notional                          
                                     amount multiplied by the return on the                     
                                     Russell 2000 Index (including                              
                                     dividends) less the notional amount                        
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread.                                     

    107,930,602/         5/6/98      Agreement with NatWest Markets dated        (12,425,863)   
    107,930,602                      5/6/97 to receive (pay) the                                
                                     counterparty's notional amount                             
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread and to pay (receive)                      
                                     the change in market value of a basket                     
                                     of selected securities (including                          
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread.                                          

     8,726,409/          5/6/98      Agreement with NatWest Markets dated           146,493     
     7,753,340                       8/20/97 to receive (pay) the                               
                                     counterparty's notional amount                             
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread and to pay (receive)                      
                                     the change in market value of a basket                     
                                     of selected securities (including                          
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread.                                          

                                                                              23

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GMO Core Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements -- (Continued)                                        

                                                        [Enlarge/Download Table]


                                                                                  Unrealized    
  Notional Amount      Expiration                                                Appreciation   
 Fund/Counterparty        Date                     Description                  (Depreciation)  
---------------------  ------------  -----------------------------------------  ----------------
                                                                                                
$   109,371,445/       5/13/98       Agreement with Morgan Stanley Capital      $    8,821,564  
    101,009,713                      Services, Inc. dated 5/13/97 to pay                        
                                     (receive) the notional amount                              
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread and to receive (pay)                      
                                     the change in market value of a basket                     
                                     of selected securities (including                          
                                     dividends) less the counterparty's                         
                                     notional amount multiplied by LIBOR                        
                                     adjusted by a specified spread.                            

                                                                                ================
                                          Net unrealized appreciation           $    4,110,228  
                                                                                ================

24                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)    
--------------------------------------------------------------------------------
                                                                                
                       DEBT OBLIGATIONS -- 47.3%                                

                       Argentina -- 11.2%                                       
ARP     35,134,370     Argentina Pro-1 Co-Participation Rights,                 
                          Variable Rate, 1 mo. Peso Deposit                     
                          Rate, 3.24%, due 4/01/07                 23,615,020   
ARP     10,000,000     Republic of Argentina Bocon Pro 1, PIK,                  
                          Variable Rate, 1 mo. Peso Deposit                     
                          Rate, 3.24%, due 4/01/07                 10,512,102   
USD      3,600,000     Republic of Argentina Discount Bond,                     
                          Variable Rate, 6 mo. LIBOR + .81%,                    
                          6.88%, due 3/31/23                        3,260,250   
USD        900,000     Republic of Argentina Global Bond,                       
                          11.38%, due 1/30/17                       1,050,300   
USD     27,000,000     Republic of Argentina Par Bond,                          
                          Variable Rate, Step Up, 5.50%, due                    
                          3/31/23                                  19,895,625   
                                                                  -----------   
                                                                   58,333,297   
                                                                  -----------   

                       Brazil -- 2.6%                                           
USD     16,693,636     Brazil Capitalization Bond, PIK, 8.00%,                  
                          due 4/15/14                              13,605,313   
                                                                  -----------   

                       Bulgaria -- 0.4%                                         
USD     18,000,000     Bulgaria Discount Bond, Series B Strips,                 
                          Basket 2, due 7/28/24                     1,981,080   
USD      5,000,000     Bulgaria Par Bond, Series B Strips,                      
                          Tranche 2, due 7/28/24                      300,300   
                                                                  -----------   
                                                                    2,281,380   
                                                                  -----------   

                       Costa Rica -- 0.8%                                       
USD      2,099,136     Central Bank of Costa Rica Interest                      
                          Series A,                                             
                          Variable Rate, 3 mo. LIBOR + .81%,                    
                          6.66%, due 5/21/05                        2,046,658   
USD      1,194,336     Central Bank of Costa Rica Interest                      
                          Series B,                                             
                          Variable Rate, 3 mo. LIBOR + .81%,                    
                          6.66%, due 5/21/05                        1,158,506   
USD      1,000,000     Central Bank of Costa Rica Principal                     
                          Bond Series A, 6.25%, due 5/21/10           865,000   
                                                                  -----------   
                                                                    4,070,164   
                                                                  -----------   

                       Dominican Republic -- 1.6%                               
USD     10,957,000     Dominican Republic Discount Bond,                        
                          Variable Rate, 6 mo. LIBOR + .81%,                    
                          6.88%, due 8/30/24                        8,382,105   
                                                                  -----------   

                       Ecuador -- 5.8%                                          
USD      8,215,000     Republic of Ecuador Discount Bond                        
                          (Global Registered), Variable Rate,                   
                          6 mo. LIBOR + .81%, 6.69%, due 2/28/25    6,387,163   
USD     44,500,000     Republic of Ecuador Par Bond,                            
                          Variable Rate, Step up, 3.50%, due                    
                          2/28/25                                  23,306,875   

             See accompanying notes to the financial statements.             1

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)    
--------------------------------------------------------------------------------
                                                                                
                       Ecuador -- continued                                     
USD        765,558     Republic of Ecuador PDI, (Global Bearer                  
                          Capitalization Bond), PIK, Variable                   
                          Rate, 6 mo. LIBOR + .81%, 6.69%, due                  
                          2/27/15                                    538,283    
                                                                 ------------   
                                                                  30,232,321    
                                                                 ------------   
                       Jordan -- 5.0%                                           
USD     21,250,000     Hashemite Kingdom of Jordan Par Bond,                    
                          Variable Rate, Step up  144A, 4.00%,                  
                          due 12/23/23                            14,662,500    
USD     11,631,619     Hashemite Kingdom of Jordan PDI,                         
                          Variable Rate, 6 mo. LIBOR + .81%,                    
                          6.75%, due 12/23/05                     11,166,354    
                                                                 ------------   
                                                                  25,828,854    
                                                                 ------------   
                       Macedonia -- 0.2%                                        
USD      1,721,615     Macedonia Capitalization Bond, PIK,                      
                          Variable Rate, 9 mo. and 10 mo.                       
                          interpolated LIBOR + .81%, 6.88%,                     
                          due 7/02/12                              1,196,523    
                                                                 ------------   
                       Mexico -- 9.1%                                           
USD        550,000     Mexico Discount Bond Series C,                           
                          Variable Rate, 6 mo. LIBOR + .81%,                    
                          6.82%, due 12/31/19                        518,031    
FRF    335,250,000     Mexico Par Bond, 6.63%, due 12/31/19       47,188,144    
                                                                 ------------   
                                                                  47,706,175    
                                                                 ------------   
                       Nigeria -- 1.8%                                          
USD     13,500,000     Central Bank of Nigeria Par Bond,                        
                          Variable Rate, Step up, 6.25%, due                    
                          11/15/20                                 9,585,000    
                                                                 ------------   
                       Panama -- 1.1%                                           
USD      7,518,000     Panama Interest Reduction Bond,                          
                          Variable Rate, Step up, 3.75%, due                    
                          7/17/14                                  5,798,258    
                                                                 ------------   
                       Peru -- 0.6%                                             
USD      5,000,000     Peru FLIRB,                                              
                          Variable Rate, Step up 144A, 3.25%,                   
                          due 3/07/17                              2,968,750    
                                                                 ------------   
                       Supra National -- 0.9%                                   
ZAR    150,000,000     International Bank Recon and Development,                
                          0.00%, due 5/14/12                       4,453,799    
                                                                 ------------   
                       United States -- 0.4%                                    

                       Structured Notes -- 0.4%                                 
USD      2,000,000     Bankers Trust Medium Term Note, 17.10%,                  
                          due 10/14/97(a)                          2,188,800    
                                                                 -----------    

                       Total United States                         2,188,800    
                                                                 ------------   

2             See accompanying notes to the financial statements.               

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)    
--------------------------------------------------------------------------------
                                                                                
                       Venezuela -- 5.8%                                        
USD     15,000,000     Republic of Venezuela DCB, Variable                      
                          Rate, 6 mo. LIBOR + .88%, 6.88%, due                  
                          12/18/08                                 13,659,375   
USD        360,000     Republic of Venezuela FLIRB Series B Odd                 
                          Lot, Variable Rate, 6 mo. LIBOR +                     
                          .88%, 6.75%, due 3/31/07                    333,675   
USD     15,265,500     Republic of Venezuela New Money Bond                     
                          Series A, Variable Rate, 6 Mo.                        
                            LIBOR + 1, 6.88%, due 12/18/05         14,425,900   
USD      2,062,500     Republic of Venezuela New Money Bond                     
                          Series B Odd Lot, Variable Rate, 6                    
                          mo. LIBOR + .88%, 6.75%, due 12/18/05     1,949,063   
                                                                 ------------   
                                                                   30,368,013   
                                                                 ------------   
                       TOTAL DEBT OBLIGATIONS                                   
                       (COST $191,852,333)                        246,998,752   
                                                                 ------------   
                       LOAN ASSIGNMENTS -- 9.0%                                 

                       Congo Republic -- 1.7%                                   
ECU      8,195,761     Congo Loan Agreement (Direct Assignment                  
                          with F.H. International and Bank of                   
                          America)*                                 3,088,519   
FRF    102,097,963     Congo Loan Agreement (Direct Assignment                  
                          with F.H. International, Salomon and                  
                          Bank of America)*                         5,807,237   
                                                                 ------------   
                                                                    8,895,756   
                                                                 ------------   
                       Ivory Coast -- 6.0%                                      
FRF    298,297,436     Ivory Coast Credit Agreement (Assignment                 
                          with Banque Paribas, J.P. Morgan,                     
                          Bank of America, Chase Manhattan and                  
                          Salomon)*                                25,819,166   
USD      2,014,873     Ivory Coast Credit Agreement (Assignment                 
                          with J.P. Morgan)*                          967,139   
DEM        361,735     Ivory Coast Credit Agreement (Assignment                 
                          with Salomon)*                               88,414   
SDR      2,974,383     Ivory Coast Credit Agreement (Assignment                 
                          with Salomon)*                            1,784,582   
FRF      1,150,000     Ivory Coast Credit Agreement (Assignment                 
                          with Salomon)*                               99,538   
JPY    428,291,342     Ivory Coast Refinancing Agreement                        
                          (Assignment with Salomon)*                1,566,616   
USD      1,641,700     Ivory Coast Refinancing Agreement                        
                          (Assignment with Salomon)*                  705,931   

              See accompanying notes to the financial statements.              3

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


       Par Value       Description                                Value ($)    
-------------------------------------------------------------------------------
                                                                               
                       Ivory Coast -- continued                                
BEF     18,333,554     Ivory Coast Refinancing Agreement                       
                          (Assignment with Salomon)*                 217,082   
                                                                 ------------  
                                                                  31,248,468   
                                                                 ------------  
                       Russia -- 1.3%                                          
CHF      1,500,000     International Bank for Economic                         
                          Cooperation Loan Agreement (Direct                   
                          Assignment with Oppenheimer)*              704,973   
ECU      5,000,000     International Bank for Economic                         
                          Cooperation Loan Agreement (Direct                   
                          Assignment with Salomon)*                3,809,396   
DEM      5,208,190     Russia Vnesheconombank Note Purchase                    
                          Agreement (Direct Assignment with                    
                          German Hermes Club)*                     2,473,615   
                                                                 ------------  
                                                                   6,987,984   
                                                                 ------------  
                       TOTAL LOAN ASSIGNMENTS                                  
                       (COST $28,472,793)                         47,132,208   
                                                                 ------------  
                       LOAN PARTICIPATIONS -- 30.6%                            

                       Algeria -- 3.3%                                         
JPY    217,500,000     Algeria Tranche 1, Japanese LIBOR +                     
                          13/16, 1.375%, (Participation with                   
                          Bank of America)                         1,417,122   
USD      2,000,000     Algeria Tranche 2, LIBOR + 13/16,                       
                          6.50%, (Participation with Salomon)      1,737,500   
JPY    500,000,000     Algeria Tranche 3, Japanese 6 mo. LIBOR                 
                          +13/16, 1.375% (Participation with                   
                          Credit Agricole Indosuez)                3,086,291   
FRF     50,564,324     Algeria Tranche 3, PIBOR + 13/16,                       
                          4.1875%, (Participation with Salomon                 
                          and Union De Banques Arabes Et                       
                          Francaises)                              6,231,445   
FRF     40,000,000     Algeria Tranche 3, PIBOR + 13/16,                       
                          4.1875%, (Participation with Salomon)    4,929,519   
                                                                 ------------  
                                                                  17,401,877   
                                                                 ------------  
                       Cameroon -- 0.8%                                        
NLG     28,052,902     Cameroon Loan Agreement (Participation                  
                          with Bank of America and Salomon)*       4,014,479   
                                                                 ------------  

4             See accompanying notes to the financial statements.               

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)   
-------------------------------------------------------------------------------
                                                                               
                       Congo Republic -- 0.3%                                  
USD      4,179,127     Republic of Congo Loan (Participation                   
                          with F.H. International)*                1,441,799   
                                                                 ------------  
                       Jamaica -- 1.0%                                         
USD      6,000,000     Jamaica Refinancing Agreement Tranche                   
                          B, LIBOR + 13/16, 6.56%,                             
                          (Participation with Salomon and                      
                          Chase Manhattan Bank)                    5,550,000   
                                                                 ------------  
                       Morocco -- 4.4%                                         
JPY    384,300,844     Morocco Restructuring and Consolidating                 
                          Agreement Tranche A, Japanese Long                   
                          Term Fixed Prime + .2175%, 3.0175%,                  
                          (Participation with J.P. Morgan)         2,647,679   
JPY  2,971,603,837     Morocco Restructuring and Consolidating                 
                          Agreement Tranche A, Japanese Long                   
                          Term Floating Prime + .1175%,                        
                          2.6175%, (Participation with Bankers                 
                          Trust Co. and J.P. Morgan)              20,473,162   
                                                                 ------------  
                                                                  23,120,841   
                                                                 ------------  
                       Russia -- 20.0%                                         
USD     24,000,000     International Investment Bank Loan                      
                          Agreement (Participation with Bank                   
                          of America and Salomon)*                17,280,000   
JPY    900,000,000     International Investment Bank Loan                      
                          Agreement (Participation with Bank                   
                          of America)*                             4,863,247   
DEM     10,000,000     International Investment Bank Loan                      
                          Agreement (Participation with Bank                   
                          of America)*                             3,999,556   
ECU      2,550,000     Russia Vnesheconombank Loan Agreement                   
                          (Participation with Bank of America)*    2,879,371   
FRF    313,826,550     Russia Vnesheconombank Loan Agreement                   
                          (Participation with Banque Paribas,                  
                          Chase Manhattan, Bank of America,                    
                          Lehman Brothers and J.P. Morgan)*       53,485,812   
GBP      8,311,366     Russia Vnesheconombank Loan Agreement                   
                          (Participation with Chase Manhattan                  
                          Bank and Bank of America)*              13,934,302   
ECU      3,000,000     Russia Vnesheconombank Note Purchase                    
                          Agreement (Participation with Bank                   
                          of America)*                             3,387,495   
ECU      5,000,000     Russia Vnesheconombank Note Purchase                    
                          Agreement (Participation with J.P.                   
                          Morgan)*                                 4,580,833   
                                                                 ------------  
                                                                 104,410,616   
                                                                 ------------  

5             See accompanying notes to the financial statements.               

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)   
-------------------------------------------------------------------------------
                                                                               
                       Yugoslavia -- 0.8%                                      
USD      2,144,772     Yugoslavia Loan Participation Note                      
                          Tranche A (Participation with Chase                  
                          Manhattan Bank)*                         1,045,576   
USD      3,202,321     Yugoslavia Loan Participation Note                      
                          Tranche B (Participation with Chase                  
                          Manhattan Bank)*                         1,561,131   
USD      3,181,156     Yugoslavia Loan Participation Note                      
                          Tranche C (Participation with Chase                  
                          Manhattan Bank and J.P. Morgan)*         1,550,814   
                                                                -------------  
                                                                   4,157,521   
                                                                -------------  
                       TOTAL LOAN PARTICIPATIONS (COST                         
                       $85,419,755)                              160,097,133   
                                                                -------------  


      Principal Amount                                                         
     -------------------                                                       
                                                                               
                       CALL OPTIONS PURCHASED -- 4.8%                          

                       Options on Bonds -- 4.8%                                
USD     55,000,000     Argentina Discount Bond, Expires                        
                       9/19/97 Knock out 78.00, Strike 75.00       6,891,500   
USD     60,000,000     Brazil Discount Bond, Expires 11/07/97,                 
                       Strike 80.00                                3,492,300   
USD     30,000,000     Brazil Discount Bond, Expires 9/12/97                   
                       Knock Out 77.00, Strike 77.00               2,799,000   
USD     83,000,000     Brazil Par Bond, Expires 11/21/97,                      
                       Strike 58.00                                3,278,500   
USD     50,000,000     Mexico Discount Bond, Expires 9/05/97                   
                       Knock Out 86.00, Strike 86.00               4,360,000   
USD     58,000,000     Venezuela Par Bond, Expires 12/05/97,                   
                       Strike 74.00                                4,437,000   
                                                                -------------  
                                                                  25,258,300   
                                                                -------------  
                       TOTAL CALL OPTIONS PURCHASED                            
                       (COST  $21,254,400)                        25,258,300   
                                                                -------------  
                       PUT OPTIONS PURCHASED -- 0.0%                           

                       Cross Currency Options -- 0.0%                          
USD      3,914,929     TRL Put/USD, DEM Basket Call, Expires                   
                       12/15/97, Strike 425                           17,500   
                                                                -------------  
                       Options on Bonds -- 0.0%                                
USD                    Russia Ministry of Finance Series 3,                    
        15,000,000     Expires 10/06/97, Strike 77.125                    60   
USD     30,000,000     Russia Ministry of Finance Series 3,                    
                       Expires 9/29/97, Strike 76.3125                    --   
                                                                -------------  
                                                                          60   
                                                                -------------  

6             See accompanying notes to the financial statements.               

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


      Principal Amount Description                                 Value ($)    
--------------------------------------------------------------------------------
                                                                                
                       Options on Commodities -- 0.0%                           
 USD       200,000     NYMEX, Expires 6/05/98, Strike 16.2            42,000    
                                                                  ------------  

                       TOTAL PUT OPTIONS PURCHASED                              
                       (COST  $356,998)                               59,560    
                                                                  ------------  


        Par Value/                                                              
          Shares                                                                
      -----------------                                                         
                                                                                
                       RIGHTS AND WARRANTS -- 0.0%                              

                       Mexico -- 0.0%                                           
        75,017,000     United Mexican States Warrants, Expires                  
                       6/30/03 **                                          --   
                                                                  ------------  

                       Nigeria -- 0.0%                                          
            14,000     Central Bank of Nigeria Payment                          
                       Adjusted Warrants, Expires 11/15/20 **              --   
                                                                  ------------  

                       Venezuela -- 0.0%                                        
           312,840     Republic of Venezuela Recovery Warrants,                 
                       Expires 04/15/20 **                                 --   
                                                                  ------------  

                       TOTAL RIGHTS AND WARRANTS  (COST  $0)               --   
                                                                  ------------  

                       SHORT-TERM INVESTMENTS -- 11.2%                          

                       Cash Equivalents -- 4.9%                                 
 USD    10,188,707     BankBoston Eurodollar Time Deposit,                      
                       5.7875% due 9/2/97/(b)/                     10,188,707   
 USD       536,856     First Union National Bank of North                       
                       Carolina Eurodollar Time Deposit,                        
                       5.5625% due 9/2/97/(b)/                        536,856   
 USD     1,610,568     Harris Bank and Trust Eurodollar Time                    
                       Deposit, 5.625% due 9/2/97/(b)/              1,610,568   
        13,400,000     Janus Money Market Fund Institutional                    
                       Shares/(b)/                                 13,400,000   
                                                                  ------------  
                                                                   25,736,131   
                                                                  ------------  

                       Repurchase Agreements -- 5.5%                            
 USD     2,403,588     Prudential Securities, Inc. Repurchase                   
                       Agreement, dated 8/29/97, due 9/2/97,                    
                       with a maturity value of $2,404,920 and                  
                       an effective yield of 4.99%,                             
                       collateralized by a U.S. Government                      
                       Agency Obligation with a rate of                         
                       6.811%, with a maturity date of 3/1/35                   
                       and a market value of $2,451,668.            2,403,588   

             See accompanying notes to the financial statements.             7

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


        Par Value      Description                                 Value ($)    
--------------------------------------------------------------------------------
                                                                                

                       Repurchase Agreements -- continued                       
USD     26,352,125     Salomon Brothers Repurchase Agreement,                   
                       dated 8/29/97, due 9/2/97, with a                        
                       maturity value of $26,366,911 and an                     
                       effective yield of 5.05%,                                
                       collateralized by U.S. Treasury                          
                       Obligations with rates ranging from                      
                       5.00% to 6.75%, with maturity dates                      
                       ranging from 2/15/99 to 8/15/26 and                      
                       with an aggregate market value of                        
                       $26,955,984.                               26,352,125    
                                                                -------------   
                                                                  28,755,713    
                                                                -------------   

                       U.S. Government -- 0.8%                                  
 USD     4,000,000     U.S. Treasury Bill, 5.31% due 1/08/98(c)    3,926,752    
                                                                -------------   

                       TOTAL SHORT-TERM INVESTMENTS                             
                       (COST  $58,413,888)                        58,418,596    
                                                                -------------   

                       TOTAL INVESTMENTS -- 102.9%                              
                       (COST $385,770,167)                       537,964,549    

                       Other Assets and Liabilities (net) --                    
                       (2.9)%                                    (14,931,755)   
                                                                -------------   

                       TOTAL NET ASSETS -- 100%                 $523,032,794    
                                                                =============   

   Notes to the Schedule of Investments:

DCB - Debt Conversion Bond        

          FLIRB - Front Loaded Interest Reduction Bond

PIK - Payment In Kind             

PDI - Past Due Interest           

                    Knock Out -- Option will expire if underlying security
reaches knock out price.    

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

8              See accompanying notes to the financial statements.              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------
               Notes to the Schedule of Investments -- continued
     Variable and Step up rates -- The rates
                    shown on variable and step up rate notes are the
                        current interest rates at August 31, 1997, which are
                         subject to change based on the terms of the security.

Currency Abbreviations:           

ARP - Argentinian Peso            
BEF - Belgian Franc               
CHF - Swiss Franc                 
DEM - German Mark                 
ECU - European Currency Unit      
FRF - French Franc                
GBP - British Pound               
JPY - Japanese Yen                
NLG - Netherlands Guilder         
SDR - Special Drawing Rights      
ZAR - South African Rand          
THB - Thailand Baht               
TRL - Turkish Lira                
USD - United States Dollar        

(a) Principal is linked to the value of the Brazilian   
             Capitalization Bond and the Brazilian IDU Bond. Restricted as
              to public resale. At the date of aquisition, this security was
      valued at cost. There were no outstanding unrestricted
securities of the same class as those held.     
           (b) Represents investments of security lending collateral (Note 1).
   (c) All or a portion of this security is held as collateral
for open futures contracts.                     
    *   Non-performing.  Borrower not currently paying interest.
**  Non-income producing security.                      

             See accompanying notes to the financial statements.             9

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Assets:                                                                        
   Investments, at value (cost $385,770,167) (Note 1)              $537,964,549
   Cash                                                                   6,063
   Foreign currency, at value (cost $155,680) (Note 1)                  153,814
   Receivable for investments sold                                    2,684,762
   Interest receivable                                                4,681,548
   Receivable for open swap contracts (Notes 1 and 6)                 6,500,602
   Receivable for open forward foreign currency contracts                      
     (Notes 1 and 6)                                                 13,998,805
   Receivable for expenses waived or borne by Manager (Note 2)           74,544
   Receivable for Fund shares sold                                      120,823
   Miscellaneous receivable                                             300,000
                                                                   ------------
      Total assets                                                  566,485,510
                                                                   ------------
Liabilities:                                                                   
   Payable for investments purchased                                  5,594,370
   Payable upon return of securities loaned (Note 1)                 25,736,131
   Written options outstanding, at value (premiums $1,155,454)                 
     (Notes 1 and 6)                                                  1,909,595
   Payable for Fund shares repurchased                                  613,591
   Payable to affiliate for (Note 2):                                          
     Management fee                                                     210,057
     Shareholder service fee                                             64,088
   Accrued expenses                                                     207,799
   Payable for open forward foreign currency contracts                         
     (Notes 1 and 6)                                                  6,300,031
   Payable for variation margin on open futures contracts                      
     (Notes 1 and 6)                                                  2,773,247
   Miscellaneous payable                                                 43,807
                                                                   ------------
      Total liabilities                                              43,452,716
                                                                   ------------
Net assets                                                         $523,032,794
                                                                   ============
Net assets consist of:                                                         
   Paid-in capital                                                 $281,826,473
   Accumulated undistributed net investment income                   32,440,493
   Accumulated undistributed net realized gain                       43,714,761
   Net unrealized appreciation                                      165,051,067
                                                                   ------------
                                                                   $523,032,794
                                                                   ============
Net assets attributable to:                                                    
   Class I shares                                                  $  8,987,503
                                                                   ============
   Class II shares                                                 $  2,684,668
                                                                   ============
   Class III shares                                                $511,360,623
                                                                   ============
Shares outstanding:                                                            
   Class I                                                              674,958
                                                                   ============
   Class II                                                             201,559
                                                                   ============
   Class III                                                         38,335,213
                                                                   ============
Net asset value per share:                                                     
   Class I                                                         $      13.32
                                                                   ============
   Class II                                                        $      13.32
                                                                   ============
   Class III                                                       $      13.34
                                                                   ============

10              See accompanying notes to the financial statements.             

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Investment Income:                                                             
   Interest                                                        $17,814,562 
                                                                   ----------- 

Expenses:                                                                      
   Management fee (Note 2)                                           1,299,053 
   Custodian and transfer agent fees                                   149,821 
   Audit fees                                                           35,199 
   Transfer agent and dividend disbursing agent fees                    16,699 
   Legal fees                                                           14,779 
   Trustees fees (Note 2)                                                2,460 
   Miscellaneous                                                         3,073 
   Fees waived or borne by Manager (Note 2)                           (453,402)
                                                                   ----------- 
                                                                     1,067,682 
   Shareholder service fee (Note 2)                                            
      Class I                                                            5,773 
      Class II                                                           2,327 
      Class III                                                        384,783 
                                                                   ----------- 
      Net expenses                                                   1,460,565 
                                                                   ----------- 

        Net investment income                                       16,353,997 
                                                                   ----------- 

Realized and unrealized gain (loss):                                           
  Net realized gain (loss) on:                                                 
      Investments                                                   52,283,801 
      Closed futures contracts                                       1,098,035 
      Closed swap contracts                                          1,061,908 
      Written options                                               (1,880,000)
      Foreign currency, forward contracts and foreign currency                 
      related transactions                                          18,924,826 
                                                                   ----------- 

        Net realized gain                                           71,488,570 
                                                                   ----------- 

   Change in net unrealized appreciation (depreciation) on:                    
      Investments                                                    1,399,269 
      Open futures contracts                                        (1,202,746)
      Open swap contracts                                            4,992,543 
      Written options                                                 (754,141)
      Foreign currency, forward contracts and foreign currency                 
      related transactions                                          (1,250,977)
                                                                   ----------- 

        Net unrealized gain                                          3,183,948 
                                                                   ----------- 

      Net realized and unrealized gain                              74,672,518 
                                                                   ----------- 

Net increase in net assets resulting from operations               $91,026,515 
                                                                   =========== 

             See accompanying notes to the financial statements.            11

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                              Six Months                    
                                                                 Ended          Year Ended  
                                                            August 31, 1997      February   
                                                              (Unaudited)        28, 1997   
                                                           ----------------  ---------------
                                                                                            
Increase (decrease) in net assets:                                                          
Operations:                                                                                 
   Net investment income                                      $16,353,997      $ 53,277,149 
   Net realized gain                                           71,488,570       223,812,662 
   Change in net unrealized appreciation (depreciation)         3,183,948        74,007,909 
                                                             ------------     ------------- 

   Net increase in net assets resulting from operations        91,026,515       351,097,720 
                                                             ------------     ------------- 

Distributions to shareholders from:                                                         
   Net investment income                                                                    
       Class I                                                    (87,057)               -- 
       Class II                                                   (27,620)               -- 
       Class III                                               (5,393,380)      (60,410,173)
                                                             ------------     ------------- 
       Total distributions from net investment income          (5,508,057)      (60,410,173)
                                                             ------------     ------------- 
   Net realized gains                                                                       
       Class I                                                 (1,536,333)               -- 
       Class II                                                  (487,418)               -- 
       Class III                                              (99,192,711)     (149,956,551)
                                                             ------------     ------------- 
       Total distributions from net realized gains           (101,216,462)     (149,956,551)
                                                             ------------     ------------- 

                                                             (106,724,519)     (210,366,724)
                                                             ------------     ------------- 
   Net share transactions: (Note 5)                                                         
       Class I                                                  9,415,878            34,101 
       Class II                                                 2,710,273                -- 
       Class III                                              (28,883,710)     (200,761,783)
                                                             ------------     ------------- 
   Decrease in net assets resulting from net share                                          
      transactions                                            (16,757,559)     (200,727,682)
                                                             ------------     ------------- 

      Total decrease in net assets                            (32,455,563)      (59,996,686)

Net assets:                                                                                 
   Beginning of period                                        555,488,357       615,485,043 
                                                             ------------     ------------- 

   End of period (including accumulated undistributed net                                   
      investment income of $32,440,493 and $21,594,553,                                     
      respectively)                                          $523,032,794      $555,488,357 
                                                             ============     ============= 

12              See accompanying notes to the financial statements.             

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                  Six Months Ended  Period from December 31, 1996
                                                  August 31, 1997   (commencement of operations) 
                                                    (Unaudited)          to February 28, 1997    
                                                  ----------------  -----------------------------
                                                                                                 
Net asset value, beginning of period                   $14.08                 $12.87             
                                                       ------                 ------             

Income from investment operations:                                                               
   Net investment income                                 0.40 **                0.10             
   Net realized and unrealized gain                      2.06                   1.11             
                                                       ------                 ------             

      Total from investment operations                   2.46                   1.21             
                                                       ------                 ------             

Less distributions to shareholders:                                                              
   From net investment income                           (0.17)                    --             
   From net realized gains                              (3.05)                    --             
                                                       ------                 ------             

      Total distributions                               (3.22)                    --             
                                                       ------                 ------             
Net asset value, end of period                         $13.32                 $14.08             
                                                       ======                 ======             

Total Return (a)                                        19.43%                  9.40%            

Ratios/Supplemental Data:                                                                        
   Net assets, end of period (000's)                   $8,988                 $   36             
   Net expenses to average daily net assets              0.69%*                 0.71%*           
   Net investment income to average daily net                                                    
      assets                                             5.24%*                 6.06%*           
   Portfolio turnover rate                                 61%                   152%            
   Fees and expenses voluntarily waived or borne                                                 
      by the Manager consisted of the following                                                  
      per share amounts:                               $ 0.01                 $ 0.00(b)          

*   Annualized.                                                                 
**  Computed using average shares outstanding throughout the period.            
(a) Calculation excludes purchase premiums and redemption fees. The total       
 returns would have been lower had certain expenses not been waived during
the periods shown.                                                      
(b) Fees and expenses waived or borne by the Manager were less than $0.01 per   
share.                                                                  

              See accompanying notes to the financial statements.             13

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                            Period from March 21, 1997  
                                                            (commencement of operations)
                                                               to August 31, 1997       
                                                                   (Unaudited)          
                                                            --------------------------  
                                                                                        
Net asset value, beginning of period                                 $ 13.74            
                                                                     -------            

Income from investment operations:                                                      
   Net investment income                                                0.35            
   Net realized and unrealized gain                                     2.45            
                                                                     -------            

      Total from investment operations                                  2.80            
                                                                     -------            

Less distributions to shareholders:                                                     
   From net investment income                                          (0.17)           
   From net realized gains                                             (3.05)           
                                                                     -------            

      Total distributions                                              (3.22)           
                                                                     -------            
Net asset value, end of period                                       $ 13.32            
                                                                     =======            

Total Return/(a)/                                                      22.39%           

Ratios/Supplemental Data:                                                               
   Net assets, end of period (000's)                                 $ 2,685            
   Net expenses to average daily net assets                             0.63%*          
   Net investment income to average daily net assets                    6.06%*          
   Portfolio turnover rate                                                61%           
   Fees and expenses voluntarily waived or borne by the                                 
      Manager consisted of the following per share amount:           $  0.01            

*   Annualized.                                                                 
(a) Calculation excludes purchase premiums and redemption fees. The total       
 returns would have been lower had certain expenses not been waived during
the periods shown.                                                      

14            See accompanying notes to the financial statements.               

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                               Six Months Ended                                  
                                               August 31, 1997    Year Ended February 28/29,     
                                                                -------------------------------  
                                                  (Unaudited)     1997       1996      1995*     
                                                  -----------   ---------  ---------  ---------  
                                                                                                 
Net asset value, beginning of period               $  14.09     $  11.76   $   8.39   $  10.00   
                                                   ---------    ---------  ---------  ---------  

Income from investment operations:                                                               
   Net investment income                               0.46         1.48       1.35       0.48   
   Net realized and unrealized gain (loss)             2.01         6.40       3.84      (1.59)  
                                                   ---------    ---------  ---------  ---------  

      Total from investment operations                 2.47         7.88       5.19      (1.11)  
                                                   ---------    ---------  ---------  ---------  

Less distributions to shareholders:                                                              
   From net investment income                         (0.17)       (1.58)     (1.17)     (0.40)  
   From net realized gains                            (3.05)       (3.97)     (0.65)        --   
   In excess of net realized gains                       --           --         --      (0.10)  
                                                   ---------    ---------  ---------  ---------  

      Total distributions                             (3.22)       (5.55)     (1.82)     (0.50)  
                                                   ---------    ---------  ---------  ---------  
Net asset value, end of period                     $  13.34     $  14.09   $  11.76   $   8.39   
                                                   =========    =========  =========  =========  

Total Return /(a)/                                    19.52%       74.32%     63.78%    (11.65)% 

Ratios/Supplemental Data:                                                                        
   Net assets, end of period (000's)               $511,361     $555,452   $615,485   $243,451   
   Net expenses to average daily net assets            0.56%**      0.57%      0.50%      0.50%**
   Net investment income to average daily net                                                    
      assets                                           6.29%**      8.35%     12.97%     10.57%**
   Portfolio turnover rate                               61%         152%       158%       104%  
   Fees and expenses voluntarily waived or                                                       
      borne by the Manager consisted of the                                                      
      following per share amounts:                 $   0.01     $   0.03   $   0.02   $   0.01   


*     For the period from April 19, 1994 (commencement of operations) to        
February 28, 1995.                                                  
**    Annualized.                                                               
/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  

              See accompanying notes to the financial statements.             15

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

   The Fund seeks high total return by investing primarily in sovereign debt
of countries in Asia, Latin America, the Middle East, Southern Europe,
Eastern Europe and Africa.                                            

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
as those shares.                                                      

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

16                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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

Futures contracts                                                     
   The Fund may use futures contracts to manage its exposure to the bond and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
change in value ("variation margin") is recorded by the Fund. Gains or
losses are recognized but not considered realized until the contracts 
   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from changes in the value of the
 underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

Forward currency contracts                                            
The Fund may enter into forward currency contracts in connection with 
    settling planned purchases or sales of securities or to hedge the currency
    exposure associated with some or all of the Fund's portfolio securities. A
  forward currency contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The market value of a
forward currency contract fluctuates with changes in forward currency 
   exchange rates. Forward currency contracts are marked to market daily and
    the change in value is recorded by the Fund as an unrealized gain or loss.
   Realized gains or losses equal to the difference between the value of the
    contract at the time it was opened and the value at the time it was closed
are recorded upon delivery or receipt of the currency or, if a forward
currency contract is offset by entering into another forward currency 
 contract with the same broker, upon settlement of the net gain or loss.
     These contracts may involve market risk in excess of the unrealized gain or
loss reflected in the Fund's Statement of Assets and Liabilities. In  
addition, the Fund could be exposed to risk if the counterparties are 
   unable to meet the terms of the contracts or if the value of the currency

                                                                              17

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

changes unfavorably to the U.S. dollar. The U.S. dollar value of the  
    currencies the Fund has committed to buy or sell is shown under Note 6 and
  represents the currency exposure the Fund has acquired or hedged through
currency contracts as of August 31, 1997.                             

Options                                                               
   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
     the realized gain or loss. The Fund as a writer of an option has no control
over whether the underlying securities may be sold (call) or purchased
     (put) and as a result bears the market risk of an unfavorable change in the
    price of the security underlying the written option. There is the risk the
Fund may not be able to enter into a closing transaction because of an
 illiquid market. See Note 6 for all open written option contracts as of
August 31, 1997.                                                      

  The Fund may also purchase put and call options. The Fund pays a premium
   which is included in the Fund's Statement of Assets and Liabilities as an
   investment and subsequently marked to market to reflect the current value
    of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                          

Loan agreements                                                       
The Fund may invest in direct debt instruments which are interests in 
    amounts owed by a corporate, governmental, or other borrower to lenders or
   lending syndicates. The Fund's investments in loans may be in the form of
  participations in loans or assignments of all or a portion of loans from
  third parties. A loan is often administered by a bank or other financial
institution (the lender) that acts as agent for all holders. The agent
     administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, the Fund has the right to receive  
   payments of principal, interest and any fees to which it is entitled only
 from the lender selling the loan agreement and only upon receipt by the
  lender of payments from the borrower. The Fund generally has no right to
    enforce compliance with the terms of the loan agreement with the borrower.
As a result, the Fund may be subject to the credit risk of both the   
   borrower and the lender that is selling the loan agreement. When the Fund
  purchases assignments from lenders it acquires direct rights against the
    borrower on the loan. Direct indebtedness of emerging countries involves a
  risk that the governmental entities responsible for the repayment of the
     debt may be unable or unwilling to pay the principal and interest when due.

Indexed securities                                                    
  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
     or other financial indicators. The Fund uses indexed securities to increase
  or decrease its exposure to different underlying instruments and to gain
     exposure to markets that may be difficult to invest in through conventional
   securities. Indexed securities may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original    
investment.                                                           

18                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                       
    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their    
 respective commitments to pay or receive interest, e.g., an exchange of
   floating rate payments for fixed rate payments with respect to a notional
   amount of principal. Interest rate swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap  
agreements as of August 31, 1997.                                     

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
  loaned securities having a market value of $25,204,816 collateralized by
cash in the amount of $25,736,131, which was invested in short-term   
instruments.                                                          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

                                                                              19

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual basis, and is adjusted for the accretion of   
discounts. Income is not recognized and discounts are not amortized on
 securities for which collection is not expected. In determining the net
  gain or loss on securities sold, the cost of securities is determined on
the identified cost basis.                                            

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .50% of the amount    
  invested. In the case of cash redemptions, the fee is .25% of the amount
   redeemed. Effective June 1, 1996, the Manager will reduce such premium or
fee only when any portion of a purchase is offset by a corresponding  
    redemption occurring on the same day. All purchase premiums and redemption
   fees are paid to and recorded as paid-in capital by the Fund. For the six
months ended August 31, 1997, the Fund received $230,182 in purchase  
premiums and $234,487 in redemption fees. There is no premium for     
reinvested distributions or in-kind transactions.                     

Investment risk                                                       
 Investments in emerging country debt present certain risks that are not
     inherent in many other securities. Many emerging countries present elements
  of political and/or economic instability, which may result in the fund's
    inability to collect on a timely basis, or in full, principal and interest
   payments. Further, countries may impose various types of foreign currency
regulations or controls which may impede the                          

20                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

fund's ability to repatriate amounts it receives. The fund may acquire
   interests in securities or bank loans which are in default at the time of
acquisition in anticipation of improving conditions in the related    
     countries. These factors may result in significant volatility in the values
of its holdings. The markets for emerging country debt are relatively 
 illiquid. Accordingly, the fund may not be able to realize in an actual
sale amounts approximating those used to value its holdings.          

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .50% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting and other   
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
  the annual rate of .28% for Class I shares, .22% for Class II shares and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
   management fee but excluding custody fees, brokerage commissions, certain
 other transaction costs (including transfer taxes), shareholder service
   fees and extraordinary expenses) exceed .35% of average daily net assets.
Prior to June 1, 1996, a similar waiver existed for annual expenses   
  exceeding .50%; thus the net annual expense ratio after the waiver for a
Class III shareholder is unchanged.                                   

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997, was $2,460. No  
   remuneration is paid to any Trustee or officer who is affiliated with the
Manager.                                                              

3.   Purchases and sales of securities                                          

  For the six months ended August 31, 1997, cost of purchases and proceeds
from sales of investments, other than short-term obligations, were as 
follows:                                                              

                                                                [Download Table]

                                                   Purchases           Proceeds    
                                              -----------------  ------------------
                                                                                   
Investments (non-U.S. Government securities)   $   284,799,692     $   352,012,908 


At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                            Gross Unrealized        Gross Unrealized        Net Unrealized    
    Aggregate Cost            Appreciation            Depreciation           Appreciation     
-----------------------  -----------------------  ----------------------  --------------------
                                                                                              
     $385,770,167             $154,228,351             $2,033,969            $152,194,382     

                                                                              21

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

4.   Principal shareholders                                                     

    At August 31, 1997, 31% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]


                                                                             Period from December 31, 1996      
                                            Six Months Ended                 (commencement of operations) to    
                                             August 31, 1997                        February 28, 1997           
                                    ----------------------------------    --------------------------------------
Class I:                               Shares              Amount              Shares                Amount     
                                    --------------     ---------------    -----------------     ----------------
                                                                                                                
Shares sold                            547,047        $     7,875,387             2,566           $    34,101   
Shares issued to shareholders in                                                                                
   reinvestment of                                                                                              
   distributions                       125,345              1,540,491               --                   --     
Shares repurchased                       --                    --                   --                   --     
                                    --------------     ---------------    -----------------     ----------------
Net increase                           672,392        $     9,415,878             2,566           $    34,101   
                                    ==============     ===============    =================     ================

                                        Period from March 21, 1997                                              
                                      (commencement of operations) to                                           
                                              August 31, 1997                                                   
                                    ------------------------------------                                        
Class II:                                Shares              Amount                                             
                                    ---------------     ----------------                                        
Shares sold                            159,652       $      2,195,235                                           
Shares issued to shareholders in                                                                                
   reinvestment of                                                                                              
   distributions                        41,907                515,038                                           
Shares repurchased                     --                 --                                                    
                                    ---------------     ----------------                                        
Net increase                           201,559       $      2,710,273                                           
                                    ===============     ================                                        


                                            Six Months Ended                           Year Ended               
                                            August 31, 1997                        February 28, 1997            
                                  ------------------------------------      ------------------------------------
Class III:                             Shares                Amount             Shares               Amount     
                                  --------------        --------------      ---------------     ----------------
                                                                                                                
Shares sold                          5,703,905     $      84,484,383          11,310,056     $      162,038,721 
Shares issued to shareholders in                                                                                
   reinvestment of                                                                                              
   distributions                     8,351,431           102,806,110          14,440,766            185,738,098 
Shares repurchased                 (15,129,948)         (216,174,203)        (38,680,281)          (548,538,602)
                                  --------------      ---------------      ----------------     ----------------
Net decrease                        (1,074,612)    $     (28,883,710)        (12,929,459)    $     (200,761,783)
                                  ==============      ===============      ================     ================

22                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Forward currency contracts                                            

                                                        [Enlarge/Download Table]

                                                                       Net Unrealized  
Settlement                          Units of                            Appreciation   
   Date       Deliver/Receive       Currency            Value          (Depreciation)  
------------  -----------------  ----------------   --------------    -----------------
                                                                                       
   Buys                                                                                

  9/05/97           DEM                3,600,000   $    2,000,727   $           70,587 
  9/19/97           DEM               70,000,000       38,939,987           (1,958,082)
 10/31/97           FRF               76,900,000       12,731,230              101,896 
  9/19/97           NLG               78,767,500       38,920,497           (1,937,468)
  9/02/97           THB              522,000,000       15,237,910              (70,008)
  9/02/97           ZAR                7,025,000        1,495,646                 (308)
  9/03/97           ZAR                3,525,000          750,266                 (373)
                                                                      -----------------
                                                                    $       (3,793,756)
                                                                      =================


   Sales                                                                               
                                                                                       
 12/22/97           ARP                6,000,000   $    5,983,545    $          (4,472)
  1/15/98           ARP                3,000,000        2,988,197                1,340 
  8/11/98           ARP                7,000,000        6,983,906              (49,781)
  1/09/98           BRL                4,000,000        3,536,199                6,760 
 10/03/97           CHF                1,000,000          676,693              (16,714)
  9/05/97           DEM               39,600,000       22,007,996            1,066,574 
  9/19/97           DEM               70,000,000       38,939,987            1,917,979 
 11/20/97           ECU                6,350,000        6,957,750             (124,991)
 10/31/97           FRF              725,000,000      120,027,847           (2,137,834)
 10/17/97           GBP                8,600,000       13,918,320              557,200 
 10/09/97           JPY            3,136,000,000       26,225,443            2,027,013 
  9/19/97           NLG               78,767,500       38,920,497            1,977,572 
  9/02/97           THB            1,044,000,000       30,475,820            4,095,975 
  3/23/98           THB              200,000,000        5,463,983            1,468,426 
  6/22/98           THB              100,000,000        2,703,433              703,722 
 11/14/97           ZAR               17,500,000        3,653,101                3,761 
                                                                      -----------------
                                                                     $      11,492,530 
                                                                      =================

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Short futures contracts                                               

                                                        [Enlarge/Download Table]


 Number of                                                                              Net Unrealized  
 Contracts                  Type                  Expiration Date    Contract Value      Depreciation   
-------------  --------------------------------  ------------------  ---------------   -----------------
                                                                                                        
    100        MATIF FRF Bond                     September 1997    $    11,233,803   $       (158,292) 
    100        U.S. Treasury Bond                 September 1997         11,275,000            (41,375) 
    150        U.S. Treasury Bill                 September 1997         35,598,750           (121,475) 
                                                                                       -----------------
                                                                                      $       (321,142) 
                                                                                       =================

     At August 31, 1997, the Fund has cash and/or securities to cover any margin
requirements on open futures contracts.                               

Written call option transactions                                      

                                                                [Download Table]

                              Principal                       
                              Amount of                       
                              Contracts                       
                            (000's omitted)      Premiums     
                           -----------------  ----------------
                                                              
Outstanding, beginning                                        
         of period       $       --         $       --        
Options written                  109,091         2,025,454    
Options exercised                (50,000)         (870,000)   
                           -----------------  ----------------
Outstanding, end                                              
         of period       $        59,091    $    1,155,454    
                           =================  ================


Summary of written call options outstanding                           

                                                        [Enlarge/Download Table]


                         Principal                                                            
                         Amount of                                                            
                         Contracts                            Expiration                      
                       (000's omitted)    Exercise Price         Date               Value     
                      -----------------   ---------------  ------------------   --------------
                                                                                              
Thai Baht           $      9,091              33 THB           10/16/97        $      584,545 
Venezuela Par Bond        50,000         $    79.50             9/25/97             1,325,050 
                                                                                --------------
                                                                               $    1,909,595 
                                                                                ==============

24                                                                              

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                       

                                                        [Enlarge/Download Table]

                                                                                               Net       
                                                                                            Unrealized   
                        Expiration                                                         Appreciation  
   Notional Amount         Date                          Description                      (Depreciation) 
----------------------  ------------  --------------------------------------------------- ---------------
                                                                                                         
$5,000,000                9/08/97     Agreement with Morgan Guaranty Trust Company          $  (311,336) 
                                      dated 8/6/97 to receive the notional amount                        
                                      multiplied by the change in market value                           
                                      (including accrued interest) of Republic                           
                                      of Argentina, 11.75% due 2/12/07 and to                            
                                      pay the notional amount multiplied by 1                            
                                      month LIBOR adjusted by a specified                                
                                      spread.                                                            

 6,000,000                9/16/97     Agreement with Morgan Guaranty Trust Company              147,871  
                                      dated 6/12/97 to receive the notional amount                       
                                      multiplied by the change in market value                           
                                      (including accrued interest) of Brazil Par ZL                      
                                      Floating Rate Note 8/15/24 and to pay the                          
                                      notional amount multiplied by 3 month LIBOR                        
                                      adjusted by a specified spread.                                    

40,000,000                9/16/97     Agreement with Morgan Guaranty Trust Company           (2,489,200) 
                                      dated 3/20/97 to pay the notional amount                           
                                      multiplied by the J.P. Morgan Emerging Markets                     
                                      Bond Index on 9/16/97, adjusted by a specified                     
                                      percentage, and to receive 3.45% per year times                    
                                      the notional amount.                                               

68,500,000               11/28/97     Agreement with Credit Suisse Financial Products         6,612,111  
                                      dated 5/23/97 to receive the notional amount                       
                                      multiplied by the change in market value                           
                                      (including accrued interest) of Republic of                        
                                      Ecuador PDI Floating Rate Note due 2/27/15 and to                  
                                      pay a fixed amount upon termination.                               

30,000,000                4/24/98     Agreement with Morgan Guaranty Trust Company           (1,908,258) 
                                      dated 4/24/97 to pay the notional amount                           
                                      multiplied by the J.P. Morgan Emerging Markets                     
                                      Bond Index on 4/24/98, adjusted by a specified                     
                                      percentage, and to receive 4.78% per year times                    
                                      the notional amount.                                               


                                                                              25

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GMO Emerging Country Debt Fund                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements -- continued                                          

                                                        [Enlarge/Download Table]

                                                                                                 
$54,278,259          2/26/99  Agreement with Credit Suisse Financial Products         $8,536,814 
                              dated 2/12/97 to purchase, for a set price, a                      
                              specified amount of Bulgaria FLIRB Fixed/Floating                  
                              Rate Note Series A due July 28, 2012 and Bulgaria                  
                              FLIRB Fixed/Floating Rate Note Series B due July                   
                              28, 2012.  In the event of default by Bulgaria,                    
                              the agreement to purchase the bonds is                             
                              eliminated; in its place, Credit Suisse Financial                  
                              Products acquires the option to sell the same                      
                              amount of the bonds to the Fund for a lower set                    
                              price.                                                             

TRL 550,000,000,000  6/04/99  Agreement with Bank of America dated 6/23/97 to            135,955 
                              receive the notional amount multiplied by the                      
                              change in market value (including accrued                          
                              interest) of Turkey Index Linked Bond and to pay                   
                              the notional amount multiplied by 3 month LIBOR                    
                              adjusted by a specified spread.                                    

21,500,000           5/27/01  Agreement with Credit Suisse Financial Products         (1,288,434)
                              dated 5/21/97 to pay 4.78% per year times the                      
                              notional amount.  The Fund receives payment only                   
                              upon a default event in Ecuador, the notional                      
                              amount times the difference between par value and                  
                              the then-market value of the Republic of Ecuador                   
                              PDI Floating Rate Note maturing 2/27/15.                           

47,000,000           5/29/01  Agreement with Credit Suisse Financial Products         (2,934,926)
                              dated 5/23/97 to pay 3.30% per year times the                      
                              notional amount.  The Fund receives payment only                   
                              upon a default event in Ecuador, the notional                      
                              amount times the difference between 60.25 and the                  
                              then-market value of the Republic of Ecuador PDI                   
                              Floating Rate Note maturing 2/27/15.                               

                                                                                  ===============
                                                     Net unrealized appreciation  $    6,500,602 
                                                                                  ===============

See Notes to the Schedule of Investments for definitions of currency  
abbreviations.                                                                  

26                                                                              

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value ($)   
--------------------------------------------------------------------------------
                                                                                
                COMMON STOCKS -- 92.0%                                          

                Aerospace -- 0.1%                                               
      3,000     Boeing Company                                        163,313   
                                                                  -----------   

                Automotive -- 2.0%                                              
     10,000     Chrysler Corp                                         351,250   
     20,000     General Motors Corp                                 1,255,000   
    122,500     Mascotech Industries Inc                            2,564,844   
                                                                  -----------   
                                                                    4,171,094   
                                                                  -----------   

                Banking and Financial Services -- 9.3%                          
     32,500     American Express Co                                 2,526,875   
    105,000     Block (HR) Inc                                      4,121,249   
     45,000     Chase Manhattan Corp                                5,003,437   
     30,000     Citicorp                                            3,828,749   
     15,000     PNC Bank Corp                                         648,750   
     40,000     Travelers Group Inc                                 2,540,000   
      2,500     Wells Fargo & Co                                      635,625   
                                                                  -----------   
                                                                   19,304,685   
                                                                  -----------   

                Chemicals -- 1.0%                                               
     20,000     Albemarle Corp                                        491,250   
      5,000     Borden Chemical & Plastics L. P.                       52,188   
     10,000     Engelhard Corp                                        208,750   
     12,300     Georgia Gulf Corp                                     353,625   
     10,000     IMC Global Inc                                        351,875   
     10,000     Millenium Chemicals Inc                               210,000   
     15,000     Wellman Inc                                           341,250   
                                                                  -----------   
                                                                    2,008,938   
                                                                  -----------   

                Computer and Office Equipment -- 0.5%                           
     95,000     Intergraph Corp *                                     944,063   
          1     NCR Corp *                                                  9   
      5,000     Silicon Graphics Inc *                                137,188   
                                                                  -----------   
                                                                    1,081,260   
                                                                  -----------   

                Consumer Goods -- 4.4%                                          
     25,000     Black and Decker Corp                                 957,813   
     10,000     Burlington Industries Inc *                           120,625   
     62,500     Eastman Kodak Co                                    4,085,937   
     15,000     Hasbro Inc                                            403,125   
     42,500     Maytag Corp                                          1,166,094  

              See accompanying notes to the financial statements.              1

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Consumer Goods -- continued                                     
    100,000     Safety Kleen                                        2,018,750   
     12,500     Scotts Company, Class A *                             350,000   
                                                                  -----------   
                                                                    9,102,344   
                                                                  -----------   
                Electronic Equipment -- 0.5%                                    
     50,000     International Rectifier Corp *                      1,140,625   
                                                                  -----------   
                Environmental Control -- 0.3%                                   
     37,500     Wheelabrator Technology Inc                           588,281   
                                                                  -----------   
                Food and Beverage -- 3.2%                                       
     35,000     Anheuser Busch Cos Inc                              1,491,875   
     12,500     Coors (Adolph) Co                                     460,938   
     25,000     Cott Corp                                             239,063   
      5,000     Darden Restaurants Inc                                 50,313   
     42,500     Nestle SA ADR                                       2,477,104   
     50,000     RJR Nabisco Holdings Corp                           1,740,625   
      5,000     Sara Lee Corp                                         201,250   
                                                                  -----------   
                                                                    6,661,168   
                                                                  -----------   
                Health Care -- 1.9%                                             
     32,500     Baxter International Inc                            1,728,594   
     62,500     Beverly Enterprises Inc *                           1,019,531   
      5,000     Haemonetics Corp *                                     91,250   
      5,000     Johnson & Johnson                                     283,438   
     42,500     Owens and Minor Holdings Co                           576,406   
     15,000     Perrigo Co *                                          214,688   
      5,625     Quest Diagnostics Inc *                               105,117   
                                                                  -----------   
                                                                    4,019,024   
                                                                  -----------   
                Insurance -- 5.8%                                               
      7,500     Aetna Life and Casualty Co                            715,781   
      7,500     Allmerica Financial Corp                              310,313   
     22,500     Allstate Corp                                       1,643,906   
     25,000     Chartwell Re Corp                                     856,250   
      2,500     Cigna Corp                                            458,438   
    127,500     Reliance Group Holdings Inc                         1,561,875   
     50,000     Sedgwick Group ADR                                    500,000   
    125,000     TIG Holdings Inc                                    3,906,249   
     35,600     USF & G Corp                                          780,975   
     20,000     Washington National Corp                              590,000   
     75,000     Willis Corroon Group Plc ADR                          773,438   
                                                                  -----------   
                                                                   12,097,225   
                                                                  -----------   

2             See accompanying notes to the financial statements.               

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value($)    
--------------------------------------------------------------------------------
                                                                                
                Machinery -- 0.9%                                               
     42,500     Cincinnati Milacron Inc                             1,094,375   
     10,000     FMC Corp *                                            830,625   
                                                               ---------------  
                                                                    1,925,000   
                                                               ---------------  
                Manufacturing -- 10.7%                                          
     35,000     American Greetings Corp                             1,216,250   
     27,500     Clayton Homes Inc                                     462,344   
     22,500     Corning Inc                                         1,189,688   
     32,500     General Electric Co                                 2,031,250   
     41,000     Griffon Corp *                                        574,000   
     46,000     IBM Corp                                            4,640,249   
     15,000     Lafarge Corp                                          487,500   
     89,500     Owens Corning                                       3,630,343   
     27,500     Rockwell International Corp                         1,650,000   
     22,500     Tenneco Inc                                         1,092,656   
     30,000     United Technologies Corp                            2,341,875   
    110,001     Westinghouse Electric Corp                          2,832,512   
                                                               ---------------  
                                                                   22,148,667   
                                                               ---------------  
                Metals and Mining -- 1.7%                                       
      7,500     Alcan Aluminum Ltd                                    262,031   
     50,000     Allegheny Teledyne Inc                              1,543,750   
     32,500     Amcol International Corp                              552,500   
      7,500     Asarco Inc                                            230,625   
     10,000     Cyprus Amax Minerals Co                               252,500   
      5,000     Newmont Mining Corp                                   211,563   
     25,000     Pittston Minerals Group                               279,688   
     10,000     Placer Dome Inc                                       166,250   
                                                               ---------------  
                                                                    3,498,907   
                                                               ---------------  
                Oil and Gas -- 7.8%                                             
     10,000     Amerada Hess Corp                                     581,250   
     20,000     Cabot Oil & Gas Corp, Class A                         463,750   
      5,000     Dresser Industries Inc                                208,750   
     35,000     Enron Oil & Gas                                       844,375   
     37,488     Enserch Exploration Inc *                             337,389   
     75,000     Lasmo Plc ADR                                         923,438   
     25,000     Mitchell Energy, Class A                              621,875   
     50,300     Mitchell Energy, Class B                            1,257,500   

              See accompanying notes to the financial statements               3

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Oil and Gas -- continued                                        
     22,053     Monterey Resources Inc                                454,843   
    112,500     Occidental Petroleum Corp                           2,636,718   
      5,000     Questar Corp                                          200,000   
     50,000     Santa Fe Energy Resources Inc                         553,125   
      5,000     Texaco Inc                                            576,250   
      5,000     Total SA                                              236,875   
     35,000     Union Texas Petroleum Holdings Inc                    815,938   
     30,000     Unocal Corp                                         1,171,875   
     90,000     USX - Marathon Group                                2,930,624   
     75,000     Westcoast Energy Inc                                1,434,375   
                                                               ---------------  
                                                                   16,248,950   
                                                               ---------------  

                Paper and Allied Products -- 0.5%                               
      5,000     Champion International Corp                           295,938   
      7,500     International Paper Co                                395,625   
      5,000     Weyerhaeuser Co                                       288,750   
                                                               ---------------  
                                                                      980,313   
                                                               ---------------  

                Pharmaceuticals -- 1.7%                                         
      5,000     Glaxo Wellcome Plc ADR                                199,375   
     25,000     Lilly (Eli) & Co                                    2,615,625   
     15,000     Medpartners Inc *                                     320,625   
     10,000     Smithkline Beecham Plc                                433,125   
                                                               ---------------  
                                                                    3,568,750   
                                                               ---------------  

                Primary Materials -- 0.1%                                       
     12,500     Rubbermaid Inc                                        312,500   
                                                               ---------------  

                Primary Processing -- 0.9%                                      
     25,000     Armco Inc *                                           148,438   
      5,000     Dow Chemical Co                                       442,500   
     10,000     Du Pont (EI) De Nemours & Co                          623,125   
     20,000     Intermet Corp                                         346,250   
     10,000     USX-US Steel Group Inc                                351,250   
                                                               ---------------  
                                                                    1,911,563   
                                                               ---------------  

                Real Estate -- 3.9%                                             
     50,000     Amli Residential Properties Trust                   1,137,500   
     35,000     Boston Properties Inc *                             1,043,439   
     25,000     Crown American Realty Trust                           242,188   
     85,000     JP Realty Inc                                       2,093,125   
     25,000     Simon Debartolo Group Inc                             792,188   


See accompanying notes to the financial statements. 

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares     Description                                         Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                Real Estate -- continued                                         
     77,500     Summit Properties Inc                               1,545,156    
     50,000     Walden Residential Properties Inc                   1,193,750    
                                                                  -----------    
                                                                    8,047,346    
                                                                  -----------    
                Refining -- 0.4%                                                 
      7,500     Ashland Inc                                           375,938    
     35,000     Quaker State Corp                                     542,500    
                                                                  -----------    
                                                                      918,438    
                                                                  -----------    
                Retail Trade -- 3.4%                                             
     25,000     Costco Cos Inc *                                      901,563    
     75,000     Federated Department Stores *                       3,149,999    
     85,000     Wal Mart Stores Inc                                 3,017,499    
                                                                  -----------    
                                                                    7,069,061    
                                                                  -----------    
                Services -- 4.3%                                                 
     20,000     Cordiant Plc ADR                                      112,500    
     37,500     Ogden Corp                                            869,531    
     15,000     Pinkertons Inc                                        349,688    
      5,000     Time Warner Inc                                       257,500    
    200,000     Waste Management Inc                                6,399,999    
    115,000     Waste Management International PLC ADR *              934,375    
                                                                  -----------    
                                                                    8,923,593    
                                                                  -----------    
                Technology -- 8.9%                                               
     25,000     Avnet Inc                                           1,729,688    
     10,000     Bay Networks Inc *                                    353,750    
     22,500     Data General Corp *                                   808,594    
     75,000     Digital Equipment Corp *                            3,224,999    
     15,000     G TECH Holdings Corp *                                450,938    
     17,500     Intel Corp                                          1,612,188    
     10,000     Novell Inc *                                           93,750    
     95,000     Storage Technology Corp *                           4,839,062    
    137,500     Tandem Computers Inc *                              4,674,999    
     10,000     Xerox Corp                                            755,000    
                                                                  -----------    
                                                                   18,542,968    
                                                                  -----------    
                Telecommunications -- 6.0%                                       
      5,000     AT & T Corp                                           195,000    
     32,500     Cox Communications, Class A *                         879,531    
     90,000     GTE Corp                                            4,010,624    

              See accompanying notes to the financial statements.              5

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                Telecommunications -- continued                                  
      5,000     Liberty Media Group, Class A                          131,875    
     25,000     MCI Communications Corp                               712,500    
     25,000     SBC Communications                                  1,359,389    
     50,000     Tele-Communications, Class A                          875,000    
     47,500     US West Inc                                         1,701,094    
    125,000     US West Media Group *                               2,500,000    
                                                                  -----------    
                                                                   12,365,013    
                                                                  -----------    
                Tobacco -- 0.5%                                                  
     75,000     Imperial Tobacco Group Plc ADR                        939,008    
                                                                  -----------    
                Transportation -- 2.1%                                           
     10,500     AMR Corp *                                          1,057,875    
     70,000     Canadian Pacific                                    2,043,125    
      7,500     Delta Air Lines Inc                                   648,750    
     10,000     Ryder System Inc                                      356,875    
      5,000     USAir Group Inc *                                     170,625    
                                                                  -----------    
                                                                    4,277,250    
                                                                  -----------    
                Utilities -- 9.2%                                                
     35,000     Calpine Corp *                                        647,500    
     20,000     Cinergy Corp                                          661,250    
     25,000     DPL Inc                                               592,188    
     62,500     Duke Power Co                                       3,027,343    
     10,000     Energy Group PLC ADR                                  404,375    
     60,000     Entergy Corp                                        1,488,750    
     74,963     Houston Industries Inc                              1,518,001    
     20,900     Illinova Corp                                         480,700    
    112,500     Niagara Mohawk Power Corp *                         1,005,469    
     10,000     Northeast Utilities                                   100,625    
     25,000     Ohio Edison Co                                        550,000    
     32,500     Pacificorp                                            674,375    
     20,000     PG & E Corp                                           463,750    
     25,000     Public Service Enterprise Group Inc                   620,313    
     25,000     Southern Co                                           526,563    
    105,625     Texas Utilities Co                                  3,683,671    
     30,000     TransCanada Pipeline Ltd                              562,500    
     85,000     Unicom Corp                                         2,008,125    
                                                                  -----------    
                                                                   19,015,498    
                                                                  ===========    

                TOTAL COMMON STOCKS  (COST  $131,521,188)         191,030,782    
                                                                  -----------    

6             See accompanying notes to the financial statements.               

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


  Par Value($)/                                                                 
    Shares          Description                                       Value ($) 
--------------------------------------------------------------------------------
                                                                                
                    PREFERRED STOCKS -- 5.4%                                    

                    Banking and Financial Services -- 0.1%                      
      5,000         Time Warner Financing Convertible $.31            195,000   
                                                                   ----------   

                    Metals and Mining -- 0.8%                                   
      5,000         Battle Mountain Gold Convertible $3.25            249,375   
     50,300         Freeport McMoran Corp $0.34                     1,499,569   
                                                                   ----------   
                                                                    1,748,944   
                                                                   ----------   

                    Oil and Gas -- 0.2%                                         
     15,000         Atlantic Richfield Co Convertible 9.00%           356,250   
                                                                   ----------   

                    Paper and Allied Products -- 1.7%                           
     95,000         Fort James Corp Convertible 9.00%               3,621,874   
                                                                   ----------   

                    Primary Processing -- 0.1%                                  
      5,000         Armco Inc Convertible $3.625                      250,625   
                                                                   ----------   

                    Refining -- 0.8%                                            
     30,000         Unocal Corp Convertible 6.25% 144A              1,736,250   
                                                                   ----------   

                    Services -- 0.2%                                            
     25,000         International Technology Corp                               
                    Convertible 7.00%                                 481,250   
                                                                   ----------   
                    Telecommunications -- 0.3%                                  
     15,000         Sprint Corp Convertible 8.25%                     534,375   
                                                                   ----------   

                    Transportation -- 1.2%                                      
     26,100         Navistar International Corp $6.00                           
     10,000         US Air Group Inc Convertible                    1,562,738   
                    Series B $8.759                                   856,250   
                                                                   ----------   
                                                                    2,418,988   
                                                                   ----------   

                    TOTAL PREFERRED STOCKS  (COST $8,671,197)      11,343,556   
                                                                   ----------   

                    DEBT OBLIGATIONS -- 1.0%                                    

                    Health Care -- 0.6%                                         
   $2,500,000       Roche Holdings Inc, 0.00% due 4/20/10           1,200,000   
                                                                   ----------   

                    Oil and Gas -- 0.4%                                         
   $1,000,000       Noram Energy Corp, 6.00% due 3/15/12              897,500   
                                                                   ----------   

                    TOTAL DEBT OBLIGATIONS  (COST  $1,855,832)      2,097,500   
                                                                   ----------   

See accompanying notes to financial statements. 

N-30D 415th Page of 667 TOC 1st Previous Next ↓Bottom Just 415th
GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Par Value    Description                                        Value ($)    
--------------------------------------------------------------------------------
                                                                                
                SHORT-TERM INVESTMENTS -- 7.2%                                  

                Cash Equivalents -- 5.7%                                        
   $1,760,158   BankBoston Eurodollar Time Deposit, 5.7875% due                 
                9/2/97/(a)/                                         1,760,158   
   $  244,891   First Union National Bank of North Carolina                     
                Eurodollar Time Deposit, 5.5625% due 9/2/97/(a)/      244,891   
   $  734,672   Harris Bank and Trust Eurodollar Time Deposit,                  
                5.625% due 9/2/97/(a)/                                734,672   
   $9,000,000   Prudential Securities Group Inc Master Note,                    
                5.8875% due 9/2/97/(a)/                             9,000,000   
                                                                  -----------   
                                                                   11,739,721   
                                                                  -----------   
                Repurchase Agreement -- 1.5%                                    
   $3,073,181   Salomon Brothers Repurchase Agreement, dated                    
                8/29/97, due 9/2/97, with a maturity value of                   
                $3,074,906 and an effective yield of 5.05%,                     
                collateralized by U.S. Treasury Obligations                     
                with rates ranging from 5.00% to 6.75%, with                    
                maturity dates ranging from 2/15/99 to 8/15/26                  
                and with an aggregate market value of                           
                $3,143,603.                                         3,073,181   
                                                                  -----------   
                TOTAL SHORT-TERM INVESTMENTS  (COST                             
                $14,812,902)                                       14,812,902   
                                                                  -----------   

                TOTAL INVESTMENTS -- 105.6%                                     
                (COST $156,861,119)                               219,284,740   

                Other Assets and Liabilities (net) -- (5.6)%      (11,555,233)  
                                                                  -----------   

                TOTAL NET ASSETS-- 100%                          $207,729,507   
                                                                 ============   

Notes to the Schedule of Investments:           

ADR - American Depositary Receipt               
144A - Securities exempt from registration      
under rule 144A of the Securities Act of 1933.  
These securities may be resold in transactions  
exempt from registration, normally to           
qualified institutional investors.              
*  Non-income producing security.                 
/(a)/ Represents investments of security lending        
collateral (Note 1).                        

8             See accompanying notes to the financial statements.               

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

                                                                [Download Table]


Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                                
Assets:                                                                         
   Investments, at value (cost $156,861,119) (Note 1)              $219,284,740 
   Receivable for investments sold                                      282,522 
   Dividends and interest receivable                                    502,920 
   Receivable for expenses waived or borne by Manager (Note 2)           39,356 
                                                                   ------------ 

      Total assets                                                  220,109,538 
                                                                   ------------ 

Liabilities:                                                                    
   Payable for investments purchased                                    447,100 
   Payable upon return of securities loaned (Note 1)                 11,739,721 
   Payable to affiliate for (Note 2):                                           
     Management fee                                                     129,427 
     Shareholder service fee                                             25,874 
   Accrued expenses                                                      37,909 
                                                                   ------------ 

      Total liabilities                                              12,380,031 
                                                                   ------------ 

Net assets                                                         $207,729,507 
                                                                   ============ 

Net assets consist of:                                                          
   Paid-in-capital                                                 $116,965,400 
   Accumulated undistributed net investment income                      843,392 
   Accumulated undistributed net realized gain                       27,497,094 
   Net unrealized appreciation                                       62,423,621 
                                                                   ------------ 
                                                                   $207,729,507 
                                                                   ============ 

Net assets attributable to:                                                     
   Class III shares                                                $207,729,507 
                                                                   ============ 

Shares outstanding:                                                             
   Class III                                                         11,632,360 
                                                                   ============ 

Net asset value per share:                                                      
   Class III                                                       $      17.86 
                                                                   ============ 

             See accompanying notes to the financial statements.             9

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

                                                                [Download Table]

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------
                                                                                

Investment Income:                                                              
   Dividends                                                       $ 2,931,866  
   Interest (including securities lending income of $13,586)           161,149  
                                                                   ------------ 

      Total income                                                   3,093,015  
                                                                   ------------ 

Expenses:                                                                       
   Management fee (Note 2)                                             847,830  
   Audit fees                                                           23,484  
   Custodian and transfer agent fees                                    21,413  
   Registration fees                                                     7,188  
   Legal fees                                                            5,229  
   Trustees fees (Note 2)                                                1,059  
   Miscellaneous                                                           629  
   Fees waived or borne by Manager (Note 2)                           (228,568) 
                                                                   ------------ 
                                                                       678,264  
   Shareholder service fee (Note 2)                                             
      Class III                                                        169,566  
                                                                   ------------ 
      Net expenses                                                     847,830  
                                                                   ------------ 

        Net investment income                                        2,245,185  
                                                                   ------------ 

Realized and unrealized gain (loss):                                            
   Net realized gain (loss) on:                                                 
      Investments                                                   27,845,315  
                                                                   ------------ 

        Net realized gain                                           27,845,315  
                                                                   ------------ 

   Change in net unrealized appreciation (depreciation) on:                     
      Investments                                                    2,943,114  
                                                                   ------------ 

        Net unrealized gain                                          2,943,114  
                                                                   ------------ 

      Net realized and unrealized gain                              30,788,429  
                                                                   ------------ 

Net increase in net assets resulting from operations               $33,033,614  
                                                                   ============ 

10            See accompanying notes to the financial statements.               

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Changes in Net Assets                                                                  
----------------------------------------------------------------------------------------------------

                                                             Six Months Ended                       
                                                             August 31, 1997      Year Ended        
                                                               (Unaudited)      February 28, 1997   
                                                             ----------------   -----------------   
                                                                                                    
Increase (decrease) in net assets:                                                                  
Operations:                                                                                         
   Net investment income                                      $  2,245,185        $  4,658,349      
   Net realized gain                                            27,845,315          18,434,364      
   Change in net unrealized appreciation (depreciation)          2,943,114          17,227,189      
                                                              ------------        ------------      

   Net increase in net assets resulting from operations         33,033,614          40,319,902      
                                                              ------------        ------------      

Distributions to shareholders from:                                                                 
   Net investment income                                                                            
       Class III                                                (2,339,999)         (4,445,572)     
                                                              ------------        ------------      
       Total distributions from net investment income           (2,339,999)         (4,445,572)     
                                                              ------------        ------------      
   Net realized gains                                                                               
       Class III                                                (9,663,730)        (17,043,498)     
                                                              ------------        ------------      
       Total distributions from net realized gains              (9,663,730)        (17,043,498)     
                                                              ------------        ------------      

                                                               (12,003,729)        (21,489,070)     
                                                              ------------        ------------      
   Net share transactions: (Note 5)                                                                 
       Class III                                               (45,883,602)          1,324,046      
                                                              ------------        ------------      
   Increase (decrease) in net assets resulting from net                                             
      share transactions                                       (45,883,602)          1,324,046      
                                                              ------------        ------------      

      Total increase (decrease) in net assets                  (24,853,717)         20,154,878      

Net assets:                                                                                         
   Beginning of period                                         232,583,224         212,428,346      
                                                              ------------        ------------      

   End of period (including accumulated undistributed net                                           
      investment income of $843,392 and $938,206,                                                   
      respectively)                                           $207,729,507        $232,583,224      
                                                              ============        ============      

             See accompanying notes to the financial statements.            11

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                         Six Months Ended            Year Ended February 28/29,             
                                         August 31, 1997  ------------------------------------------------  
                                            (Unaudited)     1997      1996      1995      1994      1993    
                                            ----------    --------   -------   -------   -------   -------  
                                                                                                            
Net asset value, beginning                                                                                  
   of period                                 $ 16.33      $  15.04   $ 12.54   $ 12.49   $ 11.71   $ 10.82  
                                             -------      --------   -------   -------   -------   -------  

Income from investment operations:                                                                          
   Net investment income                        0.18          0.33      0.37      0.34      0.27      0.30  
   Net realized and unrealized gain             2.26          2.53      3.26      0.55      1.64      1.32  
                                             -------      --------   -------   -------   -------   -------  

      Total from investment                                                                                 
      operations                                2.44          2.86      3.63      0.89      1.91      1.62  
                                             -------      --------   -------   -------   -------   -------  

Less distributions to shareholders:                                                                         
   From net investment income                  (0.17)        (0.32)    (0.37)    (0.32)    (0.28)    (0.30) 
   From net realized gains                     (0.74)        (1.25)    (0.76)    (0.52)    (0.85)    (0.43) 
                                             -------      --------   -------   -------   -------   -------  

      Total distributions                      (0.91)        (1.57)    (1.13)    (0.84)    (1.13)    (0.73) 
                                             -------      --------   -------   -------   -------   -------  
Net asset value, end of period               $ 17.86      $  16.33   $ 15.04   $ 12.54   $ 12.49   $ 11.71  
                                             =======      ========   =======   =======   =======   =======  

Total Return/(a)/                              15.31%        20.03%    29.95%     7.75%    16.78%    15.66% 

Ratios/Supplemental Data:                                                                                   
   Net assets, end of period (000's)        $207,730      $232,583  $212,428   $182,871  $147,767   $62,339 
   Net expenses to average                                                                                  
      daily net assets                          0.75%*        0.75%     0.75%      0.75%     0.75%     0.73%
   Net investment income to average                                                                         
      daily net assets                          1.99%*        2.15%     2.61%      2.84%     2.32%     2.77%
   Portfolio turnover rate                        10%           25%       34%        49%       65%       83%
   Average broker commission rate                                                                           
      per equity share/(b)/                  $0.0674      $ 0.0590       N/A        N/A       N/A       N/A 
   Fees and expenses voluntarily waived                                                                     
      or borne by the Manager consisted                                                                     
      of the following per share                                                                            
      amounts:                               $  0.02      $   0.02   $  0.01    $  0.01   $  0.01    $ 0.03 

*     Annualized.                                                               
/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            

12            See accompanying notes to the financial statements.               

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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, 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 into classes.                                   

 The Fund seeks long-term capital growth through investment primarily in
equity securities.                                                    

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
     as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

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. 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.                                

                                                                              13

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Security lending                                                      
  The Fund may lend its securities to certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $11,260,103, collateralized by
cash in the amount of $11,739,721, which was invested in short-term   
instruments.                                                          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

14                                                                              

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)--(Continued)                          
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .15% of the amount    
invested. The Manager may waive such premium to the extent that a     
     transaction results in minimal brokerage and transaction costs to the Fund.
  All purchase premiums are paid to and recorded as paid-in capital by the
   Fund. For the six months ended August 31, 1997, the Fund received $150 in
 purchase premiums. There is no premium for cash redemptions, reinvested
distributions or in-kind transactions.                                

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .75% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .60% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .75%;
thus, the net annual expense ratio after the waiver for a Class III   
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $1,059. 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 six months ended August 31, 1997,     
aggregated $21,498,027 and $83,556,415, respectively.                 

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]


                             Gross Unrealized         Gross Unrealized          Net Unrealized     
     Aggregate Cost            Appreciation             Depreciation             Appreciation      
---------------------------------------------------------------------------------------------------
                                                                                                   
     $ 156,861,119             $ 65,890,956              $ 3,467,335             $ 62,423,621      

                                                                              15

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GMO Fundamental Value Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)--(Continued)                          
August 31, 1997                                                                 
--------------------------------------------------------------------------------

4.   Principal shareholders                                                     

    At August 31, 1997, 93% of the outstanding shares of the Fund were held by
    four shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]

                                          Six Months Ended                 Year Ended          
Class III:                                 August 31, 1997               February 29, 1997     
                                    -----------------------------   -------------------------- 
                                       Shares           Amount         Shares         Amount   
                                    ------------     ------------   -----------     ---------- 
                                                                                               
Shares sold                               5,670     $    100,000         7,028     $   107,000 
Shares issued to shareholders                                                                  
  in reinvestment of distributions      587,700       10,016,398     1,161,012      17,805,046 
Shares repurchased                   (3,207,188)     (56,000,000)   (1,045,307)    (16,588,000)
                                    ------------     ------------   -----------     -----------
Net increase (decrease)              (2,613,818)    $(45,883,602)      122,733     $ 1,324,046 
                                    ============     =============  ===========     ===========

16                                                                              

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

Par Value ($)/                                                                                    
    Shares         Description                                                      Value ($)     
--------------------------------------------------------------------------------------------------
                                                                                                  
                   MUTUAL FUNDS -- 100.0%                                                         
      518,570      GMO Core Fund (Class III Shares)                                10,008,400     
      371,774      GMO Currency Hedged International Core Fund (Class III Shares)   4,665,765     
    1,112,286      GMO Domestic Bond Fund (Class III Shares)                       11,467,667     
       80,083      GMO Emerging Country Debt Fund (Class III Shares)                1,068,309     
      318,066      GMO Emerging Markets Fund (Class III Shares)                     4,138,041     
       91,342      GMO Growth Fund (Class III Shares)                                 419,261     
      110,004      GMO Inflation Indexed Bond Fund (Class III Shares)               1,124,236     
       93,508      GMO International Bond Fund (Class III Shares)                   1,018,303     
      206,140      GMO International Core Fund (Class III Shares)                   5,040,116     
       38,851      GMO International Small Companies Fund (Class III Shares)          543,912     
      286,810      GMO REIT Fund (Class III Shares)                                 3,831,782     
      214,739      GMO Small Cap Growth Fund (Class III Shares)                     2,684,238     
      152,344      GMO Small Cap Value Fund (Class III Shares)                      2,780,272     
    1,271,234      GMO U.S. Bond/Global Alpha A Fund (Class III Shares)            13,424,235     
      105,596      GMO Value Fund (Class III Shares)                                1,648,347     
                                                                                  -----------     

                   TOTAL MUTUAL FUNDS  (COST $61,597,727)                          63,862,884     
                                                                                  -----------     

                   SHORT-TERM INVESTMENT -- 0.0%                                                  

                   Repurchase Agreement -- 0.0%                                                   
    $   6,708      Salomon Brothers Repurchase Agreement, dated 8/29/97, due                      
                   9/2/97, with a maturity value of $6,712 and an effective                       
                   yield of 5.05%, collateralized by U.S. Treasury Obligations                    
                   with rates ranging from 5.00% to 6.75%, with maturity dates                    
                   ranging from 2/15/99 to 8/15/26 and with an aggregate                          
                   market value of $6,862.                                              6,708     
                                                                                  -----------     

                   TOTAL SHORT-TERM INVESTMENTS (COST $6,708)                           6,708     
                                                                                  -----------     

                   TOTAL INVESTMENTS -- 100.0%                                                    
                   (Cost $61,604,435)                                              63,869,592     

                   Other Assets and Liabilities (net) -- 0.0%                            (336)    
                                                                                  -----------     

                   TOTAL NET ASSETS-- 100%                                        $63,869,256     
                                                                                  ===========     

               See accompanying notes to the financial statements.             1

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                            
Assets:                                                                     
   Investments, at value (cost $61,604,435) (Note 1)            $63,869,592 
   Receivable for expenses waived or borne by Manager (Note 2)       16,793 
                                                                ------------

       Total assets                                              63,886,385 
                                                                ------------

Liabilities:                                                                
   Payable to affiliate for (Note 2):                                       
      Shareholder service fee                                         3,383 
   Accrued expenses                                                  13,746 
                                                                ------------

       Total liabilities                                             17,129 
                                                                ------------

Net assets                                                      $63,869,256 
                                                                ============

Net assets consist of:                                                      
   Paid-in-capital                                              $58,388,148 
   Accumulated undistributed net investment income                  433,389 
   Accumulated undistributed net realized gain                    2,782,562 
   Net unrealized appreciation                                    2,265,157 
                                                                ============
                                                                $63,869,256 
                                                                ============

Net assets attributable to:                                                 
   Class I shares                                               $14,107,807 
                                                                ============
   Class II shares                                              $34,592,428 
                                                                ============
   Class III shares                                             $15,169,021 
                                                                ============

Shares outstanding:                                                         
   Class I                                                        1,160,947 
                                                                ============
   Class II                                                       2,844,780 
                                                                ============
   Class III                                                      1,247,141 
                                                                ============

Net asset value per share:                                                  
   Class I                                                      $     12.15 
                                                                ============
   Class II                                                     $     12.16 
                                                                ============
   Class III                                                    $     12.16 
                                                                ============

2                      See accompanying notes to the financial statements.      

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Investment Income:                                                            
   Dividends from investment company shares                        $  447,920 
   Interest                                                             1,935 
                                                                   -----------

       Total income                                                   449,855 
                                                                   -----------

Expenses:                                                                     
   Custodian and transfer agent fees                                   12,191 
   Registration fees                                                    8,214 
   Audit fees                                                           7,576 
   Legal fees                                                             786 
   Trustees fees (Note 2)                                                 171 
   Fees waived or borne by Manager (Note 2)                           (28,938)
                                                                   -----------
                                                                           -- 
   Shareholder service fee (Note 2)                                           
       Class I                                                          6,619 
       Class II                                                         9,847 
                                                                   -----------
       Net expenses                                                    16,466 
                                                                   -----------

          Net investment income                                       433,389 
                                                                   -----------

Realized and unrealized gain (loss):                                          
   Net realized gain (loss) on:                                               
       Investments                                                    104,856 
       Realized gain distributions from investment company shares   2,683,941 
                                                                   -----------

          Net realized gain                                         2,788,797 
                                                                   -----------

   Change in net unrealized appreciation (depreciation) on:                   
       Investments                                                  1,491,067 
                                                                   -----------

          Net unrealized gain                                       1,491,067 
                                                                   -----------

       Net realized and unrealized gain                             4,279,864 
                                                                   -----------

Net increase in net assets resulting from operations               $4,713,253 
                                                                   ===========


             See accompanying notes to the financial statements.             3

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                           Six Months Ended   Period from July 29, 1996  
                                           August 31, 1997   (commencement of operations)
                                            (Unaudited)           February 28, 1997      
                                           ----------------  ----------------------------
                                                                                         
Increase (decrease) in net assets:                                                       
Operations:                                                                              
   Net investment income                     $  433,389             $   64,042           
   Net realized gain                          2,788,797                206,668           
   Change in net unrealized appreciation                                                 
      (depreciation)                          1,491,067                774,090           
                                             -----------            -----------          

   Net increase in net assets resulting                                                  
      from operations                          4,713,253              1,044,800          
                                             -----------            -----------          

Distributions to shareholders from:                                                      
   Net investment income                                                                 
       Class I                                        --                (64,042)         
                                             -----------            -----------          
       Total distributions from net                                                      
       investment income                              --                (64,042)         
                                             -----------            -----------          
   In excess of net investment income                                                    
       Class I                                        --                 (1,958)         
                                             -----------            -----------          
       Total distributions in excess of                                                  
       net investment income                          --                 (1,958)         
                                             -----------            -----------          
   Net realized gains                                                                    
       Class I                                   (31,446)               (48,900)         
       Class II                                  (90,795)                    --          
       Class III                                 (39,804)                    --          
                                             -----------            -----------          
       Total distributions from net                                                      
       realized gains                           (162,045)               (48,900)         
                                             -----------            -----------          

                                                (162,045)              (114,900)         
                                             -----------            -----------          
   Net share transactions: (Note 5)                                                      
       Class I                                 6,467,806              6,386,281          
       Class II                               17,216,657             13,891,398          
       Class III                              14,426,006                     --          
                                             -----------            -----------          
   Increase in net assets resulting from                                                 
      net share transactions                  38,110,469             20,277,679          
                                             -----------            -----------          

      Total increase in net assets            42,661,677             21,207,579          

Net assets:                                                                              
   Beginning of period                        21,207,579                     --          
                                             -----------            -----------          

   End of period (including accumulated                                                  
      undistributed net investment income                                                
      of $433,389 and $0, respectively)      $63,869,256            $21,207,579          
                                             ===========            ===========          

4             See accompanying notes to the financial statements.               

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                  Six Months Ended   Period from July 29, 1996  
                                                   August 31, 1997  (commencement of operations)
                                                     (Unaudited)       to February 28, 1997     
                                                   ---------------  ----------------------------
                                                                                                
Net asset value, beginning of period                   $ 11.19                  $10.00          
                                                       --------                 -------         

Income from investment operations:                                                              
   Net investment income (b)                              0.08                    0.22          
   Net realized and unrealized gain                       0.91                    1.35          
                                                       --------                 -------         

      Total from investment operations                    0.99                    1.57          
                                                       --------                 -------         

Less distributions to shareholders:                                                             
   From net investment income                               --                   (0.22)         
   From net realized gains                               (0.03)                  (0.16)         
                                                       --------                 -------         

      Total distributions                                (0.03)                  (0.38)         
                                                       --------                 -------         
Net asset value, end of period                         $ 12.15                  $11.19          
                                                       ========                 =======         

Total Return/(a)/                                         8.86%                  15.85%         

Ratios/Supplemental Data:                                                                       
   Net assets, end of period (000's)                   $14,108                  $6,848          
   Net expenses to average daily net assets               0.13%*                  0.15%*        
   Net investment income to average daily net                                                   
      assets/(b)/                                         1.83%*                  2.75%*        
   Portfolio turnover rate                                  18%                     33%         
   Fees and expenses voluntarily waived or borne                                                
      by the Manager consisted of the following                                                 
      per share amounts:                               $  0.01                  $ 0.03          

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
/(b)/ Recognition of net investment income is affected by the timing of the     
declaration of dividends by the underlying funds in which the fund  
invests.                                                            

*  Annualized.                                                                  

             See accompanying notes to the financial statements.             5

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                  Six Months Ended  Period from December 31, 1996
                                                  August 31, 1997   (commencement of operations) 
                                                    (Unaudited)        to February 28, 1997      
                                                  ----------------  ---------------------------- 
                                                                                                 
Net asset value, beginning of period                  $11.19                  $ 10.86            
                                                      -------                 --------           

Income from investment operations:                                                               
   Net investment income (b)                            0.09                       --            
   Net realized and unrealized gain                     0.91                     0.33            
                                                      -------                 --------           

      Total from investment operations                  1.00                     0.33            
                                                      -------                 --------           

Less distributions to shareholders:                                                              
   From net realized gains                             (0.03)                       --           
                                                      -------                 --------           
      Total distributions                              (0.03)                       --           
                                                      -------                 --------           
Net asset value, end of period                        $12.16                  $ 11.19            
                                                      =======                 ========           

Total Return/(a)/                                       8.95%                    3.04%           

Ratios/Supplemental Data:                                                                        
   Net assets, end of period (000's)                  $34,592                 $14,359            
   Net expenses to average daily net assets             0.07%*                   0.07%*          
   Net investment income to average daily net                                                    
      assets/(b)/                                       1.84%*                  (0.07)%*         
   Portfolio turnover rate                                18%                      33%           
   Fees and expenses voluntarily waived or borne                                                 
      by the Manager consisted of the following                                                  
      per share amounts:                              $ 0.01                  $  0.01            

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  

/(b)/ Recognition of net investment income is affected by the timing of the     
declaration of dividends by the underlying funds in which the fund  
invests.                                                            

*   Annualized.                                                             

6              See accompanying notes to the financial statements.              

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                                 Period from June 2, 1997    
                                                                 (commencement of operations)
                                                                    to August 31, 1997       
                                                                       (Unaudited)           
                                                                 -------------------------   
                                                                                             
Net asset value, beginning of period                                      $ 11.56            
                                                                          --------           
Income from investment operations:                                                           
   Net investment income (b)                                                 0.06            
   Net realized and unrealized gain                                          0.57            
                                                                          --------           

      Total from investment operations                                       0.63            
                                                                          --------           
Less distributions to shareholders:                                                          
   From net realized gains                                                  (0.03)           
                                                                          --------           

      Total distributions                                                   (0.03)           
                                                                          --------           
Net asset value, end of period                                            $ 12.16            
                                                                          ========           

Total Return (a)                                                             5.47%           

Ratios/Supplemental Data:                                                                    
   Net assets, end of period (000's)                                      $15,169            
   Net expenses to average daily net assets                                  0.00%*          
   Net investment income to average daily net assets (b)                     2.20%*          
   Portfolio turnover rate                                                     18%           
   Fees and expenses voluntarily waived or borne by the Manager                              
      consisted of the following per share amount:                        $  0.01            

(a)Calculation excludes purchase premiums and redemption fees. The total        
   returns would have been lower had certain expenses not been waived during the
periods shown.                                                            
(b)Recognition of net investment income is affected by the timing of the        
 declaration of dividends by the underlying funds in which the fund invests.
*  Annualized.                                                                  

          See accompanying notes to the financial statements.                7

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
------------------------------------------------------------------------------- 

1.   Significant accounting policies                                            

GMO Global Balanced Allocation Fund (the "Fund"), which commenced     
  operations on July 29, 1996, is a series of GMO Trust (the "Trust"). The
     Fund is registered under the Investment Company Act of 1940, as amended, as
     an open-end, diversified management investment company. The Fund is advised
 and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or
   "GMO"). The Trust was established as a Massachusetts Business Trust under
the laws of the Commonwealth of Massachusetts on June 24, 1985. The   
    Declaration of Trust permits the Trustees 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 operates as a "fund-of-funds" in that, pursuant to management
   provided by the Manager, it makes investments in other funds of the Trust
  ("underlying funds"). The Fund seeks a total return greater than that of
  the GMO Global Balanced Index, a benchmark developed by the Manager. The
   Fund will pursue its objective by investing primarily in Class III shares
 of domestic equity, international equity, and fixed income funds of the
Trust.                                                                

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
outlined in the Trust's prospectus.                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

    Shares of underlying funds are valued at their net asset value as reported
   on each business day. Short-term investments with a remaining maturity of
    sixty days or less are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the 
Trustees.                                                             

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. 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.                                

8                                                                               

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         

   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
    accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis.        

Allocation of operating activity                                      

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

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .35% of the amount    
  invested. In the case of cash redemptions, the fee is .11% of the amount
  redeemed. Prior to June 30, 1997, the premium on cash purchases was .31%
and the fee on cash redemptions was .03%. All purchase premiums and   
  redemption fees are paid to and recorded as paid-in capital by the Fund.
For the six months ended August 31, 1997 the Fund                     

                                                                               9

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   received $89,703 in purchase premiums and no redemption fees. There is no
premium for reinvested distributions or in-kind transactions.         

2.   Fees and other transactions with affiliates                                

The Manager determines the allocation of the assets of the Fund among 
  designated underlying funds. The Manager does not charge an advisory fee
 for asset allocation advice provided to the Fund, but receives advisory
fees from the underlying funds in which the Fund invests. The Fund has
adopted a Shareholder Services Plan under which the Fund pays GMO a   
   shareholder service fee for client and shareholder service, reporting and
   other support. Pursuant to the Shareholder Services Plan, the shareholder
 service fee is calculated based on the average daily net assets of each
   class at the annual rate of .13% for Class I shares and .07% for Class II
shares. No shareholder service fee is charged for Class III shares.   

  GMO has agreed to reimburse all expenses until further notice (excluding
    brokerage commissions, certain other transaction costs (including transfer
taxes), shareholder service fees and extraordinary expenses). Prior to
     November 25, 1996, GMO had agreed to reimburse these expenses to the extent
    that the Fund's annual expenses exceeded .05% of average daily net assets.

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $171. 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 six months ended August 31, 1997,     
aggregated $49,406,554 and $8,253,015, respectively.                  

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]


                     Gross Unrealized     Gross Unrealized      Net Unrealized  
  Aggregate Cost       Appreciation         Depreciation         Appreciation   
------------------  -------------------   ------------------  ------------------
                                                                                
   $ 61,604,435         $2,393,120            $127,963            $2,265,157    

4.   Principal shareholders                                                     

    At August 31, 1997, 74% of the outstanding shares of the Fund were held by
     three shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

10                                                                              

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GMO Global Balanced Allocation Fund                                             
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]


                                                                              Period from July 29, 1996    
                                               Six Months Ended              (commencement of operations)  
   Class I:                                     August 31,1997                   to February 28, 1997      
                                       --------------------------------     -------------------------------
                                          Shares            Amount            Shares            Amount     
                                       --------------    --------------    -------------    ---------------
                                                                                                           
  Shares sold                             548,802        $  6,466,367           601,548     $   6,271,381  
  Shares issued to shareholders in                                                                         
       reinvestment of distributions        2,586              31,446            10,580           114,900  
  Shares repurchased                       (2,569)            (30,007)             --                --    
                                       --------------    --------------    -------------    ---------------
  Net increase                            548,819        $  6,467,806           612,128     $   6,386,281  
                                       ==============    ==============    =============    ===============



                                                                           Period from December 31, 1996   
                                              Six Months Ended             (commencement of operations)    
Class II:                                      August 31,1997                  to February 28, 1997        
                                       -------------------------------    -------------------------------- 
                                          Shares           Amount            Shares            Amount      
                                       --------------   --------------    --------------   --------------- 
                                                                                                           
Shares sold                              1,554,303      $  17,130,385         1,283,396    $  13,891,398   
Shares issued to shareholders in                                                                           
        reinvestment of distributions        7,391             89,950            --               --       

Shares repurchased                            (310)            (3,678)           --               --       
                                       --------------    --------------    -------------    ---------------
Net increase                             1,561,384       $ 17,216,657         1,283,396     $  13,891,398  
                                       ==============    ==============    =============    ===============



                                          Period from June 2, 1997                                         
                                        (commencement of operations)                                       
Class III:                                   to August 31, 1997                                            
                                       --------------------------------                                    
                                          Shares            Amount                                         
                                       --------------   ---------------                                    
                                                                                                           
Shares sold                              1,243,871    $   14,386,202                                       
Shares issued to shareholders in                                                                           
        reinvestment of distributions        3,270            39,804                                       
Shares repurchased                           --                --                                          
                                       --------------   ----------------                                   
Net increase                             1,247,141      $ 14,426,006                                       
                                       ==============   ================                                   

                                                                              11

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

 Par Value($)/                                                                                   
    Shares       Description                                                        Value ($)    
-------------------------------------------------------------------------------------------------
                                                                                                 
                 MUTUAL FUNDS -- 100.0%                                                          
    670,376      GMO Core Fund (Class III Shares)                                   12,938,263   
    226,863      GMO Currency Hedged International Core Fund (Class III Shares)      2,847,129   
     52,761      GMO Emerging Country Debt Fund (Class III Shares)                     703,832   
    267,529      GMO Emerging Markets Fund (Class III Shares)                        3,480,549   
     94,703      GMO Growth Fund (Class III Shares)                                    434,689   
     76,185      GMO Inflation Indexed Bond Fund (Class III Shares)                    778,613   
     70,313      GMO International Bond Fund (Class III Shares)                        765,711   
    248,888      GMO International Core Fund (Class III Shares)                      6,085,320   
     37,370      GMO International Small Companies Fund (Class III Shares)             523,180   
    241,385      GMO REIT Fund (Class III Shares)                                    3,224,903   
    218,595      GMO Small Cap Growth Fund (Class III Shares)                        2,732,435   
    147,699      GMO Small Cap Value Fund (Class III Shares)                         2,695,503   
    143,663      GMO U.S. Bond/Global Alpha A Fund (Class III Shares)                1,517,079   
    117,151      GMO Value Fund (Class III Shares)                                   1,828,732   
                                                                                   -----------   

                 TOTAL MUTUAL FUNDS  (COST $39,270,154)                             40,555,938   
                                                                                   -----------   

                 SHORT-TERM INVESTMENT -- 0.0%                                                   

                 Repurchase Agreement -- 0.0%                                                    
    $ 9,636      Salomon Brothers Repurchase Agreement, dated 8/29/97, due                       
                 9/2/97, with a maturity value of $9,641 and an effective                        
                 yield of 5.05%, collateralized by U.S. Treasury Obligations                     
                 with rates ranging from 5.00% to 6.75%, with maturity dates                     
                 ranging from 2/15/99 to 8/15/26 and with an aggregate market                    
                 value of $9,856.                                                        9,636   
                                                                                   -----------   

                 TOTAL SHORT-TERM INVESTMENTS  (COST $9,636)                             9,636   
                                                                                   -----------   

                 TOTAL INVESTMENTS -- 100.0%                                                     
                 (Cost $39,279,790)                                                 40,565,574   

                 Other Assets and Liabilities (net) -- 0.0%                              3,053   
                                                                                   -----------   

                 TOTAL NET ASSETS -- 100%                                          $40,568,627   
                                                                                   ===========   

             See accompanying notes to the financial statements.             1

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                           
Assets:                                                                    
   Investments, at value (cost $39,279,790) (Note 1)            $40,565,574
   Receivable for expenses waived or borne by Manager (Note 2)       16,765
                                                                -----------

       Total assets                                              40,582,339
                                                                -----------

Liabilities:                                                               
   Payable to affiliate for (Note 2):                                      
      Shareholder service fee                                           129
   Accrued expenses                                                  13,583
                                                                -----------

       Total liabilities                                             13,712
                                                                -----------

Net assets                                                      $40,568,627
                                                                ===========

Net assets consist of:                                                     
   Paid-in-capital                                              $36,011,348
   Accumulated undistributed net investment income                  235,779
   Accumulated undistributed net realized gain                    3,035,716
   Net unrealized appreciation                                    1,285,784
                                                                ===========
                                                                $40,568,627
                                                                ===========

Net assets attributable to:                                                
   Class I shares                                               $ 1,226,782
                                                                ===========
   Class III shares                                             $39,341,845
                                                                ===========

Shares outstanding:                                                        
   Class I                                                          108,248
                                                                ===========
   Class III                                                      3,469,237
                                                                ===========

Net asset value per share:                                                 
   Class I                                                      $     11.33
                                                                ===========
   Class III                                                    $     11.34
                                                                ===========

2                      See accompanying notes to the financial statements.      

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Investment Income:                                                            
   Dividends from investment company shares                        $  235,452 
   Interest                                                               748 
                                                                   -----------

       Total income                                                   236,200 
                                                                   -----------

Expenses:                                                                     
   Registration fees                                                    9,818 
   Audit fees                                                           8,106 
   Custodian and transfer agent fees                                    7,977 
   Legal fees                                                             775 
   Trustees fees (Note 2)                                                 171 
   Miscellaneous                                                          168 
   Fees waived or borne by Manager (Note 2)                           (27,015)
                                                                   -----------
                                                                           -- 
   Shareholder service fee (Note 2)                                           
       Class I                                                            413 
                                                                   -----------
       Net expenses                                                       413 
                                                                   -----------

          Net investment income                                       235,787 
                                                                   -----------

Realized and unrealized gain (loss):                                          
   Net realized gain (loss) on:                                               
       Investments                                                     73,548 
       Realized gain distributions from investment company shares   3,087,507 
                                                                   -----------

          Net realized gain                                         3,161,055 
                                                                   -----------

   Change in net unrealized appreciation (depreciation) on:                   
       Investments                                                    908,152 
                                                                   -----------

          Net unrealized gain                                         908,152 
                                                                   -----------

       Net realized and unrealized gain                             4,069,207 
                                                                   -----------

Net increase in net assets resulting from operations               $4,304,994 
                                                                   ===========

             See accompanying notes to the financial statements.             3

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                             Six Months           Period from        
                                               Ended           November 25, 1996     
                                             August 31,         (commencement of     
                                                1997              operations)        
                                            (Unaudited)       to February 28, 1997   
                                           ---------------  -------------------------
                                                                                     
Increase (decrease) in net assets:                                                   
Operations:                                                                          
   Net investment income                    $   235,787           $   202,369        
   Net realized gain                          3,161,055               672,205        
   Change in net unrealized appreciation                                             
      (depreciation)                            908,152               377,632        
                                            -----------           -----------        

   Net increase in net assets resulting                                              
      from operations                         4,304,994             1,252,206        
                                            -----------           -----------        

Distributions to shareholders from:                                                  
   Net investment income                                                             
       Class III                                     --              (202,377)       
                                            -----------           -----------        
       Total distributions from net                                                  
       investment income                             --              (202,377)       
                                            -----------           -----------        
   Net realized gains                                                                
       Class I                                  (17,980)                   --        
       Class III                               (644,646)             (134,918)       
                                            -----------           -----------        
       Total distributions from net                                                  
       realized gains                          (662,626)             (134,918)       
                                            -----------           -----------        

                                               (662,626)             (337,295)       
                                            -----------           -----------        
   Net share transactions: (Note 5)                                                  
       Class I                                1,163,492                    --        
       Class III                              4,976,188            29,871,668        
                                            -----------           -----------        
   Increase in net assets resulting from                                             
      net share transactions                  6,139,680            29,871,668        
                                            -----------           -----------        

      Total increase in net assets            9,782,048            30,786,579        

Net assets:                                                                          
   Beginning of period                       30,786,579                    --        
                                            -----------           -----------        

   End of period (including accumulated                                              
      undistributed net investment income                                            
      of $235,779 and distributions in                                               
      excess of net investment income                                                
      $8, respectively)                     $40,568,627           $30,786,579        
                                            ===========           ===========        

4                      See accompanying notes to the financial statements.      

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                                 Period from April 30, 1997
                                                                      (commencement of     
                                                                       operations) to      
                                                                       August 31, 1997     
                                                                        (Unaudited)        
                                                                 --------------------------
                                                                                           
Net asset value, beginning of period                                       $10.24          
                                                                           -------         

Income from investment operations:                                                         
   Net investment income (b)                                                 0.04          
   Net realized and unrealized gain                                          1.24          
                                                                           -------         

      Total from investment operations                                       1.28          
                                                                           -------         

Less distributions to shareholders:                                                        
   From net realized gains                                                  (0.19)         
                                                                           -------         

      Total distributions                                                   (0.19)         
                                                                           -------         
Net asset value, end of period                                             $11.33          
                                                                           =======         

Total Return/(a)/                                                           12.51%         

Ratios/Supplemental Data:                                                                  
   Net assets, end of period (000's)                                       $1,227          
   Net expenses to average daily net assets                                  0.13%*        
   Net investment income to average daily net assets/(b)/                    1.30%*        
   Portfolio turnover rate                                                     14%         
   Fees and expenses voluntarily waived or borne by the Manager                            
      consisted of the following per share amount:                         $ 0.01          

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
    return would have been lower had certain expenses not been waived during
the period shown.                                                   
/(b)/ Recognition of net investment income is affected by the timing of the     
declaration of dividends by the underlying funds in which the fund  
invests.                                                            

*  Annualized.                                                                  

             See accompanying notes to the financial statements.             5

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                                        Period from    
                                                    Six Months       November 25, 1996 
                                                       Ended         (commencement of  
                                                  August 31, 1997       operations)    
                                                    (Unaudited)    to February 28, 1997
                                                  ---------------  --------------------
                                                                                       
Net asset value, beginning of period                  $ 10.30              $ 10.00     
                                                      -------              -------     

Income from investment operations:                                                     
   Net investment income (b)                             0.07                 0.12     
   Net realized and unrealized gain                      1.16                 0.38     
                                                      -------              -------     

      Total from investment operations                   1.23                 0.50     
                                                      -------              -------     

Less distributions to shareholders:                                                    
   From net investment income                              --                (0.12)    
   From net realized gains                              (0.19)               (0.08)    
                                                      -------              -------     

      Total distributions                               (0.19)               (0.20)    
                                                      -------              -------     
Net asset value, end of period                        $ 11.34              $ 10.30     
                                                      =======              =======     

Total Return/(a)/                                       11.96%                5.09%    

Ratios/Supplemental Data:                                                              
   Net assets, end of period (000's)                  $39,342              $30,787     
   Net expenses to average daily net assets              0.00%*               0.00%*   
   Net investment income to average daily net                                          
      assets/(b)/                                        1.29%*               3.21%*   
   Portfolio turnover rate                                 14%                  10%    
   Fees and expenses voluntarily waived or borne                                       
      by the Manager consisted of the following                                        
      per share amounts:                              $  0.01              $  0.01     

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
/(b)/ Recognition of net investment income is affected by the timing of the     
declaration of dividends by the underlying funds in which the fund  
invests.                                                            

*  Annualized.                                                                  

6                      See accompanying notes to the financial statements.      

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

 GMO Global (U.S.+) Equity Allocation Fund (the "Fund"), which commenced
  operations on November 25, 1996, is a series of GMO Trust (the "Trust").
The Fund is registered under the Investment Company Act of 1940, as   
 amended, as an open-end, diversified management investment company. The
    Fund is advised and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the
    "Manager" or "GMO"). The Trust was established as a Massachusetts Business
     Trust under the laws of the Commonwealth of Massachusetts on June 24, 1985.
     The Declaration of Trust permits the Trustees 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 operates as a "fund-of-funds" in that, pursuant to management
   provided by the Manager, it makes investments in other funds of the Trust
  ("underlying funds"). The Fund seeks a total return greater than that of
    the GMO Global (U.S.+) Equity Index, a benchmark developed by the Manager.
The Fund will pursue its objective by investing primarily in Class III
    shares of domestic equity, international equity, and fixed income funds of
the Trust.                                                            

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class I and Class
III were the only active classes of shares of the Fund.               

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

    Shares of underlying funds are valued at their net asset value as reported
   on each business day. Short-term investments with a remaining maturity of
    sixty days or less are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the 
Trustees.                                                             

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. In connection with transactions in repurchase  
agreements, if the seller defaults and the value of the collateral    

                                                                               7

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

 declines or if the seller enters insolvency proceedings, realization of
collateral by the Fund may be delayed or limited.                     

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         

   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
    accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis.        

Allocation of operating activity                                      

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

8                                                                               

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .47% of the amount    
  invested. In the case of cash redemptions, the fee is .15% of the amount
  redeemed. Prior to June 30, 1997, the premium on cash purchases was .42%
and the fee on cash redemptions was .05%. All purchase premiums and   
  redemption fees are paid to and recorded as paid-in capital by the Fund.
For the six months ended August 31, 1997, the Fund received $35,943 in
  purchase premiums and $1,531 in redemption fees. There is no premium for
reinvested distributions or in-kind transactions.                     

2.   Fees and other transactions with affiliates                                

The Manager determines the allocation of the assets of the Fund among 
  designated underlying funds. The Manager does not charge an advisory fee
 for asset allocation advice provided to the Fund, but receives advisory
fees from the underlying funds in which the Fund invests. The Fund has
adopted a Shareholder Services Plan under which the Fund pays GMO a   
   shareholder service fee for client and shareholder service, reporting and
   other support. Pursuant to the Shareholder Services Plan, the shareholder
 service fee is calculated based on the average daily net assets of each
   class at the annual rate of .13% for Class I shares and .07% for Class II
shares. No shareholder service fee is charged for Class III shares.   

  GMO has agreed to reimburse all expenses until further notice (excluding
    brokerage commissions, certain other transaction costs (including transfer
taxes), shareholder service fees and extraordinary expenses).         

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $171. 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 six months ended August 31, 1997,     
aggregated $13,740,792 and $4,958,268, respectively.                  

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]

                       Gross Unrealized      Gross Unrealized     Net Unrealized   
  Aggregate Cost         Appreciation          Depreciation        Appreciation    
--------------------  --------------------  -------------------  ------------------
                                                                                   
   $ 39,279,790           $ 1,741,475           $ 455,691           $ 1,285,784    

                                                                               9

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GMO Global (U.S.+) Equity Allocation Fund                                       
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

4.   Principal shareholders                                                     

    At August 31, 1997, 49% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]

                                     Period from April 30, 1997                                       
                                    (commencement of operations)                                      
Class I:                                  to August 31, 1997                                          
                                  ---------------------------------                                   
                                       Shares            Amount                                       
                                  ---------------   ---------------                                   
                                                                                                      
Shares sold                           106,668         $1,145,512                                      
Shares issued to shareholders in                                                                      
  reinvestment of distributions         1,580             17,980                                      
Shares repurchased                      --                --                                          
                                  ---------------   ---------------                                   
Net increase                          108,248         $1,163,492                                      
                                  ===============   ===============                                   


                                                                       Period from November 25, 1996  
                                             Six Months Ended          (commencement of operations)   
 Class III:                                  August 31, 1997               to February 28, 1997       
                                   --------------------------------  ---------------------------------
                                      Shares             Amount           Shares            Amount    
                                   --------------   ---------------  ---------------   ---------------
                                                                                                      
Shares sold                           677,223         $7,121,850        3,086,368        $30,859,765  
Shares issued to shareholders in                                                                      
  reinvestment of distributions        16,835            191,584           --                 --      
Shares repurchased                   (213,689)        (2,337,246)         (97,500)          (988,097) 

                                   --------------   ---------------  ---------------   ---------------
Net increase                          480,369         $4,976,188        2,988,868        $29,871,668  
                                  ===============   ===============  ===============   ===============

10                                                                              

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares       Description                                          Value ($)  
--------------------------------------------------------------------------------
                                                                                
                COMMON STOCKS -- 95.6%                                          

                Advertising -- 0.2%                                             
      6,900     Interpublic Group Inc                                 336,375   
                                                                   -----------  

                Aerospace -- 0.9%                                               
      3,800     Allied Signal Inc                                     313,738   
     20,200     Raytheon Co                                         1,111,000   
        500     Teleflex Inc                                           15,844   
      4,600     Thiokol Corp                                          366,275   
                                                                   -----------  
                                                                    1,806,857   
                                                                   -----------  

                Automotive -- 0.4%                                              
      1,200     Bandag Inc                                             63,975   
      3,400     Borg Warner Automotive Inc                            177,225   
        800     Breed Technologies Inc                                 17,000   
      8,650     Genuine Parts Co                                      267,069   
      4,900     Lear Corp *                                           224,481   
                                                                   -----------  
                                                                      749,750   
                                                                   -----------  

                Banking and Financial Services -- 6.5%                          
     11,500     Ahmanson (HF) & Co                                    583,625   
      3,000     Alex Brown Inc                                        254,063   
      2,350     Amsouth Bancorp                                        98,847   
      7,600     BankBoston Corp                                       631,750   
      2,100     Bankers Trust New York Corp                           217,875   
      5,800     Barnett Banks Inc                                     395,125   
      5,996     Bear Stearns Inc                                      237,223   
      5,200     Beneficial Corp                                       372,125   
     17,200     Charles Schwab & Co Inc                               729,925   
      5,900     Chase Manhattan Corp                                  656,006   
      4,900     City National Corp                                    136,894   
      2,001     Comdisco Inc                                           54,395   
      1,000     Credit Acceptance Corp *                               14,125   
     10,000     Dime Bancorp Inc                                      193,125   
      7,100     Edwards (AG) Inc                                      282,225   
        900     Fleet Financial Group Inc                              57,994   
      6,800     Franklin Resources Inc                                526,150   
      1,900     Golden State Bancorp *                                 54,863   
      2,500     Greenpoint Financial Corp                             153,906   
      8,800     Hibernia Corporation, Class A                         133,650   
        700     John Nuveen and Co Inc, Class A                        21,306   
        500     Liberty Financial Cos                                  24,781   

              See accompanying notes to the financial statements.              1

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Banking and Financial Services -- continued                     
      8,300     MGIC Investment Corp                                  417,594   
     27,900     Morgan Stanley Dean Witter Discover & Co            1,342,688   
      3,000     Paine Webber Group Inc                                115,313   
      2,200     Peoples Heritage Finance Group Inc                     81,950   
      9,500     PNC Bank Corp                                         410,875   
        600     Popular Inc                                            25,950   
      8,600     Providian Financial Corp                              320,350   
      7,300     Rowe (T) Price & Associates Inc                       401,500   
        800     Sunamerica Inc                                         43,100   
     53,197     Travelers Group Inc                                 3,378,010   
        180     Washington Federal Inc                                  4,905   
      8,300     Washington Mutual Inc                                 496,963   
                                                               --------------   
                                                                   12,869,176   
                                                               --------------   

                Chemicals -- 0.8%                                               
        300     Betzdearborn Inc                                       19,556   
      5,600     Great Lakes Chemical Corp                             260,400   
      2,300     Lubrizol Corp                                         100,769   
     10,900     Morton International Inc                              362,425   
      5,800     Praxair Inc                                           309,938   
      2,900     Scherer (RP) Corp *                                   163,306   
      9,300     Sherwin Williams Co                                   255,169   
      8,900     Wellman Inc                                           202,475   
                                                               --------------   
                                                                    1,674,038   
                                                               --------------   

                Computer and Office Equipment -- 8.0%                           
    113,500     Compaq Computer Corp                                7,434,250   
     33,700     EMC Corp *                                          1,729,231   
     22,700     Gateway 2000 Inc                                      888,138   
     32,600     Hewlett Packard Co                                  1,998,788   
      5,000     Lexmark International Group Inc *                     175,000   
     37,500     Micron Technology Inc *                             1,671,094   
     25,600     Quantum Corp                                          897,600   
      9,300     Silicon Graphics Inc *                                255,169   
      5,400     Stratus Computer Inc *                                299,700   
     10,600     Western Digital Corp                                  510,125   
                                                               --------------   
                                                                   15,859,095   
                                                               --------------   

                Construction -- 0.3%                                            
     11,900     Home Depot Inc                                        561,531   
      1,300     McDermott International Inc                            41,925   
                                                               --------------   
                                                                      603,456   
                                                               --------------   

2                See accompanying notes to financial statements.                

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                      Value ($)    
--------------------------------------------------------------------------------
                                                                                
                Consumer Goods -- 5.5%                                          
      1,500     Avon Products Inc                                      96,094   
      1,400     Block Drug Co Inc, Class A                             66,500   
     18,600     Callaway Golf Co                                      626,588   
      3,300     Clorox Co                                             433,125   
     18,600     Colgate-Palmolive Co                                1,167,150   
      3,200     Department 56 Inc *                                    87,400   
      6,700     Eastman Kodak Co                                      438,013   
      5,200     First Brands Corp                                     129,675   
      6,900     Fortune Brands Inc                                    237,188   
      2,400     Hasbro Inc                                             64,500   
      2,200     Hon Industries Inc                                    128,700   
     11,400     Jones Apparel Group Inc                               572,138   
      2,100     Kinetic Concepts Inc                                   38,588   
      5,300     Kohls Corp *                                          365,369   
      4,700     Lancaster Colony Corp                                 243,519   
      4,200     Liz Claiborne Inc                                     187,163   
     12,300     Miller Herman Inc                                     636,525   
     11,400     Newell Co                                             448,875   
      8,100     Nike Inc, Class B                                     432,338   
      1,000     Nine West Group Inc *                                  42,250   
     17,200     Procter and Gamble Co                               2,288,675   
      8,600     Reebok International Ltd                              377,863   
      8,500     Russell Corp                                          242,250   
      8,900     Sunbeam Corp                                          391,600   
      3,300     Technology Data Corp *                                128,494   
      6,300     Terra Industries Inc                                   84,263   
      6,900     Unifi Inc                                             264,788   
      7,300     VF Corp                                               645,138   
      3,400     Wallace Computer Services                             105,400   
                                                               --------------   
                                                                   10,970,169   
                                                               --------------   

                Electronic Equipment -- 5.3%                                    
      1,800     3 Com Corp *                                           89,888   
      6,400     Adaptec Inc                                           307,200   
      7,000     ADC Telecommunications Inc                            259,875   
     14,100     Altera Corp                                           750,825   
     31,700     American Power Conversion Corp *                      832,125   
        200     Andrew Corp                                             4,975   

              See accompanying notes to the financial statements.              3

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares       Description                                       Value ($)     
--------------------------------------------------------------------------------
                                                                                
                Electronic Equipment -- continued                               
      2,400     Atmel Corp *                                           84,900   
     14,800     Cypress Semiconductor Corp *                          262,700   
      7,100     Dallas Semiconductor Corp                             272,019   
        200     Diebold Inc                                             9,275   
        700     Hubbell Inc, Class B                                   32,113   
        900     Integrated Device Technology Inc *                     12,263   
      4,100     Lattice Semiconductor Corp *                          261,119   
     10,100     Linear Technology Corp                                662,181   
      3,400     Litton Industries *                                   169,575   
      5,900     LSI Logic *                                           189,906   
     12,600     Maxim Integrated Products Inc *                       870,975   
     11,000     Microchip Technology Inc                              444,813   
      4,900     Molex Inc                                             191,713   
     37,600     Motorola Inc                                        2,758,900   
      3,200     Perkin Elmer Corp                                     236,800   
     13,100     Read Rite Corp *                                      375,806   
      1,700     Sanmina Corp *                                        134,725   
      2,700     Tellabs Inc                                           161,156   
      6,400     Texas Instruments                                     727,200   
      4,400     Vishay Intertechnology Inc                            117,425   
      5,400     Xilinx Inc *                                          256,500   
                                                               --------------   
                                                                   10,476,952   
                                                               --------------   

                Environmental Control -- 0.1%                                   
     15,900     Wheelabrator Technology Inc                           249,431   
                                                               --------------   

                Food and Beverage -- 5.7%                                       
      7,471     Archer Daniels Midland Co                             161,555   
    131,100     Coca Cola Co                                        7,513,669   
     36,900     Coca Cola Enterprises Inc                           1,014,750   
      8,900     CPC International Inc                                 793,213   
      1,200     Darden Restaurants Inc                                 12,075   
        400     Dean Foods Co                                          17,750   
      6,700     Flowers Industries Inc                                123,950   
      6,300     IBP Inc                                               144,506   
      6,000     Pepsico Inc                                           216,000   
     11,500     RJR Nabisco Holdings Corp                             400,344   
      2,400     Sara Lee Corp                                          96,600   
      3,700     Smith Food and Drug Center, Class B *                 202,575   
      2,500     Unilever NV ADR                                       503,125   

4             See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares       Description                                       Value ($)     
--------------------------------------------------------------------------------
                                                                                
                Food and Beverage -- continued                                  
      1,500     Universal Corp                                         54,563   
      7,600     Whitman Corp                                          186,200   
                                                               --------------   
                                                                   11,440,875   
                                                               --------------   

                Health Care -- 4.8%                                             
      3,400     Bard (CR)                                             117,300   
      2,700     Beckman Instruments Inc                               127,069   
      3,800     Becton Dickinson & Co                                 182,163   
     26,500     BioMet Inc                                            549,875   
      9,950     Cardinal Health Inc                                   659,188   
     67,600     Columbia HCA Healthcare Corp                        2,133,625   
      1,400     Forest Laboratories Inc *                              57,488   
     10,400     Health Care & Retirement *                            378,950   
      3,600     Hillenbrand Industries Inc                            158,175   
     32,700     Johnson & Johnson                                   1,853,681   
      4,100     Laboratory Corporation America Holdings                10,763   
      7,500     Lincare Holdings Inc *                                357,656   
      9,400     Mallinckrodt Inc                                      341,925   
      2,300     Marquette Medical Systems, Class A *                   59,513   
      6,500     McKesson Corp                                         608,969   
      8,500     Novacare Corp *                                       128,031   
      7,500     Perrigo Co *                                          107,344   
      7,800     Sofamor Denek Group Inc *                             373,913   
      6,800     Stryker Corp                                          271,575   
      4,695     Tenet Healthcare Corp *                               127,939   
      7,500     United States Surgical Corp                           247,031   
      5,500     Universal Health Services, Class B *                  240,969   
      6,300     Vencor Inc *                                          252,788   
      4,100     Wellpoint Health Network *                            222,938   
                                                               --------------   
                                                                    9,568,868   
                                                               --------------   

                Insurance -- 3.5%                                               
     12,900     AFLAC Corp                                            710,306   
      2,800     AMBAC Inc                                             226,275   
      3,400     American Bankers Insurance Group                      224,400   
        600     American International Group Inc                       56,625   
      1,800     American National Insurance Co                        174,600   
     17,600     Conseco Inc                                           756,800   
        600     Equitable of Iowa Cos                                  39,075   
     10,900     Foundation Health Systems *                           346,756   

              See accompanying notes to the financial statements.              5

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investment -- (Continued)                                           
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Insurance -- continued                                          
      2,300     Fremont General Corp                                   91,713   
      2,100     Horace Mann Educators Corp                            114,713   
      9,800     Loews Corp                                            998,988   
      5,000     MBIA Inc                                              566,250   
          1     Pacificare Health Systems, Class A *                       53   
      1,396     Pacificare Health Systems, Class B *                   95,452   
      7,900     Progressive Corp                                      782,100   
      2,300     Reliastar Financial Corp                              171,925   
     12,800     Saint Paul Cos Inc                                    939,200   
     11,800     Torchmark Corp                                        444,713   
      3,900     Transatlantic Holding Inc                             275,681   
                                                               --------------   
                                                                    7,015,625   
                                                               --------------   

                Machinery -- 2.5%                                               
     35,800     Applied Materials Inc *                             3,378,625   
      1,300     Donaldson Co Inc                                       58,013   
      8,500     Lam Research Corp *                                   480,250   
        300     Nordson Corp                                           17,325   
      5,700     Novellus System Inc *                                 653,363   
     14,800     Oakley Inc                                            180,375   
      1,600     Smith International Inc *                             116,400   
        800     Tecumseh Products Co, Class B                          43,200   
      2,500     US Filter Corp *                                       90,000   
                                                               --------------   
                                                                    5,017,551   
                                                               --------------   

                Manufacturing -- 3.4%                                           
      9,400     American Greetings Corp                               326,650   
      2,600     Corning Inc                                           137,475   
      5,500     Crane Co                                              242,688   
     40,046     Gillette Co                                         3,316,309   
        400     IBM Corp                                               40,350   
      9,300     Leggett & Platt Inc                                   399,900   
     15,700     Owens Illinois Inc *                                  546,556   
      6,200     Trinity Industries Inc                                246,450   
     20,000     Tyco International Ltd *                            1,568,750   
                                                               --------------   
                                                                    6,825,128   
                                                               --------------   

                Metals and Mining -- 0.1%                                       
      6,600     Timken Co                                             247,088   
                                                               --------------   

6             See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

   Shares       Description                                       Value ($)     
--------------------------------------------------------------------------------
                                                                                
                Oil and Gas -- 2.8%                                             
      6,500     Apache Corp                                           257,969   
      8,800     Atlantic Richfield Co                                 660,000   
        400     BJ Services Co *                                       28,900   
        900     Columbia Natural Gas Systems Inc                       59,400   
      4,800     El Paso Natural Gas Co                                270,000   
          1     Enserch Exploration Inc *                                   3   
        100     FINA Inc, Class A                                       6,600   
      2,100     National Fuel Natural Gas Co                           93,319   
      2,600     Pennzoil Co                                           200,688   
      6,800     Phillips Petroleum Co                                 323,425   
      1,400     Pioneer Natural Resources Co *                         55,913   
     10,000     Santa Fe Energy Resources Inc                         110,625   
      7,100     Schlumberger Ltd                                      540,931   
      8,200     Sonat Inc                                             408,463   
      2,000     Texaco Inc                                            230,500   
     11,400     Union Pacific Resources Group                         285,000   
      4,800     Union Texas Petroleum Holdings Inc                    111,900   
     15,400     Unocal Corp                                           601,563   
     36,100     USX - Marathon Group                                1,175,506   
      5,000     Williams Co Inc                                       232,813   
                                                                  -----------   
                                                                    5,653,518   
                                                                  -----------   
                Paper and Allied Products -- 0.1%                               
        900     Plum Creek Timber Co Limited Partnership               29,981   
      4,800     Sonoco Products Co                                    156,300   
                                                                  -----------   
                                                                      186,281   
                                                                  -----------   
                Pharmaceuticals -- 7.5%                                         
     76,204     Abbott Laboratories                                 4,567,477   
      1,200     Agouron Pharmaceuticals Inc                            52,800   
      4,400     Allergan Inc                                          142,450   
      2,000     Barr Laboratories Inc                                  78,500   
      8,725     Bergen Brunswig Corp, Class A                         366,450   
      2,900     Bristol Myers Squibb Co                               220,400   
      3,600     General Nutrition Cos Inc *                            99,900   
      7,100     Immnunex Corp *                                       310,625   
      4,230     Mark IV Industries Inc                                106,279   
     20,600     Merck & Co Inc                                      1,891,338   
     68,212     Pfizer Inc                                          3,777,240   
     24,500     Schering Plough Corp                                1,176,000   
     16,300     Warner Lambert Co                                   2,071,119   
                                                                  -----------   
                                                                   14,860,578   
                                                                  -----------   

              See accompanying notes to the financial statements.              7

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

  Shares        Description                                       Value ($)     
--------------------------------------------------------------------------------
                                                                                
                Primary Materials -- 0.4%                                       
      1,100     EVI Inc                                                57,819   
      7,600     Premark International Inc                             226,100   
      8,700     Rubbermaid Inc                                        217,500   
      1,800     Tupperware Corp                                        60,413   
      2,200     Vulcan Materials Co                                   193,325   
                                                                  -----------   
                                                                      755,157   
                                                                  -----------   

                Printing and Publishing -- 0.2%                                 
      1,100     Central Newspapers, Class A                            74,869   
        700     Pulitzer Publishing Co                                 36,794   
        700     Washington Post Co, Class B                           294,525   
                                                                  -----------   
                                                                      406,188   
                                                                  -----------   

                Real Estate -- 0.0%                                             
        900     Lennar Corp                                            33,638   
                                                                  -----------   

                Refining -- 0.3%                                                
     14,700     Tosco Corp                                            486,019   
      3,600     Valero Energy Corp                                    119,925   
                                                                  -----------   
                                                                      605,944   
                                                                  -----------   

                Retail Trade -- 7.4%                                            
     31,300     Albertsons Inc                                      1,075,938   
     24,600     American Stores Co                                    582,713   
     19,300     Autozone Inc *                                        545,225   
      5,600     Bed, Bath & Beyond Inc *                              173,600   
      1,100     Blair Corp                                             17,325   
        800     Circuit City Stores Inc                                28,500   
        187     Consolidated Stores Corp                                7,001   
     35,000     Costco Cos Inc *                                    1,262,188   
        700     Dayton Hudson Corp                                     39,900   
     15,775     DG Corp                                               653,677   
      3,300     Dillards Department Stores Inc                        132,000   
     21,500     Food Products Lion Inc                                155,875   
     11,700     Fruit of the Loom Inc *                               312,975   
     24,200     Gap Inc                                             1,075,388   
      2,700     Hannaford Brothers Co                                  91,800   
      3,200     Kmart Corp *                                           44,400   
      7,900     Limited Inc                                           179,725   

8             See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


  Shares        Description                                       Value ($)     
--------------------------------------------------------------------------------
                                                                                
                Retail Trade -- continued                                       
        800     Macfrugals Bargains Close Outs Inc *                   21,800   
      1,800     Meyer Fred Inc *                                       93,600   
      2,000     Pep Boys, Manny, Moe & Jack                            53,000   
      6,400     Rite Aid Corp                                         320,400   
      4,500     Ross Stores Inc                                       132,188   
     36,363     Safeway Inc *                                       1,852,215   
      3,800     Southland Corp *                                       10,806   
        800     Stanhome Inc                                           26,000   
      3,600     Tandy Corp                                            238,950   
      3,200     TJX Cos Inc                                            88,000   
     11,900     Toys R Us Inc *                                       411,294   
      1,800     Value City Department Stores Inc *                     14,400   
    141,100     Wal Mart Stores Inc                                 5,009,050   
        500     Weismarkets Inc                                        16,875   
                                                                  -----------   
                                                                   14,666,808   
                                                                  -----------   

                Services -- 2.6%                                                
        600     BHC Communications Inc, Class A                        73,650   
      2,800     Catalina Marketing Corp *                             129,675   
      3,300     Cintas Corp                                           230,175   
      1,000     Circus Circus Enterprises Inc *                        23,938   
     35,600     Disney Walt Co                                      2,734,525   
      3,300     Fleming Cos Inc                                        62,288   
        300     Kingworld Productions Inc                              11,925   
      5,500     Robert Half International Inc *                       321,063   
      9,450     Servicemaster Industry Inc                            240,384   
      9,700     Supervalu Inc                                         380,725   
      1,100     Total System Services Inc                              25,781   
     25,900     Waste Management Inc                                  828,800   
      7,000     Wolverine World Wide                                  154,875   
                                                                  -----------   
                                                                    5,217,804   
                                                                  -----------   

                Technology -- 19.2%                                             
      3,500     Acxiom Corp                                            62,125   
     12,400     Adobe Systems Inc                                     488,250   
     18,200     Advanced Micro Devices Inc *                          681,363   
      9,500     America Online Inc *                                  612,750   
      7,000     Autodesk Inc                                          306,250   
      7,400     Avnet Inc                                             511,988   
      3,500     Bay Networks Inc *                                    123,813   

              See accompanying notes to the financial statements.              9

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

   Shares       Description                                          Value ($)  
--------------------------------------------------------------------------------
                                                                                
                Technology -- continued                                         
     11,500     BMC Software Inc                                      720,188   
     18,400     Cisco Systems Inc *                                 1,386,900   
      6,300     Cognex Corp *                                         240,975   
     15,000     Compuware Corp                                        926,250   
     57,600     Dell Computer Corp                                  4,726,800   
      3,100     Fiserv Inc *                                          139,500   
      5,800     Grainger (WW) Inc                                     515,113   
    124,700     Intel Corp                                         11,487,988   
      2,800     Keane Inc                                             164,500   
      7,500     KLA Instruments Corp *                                531,563   
     79,300     Microsoft Corp                                     10,482,469   
     26,700     Oracle Corp                                         1,017,938   
      2,850     Paychex Inc                                            97,613   
     36,100     Seagate Technology Corp                             1,378,569   
        700     Solectron Corp                                         29,313   
     16,800     Storage Technology Corp *                             855,750   
      2,400     Sungard Data Systems Inc *                            125,100   
      4,700     Symantec *                                            113,094   
      9,600     Teradyne Inc *                                        534,600   
                                                                  -----------   
                                                                   38,260,762   
                                                                  -----------   

                Telecommunications -- 2.6%                                      
     67,600     AT & T Corp                                         2,636,400   
        400     Century Telephone                                      14,525   
      1,700     Comsat Corp                                            36,869   
     16,900     MCI Communications Corp                               481,650   
          1     SBC Communications                                         43   
     26,700     Sprint Corp                                         1,254,900   
     27,400     Worldcom Inc *                                        820,288   
                                                                  -----------   
                                                                    5,244,675   
                                                                  -----------   

                Tobacco -- 2.8%                                                 
    127,384     Philip Morris Cos Inc                               5,557,127   
                                                                  -----------   

                Transportation -- 1.5%                                          
     14,000     Burlington Northern Santa Fe Railroad Co            1,283,625   
     14,600     CSX Corp                                              834,938   
     10,100     Federal Express Corp                                  671,019   
      2,200     Gatx Corp                                             137,638   
                                                                  -----------   
                                                                    2,927,220   
                                                                  -----------   

10            See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


Par Value($)/   Description                                                     
  Shares                                                           Value ($)    
--------------------------------------------------------------------------------
                                                                                
                Utilities -- 0.2%                                               
        800     Brooklyn Union Natural Gas Co                          24,150   
      6,868     Citizens Utilities, Class B                            57,520   
      1,100     Coastal Corp                                           63,525   
      1,918     Houston Industries Inc                                 38,846   
      4,800     MCN Corp                                              147,300   
      3,300     Natural Gas Clearinghouse                              54,038   
      1,600     Nicor Inc                                              58,100   
      1,994     PG & E Corp                                            46,245   
        193     Texas Utilities Co                                      6,674   
                                                                 ------------   
                                                                      496,398   
                                                                 ------------   

                TOTAL COMMON STOCKS (COST $146,796,290)           190,582,532   
                                                                 ------------   
                SHORT-TERM INVESTMENTS -- 19.8%                                 

                Cash Equivalents -- 16.2%                                       
 $9,322,164     BankBoston Eurodollar Time Deposit, 5.7875% due                 
                9/2/97/(a)/                                         9,322,164   
   $675,605     First Union National Bank of North Carolina                     
                Eurodollar Time Deposit, 5.5625% due                            
                9/2/97/(a)/                                           675,605   
 $3,426,816     Harris Bank and Trust Eurodollar Time Deposit,                  
                5.625% due 9/2/97/(a)/                              3,426,816   
  9,962,992     Merrimac Cash Fund Premium Class/(a)/               9,962,992   
 $9,000,000     Prudential Securities Group Inc Master Note,                    
                5.8875% due 9/2/97/(a)/                             9,000,000   
                                                                 ------------   
                                                                   32,387,577   
                                                                 ------------   

                U.S. Government -- 0.3%                                         
   $700,000     U.S. Treasury Bill, 5.22% due 11/28/97/(b)/           691,389   
                                                                 ------------   

                Repurchase Agreement -- 3.3%                                    
 $6,499,364     Salomon Brothers Repurchase Agreement, dated                    
                8/29/97, due 9/2/97, with a maturity value of                   
                $6,503,010 and an effective yield of 5.05%,                     
                collateralized by U.S. Treasury Obligations                     
                with rates ranging from 5.00% to 6.75%, with                    
                maturity dates ranging from 2/15/99 to 8/15/26                  
                and with an aggregate market value of                           
                $6,648,297.                                         6,499,364   
                                                                 ------------   

                TOTAL SHORT-TERM INVESTMENTS (COST $39,577,981)    39,578,330   
                                                                 ------------   
                TOTAL INVESTMENTS -- 115.4%                                     
                (COST $186,374,271)                               230,160,862   

                Other Assets and Liabilities (net) -- (15.4)%     (30,787,144)  
                                                                 ------------   

                TOTAL NET ASSETS -- 100%                         $199,373,718   
                                                                 ============   

              See accompanying notes to the financial statements.             11

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------

Notes to the Schedule of Investments:                 

ADR - American Depositary Receipt                     
* Non-income producing security.                      
     /(a)/ Represents investments of security lending collateral
(Note 1).                                 
            /(b)/ Security has been segregated to cover margin requirements on
open financial futures contracts.         

12            See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                          
Assets:                                                                                   
   Investments, at value (cost $186,374,271) (Note 1)                         $230,160,862
   Receivable for investments sold                                               4,381,246
   Dividends and interest receivable                                               133,898
   Receivable for open swap contracts (Notes 1 and 6)                              954,089
   Receivable for variation margin on open futures contracts (Notes 1 and 6)        19,864
   Receivable for expenses waived or borne by Manager (Note 2)                      40,588
                                                                              ------------

      Total assets                                                             235,690,547
                                                                              ------------

Liabilities:                                                                              
   Payable for investments purchased                                             3,344,774
   Payable upon return of securities loaned (Note 1)                            32,387,577
   Payable for Fund shares repurchased                                             434,023
   Payable to affiliate for (Note 2):                                                     
     Management fee                                                                 85,104
     Shareholder service fee                                                        25,938
   Accrued expenses                                                                 39,413
                                                                              ------------

      Total liabilities                                                         36,316,829
                                                                              ------------

Net assets                                                                    $199,373,718
                                                                              ============

Net assets consist of:                                                                    
   Paid-in-capital                                                            $135,699,182
   Accumulated undistributed net investment income                                 208,375
   Accumulated undistributed net realized gain                                  18,895,325
   Net unrealized appreciation                                                  44,570,836
                                                                              ------------
                                                                              $199,373,718
                                                                              ============

Net assets attributable to:                                                               
   Class III shares                                                           $199,373,718
                                                                              ============

Shares outstanding:                                                                       
   Class III                                                                    43,449,109
                                                                              ============

Net asset value per share:                                                                
   Class III                                                                  $       4.59
                                                                              ============

               See accompanying notes to financial statements.              13

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                
Investment Income:                                                              
   Dividends                                                        $   977,303 
   Interest (including securities lending income of $13,884)            352,632 
                                                                    ----------- 

      Total income                                                    1,329,935 
                                                                    ----------- 

Expenses:                                                                       
   Management fee (Note 2)                                              511,712 
   Custodian and transfer agent fees                                     42,832 
   Audit fees                                                            23,426 
   Legal fees                                                             4,950 
   Trustees fees (Note 2)                                                   983 
   Registration fees                                                        288 
   Miscellaneous                                                            615 
   Fees waived or borne by Manager (Note 2)                            (247,076)
                                                                    ----------- 
                                                                        337,730 
   Shareholder service fee (Note 2)                                             
      Class III                                                         153,920 
                                                                    ----------- 
      Net expenses                                                      491,650 
                                                                    ----------- 

        Net investment income                                           838,285 
                                                                    ----------- 

Realized and unrealized gain (loss):                                            
   Net realized gain (loss) on:                                                 
      Investments                                                    18,299,867 
      Closed futures contracts                                        1,347,258 
      Closed swap contracts                                          (2,260,246)
                                                                    ----------- 

        Net realized gain                                            17,386,879 
                                                                    ----------- 

   Change in net unrealized appreciation (depreciation) on:                     
      Investments                                                    16,173,086 
      Open futures contracts                                            138,001 
      Open swap contracts                                             2,603,610 
                                                                    ----------- 

        Net unrealized gain                                          18,914,697 
                                                                    ----------- 

      Net realized and unrealized gain                               36,301,576 
                                                                    ----------- 

Net increase in net assets resulting from operations                $37,139,861 
                                                                    =========== 

14            See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                     Six Months Ended                   
                                                                     August 31, 1997      Year Ended    
                                                                       (Unaudited)     February 28, 1997
                                                                    -----------------  -----------------
                                                                                                        
Increase (decrease) in net assets:                                                                      
Operations:                                                                                             
   Net investment income                                                $   838,285       $  3,964,241  
   Net realized gain                                                     17,386,879        108,934,644  
   Change in net unrealized appreciation (depreciation)                  18,914,697        (50,479,915) 
                                                                       ------------       ------------  

   Net increase in net assets resulting from operations                  37,139,861         62,418,970  
                                                                       ------------       ------------  

Distributions to shareholders from:                                                                     
   Net investment income                                                                                
       Class III                                                         (1,298,039)        (4,363,604) 
                                                                       ------------       ------------  
       Total distributions from net investment income                    (1,298,039)        (4,363,604) 
                                                                       ------------       ------------  
   Net realized gains                                                                                   
       Class III                                                        (50,944,575)       (77,849,380) 
                                                                       ------------       ------------  
       Total distributions from net realized gains                      (50,944,575)       (77,849,380) 
                                                                       ------------       ------------  

                                                                        (52,242,614)       (82,212,984) 
                                                                       ------------       ------------  
   Net share transactions: (Note 5)                                                                     
       Class III                                                        (29,706,961)      (127,388,467) 
                                                                       ------------       ------------  
   Decrease in net assets resulting from net share                                                      
      transactions                                                      (29,706,961)      (127,388,467) 
                                                                       ------------       ------------  

      Total decrease in net assets                                      (44,809,714)      (147,182,481) 

Net assets:                                                                                             
   Beginning of period                                                  244,183,432        391,365,913  
                                                                       ------------       ------------  

   End of period (including accumulated undistributed net investment                                    
      income of $208,375 and $668,129, respectively)                   $199,373,718       $244,183,432  
                                                                       ============       ============  

              See accompanying notes to the financial statements.             15

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                   Six Months Ended              Year Ended February 28/29,             
                                    August 31, 1997  ------------------------------------------------   
                                      (Unaudited)      1997      1996      1995      1994      1993     
                                   ----------------  --------  --------  --------  --------  --------   
                                                                                                        
Net asset value, beginning                                                                              
   of period                            $  5.18      $   5.65   $  4.45   $  4.14   $  4.55   $  5.82   
                                        -------      --------   -------   -------   -------   -------   

Income from investment operations:                                                                      
   Net investment income                   0.03          0.07      0.08      0.06      0.06      0.07   
   Net realized and                                                                                     
      unrealized gain                      0.90          1.03      1.54      0.38      0.11      0.17   
                                        -------      --------   -------   -------   -------   -------   

      Total from                                                                                        
      investment operations                0.93          1.10      1.62      0.44      0.17      0.24   
                                        -------      --------   -------   -------   -------   -------   

Less distributions to shareholders:                                                                     
   From net investment income             (0.04)        (0.08)    (0.07)    (0.06)    (0.06)    (0.08)  
   From net realized gains                (1.48)        (1.49)    (0.35)    (0.07)    (0.52)    (1.43)  
                                        -------      --------   -------   -------   -------   -------   

      Total distributions                 (1.52)        (1.57)    (0.42)    (0.13)    (0.58)    (1.51)  
                                        -------      --------   -------   -------   -------   -------   
Net asset value, end                                                                                    
   of period                            $  4.59      $   5.18   $  5.65   $  4.45   $  4.14   $  4.55   
                                        =======      ========   =======   =======   =======   =======   

Total Return /(a)/                        20.20%        21.64%    37.77%    10.86%     4.13%     3.71%  

Ratios/Supplemental Data:                                                                               
   Net assets, end of period                                                                            
      (000's)                          $199,374      $244,183  $391,366  $239,006  $230,698  $168,143   
   Net expenses to average                                                                              
      daily net assets                     0.48%*        0.48%     0.48%     0.48%     0.48%     0.49%  
   Net investment income to                                                                             
      average daily net assets             0.82%*        1.21%     1.54%     1.50%     1.38%     1.15%  
   Portfolio turnover rate                   25%          100%       76%      139%       57%       36%  
   Average broker commission                                                                            
      rate per equity share /(c)/       $0.0277      $ 0.0281       N/A       N/A       N/A       N/A   
   Fees and expenses voluntarily                                                                        
      waived or borne by the                                                                            
      Manager consisted of                                                                              
      the following per                                                                                 
      share amounts:                    $  0.01      $   0.01          (b)       (b)       (b)       (b)

/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ Fees and expenses waived or borne by the Manager were less than $0.01 per 
share.                                                              
/(c)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            
*     Annualized.                                                               

16            See accompanying notes to the financial statements.               

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

  GMO Growth 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 into classes.                                   

The Fund seeks long-term growth of capital through investment of      
   substantially all of its assets in common stocks chosen from the Wilshire
    5000 Index and primarily in the equity securities of companies chosen from
among the 1,200 companies with the largest equity capitalization whose
securities are listed on a United States national securities exchange.

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
     as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     

The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S.             

                                                                              17

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   government obligations in accordance with the initial margin requirements
     of the broker or exchange. Futures contracts are marked to market daily and
  an appropriate payable or receivable for the change in value ("variation
   margin") is recorded by the Fund. The payable or receivable is liquidated
on the following business day. Gains or losses are recognized but not 
considered realized until the contracts expire or are closed. Futures 
contracts involve, to varying degrees, risk of loss in excess of the  
variation margin disclosed in the Statement of Assets and Liabilities.
     Losses may arise from changes in the value of the underlying instrument, if
there is an illiquid secondary market for the contracts, or if        
   counterparties do not perform under the contract terms. Futures contracts
 are valued at the settlement price established each day by the board of
     trade or exchange on which they are traded. See Note 6 for all open futures
contracts held as of August 31, 1997.                                 

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $31,324,576, collateralized by
cash in the amount of $32,387,577, which was invested in short-term   
instruments.                                                          

Swap agreements                                                       

The Fund may enter into swap agreements to manage its exposure to the 
    equity markets. A swap is an agreement to exchange the return generated by
 one instrument for the return generated by another instrument. The Fund
    enters into equity swap agreements which involve a commitment by one party
 in the agreement to pay interest in exchange for a market linked return
based on a notional amount. To the extent that the total return of the
    security or index underlying the transaction exceeds or falls short of the
   offsetting interest rate obligation, the Fund will receive a payment from
or make a payment to the counterparty, respectively. Equity swaps are 
 marked to market daily based upon quotations from market makers and the
    change, if any, is recorded as unrealized gain or loss in the Statement of
    Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations. 
  Entering into these agreements involves, to varying degrees, elements of
     credit and market risk in excess of the amounts recognized on the Statement
     of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these agreements, that the counterparty to the   
agreements may default on its obligation to perform, or that          

18                                                                              

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

there may be unfavorable changes in the price of the security or index
  underlying these transactions. See Note 6 for a summary of all open swap
agreements as of August 31, 1997.                                     

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      

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

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .14% of the amount    
    invested. Prior to June 1, 1996, the premium on cash purchases was .17% of
the amount invested. All purchase premiums are paid to and recorded as
    paid-in capital by the Fund. For the six months ended August 31, 1997, the
Fund                                                                  

                                                                              19

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

received $345 in purchase premiums. There is no premium for cash      
redemptions, reinvested distributions or in-kind transactions.        

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .50% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .33% of average daily net assets. Prior to
June 1, 1996, a similar waiver existed for annual expenses exceeding  
   .48%; thus, the net annual expense ratio after the waiver for a Class III
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the year ended February 28, 1997 was $983. 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 six months ended August 31, 1997,     
aggregated $48,724,067 and $115,423,000, respectively.                

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]

                     Gross Unrealized    Gross Unrealized     Net Unrealized  
  Aggregate Cost       Appreciation        Depreciation        Appreciation   
------------------  ------------------  ------------------  ------------------
                                                                              
   $186,374,271         $46,239,035         $2,452,444          $43,786,591   

4.   Principal shareholders                                                     

    At August 31, 1997, 70% of the outstanding shares of the Fund were held by
     three shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

20                                                                              

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]


                                       Six Months Ended                   Year Ended            
Class III:                             August 31, 1997                 February 28, 1997        
                               ------------------------------   --------------------------------
                                  Shares            Amount          Shares            Amount    
                               ------------     -------------   -------------   ----------------
                                                                                                
Shares sold                          83,220    $      428,959       2,041,337   $    11,235,177 
Shares issued to shareholders                                                                   
     in reinvestment of                                                                         
     distributions               12,178,950        52,068,328      15,334,132        78,162,104 
Shares repurchased              (15,948,801)      (82,204,248)    (39,536,755)     (216,785,748)
                               -------------    --------------  --------------   ---------------
Net decrease                     (3,686,631)   $  (29,706,961)    (22,161,286)  $  (127,388,467)
                               =============    ==============  ==============   ===============

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Long futures contracts                                                

                                                        [Enlarge/Download Table]

  Number of                                                                   Net Unrealized  
  Contracts           Type        Expiration Date      Contract Value          Depreciation   
---------------  ---------------  ----------------  ---------------------    -----------------
                                                                                              
      11            S&P 500       September 1997         $4,967,050        $      169,844     
                                                                             =================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                  

Swap agreements                                                       

                                                        [Enlarge/Download Table]


  Notional Amount      Expiration                                                  Unrealized   
 Fund/Counterparty        Date                     Description                    Appreciation  
---------------------  ------------  -----------------------------------------  ----------------
                                                                                                
$    11,821,545/         9/19/97     Agreement with Morgan Stanley Capital      $      370,084  
     10,497,940                      Services, Inc. dated September 19, 1996                    
                                     to pay (receive) the notional amount                       
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread and to receive                       
                                     (pay) the counterparty's notional                          
                                     amount multiplied by the return on the                     

                                                                              21

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GMO Growth Fund                                                                 
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements -- continued                                              

                                                        [Enlarge/Download Table]

   Notional Amount      Expiration                                                 Unrealized   
  Fund/Counterparty        Date                     Description                   Appreciation  
---------------------  ------------  -----------------------------------------  ----------------
                                                                                                
                                     Russell 2000 Index (including                              
                                     dividends) less the notional amount                        
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread.                                     

$    10,131,000/         6/23/98     Agreement with Morgan Stanley Capital              584,005 
     10,131,000                      Services, Inc. dated 6/23/97 to pay                        
                                     (receive) the notional amount                              
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread and to receive (pay)                      
                                     the counterparty's notional amount                         
                                     multiplied by the return on the                            
                                     Russell 2000 Index (including                              
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread.                                          

                                                                                ================
                                               Net unrealized appreciation       $      954,089 
                                                                                ================

22                                                                              

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


 Par Value ($)/                                                                                   
     Shares        Description                                                     Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                   MUTUAL FUNDS -- 100.0%                                                         
       79,168      GMO Emerging Country Debt Fund (Class III Shares)                1,056,099     
    1,140,572      GMO Emerging Markets Fund (Class III Shares)                    14,838,841     
       92,004      GMO Evolving Countries Fund (Class III Shares)                     920,040     
       61,817      GMO Inflation Indexed Bond Fund (Class III Shares)                 631,768     
      137,149      GMO International Bond Fund (Class III Shares)                   1,493,553     
    2,379,808      GMO International Core Fund (Class III Shares)                  58,186,308     
      209,313      GMO International Small Companies Fund (Class III Shares)        2,930,383     
       59,956      GMO U.S. Bond/Global Alpha A Fund (Class III Shares)               633,131     
                                                                                  -----------     

                   TOTAL MUTUAL FUNDS  (COST  $80,983,197)                         80,690,123     
                                                                                  -----------     

                   SHORT-TERM INVESTMENT -- 0.7%                                                  

                   Repurchase Agreement -- 0.7%                                                   
    $ 686,374      Salomon Brothers Repurchase Agreement, dated 8/29/97, due                      
                   9/2/97, with a maturity value of $686,759 and an effective                     
                   yield of 5.05%, collateralized by U.S. Treasury Obligations                    
                   with rates ranging from 5.00% to 6.75%, with maturity dates                    
                   ranging from 2/15/99 to 8/15/26 and with an aggregate                          
                   market value of $702,102.                                          686,374     
                                                                                  -----------     

                   TOTAL SHORT-TERM INVESTMENTS  (COST  $686,374)                     686,374     
                                                                                  -----------     

                   TOTAL INVESTMENTS -- 100.8%                                                    
                   (Cost $81,669,571)                                              81,376,497     

                   Other Assets and Liabilities (net)-- (0.8)%                       (671,441)    
                                                                                  -----------     

                   TOTAL NET ASSETS-- 100%                                        $80,705,056     
                                                                                  ===========     

              See accompanying notes to the financial statements.              1

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                            
Assets:                                                                     
   Investments, at value (cost $80,983,197) (Note 1)             $81,376,497
   Cash                                                              259,787
   Receivable for expenses waived or borne by Manager (Note 2)        20,366
                                                                 -----------

       Total assets                                               81,656,650
                                                                 -----------

Liabilities:                                                                
   Payable for investments purchased                                 935,000
   Payable to affiliate for (Note 2):                                       
      Shareholder service fee                                          1,224
   Accrued expenses                                                   15,370
                                                                 -----------

       Total liabilities                                             951,594
                                                                 -----------

Net assets                                                       $80,705,056
                                                                 ===========

Net assets consist of:                                                      
   Paid-in-capital                                               $78,662,307
   Accumulated undistributed net investment income                   488,180
   Accumulated undistributed net realized gain                     1,161,269
   Net unrealized appreciation                                       393,300
                                                                 ===========
                                                                 $80,705,056
                                                                 ===========

Net assets attributable to:                                                 
   Class I shares                                                $ 5,274,602
                                                                 ===========
   Class II shares                                               $16,131,335
                                                                 ===========
   Class III shares                                              $59,299,119
                                                                 ===========

Shares outstanding:                                                         
   Class I                                                           491,118
                                                                 ===========
   Class II                                                        1,502,898
                                                                 ===========
   Class III                                                       5,523,149
                                                                 ===========

Net asset value per share:                                                  
   Class I                                                       $     10.74
                                                                 ===========
   Class II                                                      $     10.73
                                                                 ===========
   Class III                                                     $     10.74
                                                                 ===========

2             See accompanying notes to the financial statements.               

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Investment Income:                                                            
   Dividends from investment company shares                        $  494,241 
   Interest                                                               551 
                                                                   ---------- 

       Total income                                                   494,792 
                                                                   ---------- 
Expenses:                                                                     
   Custodian and transfer agent fees                                   14,522 
   Registration fees                                                   13,307 
   Audit fees                                                           7,925 
   Legal fees                                                             955 
   Trustees fees (Note 2)                                                 181 
   Miscellaneous                                                          168 
   Fees waived or borne by Manager (Note 2)                           (37,058)
                                                                   ---------- 
                                                                           -- 
   Shareholder service fee (Note 2)                                           
       Class I                                                            997 
       Class II                                                         5,615 
                                                                   ---------- 
       Net expenses                                                     6,612 
                                                                   ---------- 

          Net investment income                                       488,180 
                                                                   ---------- 

Realized and unrealized gain (loss):                                          
   Net realized gain (loss) on:                                               
       Investments                                                   (196,563)
       Realized gain distributions from investment company shares   1,363,912 
                                                                   ---------- 

          Net realized gain                                         1,167,349 
                                                                   ---------- 

   Change in net unrealized appreciation (depreciation) on:                   
       Investments                                                   (162,551)
                                                                   ---------- 

          Net unrealized loss                                        (162,551)
                                                                   ---------- 

       Net realized and unrealized gain                             1,004,798 
                                                                   ---------- 

Net increase in net assets resulting from operations               $1,492,978 
                                                                   ========== 

              See accompanying notes to the financial statements.              3

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                           Six Months Ended  Period from October 11, 1996
                                           August 31, 1997   (commencement of operations)
                                             (Unaudited)         to February 28, 1997    
                                           ---------------    ---------------------------
                                                                                         
Increase (decrease) in net assets:                                                       
Operations:                                                                              
   Net investment income                     $    488,180           $    258,062         
   Net realized gain                            1,167,349                831,547         
   Change in net unrealized appreciation                                                 
      (depreciation)                             (162,551)               555,851         
                                             ------------           ------------         

   Net increase in net assets resulting                                                  
      from operations                           1,492,978              1,645,460         
                                             ------------           ------------         

Distributions to shareholders from:                                                      
   Net investment income                                                                 
       Class I                                         --                     --         
       Class II                                        --                (98,709)        
       Class III                                       --               (159,298)        
                                             ------------           ------------         
       Total distributions from net                                                      
         investment income                             --               (258,007)        
                                             ------------           ------------         
   Net realized gains                                                                    
       Class I                                    (22,318)                    --         
       Class II                                  (175,525)               (44,198)        
       Class III                                 (524,314)               (71,327)        
                                             ------------           ------------         
       Total distributions from net                                                      
         realized gains                          (722,157)              (115,525)        
                                             ------------           ------------         

                                                 (722,157)              (373,532)        
                                             ------------           ------------         
   Net share transactions: (Note 5)                                                      
       Class I                                  5,337,667                     --         
       Class II                                   175,525             15,022,907         
       Class III                               28,472,141             29,654,067         
                                             ------------           ------------         
   Increase in net assets resulting from                                                 
      net share transactions                   33,985,333             44,676,974         
                                             ------------           ------------         

      Total increase in net assets             34,756,154             45,948,902         

Net assets:                                                                              
   Beginning of period                         45,948,902                     --         
                                             ------------           ------------         

   End of period (including accumulated                                                  
      undistributed net investment income                                                
      of $488,180 and $0, respectively)      $ 80,705,056           $ 45,948,902         
                                             ============           ============         

4             See accompanying notes to the financial statements.               

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                                  Period from April 1, 1997  
                                                                 (commencement of operations)
                                                                      to August 31, 1997     
                                                                          (Unaudited)        
                                                                 ----------------------------
                                                                                             
Net asset value, beginning of period                                      $10.17             
                                                                          ------             

Income from investment operations:                                                           
   Net investment income/(b)/                                               0.07+            
   Net realized and unrealized gain                                         0.62             
                                                                          ------             

      Total from investment operations                                      0.69             
                                                                          ------             

Less distributions to shareholders:                                                          
   From net realized gains                                                 (0.12)            
                                                                          ------             

      Total distributions                                                  (0.12)            
                                                                          ------             
Net asset value, end of period                                            $10.74             
                                                                          ======             

Total Return/(a)/                                                           6.70%            

Ratios/Supplemental Data:                                                                    
   Net assets, end of period (000's)                                      $5,275             
   Net expenses to average daily net assets                                 0.13%*           
   Net investment income to average daily net assets (b)                    1.79%*           
   Portfolio turnover rate                                                     9%            
   Fees and expenses voluntarily waived or borne by the Manager                              
      consisted of the following per share amount:                        $ 0.01             

/(a)/Calculation excludes purchase premiums and redemption fees. The total      
  return would have been lower had certain expenses not been waived during
the period shown.                                                     
/(b)/Recognition of net investment income is affected by the timing of the      
     declaration of dividends by the underlying funds in which the fund invests.
+  Computed using average shares outstanding throughout the period.         
*  Annualized.                                                              

               See accompanying notes to the financial statements.           5

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                  Six Months Ended  Period from December 23, 1996
                                                   August 31, 1997  (commencement of operations) 
                                                     (Unaudited)        to February 28, 1997     
                                                  ----------------  -----------------------------
                                                                                                 
Net asset value, beginning of period                   $10.41                $ 10.10             
                                                      -------                -------             

Income from investment operations:                                                               
   Net investment income/(b)/                            0.08+                    --             
   Net realized and unrealized gain                      0.36                   0.41             
                                                      -------                -------             

      Total from investment operations                   0.44                   0.41             
                                                      -------                -------             

Less distributions to shareholders:                                                              
   From net investment income                              --                  (0.07)            
   From net realized gains                              (0.12)                 (0.03)            
                                                      -------                -------             

      Total distributions                               (0.12)                 (0.10)            
                                                      -------                -------             
Net asset value, end of period                        $ 10.73                $ 10.41             
                                                      =======                =======             

Total Return/(a)/                                        4.24%                  4.07%            

Ratios/Supplemental Data:                                                                        
 Net assets, end of period (000's)                    $16,131                $15,490             
   Net expenses to average daily net assets              0.07%*                 0.07%*           
   Net investment income to average daily net                                                    
      assets/(b)/                                        1.43%*                (0.07)%*          
   Portfolio turnover rate                                  9%                     0%            
   Fees and expenses voluntarily waived or borne                                                 
      by the Manager consisted of the following                                                  
      per share amounts:                              $  0.01                       /(c)/        

/(a)/Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
/(b)/Recognition of net investment income is affected by the timing of the      
     declaration of dividends by the underlying funds in which the fund invests.
+  Computed using average shares outstanding throughout the period.         
*  Annualized.                                                              
/(c)/Fees and expenses waived or borne by the Manager were less than $0.01 per  
share.                                                                

6                      See accompanying notes to the financial statements.      

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                  Six Months Ended  Period from October 11, 1996
                                                   August 31, 1997  (commencement of operations)
                                                     (Unaudited)        to February 28, 1997    
                                                  ----------------  ----------------------------
                                                                                                
Net asset value, beginning of period                  $ 10.41                $ 10.00            
                                                      -------                -------            

Income from investment operations:                                                              
   Net investment income/(b)/                            0.09+                  0.10            
   Net realized and unrealized gain                      0.36                   0.41            
                                                      -------                -------            

      Total from investment operations                   0.45                   0.51            
                                                      -------                -------            

Less distributions to shareholders:                                                             
   From net investment income                              --                  (0.07)           
   From net realized gains                              (0.12)                 (0.03)           
                                                      -------                -------            

      Total distributions                               (0.12)                 (0.10)           
                                                      -------                -------            
Net asset value, end of period                        $ 10.74                $ 10.41            
                                                      =======                =======            

Total Return/(a)/                                        4.24%                  5.11%           

Ratios/Supplemental Data:                                                                       
   Net assets, end of period (000's)                  $59,299                $30,459            
   Net expenses to average daily net assets              0.00%*                 0.01%*          
   Net investment income to average daily net                                                   
      assets/(b)/                                        1.81%*                 3.60%*          
   Portfolio turnover rate                                  9%                    --            
   Fees and expenses voluntarily waived or borne                                                
      by the Manager consisted of the following                                                 
      per share amounts:                              $  0.01                $  0.01            

/(a)/Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
/(b)/Recognition of net investment income is affected by the timing of the      
     declaration of dividends by the underlying funds in which the fund invests.
+  Computed using average shares outstanding throughout the period.         
*  Annualized.                                                              

              See accompanying notes to the financial statements.              7

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

GMO International Equity Allocation Fund (the "Fund"), which commenced
     operations on October 11, 1996, is a series of GMO Trust (the "Trust"). The
     Fund is registered under the Investment Company Act of 1940, as amended, as
     an open-end, diversified management investment company. The Fund is advised
 and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or
   "GMO"). The Trust was established as a Massachusetts Business Trust under
the laws of the Commonwealth of Massachusetts on June 24, 1985. The   
    Declaration of Trust permits the Trustees 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 operates as a "fund-of-funds" in that, pursuant to management
   provided by the Manager, it makes investments in other funds of the Trust
  ("underlying funds"). The Fund seeks a total return greater than that of
  the Morgan Stanley Capital International Europe, Australian and Far East
   Index. The Fund will pursue its objective by investing primarily in Class
 III shares of international equity and fixed income funds of the Trust.

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
outlined in the Trust's prospectus.                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

    Shares of underlying funds are valued at their net asset value as reported
   on each business day. Short-term investments with a remaining maturity of
    sixty days or less are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the 
Trustees.                                                             

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. 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.                                

8                                                                               

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         

   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
    accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis.        

Allocation of operating activity                                      

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

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .80% of the amount    
  invested. In the case of cash redemptions, the fee is .11% of the amount
     redeemed. Prior to June 30, 1997, the fee on cash redemptions was .10%. All
   purchase premiums and redemption fees are paid to and recorded as paid-in
capital by the                                                        

                                                                               9

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    Fund. For the six months ended August 31, 1997, the Fund received $209,010
 in purchase premiums and $4,300 in redemption fees. There is no premium
for reinvested distributions or in-kind transactions.                 

2.   Fees and other transactions with affiliates                                

The Manager determines the allocation of the assets of the Fund among 
  designated underlying funds. The Manager does not charge an advisory fee
 for asset allocation advice provided to the Fund, but receives advisory
fees from the underlying funds in which the Fund invests. The Fund has
adopted a Shareholder Services Plan under which the Fund pays GMO a   
   shareholder service fee for client and shareholder service, reporting and
   other support. Pursuant to the Shareholder Services Plan, the shareholder
 service fee is calculated based on the average daily net assets of each
   class at the annual rate of .13% for Class I shares and .07% for Class II
shares. No shareholder service fee is charged for Class III shares.   

  GMO has agreed to reimburse all expenses until further notice (excluding
    brokerage commissions, certain other transaction costs (including transfer
taxes), shareholder service fees and extraordinary expenses). Prior to
     November 25, 1996, GMO had agreed to reimburse these expenses to the extent
    that the Fund's annual expenses exceeded .05% of average daily net assets.

The Fund's portion of the fee paid by the Trust to the unaffiliated   
    Trustees during the period ended August 31, 1997 was $181. 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 August 31, 1997, aggregated
$40,123,341 and $5,032,000, respectively.                             

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]

                     Gross Unrealized    Gross Unrealized     Net Unrealized   
  Aggregate Cost       Appreciation        Depreciation        Appreciation    
-------------------  ------------------  ------------------  ------------------
                                                                               
   $80,983,197          $1,629,371          $1,236,071           $393,300      

4.   Principal shareholders                                                     

    At August 31, 1997, 43% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

10                                                                              

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                                [Download Table]

                                                Period from April 1, 1997      
                                               (commencement of operations)    
Class I:                                            to August 31, 1997         
                                            -----------------------------------
                                                Shares             Amount      
                                            ---------------    ----------------
                                                                               
Shares sold                                    489,162      $     5,315,349    
Shares issued to shareholders in                                               
  reinvestment of distributions                  1,956               22,318    
Shares repurchased                                --                   --      
                                            ---------------    ----------------
Net increase                                   491,118      $     5,337,667    
                                            ===============    ================

                                                    Six Months Ended           
Class II:                                            August 31, 1997           
                                            ---------------------------------- 
                                                Shares             Amount      
                                            ---------------    --------------- 
                                                                               
Shares sold                                      --         $       --         
Shares issued to shareholders in                                               
  reinvestment of distributions                 15,397              175,525    
Shares repurchased                                --                  --       
                                            ---------------    --------------- 
Net increase                                    15,397      $       175,525    
                                            ===============    =============== 

                                              Period from December 23, 1996    
                                              (commencement of operations)     
Class II:                                         to February 28, 1997         
                                            ---------------------------------- 
                                                Shares             Amount      
                                            ---------------    --------------- 
                                                                               
Shares sold                                   1,473,267     $    14,880,000    
Shares issued to shareholders in                                               
  reinvestment of distributions                  14,234             142,907    
Shares repurchased                                --                  --       
                                            ---------------    --------------- 
Net increase                                  1,487,501     $    15,022,907    
                                            ===============    =============== 

                                                                              11

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GMO International Equity Allocation Fund                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

5.   Share transactions -- (Continued)                                          

                                                                [Download Table]

                                            Six Months Ended            
Class III:                                   August 31, 1997            
                                  --------------------------------------
                                       Shares              Amount       
                                  -----------------  -------------------
                                                                        
Shares sold                           2,969,431     $    32,243,187     
Shares issued to shareholders in                                        
  reinvestment of distributions          45,952             524,314     
Shares repurchased                     (417,442)         (4,295,360)    
                                  -----------------  -------------------
Net increase                          2,597,941     $    28,472,141     
                                  =================  ===================


                                      Period from October 11, 1996      
                                      (commencement of operations)      
Class III:                                to February 28, 1997          
                                  --------------------------------------
                                       Shares              Amount       
                                  -----------------  -------------------
                                                                        
Shares sold                           2,910,529     $    29,506,688     
Shares issued to shareholders in                                        
  reinvestment of distributions          14,679             147,379     
Shares repurchased                       --                   --        
                                  -----------------  -------------------
Net increase                          2,925,208     $    29,654,067     
                                  =================  ===================

12                                                                              

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 REAL ESTATE INVESTMENT TRUSTS -- 97.4%                         

                 Apartments -- 15.3%                                            
     32,400      Ambassador Apartments Inc                            720,900   
     33,900      AMLI Residential Properties Trust                    771,225   
     60,700      Apartment Investment & Management Co, Class A      1,968,956   
     22,200      Associated Estates Realty Capital                    503,663   
     87,700      Avalon Properties Inc                              2,461,081   
     98,300      Bay Apartment Communities Inc                      3,655,531   
     71,000      Berkshire Realty Co                                  803,188   
     88,900      BRE Properties Inc                                 2,394,744   
    112,804      Camden Property Trust                              3,327,718   
     39,000      Columbus Realty Trust                                884,813   
    300,025      Equity Residential Properties Trust               14,607,442   
     49,000      Evans Withycombe Residential                       1,166,813   
     59,400      Gables Residential Trust                           1,562,963   
     71,400      Irvine Apartment Communities                       2,043,825   
    101,600      Merry Land & Investment Co                         2,209,800   
     26,500      Mid America Apartment Community                      727,094   
     38,900      Oasis Residential Inc                                909,288   
     44,500      Post Properties Inc                                1,660,406   
    110,200      Security Capital Atlantic                          2,486,388   
     38,400      Security Capital Atlantic (Rights)                       599   
    397,275      Security Capital Industry (Rights)                     3,099   
    314,500      Security Capital Pacific (Rights)                      4,906   
    297,000      Security Capital Pacific Trust                     6,478,313   
     20,800      Smith (Charles E) Residential                        634,400   
     55,900      Summit Properties Inc                              1,114,506   
      8,300      Town & Country Trust                                 141,100   
    295,838      United Dominion Realty Trust                       4,178,712   
     50,500      Walden Residential Properties Inc                  1,205,688   
                                                                  -----------   
                                                                   58,627,161   
                                                                  -----------   
                 Diversified -- 7.9%                                            
    581,600      Catellus Development Corp *                       11,195,799   
     86,600      Colonial Properties Trust                          2,500,575   
    101,500      Cousins Properties Inc                             2,708,781   
    460,000      First Union Real Estate                            6,037,500   
     80,000      Glenborough Realty Trust Inc                       2,065,000   
    124,900      Lexington Corporate Properties                     1,850,081   
     45,600      MGI Properties Inc                                 1,057,350   
     50,900      Pacific Gulf Properties Inc                        1,164,338   
     13,100      Pennsylvania Real Estate                             338,144   

              See accompanying notes to the financial statements.              1

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Diversified -- continued                                       
     72,200      Washington Realty Trust                            1,218,375   
                                                                   -----------  
                                                                   30,135,943   
                                                                   -----------  

                 Enclosed Malls -- 9.5%                                         
     97,000      CBL & Associates Properties                        2,346,188   
     73,100      Crown American Realty Trust                          708,156   
    156,100      General Growth Properties                          5,346,425   
     86,600      JP Realty Inc                                      2,132,525   
    130,400      Macerich Co                                        3,610,450   
    107,900      Mills Corp                                         2,859,350   
    447,100      Simon Debartolo Group Inc                         14,167,480   
    182,600      Taubman Centers Inc                                2,328,150   
     90,100      Urban Shopping Centers Inc                         2,787,469   
                                                                   ----------   
                                                                   36,286,193   
                                                                   ----------   

                 Factory Outlet -- 0.4%                                         
     30,400      Chelsea GCA Realty Inc                             1,141,900   
     17,200      Horizon Group Inc                                    216,075   
      8,000      Prime Retail Inc                                     115,500   
                                                                   ----------   
                                                                    1,473,475   
                                                                   ----------   

                 Hotel/Motel -- 16.5%                                           
     97,800      American General Hospitality                       2,524,463   
     43,800      Boykin Lodging Co                                  1,127,850   
    124,200      Equity Inns Inc                                    1,800,900   
    194,400      Felcor Suite Hotels Inc                            7,387,199   
    188,100      Franchise Finance Corp of America                  4,714,256   
     48,000      Homestead Village                                    804,000   
     11,182      Homestead Village Properties Purchase Warrants*       83,862   
     99,100      Hospitalities Properties Trust                     3,319,850   
    212,000      Innkeepers USA Trust                               3,233,000   
     44,800      Jameson Inns Inc                                     560,000   
    839,974      Patriot America Hospitality Inc                   20,474,365   
    102,300      RFS Hotel Investors Inc                            1,892,550   
    276,600      Starwood Lodging Trust                            12,775,462   
     97,000      Sunstone Hotel Investors Inc                       1,461,063   
     72,800      Winston Hotels Inc                                   973,700   
                                                                   ----------   
                                                                   63,132,520   
                                                                   ----------   

                 Industrial -- 10.7%                                            
     41,800      Bedford Property Investors                           856,900   
     80,900      Centerpoint Properties Corp                        2,598,913   

See accompanying notes to the financial statements. 

2                                                                               

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares      Description                                      Value ($)     
--------------------------------------------------------------------------------
                                                                                
                 Industrial -- continued                                        
    291,600      Duke Realty Investments                            6,105,375   
     48,850      Eastgroup Properties Inc                             998,372   
    124,100      First Industrial Reality Trust                     3,831,588   
    186,300      Liberty Property Trust                             4,785,581   
     35,200      Meridian Industrial Trust Inc                        805,200   
    357,075      Security Capital Industrial Trust                  7,543,208   
    239,600      Spieker Properties Inc                             8,910,124   
     71,700      Trinet Corporate Realty Trust                      2,549,831   
     62,300      Weeks Corp                                         1,962,450   
                                                                   ----------   
                                                                   40,947,542   
                                                                   ----------   

                 Manufactured Housing -- 1.6%                                   
     63,700      Chateau Communities Inc                            1,918,963   
     81,200      Manufactured Home Communities                      1,903,125   
     63,400      Sun Communities Inc                                2,234,850   
                                                                   ----------   
                                                                    6,056,938   
                                                                   ----------   

                 Office -- 17.2%                                                
    128,600      Arden Realty Group Inc                             3,713,325   
     76,000      Boston Properties Inc *                            2,265,750   
    155,400      Brandywine Realty Trust                            3,321,675   
    176,100      Cali Realty Trust                                  6,559,725   
    278,700      Carramerica Realty Corp                            8,308,743   
    392,200      Crescent Real Estate Equities                     12,403,324   
    275,500      Equity Office Properties                           8,041,155   
     37,000      Great Lakes Reit Inc                                 649,813   
    171,800      Highwood Properties Inc                            5,583,500   
     47,400      Kilroy Realty Corp                                 1,211,663   
     71,300      Koger Equity Inc                                   1,381,438   
     32,400      Parkway Properties Inc                             1,012,500   
    100,800      Prentiss Properties Trust                          2,784,600   
    111,000      Reckson Associates Realty                          2,677,875   
    100,000      Sl Green Realty Corp                               2,381,250   
    150,000      Trizec Hahn Corporation                            3,384,375   
                                                                   ----------   
                                                                   65,680,711   
                                                                   ----------   

                 Recreation -- 0.3%                                             
     36,700      National Golf Properties Inc                       1,176,694   
                                                                   ----------   

                 Self Storage -- 5.4%                                           
    490,800      Public Storage Inc                                13,773,074   
     59,100      Shurgard Storage Centers                           1,628,944   

See accompanying notes to the financial statements. 

                                                                               3

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                       Value ($)  
------------------------------------------------------------------------------
                                                                              
                 Self Storage -- continued                                    
     24,100      Sovran Self Storage                                  732,038 
     33,000      Storage Trust Realty                                 837,375 
     94,700      Storage USA Inc                                    3,870,863 
                                                                 ------------ 
                                                                   20,842,294 
                                                                 ------------ 

                 Shopping Centers -- 0.1%                                     
     30,000      Pan Pacific Retail Properties Inc                    601,875 
                                                                 ------------ 

                 Shopping/Power Center -- 12.5%                               
     32,300      Alexander Haagen Properties                          506,706 
     73,500      Bradley Real Estate Inc                            1,378,125 
     82,100      Burnham Pacific Properties Inc                     1,139,138 
     89,400      Commercial Net Lease Realty                        1,408,050 
     80,400      Developers Diversified Realty Corp                 3,125,550 
     60,300      Essex Property Trust Inc                           1,929,600 
     73,900      Excel Realty Trust Inc                             2,189,288 
    125,700      Federal Realty Investment Trust                    3,166,069 
      5,300      First Washington Realty Trust                        125,544 
     76,700      Glimcher Realty Trust                              1,581,938 
    102,700      IRT Property Co                                    1,245,238 
     53,400      JDN Realty Corp                                    1,738,838 
    122,900      Kimco Realty Corp                                  4,140,194 
     19,800      Kranzco Realty Trust                                 348,975 
     10,900      Mark Centers Trust                                   101,506 
    116,100      New Plan Realty Trust                              2,728,350 
     40,700      Price Reit Inc                                     1,544,056 
     10,800      Ramco-Gershenson Property                            214,650 
     87,400      Realty Income Corp                                 2,414,425 
     74,600      Regency Realty Corp                                1,981,563 
     30,500      Saul Centers Inc                                     533,750 
    135,200      Vornado Realty Trust                               9,396,399 
    100,800      Weingarten Realty                                  4,189,500 
     53,400      Western Investment Real Estate Trust                 717,563 
                                                                 ------------ 
                                                                   47,845,015 
                                                                 ------------ 

                 TOTAL REAL ESTATE INVESTMENT TRUSTS  (COST                   
                 $353,490,128)                                    372,806,361 
                                                                 ------------ 

4              See accompanying notes to the financial statements.              

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

Par Value($)/                                                                   
   Shares        Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                

                 SHORT-TERM INVESTMENTS -- 4.9%                                 

                 Cash Equivalents -- 1.6%                                       
 $   472,135     BankBoston Eurodollar Time Deposit, 5.7875%                    
                 due 9/2/97/(a)/                                      472,135   
 $   124,541     First Union National Bank of North Carolina                    
                 Eurodollar Time Deposit, 5.5625% due                           
                 9/2/97/(a)/                                          124,541   
 $   373,624     Harris Bank and Trust Eurodollar Time Deposit,                 
                 5.625% due 9/2/97/(a)/                               373,624   
   3,000,000     Merrimac Cash Fund Premium Class/(a)/              3,000,000   
 $ 2,000,000     Prudential Securities Group Inc Master Note,                   
                 5.8875% due 9/2/97/(a)/                            2,000,000   
                                                                 ------------   
                                                                    5,970,300   
                                                                 ------------   
                 U.S. Government -- 0.1%                                        
 $   400,000     U.S. Treasury Bill, 5.22% due 11/28/97/(b)/          395,079   
                                                                 ------------   
                 Repurchase Agreement -- 3.2%                                   
 $12,258,505     Salomon Brothers Repurchase Agreement, dated                   
                 8/29/97, due 9/2/97, with a maturity value of                  
                 $12,265,383 and an effective yield of 5.05%,                   
                 collateralized by U.S. Treasury Obligations                    
                 with rates ranging from 5.00% to 6.75%, with                   
                 maturity dates ranging from 2/15/99 to 8/15/26                 
                 and with an aggregate market value of                          
                 $12,539,408.                                      12,258,505   
                                                                 ------------   
                 TOTAL SHORT-TERM INVESTMENTS                                   
                 (COST  $18,623,685)                               18,623,884   
                                                                 ------------   
                 TOTAL INVESTMENTS -- 102.3%                                    
                 (COST $372,113,813)                              391,430,245   

                 Other Assets and Liabilities (net) -- (2.3)%      (8,709,902)  
                                                                 ------------   

                 TOTAL NET ASSETS-- 100%                         $382,720,343   
                                                                 ============   

Notes to the Schedule of Investments:         

*  Non-income producing security.                       
         (a) Represents investments of security lending collateral (Note 1).
   (b) Security has been segregated to cover margin requirements
on open financial futures contracts.              

              See accompanying notes to the financial statements.              5

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

                                                                [Download Table]

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------
                                                                                

Assets:                                                                         
   Investments, at value (cost $372,113,813) (Note 1)            $ 391,430,245  
   Dividends and interest receivable                                   564,879  
   Receivable for variation margin on open futures contracts                    
     (Notes 1 and 6)                                                    21,643  
   Receivable for expenses waived or borne by Manager (Note 2)         133,223  
   Miscellaneous receivable                                             14,863  
                                                                 -------------- 

      Total assets                                                 392,164,853  
                                                                 -------------- 

Liabilities:                                                                    
   Payable for investments purchased                                   192,350  
   Payable upon return of securities loaned (Note 1)                 5,970,300  
   Payable for Fund shares repurchased                               2,977,385  
   Payable to affiliate for (Note 2):                                           
     Management fee                                                    219,641  
     Shareholder service fee                                            43,960  
   Accrued expenses                                                     40,874  
                                                                 -------------- 

      Total liabilities                                              9,444,510  
                                                                 -------------- 

Net assets                                                       $ 382,720,343  
                                                                 ============== 

Net assets consist of:                                                          
   Paid-in-capital                                               $ 338,016,031  
   Accumulated undistributed net investment income                   8,454,789  
   Accumulated undistributed net realized gain                      17,048,824  
   Net unrealized appreciation                                      19,200,699  
                                                                 ============== 
                                                                 $ 382,720,343  
                                                                 ============== 

Net assets attributable to:                                                     
   Class I shares                                                $     111,722  
                                                                 ============== 
   Class III shares                                              $ 382,608,621  
                                                                 ============== 

Shares outstanding:                                                             
   Class I                                                               8,368  
                                                                 ============== 
   Class III                                                        28,640,140  
                                                                 ============== 

Net asset value per share:                                                      
   Class I                                                       $       13.35  
                                                                 ============== 
   Class III                                                     $       13.36  
                                                                 ============== 

6             See accompanying notes to the financial statements.               

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Statement of Operations--Six Months Ended August 31, 1997 (Unaudited)           
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                           
Investment Income:                                                         
   Dividends                                                   $ 9,159,761 
   Interest (including securities lending income of $12,004)       452,304 
                                                              ------------ 
       Total income                                              9,612,065 
                                                              ------------ 
Expenses:                                                                  
   Management fee (Note 2)                                       1,265,212 
   Custodian and transfer agent fees                                48,674 
   Registration fees                                                40,681 
   Audit fees                                                       19,492 
   Legal fees                                                        7,023 
   Trustees fees (Note 2)                                            1,721 
   Miscellaneous                                                       895 
   Fees waived or borne by Manager (Note 2)                       (475,753)
                                                              ------------ 
                                                                   907,945 
   Shareholder service fee (Note 2)                                        
       Class I                                                          96 
       Class II                                                      1,386 
       Class III                                                   252,055 
                                                              ------------ 
       Net expenses                                              1,161,482 
                                                              ------------ 
          Net investment income                                  8,450,583 
                                                              ------------ 
Realized and unrealized gain (loss):                                       
   Net realized gain (loss) on:                                            
       Investments                                              16,155,001 
       Closed futures contracts                                  1,278,491 
                                                              ------------ 
          Net realized gain                                     17,433,492 
                                                              ------------ 
   Change in net unrealized appreciation (depreciation) on:                
       Investments                                              (2,710,929)
       Open futures contracts                                     (421,661)
                                                              ------------ 
          Net unrealized loss                                   (3,132,590)
                                                              ------------ 
       Net realized and unrealized gain                         14,300,902 
                                                              ------------ 
Net increase in net assets resulting from operations           $22,751,485 
                                                              ============ 

              See accompanying notes to the financial statements.              7

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                                [Download Table]


                                            Six Months    Period from May 31, 1996
                                              Ended           (commencement of    
                                         August 31, 1997        operations) to    
                                           (Unaudited)        February 28, 1997   
                                         ---------------  ------------------------
                                                                                  
Increase (decrease) in net assets:                                                
Operations:                                                                       
   Net investment income                   $ 8,450,583           $ 4,196,242      
   Net realized gain                        17,433,492             4,239,035      
   Change in net unrealized                                                       
      appreciation (depreciation)           (3,132,590)           22,333,289      
                                           ------------          ------------     
   Net increase in net assets resulting                                           
      from operations                       22,751,485            30,768,566      
                                           ------------          ------------     
Distributions to shareholders from:                                               
   Net investment income                                                          
       Class I                                    (203)                   --      
       Class II                                 (8,729)                   --      
       Class III                            (1,196,725)           (2,888,627)     
                                           ------------          ------------     
       Total distributions from net                                               
       investment income                    (1,205,657)           (2,888,627)     
                                           ------------          ------------     
   Net realized gains                                                             
       Class I                                    (648)                   --      
       Class II                                (26,734)                   --      
       Class III                            (3,909,302)             (784,771)     
                                           ------------          ------------     
       Total distributions from net                                               
       realized gains                       (3,936,684)             (784,771)     
                                           ------------          ------------     

                                            (5,142,341)           (3,673,398)     
                                           ------------          ------------     
   Net share transactions: (Note 5)                                               
       Class I                                  66,725                41,658      
       Class II                               (218,750)                   --      
       Class III                           104,292,920           233,833,478      
                                           ------------          ------------     
   Increase in net assets resulting                                               
      from net share transactions          104,140,895           233,875,136      
                                           ------------          ------------     

      Total increase in net assets         121,750,039           260,970,304      

Net assets:                                                                       
   Beginning of period                     260,970,304                     --     
                                           ------------          ------------     
   End of period (including accumulated                                           
      undistributed net investment                                                
      income of $8,454,789 and                                                    
      $1,209,863, respectively)            $382,720,343          $260,970,304     
                                           ============          ============     

8             See accompanying notes to the financial statements.               

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


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

                                                   Six Months Ended   Period from December 31, 1996 
                                                   August 31, 1997    (commencement of operations)  
                                                     (Unaudited)         to February 28, 1997       
                                                    ----------------  ----------------------------- 
                                                                                                    
Net asset value, beginning of period                    $12.62                $ 12.58               
                                                       -------               --------               
Income from investment operations:                                                                  
   Net investment income                                  0.32+                  0.03               
   Net realized and unrealized gain                       0.61                   0.01               
                                                       -------               --------               

      Total from investment operations                    0.93                   0.04               
                                                       -------               --------               

Less distributions to shareholders:                                                                 
   From net investment income                            (0.05)                    --               
   From net realized gains                               (0.15)                    --               
                                                       -------               --------               

      Total distributions                                (0.20)                    --               
                                                       -------               --------               
Net asset value, end of period                          $13.35                $ 12.62               
                                                       =======               ========               

Total Return/(a)/                                         7.34%                  0.32%              

Ratios/Supplemental Data:                                                                           
   Net assets, end of period (000's)                    $  112                $    41               
   Net expenses to average daily net assets               0.82%*                 0.82%*             
   Net investment income to average daily net                                                       
      assets                                              4.88%*                 3.17%*             
   Portfolio turnover rate                                  37%                    21%              
   Average broker commission rate per equity                                                        
      share                                            $0.0394                $0.0323               
   Fees and expenses voluntarily waived or borne                                                    
      by the Manager consisted of the following                                                     
      per share amounts:                                $ 0.01                (b)                   

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
/(b)/ Fees and expenses waived or borne by the Manager were less than $0.01 per 
share.                                                              
+     Computed using average shares outstanding throughout the period.          
*     Annualized.                                                               

             See accompanying notes to the financial statements.             9

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                                 Period from April 30, 1997  
                                                                 (commencement of operations)
                                                                     to August 4, 1997       
                                                                        (Unaudited)          
                                                                 ----------------------------
                                                                                             
Net asset value, beginning of period                                      $ 12.31            
                                                                          -------            

Income from investment operations:                                                           
   Net investment income                                                     0.16+           
   Net realized and unrealized gain                                          1.25            
                                                                          -------            

      Total from investment operations                                       1.41            
                                                                          -------            

Less distributions to shareholders:                                                          
   From net investment income                                               (0.05)           
   From net realized gains                                                  (0.15)           
                                                                          -------            

      Total distributions                                                   (0.20)           
                                                                          -------            
Net asset value, end of period                                             $13.52/(a)/       
                                                                           ======            

Total Return/(b)/                                                           11.46%           

Ratios/Supplemental Data:                                                                    
   Net expenses to average daily net assets                                  0.76%*          
   Net investment income to average daily net assets                         4.72%*          
   Portfolio turnover rate                                                     37%           
   Average broker commission rate per equity share                        $0.0394            
   Fees and expenses voluntarily waived or borne by the Manager                              
      consisted of the following per share amount:                        $  0.01            

+     Computed using average shares outstanding throughout the period.          
/(a)/ All Class II shares of the Fund were exchanged for Class III shares on    
 August 4, 1997. Amount represents ending net asset value per share on
August 4, 1997.                                                     
/(b)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
*     Annualized.                                                               

10            See accompanying notes to the financial statements.               

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                 Six Months      Period from May 31, 1996    
                                                    Ended        (commencement of operations)
                                               August 31, 1997     to February 28, 1997      
                                                 (Unaudited)                                 
                                               ----------------  -------------------------   
                                                                                             
Net asset value, beginning of period               $ 12.62               $  10.00            
                                                   --------              ---------           

Income from investment operations:                                                           
   Net investment income                              0.33+                  0.24            
   Net realized and unrealized gain                   0.61                   2.60            
                                                   --------              ---------           

      Total from investment operations                0.94                   2.84            
                                                   --------              ---------           

Less distributions to shareholders:                                                          
   From net investment income                        (0.05)                 (0.17)           
   From net realized gains                           (0.15)                 (0.05)           
                                                   --------              ---------           

      Total distributions                            (0.20)                 (0.22)           
                                                   --------              ---------           
Net asset value, end of period                     $ 13.36               $  12.62            
                                                   ========              =========           

Total Return/(a)/                                     7.41%                 28.49%           

Ratios/Supplemental Data:                                                                    
   Net assets, end of period (000's)              $382,609               $260,929            
   Net expenses to average daily net assets           0.69%*                 0.69%*          
   Net investment income to average daily net                                                
      assets                                          5.01%*                 4.72%*          
   Portfolio turnover rate                              37%                    21%           
   Average broker commission rate per equity                                                 
      share                                        $0.0394               $ 0.0323            
   Fees and expenses voluntarily waived or                                                   
      borne by the Manager consisted of the                                                  
      following per share amounts:                 $  0.02               $   0.02            

/(a)/ Calculation excludes purchase premiums and redemption fees. 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.          
*     Annualized.                                                               

              See accompanying notes to the financial statements.             11

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

    GMO REIT Fund (the "Fund"), which commenced operations on May 31, 1996, 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
into classes.                                                         

  The Fund seeks maximum total return through investment primarily in real
estate investment trusts ("REITs").                                   

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class I and Class
III are the only active classes of shares of the Fund.                

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     
The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S. government  
obligations in accordance with the initial margin requirements of the 
 broker or exchange. Futures contracts are marked to market daily and an
appropriate payable or receivable for the change in value ("variation 
   margin") is recorded by the Fund. The payable or receivable is liquidated
on the following business day. Gains or losses are recognized but not 
considered realized until the contracts                               

12                                                                              

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from changes in the value of the
 underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
  loaned securities having a market value of $5,753,275, collateralized by
cash in the amount of $5,970,300, which was invested in short-term    
instruments.                                                          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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 semiannually, 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. Distributions in excess of tax basis  
earnings and profits, if any, are reported in the Fund's financial    
statements as a return of capital.                                    

                                                                              13

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

  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.              

     The Fund's investments in REIT equity securities may at times result in the
  Fund's receipt of cash in excess of its interest in the REIT's earnings.
    The excess amount cannot be determined by the Fund at the time of receipt.
     If the Fund distributes amounts which are subsequently determined to exceed
  REIT earnings, such amounts would constitute a return of capital to Fund
shareholders for federal income tax purposes.                         

Security transactions and related investment income                   
   Security transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                      

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
     The premium on cash purchases and fee on redemptions of Fund shares is .50%
     of the amount invested or redeemed. Prior to March 25, 1997, the premium on
   cash purchases and the fee on redemptions was .75% of the amount invested
or redeemed. All purchase premiums and redemption fees are paid to and
  recorded as paid-in capital by the Fund. For the six months ended August
   31, 1997, the Fund received $702,701 in purchase premiums and $217,874 in
redemption fees. There is no premium for reinvested distributions or  
in-kind transactions.                                                 

Investment risk                                                       
  There are certain additional risks involved in investing in REITs rather
than a more diversified portfolio of investments. Since the Fund's    
   investments are concentrated in real-estate related securities, the value
   of its shares can be expected to change in light of factors affecting the
real estate industry, including local or regional economic conditions,
  changes in zoning laws, changes in real estate value and property taxes,
     and changes in interest rates. The value of the Fund's shares may fluctuate
more widely than the value of shares of a portfolio that invests in a 
broader range of industries.                                          

14                                                                              

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .75% of 
    average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting, and other support. Pursuant to the    
    Shareholder Services Plan, the shareholder service fee is calculated based
  on the average daily net assets of each class at the annual rate of .28%
for Class I shares, .22% for Class II shares, and .15% for Class III  
shares.                                                               

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
extraordinary expenses) exceed .54% of average daily net assets.      

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $1,721. 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 six months ended August 31, 1997,     
aggregated $224,601,783 and $118,562,192, respectively.               

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                              Gross Unrealized        Gross Unrealized         Net Unrealized    
     Aggregate Cost             Appreciation            Depreciation            Appreciation     
-------------------------  ----------------------  ----------------------  ----------------------
                                                                                                 
     $ 372,113,813              $ 21,417,967             $ 2,101,535            $ 19,316,432     

4.   Principal shareholders                                                     

    At August 31, 1997, 27% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

                                                                              15

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]


                                                                        Period from December 31, 1996     
                                             Six Months Ended              (commencement of operations)   
 Class I:                                    August 31, 1997                   to February 28, 1997       
                                    ---------------------------------  -----------------------------------
                                        Shares            Amount            Shares             Amount     
                                    ---------------    --------------   ---------------    ---------------
                                                                                                          
Shares sold                               5,019    $        65,874            3,284    $         41,658   
Shares issued to shareholders in                                                                          
  reinvestment of distributions              65                851               --                  --   
Shares repurchased                           --                 --               --                  --   
                                    ---------------    --------------   ---------------    ---------------
Net increase                              5,084    $        66,725            3,284    $         41,658   
                                    ===============    ==============   ===============    ===============

                                       Period from April 30, 1997                                         
                                      (commencement of operations)                                        
Class II:                                  to August 4, 1997                                              
                                    ---------------------------------                                     
                                        Shares            Amount                                          
                                    ---------------   ---------------                                     
                                                                                                          
Shares sold                               181,864  $      2,240,225                                       
Shares issued to shareholders                                                                             
  in reinvestment of distributions         2,703           35,463                                         
Shares repurchased                      (184,567)       (2,494,438)                                       
                                    ---------------   ---------------                                     
Net decrease                                 --    $      (218,750)                                       
                                    ===============   ===============                                     


                                                                            Period from May 31, 1996      
                                            Six Months Ended              (commencement of operations)    
Class III:                                  August 31, 1997                   to February 28, 1997        
                                    ---------------------------------   --------------------------------- 
                                        Shares            Amount            Shares            Amount      
                                    ---------------   ---------------   ---------------   ----------------
                                                                                                          
Shares sold                            10,932,795  $    143,405,985        20,722,033  $     234,377,685  
Shares issued to shareholders                                                                             
  in reinvestment of distributions       348,938         4,581,563           180,673          2,193,376   
Shares repurchased                    (3,314,206)      (43,694,628)         (230,093)        (2,737,583)  
                                    ---------------   ---------------   ---------------   ----------------
Net increase                            7,967,527  $    104,292,920        20,672,613  $     233,833,478  
                                    ===============   ===============   ===============   ================

16                                                                              

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GMO REIT Fund                                                                   
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6. Financial instruments                                                        

A summary of outstanding financial instruments at August 31, 1997 is as   
follows:                                                                        

Long futures contracts                                                

                                                        [Enlarge/Download Table]


  Number of                                                           Net Unrealized  
  Contracts         Type       Expiration Date     Contract Value      Depreciation   
-------------  -------------  -----------------  ------------------  -----------------
                                                                                      
      10          S&P 500      September 1997        $4,515,500         $(115,733)    
                                                                      ================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                            

                                                                              17

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 502nd Page of 667 TOC 1st Previous Next ↓Bottom Just 502nd
GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 COMMON STOCKS -- 94.4%                                         

                 Advertising -- 0.3%                                            

     28,400      CKS Group Inc *                                      947,850   
                                                                  -----------   

                 Aerospace -- 1.2%                                              

      5,000      AAR Corp                                             167,813   
     14,500      BE Aerospace Inc *                                   514,750   
     34,900      Gencorp Inc                                          933,575   
     15,500      Greenwich Airline Services, Class A                  465,000   
      2,094      Northrop Grumman Corp                                245,129   
      3,800      OEA Inc                                              141,313   
      4,100      Orbital Sciences Corp *                               88,919   
     19,700      Thiokol Corp                                       1,568,613   
     13,400      Unc Incorporated *                                   199,325   
                                                                  -----------   
                                                                    4,324,437   
                                                                  -----------   

                 Automotive -- 2.0%                                             

     35,500      Arvin Industries Inc                               1,235,844   
     13,200      Borg Warner Automotive Inc                           688,050   
     33,900      Caliber Systems Inc                                1,415,325   
      2,500      Coachmen Industries Inc                               46,250   
     45,600      Mascotech Industries Inc                             954,750   
     49,700      SPX Corp                                           2,888,812   
                                                                  -----------   
                                                                    7,229,031   
                                                                  -----------   

                 Banking and Financial Services -- 4.2%                         

      2,400      Acceptance Insurance Cos Inc *                        53,400   
      7,500      Albank Financial Corp                                288,750   
      3,450      Alex Brown Inc                                       292,172   
     17,700      Americredit *                                        473,475   
      9,400      Astoria Financial Corp                               452,375   
     24,700      BOK Financial Corporation                            913,900   
     23,500      City National Corp                                   656,531   
      9,000      Cityscape Financial Corp *                            92,813   
      7,610      CNB Bancshares Inc                                   312,010   
     12,750      Comdisco Inc                                         346,641   
      3,600      Deposit Guaranty Corp                                115,425   
     18,100      Dime Bancorp Inc                                     349,556   
      5,500      Donaldson Lufkin & Jenrette                          326,563   
     18,700      Eaton Vance Corp                                     535,288   
        800      Finova Group Inc                                      67,650   

               See accompanying notes to financial statements.               1

N-30D 503rd Page of 667 TOC 1st Previous Next ↓Bottom Just 503rd
GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Banking and Financial Services -- continued                    

      4,400      First Citizens Bancshares, Class A                   393,800   
        800      First Empire State Corp                              292,400   
     13,600      First Federal Financial Corp *                       459,000   
      9,300      First Finance Corp                                   299,925   
      8,800      First Financial Bancorp                              400,400   
      6,900      Fort Wayne National Corp                             217,350   
     12,100      Fund American Enterprises Holdings                 1,276,550   
      3,700      Interra Financial Inc                                160,950   
      5,500      Legg Mason Inc                                       339,625   
     12,500      Mercantile Bankshares                                351,563   
     18,600      National Commerce Bancorp                            467,325   
     17,700      Northfork Bancorp                                    441,394   
      7,100      Onbancorp Inc                                        369,200   
      6,500      Park District National Corp                          451,344   
     28,600      Provident Financial Group                          1,354,925   
     25,450      St. Paul Bancorp Inc                                 588,531   
      8,300      Sumitomo Bank Of California                          321,625   
        100      Summit Bancorp                                         5,938   
      1,900      TCF Financial Corporation                            101,294   
     11,900      United Asset Management Corp                         319,069   
     10,500      US Trust Corp                                        551,250   
     12,900      Value Line Inc                                       470,850   
      5,720      Washington Federal Inc                               155,870   
      5,700      Zions Bancorporation                                 220,875   
                                                                   -----------  
                                                                   15,287,602   
                                                                   -----------  

                 Chemicals -- 1.1%                                              

      8,300      Betzdearborn Inc                                     541,056   
     22,900      Cytec Industries Inc *                             1,117,806   
      8,100      Dexter Corp                                          307,800   
     11,400      Fuller (HB) Co                                       629,138   
      3,400      Lilly Industrial Coating Inc, Class A                 75,225   
     16,100      Macdermid Inc                                      1,247,750   
     14,500      Mississippi Chemical Corp                            314,469   
                                                                   -----------  
                                                                    4,233,244   
                                                                   -----------  

                 Communications -- 0.0%                                         

      4,800      Commnet Cellular Inc *                               168,000   
                                                                   -----------  

                 Computer and Office Equipment -- 2.6%                          
     26,100      Amdahl Corp *                                        321,356   

2              See accompanying notes to the financial statements.              

N-30D 504th Page of 667 TOC 1st Previous Next ↓Bottom Just 504th
GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                 Computer and Office Equipment -- continued                      

     12,700      Analogic Corp                                        479,425    
     21,200      Comverse Technology Inc *                            973,875    
     29,700      Concord EFS Inc *                                    824,175    
      4,000      Dynatech Corp *                                      153,000    
      9,200      General Binding Corp                                 285,200    
     32,000      Lexmark International Group Inc *                  1,120,000    
     73,000      Micron Electronics Inc *                           1,190,813    
      8,900      Network Computing Devices *                          105,688    
     18,200      Quantum Corp                                         638,138    
      3,800      Rational Software Corp                                62,700    
     23,300      Sequent Computer Inc *                               656,769    
     23,800      Stratus Computer Inc *                             1,320,900    
     95,000      Unisys Corp *                                      1,074,688    
      5,300      Western Digital Corp                                 255,063    
     14,400      Xircom Inc *                                         203,400    
                                                                   -----------   
                                                                    9,665,190    
                                                                   -----------   

                 Construction -- 0.9%                                            

     31,300      Centex Corp                                        1,701,938    
      6,700      Eagle Hardware & Garden Inc *                        146,981    
     25,000      McDermott International Inc                          806,250    
     49,400      Standard Pacific Corp                                540,313    
                                                                   -----------   
                                                                    3,195,482    
                                                                   -----------   

                 Consumer Goods -- 5.6%                                          

        700      Block Drug Co Inc, Class A                            33,250    
      7,900      CDW Computer Centers Inc *                           575,713    
     10,200      Church & Dwight Co Inc                               291,975    
     70,400      Furniture Brands International Inc *               1,240,800    
     22,500      Genesco Inc *                                        279,844    
     25,200      Hartmarx Corp *                                      195,300    
     32,300      Hon Industries Inc                                 1,889,549    
     18,700      Jones Apparel Group Inc                              938,506    
     11,000      Kimball International, Class B                       495,000    
     63,700      Miller Herman Inc                                  3,296,474    
     11,400      N. E. Business SVC Inc                               347,700    
    125,700      O'Sullivan Industries Holdings Inc *               1,657,669    
     13,400      Oxford Industries Inc                                449,738    
      8,700      Royal Appliance Manufacturing Co *                    75,581    
     22,200      Russ Berrie and Co                                   635,475    

             See accompanying notes to the financial statements.             3

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Consumer Goods -- continued                                    

     11,800      Scotts Company, Class A *                            330,400   
     18,600      Standard Register Co                                 635,888   
     84,400      Technology Data Corp *                             3,286,324   
      5,000      Tiffany & Co                                         226,250   
     34,400      Timberland Co *                                    2,272,549   
     16,400      Tultex Corp *                                         94,300   
     34,900      US Industries Inc *                                1,326,200   
                                                                  -----------   
                                                                   20,574,485   
                                                                  -----------   

                 Electronic Equipment -- 9.1%                                   

     26,400      Alliance Semiconductor Corp *                        349,800   
     27,900      American Power Conversion Corp *                     732,375   
     15,200      Ampex Corp, Class A *                                 71,250   
     25,500      Applied Magnetics Corp *                             941,906   
     24,800      Boston Technology Inc *                              730,050   
     33,400      Cellstar Corp                                      1,112,638   
          1      Chyron Corp                                                5   
     38,500      Cyrix Corp *                                       1,080,406   
     26,800      Dallas Semiconductor Corp                          1,026,775   
     27,400      Digital Microwave Corp *                           1,126,825   
      3,800      DSP Communications Inc                                73,150   
      9,300      Electro Scientific Industries *                      451,050   
     24,100      ESS Technology *                                     418,738   
      9,500      Highwaymaster Communications *                        86,688   
     51,700      Hutchinson Technology Inc                          1,706,100   
     17,700      Integrated Process Equipment *                       584,100   
     65,700      Jabil Circuit Inc                                  3,892,724   
     16,800      Lattice Semiconductor Corp *                       1,069,950   
     60,700      Magnetek Inc *                                     1,278,494   
     13,100      Microchip Technology Inc                             529,731   
    326,100      Oak Technology Inc *                               3,546,337   
     17,600      P-Com Inc *                                          817,300   
     25,700      Pairgain Technologies Inc                            661,775   
     94,100      Read Rite Corp *                                   2,699,493   
     23,900      Rexel Inc *                                          497,419   
     14,700      Sanmina Corp *                                     1,164,975   
      5,000      SCI Systems Inc                                      196,563   
     27,300      Silicon Valley Group Inc *                           921,375   
      4,400      Symmetricom Inc *                                     70,950   

4             See accompanying notes to the financial statements.               

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Electronic Equipment -- continued                              

     11,000      Technitrol Inc                                       374,000   
     30,800      Tekelec                                            1,118,425   
     11,900      Unitrode Corp *                                      928,200   
      8,300      Valmont Inds Inc                                     174,300   
     23,100      Vitesse Semiconductor Corp                         1,088,588   
     33,800      VLSI Technology *                                  1,115,400   
     13,900      Xylan Corp *                                         286,688   
     35,400      Zenith Electronics Corp *                            367,275   
                                                                  -----------   
                                                                   33,291,818   
                                                                  -----------   
                 Food and Beverage -- 5.3%                                      

     23,700      Canadnaigua Wine Co, Class B *                       959,850   
     24,400      Coors (Adolph) Co                                    899,750   
     48,000      Dean Foods Co                                      2,129,999   
     47,000      Dekalb Genetics Corp                               1,844,749   
     12,300      Dimon Inc                                            295,200   
     36,700      Flowers Industries Inc                               678,950   
     12,100      Hudson Foods Inc                                     196,625   
     52,300      Interstate Bakeries Corp                           3,066,087   
     23,500      Pilgrims Pride Corp                                  276,125   
      7,600      Quality Food Centers Inc *                           312,550   
     20,800      Ralcorp Holdings Inc *                               416,000   
      8,300      Sanderson Farms Inc                                  124,500   
      4,100      Savannah Foods and Industries Inc                     71,750   
        800      Seaboard Corp                                        231,600   
      9,800      Showbiz Pizza Time *                                 229,075   
     22,900      Smith Food and Drug Center, Class B *              1,253,775   
     46,200      Smithfield Foods Inc *                             2,546,774   
     20,400      Tootsie Roll Industries Inc                          997,050   
     17,200      Triarc Companies *                                   360,125   
     66,800      Universal Corp                                     2,429,849   
                                                                  -----------   
                                                                   19,320,383   
                                                                  -----------   
                 Health Care -- 2.7%                                            

     25,200      Acuson Corp *                                        678,825   
     30,400      Bio Technology General Corp *                        387,600   
      6,700      Lincare Holdings Inc *                               319,506   
     97,200      Novacare Corp *                                    1,464,075   
     27,000      Orthodontic Centers of America                       462,375   
      6,300      Pediatrix Medical Group Inc *                        262,238   

          See accompanying notes to the financial statements.            5

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                

                 Health Care -- continued                                       

     96,200      Safeskin Corp                                      3,198,649   
      3,700      Sofamor Denek Group Inc *                            177,369   
     17,400      Total Renal Care Holdings *                          796,050   
     77,400      Vivus Inc                                          2,070,449   
                                                                  -----------   
                                                                    9,817,136   
                                                                  -----------   

                 Insurance -- 4.8%                                              

     31,000      American Annuity Group Inc                           643,250   
      5,600      American Bankers Insurance Group                     369,600   
        600      Capital Re Corp                                       30,488   
      8,200      CMAC Investment Corp                                 378,225   
     17,000      Commerce Group Inc                                   474,938   
     46,800      Crawford and Co                                      988,650   
      8,803      Delphi Financial Group Inc                           385,681   
      6,100      Enhance Financial Services Group Inc                 282,125   
    106,500      Everest Re Holdings Inc                            3,853,968   
      6,700      First American Financial Corp                        299,825   
     14,000      Fremont General Corp                                 558,250   
     48,318      Frontier Insurance Group Inc                       1,691,130   
     15,800      Guaranty National Corp                               445,363   
      9,100      HCC Insurance Holdings Inc                           240,581   
      9,100      Life Re Corp                                         466,944   
     36,900      Mercury General Corp                               3,228,749   
      7,200      Orion Capital                                        306,000   
     24,200      Presidential Life Corp                               462,825   
    112,000      Reliance Group Holdings Inc                        1,372,000   
     10,100      United Wisconsin Services                            330,144   
     14,100      Vesta Insurance Group                                695,306   
      6,400      Zurich Reinsurance Centre Inc                        252,400   
                                                                  -----------   
                                                                   17,756,442   
                                                                  -----------   

                 Machinery -- 5.7%                                              

     18,600      Aviall Inc *                                         304,575   
     22,600      Camco International Inc                            1,556,575   
    110,900      Coltec Industries Inc *                            2,481,387   
     46,700      Cooper Cameron Corp                                3,029,662   
      8,900      Culligan Water Technologies *                        410,513   
      7,800      Donaldson Co Inc                                     348,075   
      1,700      ETEC Systems Inc *                                   113,900   
     28,500      Federal Mogul Corp                                 1,018,875   
     13,700      Graco Inc                                            433,263   

6             See accompanying notes to the financial statements.               

N-30D 508th Page of 667 TOC 1st Previous Next ↓Bottom Just 508th
GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Machinery -- continued                                         

      7,800      Helix Technology Corp                                466,050   
     60,400      Kulicke & Soffa Industries *                       2,774,624   
      2,700      Lindsay Manufacturing Co                             105,300   
     19,500      Mohawk Industries Inc *                              504,563   
      9,700      Novellus System Inc *                              1,111,863   
     10,600      Paxar Corp Common Stock                              230,550   
     31,400      Smith International Inc *                          2,284,349   
      8,500      Tennant Co                                           292,188   
     32,300      US Filter Corp *                                   1,162,800   
     55,200      Varco International Inc *                          2,194,199   
                                                                  -----------   
                                                                   20,823,311   
                                                                  -----------   

                 Manufacturing -- 3.2%                                          

      3,300      ABT Building Products Corp *                          56,925   
     11,900      ACX Technologies Inc *                               311,631   
      8,600      Applied Power Inc, Class A                           546,100   
     18,500      Barnes Group Inc                                     509,906   
     29,500      Blyth Industries Inc                               1,089,656   
      3,000      Champion Enterprises Inc *                            51,750   
     16,300      Crane Co                                             719,238   
      7,800      CSS Industries Inc *                                 279,825   
      6,100      Gibson Greetings Inc *                               137,250   
      3,100      Global Industrial Technologies Inc *                  58,706   
     26,900      Griffon Corp *                                       376,600   
     46,500      Lafarge Corp                                       1,511,250   
     42,625      Manitowoc Co Inc                                   1,539,828   
      9,700      Mine Safety Appliances                               611,100   
     65,500      Nortek Inc *                                       1,645,688   
     23,800      Robbins & Myers Inc                                  776,475   
      9,000      Synetic Inc *                                        388,125   
      6,000      Tredegar Industries                                  412,875   
     13,800      Watts Industries Inc, Class A                        336,375   
     18,600      Wyman-Gordon Co. *                                   508,013   
                                                                  -----------   
                                                                   11,867,316   
                                                                  -----------   

                 Metals and Mining -- 1.0%                                      

     17,000      Amcol International Corp                             289,000   
     23,700      Asarco Inc                                           728,775   
      1,000      Oregon Metallurgical Corp *                           22,000   
     29,500      Timken Co                                          1,104,406   

             See accompanying notes to the financial statements.             7

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                

                 Metals and Mining -- continued                                 

      4,000      Wesco Financial Corp                               1,100,250   
     20,600      Zeigler Coal Holding Co                              526,588   
                                                                  -----------   
                                                                    3,771,019   
                                                                  -----------   

                 Oil and Gas -- 6.7%                                            

      8,100      Atwood Oceanics Inc *                                734,569   
      9,400      Berry Petroleum, Class A                             172,725   
     27,600      BJ Services Co *                                   1,994,099   
      2,800      Brown Tom Inc *                                       68,600   
      7,800      Cabot Oil & Gas Corp, Class A                        180,863   
     21,500      Devon Energy Corp                                    917,781   
      5,400      El Paso Natural Gas Co                               303,750   
    122,900      Falcon Drilling Co Inc                             3,871,349   
     57,100      Harken Energy Corp *                                 353,306   
     31,800      Helmerich & Payne Inc                              2,245,874   
      8,000      HS Resources Inc *                                   122,000   
     25,800      Louis Dreyfus Natural Gas *                          493,425   
    103,000      Marine Drilling Co Inc *                           2,471,999   
     14,100      Mitchell Energy, Class B                             352,500   
          1      Monterey Resources Inc                                    21   
     25,900      Nabors Industries Inc *                              891,931   
     23,600      National Fuel Natural Gas Co                       1,048,725   
     14,400      Newfield Exploration Co                              369,900   
      2,750      North Carolina Natural Gas                            86,109   
     10,800      Nuevo Energy Co *                                    548,775   
     17,100      Ocean Energy Inc *                                 1,099,744   
      8,200      Oneok Inc                                            265,475   
      6,200      Oryx Energy Co *                                     163,913   
      6,500      Peoples Energy Corp                                  244,969   
     16,286      Pioneer Natural Resources Co *                       650,411   
      2,900      Plains Resource Inc *                                 52,925   
      7,200      Pogo Producing Co                                    312,300   
     12,900      Pooled Funds Energy Services Co *                    403,931   
     23,300      Rowan Cos Inc *                                      696,088   
      7,200      RPC Inc                                              155,700   
     24,200      Santa Fe Energy Resources Inc                        267,713   
      7,300      Seagull Energy Corp *                                178,394   
     27,000      Snyder Oil Corp                                      531,563   
      2,700      Triton Energy Limited *                              103,950   

8             See accompanying notes to the financial statements.               

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                

                 Oil and Gas -- continued                                       

      7,700      Union Texas Petroleum Holdings Inc                   179,506   
     15,500      Unit Corp *                                          208,281   
      3,800      United Meridian Corp *                               148,913   
      9,000      Vintage Petroleum Inc                                386,438   
     28,800      Weatherford Enterra Inc *                          1,326,600   
                                                                   -----------  
                                                                   24,605,115   
                                                                   -----------  

                 Paper and Allied Products -- 1.2%                              

     23,000      Bowater Inc                                        1,177,313   
     17,700      Jefferson Smurfit Corp *                             344,044   
     16,700      Mosinee Paper Corp                                   496,825   
     14,300      Playtex Products Inc *                               140,319   
     13,800      TJ International Inc                                 348,450   
     59,500      US Office Products Co *                            1,948,624   
      2,900      Zurn Industries Inc                                   86,094   
                                                                   -----------  
                                                                    4,541,669   
                                                                   -----------  

                 Pharmaceuticals -- 1.7%                                        

     29,800      Agouron Pharmaceuticals Inc                        1,311,200   
      7,200      Amerisource Health Corp *                            360,450   
      5,400      Dura Pharmaceuticals Inc *                           192,375   
     15,900      General Nutrition Cos Inc *                          441,225   
     14,100      Herbalife International Inc                          333,113   
        100      Jones Medical Industries Inc                           2,975   
     75,700      NBTY Inc *                                         1,684,325   
      7,300      Protein Design Labs Inc *                            260,063   
     13,600      Quintiles Transnational Corp *                     1,060,800   
     18,400      Rexall Sundown Inc *                                 639,400   
                                                                   -----------  
                                                                    6,285,926   
                                                                   -----------  

                 Primary Materials -- 3.5%                                      

     12,500      Carlisle Cos Inc                                     527,344   
     18,000      Centec Construction Products                         515,250   
      5,600      Elcor Corp                                           173,250   
     94,300      EVI Inc                                            4,956,643   
     10,400      Kuhlman Corp                                         295,100   
     10,400      Lone Star Industries                                 552,500   
      8,700      Medusa Corp                                          408,900   
     44,800      Premark International Inc                          1,332,800   
      2,300      Sealed Air Corp *                                    119,313   

             See accompanying notes to the financial statements.             9

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                 Primary Materials -- continued                                  

     41,000      Southdown Inc                                      1,924,437    
     45,700      USG Corp *                                         1,959,387    
                                                                   -----------   
                                                                   12,764,924    
                                                                   -----------   

                 Primary Processing -- 1.4%                                      

      3,200      Bethlehem Steel Corp *                                38,400    
      7,700      Birmingham Steel Corp                                144,375    
     66,400      Inland Steel Industries Inc                        1,398,550    
     30,600      Lone Star Technologies Inc *                       1,248,863    
     26,000      LTV Corp                                             338,000    
     29,700      National Steel Corp, Class B *                       558,731    
     13,000      Oregon Steel Mills Inc                               350,188    
     14,500      Precision Castparts Corp                             937,063    
      2,500      Quanex Corp                                           90,781    
                                                                   -----------   
                                                                    5,104,951    
                                                                   -----------   

                 Printing and Publishing -- 2.3%                                 

     39,600      Central Newspapers, Class A                        2,695,274    
        800      Harland (JH) Co                                       15,850    
     10,700      Hollinger International Inc                          137,763    
     88,200      K-III Communications Corp *                        1,074,938    
     38,375      McClatchy Newspapers Inc                           1,156,047    
      8,600      Playboy Enterprises Inc, Class B *                   108,575    
      8,600      Pulitzer Publishing Co                               452,038    
     81,800      Valassis Communications Inc *                      2,484,674    
      8,000      World Color Press Inc *                              239,000    
                                                                   -----------   
                                                                    8,364,159    
                                                                   -----------   

                 Real Estate -- 0.8%                                             

     15,250      CN Fairfield Communities Inc                         545,188    
     32,200      PEC Isreal Economic Corp *                           666,138    
     35,400      Penn Virginia Corp                                   973,500    
      7,500      Security Capital Corp                                776,250    
                                                                   -----------   
                                                                    2,961,076    
                                                                   -----------   

                 Retail Trade -- 7.8%                                            

     26,000      AnnTaylor Stores Corp *                              445,250    
      9,700      Apogee Enterprises Inc                               212,188    
      2,000      Arbor Drugs Inc                                       47,750    
     68,000      Borders Group Inc                                  1,619,250    
     43,200      Burlington Coat Factory Warehouse *                  993,600    

See accompanying notes to the financial statements. 

10                                                                              

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                       Value ($)     
---------------------------------------------------------------------------------
                                                                                 
                 Retail Trade -- continued                                       

     30,500      Cash American Investments Inc                        327,875    
     25,700      CKE Restaurants Inc                                  828,825    
      4,600      CompUSA Inc                                          142,313    
     26,450      Dollar Tree Stores Inc                             1,028,244    
    123,500      Dress Barn Inc *                                   2,531,749    
     34,500      Ethan Allen Interiors Inc                          2,535,749    
     45,350      Family Dollar Stores Inc                             963,688    
     10,800      Finish Line Inc                                      151,200    
     38,500      Foodmaker Inc *                                      755,563    
      9,400      Genovese Drug Stores Inc, Class A                    164,500    
     57,800      Goodys Family Clothing Inc *                       1,972,424    
     23,800      Just For Feet Inc                                    312,375    
     48,100      Lands End Inc *                                    1,265,631    
      8,000      Macfrugals Bargains Close Outs Inc *                 218,000    
     35,600      Meyer Fred Inc *                                   1,851,199    
     13,400      Microage Inc *                                       364,313    
      7,200      Neiman Marcus Group Inc *                            222,300    
     11,200      NPC International Inc *                              127,400    
     54,700      Pier 1 Imports Inc                                   929,900    
      3,500      Proffitts Inc *                                      187,906    
    101,700      Ross Stores Inc                                    2,987,437    
     11,300      Ruddick Corp                                         169,500    
     27,700      Shopko Stores Inc *                                  761,750    
     19,300      Stein Mart Inc *                                     540,400    
     42,600      Stride Rite Corp                                     505,875    
     90,600      Valhi Inc                                            792,750    
      2,000      Wet Seal Inc *                                        43,500    
     53,600      Williams-Sonoma Inc *                              2,398,599    
      3,400      Zale Corp *                                           73,100    
                                                                --------------   
                                                                   28,472,103    
                                                                --------------   

                 Services -- 5.9%                                                

    107,600      Accustaff Inc *                                    2,858,124    
     13,900      Apac Teleservices Inc *                              229,350    
     24,100      Apollo Group Inc *                                   860,069    
     20,400      Avid Technology Inc *                                673,200    
     11,300      Bowne and Co Inc                                     326,994    
     11,400      CDI Corp *                                           401,850    
     15,200      Central Parking Corp                                 695,400    

              See accompanying notes to the financial statements.             11

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares      Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Services -- continued                                          

    170,700      Corestaff Inc                                      5,078,324   
     33,700      Doubletree Corp *                                  1,685,000   
     19,300      Extended Stay America Inc *                          258,138   
     22,400      Handleman Co *                                       133,000   
     14,500      Hollywood Entertainment Corp *                       237,438   
      8,200      Hollywood Park District Inc *                        143,500   
     55,800      Mcgrath Rentcorp                                   1,283,400   
      3,400      Meredith Corp                                        102,000   
    133,700      Metromedia International Group Inc *               1,587,688   
     24,400      Morningstar Group Inc *                              728,950   
     22,200      Norrell Corp                                         717,338   
     36,000      Promus Hotel Corp *                                1,397,250   
     21,700      Rykoff Sexton Inc                                    547,925   
      3,450      Technology Solutions Co                               80,213   
     20,250      Volt Information Sciences Inc                      1,130,203   
     14,350      Wolverine World Wide                                 317,494   
                                                                   -----------  
                                                                   21,472,848   
                                                                   -----------  
                 Technology -- 8.2%                                             

     10,900      ABR Information Services Inc                         292,938   
     10,200      Affiliated Computer Services                         267,750   
     23,800      Autodesk Inc                                       1,041,250   
     21,800      Avanti Corporation *                                 633,563   
     10,300      BGS Systems Inc                                      283,250   
     54,200      Citrix Systems Inc *                               2,737,099   
     23,800      Cognex Corp *                                        910,350   
     14,400      Credence Systems Corp *                              677,700   
     23,500      CSG Systems International Inc *                      649,188   
     32,500      Data General Corp *                                1,167,969   
      2,900      Electronics For Imaging Inc                          155,150   
      6,600      Envoy Corporation *                                  178,200   
      4,200      Genrad Inc *                                         111,300   
     14,300      HNC Software Inc *                                   520,163   
     22,000      Hyperion Software Corp *                             633,875   
      6,300      Inso Corporation *                                    87,413   
     26,100      Keane Inc                                          1,533,375   
     13,700      KLA Instruments Corp *                               970,988   
      3,100      Mcafee Associates Inc                                175,538   
     17,000      National Instruments Corp *                          701,250   

12            See accompanying notes to the financial statements.               

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares       Description                                        Value ($)    
---------------------------------------------------------------------------------
                                                                                 
                 Technology -- continued                                         
      7,600      Network Appliance Inc *                              359,100    
     12,800      Platinum Software Corp *                             139,200    
     16,100      Psinet Inc *                                         131,819    
     52,800      Remedy Corp                                        2,036,099    
     60,800      Symantec *                                         1,463,000    
     11,700      Systems & Computer Technology Corp *                 412,425    
    223,800      Tandem Computers Inc *                             7,609,199    
      8,500      Uniphase Corp *                                      580,125    
     23,000      Vantive Corp                                         701,500    
     13,100      Viasoft Inc                                          709,038    
     67,300      Visio Corp                                         2,321,849    
                                                                  -----------    
                                                                   30,191,663    
                                                                  -----------    

                 Telecommunications -- 0.8%                                      
     46,300      Mastec Inc                                         2,161,630    
     18,000      Premiere Technologies Inc *                          559,125    
      6,100      Telemundo Group Inc *                                203,588    
                                                                  -----------    
                                                                    2,924,343    
                                                                  -----------    

                 Textiles -- 0.5%                                                
      8,750      Guilford Mills                                       190,313    
     20,000      Interface Flooring Systems Inc                       560,000    
     24,000      Westpoint Stevens Inc *                              960,000    
                                                                  -----------    
                                                                    1,710,313    
                                                                  -----------    

                 Tobacco -- 0.1%                                                 
      4,200      Culbro Corp                                          404,513    
                                                                  -----------    

                 Transportation -- 2.7%                                          
     28,100      Airborne Freight Corp                              1,383,925    
      4,200      Alexander & Baldwin Inc                              113,400    
     34,900      CNF Transportation Inc                             1,260,763    
     23,400      Expeditors International Washington Inc              857,025    
     53,800      Navistar International Corp *                      1,334,913    
     14,800      Offshore Logistics Inc *                             270,100    
     11,300      Swift Transportation Co *                            330,525    
      6,100      US Freightways Corp                                  183,000    
     49,400      USAir Group Inc *                                  1,685,775    
     76,100      Yellow Corp *                                      2,387,637    
                                                                  -----------    
                                                                    9,807,063    
                                                                  -----------    

            See accompanying notes to the financial statements.           13

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


   Par Value ($)/                                                                    
    Shares           Description                                        Value ($)    
-------------------------------------------------------------------------------------
                                                                                     
                     Utilities -- 1.1%                                               
     24,000          Aquila Natural Gas Pipeline Corp                      250,500   
     32,500          Calenergy Inc *                                     1,076,563   
     77,400          Centerior Energy Corp                                 870,750   
      5,000          Energen Corp                                          180,313   
        990          Houston Industries Inc                                 20,038   
      8,300          Kinder Morgan Energy Partners                         551,431   
      7,500          Public Services Co of New Mexico                      136,875   
      2,900          TNP Enterprises Inc                                    67,969   
        500          Tucson Electric Power Co *                              7,969   
     12,600          UGI Corp                                              329,175   
     21,200          Western Gas Resources Inc                             402,800   
                                                                       -----------   
                                                                         3,894,383   
                                                                       -----------   
                     TOTAL COMMON STOCKS  (COST  $309,778,295)         345,777,795   
                                                                       -----------   

                     SHORT-TERM INVESTMENTS -- 21.2%                                 

                     Cash Equivalents -- 12.7%                                       
$15,570,049          BankBoston Eurodollar Time Deposit, 5.7875%                     
                     due 9/2/97/(a)/                                    15,570,049   
   $974,809          First Union National Bank of North Carolina                     
                     Eurodollar Time Deposit, 5.5625% due                            
                     9/2/97/(a)/                                           974,809   
 $2,924,426          Harris Bank and Trust Eurodollar Time Deposit,                  
                     5.625% due 9/2/97/(a)/                              2,924,426   
 15,258,785          Merrimac Cash Fund Premium Class/(a)/              15,258,785   
$12,000,000          Prudential Securities Group Inc Master Note,                    
                     5.8875% due 9/2/97/(a)/                            12,000,000   
                                                                       -----------   
                                                                        46,728,069   
                                                                       -----------   

                     U.S. Government -- 0.3%                                         
 $1,000,000          U.S. Treasury Bill, 5.22% due 11/28/97/(b)/           987,698   
                                                                       -----------   

                     Repurchase Agreements -- 8.2%                                   
$18,443,595          Salomon Brothers Repurchase Agreement, dated                    
                     8/29/97, due 9/2/97, with a maturity value of                   
                     $18,453,944 and an effective yield of 5.05%,                    
                     collateralized by U.S. Treasury Obligations                     
                     with rates ranging from 5.00% to 6.75%, with                    
                     maturity dates ranging from 2/15/99 to 8/15/26                  
                     and with an aggregate market value of                           
                     $18,866,230.                                       18,443,595   
$11,589,463          Prudential Securities, Inc. Repurchase                          
                     Agreement, dated 8/29/97, due 9/2/97, with a                    
                     maturity value of $11,595,889  and an                           
                     effective yield of 4.99%, collateralized by a                   
                     U.S. Government Agency Obligation with a rate                   
                     of 6.072%, with a maturity date of 3/1/35 and                   
                     a market value of $11,821,292.                     11,589,463   
                                                                       -----------   
                                                                        30,033,050   
                                                                       -----------   

14              See accompanying notes to the financial statements.             

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


                                                                    Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 TOTAL SHORT-TERM INVESTMENTS                                   
                 (COST $77,748,327)                                 77,748,825  
                                                                  ------------  

                 TOTAL INVESTMENTS -- 115.6%                                    
                 (COST $387,526,622)                               423,526,620  

                 Other Assets and Liabilities (net) -- (15.6)%     (57,276,924) 
                                                                  ------------  

                 TOTAL NET ASSETS -- 100%                         $366,249,696  
                                                                  ============  

                 Notes to the Schedule of Investments:                          

                *     Non-income producing security.                            
                /(a)/ Represents investments of security lending collateral     
                      (Note 1).                                                 
                /(b)/ Security has been segregated to cover margin requirements 
                      on open financial futures contracts.                      

              See accompanying notes to the financial statements.             15

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]

                                                                                
Assets:                                                                         
   Investments, at value (cost $387,526,622) (Note 1)              $ 423,526,620
   Receivable for investments sold                                    10,488,967
   Dividends and interest receivable                                     191,195
   Receivable for variation margin on open futures contracts                    
     (Notes 1 and 6)                                                      98,731
   Receivable for expenses waived or borne by Manager (Note 2)            94,040
   Miscellaneous receivable                                               15,374
                                                                     -----------

      Total assets                                                   434,414,927
                                                                    ------------

Liabilities:                                                                    
   Payable for investments purchased                                  18,141,921
   Payable upon return of securities loaned (Note 1)                  46,728,069
   Payable for Fund shares repurchased                                 3,082,179
   Payable to affiliate for (Note 2):                                           
     Management fee                                                      138,292
     Shareholder service fee                                              41,371
   Accrued expenses                                                       33,399
                                                                    ------------

      Total liabilities                                               68,165,231
                                                                    ------------

Net assets                                                          $366,249,696
                                                                    ============

Net assets consist of:                                                          
   Paid-in-capital                                                  $315,535,749
   Accumulated undistributed net investment income                       458,604
   Accumulated undistributed net realized gain                        14,007,266
   Net unrealized appreciation                                        36,248,077
                                                                    ============
                                                                    $366,249,696
                                                                    ============

Net assets attributable to:                                                     
   Class III shares                                                 $366,249,696
                                                                    ============

Shares outstanding:                                                             
   Class III                                                          29,305,824
                                                                    ============

Net asset value per share:                                                      
   Class III                                                        $      12.50
                                                                    ============

16            See accompanying notes to the financial statements.               

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]


                                                                               
Investment Income:                                                             
   Dividends                                                         $ 654,635 
   Interest (including securities lending income of $70,669)           604,399 
                                                                   ------------

      Total income                                                   1,259,034 
                                                                   ------------

Expenses:                                                                      
   Management fee (Note 2)                                             546,060 
   Registration fees                                                    38,202 
   Custodian and transfer agent fees                                    25,978 
   Audit fees                                                           21,953 
   Legal fees                                                            3,771 
   Trustees fees (Note 2)                                                  902 
   Miscellaneous                                                           434 
   Fees waived or borne by Manager (Note 2)                           (278,389)
                                                                   ------------
                                                                       358,911 
   Shareholder service fee (Note 2)                                            
      Class III                                                        163,702 
                                                                   ------------
      Net expenses                                                     522,613 
                                                                   ------------

        Net investment income                                          736,421 
                                                                   ------------

Realized and unrealized gain (loss):                                           
   Net realized gain (loss) on:                                                
      Investments                                                   13,096,265 
      Closed futures contracts                                         892,587 
                                                                   ------------

        Net realized gain                                           13,988,852 
                                                                   ------------

   Change in net unrealized appreciation (depreciation) on:                    
      Investments                                                   39,118,653 
      Open futures contracts                                           531,434 
                                                                   ------------

        Net unrealized gain                                         39,650,087 
                                                                   ------------

      Net realized and unrealized gain                              53,638,939 
                                                                   ------------

Net increase in net assets resulting from operations               $54,375,360 
                                                                   ============


             See accompanying notes to the financial statements.            17

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                 Period from   
                                                                              December 31, 1996
                                                           Six Months Ended   (commencement of 
                                                           August 31, 1997     operations) to  
                                                             (Unaudited)      February 28, 1997
                                                           ----------------  ------------------
                                                                                               
Increase (decrease) in net assets:                                                             
Operations:                                                                                    
   Net investment income                                    $    736,421      $    173,151     
   Net realized gain                                          13,988,852            18,414     
   Change in net unrealized appreciation (depreciation)       39,650,087        (3,402,010)    
                                                            ------------      ------------     
   Net increase (decrease) in net assets resulting from                                        
      operations                                              54,375,360        (3,210,445)    
                                                            ------------      ------------     

Distributions to shareholders from:                                                            
   Net investment income                                                                       
       Class III                                                (450,968)               --     
                                                            ------------      ------------     
       Total distributions from net investment income           (450,968)               --     
                                                            ------------      ------------     
   Net share transactions: (Note 5)                                                            
       Class III                                             152,427,203       163,108,546     
                                                            ------------      ------------     
   Increase in net assets resulting from net share                                             
      transactions                                           152,427,203       163,108,546     
                                                            ------------      ------------     

      Total increase in net assets                           206,351,595       159,898,101     

Net assets:                                                                                    
   Beginning of period                                       159,898,101                --     
                                                            ------------      ------------     

   End of period (including accumulated undistributed net                                      
      investment income of $458,604 and $173,151,                                              
      respectively)                                         $366,249,696      $159,898,101     
                                                            ============      ============     

18            See accompanying notes to the financial statements.               

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                      Six Months Ended  Period from December 31, 1996
                                                      August 31, 1997   (commencement of operations) 
                                                        (Unaudited)         to February 28, 1997     
                                                      ----------------  -----------------------------
                                                                                                     
Net asset value, beginning of period                     $   9.82               $  10.00             
                                                         --------               --------             

Income from investment operations:                                                                   
   Net investment income                                     0.03                   0.01             
   Net realized and unrealized gain (loss)                   2.68                  (0.19)            
                                                         --------               --------             

      Total from investment operations                       2.71                  (0.18)            
                                                         --------               --------             

Less distributions to shareholders:                                                                  
   From net investment income                               (0.03)                    --             
                                                         --------               --------             

      Total distributions                                   (0.03)                    --             
                                                         --------               --------             
Net asset value, end of period                           $  12.50               $   9.82             
                                                         ========               ========             

Total Return/(a)/                                           27.63%                 (1.80)%           

Ratios/Supplemental Data:                                                                            
   Net assets, end of period (000's)                     $366,250               $159,898             
   Net expenses to average daily net assets                  0.48%*                 0.48%*           
   Net investment income to average daily net assets         0.67%*                 0.70%*           
   Portfolio turnover rate                                     81%                    13%            
   Average broker commission rate per equity share       $ 0.0264               $ 0.0344             
   Fees and expenses voluntarily waived or                                                           
      borne by the Manager consisted of the                                                          
      following per share amounts:                        $  0.01               $   0.01             

/(a)/Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
*  Annualized.                                                              

              See accompanying notes to the financial statements.             19

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Notes to the Financial Statements (Unaudited)                                   
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

GMO Small Cap Growth Fund (the "Fund"), which commenced operations on 
December 31, 1996, 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 into classes.                                   

    The Fund seeks long-term growth of capital through investment primarily in
    companies whose equity capitalization ranks in the lower two-thirds of the
     1,800 companies with the largest equity capitalization whose securities are
listed on a United States national securities exchange.               

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class III was the
only active class of shares of the Fund.                              

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     
The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S. government  
obligations in accordance with the initial margin requirements of the 
broker or exchange.                                                   

20                                                                              

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Notes to the Financial Statements (Unaudited)-(Continued)                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    Futures contracts are marked to market daily and an appropriate payable or
    receivable for the change in value ("variation margin") is recorded by the
 Fund. The payable or receivable is liquidated on the following business
   day. Gains or losses are recognized but not considered realized until the
contracts expire or are closed. Futures contracts involve, to varying 
  degrees, risk of loss in excess of the variation margin disclosed in the
   Statement of Assets and Liabilities. Losses may arise from changes in the
value of the underlying instrument, if there is an illiquid secondary 
 market for the contracts, or if counterparties do not perform under the
contract terms. Futures contracts are valued at the settlement price  
  established each day by the board of trade or exchange on which they are
 traded. See Note 6 for all open futures contracts held as of August 31,
1997.                                                                 

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $44,946,561, collateralized by
cash in the amount of $46,728,069, which was invested in short-term   
instruments.                                                          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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            

                                                                          21

N-30D 523rd Page of 667 TOC 1st Previous Next ↓Bottom Just 523rd
GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Notes to the Financial Statements (Unaudited)-(Continued)                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

  shares of the Fund, at net asset value, unless the shareholder elects to
   receive cash distributions. The Fund declares separate dividends from net
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
     The premium on cash purchases and fee on redemptions of Fund shares is .50%
  of the amount invested or redeemed. All purchase premiums and redemption
   fees are paid to and recorded as paid-in capital by the Fund. For the six
months ended August 31, 1997, the Fund received $754,834 in purchase  
     premiums and $47,596 in redemption fees. There is no premium for reinvested
distributions or in-kind transactions.                                

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .50% of 
    average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting, and other support. Pursuant to the    
    Shareholder Services Plan, the shareholder service fee is calculated based
  on the average daily net assets of each class at the annual rate of .28%
for Class I shares, .22% for Class II shares, and .15% for Class III  
shares.                                                               

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions,                   

22                                                                              

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Notes to the Financial Statements (Unaudited)-(Continued)                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

 certain other transaction costs (including transfer taxes), shareholder
   service fees and extraordinary expenses) exceed .33% of average daily net
assets.                                                               

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $902. 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 six months ended August 31, 1997,     
aggregated $316,731,770 and $167,553,743, respectively.               

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]


                     Gross Unrealized    Gross Unrealized       Net Unrealized    
 Aggregate Cost        Appreciation        Depreciation          Appreciation     
------------------  -------------------  ------------------  ---------------------
                                                                                  
  $ 388,172,008        $ 39,453,019         $ 4,098,407          $ 35,354,612     


4.   Principal shareholder                                                      

    At August 31, 1997, 22% of the outstanding shares of the Fund were held by
one shareholder.                                                      

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:                                               

                                                        [Enlarge/Download Table]


                                                                            Period from            
                                                                         December 31, 1996         
                                       Six Months Ended             (commencement of operations)   
Class III:                              August 31, 1997                 to February 28, 1997       
                               ----------------------------------  ------------------------------- 
                                   Shares             Amount          Shares            Amount     
                               ---------------    ---------------  --------------   ---------------
                                                                                                   
Shares sold                      13,854,939      $  162,453,671       16,278,745   $   163,108,546 
Shares issued to shareholders                                                                      
   in reinvestment of                                                                              
   distributions                     22,568             223,251         --               --        
Shares repurchased                 (850,428)        (10,249,719)        --               --        
                               ===============    ===============  ==============   ===============
Net increase                     13,027,079     $   152,427,203       16,278,745   $   163,108,546 
                               ===============    ===============  ==============   ===============

                                                                              23

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GMO Small Cap Growth Fund                                                       
(A Series of GMO Trust)                                                         

Notes to the Financial Statements (Unaudited)-(Continued)                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Long futures contracts                                                

                                                        [Enlarge/Download Table]


 Number of                                                                 Net Unrealized   
 Contracts         Type          Expiration Date       Contract Value       Appreciation    
------------  ---------------  --------------------  ------------------  -------------------
                                                                                            
    70         Russell 2000      September 1997         $  14,843,500    $      248,079     
                                                                         ===================

     At August 31, 1997, the Fund had sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                  

7.   Federal Tax Information                                                    

     For the tax year ended August 31, 1997, all of the Fund's distributions are
from investment company taxable income.                               

24                                                                              

N-30D 526th Page of 667 TOC 1st Previous Next ↓Bottom Just 526th
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

N-30D 527th Page of 667 TOC 1st Previous Next ↓Bottom Just 527th
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                            Value ($)    
----------------------------------------------------------------------------------------
                                                                                        
                    COMMON STOCKS -- 93.6%                                              

                    Advertising -- 0.1%                                                 
         1,700      Grey Advertising Inc                                     527,000    
                                                                       --------------   

                    Aerospace -- 1.3%                                                   
         6,100      Curtiss Wright Corp                                      445,300    
        25,600      Gencorp Inc                                              684,800    
        95,800      Kaman Corp, Class A                                    1,604,650    
        12,198      Northrop Grumman Corp                                  1,427,928    
        18,900      Teleflex Inc                                             598,894    
        60,000      Thiokol Corp                                           4,777,499    
                                                                       --------------   
                                                                           9,539,071    
                                                                       --------------   

                    Automotive -- 1.7%                                                  
        17,900      Bandag Inc                                               954,294    
        34,300      Borg Warner Automotive Inc                             1,787,888    
        25,600      Breed Technologies Inc                                   544,000    
        37,500      Caliber Systems Inc                                    1,565,625    
        36,700      Cooper Tire & Rubber Co                                  922,088    
         7,000      Lear Corp *                                              320,688    
        13,800      Mascotech Industries Inc                                 288,938    
        60,400      Modine Manufacturing Co                                1,849,750    
        17,900      Paccar Inc                                               848,013    
        48,800      Smith (AO) Corp, Class B                               1,720,200    
         6,300      SPX Corp                                                 366,188    
        24,500      Superior Industries International Inc                    667,625    
        36,800      Wabash National Corp                                   1,081,000    
                                                                       --------------   
                                                                          12,916,297    
                                                                       --------------   

                    Banking and Financial Services -- 11.4%                             
        22,800      Advanta Corp, Class A                                    755,250    
        13,000      Albank Financial Corp                                    500,500    
        40,750      Alex Brown Inc                                         3,451,015    
        34,000      Astoria Financial Corp                                 1,636,250    
        29,000      Baldwin and Lyons Inc, Class B                           561,875    
         3,500      BOK Financial Corporation                                129,500    
        11,500      CCB Financial Corp                                       930,063    
        61,100      Central Fidelity Banks Inc                             2,390,537    
         3,100      Charter One Financial Inc                                168,563    
        19,100      Citizens Banking Corp Michigan                           754,450    
       129,750      Comdisco Inc                                           3,527,577    
        65,800      Commerce Bancshares Inc                                3,544,974    

            See accompanying notes to the financial statements.                1

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                     Value ($)     
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Banking and Financial Services -- continued                                   
        46,950      Compass Bancshares Inc                                           1,672,594    
        13,400      Corus Bancshares Inc                                               475,700    
        22,100      Deposit Guaranty Corp                                              708,581    
        45,400      Dime Bancorp Inc                                                   876,788    
        24,535      Downey Financial Corp                                              542,837    
        28,800      Eaton Vance Corp                                                   824,400    
        74,500      Edwards (AG) Inc                                                 2,961,374    
        28,500      Financial Security Assurance Holdings Ltd                        1,184,531    
         3,800      Finova Group Inc                                                   321,338    
        13,600      First Citizens Bancshares, Class A                               1,217,200    
        13,900      First Commerce Corp                                                741,913    
         3,800      First Empire State Corp                                          1,388,900    
        12,400      First Federal Financial Corp *                                     418,500    
        25,775      First Finance Corp                                                 831,244    
        45,000      First Hawaiian Inc                                               1,659,375    
         8,125      First Midwest Bancorp Inc                                          284,375    
         9,150      First Security Corp                                                258,488    
        35,300      First Virginia Banks Inc                                         2,404,812    
         7,700      Firstbank of Illinois Co                                           333,025    
        16,000      Firstbank Puerto Rico                                              451,000    
        18,680      Fulton Financial Corp                                              513,700    
         7,200      Greenpoint Financial Corp                                          443,250    
        20,900      Interra Financial Inc                                              909,150    
        13,300      Jefferies Group Inc                                                904,400    
         6,600      JSB Financial                                                      299,475    
         5,400      Legg Mason Inc                                                     333,450    
        34,200      Leucadia National Corp                                           1,090,125    
        35,400      Liberty Financial Cos                                            1,754,513    
        10,100      Long Island Bancorp Inc                                            402,738    
        83,600      Mercantile Bankshares                                            2,351,277    
        21,850      Morgan Keegan Inc                                                  558,541    
         9,300      National Bancorp of Alaska Inc                                     818,400    
        46,800      North American Mortgage Co                                       1,210,950    
        12,075      Old Kent Financial Corp                                            739,594    
        22,400      Onbancorp Inc                                                    1,164,800    
        14,400      One Valley Bancorp Inc                                             618,300    
        47,900      Pacific Century Financial Corp                                   2,362,068    
        27,550      Peoples Bank Bridgeport                                            773,122    
        36,500      Piper Jaffray Inc                                                  825,813    
        14,900      PMI Group Inc                                                      861,406    
        71,600      Popular Inc                                                      3,096,699    

2             See accompanying notes to the financial statements.               

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                              Value ($)    
------------------------------------------------------------------------------------------
                                                                                          
                    Banking and Financial Services -- continued                           
        13,400      Provident Financial Group                                  634,825    
        64,703      Quick And Reilly Group                                   2,216,078    
        50,750      Raymond James Financial Corp                             1,471,750    
         9,000      RCSB Financial Inc                                         439,875    
        23,900      Riggs National Corp                                        501,900    
        34,700      Rowe (T) Price & Associates Inc                          1,908,500    
        82,700      Ryland Group Inc                                         1,380,056    
        15,000      SEI Investments Co                                         435,000    
        45,200      Signet Banking Corp                                      2,341,924    
        67,680      Sovereign Bancorp Inc                                    1,049,040    
        25,562      St. Paul Bancorp Inc                                       591,121    
        15,500      Student Loan Group                                         635,500    
         7,945      Summit Bancorp                                             471,734    
             1      Toronto Dominion Bank Ontario                                   10    
        26,100      Trustmark Corp                                             751,189    
        19,700      UMB Financial Corp                                         886,500    
        23,200      Union Planters Corp                                      1,189,000    
        15,200      Unionbancal Corp                                         1,175,150    
        12,700      United Asset Management Corp                               340,519    
        33,500      United Cos Financial Corp                                  954,750    
         6,800      US Trust Corp                                              357,000    
        11,000      Value Line Inc                                             401,500    
        45,165      Washington Federal Inc                                   1,230,746    
         8,400      Washington Mutual Inc                                      502,950    
        61,800      Wilmington Trust Corp                                    3,113,174    
                                                                         --------------   
                                                                            84,919,091    
                                                                         --------------   
                    Chemicals -- 1.0%                                                     
        25,500      Albemarle Corp                                             626,344    
        18,100      Cabot Corporation                                          495,488    
         8,700      Crompton & Knowles Corp                                    219,675    
        15,500      Cytec Industries Inc *                                     756,594    
         9,900      Ferro Corp                                                 372,488    
         8,300      Fuller (HB) Co                                             458,056    
        16,600      Geon Co                                                    329,925    
        20,700      Hanna (MA) Co                                              535,613    
        42,900      Kaiser Aluminum Corp *                                     603,281    
        27,500      Mississippi Chemical Corp                                  596,406    
        14,200      Olin Corp                                                  631,900    
             1      Potash Corp of Saskatchewan                                     74    
        33,100      Stepan Co                                                  779,919    

             See accompanying notes to the financial statements.               3

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Chemicals -- continued                                                        
        64,000      Wellman Inc                                                      1,456,000    
                                                                                 --------------   
                                                                                     7,861,763    
                                                                                 --------------   

                    Communications -- 0.0%                                                        
        13,800      DSC Communications Corp *                                          401,925    
                                                                                 --------------   

                    Computer and Office Equipment -- 2.8%                                         
        77,600      Amdahl Corp *                                                      955,450    
        19,500      Banctec Inc *                                                      482,625    
         9,900      Everex Systems Inc/(a)/ *                                               --    
        53,600      Exabyte Corp *                                                     629,800    
        45,900      Intergraph Corp *                                                  456,131    
        98,700      Lexmark International Group Inc *                                3,454,499    
       153,400      Quantum Corp                                                     5,378,587    
        61,700      Sequent Computer Inc *                                           1,739,169    
        30,500      Sterling Software Inc                                            1,046,531    
        53,600      Stratus Computer Inc *                                           2,974,799    
        87,200      Unisys Corp *                                                      986,450    
        41,800      Western Digital Corp                                             2,011,625    
        19,100      Zebra Technologies Corp *                                          561,063    
                                                                                 --------------   
                                                                                    20,676,729    
                                                                                 --------------   
                    Construction -- 1.9%                                                          
        34,200      Bridge & Toll Road Brothers Inc *                                  735,300    
        41,300      Centex Corp                                                      2,245,688    
        11,400      Eagle Hardware & Garden Inc *                                      250,088    
        17,700      Foster Wheeler Corp                                                808,669    
        29,900      Granite Construction Inc                                           627,900    
        44,700      Horton (DR) Inc                                                    704,025    
       116,300      Kaufman & Broad Home Corp                                        2,325,999    
        49,800      McDermott International Inc                                      1,606,050    
        64,100      MEMC Electronic Materials *                                      1,858,900    
        33,600      Pulte Corp                                                       1,230,600    
       137,300      Standard Pacific Corp                                            1,501,719    
        19,800      Texas Industries Inc                                               659,588    
                                                                                 --------------   
                                                                                    14,554,526    
                                                                                 --------------   
                    Consumer Goods -- 3.8%                                                        
        13,900      Alberto Culver Co, Class B                                         405,706    
        17,700      Bassett Furniture Industries Inc                                   486,750    

4             See accompanying notes to the financial statements.               

N-30D 531st Page of 667 TOC 1st Previous Next ↓Bottom Just 531st
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                             Value ($)      
-------------------------------------------------------------------------------------------
                                                                                           
                    Consumer Goods -- continued                                            
        16,200      Block Drug Co Inc, Class A                                  769,500    
        81,200      Burlington Industries Inc *                                 979,475    
        10,100      Callaway Golf Co                                            340,244    
        29,700      Coleman Co Inc *                                            469,631    
        46,400      Compucom Systems Inc *                                      466,900    
        22,500      Department 56 Inc *                                         614,531    
        48,600      Fastenal Co                                               2,800,574    
        21,500      First Brands Corp                                           536,156    
        53,100      Furniture Brands International Inc *                        935,888    
        22,800      Jones Apparel Group Inc                                   1,144,275    
        91,300      Justin Industries                                         1,335,263    
        21,600      Kimball International, Class B                              972,000    
       139,000      Kinetic Concepts Inc                                      2,554,124    
        25,700      La-z-boy Chair Co                                           909,138    
        31,310      Lancaster Colony Corp                                     1,622,249    
             1      Mattel Co                                                         3    
        77,000      Moore Corp Ltd                                            1,525,563    
         7,800      National Service Industries                                 345,150    
        20,600      Nine West Group Inc *                                       870,350    
        31,300      Oneida LTD                                                  991,819    
        38,400      Osh Kosh B Gosh, Class A                                    974,400    
        10,100      Patterson Dental Company *                                  357,288    
         6,100      Pittston Brinks Group                                       216,550    
        33,600      Russell Corp                                                957,600    
        24,000      Safety Kleen                                                484,500    
         5,100      Sunbeam Corp                                                224,400    
        16,800      Technology Data Corp *                                      654,150    
       117,900      Terra Industries Inc                                      1,576,913    
         5,800      Timberland Co *                                             383,163    
        18,000      Unifi Inc                                                   690,750    
        14,900      US Industries Inc *                                         566,200    
                                                                          --------------   
                                                                             28,161,203    
                                                                          --------------   

                    Electronic Equipment -- 4.6%                                           
         5,700      Altera Corp                                                 303,525    
       107,000      American Power Conversion Corp *                          2,808,749    
         8,900      Burr - Brown Corp                                           315,950    
         5,400      CTS Corp                                                    437,400    
        71,600      Cypress Semiconductor Corp *                              1,270,900    
        47,300      Dallas Semiconductor Corp                                 1,812,181    

             See accompanying notes to the financial statements.               5

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Electronic Equipment -- continued                                             
        22,000      Federal Signal Corp                                                572,000    
         7,800      Franklin Electric Inc                                              479,700    
        16,700      Harman International Industries                                    747,325    
        13,900      Hutchinson Technology Inc                                          458,700    
        86,800      Integrated Device Technology Inc *                               1,182,650    
        32,500      Jabil Circuit Inc                                                1,925,625    
        13,500      Kemet Corp *                                                       393,188    
        39,100      Komag Inc *                                                        686,694    
         9,900      Lattice Semiconductor Corp *                                       630,506    
        17,800      Magnetek Inc *                                                     374,913    
        60,000      Marshall Industries *                                            2,381,249    
         6,400      Maxim Integrated Products Inc *                                    442,400    
        26,900      Methode Electronics, Class A                                       638,875    
        74,200      Oak Technology Inc *                                               806,925    
        25,500      Octel Communications Corp *                                        774,563    
        76,600      Pioneer Standard Electronics Inc                                 1,149,000    
         8,000      Pittway Corp, Class A                                              482,500    
        49,500      Read Rite Corp *                                                 1,420,031    
        69,400      SCI Systems Inc                                                  2,728,287    
        24,700      Sensormatic Electronics Corp                                       322,644    
        71,400      Silicon Valley Group Inc *                                       2,409,749    
        48,600      Stewart & Stevenson Services Corp                                1,184,625    
        19,900      Tech Corp *                                                        660,431    
         9,501      Thomas & Betts Corp                                                532,054    
        47,705      Vishay Intertechnology Inc                                       1,273,127    
        27,300      VLSI Technology *                                                  900,900    
        26,400      Watkins Johnson                                                    907,500    
        53,500      Zilog Inc *                                                      1,310,750    
                                                                                 --------------   
                                                                                    34,725,616    
                                                                                 --------------   
                    Food and Beverage -- 3.2%                                                     
        46,300      Bob Evans Farms Inc                                                821,825    
        63,500      Chiquita Brands International Inc                                  904,875    
        43,500      Coors (Adolph) Co                                                1,604,063    
       328,600      Darden Restaurants Inc                                           3,306,537    
        25,900      Dean Foods Co                                                    1,149,313    
         5,900      Farmer Brothers Co                                                 873,200    
        15,900      Flowers Industries Inc                                             294,150    
        45,700      Great Atlantic & Pacific Tea Co                                  1,145,356    
        17,500      Hormel (Geo A) and Co                                              520,625    

6              See accompanying notes to the financial statements.              

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Food and Beverage -- continued                                                
        41,400      Hudson Foods Inc                                                   672,750    
        40,900      International Multifoods Corp                                    1,099,188    
        46,900      Interstate Bakeries Corp                                         2,749,512    
        35,700      Luby's Cafeterias Inc                                              702,844    
        60,000      Michael Foods Inc                                                1,297,500    
        27,600      Pilgrims Pride Corp                                                324,300    
        12,600      Quality Food Centers Inc *                                         518,175    
        84,600      Ryans Family Steak House *                                         782,550    
         1,600      Seaboard Corp                                                      463,200    
        13,565      Smith Food and Drug Center, Class B *                              742,684    
        25,600      Smithfield Foods Inc *                                           1,411,200    
        13,400      Triarc Companies *                                                 280,563    
        48,525      Universal Foods Corp                                             1,883,377    
                                                                                --------------    
                                                                                    23,547,787    
                                                                                --------------    

                    Health Care -- 5.1%                                                           
        52,400      Apria Healthcare Group *                                           917,000    
        15,500      Arrow International Inc.                                           459,188    
        46,400      Ballard Medical Products                                         1,073,000    
        58,200      Bard (CR)                                                        2,007,900    
        35,900      Beckman Instruments Inc                                          1,689,544    
       115,200      Beverly Enterprises Inc *                                        1,879,200    
        61,100      Bindley Western Industries Inc                                   1,538,956    
        77,500      BioMet Inc                                                       1,608,125    
        11,300      Dentsply International Inc                                         635,625    
         7,900      Forest Laboratories Inc *                                          324,394    
        12,200      Genesis Health Ventures Inc *                                      425,475    
        32,600      Haemonetics Corp *                                                 594,950    
        16,400      Health Care & Retirement *                                         597,575    
        70,700      Horizon CMS Healthcare Corp *                                    1,453,769    
        73,500      Integrated Health Services Inc                                   2,425,499    
       402,400      Laboratory Corporation America Holdings                          1,056,300    
        37,400      Lincare Holdings Inc *                                           1,783,513    
        27,000      Living Centers of America Inc *                                  1,036,125    
        22,800      Marquette Medical Systems, Class A *                               589,950    
       152,500      Mid Atlantic Medical Services Inc *                              2,354,218    
       180,800      Novacare Corp *                                                  2,723,299    
       157,500      Perrigo Co *                                                     2,254,219    
        16,600      Quorum Health Group Inc *                                          565,438    

               See accompanying notes to the financial statements.             7

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                           Value ($)      
-----------------------------------------------------------------------------------------
                                                                                         
                    Health Care -- continued                                             
        46,100      Rightchoice Managed Care, Class A *                       501,338    
        23,700      Sierra Health Services Inc *                              780,619    
        36,200      Sofamor Denek Group Inc *                               1,735,338    
        54,600      Spacelabs Medical Inc *                                 1,208,025    
        45,500      Sunrise Medical Inc *                                     673,969    
        18,600      Sybron International Corp *                               742,838    
         8,500      United States Surgical Corp                               279,969    
        19,300      Universal Health Services, Class B *                      845,581    
        18,400      Varian Associates Inc                                   1,049,950    
           800      Vencor Inc *                                               32,100    
                                                                       --------------    
                                                                           37,842,989    
                                                                       --------------    

                    Insurance -- 10.3%                                                   
         5,757      Alleghany Corp                                          1,381,680    
        37,700      Allied Group Inc                                        1,668,225    
             1      Allmerica Financial Corp                                       15    
         9,600      AMBAC Inc                                                 775,800    
        28,600      American Bankers Insurance Group                        1,887,600    
        18,200      American Financial Group Inc                              787,150    
        19,749      American Heritage Life Investments                        697,387    
        16,800      American National Insurance Co                          1,629,600    
        77,300      APL Ltd                                                 2,473,599    
        25,500      Argonaut Group Inc                                        828,750    
        30,000      Berkley (WR) Corp                                       1,659,375    
        19,100      Capital Re Corp                                           970,519    
        50,200      Citizens Corp                                           1,418,150    
        12,300      CMAC Investment Corp                                      567,338    
        50,100      Commerce Group Inc                                      1,399,669    
        95,802      Conseco Inc                                             4,119,485    
        27,090      Delphi Financial Group Inc                              1,186,881    
        21,200      Enhance Financial Services Group Inc                      980,500    
        44,400      Equitable of Iowa Cos                                   2,891,549    
        34,400      Everest Re Holdings Inc                                 1,244,850    
        20,500      First American Financial Corp                             917,375    
        61,510      Foundation Health Systems *                             1,956,787    
        48,715      Fremont General Corp                                    1,942,511    
        14,700      Gallagher (Arthur J) and Co                               525,525    
        24,500      Guaranty National Corp                                    690,594    
        22,500      Harleysville Group Inc                                    953,438    
        26,000      Horace Mann Educators Corp                              1,420,250    

8                      See accompanying notes to the financial statements.      

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

      Shares        Description                                           Value ($)      
-----------------------------------------------------------------------------------------
                                                                                         
                    Insurance -- continued                                               
        85,700      Integon Corp                                            2,169,281    
        38,200      John Alden Financial Corp                               1,091,088    
         9,900      Kansas City Life Insurance Co                             806,850    
        26,400      Liberty Corp                                            1,145,100    
        28,700      Life Re Corp                                            1,472,669    
        37,500      Mercury General Corp                                    3,281,249    
        23,700      NAC Re Corp                                             1,116,863    
        45,300      Ohio Casualty Corp                                      2,106,450    
        27,950      Old Republic International Corp                         1,004,453    
        49,500      Orion Capital                                           2,103,750    
        26,800      Penncorp Financial Group Inc                              859,275    
        50,600      Presidential Life Corp                                    967,725    
        35,600      Protective Life Corp                                    1,771,100    
        88,667      Provident Cos Inc                                       5,774,463    
         5,900      Reinsurance Group of America                              353,631    
        74,300      Reliance Group Holdings Inc                               910,175    
        48,339      Reliastar Financial Corp                                3,613,339    
        19,875      RLI Corp                                                  752,766    
        27,800      Selective Insurance Group                               1,369,150    
        36,300      TIG Holdings Inc                                        1,134,375    
        35,300      Transatlantic Holding Inc                               2,495,268    
        13,950      Trenwick Group Inc                                        507,431    
        16,900      Twentieth Century Industries                              391,869    
         9,600      UICI *                                                    288,000    
        14,500      USF & G Corp                                              318,094    
        32,700      Washington National Corp                                  964,650    
        32,200      Western National Corp                                     897,575    
        10,200      Zurich Reinsurance Centre Inc                             402,263    
                                                                       --------------    
                                                                           77,043,504    
                                                                       --------------    
                    Machinery -- 3.8%                                                    
        70,400      Agco Corporation                                        2,288,000    
        36,800      Cincinnati Milacron Inc                                   947,600    
        19,000      Coltec Industries Inc *                                   425,125    
        32,100      Cummins Engine Inc                                      2,469,693    
        66,200      Detroit Diesel Corp. *                                  1,435,713    
        53,400      Donaldson Co Inc                                        2,382,974    
        20,800      Federal Mogul Corp                                        743,600    
        11,500      Harnischfeger Industries Inc                              461,438    
        15,700      Kennametal Inc                                            734,956    
        31,400      Kulicke & Soffa Industries *                            1,442,438    

                See accompanying notes to the financial statements.            9

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

      Shares        Description                                            Value ($)      
------------------------------------------------------------------------------------------
                                                                                          
                    Machinery -- continued                                                
        65,500      Lam Research Corp *                                      3,700,749    
        36,000      Mohawk Industries Inc *                                    931,500    
        26,800      Nordson Corp                                             1,547,700    
        31,800      Novellus System Inc *                                    3,645,074    
       104,800      Oakley Inc                                               1,277,250    
        21,300      Starrett (LS) Co, Class A                                  745,500    
        38,600      Tecumseh Products Co, Class B                            2,084,400    
         9,500      Toro Co                                                    352,688    
        17,800      Ultratech Stepper Inc *                                    511,750    
                                                                        --------------    
                                                                            28,128,148    
                                                                        --------------    

                    Manufacturing -- 3.4%                                                 
        70,500      ACX Technologies Inc *                                   1,846,219    
        21,000      Aeroquip-Vickers Inc                                     1,173,375    
         7,700      Alliant Techsystems Inc *                                  497,131    
        87,700      Amcast Industrial Corp                                   2,126,725    
        25,200      Applied Power Inc, Class A                               1,600,200    
        34,300      Ball Corp                                                1,127,613    
        26,200      Barnes Group Inc                                           722,138    
        64,650      Clayton Homes Inc                                        1,086,928    
        47,500      Crane Co                                                 2,095,938    
        10,900      CSS Industries Inc *                                       391,038    
        23,000      Gibson Greetings Inc *                                     517,500    
        28,300      Global Industrial Technologies Inc *                       535,931    
        13,100      Greif Brothers Corp                                        393,000    
        44,500      Griffon Corp *                                             623,000    
        15,900      Harsco Corp                                                716,494    
        22,400      International Game Technology                              448,000    
        59,600      Lafarge Corp                                             1,937,000    
        13,400      Lydall Inc *                                               318,250    
         9,500      Mine Safety Appliances                                     598,500    
        10,700      Owens Illinois Inc *                                       372,494    
        15,100      Sequa Corp, Class A *                                      773,875    
        17,200      Standex International Corp                                 542,875    
         9,950      Tredegar Industries                                        684,684    
        72,200      Trinity Industries Inc                                   2,869,949    
        33,200      Watts Industries Inc, Class A                              809,250    
        11,100      West Co Inc                                                345,488    
                                                                        --------------    
                                                                            25,153,595    
                                                                        --------------    

10              See accompanying notes to the financial statements.             

N-30D 537th Page of 667 TOC 1st Previous Next ↓Bottom Just 537th
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                          Value ($)      
----------------------------------------------------------------------------------------
                                                                                        
                    Metals and Mining -- 1.2%                                           
        13,600      Allegheny Teledyne Inc                                   419,900    
        30,100      Arch Coal Inc                                            833,394    
        86,500      Asarco Inc                                             2,659,874    
        16,700      Cleveland Cliffs Inc                                     696,181    
        29,500      Commercial Metals Co                                     907,125    
        15,700      Nacco Inds Inc, Class A                                1,354,125    
        60,400      Timken Co                                              2,261,225    
                                                                      --------------    
                                                                           9,131,824    
                                                                      --------------    

                    Oil and Gas -- 1.3%                                                 
         8,200      El Paso Natural Gas Co                                   461,250    
        57,511      Enserch Exploration Inc *                                517,597    
        57,100      Equitable Resources Inc                                1,745,119    
         8,100      FINA Inc, Class A                                        534,600    
        19,700      KCS Energy Inc                                           525,744    
        22,900      Mitchell Energy, Class B                                 572,500    
             1      Monterey Resources Inc                                        21    
        47,400      Oneok Inc                                              1,534,575    
        24,700      Oryx Energy Co *                                         653,006    
        16,600      Peoples Energy Corp                                      625,613    
        35,400      Santa Fe Energy Resources Inc                            391,613    
        32,400      Seagull Energy Corp *                                    791,775    
        45,800      Union Texas Petroleum Holdings Inc                     1,067,713    
                                                                      --------------    
                                                                           9,421,126    
                                                                      --------------    

                    Paper and Allied Products -- 3.0%                                   
        43,200      Boise Cascade Corp                                     1,709,100    
        76,100      Bowater Inc                                            3,895,368    
        66,800      Chesapeake Corp                                        2,296,250    
        58,600      Jefferson Smurfit Corp *                               1,139,038    
        22,300      Longview Fibre Co                                        466,906    
        48,600      Media General Inc, Class A                             1,786,050    
        19,500      Pentair Inc                                              694,688    
        41,400      Potlatch Corp                                          1,932,863    
        63,600      Rayonier Inc                                           3,104,474    
        53,900      Rock-Tenn Co, Class A                                  1,145,375    
        22,300      Shorewood Packaging Corp *                               482,238    
       144,500      Stone Container Corp                                   2,492,624    
        16,100      TJ International Inc                                     406,525    
        22,700      Zurn Industries Inc                                      673,906    
                                                                      --------------    
                                                                          22,225,405    
                                                                      --------------    

              See accompanying notes to the financial statements.             11

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

      Shares        Description                                           Value ($)      
-----------------------------------------------------------------------------------------
                                                                                         
                    Pharmaceuticals -- 1.0%                                              
        11,300      Amerisource Health Corp *                                 565,706    
        54,675      Bergen Brunswig Corp, Class A                           2,296,350    
        74,000      ICN Pharmaceuticals Inc                                 2,673,249    
        64,575      Mark IV Industries Inc                                  1,622,447    
                                                                       --------------    
                                                                            7,157,752    
                                                                       --------------    

                    Primary Materials -- 1.2%                                            
        20,100      Ameron Inc                                              1,174,594    
        22,200      Carpenter Technology Corp                                 994,838    
        16,700      Florida Rock Inds                                         824,563    
        20,000      Martin Marietta Materials Inc                             698,750    
        15,600      Medusa Corp                                               733,200    
        78,100      Premark International Inc                               2,323,475    
        13,800      Southdown Inc                                             647,738    
        32,900      USG Corp *                                              1,410,588    
                                                                       --------------    
                                                                            8,807,746    
                                                                       --------------    

                    Primary Processing -- 2.4%                                           
        31,700      AK Steel Holding Corp                                   1,434,425    
        98,200      Alumax Inc *                                            4,069,162    
       182,100      Bethlehem Steel Corp *                                  2,185,200    
        39,500      Birmingham Steel Corp                                     740,625    
        44,900      Chaparral Steel Corp                                      679,113    
        56,000      Inland Steel Industries Inc                             1,179,500    
       125,400      LTV Corp                                                1,630,200    
        44,500      Lukens Inc                                                831,594    
         6,700      Maxxam Inc *                                              368,500    
         6,700      Mueller Industries Inc *                                  293,544    
        81,400      National Steel Corp, Class B *                          1,531,338    
        11,100      NCH Corp                                                  754,800    
        25,000      Oregon Steel Mills Inc                                    673,438    
        19,700      Quanex Corp                                               715,356    
        38,600      Rouge Industries Inc, Class A                             593,475    
                                                                       --------------    
                                                                           17,680,270    
                                                                       --------------    

                    Printing and Publishing -- 0.2%                                      
        20,900      American Business Products Inc                            483,313    
        56,600      Hollinger International Inc                               728,725    
         8,799      Pulitzer Publishing Co                                    462,497    
                                                                       --------------    
                                                                            1,674,535    
                                                                       --------------    

12              See accompanying notes to the financial statements.             

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Real Estate -- 0.4%                                                           
        47,300      Lennar Corp                                                      1,767,838    
         4,400      Security Capital Corp                                              455,400    
        57,900      Webb (D) Corp                                                    1,013,250    
                                                                                --------------    
                                                                                     3,236,488    
                                                                                --------------    

                    Refining -- 0.6%                                                              
        19,500      Holly Corp                                                         510,656    
        23,400      Lyondell Petro Chemical Co                                         567,450    
         9,300      Tosco Corp                                                         307,481    
        56,892      Ultramar Diamond Shamrock Corp                                   1,856,102    
        34,700      Valero Energy Corp                                               1,155,944    
                                                                                --------------    
                                                                                     4,397,633    
                                                                                --------------    

                    Retail Trade -- 6.9%                                                          
        20,800      AnnTaylor Stores Corp *                                            356,200    
        13,400      Barnes & Noble Inc *                                               622,263    
        67,300      Bed, Bath & Beyond Inc *                                         2,086,300    
        50,900      Best Buy Co Inc *                                                  865,300    
        28,100      Borders Group Inc                                                  669,131    
        36,800      Brinker International Inc *                                        616,400    
        32,900      Brown Group Inc                                                    549,019    
        15,800      Brunos Inc *                                                       138,250    
        69,600      Burlington Coat Factory Warehouse *                              1,600,800    
        24,800      Casey's General Stores Inc                                         564,200    
        54,700      Cash American Investments Inc                                      588,025    
        88,200      Charming Shoppes Inc *                                             531,952    
        25,500      Claire's Stores Inc                                                535,500    
        47,600      CompUSA Inc                                                      1,472,625    
        79,100      Cone Mills Corp *                                                  622,913    
        55,100      CPI Corp                                                         1,308,625    
        62,100      Dress Barn Inc *                                                 1,273,050    
       100,550      Family Dollar Stores Inc                                         2,136,688    
       124,700      Fingerhut Cos Inc                                                2,525,174    
        28,200      Foodmaker Inc *                                                    553,425    
        14,300      Goodys Family Clothing Inc *                                       487,988    
        37,100      Hannaford Brothers Co                                            1,261,400    
        41,500      Heilig Meyers Co                                                   622,500    
       132,900      Homebase Inc                                                     1,046,588    
        61,600      Ingles Markets Inc                                                 823,900    
        51,500      Longs Drug Stores Corp                                           1,303,594    

            See accompanying notes to the financial statements.               13

N-30D 540th Page of 667 TOC 1st Previous Next ↓Bottom Just 540th
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                          Value ($)      
----------------------------------------------------------------------------------------
                                                                                        
                    Retail Trade -- continued                                           
        18,000      Macfrugals Bargains Close Outs Inc *                     490,500    
        30,100      Mercantile Stores                                      1,879,369    
        40,400      Meyer Fred Inc *                                       2,100,800    
        84,200      Michaels Stores Inc *                                  2,057,638    
        38,300      Micro Warehouse Inc *                                  1,000,588    
        19,800      Microage Inc *                                           538,313    
        36,800      Neiman Marcus Group Inc *                              1,136,200    
        26,700      NPC International Inc *                                  303,713    
        74,300      Officemax Inc *                                        1,100,569    
        25,200      Outback Steakhouse Inc *                                 607,950    
        47,500      Phillips Van Heusen                                      682,813    
        15,950      Pier 1 Imports Inc                                       271,150    
        12,600      Proffitts Inc *                                          676,463    
        35,200      Richfood Holdings Inc                                    792,000    
        58,300      Ross Stores Inc                                        1,712,563    
        26,000      Ruby Tuesday Inc *                                       702,000    
        46,900      Ruddick Corp                                             703,500    
       377,500      Service Merchandise Co *                               1,462,813    
        91,000      Shopko Stores Inc *                                    2,502,499    
       324,800      Southland Corp *                                         923,634    
        80,400      Spiegel Inc, Class A *                                   512,550    
        46,000      Stanhome Inc                                           1,495,000    
         1,900      TJX Cos Inc                                               52,250    
       118,900      Value City Department Stores Inc *                       951,200    
        22,800      Weismarkets Inc                                          769,500    
        10,800      Woolworth (FW) Co *                                      241,650    
        27,800      Zale Corp *                                              597,700    
                                                                       --------------   
                                                                          51,426,735    
                                                                       --------------   
                    Services -- 5.5%                                                    
        14,300      Amerco *                                                 384,313    
        38,200      Anixter International Inc *                              618,363    
        54,925      Arctic Cat Inc                                           597,309    
         8,004      Ascent Entertainment Group *                              88,044    
       103,000      Aztar Corp *                                             721,000    
        82,050      Banta Corp                                             2,215,350    
        16,300      Belo (AH) Corp                                           698,863    
        19,500      Berlitz International Inc *                              511,875    
        31,300      Bowne and Co Inc                                         905,744    

14             See accompanying notes to the financial statements.              

N-30D 541st Page of 667 TOC 1st Previous Next ↓Bottom Just 541st
GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Services -- continued                                                         
       105,100      Buffetts Inc *                                                   1,149,531    
         8,900      Carmike Cinemas Inc, Class A *                                     280,350    
        12,700      Catalina Marketing Corp *                                          588,169    
         9,100      Chemed Corp                                                        342,388    
        30,338      Chris Craft Industries Inc                                       1,488,452    
       198,300      Dames and Moore Inc                                              2,602,687    
        23,100      Devon Group Inc *                                                  877,800    
        28,600      Electro Rental Corp *                                              772,200    
        71,600      Fleming Cos Inc                                                  1,351,450    
        23,000      Franklin Covey Co *                                                572,125    
       101,700      Grand Casinos Inc *                                              1,569,994    
        90,200      Handleman Co *                                                     535,563    
        46,800      Healthcare Compare Corp *                                        2,609,099    
        14,000      Hollywood Entertainment Corp *                                     229,250    
        13,400      Interim Services Inc *                                             661,625    
        26,500      International Dairy Queen Inc, Class A *                           652,563    
        32,200      Interpool Inc                                                      511,175    
        27,500      Jacobs Engineering Group *                                         880,000    
        64,900      Kellwood Co                                                      2,344,512    
        35,300      Kelly Services                                                   1,182,550    
        38,100      Kingworld Productions Inc                                        1,514,475    
        12,300      Marcus Corp                                                        305,194    
       130,700      Nash Finch Co                                                    2,793,712    
         9,700      Norrell Corp                                                       313,431    
        41,500      Ogden Corp                                                         962,281    
        62,700      Olsten Corp                                                      1,175,625    
             1      Philip Services *                                                       11    
        35,700      Rollins Truck Leasing Corp                                         577,894    
        18,700      Rykoff Sexton Inc                                                  472,175    
        17,900      Sbarro Inc                                                         478,825    
        66,500      Spelling Entertainment Group Inc *                                 519,531    
         9,500      Stone & Webster Inc                                                450,063    
        71,100      Sun Healthcare Group Inc *                                       1,528,650    
        31,900      Supervalu Inc                                                    1,252,075    
        21,500      United Video Satellite *                                           599,313    
        24,648      United Water Resources Inc                                         440,583    
                                                                                 --------------   
                                                                                    41,326,182    
                                                                                 --------------   

            See accompanying notes to the financial statements.               15

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Technology -- 4.0%                                                            
       113,000      Advanced Micro Devices Inc *                                     4,230,437    
        41,100      Autodesk Inc                                                     1,798,125    
        16,600      Broderbund Software Inc *                                          489,700    
        36,800      Cirrus Logic Corp *                                                632,500    
        60,800      Cognex Corp *                                                    2,325,599    
        10,100      Cohu Inc                                                           565,600    
        29,500      Data General Corp *                                              1,060,156    
         7,700      Dionex Corp *                                                      359,975    
        36,400      EG & G Inc                                                         773,500    
        35,500      Electroglas Inc *                                                1,136,000    
        23,500      Esterline Corp. *                                                  872,438    
        13,200      Fisher Scientific International Inc                                650,100    
         6,000      Fluke Corp                                                         297,000    
        19,000      G TECH Holdings Corp *                                             571,188    
        16,300      KLA Instruments Corp *                                           1,155,263    
        23,800      MTS Systems Inc                                                    761,600    
         9,900      National Computer System Inc                                       324,225    
        14,400      Solectron Corp                                                     603,000    
        23,300      Storage Technology Corp *                                        1,186,844    
       160,800      Tandem Computers Inc *                                           5,467,199    
        18,800      Tektronix Inc                                                    1,044,575    
        65,100      Teradyne Inc *                                                   3,625,255    
                                                                                 --------------   
                                                                                    29,930,279    
                                                                                 --------------   

                    Telecommunications -- 0.3%                                                    
        24,400      Century Telephone                                                  886,025    
        53,200      Comsat Corp                                                      1,153,775    
                                                                                 --------------   
                                                                                     2,039,800    
                                                                                 --------------   

                    Textiles -- 0.7%                                                              
         4,200      Crystal Brands Inc./(a)/ *                                              --    
        44,250      Guilford Mills                                                     962,438    
        44,300      Interface Flooring Systems Inc                                   1,240,400    
        68,300      Shaw Industries                                                    764,106    
        36,600      Springs Industries Inc, Class A                                  1,720,200    
        21,200      Westpoint Stevens Inc *                                            848,000    
                                                                                 --------------   
                                                                                     5,535,144    
                                                                                 --------------   

16               See accompanying notes to the financial statements.            

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Transportation -- 3.2%                                                        
        52,700      Airborne Freight Corp                                            2,595,474    
        37,950      Airline Express International Corp                               1,152,731    
        15,800      Alaska Airline Group Inc *                                         433,513    
        39,600      American West Holdings Corp, Class B *                             477,675    
        24,200      Asa Holdings Inc                                                   719,950    
       123,600      CNF Transportation Inc                                           4,465,049    
        41,800      Comair Holdings Inc                                              1,123,375    
        30,500      Fleetwood Enterprises Inc                                          949,313    
        37,100      Gatx Corp                                                        2,321,069    
             1      Halter Marine Group Inc *                                               32    
        23,300      Heartland Express Inc                                              576,675    
        45,200      Hunt (JB) Transportation Services Inc                              751,450    
        25,600      Illinois Central Corp                                              859,200    
        64,600      Navistar International Corp *                                    1,602,888    
        13,500      US Freightways Corp                                                405,000    
       109,600      USAir Group Inc *                                                3,740,099    
        44,400      Viad Corp                                                          807,525    
        11,000      Werner Enterprises Inc                                             240,625    
        33,500      Yellow Corp *                                                    1,051,063    
                                                                                 --------------   
                                                                                    24,272,706    
                                                                                 --------------   
                    Utilities -- 7.3%                                                             
        13,400      AES Corp                                                           495,800    
        62,600      American Water Works Co                                          1,298,950    
       138,400      Atlantic Energy Inc                                              2,396,049    
        89,200      Boston Edison Co                                                 2,519,899    
        28,200      Brooklyn Union Natural Gas Co                                      851,288    
       286,900      Centerior Energy Corp                                            3,227,624    
        21,500      Central Hudson Gas & Electric                                      717,563    
        15,600      Central Louisiana Electric Inc                                     409,500    
        61,900      Central Maine Power Co                                             785,356    
         8,400      Cilcorp Inc                                                        337,575    
        76,500      Commonwealth Energy Systems                                      1,883,813    
        79,100      Delmarva Power and Light Co                                      1,418,856    
        16,100      Eastern Enterprises                                                574,569    
        35,900      Eastern Utilities Associates                                       686,588    
        59,300      El Paso Electric Company *                                         370,625    
         9,800      Energen Corp                                                       353,413    
        24,400      Hawaiian Electric Industry Inc                                     882,975    
        13,883      Houston Industries Inc                                             281,134    
        47,200      Illinova Corp                                                    1,085,600    
        24,500      LES Industries Inc                                                 750,313    

              See accompanying notes to the financial statements.             17

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


      Shares        Description                                                    Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Utilities -- continued                                                        
        28,300      Mapco Inc                                                          849,000    
       101,882      Midamerican Energy Holding Co                                    1,738,362    
        13,300      Minnesota Power & Light Co                                         457,188    
       108,800      Montana Power Co                                                 2,509,199    
        25,600      Natural Gas Clearinghouse                                          419,200    
        41,600      Nevada Power Co                                                    878,800    
       111,800      New York State Electric and Gas Corp                             2,725,124    
       289,900      Niagara Mohawk Power Corp *                                      2,590,980    
       187,600      Northeast Utilities                                              1,887,725    
        30,400      Nui Corporation                                                    699,200    
        16,600      Orange and Rockland Utilities                                      563,363    
        19,224      PG & E Corp                                                        445,752    
       122,600      Public Services Co of New Mexico                                 2,237,450    
        55,900      Puget Sound Power and Light Co                                   1,418,463    
       113,400      Rochester Gas and Electric Corp                                  2,671,987    
        28,300      Sierra Pacific Resources                                           884,375    
        30,800      Southwest Natural Gas Corp                                         610,225    
        16,843      Texas Utilities Co                                                 587,382    
        44,700      TNP Enterprises Inc                                              1,047,656    
        22,340      Tucson Electric Power Co *                                         356,044    
        31,500      United Illuminating Co                                           1,100,531    
        59,900      Utilicorp United Inc                                             1,782,025    
        27,800      Washington Gas Light Co                                            707,163    
        26,300      Washington Water Power                                             512,850    
        81,100      Western Gas Resources Inc                                        1,540,900    
        38,600      Western Resources Inc                                            1,293,100    
        24,000      Wisconsin Power & Light Holding Co                                 664,500    
                                                                                 -------------    
                                                                                    54,506,034    
                                                                                 -------------    

                    TOTAL COMMON STOCKS  (COST  $586,102,341)                      698,768,903    
                                                                                 -------------    

                    RIGHTS AND WARRANTS -- 0.0%                                                   

                    Printing and Publishing -- 0.0%                                               
           550      American Satellite Network Warrants expire 06/30/99                     --    
                    (Cost $0)*                                                                    
                                                                                 -------------    

                    TOTAL RIGHTS AND WARRANTS  (COST  $0)                                   --    
                                                                                 -------------    

                    SHORT-TERM INVESTMENTS -- 15.5%                                               

                    Cash Equivalents -- 8.1%                                                      
    $14,385,115     BankBoston Eurodollar Time Deposit, 5.7875% due 9/2/97/(b)/     14,385,115    


18                     See accompanying notes to the financial statements.      

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


   Par Value($)/                                                                                  
       Shares       Description                                                      Value ($)    
--------------------------------------------------------------------------------------------------
                                                                                                  
                    Cash Equivalents -- continued                                                 
    $ 1,251,691     First Union National Bank of North Carolina Eurodollar                        
                    Time Deposit, 5.5625% due 9/2/97/(b)/                            1,251,691    
    $ 3,758,074     Harris Bank and Trust Eurodollar Time Deposit, 5.625% due                     
                    9/2/97/(b)/                                                      3,758,074    
     31,656,404     Merrimac Cash Fund Premium Class/(b)/                           31,656,404    
    $ 9,000,000     Prudential Securities Group Inc Master Note, 5.8875% due                      
                    9/2/97/(b)/                                                      9,000,000    
                                                                                 --------------   
                                                                                    60,051,284    
                                                                                 --------------   
                    U.S. Government -- 0.1%                                                       
    $ 1,000,000     U.S. Treasury Bill, 5.22% due 11/28/97/(c)/                        987,698    
                                                                                 --------------   

                    Repurchase Agreements -- 7.3%                                                 
    $37,627,397     Salomon Brothers Repurchase Agreement, dated 8/29/97, due                     
                    9/2/97, with a maturity value of $37,648,510 and an                           
                    effective yield of 5.05%, collateralized by U.S. Treasury                     
                    Obligations with rates ranging from 5.00% to 6.75%, with                      
                    maturity dates ranging from 2/15/99 to 8/15/26 and with                       
                    an aggregate market value of $38,489,629.                       37,627,397    

    $17,143,405     Prudential Securities, Inc. Repurchase Agreement, dated                       
                    8/29/97, due 9/2/97, with a maturity value of $17,152,910                     
                    and an effective yield of 4.99%, collateralized by U.S.                       
                    Government and Agency Obligations with rates ranging from                     
                    6.072% to 6.914%, with maturity dates ranging from                            
                    10/1/32 to 8/1/35 and with an aggregate market value of                       
                    $17,486,330.                                                    17,143,405    
                                                                                 --------------   
                                                                                    54,770,802    
                                                                                 --------------   

                    TOTAL SHORT-TERM INVESTMENTS                                                  
                    (COST  $115,809,286)                                           115,809,784    
                                                                                 --------------   

                    TOTAL INVESTMENTS -- 109.1%                                                   
                    (COST $701,911,627)                                            814,578,687    

                    Other Assets and Liabilities (net)-- (9.1)%                    (68,038,820)   
                                                                                 --------------   

                    TOTAL NET ASSETS-- 100%                                      $ 746,539,867    
                                                                                 ==============   

Notes to the Schedule of Investments:       

*   Non-income producing security.                  
/(a)/ Bankrupt security - valued by management (Note 1).
   /(b)/ Represents investments of security lending collateral
(Note 1).                                   
       /(c)/ Security has been segregated to cover margin requirements
on open financial futures contracts.        

             See accompanying notes to the financial statements.              19

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                                                          
Assets:                                                                                   
   Investments, at value (cost $701,911,627) (Note 1)                         $814,578,687
   Receivable for investments sold                                               8,842,176
   Dividends and interest receivable                                               804,325
   Receivable for variation margin on open futures contracts (Notes 1 and 6)       218,627
   Receivable for expenses waived or borne by Manager (Note 2)                     179,372
   Miscellaneous receivable                                                         37,341
                                                                              ------------

       Total assets                                                            824,660,528
                                                                              ------------

Liabilities:                                                                              
   Payable for investments purchased                                            10,176,513
   Payable upon return of securities loaned (Note 1)                            60,051,284
   Payable for Fund shares repurchased                                           7,475,612
   Payable to affiliate for (Note 2):                                                     
      Management fee                                                               291,011
      Shareholder service fee                                                       87,006
   Accrued expenses                                                                 39,235
                                                                              ------------

       Total liabilities                                                        78,120,661
                                                                              ------------

Net assets                                                                    $746,539,867
                                                                              ============

Net assets consist of:                                                                    
   Paid-in-capital                                                            $587,972,207
   Accumulated undistributed net investment income                               1,967,188
   Accumulated undistributed net realized gain                                  43,387,803
   Net unrealized appreciation                                                 113,212,669
                                                                              ------------
                                                                              $746,539,867
                                                                              ============

Net assets attributable to:                                                               
   Class I shares                                                             $  1,725,622
                                                                              ============
   Class III shares                                                           $744,814,245
                                                                              ============

Shares outstanding:                                                                       
   Class I                                                                          94,566
                                                                              ============
   Class III                                                                    40,813,011
                                                                              ============

Net asset value per share:                                                                
   Class I                                                                    $      18.25
                                                                              ============
   Class III                                                                  $      18.25
                                                                              ============

20             See accompanying notes to the financial statements.              

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]

                                                                            
Investment Income:                                                          
   Dividends                                                  $   3,825,406 
   Interest (including securities lending income of $41,679)      4,765,073 
                                                              ------------- 

       Total income                                               8,590,479 
                                                              ------------- 

Expenses:                                                                   
   Management fee (Note 2)                                        1,758,768 
   Custodian and transfer agent fees                                 71,355 
   Registration fees                                                 70,289 
   Audit fees                                                        25,324 
   Legal fees                                                        15,240 
   Trustees fees (Note 2)                                             3,683 
   Miscellaneous                                                      2,132 
   Fees waived or borne by Manager (Note 2)                        (786,004)
                                                              ------------- 
                                                                  1,160,787 
   Shareholder service fee (Note 2)                                         
       Class I                                                        2,098 
       Class III                                                    526,033 
                                                              ------------- 
       Net expenses                                               1,688,918 
                                                              ------------- 

          Net investment income                                   6,901,561 
                                                              ------------- 

Realized and unrealized gain (loss):                                        
   Net realized gain (loss) on:                                             
       Investments                                               16,805,156 
       Closed futures contracts                                  25,520,750 
                                                              ------------- 

          Net realized gain                                      42,325,906 
                                                              ------------- 

   Change in net unrealized appreciation (depreciation) on:                 
       Investments                                               82,967,788 
       Open futures contracts                                     2,545,139 
                                                              ------------- 

          Net unrealized gain                                    85,512,927 
                                                              ------------- 

       Net realized and unrealized gain                         127,838,833 
                                                              ------------- 

Net increase in net assets resulting from operations          $ 134,740,394 
                                                              ============= 

           See accompanying notes to the financial statements.              21

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                           Six Months Ended    Year Ended   
                                                           August 31, 1997    February 28,  
                                                             (Unaudited)          1997      
                                                           ----------------  ---------------
                                                                                            
Increase (decrease) in net assets:                                                          
Operations:                                                                                 
   Net investment income                                    $   6,901,561     $   8,393,192 
   Net realized gain                                           42,325,906        48,217,450 
   Change in net unrealized appreciation (depreciation)        85,512,927         7,279,028 
                                                            -------------     ------------- 
   Net increase in net assets resulting from operations       134,740,394        63,889,670 
                                                            -------------     ------------- 

Distributions to shareholders from:                                                         
   Net investment income                                                                    
       Class I                                                    (14,575)               -- 
       Class III                                               (7,251,227)       (6,723,900)
                                                            -------------     ------------- 
       Total distributions from net investment income          (7,265,802)       (6,723,900)
                                                            -------------     ------------- 
   Net realized gains                                                                       
       Class I                                                    (53,330)               -- 
       Class III                                              (25,584,900)       (9,617,877)
                                                            -------------     ------------- 
       Total distributions from net realized gains            (25,638,230)       (9,617,877)
                                                            -------------     ------------- 

                                                              (32,904,032)      (16,341,777)
                                                            -------------     ------------- 
   Net share transactions: (Note 5)                                                         
       Class I                                                    120,769         1,343,250 
       Class III                                              (12,181,277)      376,339,439 
                                                            -------------     ------------- 
   Increase (decrease) in net assets resulting from net                                     
      share transactions                                      (12,060,508)      377,682,689 
                                                            -------------     ------------- 

      Total increase in net assets                             89,775,854       425,230,582 

Net assets:                                                                                 
   Beginning of period                                        656,764,013       231,533,431 
                                                            -------------     ------------- 

   End of period (including accumulated undistributed net                                   
      investment income of $1,967,188 and $2,331,429,       $ 746,539,867     $ 656,764,013 
      respectively)                                         =============     ============= 

22            See accompanying notes to the financial statements.               

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                      Six Months Ended  Period from January 2, 1997 
                                                       August 31, 1997  (commencement of operations)
                                                         (Unaudited)      to February 28, 1997      
                                                      ----------------  ----------------------------
                                                                                                    
Net asset value, beginning of period                       $ 15.89                $ 15.34           
                                                           -------                -------           

Income from investment operations:                                                                  
   Net investment income                                      0.16                   0.05           
   Net realized and unrealized gain                           2.98                   0.50           
                                                           -------                -------           

      Total from investment operations                        3.14                   0.55           
                                                           -------                -------           

Less distributions to shareholders:                                                                 
   From net investment income                                (0.17)                    --           
   From net realized gains                                   (0.61)                    --           
                                                           -------                -------           

      Total distributions                                    (0.78)                    --           
                                                           -------                -------           
Net asset value, end of period                             $ 18.25                $ 15.89           
                                                           =======                =======           

Total Return/(a)/                                            20.25%                  3.52%          

Ratios/Supplemental Data:                                                                           
   Net assets, end of period (000's)                       $ 1,726                $ 1,391           
   Net expenses to average daily net assets                   0.61%*                 0.61%*         
   Net investment income to average daily net assets          1.86%*                 1.87%*         
   Portfolio turnover rate                                      23%                    58%          
   Average broker commission rate per equity share         $0.0370                $0.0271           
   Fees and expenses voluntarily waived or borne                                                    
      by the Manager consisted of the following                                                     
      per share amounts:                                   $  0.02                /(b)/             

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  

/(b)/ Fees and expenses waived or borne by the Manager were less than $0.01 per 
share.                                                              

*     Annualized.                                                               

             See accompanying notes to the financial statements.            23

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                             Six Months Ended                   Year Ended February 28/29,                     
                                              August 31, 1997  --------------------------------------------------------------- 
                                                (Unaudited)      1997           1996         1995           1994        1993   
                                                -----------    --------       --------     --------       --------    -------- 
                                                                                                                               
Net asset value, beginning of period              $  15.89     $  13.89       $  13.61     $  14.31       $  12.68    $  11.12 
                                                  --------     --------       --------     --------       --------    -------- 

Income from investment operations:                                                                                             
   Net investment income                              0.16         0.28           0.23         0.20           0.21        0.22 
   Net realized and unrealized gain                   2.98         2.32           3.20         0.34           2.14        1.59 
                                                  --------     --------       --------     --------       --------    -------- 

      Total from investment operations                3.14         2.60           3.43         0.54           2.35        1.81 
                                                  --------     --------       --------     --------       --------    -------- 

Less distributions to shareholders:                                                                                            
   From net investment income                        (0.17)       (0.27)         (0.23)       (0.20)         (0.22)      (0.21)
   From net realized gains                           (0.61)       (0.33)         (2.92)       (1.04)         (0.50)      (0.04)
                                                  --------     --------       --------     --------       --------    -------- 

      Total distributions                            (0.78)       (0.60)         (3.15)       (1.24)         (0.72)      (0.25)
                                                  --------     --------       --------     --------       --------    -------- 
Net asset value, end of period                    $  18.25     $  15.89       $  13.89     $  13.61       $  14.31    $  12.68 
                                                  ========     ========       ========     ========       ========    ======== 

Total Return /(a)/                                   20.22%       19.12%         27.18%        4.48%         18.97%      16.46%

Ratios/Supplemental Data:                                                                                                      
   Net assets, end of period (000's)              $744,814     $655,373       $231,533     $235,781       $151,286    $102,232 
   Net expenses to average daily net assets           0.48%*       0.48%          0.48%        0.48%          0.48%       0.49%
   Net investment income to average                                                                                            
      daily net assets                                1.96%*       2.15%          1.67%        1.55%          1.66%       2.02%
   Portfolio turnover rate                              23%          58%           135%          54%            30%          3%
   Average broker commission rate per                                                                                          
      equity share /(b)/                          $ 0.0370     $ 0.0271            N/A          N/A            N/A         N/A 
   Fees and expenses                                                                                                           
      voluntarily waived or borne                                                                                              
      by the Manager consisted of                                                                                              
      the following per share amounts:            $   0.02     $   0.03       $   0.02     $   0.01       $   0.02    $   0.02 

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            
*     Annualized.                                                               

24                                                                              

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

    The Fund seeks long-term growth of capital through investment primarily in
    companies whose equity capitalization ranks in the lower two-thirds of the
     1,800 companies with the largest equity capitalization whose securities are
listed on a United States national securities exchange.               

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
 as those shares. At August 31,1997, Class I and Class III were the only
active classes of shares of the Fund.                                 

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     
The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S. government  
obligations in accordance with the initial margin requirements of the 
broker or exchange.                                                   

                                                                              25

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    Futures contracts are marked to market daily and an appropriate payable or
    receivable for the change in value ("variation margin") is recorded by the
 Fund. The payable or receivable is liquidated on the following business
   day. Gains or losses are recognized but not considered realized until the
contracts expire or are closed. Futures contracts involve, to varying 
  degrees, risk of loss in excess of the variation margin disclosed in the
   Statement of Assets and Liabilities. Losses may arise from changes in the
value of the underlying instrument, if there is an illiquid secondary 
 market for the contracts, or if counterparties do not perform under the
contract terms. Futures contracts are valued at the settlement price  
  established each day by the board of trade or exchange on which they are
 traded. See Note 6 for all open futures contracts held as of August 31,
1997.                                                                 

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $57,827,314, collateralized by
cash in the amount of $60,051,284, which was invested in short-term   
instruments.                                                          

Swap agreements                                                       
The Fund may enter into swap agreements to manage its exposure to the 
    equity markets. A swap is an agreement to exchange the return generated by
 one instrument for the return generated by another instrument. The Fund
    enters into equity swap agreements which involve a commitment by one party
 in the agreement to pay interest in exchange for a market linked return
based on a notional amount. To the extent that the total return of the
    security or index underlying the transaction exceeds or falls short of the
   offsetting interest rate obligation, the Fund will receive a payment from
or make a payment to the counterparty, respectively. Equity swaps are 
 marked to market daily based upon quotations from market makers and the
    change, if any, is recorded as unrealized gain or loss in the Statement of
    Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations. 
  Entering into these agreements involves, to varying degrees, elements of
     credit and market risk in excess of the amounts recognized on the Statement
     of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these agreements, that the counterparty to the   
   agreements may default on its obligation to perform, or that there may be
unfavorable changes in                                                

26                                                                              

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

 the price of the security or index underlying these transactions. There
were no open swap agreements as of August 31, 1997.                   

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
     The premium on cash purchases and fee on redemptions of Fund shares is .50%
   of the amount invested or redeemed. Prior to June 1, 1996, the premium on
  cash purchases and fee on redemptions was .75% of the amount invested or
redeemed. All purchase premiums and redemption fees are paid to and   
  recorded as paid-in capital by the Fund. For the six months ended August
31, 1997, the Fund received $523,094 in                               

                                                                              27

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

    purchase premiums and $495,204 in redemption fees. There is no premium for
reinvested distributions or in-kind transactions.                     

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .50% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .33% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .48%;
thus, the net annual expense ratio after the waiver for a Class III   
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $3,683. 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 six months ended August 31, 1997,     
aggregated $264,525,965 and $121,448,476, respectively.               

At August 31, 1997, the cost for Federal income tax purposes and gross
 unrealized appreciation and depreciation in value of investments was as
follows:                                                              

                                                        [Enlarge/Download Table]

                          Gross Unrealized      Gross Unrealized      Net Unrealized   
   Aggregate Cost           Appreciation          Depreciation         Appreciation    
----------------------  ---------------------  --------------------  ------------------
                                                                                       
    $ 701,911,627          $ 119,450,718           $ 6,783,658         $ 112,667,060   

4.   Principal shareholder                                                      

    At August 31, 1997, 11% of the outstanding shares of the Fund were held by
one shareholder.                                                      

28                                                                              

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                                [Download Table]

                                                        Six Months Ended        
Class I:                                                August 31, 1997         
                                            ------------------------------------
                                                 Shares              Amount     
                                            ----------------    ----------------
                                                                                
Shares sold                                       2,943             $ 52,864    
Shares issued to shareholders in                                                
  reinvestment of distributions                   4,058               67,905    
Shares repurchased                                  -                    -      
                                            ----------------    ----------------
Net increase                                      7,001             $120,769    
                                            ================    ================

                                                  Period from January 2, 1997   
                                                 (commencement of operations)   
 Class I:                                            to February 28, 1997       
                                            ------------------------------------
                                                 Shares              Amount     
                                            ----------------    ----------------
                                                                                
Shares sold                                      87,565             $1,343,250  
Shares issued to shareholders in                                                
  reinvestment of distributions                     -                    -      
Shares repurchased                                  -                    -      
                                            ----------------    ----------------
Net increase                                     87,565             $1,343,250  
                                            ================    ================


                                                      Six Months Ended          
 Class III:                                           August 31, 1997           
                                            ------------------------------------
                                                 Shares              Amount     
                                            ----------------    ----------------
                                                                                
 Shares sold                                    6,363,495         $106,308,601  
 Shares issued to shareholders                                                  
      in reinvestment of distributions          1,742,775           29,285,444  
 Shares repurchased                            (8,528,031)        (147,775,322) 
                                            ----------------    ----------------
 Net increase (decrease)                         (421,761)       $ (12,181,277) 
                                            ================    ================


 Class III:                                              Year Ended             
                                                     February 28, 1997          
                                            ------------------------------------
                                                 Shares              Amount     
                                            ----------------    ----------------
                                                                                
 Shares sold                                   36,443,463         $557,963,243  
 Shares issued to shareholders                                                  
    in reinvestment of distributions              846,111           12,460,382  
 Shares repurchased                           (12,721,369)        (194,084,186) 
                                            ----------------    ----------------
 Net increase (decrease)                        24,568,205        $376,339,439  
                                            ================    ================

                                                                              29

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GMO Small Cap Value Fund                                                        
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                                        

Long futures contracts                                                

                                                        [Enlarge/Download Table]

  Number of                                                                   Net Unrealized 
  Contracts           Type          Expiration Date        Contract Value      Appreciation  
---------------  ---------------  ---------------------  -------------------  ---------------
                                                                                             
     152            S&P 500          September 1997           $32,231,600         $545,609   
                                                                                ============ 

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                  

30                                                                              

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares     Description                                          Value ($)   
---------------------------------------------------------------------------------
                                                                                 
                COMMON STOCKS -- 87.3%                                           

                Advertising -- 0.0%                                              
        300     Interpublic Group Inc                                  14,625    
                                                                   ----------    
                Aerospace -- 0.9%                                                
      8,500     Raytheon Co                                           467,500    
      1,400     Textron Inc                                            87,238    
      3,900     TRW Inc                                               203,288    
                                                                   ----------    
                                                                      758,026    
                                                                   ----------    
                Automotive -- 1.5%                                               
        100     Bandag Inc                                              5,331    
        900     Chrysler Corp                                          31,613    
        500     Eaton Corp                                             45,031    
     13,800     Ford Motor Co                                         593,400    
      6,300     General Motors Corp                                   395,325    
      2,600     Genuine Parts Co                                       80,275    
      2,000     Goodyear Tire & Rubber Co                             123,250    
                                                                   ----------    
                                                                    1,274,225    
                                                                   ----------    
                Banking and Financial Services -- 11.5%                          
      6,500     Ahmanson (HF) & Co                                    329,875    
      3,150     Amsouth Bancorp                                       132,497    
      4,500     Bank of New York Inc                                  200,813    
      8,300     BankBoston Corp                                       689,937    
      3,700     Bankers Trust New York Corp                           383,875    
      9,500     Barnett Banks Inc                                     647,187    
      5,635     Bear Stearns Inc                                      222,949    
      1,900     Beneficial Corp                                       135,969    
        600     Charles Schwab & Co Inc                                25,463    
     11,164     Chase Manhattan Corp                                1,241,296    
      1,500     Citicorp                                              191,438    
        100     Comdisco Inc                                            2,719    
      2,400     Countrywide Credit Industry Inc                        80,850    
      1,300     Donaldson Lufkin & Jenrette                            77,188    
      4,300     Edwards (AG) Inc                                      170,925    
      3,900     Fleet Financial Group Inc                             251,306    
      2,100     Franklin Resources Inc                                162,488    
        100     Golden West Financial Corp                              8,231    
      3,300     Greenpoint Financial Corp                             203,156    
        100     Household International Inc                            11,094    
      1,900     J.P. Morgan & Co Inc                                  203,775    

              See accompanying notes to the financial statements.              1

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares     Description                                          Value ($)   
---------------------------------------------------------------------------------
                                                                                 
                Banking and Financial Services -- continued                      
      4,800     Lehman Brothers Holding Inc                           210,600    
      9,200     Merrill Lynch                                         565,800    
        300     MGIC Investment Corp                                   15,094    
     12,545     Morgan Stanley Dean Witter Discover & Co              603,728    
      4,700     Paine Webber Group Inc                                180,656    
     13,900     PNC Bank Corp                                         601,175    
      3,700     Providian Financial Corp                              137,825    
        100     Republic New York Corp                                 10,706    
      6,600     Salomon Inc                                           395,175    
        500     SLM Holding Corp                                       67,750    
      2,000     Summit Bancorp                                        118,750    
      2,850     Synovus Financial Corp                                 74,634    
     12,533     Travelers Group Inc                                   795,845    
      8,800     Washington Mutual Inc                                 526,900    
                                                                   ----------    
                                                                    9,677,669    
                                                                   ----------    
                Chemicals -- 0.7%                                                
      2,200     Eastman Chemical Co                                   131,588    
      3,300     Great Lakes Chemical Corp                             153,450    
      1,500     Lubrizol Corp                                          65,719    
      5,100     Union Carbide Corp                                    261,694    
                                                                   ----------    
                                                                      612,451    
                                                                   ----------    
                Computer and Office Equipment -- 3.5%                            
     28,250     Compaq Computer Corp                                1,850,374    
      6,600     EMC Corp *                                            338,663    
      1,100     Gateway 2000 Inc                                       43,038    
     11,300     Micron Technology Inc *                               503,556    
        800     Pitney Bowes Inc                                       61,100    
        200     Sterling Software Inc                                   6,863    
      3,000     Western Digital Corp                                  144,375    
                                                                   ----------    
                                                                    2,947,969    
                                                                   ----------    
                Construction -- 0.1%                                             
      1,100     Georgia-Pacific Corp                                  100,375    
                                                                   ----------    
                Consumer Goods -- 3.6%                                           
      4,500     Callaway Golf Co                                      151,594    
      1,800     Clorox Co                                             236,250    
        900     Colgate-Palmolive Co                                   56,475    
      6,300     Eastman Kodak Co                                      411,863    
     10,200     Fortune Brands Inc                                    350,625    

2             See accompanying notes to the financial statements.               

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                          Value ($)  
--------------------------------------------------------------------------------
                                                                                
                Consumer Goods -- continued                                     
      1,050     Hasbro Inc                                             28,219   
      1,600     Jones Apparel Group Inc                                80,300   
      2,000     Liz Claiborne Inc                                      89,125   
      2,100     Moore Corp Ltd                                         41,606   
      3,900     Newell Co                                             153,563   
        300     Nike Inc, Class B                                      16,013   
      6,400     Procter and Gamble Co                                 851,599   
      3,900     Reebok International Ltd                              171,356   
      2,400     Sunbeam Corp                                          105,600   
      2,700     VF Corp                                               238,613   
                                                                   ----------   
                                                                    2,982,801   
                                                                   ----------   
                Electronic Equipment -- 0.8%                                    
        300     Arrow Electronics Inc *                                18,431   
      1,200     Cooper Industries Inc                                  63,975   
        400     Harris Corp Inc                                        34,850   
      1,000     Litton Industries *                                    49,875   
      4,500     Motorola Inc                                          330,188   
      1,400     Texas Instruments                                     159,075   
                                                                   ----------   
                                                                      656,394   
                                                                   ----------   
                Environmental Control -- 0.1%                                   
      4,500     Wheelabrator Technology Inc                            70,594   
                                                                   ----------   
                Food and Beverage -- 6.6%                                       
     17,100     Anheuser Busch Cos Inc                                728,887   
     23,571     Archer Daniels Midland Co                             509,733   
      2,600     Campbell Soup Co                                      120,575   
     15,900     Coca Cola Co                                          911,268   
      9,300     Coca Cola Enterprises Inc                             255,750   
      8,600     CPC International Inc                                 766,474   
      1,100     Dean Foods Co                                          48,813   
      8,700     Heinz (HJ) Co                                         362,138   
      4,700     IBP Inc                                               107,806   
     14,900     Sara Lee Corp                                         599,725   
      6,700     Seagrams Co Ltd                                       234,081   
      3,500     Unilever NV ADR                                       704,374   
        400     Universal Foods Corp                                   15,525   
      4,100     Whitman Corp                                          100,450   
        500     Wrigley (William Jr) Co                                36,250   
                                                                   ----------   
                                                                    5,501,849   
                                                                   ----------   

              See accompanying notes to the financial statements.              3

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                          Value ($)  
--------------------------------------------------------------------------------
                                                                                

                Health Care -- 1.6%                                             
        400     Becton Dickinson & Co                                  19,175   
      2,700     Columbia HCA Healthcare Corp                           85,219   
      1,100     Hillenbrand Industries Inc                             48,331   
      5,200     Johnson & Johnson                                     294,775   
      3,800     Mallinckrodt Inc                                      138,225   
      1,200     McKesson Corp                                         112,425   
      7,300     Pharmacia & Upjohn Inc                                248,656   
      9,300     Tenet Healthcare Corp *                               253,425   
      2,600     United States Surgical Corp                            85,638   
        800     Wellpoint Health Network *                             43,500   
                                                                --------------  
                                                                    1,329,369   
                                                                --------------  

                Insurance -- 3.4%                                               
      4,200     AFLAC Corp                                            231,263   
      1,700     AMBAC Inc                                             137,381   
        500     CNA Financial Corp *                                   56,719   
     12,700     Conseco Inc                                           546,100   
      3,900     Lincoln National Corp                                 261,056   
      1,800     MBIA Inc                                              203,850   
      2,100     Old Republic International Corp                        75,469   
      2,400     Progressive Corp                                      237,600   
      1,100     Reliastar Financial Corp                               82,225   
      4,600     Safeco Corp                                           225,975   
      4,500     Saint Paul Cos Inc                                    330,188   
      4,200     Torchmark Corp                                        158,288   
      2,400     Transamerica Corp                                     236,550   
        900     Transatlantic Holding Inc                              63,619   
                                                                --------------  
                                                                    2,846,283   
                                                                --------------  

                Machinery -- 1.3%                                               
      9,300     Applied Materials Inc *                               877,687   
      1,800     Cummins Engine Inc                                    138,488   
      1,100     FMC Corp *                                             91,369   
                                                                --------------  
                                                                    1,107,544   
                                                                --------------  

                Manufacturing -- 5.5%                                           
      5,700     Corning Inc                                           301,388   
     24,400     General Electric Co                                 1,524,999   
      1,000     Gillette Co                                            82,813   
     15,100     IBM Corp                                            1,523,212   
      3,900     International Game Technology                          78,000   


4              See accompanying notes to the financial statements.              

N-30D 562nd Page of 667 TOC 1st Previous Next ↓Bottom Just 562nd
GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

     Shares     Description                                          Value ($)   
---------------------------------------------------------------------------------
                                                                                 
                Manufacturing -- continued                                       
      1,900     Leggett & Platt Inc                                    81,700    
      4,200     Minnesota Mining And Manufacturing Co                 377,475    
      2,500     Owens Illinois Inc *                                   87,031    
      2,600     Temple Inland Inc                                     167,700    
      4,600     Tyco International Ltd *                              360,813    
        900     United Technologies Corp                               70,256    
                                                                   ----------    
                                                                    4,655,387    
                                                                   ----------    
                Metals and Mining -- 0.1%                                        
      1,500     Phelps Dodge Corp                                     120,656    
                                                                   ----------    
                Oil and Gas -- 7.3%                                              
      4,600     Apache Corp                                           182,563    
     10,000     Atlantic Richfield Co                                 749,999    
        200     Burlington Resources Inc                               10,125    
      4,100     Chevron Corp                                          317,494    
      1,400     Columbia Natural Gas Systems Inc                       92,400    
      2,600     El Paso Natural Gas Co                                146,250    
        100     Ensco International Inc                                 6,350    
     21,400     Exxon Corp                                          1,309,412    
      1,200     Mobil Corp                                             87,300    
      3,300     Occidental Petroleum Corp                              77,344    
      1,500     Oryx Energy Co *                                       39,656    
      1,500     Pennzoil Co                                           115,781    
      8,900     Phillips Petroleum Co                                 423,306    
      7,100     Schlumberger Ltd                                      540,931    
      4,500     Sonat Inc                                             224,156    
      5,700     Texaco Inc                                            656,924    
      7,900     Union Pacific Resources Group                         197,500    
     11,300     Unocal Corp                                           441,406    
     15,400     USX - Marathon Group                                  501,463    
                                                                   ----------    
                                                                    6,120,360    
                                                                   ----------    
                Paper and Allied Products -- 1.3%                                
      2,400     Champion International Corp                           142,050    
      1,700     Fort James Corp                                        71,400    
      7,000     International Paper Co                                369,250    
      2,000     Mead Corp                                             141,875    
      1,800     Sonoco Products Co                                     58,613    
      4,300     Westvaco Corp                                         145,663    
      1,600     Willamette Industries Inc                             127,600    
                                                                   ----------    
                                                                    1,056,451    
                                                                   ----------    

              See accompanying notes to the financial statements.              5

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


                                                                      Value     
     Shares     Description                                            ($)      
--------------------------------------------------------------------------------
                                                                                
                Pharmaceuticals -- 7.3%                                         
     27,400     Abbott Laboratories                                 1,642,287   
      2,100     Allergan Inc                                           67,988   
      2,000     American Home Products Corp                           144,000   
     26,200     Bristol Myers Squibb Co                             1,991,199   
      1,600     Lilly (Eli) & Co                                      167,400   
      9,700     Merck & Co Inc                                        890,580   
      2,000     Pfizer Inc                                            110,750   
      7,900     Schering Plough Corp                                  379,200   
      5,800     Warner Lambert Co                                     736,962   
                                                                   ----------   
                                                                    6,130,366   
                                                                   ----------   
                Primary Materials -- 0.1%                                       
      1,100     Rubbermaid Inc                                         27,500   
        800     Vulcan Materials Co                                    70,300   
                                                                   ----------   
                                                                       97,800   
                                                                   ----------   
                Primary Processing -- 0.2%                                      
      1,600     Du Pont (EI) De Nemours & Co                           99,700   
      2,900     USX-US Steel Group Inc                                101,863   
                                                                   ----------   
                                                                      201,563   
                                                                   ----------   
                Refining -- 0.8%                                                
        500     Murphy Oil Corp                                        26,844   
      9,600     Royal Dutch Petroleum                                 487,200   
      4,200     Tosco Corp                                            138,863   
                                                                   ----------   
                                                                      652,907   
                                                                   ----------   
                Retail Trade -- 4.4%                                            
     10,700     Albertsons Inc                                        367,813   
     12,800     American Stores Co                                    303,200   
     13,000     Costco Cos Inc *                                      468,813   
      8,800     Dayton Hudson Corp                                    501,600   
      1,300     Dillards Department Stores Inc                         52,000   
      3,800     Fruit of the Loom Inc *                               101,650   
     39,400     Kmart Corp *                                          546,675   
      6,400     Limited Inc                                           145,600   
        700     Penney (JC) Co Inc                                     42,000   
      3,400     Rite Aid Corp                                         170,213   
      5,398     Safeway Inc *                                         274,935   

6             See accompanying notes to the financial statements.               

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                          Value ($)  
--------------------------------------------------------------------------------
                                                                                
                Retail Trade -- continued                                       
      2,200     TJX Cos Inc                                            60,500   
      1,500     Toys R Us Inc *                                        51,844   
     16,400     Wal Mart Stores Inc                                   582,200   
                                                                 -------------  
                                                                    3,669,043   
                                                                 -------------  
                Services -- 0.3%                                                
        400     BHC Communications Inc, Class A                        49,100   
      1,500     Disney Walt Co                                        115,219   
        300     Fleming Cos Inc                                         5,663   
      2,700     Supervalu Inc                                         105,975   
                                                                 -------------  
                                                                      275,957   
                                                                 -------------  
                Technology -- 10.2%                                             
      7,900     Advanced Micro Devices Inc *                          295,756   
      2,100     Avnet Inc                                             145,294   
      1,000     Cisco Systems Inc *                                    75,375   
     13,600     Dell Computer Corp                                  1,116,049   
      1,100     Grainger (WW) Inc                                      97,694   
     32,500     Intel Corp                                          2,994,062   
     18,500     Microsoft Corp                                      2,445,468   
      2,400     Oracle Corp                                            91,500   
      6,000     Seagate Technology Corp                               229,125   
      5,900     Storage Technology Corp *                             300,531   
      3,100     Teradyne Inc *                                        172,631   
      8,000     Xerox Corp                                            604,000   
                                                                 -------------  
                                                                    8,567,485   
                                                                 -------------  
                Telecommunications -- 4.9%                                      
     34,000     AT & T Corp                                         1,325,999   
      6,894     Bell Atlantic Corp                                    498,924   
        400     Bellsouth Corp                                         17,600   
      1,800     Cincinnati Bell Inc                                    48,488   
      6,000     GTE Corp                                              267,375   
     21,400     MCI Communications Corp                               609,899   
      4,800     SBC Communications                                    261,000   
     19,500     Sprint Corp                                           916,499   
      3,500     US West Inc                                           125,344   
                                                                 -------------  
                                                                    4,071,128   
                                                                 -------------  

              See accompanying notes to the financial statements.              7

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares     Description                                         Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Transportation -- 1.8%                                          
      9,700     Burlington Northern Santa Fe Railroad Co              889,368   
      3,300     CSX Corp                                              188,719   
      3,900     Federal Express Corp                                  259,106   
      1,800     Ryder System Inc                                       64,238   
      1,300     UAL Corp *                                             99,044   
                                                                   ----------   
                                                                    1,500,475   
                                                                   ----------   
                Utilities -- 7.5%                                               
     10,000     AES Corp*                                             370,000   
      4,800     Allegheny Power System Inc                            139,500   
      7,000     American Electric Power Inc                           305,813   
     10,600     Baltimore Gas and Electric Co                         286,200   
      3,500     Carolina Power and Light Co                           118,125   
      1,300     Central & South West Corp                              26,894   
      9,800     Cinergy Corp                                          324,013   
      2,828     Citizens Utilities, Class B                            23,685   
      4,000     CMS Energy Corp                                       143,750   
      2,900     Coastal Corp                                          167,475   
      7,000     Dominion Resources Inc                                252,000   
      4,500     DPL Inc                                               106,594   
      3,800     DQE Inc                                               120,650   
      6,800     Duke Power Co                                         329,375   
     17,800     Edison International                                  429,425   
     17,600     Entergy Corp                                          436,700   
      4,900     Florida Progress Corp                                 157,719   
     22,300     Houston Industries Inc                                451,575   
      4,700     Illinova Corp                                         108,100   
      2,000     LG&E Energy Corp                                       45,250   
      5,500     Long Island Lighting Co                               135,781   
      1,700     New Century Energies Inc *                             68,638   
      2,100     Nipsco Industries Inc                                  85,706   
      1,700     Northern States Power Co                               81,813   
     10,500     Pacificorp                                            217,875   
      2,200     PG & E Corp                                            51,013   
      3,400     Potomac Electric Power Co                              77,138   
      1,000     PP & L Resources Inc                                   21,938   
      2,200     Scana Corp                                             53,075   
     35,300     Southern Co                                           743,505   
      3,500     Teco Energy Inc                                        84,219   
      7,200     Texas Utilities Co                                    251,100   
      3,100     Wisconsin Energy Corp                                  79,244   
                                                                   ----------   
                                                                    6,293,888   
                                                                   ----------   
                TOTAL COMMON STOCKS  (COST  $60,139,758)           73,293,640   
                                                                   ==========   

8             See accompanying notes to the financial statements.               

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


 Par Value($)/                                                                 
   Shares       Description                                          Value ($) 
-------------------------------------------------------------------------------
                                                                               
                SHORT-TERM INVESTMENTS -- 16.2%                                

                Cash Equivalents -- 5.6%                                       
 $1,573,771     BankBoston Eurodollar Time Deposit, 5.7875% due                
                9/2/97/(a)/                                         1,573,771  
   $ 97,423     First Union National Bank of North Carolina                    
                Eurodollar Time Deposit, 5.5625% due 9/2/97/(a)/       97,423  
   $292,270     Harris Bank and Trust Eurodollar Time Deposit,                 
                5.625% due 9/2/97/(a)/                                292,270  
    706,878     Merrimac Cash Fund Premium Class/(a)/                 706,878  
 $2,000,000     Prudential Securities Group Inc Master Note,                   
                5.8875% due 9/2/97/(a)/                             2,000,000  
                                                                  -----------  
                                                                    4,670,342  
                                                                  -----------  
                Repurchase Agreements -- 10.0%                                 

 $4,198,363     Prudential Securities, Inc. Repurchase                         
                Agreement, dated 8/29/97, due 9/2/97, with a                   
                maturity value of $4,200,691 and an effective                  
                yield of 4.99%, collateralized by a U.S.                       
                Government Agency Obligation with a rate of                    
                6.811%, with a maturity date of 3/1/35 and with                
                a market value of $4,282,345.                       4,198,363  
 $4,198,363     Salomon Brothers Repurchase Agreement, dated                   
                8/29/97, due 9/2/97, with a maturity value of                  
                $4,200,719 and an effective yield of 5.05%,                    
                collateralized by U.S. Treasury Obligations with               
                rates ranging from 5.00% to 6.75%, with maturity               
                dates ranging from 2/15/99 to 8/15/26 and with                 
                an aggregate market value of $4,294,569.            4,198,363  
                                                                  -----------  
                                                                    8,396,726  
                                                                  -----------  
                U.S. Government -- 0.6%                                        

   $510,000     U.S. Treasury Bill, 5.22% due 11/28/97/(b)/           503,726  
                                                                  -----------  

                TOTAL SHORT-TERM INVESTMENTS (COST $13,570,540)    13,570,794  
                                                                  -----------  

                TOTAL INVESTMENTS -- 103.5%                                    
                (COST $73,710,298)                                 86,864,434  

                Other Assets and Liabilities (net) -- (3.5)%       (2,904,391) 
                                                                  -----------  

                TOTAL NET ASSETS-- 100%                           $83,960,043  
                                                                  ===========  


Notes to the Schedule of Investments:           

ADR - American Depositary Receipt               
* Non-income producing security.                
         /(a)/ Represents investments of security lending collateral
(Note 1).                             
             /(b)/ Security has been segregated to cover margin requirements
on open financial futures contracts.  

              See accompanying notes to the financial statements.              9

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]


                                                                              
Assets:                                                                       
   Investments, at value (cost $73,710,298) (Note 1)               $86,864,434
   Cash                                                              3,801,810
   Receivable for investments sold                                     841,080
   Dividends and interest receivable                                   143,229
   Receivable for open swap contracts (Notes 1 and 6)                  115,168
   Receivable for variation margin on open futures contracts (Notes           
     1 and 6)                                                           34,650
   Receivable for expenses waived or borne by Manager (Note 2)          23,016
                                                                   -----------
      Total assets                                                  91,823,387
                                                                   -----------

Liabilities:                                                                  
   Payable for investments purchased                                 3,113,357
   Payable upon return of securities loaned (Note 1)                 4,670,342
   Payable to affiliate for (Note 2):                                         
     Management fee                                                     32,056
     Shareholder service fee                                             9,601
   Accrued expenses                                                     37,988
                                                                   -----------
      Total liabilities                                              7,863,344
                                                                   -----------
Net assets                                                         $83,960,043
                                                                   ===========

Net assets consist of:                                                        
   Paid-in-capital                                                 $67,211,464
   Accumulated undistributed net investment income                     236,490
   Accumulated undistributed net realized gain                       3,266,805
   Net unrealized appreciation                                      13,245,284
                                                                   ===========
                                                                   $83,960,043
                                                                   ===========
Net assets attributable to:                                                   
   Class III shares                                                $83,960,043
                                                                   ===========
Shares outstanding:                                                           
   Class III                                                         6,503,780
                                                                   ===========
Net asset value per share:                                                    
   Class III                                                       $     12.91
                                                                   ===========

10            See accompanying notes to the financial statements.               

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]

                                                                               
Investment Income:                                                             
   Dividends (net of withholding taxes of $77)                     $   645,145 
   Interest (including securities lending income of $1,185)            176,076 
                                                                   ----------- 

      Total income                                                     821,221 
                                                                   ----------- 

Expenses:                                                                      
   Management fee (Note 2)                                             179,569 
   Audit fees                                                           23,368 
   Custodian and transfer agent fees                                    22,135 
   Registration fees                                                     5,134 
   Legal fees                                                            1,550 
   Trustees fees (Note 2)                                                  358 
   Miscellaneous                                                            92 
   Fees waived or borne by Manager (Note 2)                           (113,690)
                                                                   ----------- 
                                                                       118,516 
   Shareholder service fee (Note 2)                                            
      Class III                                                         53,854 
                                                                   ----------- 
      Net expenses                                                     172,370 
                                                                   ----------- 

        Net investment income                                          648,851 
                                                                   ----------- 

Realized and unrealized gain (loss):                                           
   Net realized gain (loss) on:                                                
      Investments                                                    2,805,970 
      Closed futures contracts                                         560,808 
      Closed swap contracts                                           (105,975)
                                                                   ----------- 

        Net realized gain                                            3,260,803 
                                                                   ----------- 

   Change in net unrealized appreciation (depreciation) on:                    
      Investments                                                    7,469,435 
      Open futures contracts                                           (11,464)
      Open swap contracts                                              199,867 
                                                                   ----------- 

        Net unrealized gain                                          7,657,838 
                                                                   ----------- 

      Net realized and unrealized gain                              10,918,641 
                                                                   ----------- 

Net increase in net assets resulting from operations               $11,567,492 
                                                                   =========== 

             See accompanying notes to the financial statements.            11

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                       Six Months Ended       Year Ended     
                                                                        August 31, 1997      February 28,    
                                                                          (Unaudited)            1997        
                                                                       ------------------  ------------------
                                                                                                             
Increase (decrease) in net assets:                                                                           
Operations:                                                                                                  
    Net investment income                                                $     648,851       $   1,068,038   
    Net realized gain                                                        3,260,803          17,195,664   
    Change in net unrealized appreciation (depreciation)                     7,657,838          (6,109,720)  
                                                                         -------------       -------------   
    Net increase in net assets resulting from operations                    11,567,492          12,153,982   
                                                                         -------------       -------------   
Distributions to shareholders from:                                                                          
    Net investment income                                                                                    
        Class III                                                             (577,419)         (1,070,308)  
                                                                         -------------       -------------   
        Total distributions from net investment income                        (577,419)         (1,070,308)  
                                                                         -------------       -------------   
    Net realized gains                                                                                       
        Class III                                                          (10,998,257)        (10,440,389)  
                                                                         -------------       -------------   
        Total distributions from net realized gains                        (10,998,257)        (10,440,389)  
                                                                         -------------       -------------   
                                                                           (11,575,676)        (11,510,697)  
                                                                         -------------       -------------   
    Net share transactions: (Note 5)                                                                         
        Class III                                                           17,707,792           8,132,135   
                                                                         -------------       -------------   
    Increase in net assets resulting from net share transactions            17,707,792           8,132,135   
                                                                         -------------       -------------   
       Total increase in net assets                                         17,699,608           8,775,420   

Net assets:                                                                                                  
    Beginning of period                                                     66,260,435          57,485,015   
                                                                         -------------       -------------   
    End of period (including accumulated undistributed net investment                                        
       income of $236,490 and $165,058, respectively)                    $  83,960,043       $  66,260,435   
                                                                         =============       =============   

12            See accompanying notes to the financial statements.               

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


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

                                         Six Months Ended               Year Ended February 28/29,                
                                         August 31, 1997    ----------------------------------------------------  
                                           (Unaudited)        1997      1996       1995       1994       1993     
                                           -----------      ---------  --------  ---------  ---------  ---------  
                                                                                                                  
Net asset value, beginning of period         $  12.98       $  12.93   $ 10.65   $  11.07   $  11.35   $  10.50   
                                            ---------       --------   -------   --------   --------   --------   

Income from investment operations:                                                                                
    Net investment income                        0.12           0.24      0.28       0.23       0.34       0.31   
    Net realized and unrealized gain             2.03           2.41      3.71       0.50       1.18       0.84   
                                            ---------       --------   -------   --------   --------   --------   

       Total from investment                                                                                      
       operations                                2.15           2.65      3.99       0.73       1.52       1.15   
                                            ---------       --------   -------   --------   --------   --------   

Less distributions to shareholders:                                                                               
    From net investment income                  (0.11)         (0.24)    (0.25)     (0.28)     (0.35)     (0.30)  
    From net realized gains                     (2.11)         (2.36)    (1.46)     (0.87)     (1.45)        --   
                                            ---------       --------   -------   --------   --------   --------   

       Total distributions                      (2.22)         (2.60)    (1.71)     (1.15)     (1.80)     (0.30)  
                                            ---------       --------   -------   --------   --------   --------   
Net asset value, end of period               $  12.91       $  12.98   $ 12.93   $  10.65   $  11.07   $  11.35   
                                            =========       ========   =======   ========   ========   ========   

Total Return/(a)/                               17.39%         22.76%    38.64%      7.36%     14.12%     11.20%  

Ratios/Supplemental Data:                                                                                         
    Net assets, end of period (000's)        $ 83,960       $ 66,260   $57,485   $ 47,969   $ 55,845   $ 85,232   
    Net expenses to average daily net                                                                             
       assets                                    0.48%*         0.48%     0.48%      0.48%      0.48%      0.49%  
    Net investment income to average                                                                              
       daily net assets                          1.81%*         1.83%     2.25%      2.52%      2.42%      2.88%  
    Portfolio turnover rate                        28%           131%       81%       112%        38%        56%  
    Average broker commission rate per                                                                            
       equity share (b)                      $ 0.0253       $ 0.0259       N/A        N/A        N/A        N/A   
    Fees and expenses voluntarily                                                                                 
       waived or borne by the Manager                                                                             
       consisted of the following per                                                                             
       share amounts:                        $   0.02       $   0.04   $  0.03   $   0.03   $   0.03   $   0.02   

/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            
*     Annualized.                                                               

              See accompanying notes to the financial statements.             13

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.  Significant accounting policies                                             

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

    The Fund seeks a total return greater than that of the Standard & Poor's 500
   Stock Index through investment of substantially all of its assets in common
 stocks chosen from the Wilshire 5000 Index and primarily in common stocks
chosen from the among the 1,200 companies with the largest equity       
capitalization whose securities are listed on a United States national  
securities exchange which are not tobacco producing issuers.            

  On June 1, 1996, the Fund began to offer three classes of shares: Class I,
   Class II and Class III. The principal economic difference among the classes
of shares is the level of shareholder service fee borne by the classes. 
Eligibility for and automatic conversion between the various classes of 
  shares is generally based on the total amount of assets invested with GMO,
  as more fully outlined in the Trust's prospectus. Class III shares are the
  continuation of the Trust's shares that existed prior to June 1, 1996, and
   bear the same total operating expenses (after the voluntary expense waiver)
   as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                     

  The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are  
consistently followed by the Fund in the preparation of its financial   
  statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make    
  estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those     
estimates.                                                              

Portfolio valuation                                                     
Portfolio securities listed on a securities exchange for which market   
 quotations are available are valued at the last quoted 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. Other assets and securities
 for which no quotations are readily available are valued at fair value as
determined in good faith by the Trustees.                               

Futures contracts                                                       
The Fund may purchase and sell futures contracts on the domestic stock  
indices. Stock index futures contracts represent commitments for future 
delivery of cash based upon the level of a specified index of equity    
 securities at a specified price at a given date. The Fund may use futures
   contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling   
  futures tends to decrease the Fund's exposure to the underlying instrument
 or hedge other Fund instruments. Upon purchase of a futures contract, the
Fund is required to deposit with its                                    

14                                                                              

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

custodian, in a segregated account in the name of the futures broker, an
    amount of cash or U.S. government obligations in accordance with the initial
   margin requirements of the broker or exchange. Futures contracts are marked
  to market daily and an appropriate payable or receivable for the change in
value ("variation margin") is recorded by the Fund. The payable or      
   receivable is liquidated on the following business day. Gains or losses are
recognized but not considered realized until the contracts expire or are
closed. Futures contracts involve, to varying degrees, risk of loss in  
excess of the variation margin disclosed in the Statement of Assets and 
 Liabilities. Losses may arise from changes in the value of the underlying
  instrument, if there is an illiquid secondary market for the contracts, or
    if counterparties do not perform under the contract terms. Futures contracts
are valued at the settlement price established each day by the board of 
   trade or exchange on which they are traded. See Note 6 for all open futures
contracts held as of August 31, 1997.                                   

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund loaned
 securities having a market value of $4,489,740, collateralized by cash in
the amount of $4,670,342, which was invested in short-term instruments. 

Swap agreements                                                         
    The Fund may enter into swap agreements to manage its exposure to the equity
markets. A swap is an agreement to exchange the return generated by one 
  instrument for the return generated by another instrument. The Fund enters
  into equity swap agreements which involve a commitment by one party in the
   agreement to pay interest in exchange for a market linked return based on a
notional amount. To the extent that the total return of the security or 
 index underlying the transaction exceeds or falls short of the offsetting
interest rate obligation, the Fund will receive a payment from or make a
    payment to the counterparty, respectively. Equity swaps are marked to market
 daily based upon quotations from market makers and the change, if any, is
    recorded as unrealized gain or loss in the Statement of Operations. Payments
received or made at the end of the measurement period are recorded as   
 realized gain or loss in the Statement of Operations. Entering into these
   agreements involves, to varying degrees, elements of credit and market risk
in excess of the amounts recognized on the Statement of Assets and      
Liabilities. Such risks involve the possibility that there is no liquid 
market for these                                                        

                                                                              15

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

agreements, that the counterparty to the agreements may default on its  
    obligation to perform, or that there may be unfavorable changes in the price
of the security or index underlying these transactions. See Note 6 for a
summary of all open swap agreements as of August 31, 1997.              

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 taxable 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 federal
 income tax purposes. Therefore, no provision for federal income or excise
tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment 
income on each class of shares.                                         

Income distributions and capital gain distributions are determined in   
accordance with income tax regulations which may differ from generally  
accepted accounting principles. 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 is
    recorded on the ex-dividend date. Interest income is recorded on the accrual
    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.                                                  

Allocation of operating activity                                        
The majority of expenses of the Trust are directly identifiable to an   
  individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,  
taking into consideration, among other things, the nature and type of   
expense and the relative size of the Funds. Investment income, common   
    expenses and realized and unrealized gains and losses are allocated pro-rata
among the classes based on the relative net assets of each class.       
Shareholder service fees, which are directly attributable to a class of 
shares, are charged to that class' operations.                          

Purchases and redemptions of Fund shares                                
    The premium on cash purchases of Fund shares is .14% of the amount invested.
   Prior to June 1, 1996, the premium on cash purchases was .17% of the amount
   invested. All purchase premiums are paid to and recorded as paid-in capital
by the Fund. For the six months ended August 31, 1997, the Fund         

16                                                                              

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)--(Continued)                          
August 31, 1997                                                                 
--------------------------------------------------------------------------------

received $9,034 in purchase premiums. There is no premium for cash      
redemptions, reinvested distributions or in-kind transactions.          

2.  Fees and other transactions with affiliates                                 

GMO earns a management fee paid monthly at the annual rate of .50% of   
average daily net assets. Effective June 1, 1996, the Fund adopted a    
Shareholder Services Plan under which the Fund pays GMO a shareholder   
service fee for client and shareholder service, reporting, and other    
   support. Pursuant to the Shareholder Services Plan, the shareholder service
    fee is calculated based on the average daily net assets of each class at the
  annual rate of .28% for Class I shares, .22% for Class II shares, and .15%
for Class III shares.                                                   

  GMO has agreed to waive a portion of its fee and bear other expenses until
   further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other       
  transaction costs (including transfer taxes), shareholder service fees and
 extraordinary expenses) exceed .33% of average daily net assets. Prior to
  June 1, 1996, a similar waiver existed for annual expenses exceeding .48%;
thus, the net annual expense ratio after the waiver for a Class III     
shareholder is unchanged.                                               

    The Fund's portion of the fee paid by the Trust to the unaffiliated Trustees
during the six months ended August 31, 1997 was $358. 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 six months ended August 31, 1997, aggregated
$18,749,031 and $18,355,671, respectively.                              

At August 31, 1997, the cost for Federal income tax purposes and gross  
    unrealized appreciation and depreciation in value of investments held was as
follows:                                                                

                                                                [Download Table]

                      Gross Unrealized      Gross Unrealized      Net Unrealized   
  Aggregate Cost        Appreciation          Depreciation         Appreciation    
------------------  --------------------  --------------------  -------------------
                                                                                   
   $ 73,710,298         $ 13,786,390           $ 632,254           $ 13,154,136    

4.  Principal shareholders                                                      

  At August 31, 1997, 87% of the outstanding shares of the Fund were held by
   three shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                                 

                                                                              17

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) - (Continued)                         
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                                 

                                                        [Enlarge/Download Table]


                                                   Six Months Ended                     Year Ended            
Class III:                                         August 31, 1997                    February 28, 1996       
                                          ----------------------------------  ------------------------------- 
                                              Shares             Amount           Shares          Amount      
                                          ---------------    ---------------  --------------  --------------- 
                                                                                                              
Shares sold                                   484,857      $      6,453,116     1,730,490    $     22,801,781 
Shares issued to shareholders                                                                                 
        in reinvestment of distributions      934,872            11,575,676       933,753          11,510,698 
Shares repurchased                            (22,153)             (321,000)   (2,002,361)        (26,180,344)
                                          -----------           -----------   -----------          ---------- 
Net increase                                1,397,576      $     17,707,792       661,882    $      8,132,135 
                                          ===========           ===========   ===========          ========== 
                                                                               
6.  Financial instruments                                                       

A summary of outstanding financial instruments at August 31, 1997 is as 
follows:                                                                        

Long futures contracts                                                  

                                                                [Download Table]


                                                                     Net      
 Number of                    Expiration                          Unrealized  
 Contracts        Type           Date         Contract Value      Depreciation
-------------  ------------  --------------  -----------------  --------------
                                                                              
     21          S&P 500     September 1997     $ 9,482,550       $  24,020   
                                                                ==============

   At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                    

18                                                                              

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GMO Tobacco-Free Core Fund                                                      
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)--(Continued)                          
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                         

                                                        [Enlarge/Download Table]

                                                                                  Unrealized    
Notional Amount   Expiration                                                     Appreciation   
Fund/Counterparty   Date                Description                              (Depreciation) 
----------------- ----------  -----------------------------------------------   ----------------
                                                                                                
$   1,886,617/     9/11/97    Agreement with Morgan Stanley Capital Services,    $   110,492    
    1,819,266                 Inc. dated September 9, 1996 to pay (receive)                     
                              the notional amount multiplied by the return on                   
                              the Standard & Poor's 500 Index (including                        
                              dividends) less the notional amount                               
                              multiplied by 6 month LIBOR adjusted by a                         
                              specified spread and to receive (pay) the                         
                              change in market value of a basket of                             
                              selected securities (including dividends)                         
                              less the counterparty's notional amount                           
                              multiplied by 6 month LIBOR adjusted by a                         
                              specified spread.                                                 

$   2,359,489/     5/6/98     Agreement with NatWest Markets dated 5/6/97 to        (271,643)   
    2,359,489                 receive (pay) the counterparty's notional                         
                              amount multiplied by the return on the Standard                   
                              & Poor's 500 Index (including dividends) less                     
                              the notional amount multiplied by LIBOR adjusted                  
                              by a specified spread and to pay (receive) the                    
                              change in market value of a basket of selected                    
                              securities (including dividends) less the                         
                              notional amount multiplied by LIBOR adjusted by a                 
                              specified spread.                                                 

    3,425,851/     5/13/98    Agreement with Morgan Stanley Capital Services,        276,319    
    3,163,935                 Inc. dated 5/13/97 to pay (receive) the notional                  
                              amount multiplied by the return on the Standard &                 
                              Poor's 500 Index (including dividends) less the                   
                              notional amount multiplied by LIBOR adjusted by a                 
                              specified spread and to receive (pay) the change                  
                              in market value of a basket of selected securities                
                              (including dividends) less the counterparty's                     
                              notional amount multiplied by LIBOR adjusted by a                 
                              specified spread.                                                 

                                                                                --------------  
                                  Net unrealized appreciation                    $   115,168    
                                                                                ==============  

                                                                              19

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


        Par Value        Description                                             Value ($)    
----------------------------------------------------------------------------------------------
                                                                                              
                           DEBT OBLIGATIONS -- 89.5%                                          
                           Argentina -- 0.4%                                                  
USD         1,000,000      Republic of Argentina Par Bond,                                    
                              Variable Rate, Step Up, 5.50%, due 3/31/23               736,875
                                                                                 -------------
                           Brazil -- 0.8%                                                     
USD         1,702,221      Brazil Capitalization Bond, PIK, 8.00%, due 4/15/14       1,387,311
                                                                                 -------------
                           Bulgaria -- 0.1%                                                   
USD         2,000,000      Bulgaria Discount Bond, Series B Strips, Basket 2,                 
                              due 7/28/24                                              220,120
                                                                                 -------------
                           Denmark -- 0.6%                                                    
DKK         6,700,000      Kingdom of Denmark Bullet, 7.00%, due 11/15/07            1,027,687
                                                                                 -------------
                           Mexico -- 1.3%                                                     
FRF        10,000,000      Mexico Par Bond, 6.63%, due 12/31/19                      1,407,551
USD         1,000,000      Mexico Par Bond Series B, 6.25%, due 12/31/19               800,000
                                                                                 -------------
                                                                                     2,207,551
                                                                                 -------------
                           New Zealand -- 4.3%                                                
NZD        12,000,000      New Zealand Index Linked Bond, 4.50%, due 2/15/16         7,329,609
                                                                                 -------------
                           Supra National -- 2.1%                                             
ITL     5,000,000,000      European Investment Bank, 12.20%, due 2/18/03             3,545,455
                                                                                 -------------
                           Sweden -- 4.8%                                                     
SEK        65,800,000      Kingdom of Sweden, 6.00%, due 2/09/05                     8,188,333
                                                                                 -------------
                           United States -- 74.6%                                             

                           Asset Backed Securities -- 61.2%                                   
USD           918,049      AFC Home Equity Loan Trust Series 97-1 Class A,                    
                              Variable Rate, 1 mo. LIBOR + .22%, 5.87%, due                   
                              3/25/27                                                  917,475
USD         3,379,369      Americredit Automobile Receivables Trust Series                    
                              96-B Class A, 6.50%, due 1/12/02                       3,392,569
USD        15,500,000      Big Flower Receivables Master Trust 96-2 Class A,                  
                              Variable Rate, LIBOR + .25%, 5.65%, due 4/25/03       15,500,000
USD        10,000,000      Brazos Student Loan Finance Corp. Series 96-A4,                    
                              Variable Rate, 3 mo. U.S. Treasury Bill + .50%,                 
                              5.94%, due 12/01/02                                    9,985,938
USD        10,000,000      First Chicago Master Trust II 95-0,                                
                              Variable Rate, 1 mo. LIBOR + .23%, 5.88%, due                   
                              2/15/04                                               10,037,500

              See accompanying notes to the financial statements.              1

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


          Par Value        Description                                             Value ($)  
----------------------------------------------------------------------------------------------
                                                                                              
                           Asset Backed Securities -- continued                               
USD        20,000,000      First Chicago Master Trust II 96-S Class A,                        
                              Variable Rate, 1 mo. LIBOR + .13%, 5.78%, due                   
                              8/15/04                                               20,005,999
USD         5,000,000      First USA Credit Card Master Trust 97-4 Class A,                   
                              Variable Rate, 1 mo. LIBOR + .21%, 5.85%, due                   
                              2/17/10                                                4,999,219
USD         3,025,184      Keycorp Student Loan Trust 94-B Class A,                           
                              Variable Rate, 1 mo. LIBOR + .29%, 5.92%, due                   
                              8/27/18                                                3,036,528
USD        10,000,000      MBNA Master Credit Card Trust 94-C Class A,                        
                              Variable Rate, 1 mo. LIBOR + .25%, 5.88%, due                   
                              3/15/04                                               10,051,563
USD        10,000,000      Navistar Financial Dealer Note Master Trust 90-A                   
                              Class A3, Variable Rate, 1 mo. LIBOR + .90%,                    
                              6.54%, due 1/25/03                                    10,093,750
USD         5,000,000      Northstar CBO Series 97-1 Class A2, 6.62%, due                     
                              7/15/09                                                5,148,500
USD         8,311,004      Signet Student Loan Trust Series 96-A Class A-1,                   
                              Variable Rate, 1 mo. LIBOR + .09%, 5.72%, due                   
                              1/25/05                                                8,311,004
USD         3,000,000      Starvest CBO-1 Class A,                                            
                              Variable Rate, 6 mo. LIBOR + .19%, 6.00%, due                   
                              7/30/11, 144A                                          2,982,972
                                                                                 -------------
                                                                                   104,463,017
                                                                                 -------------

                           U.S. Government -- 13.4%                                           
USD        19,000,000      U.S. Treasury Bond, 6.25%, due 8/15/23/(a)/              17,978,749
USD         5,000,000      U.S. Treasury Inflation Indexed Note, 3.375%, due                  
                              1/15/07                                                4,976,053
                                                                                 -------------
                                                                                    22,954,802
                                                                                 -------------

                           Total United States                                     127,417,819
                                                                                 -------------

                           Venezuela -- 0.5%                                                  
USD         1,000,000      Republic of Venezuela Par Bond, 6.75%, due 3/31/20          819,375
                                                                                 -------------

                           TOTAL DEBT OBLIGATIONS (COST $152,016,156)              152,880,135
                                                                                 -------------

           Shares                                                                             
---------------------------                                                                   
                                                                                              
                           PREFERRED STOCKS -- 2.3%                                           

                           United States -- 2.3%                                              
                4,000      Bear Stearns Managed Income Securities Plus Fund          3,959,880
                                                                                 -------------

                           TOTAL PREFERRED STOCKS (COST $3,949,109)                  3,959,880
                                                                                 -------------

              See accompanying notes to the financial statements.              2

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


       Principal Amount    Description                                             Value ($)  
----------------------------------------------------------------------------------------------
                                                                                              
                           CALL OPTIONS PURCHASED -- 1.1%                                     

                           Cross Currency Options -- 0.9%                                     
ECU        46,100,000      ECU Call/DEM Put, Expires 1/21/98, Strike 1.9450            518,657
ECU        19,800,000      ECU Call/DEM Put, Expires 10/30/97, Strike 1.918            480,131
ECU        20,200,000      ECU Call/DEM Put, Expires 12/15/97 Knock Out                       
                           1.9225, Strike 1.91                                         536,166
                                                                                 -------------
                                                                                     1,534,954
                                                                                 -------------
                           Options on Bonds -- 0.0%                                           
SEK        20,000,000      Sweden Government Bond, Expires 10/24/97, Strike                   
                           95.484                                                       52,783
                                                                                 -------------
                           Options on Currency -- 0.2%                                        
USD        10,700,000      British Pound, Expires 11/06/97, Strike 1.6325              236,470
                                                                                 -------------
                           TOTAL CALL OPTIONS PURCHASED                                       
                           (COST $1,732,995)                                         1,824,207
                                                                                 -------------
                           PUT OPTIONS PURCHASED -- 0.0%                                      

                           Cross Currency Options -- 0.0%                                     
USD           600,000      TRL Put/USD, DEM Basket Call, Expires 12/15/97,                    
                           Strike 400                                                    7,200
USD           234,896      TRL Put/USD, DEM Basket Call, Expires 12/15/97,                    
                           Strike 425                                                    1,050
                                                                                 -------------
                                                                                         8,250
                                                                                 -------------
                           TOTAL PUT OPTIONS PURCHASED                                        
                           (COST $11,130)                                                8,250
                                                                                 -------------

            Shares                                                                            
---------------------------                                                                   
                                                                                              
                           RIGHTS AND WARRANTS -- 0.0%                                        

                           Mexico -- 0.0%                                                     
            2,740,000      United Mexican States Warrants, Expires 6/30/03 *                --
                                                                                 -------------

                           Venezuela -- 0.0%                                                  
            1,000,000      Republic of Venezuela Recovery Warrants, Expires                   
                           04/15/20 *                                                       --
                                                                                 -------------

                           TOTAL RIGHTS AND WARRANTS (COST $0)                              --
                                                                                 -------------

             See accompanying notes to the financial statements.               3

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


          Par Value        Description                                             Value ($)   
---------------------------------------------------------------------------------------------- 
                                                                                               
                           SHORT-TERM INVESTMENTS -- 10.2%                                     

                           Repurchase Agreements -- 10.2%                                      
USD         8,698,570      Prudential Securities, Inc. Repurchase Agreement,                   
                           dated 8/29/97, due 9/2/97, with a maturity value                    
                           of $8,703,393 and an effective yield of 4.99%,                      
                           collateralized by U.S. Government Agency                            
                           Obligations with rates ranging from 6.072% to                       
                           6.811%, with maturity dates ranging from 10/1/32                    
                           to 3/1/35 and with an aggregate market value of                     
                           $8,872,571.                                               8,698,570 

USD         8,698,570      Salomon Brothers Repurchase Agreement, dated                        
                           8/29/97, due 9/2/97, with a maturity value of                       
                           $8,703,450 and an effective yield of 5.05%,                         
                           collateralized by U.S. Treasury Obligations with                    
                           rates ranging from 5.00% to 6.75%, with maturity                    
                           dates ranging from 2/15/99 to 8/15/26 and with an                   
                           aggregate market value of $8,897,897.                     8,698,570 
                                                                                 ------------- 
                                                                                    17,397,140 
                                                                                 ------------- 

                           TOTAL SHORT-TERM INVESTMENTS                                        
                           (COST $17,397,140)                                       17,397,140 
                                                                                 ------------- 

                           TOTAL INVESTMENTS -- 103.1%                                         
                           (COST $175,106,530)                                     176,069,612 

                           Other Assets and Liabilities (net) -- (3.1)%             (5,286,200)
                                                                                 ------------- 

                           TOTAL NET ASSETS -- 100%                              $ 170,783,412 
                                                                                 ============= 

           Notes to the Schedule of Investments:

PIK -- Payment In Kind    

                   Knock Out -- Option will expire if underlying
             security reaches Knock Out price.

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

4                      See accompanying notes to the financial statements.      

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

--------------------------------------------------------------------------------
   Notes to the Schedule of Investments -- continued
  Variable and Step up rates -- The rates shown on
       variable and step up rate notes are the current
    interest rates at August 31, 1997, which are
   subject to change based on the terms of the
security.                               

                                                                [Download Table]
Currency Abbreviations                                       
                                                             
AUD - Australian Dollar            GBP - British Pound       
BEF - Belgian Franc                ITL - Italian Lira        
CAD - Canadian Dollar              JPY - Japanese Yen        
CHF - Swiss Franc                  NLG - Netherlands Guilder 
DEM - German Mark                  NZD - New Zealand Dollar  
DKK - Danish Krone                 SEK - Swedish Krona       
ECU - European Currency Unit       THB - Thailand Baht       
ESP - Spanish Peseta               TRL - Turkish Lira        
FRF - French Franc                 USD - United States Dollar

/(a)/All or a portion of this security is held as collateral      
for open futures contracts.                             
*  Non-income producing security.                             

           See accompanying notes to the financial statements.               5

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                         
Assets:                                                                                  
   Investments, at value (cost $175,106,530) (Note 1)                        $176,069,612
   Cash                                                                        21,880,488
   Foreign currency, at value (cost $9,635) (Note 1)                               11,917
   Interest receivable                                                          1,096,545
   Receivable for open forward foreign currency contracts (Notes 1 and 6)       1,767,959
   Receivable for expenses waived or borne by Manager (Note 2)                     37,775
   Receivable for Fund shares sold                                                 74,346
   Miscellaneous receivable                                                           112
                                                                             ------------
       Total assets                                                           200,938,754
                                                                             ------------

Liabilities:                                                                             
   Payable for investments purchased                                           25,141,159
   Written options outstanding, at value (premiums $46,637) (Notes 1 and 6)       175,364
   Payable for open forward foreign currency contracts (Notes 1 and 6)          1,073,784
   Payable for Fund shares repurchased                                          3,263,012
   Payable to affiliate for (Note 2):                                                    
       Management fee                                                              42,472
       Shareholder service fee                                                     15,927
   Accrued expenses                                                                82,603
   Payable for open swap contracts (Notes 1 and 6)                                 85,779
   Payable for variation margin on open futures contracts (Notes 1 and 6)         275,242
                                                                             ------------
       Total liabilities                                                       30,155,342
                                                                             ------------
Net assets                                                                   $170,783,412
                                                                             ============

Net assets consist of:                                                                   
   Paid-in-capital                                                           $166,479,984
   Accumulated undistributed net investment income                              1,951,168
   Accumulated undistributed net realized gain                                  1,218,146
   Net unrealized appreciation                                                  1,134,114
                                                                             ------------
                                                                             $170,783,412
                                                                             ============
Net assets attributable to:                                                              
   Class III shares                                                          $170,783,412
                                                                             ============
Shares outstanding:                                                                      
   Class III                                                                   16,169,307
                                                                             ============
Net asset value per share:                                                               
   Class III                                                                 $      10.56
                                                                             ============

6              See accompanying notes to the financial statements.              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Statement of Operations --                                                      
Period from April 30, 1997 (commencement of operations) to                
August 31, 1997 (Unaudited)                                               
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                    
Investment Income:                                                                  
   Interest                                                              $1,941,960 
   Dividends                                                                132,700 
                                                                         ---------- 
       Total income                                                       2,074,660 
                                                                         ---------- 
Expenses:                                                                           
   Management fee (Note 2)                                                  123,193 
   Custodian and transfer agent fees                                         68,117 
   Audit fees                                                                25,575 
   Registration fees                                                          1,291 
   Legal fees                                                                 1,203 
   Trustees fees (Note 2)                                                       205 
   Miscellaneous                                                                395 
   Fees waived or borne by Manager (Note 2)                                (142,685)
                                                                         ---------- 
                                                                             77,294 
   Shareholder service fee (Note 2)                                                 
       Class III                                                             46,198 
                                                                         ---------- 
       Net expenses                                                         123,492 
                                                                         ---------- 
          Net investment income                                           1,951,168 
                                                                         ---------- 
Realized and unrealized gain (loss):                                                
   Net realized gain (loss) on:                                                     
       Investments                                                           86,222 
       Closed futures contracts                                             785,797 
       Closed swap contracts                                                 94,982 
       Foreign currency, forward contracts and foreign currency related             
       transactions                                                         251,145 
                                                                         ---------- 
          Net realized gain                                               1,218,146 
                                                                         ---------- 
   Change in net unrealized appreciation (depreciation) on:                         
       Investments                                                          963,082 
       Open futures contracts                                              (338,818)
       Open swap contracts                                                  (85,779)
       Written options                                                     (128,727)
       Foreign currency, forward contracts and foreign currency related             
       transactions                                                         724,356 
                                                                         ---------- 
          Net unrealized gain                                             1,134,114 
                                                                         ---------- 
       Net realized and unrealized gain                                   2,352,260 
                                                                         ---------- 
Net increase in net assets resulting from operations                     $4,303,428 
                                                                         ========== 

7              See accompanying notes to the financial statements.              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                            Period from April 30, 1997 
                                                           (commencement of operations)
                                                              to August 31, 1997       
                                                                  (Unaudited)          
                                                           ----------------------------
                                                                                       
Increase (decrease) in net assets:                                                     
Operations:                                                                            
   Net investment income                                           $  1,951,168        
   Net realized gain                                                  1,218,146        
   Change in net unrealized appreciation (depreciation)               1,134,114        
                                                                   ------------        
   Net increase in net assets resulting from operations               4,303,428        
                                                                   ------------        
   Net share transactions: (Note 5)                                                    
       Class III                                                    166,479,984        
                                                                   ------------        
   Increase in net assets resulting from net share                                     
      transactions                                                  166,479,984        
                                                                   ------------        
      Total increase in net assets                                  170,783,412        

Net assets:                                                                            
   Beginning of period                                                       --        
                                                                   ------------        
   End of period (including accumulated undistributed net                              
      investment income of $1,951,168)                             $170,783,412        
                                                                   ============        

8              See accompanying notes to the financial statements.              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                             Period from April 30, 1997 
                                                            (commencement of operations)
                                                                 to August 31, 1997     
                                                                    (Unaudited)         
                                                             ---------------------------
                                                                                        
Net asset value, beginning of period                                  $  10.00          
                                                                      --------          
Income from investment operations:                                                      
   Net investment income                                                  0.21+         
   Net realized and unrealized gain                                       0.35          
                                                                      --------          
      Total from investment operations                                    0.56          
                                                                      --------          
Net asset value, end of period                                        $  10.56          
                                                                      ========          
Total Return/(a)/                                                         5.60%         

Ratios/Supplemental Data:                                                               
   Net assets, end of period (000's)                                  $170,787          
   Net expenses to average daily net assets                               0.40%*        
   Net investment income to average daily net assets                      6.34%*        
   Portfolio turnover rate                                                   7%         
   Fees and expenses voluntarily waived or borne by the                                 
      Manager consisted of the following per share amount:            $   0.02          

+     Computed using average shares outstanding throughout the period.          
*     Annualized.                                                               
/(a)/ Calculation excludes purchase premiums. The total return would have been  
lower had certain expenses not been waived during the period shown. 

     See accompanying notes to the financial statements.                       9

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

    GMO U.S. Bond/Global Alpha A Fund (the "Fund"), which commenced operations
on April 30, 1997, 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 a high total return primarily through investing in     
investment-grade bonds.                                               

    The Fund offers three classes of shares: Class I, Class II, and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class III was the
only active class of shares of the Fund.                              

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

Foreign currency translation                                          
The accounting records of the Fund are maintained in U.S. dollars. The
     market values of foreign securities, currency holdings and other assets and
     liabilities are translated to U.S. dollars based on the prevailing exchange
rates each business day. Income and expenses denominated in foreign   
currencies                                                            

10                                                                              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   are translated at prevailing exchange rates when accrued or incurred. The
     Fund does not isolate realized and unrealized gains and losses attributable
    to changes in exchange rates from gains and losses that arise from changes
     in the market value of investments. Such fluctuations are included with net
     realized and unrealized gain or loss on investments. Net realized gains and
  losses on foreign currency transactions represent net exchange gains and
losses on disposition of foreign currencies, currency gains and losses
     realized between the trade and settlement dates on securities transactions,
and the difference between the amount of investment income and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar    
equivalent amounts actually received or paid.                         

Futures contracts                                                     
   The Fund may use futures contracts to manage its exposure to the bond and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
change in value ("variation margin") is recorded by the Fund. Gains or
losses are recognized but not considered realized until the contracts 
   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from the changes in the value of
     the underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

Forward currency contracts                                            
The Fund may enter into forward currency contracts and forward cross  
   currency contracts in connection with settling planned purchases or sales
     of securities or to hedge the currency exposure associated with some or all
of the Fund's portfolio securities. A forward currency contract is an 
    agreement between two parties to buy and sell a currency at a set price on
   a future date. The market value of a forward currency contract fluctuates
     with changes in forward currency exchange rates. Forward currency contracts
    are marked to market daily and the change in value is recorded by the Fund
as an unrealized gain or loss. Realized gains or losses equal to the  
    difference between the value of the contract at the time it was opened and
   the value at the time it was closed are recorded upon delivery or receipt
  of the currency or, if a forward currency contract is offset by entering
into another forward currency contract with the same broker, upon     
     settlement of the net gain or loss. These contracts may involve market risk
    in excess of the unrealized gain or loss reflected in the Fund's Statement
   of Assets and Liabilities. In addition, the Fund could be exposed to risk
   if the counterparties are unable to meet the terms of the contracts or if
    the value of the currency changes unfavorably to the U.S. dollar. The U.S.
 dollar value of the currencies the Fund has committed to buy or sell is
shown under Note 6 and represents the currency exposure the Fund has  
acquired or hedged through currency contracts as of August 31, 1997.  

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Options                                                               
   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
     the realized gain or loss. The Fund as a writer of an option has no control
over whether the underlying securities may be sold (call) or purchased
     (put) and as a result bears the market risk of an unfavorable change in the
    price of the security underlying the written option. There is the risk the
Fund may not be able to enter into a closing transaction because of an
illiquid market. See Note 6 for a summary of the open written option  
contracts as of August 31, 1997.                                      

  The Fund may also purchase put and call options. The Fund pays a premium
   which is included in the Fund's Statement of Assets and Liabilities as an
   investment and subsequently marked to market to reflect the current value
    of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                          

Indexed securities                                                    
  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
     or other financial indicators. The Fund uses indexed securities to increase
  or decrease its exposure to different underlying instruments and to gain
     exposure to markets that may be difficult to invest in through conventional
   securities. Indexed securities may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original    
investment.                                                           

Swap agreements                                                       
    The Fund may invest in swap agreements. A swap is an agreement to exchange
    the return generated by one instrument for the return generated by another
    instrument. The Fund may enter into swap agreements to manage its exposure
to interest rates. The Fund entered into interest rate swap agreements
which involve the exchange by the Fund with another party of their    
 respective commitments to pay or receive interest, e.g., an exchange of
   floating rate payments for fixed rate payments with respect to a notional
   amount of principal. Interest rate swaps are marked to market daily based
   upon quotations from market makers and the change, if any, is recorded as
   unrealized gain or loss in the Statement of Operations. Payments received
    or made at the end of the measurement period are recorded as realized gain
or loss in the Statement of Operations. Entering into these agreements
    involves, to varying degrees, elements of credit and market risk in excess
    of the amounts recognized on the Statement of Assets and Liabilities. Such
risks involve the possibility that there is no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the
fluctuation of interest rates. See Note 6 for a summary of open swap  
agreements as of August 31, 1997.                                     

12                                                                              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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. 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 certain member firms of the New York
Stock Exchange. 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 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 fail financially. The Fund receives compensation for
   lending its securities. At August 31, 1997, 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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual 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.             

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .15% of the amount    
     invested. All purchase premiums are paid to and recorded as paid-in capital
by the Fund. For the period ended August 31, 1997, the Fund received  
  $255,362 in purchase premiums. There is no premium for cash redemptions,
reinvested distributions or in-kind transactions.                     

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .40% of 
    average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting, and other support. Pursuant to the    
    Shareholder Services Plan, the shareholder service fee is calculated based
  on the average daily net assets of each class at the annual rate of .28%
for Class I shares, .22% for Class II shares, and .15% for Class III  
shares.                                                               

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
extraordinary expenses) exceed .25% of average daily net assets.      

The Fund's portion of the fee paid by the Trust to the unaffiliated   
    Trustees during the period ended August 31, 1997 was $205. No remuneration
is paid to any Trustee or officer who is affiliated with the Manager. 

14                                                                              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

3.   Purchases and sales of securities                                          

   For the period ended August 31, 1997, cost of purchases and proceeds from
   sales of investments, other than short-term obligations, were as follows:

                                                        [Enlarge/Download Table]

                                                     Purchases              Proceeds     
                                                -------------------    ------------------
                                                                                         
U.S. Government securities                    $        25,823,752    $       3,652,500   
Investments (non-U.S. Government securities)          136,782,744            2,409,360   

  At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                            Gross Unrealized        Gross Unrealized        Net Unrealized    
    Aggregate Cost            Appreciation            Depreciation           Appreciation     
-----------------------  -----------------------  ----------------------  --------------------
                                                                                              
     $175,106,530              $1,426,699               $463,617               $963,082       

4.   Principal shareholders                                                     

    At August 31, 1997, 59% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                                [Download Table]

                                           Period from April 30, 1997    
                                          (commencement of operations)   
Class III:                                     to August 31, 1997        
                                        ---------------------------------
                                           Shares            Amount      
                                        -------------    ----------------
                                                                         
Shares sold                               16,530,426    $   170,266,298  
Shares issued to shareholders                                            
  in reinvestment of distributions                --                 --  

Shares repurchased                          (361,119)        (3,786,314) 
                                        -------------    --------------- 
Net increase                              16,169,307    $   166,479,984  
                                        =============    =============== 

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Forward currency contracts                                            

                                                        [Enlarge/Download Table]


                                                                            Net Unrealized  
 Settlement                            Units of                              Appreciation   
    Date         Deliver/Receive       Currency              Value          (Depreciation)  
--------------  ------------------  ----------------     ---------------   -----------------
                                                                                            
Buys                                                                                        

   9/26/97             CAD               20,400,000   $      14,716,844  $          (9,489) 
   9/02/97             DEM                3,178,913           1,766,345               2,605 
   9/05/97             DEM               80,900,000          44,960,780           (202,115) 
  10/17/97             GBP                7,200,000          11,652,547           (116,971) 
  10/09/97             JPY              630,000,000           5,268,504           (213,730) 
                                                                           -----------------
                                                                         $        (539,700) 
                                                                           =================
Sales                                                                                       

  11/28/97             AUD                4,600,000   $       3,386,170  $           55,550 
   9/26/97             CAD               25,400,000          18,323,914              28,337 
   9/05/97             DEM               57,801,273          32,123,489             226,375 
  10/17/97             GBP               13,100,000          21,201,161               1,409 
  10/09/97             JPY            1,120,000,000           9,366,230             228,516 
   9/23/97             NZD               11,600,000           7,403,604             129,196 
   3/23/98             THB               60,000,000           1,639,195             440,528 
   6/22/98             THB               30,000,000             811,030             211,116 
                                                                           -----------------
                                                                         $        1,321,027 
                                                                           =================

Forward cross currency contracts                                      

                                                        [Enlarge/Download Table]


                                                                                    Net Unrealized  
 Settlement                                                                          Appreciation   
    Date        Deliver/Units of Currency        Receive/In Exchange For            (Depreciation)  
--------------  ---------------------------  ---------------------------------     -----------------
                                                                                                    
  10/10/97        BEF        2,613,775,780        DEM             126,600,000   $            17,243 
  11/13/97        CHF            7,732,460        DEM               9,400,000              (10,037) 
   9/02/97        DEM              901,638        DKK               3,433,887                    87 
   9/02/97        DEM            2,277,275        SEK               9,917,535               (1,953) 
   9/19/97        DEM            3,200,000        NLG               3,603,382                   385 
   9/22/97        DEM           42,200,000        ITL          41,843,334,750               265,976 

16                                                                              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Forward cross currency contracts -- continued                         

                                                        [Enlarge/Download Table]


                                                                                  Net Unrealized  
 Settlement                                                                        Appreciation   
    Date        Deliver/Units of Currency        Receive/In Exchange For          (Depreciation)  
--------------  ---------------------------  ---------------------------------   -----------------
                                                                                                  
  10/23/97        DEM           12,000,000        ESP           1,017,075,900   $           1,904 
  10/27/97        DEM          250,202,940        ECU             127,200,000           (293,783) 
  11/07/97        DEM            2,600,000        FRF               8,762,598                 140 
  11/13/97        DEM            3,200,000        CHF               2,624,864             (1,658) 
  11/21/97        DEM            9,900,000        SEK              43,288,830                 275 
  11/14/97        DKK           85,408,760        DEM              22,400,000             (8,346) 
  10/27/97        ECU           32,100,000        DEM              63,286,805             155,554 
  10/23/97        ESP          652,594,900        DEM               7,700,000             (1,032) 
  11/07/97        FRF          146,400,698        DEM              43,400,000            (24,325) 
   9/22/97        ITL       32,081,825,500        DEM              32,400,000           (179,048) 
   9/19/97        NLG           14,517,402        DEM              12,900,000               2,763 
  11/21/97        SEK           92,345,882        DEM              21,100,000            (11,297) 
                                                                                 -----------------
                                                                                $         (87,152)
                                                                                 =================


Futures contracts                                                     

                                                        [Enlarge/Download Table]


                                                                                       Net Unrealized   
 Number of                                                              Contract        Appreciation    
 Contracts                  Type                  Expiration Date        Value         (Depreciation)   
-------------  --------------------------------  ------------------  --------------   ----------------- 
                                                                                                        
     Buys                                                                                               

     26        Australian Government Bond 3 yr    September 1997   $      2,299,494  $           47,282 
     48        Australian Government Bond 10      September 1997          5,011,257             150,809 
               yr                                                                                       
     45        Canadian Government Bond           September 1997          3,904,134              99,084 
     24        German Government Bond              December 1997          3,376,112             (6,179) 
     27        Japanese Government Bond           September 1997         28,660,726               (260) 
    117        U.K. Gilt                          September 1997         11,075,203            (16,850) 
     31        U.K. Gilt                           December 1997          2,870,276               2,405 
    338        U.S. Treasury Note 5 yr.            December 1997         35,975,875              26,636 
    187        U.S. Treasury Note 10 yr.          September 1997         20,388,844              81,160 
    129        U.S. Treasury Note 10 yr.           December 1997         14,020,688               2,689 
    133        U.S. Treasury Bond 30 yr.          September 1997         15,045,625             162,777 
     49        U.S. Treasury Bond 30 yr.           December 1997          5,524,750              15,258 
                                                                                       -----------------
                                                                                     $          564,811 
                                                                                       =================

                                                                              17

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Futures contracts -- continued                                        

                                                        [Enlarge/Download Table]


                                                                                       Net Unrealized  
 Number of                                                              Contract        Appreciation   
 Contracts                  Type                  Expiration Date        Value         (Depreciation)  
-------------  --------------------------------  ------------------  ---------------  -----------------
                                                                                                       
     Sales                                                                                             

     47        MATIF FRF Bond                     September 1997   $      5,017,001  $          22,683 
     5         Italian Government Bond 10 yr.      December 1997            613,548              (664) 
     27        Japanese Government Bond            December 1997         28,492,845            (4,692) 
     27        Japanese Government Bond           September 1997         29,774,812          (873,780) 
     6         Japanese Government Bond            December 1997          6,406,436           (11,831) 
     91        Spanish Government Bond 10 yr.     September 1997          7,075,637           (52,095) 
    101        Swiss Government Bond              September 1997          8,343,347             10,337 
     63        Swiss Government Bond               December 1997          5,003,538              6,413 
                                                                                      -----------------
                                                                                     $       (903,629) 
                                                                                      =================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on these contracts.                         

                                                                [Download Table]


Written call option transactions                                  

                             Principal Amount                     
                              of Contracts                        
                             (000's omitted)            Premiums  
                            -----------------         ------------
                                                                  
 Outstanding, beginning                                           
   of period              $        --               $        --   
 Options written                 2,727                     46,637 
                            -----------------         ------------
 Outstanding, end                                                 
   of period              $      2,727              $      46,637 
                            =================         ============


Summary of written options outstanding                                

                                                        [Enlarge/Download Table]


                   Principal Amount                                                      
                     of Contracts                        Expiration                      
                   (000's omitted)   Exercise Price         Date              Value      
                  -----------------  ---------------  ------------------  ---------------
                                                                                         
Thai Baht Call  $      2,727             33 THB           10/16/97      $    175,364     
                                                                          ===============

18                                                                              

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GMO U.S. Bond/Global Alpha A Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


     Swap agreements                                                                                     

                                                                                          Net Unrealized 
                        Expiration                                                         Appreciation  
   Notional Amount         Date                         Description                       (Depreciation) 
---------------------- ------------- ---------------------------------------------------  ---------------
                                                                                                         
TRL 80,250,000,000       5/14/99     Agreement with Bank of America dated 5/29/97 to    $    (93,935)    
                                     receive the notional amount multiplied by the                       
                                     change in market value (including accrued                           
                                     interest) of Turkey Index Linked Bond and to pay                    
                                     the notional amount multiplied by 3 month LIBOR                     
                                     adjusted by a specified spread.                                     

TRL 33,000,000,000       6/04/99     Agreement with Bank of America dated 6/23/97 to           8,156     
                                     receive the notional amount multiplied by the                       
                                     change in market value (including accrued                           
                                     interest) of Turkey Index Linked Bond and to pay                    
                                     the notional amount multiplied by 3 month LIBOR                     
                                     adjusted by a specified spread.                                     

                                                                                          -------------- 
                                                            Net unrealized depreciation $    (85,779)    
                                                                                          ============== 

See Notes to the Schedule of Investments for definitions of currency  
abbreviations.                                                                  

                                                                              19

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Par Value       Description                                               Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                         DEBT OBLIGATIONS -- 93.6%                                                

                         Cayman Islands -- 0.8%                                                   
CAD       4,000,000      Government of Canada (Cayman), 7.25%, due 6/01/08           3,073,821    
                                                                                 -------------    
                         Denmark -- 1.7%                                                          
DKK      41,800,000      Kingdom of Denmark Bullet, 7.00%, due 11/15/07              6,411,537    
                                                                                 -------------    
                         France -- 2.4%                                                           
ECU       4,000,000      Government of France, 8.25%, due 4/25/22                    5,205,902    
ECU       3,000,000      Societe Nationale des Chemins de Fer, 9.38%, due                         
                            3/12/01                                                  3,709,451    
                                                                                 -------------    
                                                                                     8,915,353    
                                                                                 -------------    
                         Japan -- 1.5%                                                            
GBP       3,000,000      Export Import Bank of Japan, 10.75%, due 5/15/01            5,354,373    
                                                                                 -------------    
                         New Zealand -- 1.8%                                                      
NZD      10,700,000      New Zealand Index Linked Bond, 4.50%, due 2/15/16           6,535,568    
                                                                                 -------------    
                         Sweden -- 5.4%                                                           
SEK      159,600,000     Kingdom of Sweden, 6.00%, due 2/09/05                      19,861,062    
                                                                                 -------------    
                         United Kingdom -- 2.2%                                                   
GBP       4,160,000      Guaranteed Export Financial Corp, 12.88%, due 9/29/02       8,261,319    
                                                                                 -------------    

                         United States -- 77.8%                                                   

                         Asset Backed Securities -- 42.4%                                         
USD      10,000,000      Anfield Road I Ltd.,                                                     
                             Variable Rate, 6 mo. LIBOR + .25%, 6.09%, due                        
                            11/06/06                                                10,007,700    
USD       9,795,184      Banc One Student Loan Trust 94-A Class A2,                               
                            Variable Rate, 1 mo. LIBOR + .30%, 5.95%, due                         
                            10/25/16                                                 9,834,365    
USD       5,000,000      Big Flower Receivables Master Trust 96-2 Class A,                        
                            Variable Rate, LIBOR + .25%, 5.65%, due 4/25/03          5,000,000    
USD       5,000,000      Bombardier Receivables Master Trust I 97-1 Class A,                      
                            Variable Rate, 1 mo. LIBOR + .12%, 5.80%, due                         
                            4/15/04                                                  5,003,125    
USD       5,000,000      Brazos Student Loan Finance Corp. Series 96-A4,                          
                            Variable Rate, 3 mo. U.S. Treasury Bill + .50%,                       
                            5.94%, due 12/01/02                                      4,992,969    
USD      15,000,000      Chevy Chase Master Credit Card Trust 95-C Class A,                       
                            Variable Rate, LIBOR + .26%, 5.91%, due 12/15/02        15,030,000    
USD       7,500,000      Chevy Chase Master Credit Card Trust Series 96-A,                        
                            Variable Rate, 1 mo. LIBOR + .15%, 5.80%, due                         
                            2/15/05                                                  7,501,172    

     See accompanying notes to the financial statements.                       1

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Par Value       Description                                               Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                         Asset Backed Securities -- continued                                     
USD      10,000,000      Circuit City Credit Card Master Trust 96-1 Class A,                      
                            Variable Rate, LIBOR + .17%, 5.85%, due 10/15/06        10,000,000    
USD       5,000,000      European Sovereign Investments,                                          
                            Variable Rate, 6 mo. LIBOR + .40%, 6.24%, due                         
                            1/20/99                                                  5,020,000    
USD       4,000,000      First Chicago Master Trust II 95-0,                                      
                            Variable Rate, 1 mo. LIBOR + .23%, 5.88%, due                         
                            2/15/04                                                  4,015,000    
USD       5,000,000      First Deposit Master Trust Series 96-1A,                                 
                            Variable Rate, 1 mo. LIBOR +.17%, 5.82%, due                          
                            8/15/07                                                  5,012,500    
USD      14,000,000      First Union Master Credit Card Trust 96-1 Class A,                       
                            Variable Rate, 1 mo. LIBOR + .17%, 5.82%, due                         
                            9/15/03                                                 14,017,500    
USD      10,000,000      Keycorp Student Loan Trust 95-A Class B,                                 
                            Variable Rate, 1 mo. LIBOR + .75%, 6.44%, due                         
                            10/27/21                                                10,000,000    
USD       6,618,872      Keystone Auto Grantor Trust Series 1996-A Class A,                       
                            6.60%, due 12/15/02, 144A                                6,698,298    
USD       3,000,000      MBNA Master Credit Card Trust 96-J Class A,                              
                            Variable Rate. 1 mo. LIBOR + .15%, 5.80%, due                         
                            2/15/06                                                  3,003,000    
USD       8,000,000      PARMA Food Corp BV,                                                      
                            Variable Rate, 3 mo. LIBOR + .25%, 6.03%, due                         
                            12/20/00                                                 8,024,000    
USD       5,000,000      Premier Auto Trust 95-1 Certificates, 8.10%, due                         
                            12/04/98                                                 5,112,500    
USD       3,220,936      Resolution Trust Corp 94-C1 Class A1,                                    
                            Variable Rate, 1 mo. LIBOR + .45%, 6.08%, due                         
                            6/25/26                                                  3,219,930    
USD      10,000,000      Rhino CBO Series 97-1 Class A-2, 6.33%, due 9/15/09,                     
                            144A                                                    10,049,900    
USD      12,466,506      Signet Student Loan Trust Series 96-A Class A-1,                         
                            Variable Rate, 1 mo. LIBOR + .09%, 5.72%, due                         
                            1/25/05                                                 12,466,506    
USD       2,620,000      SMS Student Loan Trust 94-B Certificates,                                
                            Variable Rate, 1 mo. LIBOR + .75%, 6.38%, due                         
                            10/25/23                                                 2,620,000    
                                                                                 --------------   
                                                                                   156,628,465    
                                                                                 --------------   
                         Structured Notes -- 6.2%                                                 
USD       2,900,000      Federal Home Loan Bank,                                                  
                            Variable Rate, (10.00% - 6 mo. LIBOR), 4.34%, due                     
                            3/03/98                                                  2,871,000    
USD      20,000,000      Student Loan Marketing Association Series 95-1 Class                     
                            A2, Variable Rate, 3 mo. U.S. Treasury Bill + .75%,                   
                            6.06%, due 5/25/04                                      20,120,000    
                                                                                 --------------   
                                                                                    22,991,000    
                                                                                 --------------   
                         U.S. Government -- 18.0%                                                 
USD       5,000,000      U.S. Treasury Inflation Indexed Note, 3.375%, due                        
                            1/15/07                                                  4,976,053    
USD      29,000,000      U.S. Treasury Note, 6.88%, due 8/31/99/(a)/                29,489,375    
USD      31,600,000      U.S. Treasury Note, 6.38%, due 8/15/02                     31,807,359    
                                                                                 --------------   
                                                                                    66,272,787    
                                                                                 --------------   

2              See accompanying notes to the financial statements.              

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


         Par Value       Description                                               Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                         U.S. Government Agency -- 11.2%                                          
USD      16,666,667      Agency for International Development Floater                             
                            (Support of India), 5.56%, due 2/01/99                  16,661,458    
USD       5,000,000      Agency for International Development Floater                             
                            (Support of C.A.B.E.I.), Variable Rate, 6 mo.                         
                            U.S. Treasury Bill + .40%, 5.85%, due 10/01/12           4,987,500    
USD      20,000,000      Federal National Mortgage Association, 6.49%, due                        
                            1/19/06                                                 19,460,000    
                                                                                 -------------    
                                                                                    41,108,958    
                                                                                 -------------    
                         Total United States                                       287,001,210    
                                                                                 -------------    
                         TOTAL DEBT OBLIGATIONS  (COST  $346,387,193)              345,414,243    
                                                                                 -------------    

                                                        [Enlarge/Download Table]

    Principal Amount                                                                          
-----------------------                                                                       
                                                                                              
                         CALL OPTION PURCHASED -- 0.2%                                        

                         Cross Currency Option -- 0.2%                                        
ECU      68,700,000      ECU Call/DEM Put, Expires 1/21/98, Strike 1.9450              772,922
                                                                                 -------------
                         TOTAL CALL OPTION PURCHASED                                          
                         (COST  $804,841)                                              772,922
                                                                                 -------------

                         SHORT-TERM INVESTMENTS -- 9.3%                                       

                         Repurchase Agreements -- 9.3%                                        
USD      16,192,894      Prudential Securities, Inc. Repurchase Agreement,                    
                         dated 8/29/97, due 9/2/97, with a maturity value of                  
                         $16,201,867 and an effective yield of 4.99%,                         
                         collateralized by a U.S. Government Agency                           
                         Obligation with a rate of 6.072%, with a maturity                    
                         date of 10/01/32 and a market value of $16,516,807.        16,192,894

USD      18,159,611      Salomon Brothers Repurchase Agreement, dated                         
                         8/29/97, due 9/2/97, with a maturity value of                        
                         $18,169,801 and an effective yield of 5.05%,                         
                         collateralized by U.S. Treasury Obligations with rates               
                         ranging from 5.00% to 6.75%, with maturity                           
                         dates ranging from 2/15/99 to 8/15/26 and with an                    
                         aggregate market value of $18,575,739.                     18,159,611
                                                                                 -------------
                                                                                    34,352,505
                                                                                 -------------
                         TOTAL SHORT-TERM INVESTMENTS                                         
                         (COST  $34,352,505)                                        34,352,505
                                                                                 -------------

       See accompanying notes to the financial statements.                     3

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]

                                                                                   Value ($)      
--------------------------------------------------------------------------------------------------
                                                                                                  
                         TOTAL INVESTMENTS -- 103.1%                                              
                         (COST $381,544,539)                                       380,539,670    

                         Other Assets and Liabilities (net)-- (3.1)%               (11,389,905)   
                                                                                 --------------   

                         TOTAL NET ASSETS-- 100%                                 $ 369,149,765    
                                                                                 ==============   

       Notes to the Schedule of Investments:

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

                    Variable rates -- The rates shown on variable rate
                          notes are the current interest rates at August 31,
                            1997, which are subject to change based on the terms
of the security.        

Currency Abbreviations        
AUD - Australian Dollar       
BEF - Belgian Franc           
CAD - Canadian Dollar         
CHF - Swiss Franc             
DEM - German Mark             
DKK - Danish Krone            
ECU - European Currency Unit  
ESP - Spanish Peseta          
FRF - French Franc            
GBP - British Pound           
ITL - Italian Lira            
JPY - Japanese Yen            
NLG - Netherlands Guilder     
NZD - New Zealand Dollar      
SEK - Swedish Krona           
USD - United States Dollar    
                    /(a)/ All or a portion of this security is held as
                    collateral for open futures contracts.

4      See accompanying notes to the financial statements.                      

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


Assets:                                                                                 
                                                                                        
   Investments, at value (cost $381,544,539) (Note 1)                      $380,539,670 
   Foreign currency, at value (cost $5,037) (Note 1)                              5,956 
   Receivable for Fund shares sold                                            6,429,488 
   Interest receivable                                                        4,492,522 
   Receivable for open forward foreign currency contracts (Notes 1 and 6)     1,275,245 
   Receivable for expenses waived or borne by Manager (Note 2)                   80,552 
   Miscellaneous receivable                                                       9,659 
                                                                           ------------ 
       Total assets                                                         392,833,092 
                                                                           ------------ 

Liabilities:                                                                            
   Payable for investments purchased                                         20,744,916 
   Payable for open forward foreign currency contracts (Notes 1 and 6)        2,206,278 
   Payable to affiliate for (Note 2):                                                   
      Management fee                                                            106,816 
      Shareholder service fee                                                    40,056 
   Accrued expenses                                                              27,966 
   Payable for variation margin on open futures contracts (Notes 1 and 6)       557,295 
                                                                           ------------ 
       Total liabilities                                                     23,683,327 
                                                                           ------------ 
Net assets                                                                 $369,149,765 
                                                                           ============ 

Net assets consist of:                                                                  
   Paid-in-capital                                                         $372,662,834 
   Accumulated undistributed net investment income                            1,663,865 
   Accumulated undistributed net realized loss                                 (982,038)
   Net unrealized depreciation                                               (4,194,896)
                                                                           ============ 
                                                                           $369,149,765 
                                                                           ============ 
Net assets attributable to:                                                             
   Class III shares                                                        $369,149,765 
                                                                           ============ 
Shares outstanding:                                                                     
   Class III                                                                 37,287,495 
                                                                           ============ 
Net asset value per share:                                                              
   Class III                                                               $       9.90 
                                                                           ============ 

       See accompanying notes to the financial statements.                     5

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Statement of Operations --                                                      
Period from July 29, 1997 (commencement of operations) to                 
August 31, 1997 (Unaudited)                                               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Investment Income:                                                                   
                                                                                     
   Interest                                                              $ 1,760,575 

Expenses:                                                                            
   Management fee (Note 2)                                                   110,526 
   Custodian and transfer agent fees                                          19,350 
   Audit fees                                                                  7,050 
   Registration fees                                                             690 
   Legal fees                                                                    600 
   Trustees fees (Note 2)                                                        120 
   Miscellaneous                                                                 270 
   Fees waived or borne by Manager (Note 2)                                  (83,343)
                                                                         ----------- 
                                                                              55,263 
   Shareholder service fee (Note 2)                                                  
       Class III                                                              41,447 
                                                                         ----------- 
       Net expenses                                                           96,710 
                                                                         ----------- 
          Net investment income                                            1,663,865 
                                                                         ----------- 

Realized and unrealized gain (loss):                                                 
Net realized gain (loss) on:                                                         
       Investments                                                            (2,755)
       Closed futures contracts                                           (1,184,772)
       Foreign currency, forward contracts and foreign currency related              
       transactions                                                          205,489 
                                                                         ----------- 
          Net realized loss                                                 (982,038)
                                                                         ----------- 
   Change in net unrealized appreciation (depreciation) on:                          
       Investments                                                        (1,004,869)
       Open futures contracts                                             (2,254,951)
       Foreign currency, forward contracts and foreign currency related              
       transactions                                                         (935,076)
                                                                         ----------- 
          Net unrealized loss                                             (4,194,896)
                                                                         ----------- 
       Net realized and unrealized loss                                   (5,176,934)
                                                                         ----------- 
Net decrease in net assets resulting from operations                     $(3,513,069)
                                                                         =========== 

6              See accompanying notes to the financial statements.              

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                            Period from July 29, 1997  
                                                           (commencement of operations)
                                                                to August 31, 1997     
                                                                   (Unaudited)         
                                                           --------------------------  
                                                                                       
Increase (decrease) in net assets:                                                     
Operations:                                                                            
   Net investment income                                          $  1,663,865         
   Net realized loss                                                  (982,038)        
   Change in net unrealized appreciation (depreciation)             (4,194,896)        
                                                                  ------------         
   Net decrease in net assets resulting from operations             (3,513,069)        
                                                                  ------------         
   Net share transactions: (Note 5)                                                    
       Class III                                                   372,662,834         
                                                                  ------------         
   Increase in net assets resulting from net share                                     
      transactions                                                 372,662,834         
                                                                  ------------         
      Total increase in net assets                                 369,149,765         
Net assets:                                                                            
   Beginning of period                                                      --         
                                                                  ------------         
   End of period (including accumulated undistributed net                              
      investment income of $1,663,865)                            $369,149,765         
                                                                  ============         

      See accompanying notes to the financial statements.                      7

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                             Period from July 29, 1997  
                                                            (commencement of operations)
                                                               to August 31, 1997       
                                                                  (Unaudited)           
                                                            -------------------------   
                                                                                        
Net asset value, beginning of period                                $  10.00            
                                                                    --------            

Income from investment operations:                                                      
   Net investment income                                                0.04            
   Net realized and unrealized loss                                    (0.14)           
                                                                    --------            

      Total from investment operations                                 (0.10)           
                                                                    --------            

Net asset value, end of period                                      $   9.90            
                                                                    ========            

Total Return/(a)/                                                      (1.00)%          

Ratios/Supplemental Data:                                                               
   Net assets, end of period (000's)                                $369,150            
   Net expenses to average daily net assets                             0.35%*          
   Net investment income to average daily net assets                    6.02%*          
   Portfolio turnover rate                                                 0%           
   Fees and expenses voluntarily waived or borne by the                                 
      Manager consisted of the following per share amount:              /(b)/           

/(a)/ Calculation excludes purchase premiums. The total return would have been  
lower had certain expenses not been waived during the period shown. 

/(b)/ Fees and expenses waived or borne by the Manager were less than $0.01 per 
share.                                                              

*  Annualized.                                                                

8               See accompanying notes to the financial statements.             

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

    GMO U.S. Bond/Global Alpha B Fund (the "Fund"), which commenced operations
on July 29, 1997, 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 a high total return primarily through investing in     
investment-grade bonds.                                               

    The Fund offers three classes of shares: Class I, Class II, and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class III was the
only active class of shares of the Fund.                              

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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.     
  Securities which are primarily traded on foreign exchanges are generally
valued at the preceding closing values of such securities on their    
respective exchanges, and those values are then translated into U.S.  
dollars at the current exchange rate. Short-term investments with a   
     remaining maturity of sixty days or less are valued at amortized cost which
approximates market value. Other assets and securities for which no   
    quotations are readily available are valued at fair value as determined in
good faith by the Trustees.                                           

   Securities may be valued by independent pricing services which use prices
     provided by market-makers or estimates of market values obtained from yield
  data relating to investments or securities with similar characteristics.

Foreign currency translation                                          
The accounting records of the Fund are maintained in U.S. dollars. The
     market values of foreign securities, currency holdings and other assets and
     liabilities are translated to U.S. dollars based on the prevailing exchange
rates each business day. Income and expenses denominated in foreign   
currencies                                                            

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   are translated at prevailing exchange rates when accrued or incurred. The
     Fund does not isolate realized and unrealized gains and losses attributable
    to changes in exchange rates from gains and losses that arise from changes
     in the market value of investments. Such fluctuations are included with net
     realized and unrealized gain or loss on investments. Net realized gains and
  losses on foreign currency transactions represent net exchange gains and
losses on disposition of foreign currencies, currency gains and losses
     realized between the trade and settlement dates on securities transactions,
and the difference between the amount of investment income and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar    
equivalent amounts actually received or paid.                         

Futures contracts                                                     
   The Fund may use futures contracts to manage its exposure to the bond and
   currency markets. Buying futures tends to increase the Fund's exposure to
 the underlying instrument. Selling futures tends to decrease the Fund's
     exposure to the underlying instrument or hedge other Fund instruments. Upon
  purchase of a futures contract, the Fund is required to deposit with its
  custodian, in a segregated account in the name of the futures broker, an
amount of cash or U.S. government obligations in accordance with the  
  initial margin requirements of the broker or exchange. Futures contracts
     are marked to market daily and an appropriate payable or receivable for the
change in value ("variation margin") is recorded by the Fund. Gains or
losses are recognized but not considered realized until the contracts 
   expire or are closed. Futures contracts involve, to varying degrees, risk
 of loss in excess of the variation margin disclosed in the Statement of
   Assets and Liabilities. Losses may arise from the changes in the value of
     the underlying instrument, if there is an illiquid secondary market for the
  contracts, or if counterparties do not perform under the contract terms.
   Futures contracts are valued at the settlement price established each day
    by the board of trade or exchange on which they are traded. See Note 6 for
all open futures contracts held as of August 31, 1997.                

Forward currency contracts                                            
The Fund may enter into forward currency contracts and forward cross  
   currency contracts in connection with settling planned purchases or sales
     of securities or to hedge the currency exposure associated with some or all
of the Fund's portfolio securities. A forward currency contract is an 
    agreement between two parties to buy and sell a currency at a set price on
   a future date. The market value of a forward currency contract fluctuates
     with changes in forward currency exchange rates. Forward currency contracts
    are marked to market daily and the change in value is recorded by the Fund
as an unrealized gain or loss. Realized gains or losses equal to the  
    difference between the value of the contract at the time it was opened and
   the value at the time it was closed are recorded upon delivery or receipt
  of the currency or, if a forward currency contract is offset by entering
into another forward currency contract with the same broker, upon     
     settlement of the net gain or loss. These contracts may involve market risk
    in excess of the unrealized gain or loss reflected in the Fund's Statement
   of Assets and Liabilities. In addition, the Fund could be exposed to risk
   if the counterparties are unable to meet the terms of the contracts or if
    the value of the currency changes unfavorably to the U.S. dollar. The U.S.
 dollar value of the currencies the Fund has committed to buy or sell is
shown under Note 6 and represents the currency exposure the Fund has  
acquired or hedged through currency contracts as of August 31, 1997.  

10                                                                              

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Options                                                               
   The Fund may write call and put options on securities it owns or in which
   it may invest. When the Fund writes a call or put option, an amount equal
    to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. Premiums
   received from writing options which expire are treated as realized gains.
  Premiums received from writing options which are exercised or closed are
     offset against the proceeds or amounts paid on the transaction to determine
     the realized gain or loss. The Fund as a writer of an option has no control
over whether the underlying securities may be sold (call) or purchased
     (put) and as a result bears the market risk of an unfavorable change in the
    price of the security underlying the written option. There is the risk the
Fund may not be able to enter into a closing transaction because of an
  illiquid market. At August 31, 1997, the Fund had no outstanding written
options.                                                              

  The Fund may also purchase put and call options. The Fund pays a premium
   which is included in the Fund's Statement of Assets and Liabilities as an
   investment and subsequently marked to market to reflect the current value
    of the option. The risk associated with purchasing put and call options is
limited to the premium paid.                                          

Indexed securities                                                    
  The Fund may invest in indexed securities whose redemption values and/or
   coupons are linked to the prices of other securities, securities indices,
     or other financial indicators. The Fund uses indexed securities to increase
  or decrease its exposure to different underlying instruments and to gain
     exposure to markets that may be difficult to invest in through conventional
   securities. Indexed securities may be more volatile than their underlying
instruments, but any loss is limited to the amount of the original    
investment.                                                           

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. 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 certain member firms of the New York
Stock Exchange. 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 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 fail financially. The Fund receives compensation for
   lending its securities. At August 31, 1997, the Fund had no securities on
loan.                                                                 

                                                                              11

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         
   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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. Interest income is
recorded on the accrual 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.             

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .15% of the amount    
     invested. All purchase premiums are paid to and recorded as paid-in capital
by the Fund. For the period ended August 31, 1997, the Fund received  
  $191,158 in purchase premiums. There is no premium for cash redemptions,
reinvested distributions or in-kind transactions.                     

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .40% of 
    average daily net assets. The Fund has adopted a Shareholder Services Plan
under which the Fund pays GMO a shareholder service fee for client and
shareholder service, reporting, and other support. Pursuant to the    
    Shareholder Services Plan, the shareholder service fee is calculated based
  on the average daily net assets of each class at the annual rate of .28%
for Class I shares, .22% for Class II shares, and .15% for Class III  
shares.                                                               

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
extraordinary expenses) exceed .20% of average daily net assets.      

The Fund's portion of the fee paid by the Trust to the unaffiliated   
    Trustees during the period ended August 31, 1997 was $120. No remuneration
is paid to any Trustee or officer who is affiliated with the Manager. 

3.   Purchases and sales of securities                                          

   For the period ended August 31, 1997, cost of purchases and proceeds from
   sales of investments, other than short-term obligations, were as follows:

                                                        [Enlarge/Download Table]


                                                   Purchases            Proceeds     
                                              -------------------  ------------------
                                                                                     
U.S. Government securities                      $ 131,056,709              -         
Investments (non-U.S. Government securities)      216,054,393              -         

  At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]


                            Gross Unrealized        Gross Unrealized        Net Unrealized    
    Aggregate Cost            Appreciation            Depreciation           Depreciation     
-----------------------  -----------------------  ----------------------  --------------------
                                                                                              
     $381,544,539               $126,358               $1,131,227             $1,004,869      

                                                                              13

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

4.   Principal shareholder                                                      

     At August 31, 1997, 100% of the outstanding shares of the Fund were held by
one shareholder.                                                      

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:                                               

                                                                [Download Table]


                                          Period from July 29, 1997  
                                        (commencement of operations) 
Class III:                                   to August 31, 1997      
                                       ------------------------------
                                          Shares          Amount     
                                       -------------  ---------------
                                                                     
Shares sold                              37,287,495  $   372,662,834 
Shares issued to shareholders                     -                - 
     in reinvestment of                                              
     distributions                                                   
Shares repurchased                                -                - 
                                       =============  ===============
Net increase                             37,287,495  $   372,662,834 
                                       =============  ===============

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Forward currency contracts                                            

                                                        [Enlarge/Download Table]


                                                                         Net Unrealized   
 Settlement                             Units of                          Appreciation    
    Date         Deliver/Receive        Currency            Value        (Depreciation)   
--------------  ------------------  -----------------   --------------  ------------------
                                                                                          
    Buys                                                                                  

   9/26/97             CAD                71,800,000   $   52,013,944  $         (62,630) 
   9/02/97             DEM                 5,869,992        3,261,628               4,810 
   9/05/97             DEM                93,300,000       51,852,173             436,375 
  11/13/97             DEM                 1,100,000          614,180              24,730 
   9/02/97             DKK                 7,310,857        1,066,809               6,114 
  10/23/97             ESP               873,852,000        5,750,618             111,505 
  10/17/97             GBP                10,100,000       16,345,934              94,367 
   9/22/97             ITL            19,569,000,000       11,105,367              77,333 
  10/09/97             JPY               830,000,000        6,941,045           (202,783) 
   9/23/97             NZD                 2,400,000        1,531,780             (7,580) 
                                                                        ------------------
                                                                       $          482,241 
                                                                        ==================
    Sales                                                                                 

  11/28/97             AUD                 8,600,000        6,330,665  $          103,855 
   9/26/97             CAD                71,600,000       51,653,237                (45) 
  11/13/97             CHF                   893,750          607,798            (18,347) 
   9/02/97             DEM                 1,919,616        1,066,624             (5,929) 
   9/05/97             DEM                95,500,000       53,074,839         (1,169,601) 
   9/22/97             DEM                20,000,000       11,127,976            (99,943) 
  10/23/97             DEM                10,300,000        5,743,313           (104,210) 
  10/17/97             GBP                29,700,000       38,066,755              20,352 
  10/09/97             JPY             1,510,000,000       12,627,685             261,632 
   9/23/97             NZD                12,700,000        8,105,670              62,829 
                                                                        ------------------
                                                                       $        (949,407) 
                                                                        ==================

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Forward cross currency contracts                                      

                                                        [Enlarge/Download Table]


                                                                            Net Unrealized    
 Settlement                                                                  Appreciation     
    Date        Deliver/Units of Currency     Receive/In Exchange For       (Depreciation)    
--------------  ---------------------------  ---------------------------  ------------------- 
                                                                                              
  10/10/97        BEF        2,961,652,750     DEM          143,300,000    $         (63,835) 
  11/13/97        CHF           12,439,414     DEM           15,100,000              (28,447) 
   9/02/97        DEM           27,950,376     SEK          122,216,697                 6,248 
   9/22/97        DEM           54,600,000     ITL       53,549,528,000                 9,871 
  10/10/97        DEM            2,000,000     BEF           41,304,800                    76 
  10/23/97        DEM            9,300,000     ESP          788,407,500              (27,382) 
  10/27/97        DEM          344,876,220     ECU          175,400,000             (329,070) 
  11/07/97        DEM           22,300,000     FRF           75,215,651                11,062 
  11/13/97        DEM            6,000,000     CHF            4,921,620               (3,109) 
  11/14/97        DEM            1,400,000     DKK            5,338,760                   626 
  11/14/97        DKK          189,874,490     DEM           49,800,000              (17,458) 
  10/27/97        ECU           75,400,000     DEM          148,075,190                41,995 
  10/23/97        ESP        1,051,024,000     DEM           12,400,000               (2,267) 
  11/07/97        FRF          212,138,427     DEM           62,900,000              (28,399) 
   9/22/97        ITL       41,372,071,000     DEM           42,200,000                 1,465 
   9/19/97        NLG           25,571,523     DEM           22,700,000               (7,588) 
  11/21/97        SEK          210,965,728     DEM           48,200,000              (27,655) 
                                                                            ------------------
                                                                           $        (463,867) 
                                                                            ==================

16                                                                              

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GMO U.S. Bond/Global Alpha B Fund                                               
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Futures contracts                                                     

                                                        [Enlarge/Download Table]


                                                                                      Net Unrealized  
 Number of                                                             Contract        Appreciation   
 Contracts                  Type                  Expiration Date       Value         (Depreciation)  
-------------  --------------------------------  -----------------  ---------------  -----------------
                                                                                                      
    Buys                                                                                              

     51        Australian Government Bond 10 yr   September 1997   $     5,309,378  $          16,421 
     50        MATIF ECU Bond                     September 1997         5,208,329           (51,426) 
     9         German Government Bond              December 1997         1,266,042            (2,317) 
     43        Japanese Government Bond           September 1997        45,652,101              6,827 
     37        U.K. Gilt                          September 1997         3,409,489           (16,170) 
     11        U.K. Gilt                           December 1997         1,017,515            (1,250) 
    873        U.S. Treasury Note  5 yr.           December 1997        92,919,938             47,732 
    539        U.S. Treasury Note  10 yr.         September 1997        58,767,844          (778,855) 
    322        U.S. Treasury Note  10 yr.          December 1997        34,997,375           (19,165) 
    366        U.S. Treasury Bond 30 yr.          September 1997        41,403,750        (1,009,081) 
     98        U.S. Treasury Bond 30 yr.           December 1997        11,049,500             19,796 
                                                                                     -----------------
                                                                                    $     (1,787,488) 
                                                                                     =================

     Sales                                                                                            

     29        Canadian Government Bond           September 1997   $     2,500,899  $           1,627 
     44        MATIF FRF Bond                     September 1997         4,606,629             31,679 
     44        Italian Government Bond 10 yr.      December 1997         5,399,236            (5,800) 
     43        Japanese Government Bond            December 1997        45,377,494            (7,472) 
     43        Japanese Government Bond           September 1997        46,398,969          (608,674) 
     6         Japanese Government Bond            December 1997         6,412,621           (10,472) 
    126        Spanish Government Bond            September 1997         9,505,643             63,607 
    106        Swiss Government Bond              September 1997         8,381,524             46,037 
     66        Swiss Government Bond               December 1997         5,226,921             22,005 
                                                                                     -----------------
                                                                                    $       (467,463) 
                                                                                     =================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on these contracts.                         

See Notes to the Schedule of Investments for definitions of currency  
abbreviations.                                                        

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


     Shares        Description                                              Value ($)      
-------------------------------------------------------------------------------------------
                   MUTUAL FUNDS-- 98.1%                                                    
                                                                                           
    5,008,467      GMO Core Fund (Class III Shares)                          96,663,412    
    1,640,147      GMO REIT Fund (Class III Shares)                          21,912,363    
    1,183,830      GMO Small Cap Growth Fund (Class III Shares)              14,797,878    
      801,055      GMO Small Cap Value Fund (Class III Shares)               14,619,247    
                                                                          -------------    

                   TOTAL MUTUAL FUNDS  (COST  $149,059,175)                 147,992,900    
                                                                          -------------    

                   COMMON STOCKS -- 0.4%                                                   

                   Food and Beverage -- 0.0%                                               
        1,560      Archer Daniels Midland Co                                     33,731    
                                                                          -------------    
                   Oil and Gas -- 0.1%                                                     
        2,100      Pennzoil Co                                                  162,094    
                                                                          -------------    
                   Technology -- 0.0%                                                      
        1,150      Oracle Corp                                                   43,844    
                                                                          -------------    
                   Telecommunications -- 0.3%                                              
        5,453      Bell Atlantic Corp                                           394,646    
                                                                          -------------    
                   Utilities -- 0.0%                                                       
          122      Houston Industries Inc                                         2,474    
                                                                          -------------    

                   TOTAL COMMON STOCKS  (COST  $549,169)                        636,789    
                                                                          -------------    

                   REAL ESTATE INVESTMENT TRUSTS -- 0.0%                                   

                   Apartments -- 0.0%                                                      
        8,000      Security Capital Atlantic (Rights)                               125    
       24,100      Security Capital Industry (Rights)                               188    
       20,500      Security Capital Pacific (Rights)                                320    
                                                                          -------------    
                                                                                    633    
                                                                          -------------    

                   TOTAL REAL ESTATE INVESTMENT TRUSTS  (COST  $0)                  633    
                                                                          -------------    

             See accompanying notes to the financial statements.             1

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


    Par Value      Description                                                     Value ($)     
-------------------------------------------------------------------------------------------------
                                                                                                 
                   SHORT-TERM INVESTMENTS -- 1.4%                                                

                   Repurchase Agreement -- 1.4%                                                  
    $2,068,621     Salomon Brothers Repurchase Agreement, dated 8/29/97, due                     
                   9/2/97, with a maturity value of $2,069,782 and an                            
                   effective yield of 5.05%, collateralized by U.S. Treasury                     
                   Obligations with rates ranging from 5.00% to 6.75%, with                      
                   maturity dates ranging from 2/15/99 to 8/15/26 and with an                    
                   aggregate market value of $2,116,013.                             2,068,621   
                                                                                 -------------   

                   TOTAL SHORT-TERM INVESTMENTS  (COST  $2,068,621)                  2,068,621   
                                                                                 -------------   

                   TOTAL INVESTMENTS -- 99.9%                                                    
                   (COST $151,676,965)                                             150,698,943   

                   Other Assets and Liabilities (net) -- 0.1%                           88,942   
                                                                                 -------------   

                   TOTAL NET ASSETS -- 100%                                      $ 150,787,885   
                                                                                 =============   

2                      See accompanying notes to the financial statements.      

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Assets:                                                                       
   Investments, at value (cost $151,676,965) (Note 1)           $ 150,698,943 
   Receivable for investments sold                                  4,919,491 
   Dividends and interest receivable                                  213,741 
   Receivable for expenses waived or borne by Manager (Note 2)         44,294 
                                                                ------------- 

       Total assets                                               155,876,469 
                                                                ------------- 

Liabilities:                                                                  
   Payable for Fund shares repurchased                              4,976,389 
   Payable to affiliate for (Note 2):                                         
      Management fee                                                   61,649 
      Shareholder service fee                                          13,377 
   Accrued expenses                                                    36,737 
   Miscellaneous payable                                                  432 
                                                                ------------- 

       Total liabilities                                            5,088,584 
                                                                ------------- 

Net assets                                                      $ 150,787,885 
                                                                ============= 

Net assets consist of:                                                        
   Paid-in-capital                                              $ 109,158,067 
   Accumulated undistributed net investment income                    637,870 
   Accumulated undistributed net realized gain                     41,969,970 
   Net unrealized depreciation                                       (978,022)
                                                                ============= 
                                                                $ 150,787,885 
                                                                ============= 

Net assets attributable to:                                                   
   Class I shares                                               $   1,633,106 
                                                                ============= 
   Class III shares                                             $ 149,154,779 
                                                                ============= 

Shares outstanding:                                                           
   Class I                                                            145,192 
                                                                ============= 
   Class III                                                       13,249,765 
                                                                ============= 

Net asset value per share:                                                    
   Class I                                                      $       11.25 
                                                                ============= 
   Class III                                                    $       11.26 
                                                                ============= 


              See accompanying notes to the financial statements.              3

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                                
Investment Income:                                                              
   Dividends (net of withholding taxes of $178)                    $  2,263,230 
   Interest (including securities lending income of $3,961)             958,483 
                                                                   ------------ 

       Total income                                                   3,221,713 
                                                                   ------------ 

Expenses:                                                                       
   Management fee (Note 2)                                              497,516 
   Custodian and transfer agent fees                                     39,702 
   Audit fees                                                            23,174 
   Legal fees                                                             5,308 
   Trustees fees (Note 2)                                                 1,174 
   Registration fees                                                        309 
   Miscellaneous                                                            670 
   Fees waived or borne by Manager (Note 2)                            (245,550)
                                                                   ------------ 
                                                                        322,303 
   Shareholder service fee (Note 2)                                             
       Class I                                                            1,977 
       Class III                                                        145,605 
                                                                   ------------ 
       Net expenses                                                     469,885 
                                                                   ------------ 

          Net investment income                                       2,751,828 
                                                                   ------------ 

Realized and unrealized gain (loss):                                            
    Net realized gain (loss) on:                                                
       Investments                                                   40,132,107 
       Closed futures contracts                                       2,520,325 
       Closed swap contracts                                           (967,257)
                                                                   ------------ 

          Net realized gain                                          41,685,175 
                                                                   ------------ 

   Change in net unrealized appreciation (depreciation) on:                     
       Investments                                                  (17,249,537)
       Open futures contracts                                          (142,015)
       Open swap contracts                                              718,111 
                                                                   ------------ 

          Net unrealized loss                                       (16,673,441)
                                                                   ------------ 

       Net realized and unrealized gain                              25,011,734 
                                                                   ------------ 

Net increase in net assets resulting from operations               $ 27,763,562 
                                                                   ============ 

4             See accompanying notes to the financial statements.               

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]


                                                           Six Months Ended   Year Ended   
                                                           August 31, 1997   February 28,  
                                                             (Unaudited)         1997      
                                                           ----------------  ------------  
                                                                                           
Increase (decrease) in net assets:                                                         
Operations:                                                                                
   Net investment income                                   $   2,751,828     $   4,631,135 
   Net realized gain                                          41,685,175        65,670,531 
   Change in net unrealized appreciation (depreciation)      (16,673,441)      (21,085,079)
                                                           -------------     ------------- 

   Net increase in net assets resulting from operations       27,763,562        49,216,587 
                                                           -------------     ------------- 

Distributions to shareholders from:                                                        
   Net investment income                                                                   
       Class I                                                   (22,756)           (8,397)
       Class III                                              (3,509,367)       (3,967,362)
                                                           -------------     ------------- 
       Total distributions from net investment income         (3,532,123)       (3,975,759)
                                                           -------------     ------------- 
   Net realized gains                                                                      
       Class I                                                  (335,768)          (85,607)
       Class III                                             (45,882,564)      (51,735,148)
                                                           -------------     ------------- 
       Total distributions from net realized gains           (46,218,332)      (51,820,755)
                                                           -------------     ------------- 

                                                             (49,750,455)      (55,796,514)
                                                           -------------     ------------- 
   Net share transactions: (Note 5)                                                        
       Class I                                                   442,948         1,245,516 
       Class III                                             (55,735,695)       22,083,220 
                                                           -------------     ------------- 
   Increase (decrease) in net assets resulting from net                                    
      share transactions                                     (55,292,747)       23,328,736 
                                                           -------------     ------------- 

      Total increase (decrease) in net assets                (77,279,640)       16,748,809 

Net assets:                                                                                
   Beginning of period                                       228,067,525       211,318,716 
                                                           -------------     ------------- 

   End of period (including accumulated undistributed net                                  
      investment income of $637,870 and $1,418,165,                                        
      respectively)                                        $ 150,787,885     $ 228,067,525 
                                                           =============     ============= 


              See accompanying notes to the financial statements.              5

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]


                                                  Six Months Ended   Period from September 3, 1996
                                                   August 31, 1997    (commencement of operations)
                                                     (Unaudited)         to February 28, 1997     
                                                  ----------------  ------------------------------
                                                                                                  
Net asset value, beginning of period                    $13.03                $ 11.78             
                                                        -------               --------            

Income from investment operations:                                                                
   Net investment income                                  0.18                   0.12             
   Net realized and unrealized gain                       1.50                   2.10             
                                                        -------               --------            

      Total from investment operations                    1.68                   2.22             
                                                        -------               --------            

Less distributions to shareholders:                                                               
   From net investment income                            (0.22)                 (0.09)            
   From net realized gains                               (3.24)                 (0.88)            
                                                        -------               --------            

      Total distributions                                (3.46)                 (0.97)            
                                                        -------               --------            
Net asset value, end of period                          $11.25                $ 13.03             
                                                        =======               ========            

Total Return/(a)/                                        14.06%                 19.25%            

Ratios/Supplemental Data:                                                                         
   Net assets, end of period (000's)                   $ 1,633                $ 1,357             
   Net expenses to average daily net assets               0.58%*                 0.61%*           
   Net investment income to average daily net                                                     
      assets                                              2.53%*                 1.97%*           
   Portfolio turnover rate                                 117%                   104%            
   Average broker commission rate per equity                                                      
      share                                            $0.0497                $0.0270             
   Fees and expenses voluntarily waived or borne                                                  
      by the Manager consisted of the following                                                   
      per share amounts:                               $  0.02                $  0.01             

/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
*   Annualized.                                                                 

6             See accompanying notes to the financial statements.               

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                  Six Months Ended            Year Ended February 28/29,               
                                   August 31, 1997  ------------------------------------------------   
                                     (Unaudited)      1997      1996      1995       1994     1993 *   
                                     -----------    --------  --------  --------  --------- --------   
                                                                                                       
Net asset value, beginning                                                                             
   of period                          $ 13.03       $ 13.63   $ 11.06   $ 11.26   $  10.38  $  10.00   
                                      -------       -------   -------   -------   --------  --------   

Income from investment operations:                                                                     
   Net investment income                 0.19          0.26      0.29      0.28       0.29      0.05   
   Net realized and unrealized                                                                         
      gain                               1.51          2.20      3.90      0.49       1.21      0.33   
                                      -------       -------   -------   -------   --------  --------   
      Total from investment                                                                            
      operations                         1.70          2.46      4.19      0.77       1.50      0.38   
                                      -------       -------   -------   -------   --------  --------   

Less distributions to shareholders:                                                                    
   From net investment income           (0.23)        (0.22)    (0.29)    (0.27)     (0.30)       --   
   From net realized gains              (3.24)        (2.84)    (1.33)    (0.70)     (0.32)       --   
                                      -------       -------   -------   -------   --------  --------   
      Total distributions               (3.47)        (3.06)    (1.62)    (0.97)     (0.62)       --   
                                      -------       -------   -------   -------   --------  --------   
Net asset value, end                                                                                   
   of period                          $ 11.26       $ 13.03   $ 13.63   $ 11.06   $  11.26  $  10.38   
                                      =======       =======   =======   =======   ========  ========   

Total Return/(a)/                       14.20%        20.88%    38.90%     7.56%     14.64%     3.80%  

Ratios/Supplemental Data:                                                                              
   Net assets, end of period                                                                           
      (000's)                        $149,155      $226,711  $211,319  $207,291   $167,028  $169,208   
   Net expenses to average                                                                             
      daily net assets                   0.46%**       0.48%     0.48%     0.48%      0.48%     0.48%**
   Net investment income to                                                                            
      average daily net assets           2.71%**       1.99%     2.27%     2.61%      2.56%     3.20%**
   Portfolio turnover rate                117%          104%       84%      101%        53%        9%  
   Average broker commission                                                                           
      rate per equity share/(b)/      $0.0497       $0.0270       N/A       N/A        N/A       N/A   
   Fees and expenses                                                                                   
      voluntarily waived or                                                                            
      borne by the Manager                                                                             
      consisted of the                                                                                 
      following per share                                                                              
      amounts:                        $  0.02      $   0.02  $   0.01  $   0.01  $    0.01  $   0.01   

/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            
*   For the period from December 31, 1992 (commencement of operations) to   
February 28, 1993.                                                  
**  Annualized.                                                             

               See accompanying notes to the financial statements.             7

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

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

  The Fund seeks a total return greater than that of the Standard & Poor's
500 Stock Index through investment in common stocks either directly or
  through investments in other Funds of the Trust. Subsequently all of its
    assets will be invested in or exposed to equity securities chosen from the
  Wilshire 5000 Index and primarily in common stocks chosen from among the
     1,800 companies with the largest equity capitalization whose securities are
  listed on a United States national securities exchange, and/or shares of
other domestic equity funds of the Trust. On August 20, 1997, the Fund
   began to invest a substantial portion of its assets in other Funds of the
Trust.                                                                

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bore the same total operating expenses (after the voluntary expense waiver)
    as those shares. On August 20, 1997 the Fund revised its voluntary expense
    waiver to include certain expenses incurred indirectly by the Fund through
  investment in underlying funds (See Note 2). At August 31, 1997, Class I
and Class III were the only active classes of shares of the Fund.     

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

8                                                                               

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Futures contracts                                                     
The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S. government  
obligations in accordance with the initial margin requirements of the 
 broker or exchange. Futures contracts are marked to market daily and an
appropriate payable or receivable for the change in value ("variation 
   margin") is recorded by the Fund. The payable or receivable is liquidated
on the following business day. Gains or losses are recognized but not 
considered realized until the contracts expire or are closed. Futures 
contracts involve, to varying degrees, risk of loss in excess of the  
variation margin disclosed in the Statement of Assets and Liabilities.
     Losses may arise from changes in the value of the underlying instrument, if
there is an illiquid secondary market for the contracts, or if        
   counterparties do not perform under the contract terms. Futures contracts
 are valued at the settlement price established each day by the board of
    trade or exchange on which they are traded. At August 31, 1997, there were
no outstanding futures contracts.                                     

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund had
no securities on loan.                                                

Swap agreements                                                       
The Fund may enter into swap agreements to manage its exposure to the 
    equity markets. A swap is an agreement to exchange the return generated by
 one instrument for the return generated by another instrument. The Fund
    enters into equity swap agreements which involve a commitment by one party
 in the agreement to pay interest in exchange for a market linked return
based on a notional amount. To the extent that the total return of the
security or index underlying the transaction exceeds or falls short of

                                                                               9

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

  the offsetting interest rate obligation, the Fund will receive a payment
    from or make a payment to the counterparty, respectively. Equity swaps are
 marked to market daily based upon quotations from market makers and the
    change, if any, is recorded as unrealized gain or loss in the Statement of
    Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations. 
  Entering into these agreements involves, to varying degrees, elements of
     credit and market risk in excess of the amounts recognized on the Statement
     of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these agreements, that the counterparty to the   
   agreements may default on its obligation to perform, or that there may be
    unfavorable changes in the price of the security or index underlying these
transactions. At August 31, 1997, there were no open swap agreements  
outstanding.                                                          

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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.                                       

     The Fund's investments in REIT equity securities may at times result in the
    Fund's receipt of cash in excess of the REIT's earnings. The excess amount
cannot be determined by the Fund at the time of receipt. If the Fund  
distributes amounts which are subsequently determined to exceed REIT  
 earnings, such amounts would constitute a return of capital to the Fund
shareholders for federal income tax purposes.                         

Security transactions and related investment income                   
   Security transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

10                                                                              

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
  fund are allocated in such a manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the funds. Investment income, common 
     expenses and realized and unrealized gains and losses are allocated prorata
among the classes based on the relative net assets of each class.     
 Shareholder service fees, which are directly attributable to a class of
   shares, are charged to that class' operations. In addition, the Fund will
    also incur fees and expenses indirectly as a shareholder in the underlying
    funds. Because the underlying funds have varied expense and fee levels and
 the Fund may own different proportions of underlying funds at different
     times, the amount of fees and expenses indirectly incurred by the Fund will
vary. (See Note 2).                                                   

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .27% of the amount    
     invested. Prior to June 30, 1997, the premium on cash purchases was .14% of
the amount invested. All purchase premiums are paid to and recorded as
    paid-in capital by the Fund. For the six months ended August 31, 1997, the
Fund received $21 in purchase premiums. There is no premium for cash  
redemptions, reinvested distributions or in-kind transactions.        

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .49% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares. The Fund will always invest in the class of
shares of each underlying Fund being offered that bears the lowest    
    shareholder service fee. Like the management fee (as described below), the
   shareholder service fee of each class of the Fund's shares will be waived
     (but not below zero) to the extent of the indirect shareholder service fees
paid in connection with the Fund's investment in shares of underlying 
Funds.                                                                

    GMO has agreed to waive a portion of its fee (but not below zero) and bear
  other expenses until further notice to the extent that the Fund's annual
     expenses (including the management fee but excluding brokerage commissions,
 certain other transaction costs (including transfer taxes), shareholder
    service fees and extraordinary expenses ("fund expenses")) plus the amount
   of fees and expenses, excluding shareholder service fee and fund expenses
  (as defined above) incurred indirectly by the Fund through investment in
    underlying Funds exceed .33% of average daily net assets. Because GMO will
  not waive the management fees below zero, and because the amount of fees
and expenses incurred indirectly by the Fund will vary, the operating 
  expenses (excluding shareholder service fees and fund expenses) incurred
  indirectly by the Fund through investment in underlying Funds may exceed
0.33% of the Fund's average daily net assets.                         

                                                                              11

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $1,174. 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 six months ended August 31, 1997,     
aggregated $191,532,436 and $238,149,024, respectively.               

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]

                        Gross Unrealized    Gross Unrealized      Net Unrealized   
   Aggregate Cost         Appreciation        Depreciation         Depreciation    
---------------------  -------------------  ------------------  -------------------
                                                                                   
   $ 151,676,965           $ 487,541           $ 1,465,563          $ 978,022      

4.   Principal shareholders                                                     

    At August 31, 1997, 94% of the outstanding shares of the Fund were held by
     three shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                        [Enlarge/Download Table]

                                                                        Period from September 3, 1996  
                                           Six Months Ended             (commencement of operations)   
Class I:                                   August 31, 1997                  to February 28, 1997       
                                  -----------------------------------  --------------------------------
                                      Shares             Amount           Shares            Amount     
                                  ---------------   -----------------  -------------    ---------------
                                                                                                       
Shares sold                            9,164        $   101,224             97,467       $ 1,163,513   
Shares issued to shareholders in                                                                       
   reinvestment of distributions      33,070            358,524              7,610            94,003   
Shares repurchased                    (1,191)           (16,800)              (928)          (12,000)  
                                  ===============   =================  =============    ===============
Net increase                          41,043        $   442,948            104,149       $ 1,245,516   
                                  ===============   =================  =============    ===============

12                                                                              

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GMO U.S. Sector Fund                                                            
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Share transactions - continued                                        

                                                        [Enlarge/Download Table]

                                          Six Months Ended                     Year Ended           
Class III:                                August 31, 1997                  February 28, 1997        
                                  ---------------------------------  -------------------------------
                                     Shares             Amount         Shares            Amount     
                                  --------------    ---------------  ------------    ---------------
                                                                                                    
Shares sold                                --       $         --       7,570,612     $  96,850,986  
Shares issued to shareholders in                                                                    
  reinvestment of distributions     4,347,968         47,071,578       3,069,555        37,653,043  
Shares repurchased                 (8,493,144)      (102,807,273)     (8,749,092)     (112,420,809) 
                                  ==============    ===============  ============    ===============
Net increase (decrease)            (4,145,176)      $(55,735,695)      1,891,075     $  22,083,220  
                                  ==============    ===============  ============    ===============

                                                                              13

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares        Description                                         Value ($) 
--------------------------------------------------------------------------------
                                                                                
                 COMMON STOCKS -- 91.1%                                         

                 Aerospace -- 0.4%                                              
      2,100      Lockheed Martin Corp                                 217,744   
        800      Northrop Grumman Corp                                 93,650   
     19,000      Raytheon Co                                        1,045,000   
      2,400      Textron Inc                                          149,550   
      1,600      TRW Inc                                               83,400   
                                                                   -----------  
                                                                    1,589,344   
                                                                   -----------  

                 Automotive -- 3.6%                                             
      1,100      Bandag Inc                                            58,644   
     39,800      Chrysler Corp                                      1,397,975   
        900      Eaton Corp                                            81,056   
      6,800      Electronic Data Systems Corp                         257,125   
     88,700      Ford Motor Co                                      3,814,100   
     98,600      General Motors Corp                                6,187,150   
      2,600      Genuine Parts Co                                      80,275   
      2,400      Goodyear Tire & Rubber Co                            147,900   
        900      Harley Davidson Inc                                   48,713   
      1,200      Lear Corp *                                           54,975   
     75,000      Mascotech Industries Inc                           1,570,313   
      1,700      Paccar Inc                                            80,538   
                                                                   -----------  
                                                                   13,778,764   
                                                                   -----------  

                 Banking and Financial Services -- 12.9%                        
      2,800      Advanta Corp, Class A                                 92,750   
      1,900      Ahmanson (HF) & Co                                    96,425   
     22,200      American Express Co                                1,726,050   
      9,384      American General Corp                                452,191   
      4,150      Amsouth Bancorp                                      174,559   
     20,100      Banc One Corp                                      1,077,863   
      2,000      Bank of New York Inc                                  89,250   
     65,400      BankAmerica Corp                                   4,304,138   
      1,100      BankBoston Corp                                       91,438   
      3,800      Bankers Trust New York Corp                          394,250   
      2,000      Barnett Banks Inc                                    136,250   
      1,600      BB&T Corporation                                      82,800   
      9,855      Bear Stearns Inc                                     389,902   
      2,200      Beneficial Corp                                      157,438   
    127,500      Block (HR) Inc                                     5,004,375   
      1,400      Capital One Financial Corp                            53,900   
      1,700      Central Fidelity Banks Inc                            66,513   

              See accompanying notes to the financial statements.              1

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares        Description                                       Value($)   
--------------------------------------------------------------------------------
                                                                                
                 Banking and Financial Services -- continued                    
     49,100      Chase Manhattan Corp                               5,459,306   
     60,899      Citicorp                                           7,772,235   
      2,300      Comdisco Inc                                          62,531   
      1,900      Comerica Inc                                         134,544   
      3,400      Commerce Bancshares Inc                              183,175   
      3,250      Compass Bancshares Inc                               115,781   
      3,000      Corestates Financial Corp                            184,500   
      4,400      Countrywide Credit Industry Inc                      148,225   
      3,300      Donaldson Lufkin & Jenrette                          195,938   
      8,400      Edwards (AG) Inc                                     333,900   
     12,200      Federal Home Loan Mortgage Corp                      397,263   
     36,000      Federal National Mortgage Associates               1,584,000   
      3,100      First Bank of America Corp                           159,650   
     23,800      First Chicago NBD Corp                             1,707,650   
        200      First Empire State Corp                               73,100   
      1,900      First Hawaiian Inc                                    70,063   
      1,900      First Security Corp                                   53,675   
     16,000      First Union Corp (NE)                                769,000   
      2,300      First Virginia Banks Inc                             156,688   
      2,400      Firstar Corp                                          80,850   
      3,200      Fleet Financial Group Inc                            206,200   
      3,900      Franklin Resources Inc                               301,763   
      2,400      Golden West Financial Corp                           197,550   
      2,900      Green Tree Financial Corp                            127,419   
      4,300      Greenpoint Financial Corp                            264,719   
      1,200      Household International Inc                          133,125   
      3,900      Key Corp                                             236,438   
      7,000      Lehman Brothers Holding Inc                          307,125   
      4,300      Liberty Financial Cos                                213,119   
      7,350      MBNA Corp                                            282,516   
      5,300      Mercantile Bankshares                                149,063   
      8,100      Merrill Lynch                                        498,150   
      3,700      MGIC Investment Corp                                 186,156   
      2,800      Morgan Jersey Co Inc                                 300,300   
     29,685      Morgan Stanley Dean Witter Discover & Co           1,428,591   
      4,600      National City Corp                                   259,900   
     25,800      Nationsbank Corp                                   1,531,875   
      1,500      Northern Trust                                        79,688   
      9,000      Norwest Corp                                         516,938   
      1,180      Old Kent Financial Corp                               72,275   
      7,800      Pacific Century Financial Corp                       384,638   

2             See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Banking and Financial Services -- continued                    
      4,600      Paine Webber Group Inc                               176,813   
      1,000      PMI Group Inc                                         57,813   
     30,100      PNC Bank Corp                                      1,301,825   
      8,900      Popular Inc                                          384,925   
     13,300      Providian Financial Corp                             495,425   
      3,500      Regions Financial Corp                               119,875   
      2,700      Republic New York Corp                               289,069   
      1,500      Rowe (T) Price & Associates Inc                       82,500   
      6,900      Salomon Inc                                          413,138   
      1,800      Signet Banking Corp                                   93,263   
      1,600      SLM Holding Corp                                     216,800   
      2,900      Southtrust Corp                                      129,775   
        800      State Street Corp                                     39,900   
      2,000      Suntrust Banks Inc                                   125,000   
     35,463      Travelers Group Inc                                2,251,901   
      1,300      Union Planters Corp                                   66,625   
      2,800      Unionbancal Corp                                     216,475   
      2,000      Wachovia Corp                                        124,500   
      3,630      Washington Federal Inc                                98,918   
      6,770      Washington Mutual Inc                                405,354   
      1,900      Wells Fargo & Co                                     483,075   
      1,500      Wilmington Trust Corp                                 75,563   
                                                               --------------   
                                                                   49,358,246   
                                                               --------------   

                 Chemicals -- 0.5%                                              
     15,000      Albemarle Corp                                       368,438   
      2,400      Eastman Chemical Co                                  143,550   
      3,900      Great Lakes Chemical Corp                            181,350   
     20,000      Millenium Chemicals Inc                              420,000   
      2,000      Morton International Inc                              66,500   
      5,900      PPG Industries Inc                                   371,700   
      1,900      Sherwin Williams Co                                   52,131   
      3,100      Union Carbide Corp                                   159,069   
     10,000      Wellman Inc                                          227,500   
                                                               --------------   
                                                                    1,990,238   
                                                               --------------   

                 Computer and Office Equipment -- 1.3%                          
      7,700      Apple Computer Inc                                   167,475   
     18,250      Compaq Computer Corp                               1,195,318   
      7,900      Gateway 2000 Inc                                     309,088   
      4,800      Hewlett Packard Co                                   294,300   
    125,000      Intergraph Corp *                                  1,242,188   

              See accompanying notes to the financial statements.              3

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Computer and Office Equipment -- continued                     
      2,600      Lexmark International Group Inc *                     91,000   
      6,700      Micron Technology Inc *                              298,569   
     15,000      Office Depot                                         276,563   
      2,000      Pitney Bowes Inc                                     152,750   
      5,100      Quantum Corp                                         178,819   
     25,000      Silicon Graphics Inc *                               685,938   
      2,800      Sterling Software Inc                                 96,075   
                                                               --------------   
                                                                    4,988,083   
                                                               --------------   

                 Construction -- 0.2%                                           
      1,600      Georgia-Pacific Corp                                 146,000   
     30,000      Hanson PLC ADR                                       720,000   
                                                               --------------   
                                                                      866,000   
                                                               --------------   

                 Consumer Goods -- 3.6%                                         
      2,400      Black and Decker Corp                                 91,950   
      3,700      Callaway Golf Co                                     124,644   
      5,400      CVS Corp                                             304,425   
     79,200      Eastman Kodak Co                                   5,177,700   
      1,700      Fastenal Co                                           97,963   
          1      Footstar Inc                                              25   
      3,500      Fortune Brands Inc                                   120,313   
     28,250      Hasbro Inc                                           759,219   
      1,200      Jones Apparel Group Inc                               60,225   
      1,900      Lancaster Colony Corp                                 98,444   
      1,800      Liz Claiborne Inc                                     80,213   
      8,500      Mattel Co                                            284,219   
     85,000      Maytag Corp                                        2,332,188   
     20,700      Moore Corp Ltd                                       410,119   
      1,800      Newell Co                                             70,875   
      2,500      Nike Inc, Class B                                    133,438   
      4,700      Procter and Gamble Co                                625,394   
      2,100      Reebok International Ltd                              92,269   
      2,600      Russell Corp                                          74,100   
    112,500      Safety Kleen                                       2,271,094   
      6,300      Terra Industries Inc                                  84,263   
      1,700      Unifi Inc                                             65,238   
      2,400      VF Corp                                              212,100   
      1,800      Whirlpool Corp                                       103,050   
                                                               --------------   
                                                                   13,673,468   
                                                               --------------   

4             See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investment -- (Continued)                                           
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Electronic Equipment -- 0.7%                                   
      4,200      American Power Conversion Corp *                     110,250   
      2,300      Amp Inc                                              115,000   
      1,500      Arrow Electronics Inc *                               92,156   
      1,400      Cooper Industries Inc                                 74,638   
      3,500      Emerson Electric                                     191,406   
      1,200      Harris Corp Inc                                      104,550   
     15,000      International Rectifier Corp *                       342,188   
      2,300      ITT Corp                                             144,469   
      2,500      Linear Technology Corp                               163,906   
      2,000      Litton Industries *                                   99,750   
      1,300      LSI Logic *                                           41,844   
      1,800      Maxim Integrated Products Inc *                      124,425   
      6,200      Motorola Inc                                         454,925   
     12,600      National Semiconductor Corp                          431,550   
      1,200      Texas Instruments                                    136,350   
      3,995      Vishay Intertechnology Inc                           106,617   
        900      Xilinx Inc *                                          42,750   
                                                               --------------   
                                                                    2,776,774   
                                                               --------------   

                 Environmental Control -- 1.0%                                  
    231,900      Wheelabrator Technology Inc                        3,637,931   
                                                               --------------   

                 Food and Beverage -- 3.5%                                      
     84,300      Anheuser Busch Cos Inc                             3,593,288   
     34,292      Archer Daniels Midland Co                            741,563   
      4,200      Coca Cola Enterprises Inc                            115,500   
      1,500      ConAgra Inc                                           96,469   
     10,000      Coors (Adolph) Co                                    368,750   
      2,300      CPC International Inc                                204,988   
     56,300      Darden Restaurants Inc                               566,519   
      1,100      Dean Foods Co                                         48,813   
      2,400      Heinz (HJ) Co                                         99,900   
      2,800      Hormel (Geo A) and Co                                 83,300   
      3,600      IBP Inc                                               82,575   
      2,500      Nabisco Holdings Corp, Class A                       103,750   
     25,400      Pepsico Inc                                          914,400   
      1,000      Quaker Oats Company                                   47,000   
     98,800      RJR Nabisco Holdings Corp                          3,439,475   
      8,400      Sara Lee Corp                                        338,100   
      9,100      Seagrams Co Ltd                                      317,931   
      8,400      Tyson Food Inc, Class A                              178,500   

              See accompanying notes to the financial statements.              5

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investment -- (Continued)                                           
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                Food and Beverage -- continued                                  
     10,000      Unilever NV ADR                                    2,012,500   
      2,700      Whitman Corp                                          66,150   
      1,000      Wrigley (William Jr) Co                               72,500   
                                                               --------------   
                                                                   13,491,971   
                                                               --------------   

                 Health Care -- 1.6%                                            
      3,100      Bard (CR)                                            106,950   
      1,400      Bausch & Lomb Inc.                                    57,488   
      2,200      Becton Dickinson & Co                                105,463   
     79,900      Beverly Enterprises Inc *                          1,303,369   
      4,500      BioMet Inc                                            93,375   
     14,500      Columbia HCA Healthcare Corp                         457,656   
        700      Guidant Corp                                          61,469   
      1,700      Hillenbrand Industries Inc                            74,694   
     37,400      Johnson & Johnson                                  2,120,113   
      1,700      Mallinckrodt Inc                                      61,838   
      1,000      McKesson Corp                                         93,688   
      3,800      Medtronic Inc                                        343,425   
     11,800      Pharmacia & Upjohn Inc                               401,938   
      6,875      Quest Diagnostics Inc *                              128,477   
     10,300      Tenet Healthcare Corp *                              280,675   
      4,500      United Healthcare Corp                               218,813   
      2,900      Wellpoint Health Network *                           157,688   
                                                               --------------   
                                                                    6,067,119   
                                                               --------------   

                 Insurance -- 4.9%                                              
      3,300      Aetna Life and Casualty Co                           314,944   
      3,000      AFLAC Corp                                           165,188   
     18,082      Allstate Corp                                      1,321,116   
      3,900      AMBAC Inc                                            315,169   
      2,200      American Financial Group Inc                          95,150   
      5,800      American National Insurance Co                       562,600   
      2,300      Chubb Corp                                           153,813   
      2,800      Cigna Corp                                           513,450   
        800      Cincinnati Financial Corp                             65,000   
      3,600      CNA Financial Corp *                                 408,375   
     10,764      Conseco Inc                                          462,852   
      4,200      Equitable Companies Inc                              182,700   
      3,000      Equitable of Iowa Cos                                195,375   
      1,800      Everest Re Holdings Inc                               65,138   
      9,030      Foundation Health Systems *                          287,267   

6             See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unadited)                                                      

                                                                [Download Table]


     Shares        Description                                      Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Insurance -- continued                                         
        900      General Re Corp                                      174,488   
      4,400      Hartford Financial Services Group                    350,900   
      5,100      Lincoln National Corp                                341,381   
     14,800      Loews Corp                                         1,508,675   
      1,800      Marsh & McLennan Cos Inc                             122,850   
      2,000      MBIA Inc                                             226,500   
      1,100      Mercury General Corp                                  96,250   
     25,000      Nationwide Financial Service, Class A                693,750   
      5,400      Ohio Casualty Corp                                   251,100   
     11,400      Old Republic International Corp                      409,688   
      1,404      Pacificare Health Systems, Class B *                  95,999   
      1,400      Progressive Corp                                     138,600   
      2,017      Provident Cos Inc                                    131,357   
    175,000      Reliance Group Holdings Inc                        2,143,750   
      7,600      Reliastar Financial Corp                             568,100   
      7,000      Safeco Corp                                          343,875   
      6,100      Saint Paul Cos Inc                                   447,588   
    150,000      TIG Holdings Inc                                   4,687,500   
     10,600      Torchmark Corp                                       399,488   
      2,800      Transamerica Corp                                    275,975   
      2,100      Transatlantic Holding Inc                            148,444   
      2,700      USF & G Corp                                          59,231   
                                                                   -----------  
                                                                   18,723,626   
                                                                   -----------  

                 Machinery -- 1.2%                                              
      2,900      Agco Corporation                                      94,250   
      5,200      Applied Materials Inc *                              490,750   
      2,600      Brunswick Corp                                        79,300   
      3,800      Case Corp                                            254,838   
      3,900      Caterpillar Inc                                      226,444   
    100,000      Cincinnati Milacron Inc                            2,575,000   
      1,300      Cummins Engine Inc                                   100,019   
      6,800      FMC Corp *                                           564,825   
      4,800      Tecumseh Products Co, Class B                        259,200   
      1,300      York International Corp                               58,338   
                                                                   -----------  
                                                                    4,702,964   
                                                                   -----------  

                 Manufacturing -- 7.4%                                          
     35,600      American Greetings Corp                            1,237,100   
     40,100      Clayton Homes Inc                                    674,181   
     32,500      Corning Inc                                        1,718,438   

                See accompanying notes to financial statements.                7

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


     Shares        Description                                      Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Manufacturing -- continued                                     
      1,800      Crane Co                                              79,425   
     30,000      General Electric Co                                1,875,000   
     65,600      IBM Corp                                           6,617,400   
      3,200      International Game Technology                         64,000   
     27,700      Lafarge Corp                                         900,250   
      3,400      Minnesota Mining And Manufacturing Co                305,575   
     75,000      Owens Corning                                      3,042,188   
      2,200      Rockwell International Corp                          132,000   
      1,800      Temple Inland Inc                                    116,100   
     50,000      Tenneco Inc                                        2,428,125   
      4,300      Trinity Industries Inc                               170,925   
     37,700      United Technologies Corp                           2,942,956   
    230,000      Westinghouse Electric Corp                         5,922,500   
                                                                   ----------   
                                                                   28,226,163   
                                                                   ----------   

                 Metals and Mining -- 2.0%                                      
     39,000      Alcan Aluminum Ltd                                 1,362,563   
     20,000      Allegheny Teledyne Inc                               617,500   
     17,600      Asarco Inc                                           541,200   
     40,700      Cyprus Amax Minerals Co                            1,027,675   
     47,500      Inco Ltd                                           1,285,469   
      2,500      Newmont Mining Corp                                  105,781   
      5,000      Pegasus Gold                                          21,250   
      8,500      Phelps Dodge Corp                                    683,719   
     25,000      Pittston Minerals Group                              279,688   
     21,300      Reynolds Metals Co                                 1,505,644   
      3,100      Timken Co                                            116,056   
        200      Wesco Financial Corp                                  55,013   
                                                                   ----------   
                                                                    7,601,558   
                                                                   ----------   

                 Oil and Gas -- 6.7%                                            
     25,000      Amerada Hess Corp                                  1,453,125   
      2,800      Amoco Corp                                           264,775   
      8,100      Atlantic Richfield Co                                607,500   
     20,000      Cabot Oil & Gas Corp, Class A                        463,750   
      2,200      Columbia Natural Gas Systems Inc                     145,200   
     12,500      Dresser Industries Inc                               521,875   
        900      El Paso Natural Gas Co                                50,625   
     50,000      Enron Oil & Gas                                    1,206,250   
     74,975      Enserch Exploration Inc *                            674,778   
     15,000      Exxon Corp                                           917,813   
      1,000      FINA Inc, Class A                                     66,000   

8             See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Oil and Gas -- continued                                       
     25,000      Mitchell Energy, Class B                             625,000   
     20,300      Mobil Corp                                         1,476,825   
    230,300      Occidental Petroleum Corp                          5,397,656   
      2,500      Phillips Petroleum Co                                118,906   
     11,600      Questar Corp                                         464,000   
     12,300      Texaco Inc                                         1,417,575   
      5,500      Union Pacific Resources Group                        137,500   
    125,000      Union Texas Petroleum Holdings Inc                 2,914,063   
     67,400      Unocal Corp                                        2,632,813   
     97,800      USX - Marathon Group                               3,184,613   
     50,000      Westcoast Energy Inc                                 956,250   
                                                               --------------   
                                                                   25,696,892   
                                                               --------------   

                 Paper and Allied Products -- 1.8%                              
     16,400      Boise Cascade Corp                                   648,825   
      1,300      Bowater Inc                                           66,544   
     17,600      Champion International Corp                        1,041,700   
     22,000      Fort James Corp                                      924,000   
     44,000      International Paper Co                             2,321,000   
      1,900      Kimberly Clark Corp                                   90,131   
      3,000      Louisiana Pacific Corp                                66,375   
      1,600      Mead Corp                                            113,500   
      2,100      Plum Creek Timber Co Limited Partnership              69,956   
        900      Potlatch Corp                                         42,019   
      1,600      Rayonier Inc                                          78,100   
      2,400      Sonoco Products Co                                    78,150   
      4,000      Stone Container Corp                                  69,000   
      1,800      Union Camp Corp                                      106,763   
      3,200      Westvaco Corp                                        108,400   
     12,700      Weyerhaeuser Co                                      733,425   
      1,700      Willamette Industries Inc                            135,575   
                                                               --------------   
                                                                    6,693,463   
                                                               --------------   

                 Pharmaceuticals -- 1.6%                                        
     38,800      Abbott Laboratories                                2,325,575   
     11,600      Allergan Inc                                         375,550   
      2,100      American Home Products Corp                          151,200   
      1,500      Amgen Inc                                             74,344   
      2,600      Bergen Brunswig Corp, Class A                        109,200   
      9,500      Bristol Myers Squibb Co                              722,000   
      2,400      General Nutrition Cos Inc *                           66,600   
     25,000      Immulogic Pharmaceutical                              79,688   

               See accompanying notes to financial statements.               9

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Pharmaceuticals -- continued                                   
     12,500      Lilly (Eli) & Co                                   1,307,813   
      5,000      Merck & Co Inc                                       459,063   
      5,000      Schering Plough Corp                                 240,000   
      1,100      Warner Lambert Co                                    139,769   
                                                               --------------   
                                                                    6,050,802   
                                                               --------------   

                 Primary Materials -- 0.8%                                      
      5,000      Crown Cork & Seal Inc                                254,375   
      7,800      Premark International Inc                            232,050   
    100,000      Rubbermaid Inc                                     2,500,000   
      1,500      Vulcan Materials Co                                  131,813   
                                                               --------------   
                                                                    3,118,238   
                                                               --------------   

                 Primary Processing -- 0.8%                                     
      3,100      Alumax Inc *                                         128,456   
     20,000      Bethlehem Steel Corp *                               240,000   
     10,500      Dow Chemical Co                                      929,250   
      5,000      Du Pont (EI) De Nemours & Co                         311,563   
     23,300      LTV Corp                                             302,900   
     29,300      USX-US Steel Group Inc                             1,029,163   
                                                               --------------   
                                                                    2,941,332   
                                                               --------------   

                 Printing and Publishing -- 0.1%                                
      2,600      Dun and Bradstreet Corp                               72,800   
     25,000      News Corporation Ltd ADR                             451,563   
                                                               --------------   
                                                                      524,363   
                                                               --------------   

                 Real Estate -- 1.3%                                            
     50,000      Crown American Realty Trust                          484,375   
     25,000      Evans Withycombe Residential                         595,313   
      7,500      JP Realty Inc                                        184,688   
    125,000      Summit Properties Inc                              2,492,188   
     50,000      Walden Residential Properties Inc                  1,193,750   
                                                               --------------   
                                                                    4,950,314   
                                                               --------------   

                 Refining -- 0.2%                                               
     22,500      Quaker State Corp                                    348,750   
      6,400      Royal Dutch Petroleum                                324,800   
      2,000      Ultramar Diamond Shamrock Corp                        65,250   
                                                               --------------   
                                                                      738,800   
                                                               --------------   

10               See accompanying notes to the financial statements.            

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares         Description                                       Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Retail Trade -- 3.1%                                           
     10,500      Albertsons Inc                                       360,938   
      5,900      American Stores Co                                   139,756   
      5,200      Autozone Inc *                                       146,900   
      2,300      Bed, Bath & Beyond Inc *                              70,869   
     25,000      Cone Mills Corp *                                    196,875   
      4,400      Costco Cos Inc *                                     158,675   
      3,700      Dayton Hudson Corp                                   210,900   
      5,300      Dillards Department Stores Inc                       212,000   
     57,100      Federated Department Stores *                      2,398,200   
      2,100      Fruit of the Loom Inc *                               56,175   
      8,500      Gap Inc                                              377,719   
     20,100      Kmart Corp *                                         278,888   
     25,400      Limited Inc                                          577,850   
      3,400      May Department Stores Co                             182,963   
      8,000      Mercantile Stores                                    499,500   
      6,000      Officemax Inc *                                       88,875   
      5,300      Penney (JC) Co Inc                                   318,000   
      2,200      Safeway Inc *                                        112,063   
      1,000      Sears Roebuck & Co                                    56,750   
      2,000      Tandy Corp                                           132,750   
     10,500      Toys R Us Inc *                                      362,906   
    127,700      Wal Mart Stores Inc                                4,533,350   
      3,300      Weismarkets Inc                                      111,375   
      1,900      Winn Dixie                                            64,006   
      2,000      Woolworth (FW) Co *                                   44,750   
                                                               --------------   
                                                                   11,693,033   
                                                               --------------   

                 Services -- 3.7%                                               
      1,200      BHC Communications Inc, Class A                      147,300   
     22,500      Browning Ferris Industries Inc                       786,094   
      2,309      Chris Craft Industries Inc                           113,285   
      4,600      Circus Circus Enterprises Inc *                      110,113   
      1,100      Gannett Co Inc                                       107,181   
      2,500      Harrahs Entertainment Inc                             56,094   
      1,400      Healthcare Compare Corp *                             78,050   
      1,900      Kelly Services                                        63,650   
      3,100      Kingworld Productions Inc                            123,225   
      2,000      Meredith Corp                                         60,000   
     45,000      Ogden Corp                                         1,043,438   
      3,100      Olsten Corp                                           58,125   

              See accompanying notes to the financial statements.             11

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


    Shares          Description                                     Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Services -- continued                                          
      5,000      Servicemaster Industry Inc                           127,188   
     41,200      Supervalu Inc                                      1,617,100   
    251,700      Waste Management Inc                               8,054,400   
    175,000      Waste Management International PLC ADR *           1,421,875   
                                                               --------------   
                                                                   13,967,118   
                                                               --------------   

                 Technology -- 7.5%                                             
      2,400      Adobe Systems Inc                                     94,500   
      5,900      Advanced Micro Devices Inc *                         220,881   
      1,700      Autodesk Inc                                          74,375   
      9,600      Avnet Inc                                            664,200   
      4,100      Bay Networks Inc *                                   145,038   
      4,700      BMC Software Inc                                     294,338   
      7,400      Cabletron Systems Inc                                223,850   
     12,400      Cisco Systems Inc *                                  934,650   
     77,600      Digital Equipment Corp *                           3,336,800   
      1,100      Grainger (WW) Inc                                     97,694   
     58,100      Intel Corp                                         5,352,463   
     44,300      Microsoft Corp                                     5,855,906   
     43,900      Novell Inc *                                         411,563   
      2,500      Seagate Technology Corp                               95,469   
    103,499      Storage Technology Corp *                          5,271,980   
    145,000      Tandem Computers Inc *                             4,930,000   
      2,500      Teradyne Inc *                                       139,219   
      5,800      Xerox Corp                                           437,900   
                                                               --------------   
                                                                   28,580,826   
                                                               --------------   

                 Telecommunications -- 6.8%                                     
     97,100      AT & T Corp                                        3,786,900   
      6,456      Bell Atlantic Corp                                   467,253   
      2,400      Bellsouth Corp                                       105,600   
     12,500      Comcast Corp, Class A                                290,625   
     22,500      Comsat Corp                                          487,969   
     25,000      Cox Communications, Class A *                        676,563   
    107,900      GTE Corp                                           4,808,294   
     76,300      MCI Communications Corp                            2,174,550   
      6,700      Nextel Communications Inc, Class A                   167,919   
     62,500      SBC Communications                                 3,398,414   
     21,000      Sprint Corp                                          987,000   
     32,500      Tele-Communications, Class A                         568,750   

12            See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]

    Shares         Description                                      Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Telecommunications -- continued                                
    116,300      US West Inc                                        4,164,994   
    185,200      US West Media Group *                              3,704,000   
      3,800      Viacom Inc, Class B                                  112,575   
      2,400      Worldcom Inc *                                        71,850   
                                                                   -----------  
                                                                   25,973,256   
                                                                   -----------  

                 Tobacco -- 0.9%                                                
     17,500      Gallaher Group Plc ADR                               313,906   
     75,000      Imperial Tobacco Group Plc ADR                       939,008   
     52,900      Philip Morris Cos Inc                              2,307,763   
                                                                   -----------  
                                                                    3,560,677   
                                                                   -----------  

                 Transportation -- 1.4%                                         
     10,000      American West Holdings Corp, Class B *               120,625   
      8,100      AMR Corp *                                           816,075   
      5,800      Burlington Northern Santa Fe Railroad Co             531,788   
     85,000      Canadian Pacific                                   2,480,938   
      6,500      CSX Corp                                             371,719   
      2,100      Delta Air Lines Inc                                  181,650   
      1,300      Federal Express Corp                                  86,369   
      1,100      Gatx Corp                                             68,819   
        700      Norfolk Southern Corp                                 68,600   
      7,500      Ryder System Inc                                     267,656   
     11,700      Sabre Group Holding Inc                              359,775   
        900      UAL Corp *                                            68,569   
                                                                   -----------  
                                                                    5,422,583   
                                                                   -----------  

                 Utilities -- 9.6%                                              
      3,400      AES Corp                                             125,800   
      6,400      American Water Works Co                              132,800   
      3,000      Baltimore Gas and Electric Co                         81,000   
      3,500      Boston Edison Co                                      98,875   
     62,500      Calpine Corp *                                     1,156,250   
     13,100      Centerior Energy Corp                                147,375   
      4,600      Central & South West Corp                             95,163   
     30,000      Cinergy Corp                                         991,875   
      6,900      CMS Energy Corp                                      247,969   
      3,400      Coastal Corp                                         196,350   
     24,600      Consolidated Edison                                  753,375   
      2,500      Delmarva Power and Light Co                           44,844   
      3,700      Dominion Resources Inc                               133,200   

              See accompanying notes to the financial statements.             13

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


   Shares        Description                                       Value ($)    
--------------------------------------------------------------------------------
                                                                                
                 Utilities -- continued                                         
     20,000      DPL Inc                                              473,750   
     10,000      DTE Energy Co                                        296,250   
     50,000      Duke Power Co                                      2,421,875   
     21,900      Edison International                                 528,338   
     47,500      Energy Group PLC ADR                               1,920,781   
      3,300      Enova Corp                                            79,200   
     85,300      Entergy Corp                                       2,116,506   
      2,000      Florida Progress Corp                                 64,375   
      2,500      FPL Group Inc                                        116,250   
     11,800      General Public Utilities Inc                         396,775   
     43,781      Houston Industries Inc                               886,565   
     66,200      Illinova Corp                                      1,522,600   
      9,200      Long Island Lighting Co                              227,125   
      3,600      Midamerican Energy Holding Co                         61,425   
      2,300      Montana Power Co                                      53,044   
      3,300      New England Electric System                          126,225   
      6,000      New York State Electric and Gas Corp                 146,250   
    212,000      Niagara Mohawk Power Corp *                        1,894,750   
      8,300      Northeast Utilities                                   83,519   
     46,600      Ohio Edison Co                                     1,025,200   
     28,900      Pacificorp                                           599,675   
     16,000      Peco Energy Co                                       381,000   
    104,600      PG & E Corp                                        2,425,413   
      2,800      Pinnacle West Capital Corp                            90,475   
      7,000      PP & L Resources Inc                                 153,563   
     63,900      Public Service Enterprise Group Inc                1,585,519   
      1,900      Puget Sound Power and Light Co                        48,213   
     36,100      Southern Co                                          760,356   
    241,750      Texas Utilities Co                                 8,431,031   
     25,000      TransCanada Pipeline Ltd                             468,750   
    127,100      Unicom Corp                                        3,002,738   
      1,900      Western Resources Inc                                 63,650   
                                                               --------------   
                                                                   36,656,062   
                                                               --------------   

                 TOTAL COMMON STOCKS (COST $283,401,394)          348,040,008   
                                                               --------------   

                 PREFERRED STOCKS -- 2.5%                                       

                 Banking and Financial Services -- 0.1%                         
     10,000      Time Warner Financing Convertible $1.24              390,000   
                                                               --------------   

14               See accompanying notes to financial statements.                

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


Par Value($)/                                                                   
   Shares        Description                                        Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 Metals and Mining -- 0.1%                                      

      7,500      Freeport McMoran Corp $0.34                          223,594   
                                                               --------------   

                 Paper and Allied Products -- 1.0%                              

    100,200      Fort James Corp Convertible 9.00%                  3,820,125   
                                                               --------------   

                 Refining -- 0.4%                                               

     30,000      Unocal Corp Convertible 6.25% 144A                 1,736,250   
                                                               --------------   

                 Transportation -- 0.9%                                         

     23,900      Navistar International Corp $6.00                  1,431,013   
     22,500      US Air Group Inc Convertible Series B $8.759       1,926,563   
                                                               --------------   
                                                                    3,357,576   
                                                               --------------   

                 TOTAL PREFERRED STOCKS  (COST  $5,837,267)         9,527,545   
                                                               --------------   

                 SHORT-TERM INVESTMENTS -- 15.0%                                

                 Cash Equivalents -- 8.5%                                       

$10,750,565      BankBoston Eurodollar Time Deposit, 5.7875%                    
                 due 9/2/97/(a)/                                   10,750,565   
   $682,757      First Union National Bank of North Carolina                    
                 Eurodollar Time Deposit, 5.5625% due                           
                 9/2/97/(a)/                                          682,757   
 $2,048,272      Harris Bank and Trust Eurodollar Time Deposit,                 
                 5.625% due 9/2/97/(a)/                             2,048,272   
 13,900,000      Merrimac Cash Fund Premium Class/(a)/             13,900,000   
 $5,000,000      Prudential Securities Group Inc Master Note,                   
                 5.8875% due 9/2/97/(a)/                            5,000,000   
                                                               --------------   
                                                                   32,381,594   
                                                               --------------   
                 U.S. Government -- 0.1%                                        

   $600,000      U.S. Treasury Bill, 5.22% due 11/28/97/(b)/          592,619   
                                                               --------------   
                 Repurchase Agreements -- 6.4%                                  

$19,275,617      Salomon Brothers Repurchase Agreement, dated                   
                 8/29/97, due 9/2/97, with a maturity value of                  
                 $19,286,433 and an effective yield of 5.05%,                   
                 collateralized by U.S. Treasury Obligations                    
                 with rates ranging from 5.00% to 6.75%, with                   
                 maturity dates ranging from 2/15/99 to 8/15/26                 
                 and with an aggregate market value of                          
                 $19,717,318.                                      19,275,617   

 $5,161,101      Prudential Securities, Inc. Repurchase                         
                 Agreement, dated 8/29/97, due 9/2/97, with a                   
                 maturity value of $5,163,962 and an effective                  
                 yield of 4.99%, collateralized by a U.S.                       
                 Government Agency Obligation with a rate of                    
                 6.811%, with a maturity date of 3/1/35 and a                   
                 market value of $5,264,341.                        5,161,101   
                                                               --------------   
                                                                   24,436,718   
                                                               --------------   

                 TOTAL SHORT-TERM INVESTMENTS                                   
                 (COST  $57,410,632)                               57,410,931   
                                                               --------------   

              See accompanying notes to the financial statements.             15

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         
Schedule of Investments -- (Continued)                                          
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                                [Download Table]


                                                                    Value ($)   
--------------------------------------------------------------------------------
                                                                                
                 TOTAL INVESTMENTS -- 108.6%                                    

                 (COST $346,649,293)                              414,978,484   

                 Other Assets and Liabilities (net) -- (8.6)%     (32,960,335)  
                                                               --------------   

                 TOTAL NET ASSETS-- 100%                         $382,018,149   
                                                               ==============   

                 Notes to the Schedule of Investments:                          

                 ADR - American Depositary Receipt                              
                 144A - Securities exempt from registration under               
                 rule 144A of the Securities Act of 1933.                       
                 These securities may be resold in                              
                 transactions exempt from registration,                         
                 normally to qualified institutional investors.                 
               * Non-income producing security.                                 
            /(a)/Represents investments of security lending                     
                 collateral (Note 1).                                           
            /(b)/Security has been segregated to cover margin requirements on   
                 open financial futures contracts.                              

16              See accompanying notes to financial statements.                 

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                              
Assets:                                                                       
   Investments, at value (cost $346,649,293) (Note 1)             $414,978,484
   Receivable for investments sold                                   1,060,049
   Dividends and interest receivable                                   784,038
   Receivable for open swap contracts (Notes 1 and 6)                1,075,223
   Receivable for variation margin on open futures contracts                  
     (Notes 1 and 6)                                                    55,896
   Receivable for expenses waived or borne by Manager (Note 2)         117,968
                                                                  ------------

      Total assets                                                 418,071,658
                                                                  ------------

Liabilities:                                                                  
   Payable for investments purchased                                 1,087,577
   Payable upon return of securities loaned (Note 1)                32,381,594
   Payable for Fund shares repurchased                               2,274,126
   Payable to affiliate for (Note 2):                                         
     Management fee                                                    222,058
     Shareholder service fee                                            47,588
   Accrued expenses                                                     40,566
                                                                  ------------

      Total liabilities                                             36,053,509
                                                                  ------------

Net assets                                                        $382,018,149
                                                                  ============

Net assets consist of:                                                        
   Paid-in-capital                                                $264,390,609
   Accumulated undistributed net investment income                   1,233,449
   Accumulated undistributed net realized gain                      47,092,608
   Net unrealized appreciation                                      69,301,483
                                                                  ------------
                                                                  $382,018,149
                                                                  ============

Net assets attributable to:                                                   
   Class III shares                                               $382,018,149
                                                                  ============

Shares outstanding:                                                           
   Class III                                                        24,464,821
                                                                  ============

Net asset value per share:                                                    
   Class III                                                      $      15.61
                                                                  ============

              See accompanying notes to the financial statements.             17

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)         
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Investment Income:                                                             
   Dividends                                                       $ 4,975,348 
   Interest (including securities lending income of $8,282)            644,731 
                                                                   ----------- 

      Total income                                                   5,620,079 
                                                                   ----------- 

Expenses:                                                                      
   Management fee (Note 2)                                           1,477,425 
   Custodian and transfer agent fees                                    49,012 
   Registration fees                                                    35,494 
   Audit fees                                                           23,964 
   Legal fees                                                           10,300 
   Trustees fees (Note 2)                                                2,096 
   Miscellaneous                                                         1,550 
   Fees waived or borne by Manager (Note 2)                           (628,962)
                                                                   ----------- 
                                                                       970,879 
   Shareholder service fee (Note 2)                                            
      Class III                                                        316,593 
                                                                   ----------- 
      Net expenses                                                   1,287,472 
                                                                   ----------- 

        Net investment income                                        4,332,607 
                                                                   ----------- 

Realized and unrealized gain (loss):                                           
   Net realized gain (loss) on:                                                
      Investments                                                   45,425,771 
      Closed futures contracts                                       2,723,015 
      Closed swap contracts                                           (210,045)
                                                                   ----------- 

        Net realized gain                                           47,938,741 
                                                                   ----------- 

   Change in net unrealized appreciation (depreciation) on:                    
      Investments                                                    9,077,820 
      Open futures contracts                                           122,684 
      Open swap contracts                                            1,230,012 
                                                                   ----------- 

        Net unrealized gain                                         10,430,516 
                                                                   ----------- 

      Net realized and unrealized gain                              58,369,257 
                                                                   ----------- 

Net increase in net assets resulting from operations               $62,701,864 
                                                                   =========== 

18            See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                      Six Months Ended                   
                                                                       August 31, 1997     Year Ended    
                                                                        (Unaudited)     February 28, 1997
                                                                      ----------------  -----------------
                                                                                                         
Increase (decrease) in net assets:                                                                       
Operations:                                                                                              
   Net investment income                                                $   4,332,607      $  7,642,847  
   Net realized gain                                                       47,938,741        62,774,750  
   Change in net unrealized appreciation (depreciation)                    10,430,516        (1,146,140) 
                                                                        -------------      ------------  

   Net increase in net assets resulting from operations                    62,701,864        69,271,457  
                                                                        -------------      ------------  

Distributions to shareholders from:                                                                      
   Net investment income                                                                                 
       Class III                                                           (4,363,090)       (7,540,588) 
                                                                        -------------      ------------  
       Total distributions from net investment income                      (4,363,090)       (7,540,588) 
                                                                        -------------      ------------  
   Net realized gains                                                                                    
       Class III                                                          (34,897,880)      (44,759,234) 
                                                                        -------------      ------------  
       Total distributions from net realized gains                        (34,897,880)      (44,759,234) 
                                                                        -------------      ------------  

                                                                          (39,260,970)      (52,299,822) 
                                                                        -------------      ------------  
   Net share transactions: (Note 5)                                                                      
       Class III                                                         (111,014,107)      135,007,878  
                                                                        -------------      ------------  
   Increase (decrease) in net assets resulting from net                                                  
       share transactions                                                (111,014,107)      135,007,878  
                                                                        -------------      ------------  

     Total increase (decrease) in net assets                              (87,573,213)      151,979,513  

Net assets:                                                                                              
   Beginning of period                                                    469,591,362       317,611,849  
                                                                        -------------      ------------  

   End of period (including accumulated undistributed net investment                                     
     income of $1,233,449 and $1,263,932, respectively)                 $ 382,018,149      $469,591,362  
                                                                        =============      ============  

              See accompanying notes to the financial statements.             19

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                     Six Months Ended             Year Ended February 28/29,             
                                     August 31, 1997   --------------------------------------------------
                                        (Unaudited)      1997       1996      1995      1994      1993   
                                        -----------    --------  --------- --------- --------- ----------
                                                                                                         
Net asset value, beginning                                                                               
   of period                             $  14.85      $ 14.25   $  12.05  $  13.48  $  13.50  $   12.94 
                                         --------      -------   --------  --------  --------  --------- 
Income from investment operations:                                                                       
   Net investment income                     0.17         0.31       0.39      0.41      0.43       0.38 
   Net realized and unrealized                                                                           
      gain                                   2.11         2.47       3.71      0.32      1.27       0.98 
                                         --------      -------   --------  --------  --------  --------- 
      Total from investment                                                                              
      operations                             2.28         2.78       4.10      0.73      1.70       1.36 
                                         --------      -------   --------  --------  --------  --------- 

Less distributions to shareholders:                                                                      
   From net investment income               (0.16)       (0.32)     (0.39)    (0.45)    (0.40)     (0.38)
   From net realized gains                  (1.36)       (1.86)     (1.51)    (1.71)    (1.32)     (0.42)
                                         --------      -------   --------  --------  --------  --------- 
      Total distributions                   (1.52)       (2.18)     (1.90)    (2.16)    (1.72)     (0.80)
                                         --------      -------   --------  --------  --------  --------- 
Net asset value, end                                                                                     
   of period                             $  15.61      $ 14.85   $  14.25  $  12.05  $  13.48  $   13.50 
                                         ========      =======   ========  ========  ========  ========= 

Total Return/(a)/                           15.89%       21.26%     35.54%     6.85%    13.02%     11.01%

Ratios/Supplemental Data:                                                                                
   Net assets, end of period                                                                             
      (000's)                            $382,018     $469,591   $317,612  $350,694  $679,532 $1,239,536 
   Net expenses to average                                                                               
      daily net assets                       0.61%*       0.61%      0.61%     0.61%     0.61%      0.62%
   Net investment income to                                                                              
      average daily net assets               2.05%*       2.17%      2.66%     2.86%     2.70%      3.15%
   Portfolio turnover rate                     19%          84%        65%       77%       35%        50%
   Average broker commission                                                                             
      rate per equity share /(b)/        $ 0.0554      $0.0457        N/A       N/A       N/A        N/A 
   Fees and expenses                                                                                     
      voluntarily waived or                                                                              
      borne by the Manager                                                                               
      consisted of the                                                                                   
      following per share                                                                                
      amounts:                           $   0.02      $  0.04   $   0.02  $   0.02  $   0.02  $    0.01 

/(a)/ Calculation excludes purchase premiums. The total returns would have been 
lower had certain expenses not been waived during the periods shown.
/(b)/ For fiscal years beginning on or after September 1, 1995, a fund is       
   required to disclose its average commission rate per share for security
trades on which commissions are charged.                            
*     Annualized.                                                               

20            See accompanying notes to the financial statements.               

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

 GMO 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 into classes.                                   

  The Fund seeks a total return greater than that of the Standard & Poor's
  500 Stock Index through investment of substantially all of its assets in
   common stocks chosen from the Wilshire 5000 Index and primarily in common
stocks chosen from among the 1,200 companies with the largest equity  
capitalization whose securities are listed on a United States national
securities exchange.                                                  

    On June 1, 1996, the Fund began to offer three classes of shares: Class I,
     Class II and Class III. The principal economic difference among the classes
 of shares is the level of shareholder service fee borne by the classes.
 Eligibility for and automatic conversion between the various classes of
    shares is generally based on the total amount of assets invested with GMO,
    as more fully outlined in the Trust's prospectus. Class III shares are the
    continuation of the Trust's shares that existed prior to June 1, 1996, and
     bear the same total operating expenses (after the voluntary expense waiver)
     as those shares. At August 31, 1997, Class III was the only active class of
shares of the Fund.                                                   

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
    statements. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   
Portfolio securities listed on a securities exchange for which market 
   quotations are available are valued at the last quoted 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. Other assets and
     securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Trustees.                    

Futures contracts                                                     
The Fund may purchase and sell futures contracts on the domestic stock
 indices. Stock index futures contracts represent commitments for future
delivery of cash based upon the level of a specified index of equity  
   securities at a specified price at a given date. The Fund may use futures
     contracts to manage its exposure to the stock markets. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling 
    futures tends to decrease the Fund's exposure to the underlying instrument
   or hedge other Fund instruments. Upon purchase of a futures contract, the
    Fund is required to deposit with its custodian, in a segregated account in
the name of the futures broker, an amount of cash or U.S.             

                                                                              21

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   government obligations in accordance with the initial margin requirements
     of the broker or exchange. Futures contracts are marked to market daily and
  an appropriate payable or receivable for the change in value ("variation
   margin") is recorded by the Fund. The payable or receivable is liquidated
on the following business day. Gains or losses are recognized but not 
considered realized until the contracts expire or are closed. Futures 
contracts involve, to varying degrees, risk of loss in excess of the  
variation margin disclosed in the Statement of Assets and Liabilities.
     Losses may arise from changes in the value of the underlying instrument, if
there is an illiquid secondary market for the contracts, or if        
   counterparties do not perform under the contract terms. Futures contracts
 are valued at the settlement price established each day by the board of
     trade or exchange on which they are traded. See Note 6 for all open futures
contracts held as of August 31, 1997.                                 

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. 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 certain member firms of the New York
Stock Exchange. 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 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 August 31, 1997, the Fund 
   loaned securities having a market value of $31,572,585, collateralized by
cash in the amount of $32,381,594, which was invested in short-term   
instruments.                                                          

Swap agreements                                                       
The Fund may enter into swap agreements to manage its exposure to the 
    equity markets. A swap is an agreement to exchange the return generated by
 one instrument for the return generated by another instrument. The Fund
    enters into equity swap agreements which involve a commitment by one party
 in the agreement to pay interest in exchange for a market linked return
based on a notional amount. To the extent that the total return of the
    security or index underlying the transaction exceeds or falls short of the
   offsetting interest rate obligation, the Fund will receive a payment from
or make a payment to the counterparty, respectively. Equity swaps are 
 marked to market daily based upon quotations from market makers and the
    change, if any, is recorded as unrealized gain or loss in the Statement of
    Operations. Payments received or made at the end of the measurement period
are recorded as realized gain or loss in the Statement of Operations. 
  Entering into these agreements involves, to varying degrees, elements of
     credit and market risk in excess of the amounts recognized on the Statement
     of Assets and Liabilities. Such risks involve the possibility that there is
no liquid market for these agreements, that the counterparty to the   
   agreements may default on its obligation to perform, or that there may be
unfavorable                                                           

22                                                                              

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

changes in the price of the security or index underlying these        
  transactions. See Note 6 for a summary of all open swap agreements as of
August 31, 1997.                                                      

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
  tax is necessary. Taxes on foreign dividend income have been 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. The Fund declares separate dividends from net investment
income on each class of shares.                                       

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
accrual 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.                           

Allocation of operating activity                                      
The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the Funds. Investment income, common 
expenses and realized and unrealized gains and losses are allocated   
    pro-rata among the classes based on the relative net assets of each class.
 Shareholder service fees, which are directly attributable to a class of
shares, are charged to that class' operations.                        

Purchases and redemptions of Fund shares                              
The premium on cash purchases of Fund shares is .14% of the amount    
    invested. Prior to June 1, 1996, the premium on cash purchases was .15% of
the amount invested. All purchase premiums are paid to and recorded as
    paid-in capital by the Fund. For the six months ended August 31, 1997, the
Fund                                                                  

                                                                              23

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

received $2,561 in purchase premiums. There is no premium for cash    
redemptions, reinvested distributions or in-kind transactions.        

2.   Fees and other transactions with affiliates                                

GMO earns a management fee paid monthly at the annual rate of .70% of 
average daily net assets. Effective June 1, 1996, the Fund adopted a  
Shareholder Services Plan under which the Fund pays GMO a shareholder 
service fee for client and shareholder service, reporting, and other  
     support. Pursuant to the Shareholder Services Plan, the shareholder service
  fee is calculated based on the average daily net assets of each class at
   the annual rate of .28% for Class I shares, .22% for Class II shares, and
.15% for Class III shares.                                            

    GMO has agreed to waive a portion of its fee and bear other expenses until
     further notice to the extent that the Fund's annual expenses (including the
management fee but excluding brokerage commissions, certain other     
    transaction costs (including transfer taxes), shareholder service fees and
   extraordinary expenses) exceed .46% of average daily net assets. Prior to
    June 1, 1996, a similar waiver existed for annual expenses exceeding .61%;
thus, the net annual expense ratio after the waiver for a Class III   
shareholder is unchanged.                                             

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $2,096. 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 six months ended August 31, 1997,     
aggregated $73,730,948 and $194,126,326, respectively.                

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                        [Enlarge/Download Table]

                       Gross Unrealized      Gross Unrealized       Net Unrealized   
  Aggregate Cost         Appreciation          Depreciation          Appreciation    
--------------------  --------------------  --------------------  -------------------
                                                                                     
   $346,649,293           $74,530,013           $6,200,822           $68,329,191     

4.   Principal shareholder                                                      

    At August 31, 1997, 30% of the outstanding shares of the Fund were held by
one shareholder.                                                      

24                                                                              

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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:                                               

                                                        [Enlarge/Download Table]

                                      Six Months Ended                    Year Ended           
Class III:                             August 31, 1997                 February 29, 1997       
                               --------------------------------  ------------------------------
                                  Shares            Amount          Shares          Amount     
                               -------------    ---------------  --------------  --------------
                                                                                               
Shares sold                       122,462     $     1,829,289       9,674,742   $ 141,074,274  
Shares issued to shareholders                                                                  
     in reinvestment of                                                                        
     distributions              2,471,174          36,764,383       3,486,567      48,679,629  
Shares repurchased             (9,758,297)       (149,607,779)     (3,824,235)    (54,746,025) 
                               -------------    ---------------  --------------  --------------
Net increase (decrease)        (7,164,661)    $  (111,014,107)      9,337,074   $ 135,007,878  
                               =============    ===============  ==============  ==============

6.   Financial instruments                                                      

 A summary of outstanding financial instruments at August 31, 1997 is as
follows:                                                              

Long futures contracts                                                

                                                        [Enlarge/Download Table]

                                                                             Net Unrealized  
   Number of                                                                   Appreciation  
   Contracts          Type         Expiration Date       Contract Value      (Depreciation)  
---------------  ---------------  -------------------  --------------------  ----------------
                                                                                             
      15           Russell 2000     September 1997         $3,180,750           $     69,013 
      18           S&P 500          September 1997          8,127,900              (171,944) 
                                                                             ----------------
                                                                                $  (102,931) 
                                                                             ================

     At August 31, 1997, the Fund has sufficient cash and/or securities to cover
any commitments or margin on open futures contracts.                  

                                                                              25

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GMO Value Fund                                                                  
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Swap agreements                                                       

                                                        [Enlarge/Download Table]


  Notional Amount      Expiration                                                 Unrealized    
 Fund/Counterparty        Date                     Description                   Appreciation   
---------------------  ------------  -----------------------------------------  ----------------
                                                                                                
    $3,491,545/          9/11/97     Agreement with Morgan Stanley Capital         $    204,486 
     3,366,900                       Services, Inc. dated September 9, 1996                     
                                     to pay (receive) the notional amount                       
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread and to receive                       
                                     (pay) the change in market value of a                      
                                     basket of selected securities                              
                                     (including dividends) less the                             
                                     counterparty's notional amount                             
                                     multiplied by 6 month LIBOR adjusted                       
                                     by a specified spread.                                     

    10,795,563/          5/13/98     Agreement with Morgan Stanley Capital              870,737 
     9,970,214                       Services, Inc. dated May 13, 1997 to                       
                                     pay (receive) the notional amount                          
                                     multiplied by the return on the                            
                                     Standard & Poor's 500 Index (including                     
                                     dividends) less the notional amount                        
                                     multiplied by LIBOR adjusted by a                          
                                     specified spread and to receive (pay)                      
                                     the change in market value of a basket                     
                                     of selected securities (including                          
                                     dividends) less the counterparty's                         
                                     notional amount multiplied by LIBOR                        
                                     adjusted by a specified spread.                            

                                                                                ----------------
                                          Net unrealized appreciation                $1,075,223 
                                                                                ================

26                                                                              

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         
Semi-Annual Report                                                              
August 31, 1997                                                                 

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         
Schedule of Investments                                                         
(showing percentage of total net assets)                                        
August 31, 1997 (Unaudited)                                                     

                                                        [Enlarge/Download Table]


 Par Value ($)/                                                                                  
    Shares        Description                                                       Value($)     
-------------------------------------------------------------------------------------------------
                                                                                                 
                  MUTUAL FUNDS -- 100.0%                                                         
    333,335       GMO Core Fund (Class III Shares)                                  6,433,363    
    276,704       GMO Currency Hedged International Core Fund (Class III Shares)    3,472,632    
     52,514       GMO Emerging Country Debt Fund (Class III Shares)                   700,538    
    604,808       GMO Emerging Markets Fund (Class III Shares)                      7,868,546    
     61,210       GMO Growth Fund (Class III Shares)                                  280,952    
     61,942       GMO Inflation Indexed Bond Fund (Class III Shares)                  633,047    
     72,590       GMO International Bond Fund (Class III Shares)                      790,502    
    775,245       GMO International Core Fund (Class III Shares)                   18,954,738    
     90,698       GMO International Small Companies Fund (Class III Shares)         1,269,768    
    181,492       GMO REIT Fund (Class III Shares)                                  2,424,736    
    153,951       GMO Small Cap Growth Fund (Class III Shares)                      1,924,390    
    103,227       GMO Small Cap Value Fund (Class III Shares)                       1,883,897    
    105,894       GMO U.S. Bond/Global Alpha A Fund (Class III Shares)              1,118,238    
     87,365       GMO Value Fund (Class III Shares)                                 1,363,771    
                                                                                  -----------    

                  TOTAL MUTUAL FUNDS (COST $46,704,691)                            49,119,118    
                                                                                  -----------    

                  SHORT-TERM INVESTMENT -- 0.0%                                                  

                  Repurchase Agreement -- 0.0%                                                   
    $11,914       Salomon Brothers Repurchase Agreement, dated 8/29/97, due                      
                  9/2/97, with a maturity value of $11,921 and an effective                      
                  yield of 5.05%, collateralized by U.S. Treasury Obligations                    
                  with rates ranging from 5.00% to 6.75%, with maturity dates                    
                  ranging from 2/15/99 to 8/15/26 and with an aggregate market                   
                  value of $12,187.                                                    11,914    
                                                                                  -----------    

                  TOTAL SHORT-TERM INVESTMENTS (COST $11,914)                          11,914    
                                                                                  -----------    
                  TOTAL INVESTMENTS -- 100.0%                                                    
                  (Cost $46,716,605)                                               49,131,032    

                  Other Assets and Liabilities (net) -- 0.0%                              436    
                                                                                  -----------    

                  TOTAL NET ASSETS -- 100%                                        $49,131,468    
                                                                                  ===========    


          See accompanying notes to the financial statements.                  1

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Statement of Assets and Liabilities -- August 31, 1997 (Unaudited)              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Assets:                                                                        
   Investments, at value (cost $46,716,605) (Note 1)                $49,131,032
   Receivable for expenses waived or borne by Manager (Note 2)           13,931
                                                                    -----------

       Total assets                                                  49,144,963
                                                                    -----------

Liabilities:                                                                   
   Payable to affiliate for (Note 2):                                          
      Shareholder service fee                                             1,081
   Accrued expenses                                                      12,414
                                                                    -----------

       Total liabilities                                                 13,495
                                                                    -----------

Net assets                                                          $49,131,468
                                                                    ===========

Net assets consist of:                                                         
   Paid-in-capital                                                  $44,185,923
   Accumulated undistributed net investment income                      306,753
   Accumulated undistributed net realized gain                        2,224,365
   Net unrealized appreciation                                        2,414,427
                                                                    -----------
                                                                    $49,131,468
                                                                    ===========

Net assets attributable to:                                                    
   Class I shares                                                   $10,126,038
                                                                    ===========
   Class III shares                                                 $39,005,430
                                                                    ===========

Shares outstanding:                                                            
   Class I                                                              901,408
                                                                    ===========
   Class III                                                          3,470,046
                                                                    ===========

Net asset value per share:                                                     
   Class I                                                          $     11.23
                                                                    ===========
   Class III                                                        $     11.24
                                                                    ===========

2             See accompanying notes to the financial statements.               

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

                                                        [Enlarge/Download Table]


Statement of Operations -- Six Months Ended August 31, 1997 (Unaudited)                         
----------------------------------------------------------------------------------------------- 

                                                                                                
Investment Income:                                                                              
   Dividends from investment company shares                                          $  312,899 
   Interest                                                                                 243 
                                                                                     ---------- 

       Total income                                                                     313,142 
                                                                                     ---------- 

Expenses:                                                                                       
   Custodian and transfer agent fees                                                     12,539 
   Registration fees                                                                     11,856 
   Audit fees                                                                             7,918 
   Legal fees                                                                             1,037 
   Trustees fees (Note 2)                                                                   182 
   Miscellaneous                                                                            102 
   Fees waived or borne by Manager (Note 2)                                             (33,634)
                                                                                     ---------- 
                                                                                             -- 
   Shareholder service fee (Note 2)                                                             
       Class I                                                                            6,389 
                                                                                     ---------- 
       Net expenses                                                                       6,389 
                                                                                     ---------- 

          Net investment income                                                         306,753 
                                                                                     ---------- 

Realized and unrealized gain (loss):                                                            
   Net realized gain (loss) on:                                                                 
       Investments                                                                      (17,561)
       Realized gain distributions from investment company shares                     2,317,252 
                                                                                     ---------- 

          Net realized gain                                                           2,299,691 
                                                                                     ---------- 

   Change in net unrealized appreciation (depreciation) on:                                     
       Investments                                                                    1,044,605 
                                                                                     ---------- 

          Net unrealized gain                                                         1,044,605 
                                                                                     ---------- 

       Net realized and unrealized gain                                               3,344,296 
                                                                                     ---------- 

Net increase in net assets resulting from operations                                 $3,651,049 
                                                                                     ========== 

             See accompanying notes to the financial statements.             3

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Statement of Changes in Net Assets                                              
------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

                                              Six Months Ended  Period from June 28, 1996  
                                              August 31, 1997  (commencement of operations)
                                                (Unaudited)        to February 28, 1997    
                                              ---------------- ----------------------------
                                                                                           
Increase (decrease) in net assets:                                                         
Operations:                                                                                
   Net investment income                        $   306,753           $   159,870          
   Net realized gain                              2,299,691               634,574          
   Change in net unrealized appreciation                                                   
      (depreciation)                              1,044,605             1,369,822          
                                                -----------           -----------          
   Net increase in net assets resulting from                                               
      operations                                  3,651,049             2,164,266          
                                                -----------           -----------          
Distributions to shareholders from:                                                        
   Net investment income                                                                   
       Class I                                           --               (95,107)         
       Class III                                         --               (64,763)         
                                                -----------           -----------          
       Total distributions from net                                                        
       investment income                                 --              (159,870)         
                                                -----------           -----------          
   In excess of net investment income                                                      
       Class I                                           --                  (702)         
       Class III                                         --                  (478)         
                                                -----------           -----------          
       Total distributions in excess of net                                                
       investment income                                 --                (1,180)         
                                                -----------           -----------          
   Net realized gains                                                                      
       Class I                                      (92,297)             (157,650)         
       Class III                                   (354,272)             (104,501)         
                                                -----------           -----------          
       Total distributions from net realized                                               
       gains                                       (446,569)             (262,151)         
                                                -----------           -----------          

                                                   (446,569)             (423,201)         
                                                -----------           -----------          
   Net share transactions: (Note 5)                                                        
       Class I                                       61,705             9,038,695          
       Class II                                          --               (24,488)         
       Class III                                   (305,009)           35,415,020          
                                                -----------           -----------          
   Increase (decrease) in net assets                                                       
      resulting from net share transactions        (243,304)           44,429,227          
                                                -----------           -----------          

      Total increase in net assets                2,961,176            46,170,292          

Net assets:                                                                                
   Beginning of period                           46,170,292                    --          
                                                -----------           -----------          
   End of period (including accumulated                                                    
      undistributed net investment income of                                               
      $306,753 and $0, respectively)            $49,131,468           $46,170,292          
                                                ===========           ===========          

4             See accompanying notes to the financial statements.               

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                  Six Months Ended   Period from June 28, 1996 
                                                  August 31, 1997  (commencement of operations)
                                                    (Unaudited)        to February 28, 1997    
                                                  ----------------  -------------------------  
                                                                                               
Net asset value, beginning of period                  $ 10.52                $10.00            
                                                      --------               -------           

Income from investment operations:                                                             
   Net investment income/(b)/                            0.06+                 0.09            
   Net realized and unrealized gain                      0.75                  0.72            
                                                      --------               -------           

      Total from investment operations                   0.81                  0.81            
                                                      --------               -------           

Less distributions to shareholders:                                                            
   From net investment income                              --                 (0.11)           
   In excess of net investment income                      --                  0.00            
   From net realized gains                              (0.10)                (0.18)           
                                                      --------               -------           

      Total distributions                               (0.10)                (0.29)           
                                                      --------               -------           
Net asset value, end of period                        $ 11.23                $10.52            
                                                      ========               =======           

Total Return/(a)/                                        7.70%                 8.23%           

Ratios/Supplemental Data:                                                                      
   Net assets, end of period (000's)                  $10,126                $9,424            
   Net expenses to average daily net assets              0.13%*                0.16%*          
   Net investment income to average daily net                                                  
      assets/(b)/                                        1.21%*                1.80%*          
   Portfolio turnover rate                                 18%                   31%           
   Fees and expenses voluntarily waived or borne                                               
      by the Manager consisted of the following                                                
      per share amounts:                              $  0.01                $ 0.01            

/(a)/Calculation excludes purchase premiums and redemption fees. The total      
   returns would have been lower had certain expenses not been waived during
the periods shown.                                                    
/(b)/Recognition of net investment income is affected by the timing of the      
     declaration of dividends by the underlying funds in which the fund invests.
+  Computed using average shares outstanding throughout the period.             
*  Annualized.                                                                  

              See accompanying notes to the financial statements.              5

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

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

                                                        [Enlarge/Download Table]

                                                  Six Months Ended  Period from October 22, 1996
                                                  August 31, 1997   (commencement of operations)
                                                    (Unaudited)        to February 28, 1997     
                                                  ----------------  --------------------------  
                                                                                                
Net asset value, beginning of period                  $ 10.52               $ 10.07             
                                                      -------               -------             

Income from investment operations:                                                              
   Net investment income/(b)/                           0.07++                 0.11             
   Net realized and unrealized gain                     0.75                   0.63             
                                                      -------               -------             

      Total from investment operations                  0.82                   0.74             
                                                      -------               -------             

Less distributions to shareholders:                                                             
   From net investment income                             --                  (0.11)            
   In excess of net investment income                     --                   0.00             
   From net realized gains                             (0.10)                 (0.18)            
                                                      -------               -------             

      Total distributions                              (0.10)                 (0.29)            
                                                      -------               -------             
Net asset value, end of period                        $ 11.24               $ 10.52             
                                                      -------               -------             

Total Return/(a)/                                       7.79%                  7.51%            

Ratios/Supplemental Data:                                                                       
   Net assets, end of period (000's)                 $39,005                $36,746             
   Net expenses to average daily net assets             0.00%*                 0.00%*           
   Net investment income to average daily net                                                   
      assets/(b)/                                       1.33%*                 0.91%*           
   Portfolio turnover rate                                18%                    31%            
   Fees and expenses voluntarily waived or borne                                                
      by the Manager consisted of the following                                                 
      per share amounts:                              $ 0.01                $  0.03             

/(a)/ Calculation excludes purchase premiums and redemption fees. The total     
     returns would have been lower had certain expenses not been waived during
the periods shown.                                                  
/(b)/ Recognition of net investment income is affected by the timing of the     
declaration of dividends by the underlying funds in which the fund  
invests.                                                            
++    Computed using average shares outstanding throughout the period.          
*     Annualized.                                                               

6             See accompanying notes to the financial statements.               

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited)                                       
August 31, 1997                                                                 
--------------------------------------------------------------------------------

1.   Significant accounting policies                                            

   GMO World Equity Allocation Fund (the "Fund"), which commenced operations
on June 28, 1996, is a series of GMO Trust (the "Trust"). The Fund is 
registered under the Investment Company Act of 1940, as amended, as an
  open-end, diversified management investment company. The Fund is advised
 and managed by Grantham, Mayo, Van Otterloo & Co. LLC (the "Manager" or
   "GMO"). The Trust was established as a Massachusetts Business Trust under
the laws of the Commonwealth of Massachusetts on June 24, 1985. The   
    Declaration of Trust permits the Trustees 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 operates as a "fund-of-funds" in that, pursuant to management
   provided by the Manager, it makes investments in other funds of the Trust
  ("underlying funds"). The Fund seeks a total return greater than that of
     the World Lite Extended Index, a modification of the Morgan Stanley Capital
    International World Index that reduces the weighting of Japan and includes
   a weighting for emerging countries. The Fund will pursue its objective by
investing primarily in Class III shares of equity funds of the Trust. 

   The Fund offers three classes of shares: Class I, Class II and Class III.
    The principal economic difference among the classes of shares is the level
of shareholder service fee borne by the classes. Eligibility for and  
 automatic conversion between the various classes of shares is generally
based on the total amount of assets invested with GMO, as more fully  
   outlined in the Trust's prospectus. At August 31, 1997, Class I and Class
III were the only active classes of shares of the Fund.               

    The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles and which are
consistently followed by the Fund in the preparation of its financial 
statements. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make  
    estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those   
estimates.                                                            

Portfolio valuation                                                   

    Shares of underlying funds are valued at their net asset value as reported
   on each business day. Short-term investments with a remaining maturity of
    sixty days or less are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith by the 
Trustees.                                                             

                                                                               7

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

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. 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.                                

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 taxable 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 federal
   income tax purposes. Therefore, no provision for federal income or excise
tax is necessary.                                                     

Distributions to shareholders                                         

   The Fund's policy is to declare and pay distributions from net investment
income semi-annually, 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. The Fund declares separate dividends from net     
investment income on each class of shares.                            

Income distributions and capital gain distributions are determined in 
accordance with income tax regulations which may differ from generally
accepted accounting principles. 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 is
recorded on the ex-dividend date. Interest income is recorded on the  
    accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis.        

Allocation of operating activity                                      

The majority of expenses of the Trust are directly identifiable to an 
    individual fund. Expenses which are not readily identifiable to a specific
fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of 
expense and the relative size of the funds. Investment income, common 
expenses and realized and unrealized gains and losses                 

8                                                                               

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

   are allocated pro-rata among the classes based on the relative net assets
     of each class. Shareholder service fees, which are directly attributable to
    a class of shares, are charged to that class' operations. In addition, the
   Fund will also incur fees and expenses indirectly as a shareholder in the
    underlying funds. Because the underlying funds have varied expense and fee
  levels and the Fund may own different proportions of underlying funds at
     different times, the amount of fees and expenses indirectly incurred by the
Fund will vary.                                                       

Purchases and redemptions of Fund shares                              

The premium on cash purchases of Fund shares is .66% of the amount    
  invested. In the case of cash redemptions, the fee is .15% of the amount
  redeemed. Prior to June 30, 1997, the premium on cash purchases was .69%
and the fee on cash redemptions was .09%. All purchase premiums and   
  redemption fees are paid to and recorded as paid-in capital by the Fund.
For the six months ended August 31, 1997, the Fund received $11,234 in
  purchase premiums and $5,485 in redemption fees. There is no premium for
reinvested distributions or in-kind transactions.                     

2.   Fees and other transactions with affiliates                                

The Manager determines the allocation of the assets of the Fund among 
  designated underlying funds. The Manager does not charge an advisory fee
 for asset allocation advice provided to the Fund, but receives advisory
fees from the underlying funds in which the Fund invests. The Fund has
adopted a Shareholder Services Plan under which the Fund pays GMO a   
   shareholder service fee for client and shareholder service, reporting and
   other support. Pursuant to the Shareholder Services Plan, the shareholder
 service fee is calculated based on the average daily net assets of each
   class at the annual rate of .13% for Class I shares and .07% for Class II
shares. No shareholder service fee is charged for Class III shares.   

  GMO has agreed to reimburse all expenses until further notice (excluding
    brokerage commissions, certain other transaction costs (including transfer
taxes), shareholder service fees and extraordinary expenses). Prior to
     November 25, 1996, GMO had agreed to reimburse these expenses to the extent
    that the Fund's annual expenses exceeded .05% of average daily net assets.

The Fund's portion of the fee paid by the Trust to the unaffiliated   
Trustees during the six months ended August 31, 1997 was $182. 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 six months ended August 31, 1997, aggregated
$10,529,894 and $8,614,924, respectively.                             

                                                                               9

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

At August 31, 1997, the cost for Federal income tax purposes and gross
   unrealized appreciation and depreciation in value of investments held was
as follows:                                                           

                                                                [Download Table]


                    Gross Unrealized    Gross Unrealized    Net Unrealized 
  Aggregate Cost      Appreciation        Depreciation       Appreciation  
------------------  -----------------  ------------------  ----------------
                                                                           
   $ 46,716,605        $ 2,436,960          $ 22,533          $ 2,414,427  

4.   Principal shareholders                                                     

    At August 31, 1997, 79% of the outstanding shares of the Fund were held by
   two shareholders, each holding in excess of 10% of the Fund's outstanding
shares.                                                               

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:                                               

                                                                [Download Table]


                                                       Six Months Ended         
 Class I:                                               August 31, 1997         
                                               ---------------------------------
                                                   Shares            Amount     
                                               ---------------   ---------------
                                                                                
Shares sold                                           --        $      --       
Shares issued to shareholders in reinvestment                                   
   of distributions                                 5,320             61,705    
Shares repurchased                                    --               --       
                                               ---------------   ---------------
Net increase                                        5,320       $     61,705    
                                               ===============   ===============


                                                   Period from June 28, 1996    
                                                  (commencement of operations)  
                                                      to February 28, 1997      
                                               ---------------------------------
                                                   Shares            Amount     
                                               ---------------   ---------------
                                                                                
Shares sold                                        870,993      $   8,785,236   
Shares issued to shareholders in reinvestment                                   
   of distributions                                 25,095            253,459   
Shares repurchased                                   --                  --     
                                               ---------------   ---------------
Net increase                                       896,088      $   9,038,695   
                                               ===============   ===============

10                                                                              

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GMO World Equity Allocation Fund                                                
(A Series of GMO Trust)                                                         

Notes to Financial Statements (Unaudited) -- (Continued)                        
August 31, 1997                                                                 
--------------------------------------------------------------------------------

Share transactions - continued                                        

                                                                [Download Table]

                                                 Period from June 28, 1996     
                                                (commencement of operations)   
Class II:                                           to February 28, 1997       
                                              ---------------------------------
                                                  Shares            Amount     
                                              ---------------   ---------------
                                                                               
Shares sold                                       412,344     $   4 ,123,441   
Shares issued to shareholders in                                               
  reinvestment of distributions                        --                 --   
Shares repurchased                               (412,344)        (4,147,929)  
                                              ===============   ===============
Net decrease                                       --         $      (24,488)  
                                              ===============   ===============


                                                      Six Months Ended         
Class III:                                            August 31, 1997          
                                              ---------------------------------
                                                 Shares             Amount     
                                              ---------------   ---------------
                                                                               
Shares sold                                       534,391     $    5,429,961   
Shares issued to shareholders in                                               
  reinvestment of distributions                    30,514            354,272   
Shares repurchased                               (588,862)        (6,089,242)  
                                              ===============   ===============
Net increase/(decrease)                           (23,957)    $     (305,009)  
                                              ===============   ===============

                                                Period from October 22, 1996   
                                                (commencement of operations)   
                                                    to February 28, 1997       
                                              ---------------------------------
                                                 Shares             Amount     
                                              ---------------   ---------------
                                                                               
Shares sold                                     3,482,496     $   35,298,804   
Shares issued to shareholders in                                               
  reinvestment of distributions                    11,501            116,216   
Shares repurchased                                  --                  --     
                                              ===============   ===============
Net increase/(decrease)                         3,494,003     $   35,415,020   
                                              ===============   ===============

                                                                              11

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘N-30D’ Filing	Date	First	Last	Other Filings

	7/28/12	406
Filed on:	11/6/97	1
For Period End:	8/31/97	1	667	NSAR-A, NSAR-A/A
	8/29/97	243
	8/20/97	141	623
	8/4/97	493	499
	7/29/97	603	611
	6/30/97	145	665	13F-E
	6/2/97	431	435
	5/13/97	655
	4/30/97	441	592
	4/7/97	161
	4/1/97	475	481
	3/31/97	347	354	13F-E
	3/25/97	497
	3/21/97	394	402
	2/28/97	24	667	24F-2NT, 24F-2NT/A, 485APOS, N-30D, NSAR-B
	2/4/97	26		485APOS
	1/24/97	36		497
	1/14/97	36
	1/6/97	331	338
	1/2/97	25	555
	12/31/96	393	524	13F-E
	12/30/96	378
	12/23/96	476	481
	12/20/96	159	165
	11/29/96	26	34
	11/25/96	434	665
	10/22/96	662	667
	10/11/96	474	482
	9/30/96	202	209	13F-E
	9/26/96	102
	9/19/96	468
	9/10/96	101	293
	9/9/96	377	655
	9/3/96	621	627
	7/29/96	428	435
	7/10/96	201	208
	7/2/96	369	376	497
	6/28/96	200	667	485BPOS
	6/7/96	370	376
	6/1/96	28	653
	5/31/96	491	499
	3/14/96	131
	2/29/96	232	332	24F-2NT, 497, N-30D, NSAR-B
	2/28/96	575
	12/28/95	332
	9/1/95	27	649
	6/30/95	232		13F-E
	2/28/95	140	395	NSAR-B
	9/30/94	308
	8/18/94	288
	7/29/94	140
	4/19/94	395
	2/28/94	27	267	NSAR-B
	12/22/93	267
	12/9/93	27
	2/28/93	622
	12/31/92	622
				List all Filings

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Filing Submission 0000950109-97-006637 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Gmo Trust – ‘N-30D’ for 8/31/97

As of: Thursday, 11/6/97 · For: 8/31/97 · Accession #: 950109-97-6637 · File #: 811-04347

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Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1
Filing Table of Contents