File Nos. 2-98772
811-04347

(Name and address of agents for service)

It is proposed that this filing will become effective:

      o    Immediately upon filing pursuant to paragraph (b), or

      o    60 days after filing pursuant to paragraph (a)(1), or

      þ    On October 30, 2009 , pursuant to paragraph (b), or

      o    75 days after filing pursuant to paragraph (a)(2), of Rule 485.

If appropriate, check the following box:

      o    This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

 

 

This filing is being made in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”), of the offering of shares of each of GMO Flexible Equities Fund, GMO Short-Duration Collateral Fund, and GMO Taiwan Fund, each a series of the Registrant. This filing is also being made to remove all information in previous filings under the Securities Act relating to GMO World Opportunity Overlay Fund (“Overlay Fund”), a series of the Registrant, as Overlay Fund has determined not to register the offering of its shares under the Securities Act. This filing is not intended to amend or supersede any other prior filings relating to Overlay Fund, or to affect in any way Overlay Fund’s current registration statement under the Investment Company Act of 1940, as amended. This filing relates solely to GMO Flexible Equities Fund, GMO Short-Duration Collateral Fund, GMO Taiwan Fund, and GMO World Opportunity Overlay Fund, and the information contained herein is not intended to amend or supersede any prior filing, or remove any information contained therein, relating to any other series of the Registrant.

GMO Trust

Prospectus

October 30, 2009

n GMO Flexible Equities Fund

n Information about other funds
offered by GMO Trust is contained in
separate prospectuses.

n Shares of the Fund described in this
Prospectus may not be available for
purchase in all states. This Prospectus
does not offer shares in any state
where they may not lawfully be
offered.

Grantham, Mayo, Van Otterloo & Co. LLC

40 Rowes Wharf • Boston, Massachusetts 02110

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

		Page
FUND SUMMARY			1
DESCRIPTION OF PRINCIPAL RISKS			5
MANAGEMENT OF THE FUND			13
DETERMINATION OF NET ASSET VALUE			14
NAME POLICY			16
DISCLOSURE OF PORTFOLIO HOLDINGS			16
HOW TO PURCHASE SHARES			17
HOW TO REDEEM SHARES			19
PURCHASE PREMIUMS AND REDEMPTION FEES			22
MULTIPLE CLASSES			22
DISTRIBUTIONS AND TAXES			25
FINANCIAL HIGHLIGHTS			28
INVESTMENT IN OTHER GMO FUNDS			29
ADDITIONAL INFORMATION		back cover
SHAREHOLDER INQUIRIES		back cover
DISTRIBUTOR		back cover

FUND SUMMARY

          This summary is not all-inclusive, and GMO Flexible Equities Fund (the “Fund”) may make investments, employ strategies, and be exposed to risks that are not described in this summary. More information about the Fund’s investments and strategies is contained in the Fund’s Statement of Additional Information (“SAI”). Except for policies identified in this Prospectus or the SAI as “fundamental,” the Board of Trustees (the “Trustees”) of GMO Trust (the “Trust”) may change the Fund’s investment objective or policies without shareholder approval. The Fund’s investment manager is Grantham, Mayo, Van Otterloo & Co. LLC (the “Manager” or “GMO”) (see “Management of the Fund” for a description of the Manager). Consistent with the Fund’s investment objective and then-current policies, GMO may change the Fund’s strategies and/or the investments used to effect those strategies. The Fund, by itself, is not intended to provide a complete investment program, and investment in the Fund should only be considered as part of a diversified portfolio that includes other investments.

Investment objective

          The investment objective of the Fund is total return in excess of its benchmark, the MSCI World Index. There can be no assurance that the Fund will achieve its investment objective.

Principal investment strategies

          The Manager plans to pursue the Fund’s investment objective principally by investing in equity securities traded in any of the world’s securities markets based on the Manager’s assessment of relative opportunities in those markets. When used in this Prospectus, the term “invest” includes both direct investing and indirect investing and the term “investments” includes both direct investments and indirect investments. For example, the Fund may invest indirectly by investing in another Fund or by investing in derivatives and synthetic instruments. When used in this Prospectus, (a) the term “equity investments” refers to investments in common stocks and other stock-related securities, such as preferred stocks, convertible securities, and depositary receipts and (b) the term “total return” includes both capital appreciation and income.

          The Fund may make equity investments in companies from any country, including the U.S. Under normal circumstances, the Fund invests at least 80% of its assets in equity investments (the “Name Policy”) (see “Name Policy” below for more information). The Fund is permitted to make equity investments of all types, including equities issued by foreign and/or U.S. companies, growth and/or value style equities, and equities of any market capitalization. In addition, the Fund is not restricted in its exposure to any market or type of equity security, and may invest all its assets in a limited number of equity securities of companies in a single country and/or capitalization range. The Fund could be subject to material losses from a single investment. The Fund is not a “diversified” investment company within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

          The Manager uses proprietary quantitative models and fundamental investment techniques to select the countries and equities in which the Fund invests, to decide how much to invest in each, and to determine the Fund’s currency exposures. The Manager shifts investments among equities issued by companies in different countries in response to changes in its investment outlook and market valuations.

          The Fund generally seeks to be fully invested and normally does not take temporary defensive positions through investment in cash and cash equivalents. If the Fund takes temporary defensive positions, it may not achieve its investment objective. In pursuing its investment objective, the Fund is permitted to (but is not obligated to) use a wide variety of exchange-traded and over-the-counter (“OTC”) derivatives, including options, futures, and swap contracts, to (i) hedge equity exposure; (ii) replace direct investing (e.g., creating equity exposure through the use of futures contracts or other types of derivatives); (iii) manage risk by increasing or decreasing the Fund’s investment exposures; and/or (iv) adjust its foreign currency exposure. The Fund’s foreign currency exposure may differ significantly from the currency exposure represented by its equity investments. For investment and hedging purposes, the Fund also may make short sales of securities, including short sales of securities the Fund does not own. In addition, the Fund may take active overweighted and underweighted positions in particular currencies relative to its benchmark.

          The Fund may invest in unaffiliated money market funds. Additionally, the Fund may (but is not required to) invest in GMO U.S. Treasury Fund (“U.S. Treasury Fund”), another series of GMO Trust described in a separate prospectus (see “Investment in Other GMO Funds” below for a more detailed description of U.S. Treasury Fund’s investment objectives and strategies).

          Unless otherwise specified in this Prospectus or the SAI, the Manager is not obligated to and generally will not consider tax consequences when seeking to achieve the Fund’s investment objective (e.g., the Fund may engage in transactions that are not tax efficient for shareholders subject to U.S. federal income tax). Portfolio turnover is not a principal consideration when the Manager makes investment decisions for the Fund. Based on its assessment of market conditions, the Manager may cause the Fund to trade more frequently at some times than at others. High turnover rates may adversely affect the Fund’s performance by generating additional transaction costs and may result in additional taxable income for its shareholders.

Benchmark

          The Fund’s primary benchmark is the MSCI World Index, a global developed markets equity index that is independently maintained and published by Morgan Stanley Capital International. The Fund also may identify and measure its performance against one or more secondary benchmarks from time to time. The Fund does not seek to control risk relative to the MSCI World Index or any other benchmark.

Principal risks of investing in the Fund

          The value of the Fund’s shares changes with the value of the Fund’s investments. Many factors can affect this value, and you may lose money by investing in the Fund. Following is a brief summary of the principal risks of an investment in the Fund. For a more complete discussion of these risks, see “Description of Principal Risks” below.

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Management Risk — This is the risk that the Manager’s strategies and techniques will fail to produce the desired results.

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Market Risk—Equity Securities — Equity securities may decline in value due to factors affecting the issuing companies, their industries, or the economy and equity markets generally. Because the Fund

generally seeks to be fully invested and normally does not take temporary defensive positions, declines in stock market prices generally are likely to result in declines in the value of the Fund’s investments.

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Foreign Investment Risk — The market prices of foreign securities may fluctuate more rapidly and to a greater extent than those of U.S. securities. Foreign markets often are less stable, smaller, less liquid, and less regulated, and the cost of trading in those markets often is higher, than in U.S. markets. The Fund may need to maintain a license to invest in some foreign markets. Changes in investment, capital, or exchange control regulations could adversely affect the value of the Fund’s foreign investments. These and other risks (e.g., nationalization, expropriation, or other confiscation) are greater for the Fund’s investments in emerging countries, the economies of which tend to be more volatile than the economies of developed countries.

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Focused Investment Risk — Focusing investments in countries, regions, sectors, or a limited number of companies with high positive correlations to one another creates additional risk. This risk may be particularly pronounced for the Fund because it may invest a significant portion of its assets in a particular geographic region or foreign country or in the securities of a limited number of issuers. A decline in the market value of a particular security held by the Fund may affect the Fund’s performance more than if the Fund invested in the securities of a larger number of issuers.

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Currency Risk — Fluctuations in exchange rates may adversely affect the value of the Fund’s foreign currency holdings and investments denominated in foreign currencies.

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Liquidity Risk — Low trading volume, lack of a market maker, or legal restrictions may limit or prevent the Fund from selling securities or closing derivative positions at desirable prices.

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Smaller Company Risk — The securities of small companies typically are less widely held, trade less frequently and in lesser quantities, and have market prices that may fluctuate more than those of securities of larger capitalization companies.

          Other principal risks of an investment in the Fund include Large Shareholder Risk (risk that shareholders of the Fund, such as institutional investors or other GMO Funds, will disrupt the Fund’s operations by purchasing or redeeming Fund shares in large amounts and/or on a frequent basis), Market Disruption and Geopolitical Risk (the risk that geopolitical events may increase market volatility and have adverse long-term effects on U.S. and world economies and markets generally), Derivatives Risk (use of derivatives by the Fund involves risks different from, and potentially greater than, risks associated with direct investments in securities and other investments by the Fund), Leveraging Risk (increased risks from use of derivatives and securities lending), Credit and Counterparty Risk (risk of default of a derivatives counterparty or borrower of the Fund’s securities), Short Sales Risk (risk that the Fund’s loss on a short sale of securities that the Fund does not own is unlimited), and Fund of Funds Risk (risk that the underlying funds in which the Fund invests will not perform as expected). The Fund is a non-diversified investment company under the 1940 Act, and therefore a decline in the market value of a particular security held by the Fund may affect the Fund’s performance more than if the Fund were diversified.

Performance

          Because the Fund had not yet completed a full calendar year of operations as of the date of this Prospectus, performance information for the Fund is not included.

Fees and expenses

          The table below shows, for each class of shares, the expected cost of investing in the Fund.

Annual Fund operating expenses
(expenses that are paid from Fund assets as a percentage of average daily net assets):

DESCRIPTION OF PRINCIPAL RISKS

          Investing in mutual funds involves risk, including the risk that the Manager’s strategies and techniques will fail to produce the desired results (see “Management of the Fund” for a description of the Manager and “Management Risk” below for a more detailed discussion of this risk). The Fund is subject to risks based on the types of investments in its portfolio and the investment strategies it employs. Factors that may affect the Fund’s portfolio as a whole are called “principal risks” and are summarized in this section. This summary describes the nature of these principal risks and certain related risks, but is not intended to include every potential risk. The Fund could be subject to additional risks because the types of investments made by the Fund may change over time. The SAI includes more information about the Fund and its investments. You should keep in mind that an investment in the Fund is not a bank deposit and therefore is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. By itself, the Fund does not constitute a complete investment program.

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MANAGEMENT RISK

          The Fund is subject to management risk because it relies on the Manager’s ability to achieve its investment objective. The Manager uses proprietary investment techniques and risk analyses in making investment decisions for the Fund, but there can be no assurance that the Manager will achieve the desired results. The Manager, for example, may fail to use derivatives effectively, choosing to hedge or not to hedge positions at disadvantageous times. The Fund may buy securities not included in its benchmarks, hold securities in very different proportions than its benchmarks, and/or engage in other strategies that may cause the Fund’s performance to differ dramatically from (and/or be uncorrelated with or negatively correlated with) that of its benchmarks. In those cases, the Fund’s performance will depend on the ability of the Manager to choose securities that perform better than securities that are included in the benchmarks and/or to utilize those other strategies in a way that adds value relative to the benchmarks. The nature of the risks assumed as a result of the Fund’s derivative positions and other investments may cause the Fund to incur significant losses.

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MARKET RISK — EQUITY SECURITIES

          The Fund is subject to market risk, which is the risk of unfavorable changes in the value of Fund holdings. A principal risk of the Fund is that the equity securities in which the Fund invests will decline in value due to factors affecting the issuing companies, their industries, or the economy and equity markets generally. Equity securities may decline in value for reasons that directly relate to the issuing company, such as management performance, financial leverage and reduced demand for the issuer’s goods or services. They also may decline in value due to factors that affect a particular industry or industries, such as a decline in demand, labor or raw material shortages, increased production costs, regulation, or competitive industry conditions. In addition, they may decline in value due to general market conditions that are not specifically related to a company or industry, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally.

          The Fund invests a substantial portion of its assets in equities and generally does not take temporary defensive positions. As a result, declines in stock market prices generally are likely to reduce the value of the Fund’s investments.

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FOREIGN INVESTMENT RISK

          Because the Fund may invest in foreign (non-U.S.) securities, it is subject to additional and more varied risks because the market prices of those securities may fluctuate more than those of U.S. securities. The securities markets of many foreign countries are relatively small, involving securities of a limited number of companies in a limited number of industries. Additionally, issuers of foreign securities often are not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. Foreign portfolio transactions generally involve higher commission rates, transfer taxes, and custodial costs, and holders of foreign securities may be subject to foreign taxes on capital gains or on dividends and interest payable on those securities. Also, for investments in lesser developed countries, nationalization, expropriation or confiscatory taxation, adverse changes in investment, capital, or exchange control regulations (which may include suspension of the ability to transfer currency from a country), political changes, or diplomatic developments could adversely affect the Fund. In the event of a nationalization, expropriation, or other confiscation, the Fund could lose its entire investment in a foreign security.

          Some non-U.S. markets require foreign investors to obtain a license to invest directly in such markets. A license to invest in such markets may be subject to various limitations, including maximum investment amounts. Once a license is obtained, the Fund’s ability to continue to invest in such markets is subject to the risk that the license will be terminated or suspended. If the license were terminated or suspended, the Fund would be required to seek exposure to the market through the purchase of American Depositary Receipts, Global Depository Receipts, shares of other funds that are licensed to invest directly, or derivative instruments. The receipt of a foreign license by one of the Manager’s clients may preclude other clients, including the Fund, from obtaining a similar license and this could limit the Fund’s investment opportunities. In addition, the activities of another of the Manager’s clients could cause the suspension or a revocation of such a license and could thereby limit the Fund’s investment opportunities.

          In addition, because the Fund from time to time may invest a significant portion of its assets in the securities of issuers based in emerging countries, it is subject to greater foreign investment risk than funds investing primarily in more developed foreign countries. These risks include: greater fluctuations in currency exchange rates; increased risk of default (including both government and private issuers); greater social, economic, and political uncertainty and instability (including the risk of war or natural disaster); increased risk of nationalization, expropriation, or other confiscation; greater governmental involvement in the economy; less governmental supervision and regulation of the securities markets and participants in those markets; controls on foreign investment, capital controls, and limitations on repatriation of invested capital and on the Fund’s ability to exchange local currencies for U.S. dollars; unavailability of currency hedging techniques; companies that are smaller and more recently organized; differences in, or lack of, auditing and financial reporting standards and resulting unavailability of material information about issuers; slower clearance and settlement; difficulties in obtaining and/or enforcing legal judgments; and significantly smaller market capitalizations of issuers.

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FOCUSED INVESTMENT RISK

          Funds whose investments are focused in particular countries, regions, sectors, or companies or industries with high positive correlations to one another (e.g., different industries within broad sectors, such as technology or financial services) may be subject to greater overall risk than funds whose investments are more diversified. Therefore, those funds should only be considered as part of a diversified portfolio that includes other investments.

          Because the Fund may invest a significant portion of its assets in investments tied economically to a particular geographic region or foreign country, the Fund has more exposure to regional and country economic risks than funds making foreign investments throughout the world’s economies. The political

and economic prospects of one country or group of countries within the same geographic region may affect other countries in that region. In addition, a recession, debt crisis, or decline in currency valuation in one country within a region can spread to other countries in that region. Furthermore, to the extent the Fund invests in the debt or equity securities of companies located in a particular geographic region or foreign country, it may be particularly vulnerable to events affecting companies located in that region or country because those companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political, or other developments.

          Because the Fund may focus its investments in companies in a particular industry, it may be especially vulnerable to events affecting companies in that industry because those companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political, or other developments.

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CURRENCY RISK

          Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of the Fund’s investments. Currency risk includes both the risk that currencies in which the Fund’s investments are traded and/or in which the Fund receives income, or currencies in which the Fund has taken an active investment position, will decline in value relative to other currencies. In the case of hedging positions, currency risk includes the risk that the currency the fund is seeking exposure to will decline in value relative to the foreign currency being hedged. Currency exchange rates fluctuate significantly for many reasons, including changes in supply and demand in the currency exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks, or supranational agencies such as the International Monetary Fund, and currency controls or other political and economic developments in the U.S. or abroad.

          The Fund may use derivatives to acquire a position in currencies whose value the Manager expects to correlate with the value of currencies the Fund owns, currencies the Manager wants the Fund to own, or currencies the Fund is exposed to through its investments. This presents the risk that the exchange rates of the currencies involved may not move in relation to one another as expected. In that case, the Fund could lose money on its holding of a particular currency and also lose money on the derivative. The Fund also may overweighted or underweighted active currency positions and/or hedge the currency exposure of the securities in which it has invested. As a result, its currency exposure may differ significantly from the currency exposure of its security investments and/or its benchmarks.

          Because the Fund may invest or trade in securities denominated in foreign currencies and may use related derivatives and have foreign currency holdings, it may be adversely affected by changes in the exchange rates of foreign currencies. Currency risk is particularly pronounced for the Fund because it may, for investment purposes, regularly acquire derivatives on foreign currencies and take active long and short currency positions through exchange-traded and OTC foreign currency derivatives. Derivative transactions in foreign currencies (such as futures, forwards, options and swaps) may involve leveraging risk, in addition to currency risk, as described below under “Leveraging Risk.” In addition, consistent with industry practice, the obligations of counterparties in currency derivatives may not be secured by collateral, which increases counterparty risk (see “Credit and Counterparty Risk” below).

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LIQUIDITY RISK

          The Fund is exposed to liquidity risk when low trading volume, lack of a market maker, a large position, or legal restrictions limit or prevent the Fund from selling particular securities or closing derivative positions at desirable prices. Because the Fund’s principal investment strategies involve the

use of derivatives (in particular OTC derivatives), it has increased exposure to liquidity risk. Some derivatives (in particular OTC derivatives) are more likely to be fair valued (see “Determination of Net Asset Value” below). The Fund may not be able to initiate a transaction or liquidate a position in such investments at a desirable price. In addition, the Fund’s holdings in assets for which the relevant market is or becomes less liquid are more susceptible to loss of value. Less liquid securities also may fall more in price than other securities during periods when markets decline generally.

          The Fund is also exposed to liquidity risk when it has an obligation to purchase particular securities (e.g., as a result of entering into reverse repurchase agreements, writing a put, or closing out a short position). Some of the markets, exchanges, or securities in which the Fund invests may prove to be less liquid and this would affect the price at which, and the time period in which, the Fund may liquidate positions to meet redemption requests or other funding requirements. Although U.S. Treasury securities have historically been among the most liquid fixed income investments, there can be no assurance that the market will not become less liquid in the future.

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SMALLER COMPANY RISK

          The Fund may invest in equity securities of companies with smaller market capitalizations. Market risk and liquidity risk are particularly pronounced for securities of companies with smaller market capitalizations. These companies may have limited product lines, markets, or financial resources or they may depend on a few key employees. In addition, the securities of companies with smaller market capitalizations generally are less widely held than the securities of companies with larger market capitalizations. The securities of companies with smaller market capitalizations typically are less widely held, trade less frequently and in lesser quantities than securities of companies with larger market capitalizations, and have market prices that may fluctuate more than those of other securities. They also may trade in the OTC market or on a regional exchange, or may otherwise have limited liquidity. Investments in less seasoned companies with smaller market capitalizations may present greater total return opportunities but also involve greater risks than customarily are associated with investments in more established companies with larger market capitalizations.

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LARGE SHAREHOLDER RISK

          Because shares of the Fund are expected to be held only by GMO Funds and certain other accredited investors whose assets are managed in an asset allocation strategy by the Manager’s Asset Allocation Division, the Fund is subject to the risk that these shareholders will purchase or redeem Fund shares in large amounts and/or on a frequent basis. These transactions will affect the Fund, since the Fund may have to make redemptions in-kind or sell portfolio securities to satisfy redemption requests or purchase portfolio securities to invest cash. This risk will be particularly pronounced if one shareholder owns a substantial portion of the Fund. Asset allocation decisions by the Manager may result in substantial redemptions from (or investments into) the Fund. These transactions may adversely affect the Fund’s performance to the extent that the Fund is required to sell investments (or invest cash) at times when it would not otherwise do so. These transactions also may accelerate the realization of taxable income to shareholders if such sales of investments result in gains, and also may increase transaction costs. These transactions potentially limit the use of any capital loss carry forwards to offset future net realized gains and may limit or prevent the Fund’s ability to use tax equalization.

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MARKET DISRUPTION AND GEOPOLITICAL RISK

          The Fund is subject to the risk that geopolitical events may disrupt securities markets and adversely affect global economies and markets generally. The wars in Iraq and Afghanistan have had a substantial effect on economies and securities markets in the U.S. and worldwide. Terrorism in the U.S.

and around the world has had a similar global impact and has increased geopolitical risk. The terrorist attacks of September 11, 2001 resulted in the closure of some U.S. securities markets for four days, and similar future events are possible. War, terrorism, and related geopolitical events have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, systemic market dislocations of the kind surrounding the insolvency of Lehman Brothers in 2008 may be highly disruptive to economies and markets. Those events as well as other changes in foreign and domestic economic and political conditions also could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of the Fund’s investments. At such times, the Fund’s exposure to the risks described elsewhere in this section, including market risk, liquidity risk, and credit and counterparty risk, can increase.

          The value of the Fund’s investments may be adversely affected by acts of terrorism and other changes in foreign and domestic economic and political conditions. The risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions. Such market disruptions might prevent the Fund from implementing its investment program for a period of time and achieving its investment objectives. For example, a disruption may cause the Fund’s derivative counterparties to discontinue offering derivatives on some underlying securities, reference rates, or indices or to offer such products on a more limited basis or the current global economic crisis may strain the U.S. Treasury’s ability to satisfy its obligations.

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DERIVATIVES RISK

          The Fund may invest in derivatives, which are financial contracts whose value depends on, or is derived from, the value of underlying reference rates, assets or indices. Derivatives may relate to interest rates, securities, currencies or currency exchange rates, volatility, and related indices. The Fund may use derivatives for many purposes, including as a substitute for direct investment in securities or other assets and as a means to hedge other investments. The Fund also may use derivatives as a way to adjust its exposure to various securities, markets, and currencies without actually having to sell existing investments and make new investments. This generally is done when the adjustment is expected to be relatively temporary or in anticipation of selling Fund assets and making new investments over time. The SAI contains a description of the various derivatives the Fund may utilize.

          The use of derivatives involves risks different from, and potentially greater than, the risks associated with investing directly in securities and other more traditional assets. In particular, the use of derivatives exposes the Fund to the risk that the counterparty to an OTC derivative contract will be unable or unwilling to make timely settlement payments or otherwise to honor its obligations. OTC derivative contracts typically can be closed out only with the other party to the contract. If the counterparty defaults, the Fund will have contractual remedies, but there can be no assurance that the counterparty will meet its contractual obligations or that the Fund will be able to enforce its contractual rights. For example, because the contract for each OTC derivative is individually negotiated with a specific counterparty, the Fund is subject to the risk that a counterparty may interpret contractual terms (e.g., the definition of default) differently than the Fund. If that occurs, the cost and unpredictability of the legal proceedings required for the Fund to enforce its contractual rights may lead it to decide not to pursue its claims against the counterparty. The Fund, therefore, assumes the risk that it may be unable to obtain payments the Manager believes are owed to it under OTC derivative contracts or that those payments may be delayed or made only after the Fund has incurred the costs of litigation. In addition, the Fund may invest in derivatives as to which the counterparty’s obligations are not secured by collateral (e.g., foreign currency forwards; see “Currency Risk” above), that require collateral but in which the Fund’s security interest is

not perfected, that require a significant upfront deposit unrelated to the derivative’s intrinsic value, or in which the derivative is not regularly marked-to-market (e.g., certain OTC derivatives). Even where obligations are collateralized, there is usually a lag between the day the collateral is called for and the day the Fund receives the collateral. When the counterparties’ obligations are not fully secured by collateral, the Fund will be exposed to the risk of having limited recourse if a counterparty defaults. Due to the nature of the Fund’s investments, the Fund may invest in derivatives with a limited number of counterparties and events that affect the creditworthiness of any of those counterparties may have a pronounced effect on the Fund. Derivatives risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions.

          Derivatives also are subject to a number of risks described elsewhere in this section, including market risk, liquidity risk, currency risk, and credit and counterparty risk. Many derivatives, in particular OTC derivatives, are complex and their valuation often requires judgment, which increases the risk of mispricing or improper valuation, and there can be no assurance that the pricing models employed by the Fund’s third-party valuation services and/or the Manager will produce valuations that are reflective of levels at which such swaps and other OTC derivatives may actually be closed out or sold. This valuation risk is more pronounced in cases where the Fund enters into swaps and other OTC derivatives with specialized terms because the value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. As a result, improper valuations may result in increased cash payments to counterparties, under collateralization and/or errors in the calculation of the Fund’s net asset value.

          Derivatives also involve the risk that changes in their value may not correlate perfectly with the assets, rates, or indices they are designed to hedge or closely track. The use of derivatives also may increase the taxes payable by shareholders.

          Suitable derivatives are not available in all circumstances. For example, if a counterparty or its affiliate is deemed to be an affiliate of the Fund, the Fund will not be permitted to trade with that counterparty. There can be no assurance that the Fund’s use of derivatives will be effective or will have the desired results. In addition, the Manager may decide not to use derivatives to hedge or otherwise reduce the Fund’s risk exposures.

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LEVERAGING RISK

          The Fund’s use of reverse repurchase agreements and other derivatives and securities lending may cause its portfolio to be leveraged. Leverage increases the Fund’s portfolio losses when the value of its investments declines. The Fund’s portfolio also may be leveraged temporarily if it borrows money to meet redemption requests and/or to settle investment transactions.

          Since many derivatives have a leverage component (i.e., a notional value in excess of the assets needed to establish and/or maintain the derivative position), adverse changes in the value or level of the underlying asset, rate, or index may result in a loss substantially greater than the amount invested in the derivative itself. In the case of swaps, the risk of loss generally is related to a notional principal amount, even if the parties have not made any initial investment. Some derivatives have the potential for unlimited loss, regardless of the size of the initial investment. The Fund is not limited in the extent to which it may directly or indirectly use derivatives or in the absolute face value of its derivative positions. As a result, the Fund’s net long or short exposure may have a net notional value in excess of its net assets.

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CREDIT AND COUNTERPARTY RISK

          This is the risk that the counterparty to a repurchase or reverse repurchase agreement or other OTC derivative contract, or a borrower of the Fund’s securities will be unable or unwilling to make timely interest or settlement payments or otherwise to honor its obligations. This risk is particularly acute in environments in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers in 2008 and subsequent market disruptions. The Fund is exposed to this risk to the extent it uses derivatives (such as forward foreign currency contracts, swap contracts and repurchase agreements) or lends its portfolio securities. See “Derivatives Risk” above for more information. If a counterparty’s obligation to the Fund under such an arrangement is not collateralized then the Fund is essentially an unsecured creditor of the counterparty and there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market conditions. If the counterparty defaults, the Fund will have contractual remedies, but the Fund may be unable to enforce its contractual rights. The Fund is subject in particular to the creditworthiness of counterparties because certain types of swap contracts used by the Fund may have durations longer than six months. Counterparty risk is still present even if a counterparty’s obligations are structured to be secured by collateral because the Fund’s interest in the collateral may not be perfected, or the derivative may not be promptly marked-to-market and additional collateral may not be promptly posted.

	•		SHORT SALES RISK

          The Fund may seek to hedge investments or realize additional gains through short sales. The Fund may make short sales “against the box,” meaning the Fund may make short sales while owning or having the right to acquire, at no added cost, securities identical to those sold short. The Fund incurs transaction costs, including interest, when opening, maintaining, and closing short sales against the box. Short sales against the box protect the Fund against the risk of loss in the value of a portfolio security by offsetting a decline in value of the security by a corresponding gain in the short position. The converse, however, is that any increase in the value of the security will be offset by a corresponding loss in the short position .

          In implementing its principal investment strategies, the Fund is permitted to engage in short sales of securities that it does not own. To do so, the Fund would borrow a security from a broker and sell it to a third party. This type of short sale would expose the Fund to the risk that it will be required to acquire, convert, or exchange securities to replace the borrowed securities at a time when the securities sold short have appreciated in value, thus resulting in a loss to the Fund. If the Fund engages in short sales of securities it does not own, it may have to pay a premium to borrow the securities and must pay to the lender any dividends or interest it receives on the securities while they are borrowed. Short sales of securities the Fund does not own involve a form of investment leverage, and the amount of the Fund’s potential loss is theoretically unlimited. Accordingly, the Fund may be subject to increased leveraging risk and other investment risks described in this “Description of Principal Risks” section as a result of engaging in short sales of securities it does not own.

	•		FUND OF FUNDS RISK AND RELATED CONSIDERATIONS

          The Fund may invest in shares of other investment companies, including other GMO Funds and money market funds (“underlying funds”), and is exposed to the risk that the underlying funds will not perform as expected. The Fund also is indirectly exposed to all of the risks applicable to an investment in the underlying funds. Because the Fund bears the fees and expenses of the underlying funds in which it invests, total Fund expenses may increase if Fund assets are invested in underlying funds with higher fees or expenses than existing investments. In addition, the fees and expenses associated with an investment in the Fund will be less predictable and may potentially be higher than fees of funds that only invest in less

expensive asset classes. In addition, funds that invest in shares of other GMO Funds also are likely to be subject to Large Shareholder Risk because underlying GMO Funds are more likely to have large shareholders (e.g., other GMO Funds).

•

NON-DIVERSIFIED FUND

          The Fund is not a “diversified” investment company within the meaning of the 1940 Act. This means that the Fund is allowed to invest in the securities of a relatively small number of issuers and/or foreign currencies. As a result, the Fund may be subject to greater credit, market, and other risks, and poor performance by a single issuer may have a greater impact on the Fund’s performance than if the Fund were “diversified.”

MANAGEMENT OF THE FUND

          GMO, 40 Rowes Wharf, Boston, Massachusetts 02110, provides investment management and shareholder services to the Fund and other GMO Funds. GMO is a private company, founded in 1977. As of May 31, 2009, GMO managed on a worldwide basis more than $88.9 billion of assets for the GMO Funds and institutional investors, such as pension plans, endowments, and foundations.

          Subject to the approval of the Trustees, the Manager establishes and modifies when it deems appropriate the investment strategies of the Fund. In addition to its management of the Fund’s investment portfolio and the shareholder services it provides to the Fund, the Manager administers the Fund’s business affairs.

          The Fund pays the Manager shareholder service fees for providing client service and reporting, such as performance information reporting, client account information, personal and electronic access to Fund information, access to analysis and explanations of Fund reports, and assistance in maintaining and correcting client-related information.

          As of the date of this Prospectus, the Fund had not operated for a full fiscal year but was paying the Manager, as compensation for investment management services, an annual fee equal to 0.55% of the Fund’s average daily net assets for each class of shares.

          A discussion of the basis for the Trustees’ approval of the Fund’s initial investment management contract is included in the Fund’s annual or semiannual shareholder report for the period during which the Trustees approved that contract.

          GMO’s Asset Allocation Division is responsible for overall investment management of the Fund. Other investment divisions may, at the direction of the Asset Allocation Division, be responsible for selecting the Fund’s investments. Initially, the Quantitative Equity Division will be responsible for such decisions. Each Division’s investment professionals work collaboratively to manage the Fund’s portfolio, and no one person is primarily responsible for day-to-day investment management of the Fund.

          Ben Inker is the senior member and director of the Asset Allocation Division. Mr. Inker has been a senior member of the Division since 1996. As senior member and director of the Division, Mr. Inker allocates responsibility for portions of the Fund’s portfolio to members of the Division, oversees the implementation of trades, reviews the overall composition of the portfolio, including compliance with its stated investment objective and strategies, and monitors cash.

          Tom Hancock is the senior member and co-director of the Quantitative Equity Division. Dr. Hancock has been responsible for overseeing the portfolio management of GMO’s international global market and global quantitative equity portfolio since 1998. As senior member and director of the Division, Dr. Hancock allocates responsibility for portions of the Fund’s portfolio to members of the Division, oversees the implementation of trades, reviews the overall composition of the portfolio, including compliance with its stated investment objective and strategies, and monitors cash.

          Sam Wilderman is the senior member and co-director of the Quantitative Equity Division. Mr. Wilderman has been responsible for overseeing the portfolio management of GMO’s U.S. quantitative equity portfolios since 2005. As senior member and director of the Division, Mr. Wilderman allocates responsibility for portions of the Fund’s portfolio to members of the Division, oversees the

implementation of trades, reviews the overall composition of the portfolio, including compliance with its stated investment objective and strategies, and monitors cash.

          The SAI contains other information about how GMO determines the compensation of the senior members, other accounts they manage and related conflicts, and their ownership of the Fund.

Custodian and Fund Accounting Agent

          Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, serves as the Fund’s custodian and fund accounting agent.

Transfer Agent

          State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111, serves as the Fund’s transfer agent.

Expense Reimbursement

          As more fully described in the Fund’s “Annual Fund operating expenses” table under the caption “Fees and expenses”, the Manager has contractually agreed to reimburse the Fund for a portion of its expenses through at least the date shown in the table. As used in this Prospectus, “Excluded Fund Fees and Expenses” means shareholder service fees, expenses indirectly incurred by investment in other GMO Funds, fees and expenses of the independent Trustees of the Trust, fees and expenses for legal services not approved by the Manager for the Trust, compensation and expenses of the Trust’s Chief Compliance Officer (excluding any employee benefits), brokerage commissions, securities-lending fees and expenses, interest expense, transfer taxes, and other investment-related costs (including expenses associated with investments in any company that is an investment company (including an exchange-traded fund) or would be an investment company under the 1940 Act, but for the exceptions to the definition of investment company provided in Sections 3(c)(1) and 3(c)(7) of the 1940 Act), hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes).

•

Broker bid (if the private market is more relevant in determining market value than the exchange), based on where the securities are principally traded and their intended disposition

          (Also, see discussion in “Fair Value Pricing” below regarding foreign equity securities.)

Unlisted securities (if market quotations are readily available)

•

Most recent quoted bid price

Note: There can be no assurance that brokers will be able to provide bid prices. If quotes are not used, the Fund would seek alternative valuation methodologies (e.g., valuing the relevant assets at “fair value” as described below).

Certain debt obligations (if less than sixty days remain until maturity)

•

Amortized cost (unless circumstances dictate otherwise; for example, if the issuer’s creditworthiness has become impaired)

All other fixed income securities and options on those securities (except for options written by the Fund) (includes bonds, loans, structured notes)

•

Most recent bid supplied by a primary pricing source chosen by the Manager

Options written by the Fund

•

Most recent ask price

Shares of other GMO Funds and other open-end registered investment companies

•

Most recent NAV

“Fair Value” Pricing

          For all other assets and securities, including derivatives, and in cases where market prices are not readily available or circumstances render an existing methodology or procedure unreliable, the Fund’s investments will be valued at “fair value,” as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees.

          With respect to the Fund’s use of “fair value” pricing, you should note the following:

►

A significant percentage of the Fund’s assets may be “fair valued.” The value of assets that are “fair valued” is determined by the Trustees or persons acting at their direction pursuant to procedures approved by the Trustees. Some of the factors that may be considered in determining “fair value” are the value of other financial instruments traded on other markets, trading volumes, changes in interest rates, observations from financial institutions, significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the time that

			the Fund’s net asset value is calculated, other news events, and significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). Although the goal of fair valuation is to determine the amount the owner of the securities might reasonably expect to receive upon their current sale, because of the uncertainty inherent in fair value pricing, the fair value determined for a particular security may be materially different than the value realized upon its sale.
	►		Many foreign equity securities markets and exchanges close prior to the close of the NYSE, and, therefore, the closing prices for foreign securities in those markets or on those exchanges do not reflect events that occur after that close but before the close of the NYSE. As a result, the Fund generally values foreign equity securities as of the NYSE close using fair value prices, which are based on adjustments to closing prices supplied by a third party vendor using that vendor’s proprietary models.

          The values of foreign securities quoted in foreign currencies are translated into U.S. dollars generally at 4:00 p.m. Eastern time at then current exchange rates or at such other rates as the Trustees or persons acting at their direction may determine in computing net asset value.

          The Manager evaluates pricing sources on an ongoing basis, and may change a pricing source at any time. The Manager normally does not evaluate the prices supplied by pricing sources on a day-to-day basis. The Manager monitors erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and has discretion to override a price supplied by a source (e.g., by taking a price supplied by another) when it believes that the price supplied is not reliable. Some securities held by the Fund may be valued on the basis of a price provided by a principal market maker. Prices provided by principal market makers may vary from the value that would be realized if the securities were sold, and the differences could be material to the Fund. In addition, because the Fund may hold portfolio securities listed on foreign exchanges that trade on days on which the NYSE is closed, the net asset value of the Fund’s shares may change significantly on days when shares cannot be redeemed.

NAME POLICY

          The Fund will not change its Name Policy without providing its shareholders at least 60 days’ prior written notice. When used in connection with the Fund’s Name Policy, “assets” include the Fund’s net assets plus any borrowings made for investment purposes.

DISCLOSURE OF PORTFOLIO HOLDINGS

          The Fund has established a policy with respect to disclosure of its portfolio holdings. That policy is described in the SAI. The largest fifteen portfolio holdings of some GMO Funds are posted monthly on GMO’s website and are available to shareholders without a confidentiality agreement. Information regarding the Fund’s portfolio holdings as of each month’s end is made available to shareholders of the Trust, qualified potential shareholders as determined by GMO (“potential shareholders”), and their consultants or agents through a secured link on GMO’s website approximately five days after month end. Periodically, in response to heightened market interest in specific issuers, a Fund’s holdings in one or more issuers may be made available on a more frequent basis to shareholders of the Trust, potential shareholders, and their consultants or agents through a secured link on GMO’s website. This information may be posted as soon as the business day following the date to which the information relates.

          To access this information on GMO’s website (http://www.gmo.com/america/strategies), shareholders, potential shareholders, and their consultants and agents must contact GMO to obtain a password and user name (to the extent they do not already have them) and enter into a confidentiality agreement with GMO and the Trust that permits the information to be used only for purposes determined by GMO to be in the best interest of the shareholders of the Fund. GMO may make portfolio holdings information available in alternate formats under the conditions described in the SAI. Beneficial owners of shares who have invested in the Fund through a broker or agent should contact that broker or agent for information on how to obtain access to information on the website regarding the Fund’s portfolio holdings.

          The Fund or GMO may suspend the posting of portfolio holdings, and the Fund may modify the disclosure policy, without notice to shareholders. Once posted, the Fund’s portfolio holdings will remain available on the website at least until the Fund files a Form N-CSR (annual/semiannual report) or Form N-Q (quarterly schedule of portfolio holdings) for the period that includes the date of those holdings.

HOW TO PURCHASE SHARES

          Under ordinary circumstances, you may purchase the Fund’s shares from the Trust when the NYSE is open for business. In addition, certain brokers and agents are authorized to accept purchase and redemption orders on the Funds’ behalf. These brokers and agents may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for purchasing Fund shares through them. For instructions on purchasing shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com, or contact your broker or agent. The Trust will not accept a purchase request until it has received a GMO Trust Application deemed to be in good order by the Trust or its agent. In addition, the Trust will not accept a purchase request unless an IRS Form W-9 (for U.S. shareholders) or the appropriate IRS Form W-8 (for foreign shareholders) with a correct taxpayer identification number (if required) is on file with GMO and such W-9 or W-8 is deemed to be in good order by the Trust’s withholding agent, State Street Bank and Trust Company. Please consult your tax adviser to ensure all tax forms provided to the Trust are completed properly and maintained, as required, in good order. GMO has the right to make final good order assessments.

           Purchase Policies. You must submit a purchase request in good order to avoid having it rejected by the Trust or its agent. In general, a purchase request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being purchased;
	•		The U.S. dollar amount of the shares to be purchased;
	•		The date on which the purchase is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number (if any) set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application; and
	•		Payment in full (by check, wire, or, when approved, securities) received by an agent of the Trust by 4:00 p.m. Eastern time or the close of the NYSE, whichever is earlier.

►

If payment is not received prior to the close of regular trading on the intended purchase date, the request may be rejected unless prior arrangements for later payment have been approved by GMO.

          If the purchase request is received in good order by the Trust or its agent prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the purchase price for the Fund shares to be purchased is the net asset value per share determined on that day (plus any applicable purchase premium). If that request is received after the close of regular trading on the NYSE, the purchase price for the Fund shares to be purchased is the net asset value per share determined on the next business day that the NYSE is open (plus any applicable purchase premium). Purchase premiums (if any) are not charged on reinvestments of dividends.

          To help the U.S. government fight the funding of terrorism and money laundering activities, federal law requires the Trust to verify identifying information provided by each investor in its GMO Trust Application. Additional identifying documentation also may be required. If the Trust is unable to verify the information shortly after your account is opened, the account may be closed and your shares redeemed at their net asset value at the time of the redemption.

          The Trust and its agents reserve the right to reject any purchase order. In addition, without notice, the Fund in its sole discretion may temporarily or permanently suspend sales of its shares to new investors and, in some circumstances, existing shareholders.

          Minimum investment amounts (by class) are set forth in the tables on page 21 of this Prospectus. No minimum additional investment is required to purchase additional shares of a class of the Fund. The Trust may waive initial minimums for some investors.

          Funds advised or sub-advised by GMO (“Top Funds”) may purchase shares of the Fund after the close of regular trading on the NYSE (the “Cut-off Time”) and receive the current day’s price if the following conditions are met: (i) the Top Fund received a purchase request prior to the Cut-off Time on that day; and (ii) the purchase(s) by the Top Fund of shares of the Fund are executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

           Submitting Your Purchase Order Form . Completed purchase order forms can be submitted by mail or by facsimile or other form of communication pre-approved by Shareholder Services to the Trust at:

GMO Trust
c/o Grantham, Mayo, Van Otterloo & Co. LLC
40 Rowes Wharf
Boston, Massachusetts 02110
Facsimile: 1-617-439-4192
Attention: Shareholder Services

          Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your purchase order form. Do not send cash, checks, or securities directly to the Trust. A purchase request submitted by mail is “received” by the Trust when it is actually delivered to the Trust or its agent. A purchase request delivered by facsimile is “received” by the Trust when it is actually received by the Trust or its designated agent.

           Funding Your Investment . You may purchase shares:

•

with cash (via wire transfer or check)

►

By wire . Instruct your bank to wire the amount of your investment to:

State Street Bank and Trust Company, Boston, Massachusetts
ABA#: 011000028
Attn: Transfer Agent
Credit: GMO Deposit Account 00330902
Further credit: GMO Flexible Equities Fund/Account name and number

►

By check . All checks must be made payable to the Fund or to GMO Trust. The Trust will not accept checks payable to a third party that have been endorsed by the payee to the Trust. Mail checks to:

•

in exchange for securities acceptable to the Manager

	►		securities must be approved by the Manager prior to transfer to the Fund
	►		securities will be valued as set forth under “Determination of Net Asset Value”

•

by a combination of cash and securities

           Frequent Trading Activity. As a matter of policy, the Trust will not honor requests for purchases or exchanges by shareholders identified as engaging in frequent trading strategies, including market timing, that GMO determines could be harmful to certain other GMO Funds and their shareholders. Frequent trading strategies are generally strategies that involve repeated exchanges and/or purchases and redemptions (or redemptions and purchases) within a short period of time. Frequent trading strategies may be disruptive to the efficient management of the Funds, materially increase portfolio transaction costs and taxes, dilute the value of shares held by long-term investors, or otherwise be harmful to such Funds and their shareholders. Notwithstanding the foregoing, these policies and procedures do not limit frequent trading of the Fund.

HOW TO REDEEM SHARES

          Under ordinary circumstances, you may redeem the Fund’s shares when the NYSE is open for business. Redemption requests should be submitted to the Trust unless the Fund shares to be redeemed were purchased through a broker or agent, in which case the redemption request should be initiated through that broker or agent. The broker or agent may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for redeeming Fund shares through it. For instructions on redeeming shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com , or contact your broker or agent. The Trust may take up to seven days to remit proceeds.

           Redemption Policies. You must submit a redemption request in good order to avoid having it rejected by the Trust or its agent. In general, a redemption request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being redeemed;
	•		The number of shares or the dollar amount of the shares to be redeemed;
	•		The date on which the redemption is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application or subsequent authorized signers list; and
	•		Wire instructions or registration address that match the wire instructions or registration address (as applicable) on file at GMO or confirmation from an authorized signatory that the wire instructions are valid.

          If a redemption request in good order is received by the Trust prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the redemption price for the Fund shares to be redeemed is the net asset value per share determined on that day (less any applicable redemption fee). If that redemption request is received after the close of regular trading on the NYSE, the redemption price for the Fund shares to be redeemed is the net asset value per share determined on the next business day (less any applicable redemption fee) unless an authorized person on the account has instructed GMO Shareholder Services in writing to defer the redemption to another day. If you have instructed GMO Shareholder Services to defer the redemption to another day, an authorized person on your account may revoke your redemption request in writing at any time prior to 4:00 p.m. Eastern time or before the close of regular trading on the NYSE (whichever is earlier) on the redemption date. Redemption fees, if any, apply to all shares of the Fund regardless of how the shares were acquired (e.g., by direct purchase or by reinvestment of dividends or other distributions). In the event of a disaster affecting Boston, Massachusetts, please contact GMO to confirm receipt of your redemption request and whether it is in good order.

          Failure to provide the Trust with a properly authorized redemption request or otherwise satisfy the Trust as to the validity of any change to the wire instructions or registration address may result in a delay in processing a redemption request, delay in remittance of redemption proceeds, or a rejection of the redemption request.

          As with all GMO Funds, if the Manager determines, in its sole discretion, that paying redemption proceeds wholly or partly in cash would be detrimental to the best interests of the Fund’s remaining shareholders, the Fund may pay the redemption proceeds in whole or in part with securities instead of cash. In particular, if market conditions deteriorate and the Manager believes the Fund’s redemption fee (if any) is not fair compensation for transaction costs, the Fund may limit cash redemptions (honoring redemptions with portfolio securities) in order to protect the interests of all Fund shareholders.

          If a redemption is paid in cash:

•

payment generally will be made by means of federal funds transfer to the bank account designated in a recordable format by an authorized signatory in the GMO Trust Application to purchase the Fund shares being redeemed

►

designation of one or more additional bank accounts or any change in the bank accounts originally designated in the GMO Trust Application must be made in a recordable

format by an authorized signatory according to the procedures in the GMO Trust Redemption Order Form

•

upon request, payment will be made by check mailed to the registration address (unless another address is specified according to the procedures in the GMO Trust Redemption Order Form).

          The Trust will not make payments to third-parties on behalf of a shareholder upon a redemption request and does not offer check-writing privileges.

          If a redemption is paid with securities, it is important for you to note that:

	•		the securities will be valued as set forth under “Determination of Net Asset Value”
	•		the securities will be selected by the Manager in light of the Fund’s objective and may not represent a pro rata distribution of each security held in the Fund’s portfolio
	•		you may incur brokerage charges on the sale of the securities
	•		redemptions paid in securities generally are treated by shareholders for tax purposes the same as redemptions paid in cash
	•		the securities will be transferred and delivered by the Trust as directed in writing by an authorized person on the account.

          The Fund may suspend the right of redemption and may postpone payment for more than seven days:

	•		if the NYSE is closed on days other than weekends or holidays
	•		during periods when trading on the NYSE is restricted
	•		during an emergency which makes it impracticable for the Fund to dispose of its securities or to fairly determine the net asset value of the Fund
	•		during any other period permitted by the Securities and Exchange Commission (“SEC”) for your protection.

          Pursuant to the Trust’s Amended and Restated Agreement and Declaration of Trust, the Trust has the unilateral right to redeem Fund shares held by a shareholder at any time if at that time: (i) the shares of the Fund or a class held by the shareholder have an aggregate net asset value of less than an amount determined from time to time by the Trustees; or (ii) the shares of the Fund or a class held by the shareholder exceed a percentage of the outstanding shares of the Fund or a class determined from time to time by the Trustees. The Trustees have authorized GMO in its sole discretion to redeem shares to prevent a shareholder from becoming an affiliated person of the Fund.

          Top Funds may redeem shares of the Fund after the Cut-off Time and receive the current day’s price if the following conditions are met: (i) the Top Fund received a redemption request prior to the Cut-off Time on that day; and (ii) the redemption of the shares of the Fund is executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

           Submitting Your Redemption Request . Redemption requests can be submitted by mail or by

facsimile to the Trust at the address/facsimile number set forth under “How to Purchase Shares —Submitting Your Purchase Order Form.” Redemption requests submitted by mail are “received” by the Trust when actually delivered to the Trust or its agent. Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your redemption request.

PURCHASE PREMIUMS AND REDEMPTION FEES

          Purchase premiums and redemption fees are paid to and retained by a Fund to help offset estimated portfolio transaction costs and other related costs (e.g., stamp duties and transfer fees) incurred by the Fund (directly or indirectly through investments in underlying funds) as a result of the purchase or redemption by allocating those estimated costs to the purchasing or redeeming shareholder. At present, the Fund does not charge any purchase premium or redemption fee. However, the Manager may impose a purchase premium and/or redemption fee for the Fund at any time.

          Eligibility to purchase different classes of the Fund shares depends on the client’s meeting either (i) the minimum “Total Fund Investment” set forth in the above tables, which includes only a client’s total investment in the Fund, or (ii) the minimum “Total Investment” set forth in the above tables, calculated as described below.

          A client’s Total Investment equals the market value of all the client’s assets managed by GMO and its affiliates (i) at the time of initial investment, (ii) at the close of business on the last business day of each calendar quarter, or (iii) at other times as determined by the Manager (each, a “Determination Date”).

          Upon request, GMO may permit a client to undertake in writing to meet the applicable Total Fund Investment or Total Investment over a specified period. If the client’s goal is not met by the time specified in the letter (the “Commitment Date”), the client will be converted on the next Determination Date to the class of shares for which the client satisfied all minimum investment requirements as of the Commitment Date.

          You should note that:

	•		No minimum additional investment is required to purchase additional shares of the Fund for any class of shares.
	•		The Manager will make all determinations as to the aggregation of client accounts for purposes of determining eligibility. When making decisions regarding whether accounts should be aggregated because they are part of a larger client relationship, the Manager considers several factors including, but not limited to, whether: the multiple accounts are for one or more subsidiaries of the same parent company; the multiple accounts have the same beneficial owner regardless of the legal form of ownership; the investment mandate is the same or substantially similar across the relationship; the asset allocation strategies are substantially similar across the relationship; GMO reports to the same investment board; the consultant is the same for the entire relationship; GMO services the relationship through a single GMO relationship manager; the relationships have substantially similar reporting requirements; and/or the relationship can be serviced from a single geographic location.
	•		Eligibility requirements for each class of shares are subject to change upon notice to shareholders.
	•		The Trust may waive eligibility requirements for certain accounts or special situations (e.g., GMO Funds that invest in other GMO Funds may invest in the least expensive class of those GMO Funds offered at the time of investment).
	•		Investments through an intermediary generally are invested in Class III Shares.

Conversions between Classes

          Each client’s Total Fund Investment and Total Investment are determined by GMO on each Determination Date. Based on this determination, and subject to the following, each client’s shares of the Fund identified for conversion will be converted to the class of shares of the Fund with the lowest Shareholder Service Fee for which the client satisfies all minimum investment requirements (or, to the extent the client already holds shares of that class, the client will remain in that class). Except as noted below, with respect to the Fund:

•

To the extent a client satisfies all minimum investment requirements for a class of shares then being offered that bears a lower shareholder service fee than the class held by the client on the Determination Date, the client’s shares identified for conversion generally will be

			automatically converted to that class within 45 calendar days following the Determination Date on a date selected by the Manager.
	•		To the extent a client no longer satisfies all minimum investment requirements for the class of shares held by the client on the last Determination Date of a calendar year, the Trust generally will convert the client’s shares to the class that is then being offered bearing the lowest shareholder service fee for which the client satisfies all minimum investment requirements (and which class will typically bear a higher shareholder service fee than the class then held by the client). To the extent the client no longer satisfies all minimum investment requirements for any class of the Fund as of the last Determination Date of a calendar year, the Trust will convert the client’s shares to the class of the Fund then being offered bearing the highest shareholder service fee unless the value has increased prior to the expiration of the notice period so as to satisfy all minimum investment requirements for the client’s current class of shares. Notwithstanding the foregoing, a client’s shares will not be converted to a class of shares bearing a higher shareholder service fee without at least 15 calendar days’ prior notice by the Trust. To the extent that the client makes an additional investment and/or the value of the client’s shares otherwise increases prior to the expiration of the notice period so as to satisfy all minimum investment requirements for the client’s current class of shares, the client will remain in the class of shares then held by the client. Solely for the purpose of determining whether a client has satisfied the additional investment requirements referenced in the preceding sentence, the value of the client’s shares shall be the greater of (i) the value of the client’s shares on the relevant Determination Date and (ii) the value of the client’s shares on the date that GMO reassesses the value of the client’s account for the purpose of sending the above referenced notice. If the client is not able to make an additional investment in the Fund solely because the Fund is closed to new investment or is capacity constrained, the client will remain in the class of shares then held by the client unless the Manager approves reopening the Fund to facilitate an additional investment. Any conversion of a client’s shares to a class of shares bearing a higher shareholder service fee generally will occur within 60 calendar days following the last Determination Date of a calendar year or, in the case of conversion due to an abusive pattern of investments and/or redemptions, on any other date pursuant to the Manager’s discretion.

          However, the Trust may at any time without notice convert a client’s shares to the class which is then offered bearing the lowest shareholder service fee for which the client satisfied all minimum investment requirements (or, if there is not such class, the class of that Fund which is then being offered bearing the highest shareholder service fee) if the client no longer satisfies all minimum investment requirements for the class of shares held by the client and either: (i) the Manager believes the client has engaged in an abusive pattern of investments and/or redemptions, or (ii) the total expense ratio borne by the client immediately following such conversion is equal to or less than the total expense ratio borne by the client immediately prior to such conversion (after giving effect to any applicable fee and expense waivers or reimbursements).

          The Trust has been advised by counsel that, for tax purposes, the conversion of a client’s investment from one class of shares of the Fund to another class of shares of the Fund should not result in the recognition of gain or loss in the shares that are converted. The client’s tax basis in the new class of shares immediately after the conversion should equal the client’s basis in the converted shares immediately before conversion, and the holding period of the new class of shares should include the holding period of the converted shares.

DISTRIBUTIONS AND TAXES

          The Fund’s policy is to declare and pay distributions of its net income, if any, semi-annually. The Fund also intends to distribute net gains, whether from the sale of securities held by the Fund for not more than one year (i.e., net short-term capital gains) or from the sale of securities held by the Fund for more than one year (i.e., net long-term capital gains), if any, at least annually. In addition, the Fund may, from time to time and at its discretion, make unscheduled distributions in advance of large redemptions by shareholders or as otherwise deemed appropriate by the Fund. From time to time, distributions by the Fund could constitute, for U.S. federal income tax purposes, a return of capital to shareholders. Shareholders should read the description below for information regarding the tax character of distributions from the Fund to shareholders.

          All dividends and/or distributions are reinvested in additional shares of the Fund, at net asset value, unless a shareholder elects to receive cash. Shareholders may elect to receive cash by marking the appropriate boxes on the GMO Trust Application or by writing to the Trust. No purchase premium is charged on reinvested dividends or distributions.

          The following is a general summary of the principal U.S. federal income tax consequences to shareholders investing in the Fund. The Fund’s shareholders may include certain other GMO Funds. The summary below does not address tax consequences to shareholders of those other GMO Funds. Shareholders of those other GMO Funds should refer to the prospectuses or private placement memoranda (as applicable) and statements of additional information for those Funds for a summary of the tax consequences applicable to them. It is important for you to note:

	•		The Fund is treated as a separate taxable entity for U.S. federal income tax purposes and intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.
	•		For U.S. federal income tax purposes, distributions of investment income generally are taxable as ordinary income.
	•		For U.S. federal income tax purposes, taxes on distributions of capital gains generally are determined by how long the Fund owned the investments that generated them, rather than by how long a shareholder has owned shares in the Fund. Distributions of net capital gains from the sale of investments that the Fund owned for more than one year and that are properly designated by the Fund as capital gain dividends generally are taxable to shareholders as long-term capital gains. Distributions of gains from the sale of investments that the Fund owned for one year or less generally are taxable to shareholders as ordinary income.
	•		The Fund may make total distributions during a taxable year in an amount that exceeds the Fund’s net investment income and net capital gains for that year, in which case the excess generally would be treated as a return of capital, which would reduce a shareholder’s tax basis in its applicable shares, with any amounts exceeding such basis treated as gain from the sale of such shares. A return of capital is not taxable to shareholders to the extent such amount does not exceed a shareholder’s tax basis, but it reduces a shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares.
	•		If the Fund realizes capital losses in excess of capital gains for any taxable year, these excess losses will carry over and can be used to offset capital gains realized in succeeding taxable

			years until either (a) the end of the eighth succeeding taxable year or (b) such losses have been fully utilized to offset realized capital gains, whichever comes first. The Fund’s ability to utilize these losses to reduce distributable capital gains in succeeding taxable years may be limited by reason of direct or indirect changes in the actual or constructive ownership of the Fund.
	•		For taxable years beginning before January 1, 2011, distributions of investment income properly designated by the Fund as derived from “qualified dividend income” will be taxable to shareholders taxed as individuals at the rates applicable to long-term capital gain, provided holding period and other requirements are met at both the shareholder and Fund levels. It is currently unclear whether Congress will extend this provision to tax years beginning on or after January 1, 2011. Long-term capital gain rates applicable to most individuals have been reduced to 15% (with lower rates applying to taxpayers in the 10% and 15% rate brackets) for taxable years beginning before January 1, 2011. It is currently unclear whether Congress will extend this reduction to tax years beginning on or after January 1, 2011.
	•		Distributions by the Fund generally are taxable to a shareholder even if they are paid from income or gains earned by the Fund before that shareholder invested in the Fund (and accordingly the income or gains were included in the price the shareholder paid for the Fund’s shares). Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares.
	•		Distributions by the Fund to retirement plans that qualify for tax-exempt treatment under U.S. federal income tax laws generally will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax advisor to determine the suitability of the Fund as an investment through such a plan and the tax treatment of distributions from such a plan.
	•		Any gain resulting from a shareholder’s sale, exchange, or redemption (whether effected in cash or in-kind) of Fund shares generally will be taxable to the shareholder as short-term or long-term capital gain, depending on how long the Fund             shares were held by the shareholder.
	•		The Fund’s investment in foreign securities may be subject to foreign withholding taxes on dividends, interest, or capital gains. Those taxes will reduce the Fund’s yield on these securities. The foreign withholding tax rates applicable to the Fund’s investments in certain foreign jurisdictions may be higher if the Fund has a significant number of non-U.S. shareholders than if it has fewer non-U.S. shareholders. In certain instances, shareholders may be entitled to claim a credit or deduction (but not both) for foreign taxes paid by the Fund. In addition, the Fund’s investment in foreign securities (other than equity securities) or foreign currencies may increase or accelerate the Fund’s recognition of ordinary income and may affect the timing, character, and/or amount of the Fund’s distributions. See “Taxes” in the SAI for more information.
	•		Certain of the Fund’s investment practices, including derivative transactions and hedging activities generally, and securities lending activities, as well as the Fund’s investments in certain types of securities, including assets “marked to the market” for U.S. federal income tax purposes, will be subject to special and complex U.S. federal income tax provisions. These special rules may affect the timing, character, and/or amount of the Fund’s distributions and may cause the Fund to liquidate investments at a time when it is not

			advantageous to do so. See “Taxes” in the SAI for more information about the tax consequences of specific Fund investment practices and investments.
	•		To the extent the Fund invests in other funds of the Trust or other investment companies treated as partnerships or regulated investment companies for U.S. federal income tax purposes, the Fund’s distributions could vary, in terms of their timing, character, and/or amount, from what the Fund’s distributions would have been had the Fund invested directly in the portfolio securities and other assets held by the underlying investment companies. See “Taxes” in the SAI for more information.

          The above is a general summary of the principal U.S. federal income tax consequences of investing in the Fund for shareholders who are U.S. citizens, residents, or domestic corporations. You should consult your own tax advisors about the precise tax consequences of an investment in the Fund in light of your particular tax situation, including possible foreign, state, local, or other applicable taxes (including the federal alternative minimum tax).

          Most states permit mutual funds, such as the Fund, to “pass through” to their shareholders the state tax exemption on income earned from investments in certain Direct U.S. Treasury Obligations, as well as some limited types of U.S. government agency securities, so long as a fund meets all applicable state requirements. Therefore, you may be allowed to exclude from your state income tax returns distributions made to you by the Fund to the extent attributable to interest the Fund earned on such investments. The availability of these exemptions varies by state. You should consult your tax advisors regarding the applicability of any such exemptions to your situation.

          See “Taxes” in the SAI for more information, including a summary of certain tax consequences of investing in the Fund for non-U.S. shareholders.

FINANCIAL HIGHLIGHTS

(For a share outstanding throughout each period)

          The financial highlights table is intended to help you understand the Fund’s financial performance for the period of the Fund’s operations. Some information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). Except as otherwise noted, this information has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund’s financial statements, is included in the Fund’s Annual Report, which is incorporated by reference in the SAI. The Fund’s unaudited financial statements for the semi-annual period ended August 31, 2009 are included in the Fund’s Semi-Annual Report, which is also incorporated by reference into the SAI. The SAI, Annual Report and Semi-Annual Report are available upon request.

INVESTMENT IN OTHER GMO FUNDS

           GMO U.S. Treasury Fund. GMO U.S. Treasury Fund (“Treasury Fund”), a series of the Trust, is described in a separate prospectus. Treasury Fund is managed by GMO.

          Treasury Fund pays an investment management fee to the Manager at the annual rate of 0.08% of Treasury Fund’s average daily net assets. The Manager has voluntarily agreed to waive Treasury Fund’s management fee. The Manager may change or terminate this waiver at any time. This waiver is in addition to the Manager’s contractual agreement to reimburse Treasury Fund for expenses incurred by Treasury Fund through at least June 30, 2010 to the extent Treasury Fund’s total annual operating expenses (without giving effect to any voluntary management fee waiver and excluding investment-related costs and Excluded Expenses) exceed 0.08% of Treasury Fund’s average daily net assets. For these purposes, “Excluded Expenses” are expenses indirectly incurred by investment in other Funds of the Trust, fees and expenses of the independent Trustees of the Trust, fees and expenses for legal services not approved by the Manager for the Trust, compensation and expenses of the Trust’s Chief Compliance Officer (excluding any employee benefits), brokerage commissions, securities-lending fees and expenses, interest expense, transfer taxes, and other investment-related costs (including expenses associated with investments in any company that is an investment company (including an exchange-traded fund) or would be an investment company under the 1940 Act, but for the exceptions to the definition of investment company provided in Sections 3(c)(1) and 3(c)(7) of the 1940 Act), hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes).

          Treasury Fund’s investment objective is liquidity and safety of principal with current income as a secondary objective.

          Treasury Fund seeks to achieve its investment objective by investing primarily in U.S. Treasury securities. Under normal circumstances, Treasury Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in Direct U.S. Treasury Obligations and repurchase agreements collateralized by these Obligations. “Direct U.S. Treasury Obligations” include U.S. Treasury bills, bonds, and notes and other securities issued by the U.S. Treasury, such as Separately Traded Registered Interest and Principal Securities (STRIPS) and other zero-coupon securities, that are backed by the full faith and credit of the U.S. government as well as repurchase agreements relating to the foregoing.

          As a principal investment strategy Treasury Fund may enter into repurchase agreements, under which Treasury Fund purchases a security backed by the full faith and credit of the U.S. government from a seller who simultaneously commits to repurchase, on an agreed upon date in the future, the security from Treasury Fund at the original purchase price plus an agreed upon amount representing the original purchase price plus interest. The counterparties in repurchase agreements are typically broker-dealers and banks, and the safety of the arrangement is dependent upon Treasury Fund having an interest in the security that can be realized in the event of the insolvency of the counterparty. In addition to Direct U.S. Treasury Obligations, Treasury Fund may also invest in other fixed-income securities that are also backed by the full faith and credit of the U.S. government, such as guaranteed securities issued by the Government National Mortgage Association (GNMA) and the Federal Deposit Insurance Corporation (FDIC). Treasury Fund may also invest in unaffiliated money market funds.

          Treasury Fund normally invests in Direct U.S. Treasury Obligations and other fixed-income securities backed by the full faith and credit of the U.S. government with a stated or remaining maturity of one year or less. This may not be true of Direct U.S. Treasury Obligations purchased pursuant to

repurchase agreements, and, therefore, if the counterparty to the repurchase agreement defaults, Treasury Fund may own a security with a stated or remaining maturity of greater than one year.

          Although Treasury Fund primarily invests in short-term obligations, it is not a money market fund and is not subject to the duration, quality, diversification, and other requirements applicable to money market funds. In addition, the Manager normally seeks to maintain a duration of one year or less for Treasury Fund’s portfolio. The Manager determines Treasury Fund’s dollar-weighted average portfolio duration by aggregating the durations of Treasury Fund’s individual holdings and weighting each holding based on its market value.

          In selecting U.S. Treasury securities for Treasury Fund’s portfolio, the Manager focuses primarily on the relative attractiveness of different obligations (such as bonds, notes, or bills), which can vary depending on the general level of interest rates as well as supply/demand imbalances and other market conditions.

          Other GMO Funds may invest in Treasury Fund to achieve exposure to U.S. Treasury securities, to invest cash and/or to seek to generate a return similar to yields on U.S. Treasury securities.

          Treasury Fund’s benchmark is the Citigroup 3 Month Treasury Bill Index, an independently maintained and published short-term bill index.

          Shareholders of GMO Funds that hold investments in Treasury Fund will be indirectly exposed to the risks associated with an investment in Treasury Fund. The principal risks of an investment in Treasury Fund include Market Risk—Fixed Income Securities, Liquidity Risk, Credit and Counterparty Risk, and Focused Investment Risk.

GMO TRUST

GMO Trust

Prospectus

October 30, 2009

n GMO Short-Duration Collateral Fund

		§ Information about other funds offered by GMO Trust is contained in separate prospectuses.
		§ Shares of the Fund described in this Prospectus may not be available for purchase in all states. This Prospectus does not offer shares in any state where they may not lawfully be offered.

Grantham, Mayo, Van Otterloo & Co. LLC

40 Rowes Wharf • Boston, Massachusetts 02110

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

		Page
FUND SUMMARY			2
DESCRIPTION OF PRINCIPAL RISKS			7
MANAGEMENT OF THE FUND			13
DETERMINATION OF NET ASSET VALUE			14
DISCLOSURE OF PORTFOLIO HOLDINGS			16
HOW TO PURCHASE SHARES			16
HOW TO REDEEM SHARES			19
PURCHASE PREMIUMS AND REDEMPTION FEES			21
DISTRIBUTIONS AND TAXES			21
FINANCIAL HIGHLIGHTS			25
ADDITIONAL INFORMATION		back cover
SHAREHOLDER INQUIRIES		back cover
DISTRIBUTOR		back cover

GMO SHORT-DURATION COLLATERAL FUND

		Fund Codes
		Ticker		Symbol		CUSIP
		GMOSX		ShdurCol		362013286

FUND SUMMARY

     This summary is not all-inclusive, and GMO Short-Duration Collateral Fund (the “Fund”) may make investments, employ strategies, and be exposed to risks that are not described in this summary. More information about the Fund’s investments and strategies is contained in the Fund’s Statement of Additional Information (“SAI”). Except for policies identified in this Prospectus or the SAI as “fundamental,” the Board of Trustees (the “Trustees”) of GMO Trust (the “Trust”) may change the Fund’s investment objective or policies without shareholder approval. The Fund’s investment manager is Grantham, Mayo, Van Otterloo & Co. LLC (the “Manager” or “GMO”) (see “Management of the Fund” for a description of the Manager). The Fund, by itself, is not intended to provide a complete investment program, and investment in the Fund should only be considered as part of a diversified portfolio that includes other investments.

Investment objective

     Total return comparable to that of its benchmark, the J.P. Morgan U.S. 3 Month Cash Index.

Principal investment strategies

     The Fund primarily invests in asset-backed securities of any credit quality, including, but not limited to, securities backed by pools of residential and commercial mortgages, credit-card receivables, home equity loans, automobile loans, educational loans, corporate and sovereign bonds, and bank loans made to corporations. In addition, the Fund may invest in government securities, corporate debt securities, money market instruments, and commercial paper, and enter into credit default swaps, reverse repurchase agreements, and repurchase agreements. The Fund also may use other exchange-traded and over-the-counter (“OTC”) derivatives. The Fund also may invest in unaffiliated money market funds. Because of the deterioration in credit markets that became acute in 2008, the Fund currently holds and may continue to hold material positions of below investment grade securities. The Fund is not a “diversified” investment company within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

     In selecting fixed income securities for the Fund’s portfolio, the Manager focuses primarily on the securities’ credit quality. The Manager uses fundamental investment techniques to identify the credit risk associated with investments in fixed income securities and bases its investment decisions on that assessment.

     The Manager normally seeks to maintain an interest rate duration of 365 days or less for the Fund’s portfolio. The Fund’s dollar-weighted average portfolio maturity may be substantially longer than its dollar-weighted average interest rate duration. The Manager determines the Fund’s dollar-weighted average interest rate duration by aggregating the durations of the Fund’s individual holdings and weighting each holding based on its market value. The Manager may determine duration by traditional

means or through empirical analysis, which may produce results that differ from those produced by traditional methods of calculating duration.

     Unless otherwise specified in this Prospectus or the SAI, the Manager is not obligated to and generally will not consider tax consequences when seeking to achieve the Fund’s investment objective (e.g., the Fund may engage in transactions that are not tax efficient for shareholders subject to U.S. federal income tax). Portfolio turnover is not a principal consideration when the Manager makes investment decisions for the Fund. Based on its assessment of market conditions, the Manager may cause the Fund to trade more frequently at some times than at others. High turnover rates may adversely affect the Fund’s performance by generating additional expenses and may result in additional taxable income for its shareholders.

     The Fund is not currently accepting orders for the purchase of shares other than reinvestment of dividends. Since October of 2008, the Fund has declared and paid distributions when it has acquired a meaningful cash position rather than reinvesting that cash in portfolio securities. The Fund currently intends to continue this practice. A substantial portion of any such distributions could constitute a return of capital to shareholders for tax purposes. See “Distributions and Taxes” below for more information on the tax implications of such distributions.

      When used in this Prospectus, the term “invest” includes both direct investing and indirect investing and the term “investments” includes both direct investments and indirect investments. For example, the Fund may invest indirectly by investing in another Fund or by investing in derivatives and synthetic instruments. In addition, the term “fixed income securities” includes (i) obligations of an issuer to make payments of principal and/or interest on future dates and (ii) synthetic debt instruments created by the Manager by using a futures contract, swap contract, currency forward or option. For purposes of this Prospectus, (a) the term “bond” refers to any fixed income security, including instruments with variable interest payments, (b) the term “duration” is defined as the interest rate sensitivity of a fixed income security, and (c) the term “total return” includes both capital appreciation and income.

     For purposes of this Prospectus, the term “investment grade” refers to a rating of Baa3/P-2 or better given by Moody’s Investors Service, Inc. (“Moody’s”) or BBB-/A-2 or better given by Standard & Poor’s Ratings Services (“S&P”) to a particular fixed income security/commercial paper, and the term “below investment grade” refers to any rating below Baa3/P-2 given by Moody’s or below BBB-/A-2 given by S&P to a particular fixed income security/commercial paper. Fixed income securities rated below investment grade are also known as high yield or “junk” bonds. In addition, in this Prospectus, investment grade securities/commercial paper that are given a rating of Aa/P-1 or better by Moody’s or AA/A-1 or better by S&P are referred to as “high quality.” Securities referred to as investment grade, below investment grade, or high quality include not only securities rated by Moody’s and/or S&P, but also securities unrated by Moody’s or S&P that are determined by the Manager to have credit qualities comparable to securities rated by Moody’s or S&P as investment grade, below investment grade, or high quality, as applicable.

Benchmark

     The Fund’s benchmark is the J.P. Morgan U.S. 3 Month Cash Index, which is independently maintained and published by J.P. Morgan. The Index measures the total return performance of three-month U.S. dollar Euro-deposits.

Principal risks of investing in the Fund

     The value of the Fund’s shares changes with the value of the Fund’s investments. Many factors can affect this value, and you may lose money by investing in the Fund. Following is a brief summary of the principal risks of an investment in the Fund. Many of these risks are more pronounced as a result of current global economic conditions that began to unfold in 2008. For a more complete discussion of these risks, see “Description of Principal Risks.”

•		Market Risk — Fixed Income Securities — Typically, the value of the Fund’s fixed income securities will decline during periods of rising interest rates and widening of credit spreads on asset-backed and other fixed income securities. Recent changes in credit markets increased credit spreads and there can be no assurance that those spreads will tighten or not increase further.
•		Liquidity Risk — Low trading volume, lack of a market maker, or legal restrictions may limit or prevent the Fund from selling securities or closing derivative positions at desirable prices. The Fund invests in asset-backed securities that may be less liquid than the Fund’s benchmark. The Fund may be required to sell certain less liquid securities at distressed prices or meet redemption requests in-kind. Recent changes in credit markets have reduced the liquidity of all types of fixed income securities, including in particular the asset-backed securities held by the Fund.
•		Focused Investment Risk — Focusing investments in countries, regions, or sectors with high positive correlations to one another creates additional risk. This risk may be particularly pronounced for the Fund because of its exposure to asset-backed securities secured by different types of consumer debt (e.g., credit-card receivables, automobile loans, and home equity loans).
•		Credit and Counterparty Risk — This is the risk that the issuer or guarantor of a fixed income security, the counterparty to an OTC derivatives contract, a borrower of the Fund’s securities or the obligor of an obligation underlying an asset-backed security, will be unable or unwilling to make timely principal, interest, or settlement payments, or otherwise honor its obligations. The risk of counterparty default is particularly acute in economic environments where financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions.

     Other principal risks of an investment in the Fund include Derivatives Risk (use of derivatives by the Fund involves risks different from, and potentially greater than, risks associated with direct investments in securities and other investments by the Fund), Market Disruption and Geopolitical Risk (the risk that geopolitical events may increase market volatility and have adverse long-term effects on U.S. and world economies and markets generally), Large Shareholder Risk (risk that shareholders of the Fund, such as institutional investors or other GMO Funds, will disrupt the Fund’s operations by purchasing or redeeming Fund shares in large amounts and/or on a frequent basis), and Management Risk (risk that the Manager’s strategies and techniques will fail to produce the desired results). The Fund is a non-diversified investment company under the 1940 Act, and therefore a decline in the market value of a particular security held by the Fund may affect the Fund’s performance more than if the Fund were diversified.

Performance

     The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund’s annual total returns from year to year for the periods shown and by comparing the Fund’s average annual total returns for different calendar periods with those of a broad-based index. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your tax situation and may differ from those shown. After-tax returns shown are not relevant if you are tax-exempt or if you hold your Fund shares through tax-deferred arrangements (such as a 401(k) plan or individual retirement account). Performance results in the table reflect payment of Fund expenses; returns for the comparative index do not reflect payment of any fees, expenses, or taxes. Past performance (before and after taxes) is not an indication of future performance.

Annual Total Returns
Years Ending December 31

Highest Quarter: 1.45% (3Q2006)
Lowest Quarter: -15.22% (4Q2008)
Year-to-Date (as of 9/30/09): 21.08%

Average Annual Total Returns
Periods Ending December 31, 2008

Fees and expenses

     The table below shows the expected cost of investing in the Fund.

Annual Fund operating expenses

(expenses that are paid from Fund assets as a percentage of average daily net assets):

 

Example

     This example helps you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated, regardless of whether or not you redeem your shares at the end of such periods. The example also assumes that your investment has a 5% return each year, that the Fund’s operating expenses remain the same as shown in the table, and that all dividends and distributions are reinvested. Your actual costs may be higher or lower.

1 Year*		3 Years		5 Years		10 Years
$1		$8		$15		$37

*		After reimbursement

DESCRIPTION OF PRINCIPAL RISKS

     Investing in mutual funds involves risk, including the risk that the Manager’s strategies and techniques will fail to produce the desired results (see “Management of the Fund” for a description of the Manager and “Management Risk” below for a more detailed discussion of this risk). The Fund is subject to risks based on the types of investments in its portfolio and the investment strategies it employs. Factors that may affect the Fund’s portfolio as a whole are called “principal risks” and are summarized in this section. This summary describes the nature of these principal risks and certain related risks, but is not intended to include every potential risk. Many of these risks are more pronounced as a result of current global economic conditions that began to unfold in 2008. The Fund could be subject to additional risks because the types of investments made by the Fund may change over time. The SAI includes more information about the Fund and its investments. You should keep in mind that an investment in the Fund is not a bank deposit and therefore is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. By itself, the Fund does not constitute a complete investment program.

•

MARKET RISK—FIXED INCOME SECURITIES

     The Fund is subject to market risk, which is the risk of unfavorable changes in the value of Fund holdings. The following summarizes certain general market risks associated with investments in or exposure to fixed income securities.

     Market risks apply for the Fund by virtue of its investments in asset-backed securities. Asset-backed securities may be backed by many types of assets, including pools of residential and commercial mortgages, automobile loans, educational loans, home equity loans, or credit-card receivables. They also may be backed by pools of corporate or sovereign bonds, bank loans made to corporations, or a combination of these bonds and loans (commonly referred to as “collateralized debt obligations”). Payment of interest on asset-backed securities and repayment of principal largely depend on the cash flows generated by the underlying assets backing the securities. The amount of market risk associated with asset-backed securities depends on many factors, including the deal structure (e.g., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. Asset-backed securities involve risk of loss of principal if obligors of the underlying obligations default in payment of the obligations and the defaulted obligations exceed the credit support. The obligations of issuers (and obligors of underlying assets) also are subject to bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors. Many asset-backed securities are now rated below investment grade. See “Credit and Counterparty Risk” below for more information about credit risk.

     With the deterioration of worldwide economic and liquidity conditions that became acute in 2008, the markets for asset-backed securities became fractured and uncertainty about the creditworthiness of those securities (and underlying collateral) caused credit spreads (the difference between yields on the asset-backed securities and U.S. Government securities) to widen dramatically. Concurrently, systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions reduced the ability of financial institutions to make markets in many fixed income securities generally. These events reduced liquidity for securitized credits and contributed to substantial declines in the value of asset-backed and other fixed income securities. There can be no assurance these conditions will not continue or that they will not deteriorate further. Also, government actions and proposals affecting the terms of underlying home and consumer loans, changes in demand for products (e.g., automobiles) financed by those loans, and the inability of borrowers to refinance existing loans (e.g., sub-prime mortgages), have had, and may continue to have, adverse valuation and liquidity effects on asset-backed

securities. There can be no assurance that in the future the market for asset-backed securities will become more liquid.

     The value of an asset-backed security may depend on the servicing of its underlying asset and is, therefore, subject to risks associated with the negligence or defalcation of its servicer. In some circumstances, the mishandling of related documentation also may affect the rights of security holders in and to the underlying collateral. The insolvency of entities that generate receivables or that utilize the assets may result in a decline in the value of the underlying assets, as well as costs and delays. The obligations underlying asset-backed securities, in particular securities backed by pools of residential and commercial mortgages, also are subject to unscheduled prepayment and the Fund may be unable to invest prepayments at as high a yield as the asset-backed security.

     The risks associated with asset-backed securities are particularly pronounced for the Fund. The Fund also may be subject to greater risk because asset-backed securities representing diverse sectors (e.g., auto loans, student loans, sub-prime mortgages, and credit-card receivables) have become more highly correlated since the deterioration of worldwide economic and liquidity conditions referred to above. See “Focused Investment Risk” below for a discussion of these risks of investing in correlated sectors.

     Market risk for fixed income securities is amplified by liquidity risk which has become more pronounced since the deterioration of worldwide economic and liquidity conditions referred to above. See “Liquidity Risk” below. Even in the absence of a credit downgrade or default, the price of fixed income securities held by the Fund may decline significantly due to reduction in market demand.

     A principal risk of the Fund’s investments in fixed income securities (including bonds, notes, bills, synthetic debt instruments, and asset-backed securities) is that the values of those securities typically change as interest rates fluctuate. The risk associated with fluctuating interest rates (also called “interest rate risk”) is generally greater for funds investing in fixed income securities with longer durations.

     Interest rate risk relates to changes in a security’s value as a result of changes in interest rates. The value of fixed-rate securities generally falls when interest rates rise, since prospective interest payments on new bonds will exceed current payments on existing bonds; the opposite is true when interest rates fall, since current investments have locked in a higher interest rate. The extent to which a security’s value moves with interest rates is referred to as interest rate duration, which can be measured mathematically or empirically. Longer-maturity investments generally have longer durations, as the investment’s fixed rate is locked in for longer periods of time. Floating-rate or adjustable-rate securities, however, generally have short interest rate durations, since their interest rates are not fixed but rather float up and down with the level of prevailing interest rates.

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LIQUIDITY RISK

     The Fund is exposed to liquidity risk when low trading volume, lack of a market maker, a large position, or legal restrictions limit or prevent the Fund from selling securities or closing derivative positions at desirable prices. Because the Fund’s principal investment strategies involve investing in fixed income securities, in particular asset-backed securities, its investments may not be as liquid as those of other fixed income funds. The Fund also will have increased exposure to liquidity risk to the extent it uses derivatives (in particular OTC derivatives) as part of its principal investment strategies. Some derivatives (in particular OTC derivatives) are more likely to be fair valued (see “Determination of Net Asset Value”). The Fund may not be able to initiate a transaction or liquidate a position in such investments at a desirable price. In addition, the Fund’s holdings in assets for which the relevant market is or becomes less liquid are more susceptible to loss of value. Less liquid securities also may fall more in price than other securities during periods when markets decline generally.

     The Fund is also exposed to liquidity risk when it has an obligation to purchase particular securities (e.g., as a result of entering into reverse repurchase agreements, writing a put, or closing out a short position). Some of the markets, exchanges, or securities in which the Fund invests may prove to be less liquid and this would affect the price at which, and the time period in which, the Fund may liquidate positions to meet redemption requests or other funding requirements. As noted under “Market Risk — Fixed Income Securities” above, since the deterioration of worldwide economic and liquidity conditions that became acute in 2008, liquidity risk as been pronounced for funds that invest in fixed income securities, and particularly asset-backed securities. There can be no assurance that in the future the market for such securities will become more liquid.

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FOCUSED INVESTMENT RISK

     Funds whose investments are focused in industries with high positive correlations to one another (e.g., different industries within broad sectors, such as technology or financial services) may be subject to greater overall risk than funds whose investments are more diversified. Therefore, those funds should only be considered as part of a diversified portfolio that includes other investments. A fund that focuses its investments in a particular type of security or in securities of companies in a particular industry may be especially vulnerable to events affecting those securities or companies because those securities or companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political, or other developments. This risk is particularly pronounced for the Fund because of its significant exposure to asset-backed securities. As noted under “Market Risk—Fixed Income Securities” above, sectors of the securitized credit markets have become more highly correlated since the deterioration of worldwide economic and liquidity conditions that became acute in 2008.

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CREDIT AND COUNTERPARTY RISK

     This is the risk that the issuer or guarantor of a fixed income security, the counterparty to a repurchase agreement or other OTC derivative contract, or a borrower of the Fund’s securities will be unable or unwilling to make timely principal, interest, or settlement payments or otherwise to honor its obligations. This risk is particularly acute in environments in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers in 2008 and subsequent market disruptions.

     Credit risk for fixed income securities is the risk that the issuer will be unable to make scheduled contractual payments of principal and interest. The value of the Fund’s investments can decline as a result of an issuer’s defaulting in its payment obligations or the market’s expectation of a default. The Fund is subject to the risk that the issuers of the fixed income securities in which it invests will have their credit ratings downgraded. Nearly all fixed income securities are subject to some credit risk. The risk varies depending upon whether the issuers of the securities are corporations or domestic or foreign governments or their sub-divisions or instrumentalities and whether the particular note or other instrument held by the Fund has priority in payment of principal and interest. U.S. government securities are subject to varying degrees of credit risk depending upon whether the securities are supported by the full faith and credit of the United States, supported by the ability to borrow from the U.S. Treasury, supported only by the credit of the issuing U.S. government agency, instrumentality, or corporation, or otherwise supported by the United States. For example, issuers of many types of U.S. government securities (e.g., the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), and Federal Home Loan Banks), although chartered or sponsored by Congress, are not funded by Congressional appropriations, and their fixed income securities, including mortgage-backed and other asset-backed securities, are neither guaranteed nor insured by the U.S. government. These securities are

subject to more credit risk than U.S. government securities that are supported by the full faith and credit of the United States (e.g., U.S. Treasury bonds).

     As noted under “Market Risk — Fixed Income Securities” above, asset-backed securities may be backed by many types of assets, including pools of residential and commercial mortgages, automobile loans, educational loans, home equity loans, or credit-card receivables. Asset-backed securities also may be collateralized by the fees earned by service providers. They also may be backed by pools of corporate or sovereign bonds, bank loans made to corporations, or a combination of these bonds and loans (commonly referred to as “collateralized debt obligations”). Payment of interest on asset-backed securities and repayment of principal largely depend on the cash flows generated by the underlying assets backing the securities. The amount of market risk associated with asset-backed securities depends on many factors, including the deal structure (e.g., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. Asset-backed securities involve risk of loss of principal if obligors of the underlying obligations default in payment of the obligations and the defaulted obligations exceed the credit support. The obligations of issuers (and obligors of underlying assets) also are subject to bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors.

     The obligations of issuers also are subject to bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors. The Fund also will be exposed to credit risk on the reference security to the extent it writes protection under credit default swaps. See “Derivatives Risk” below for more information regarding risks associated with the use of credit default swaps.

     Credit risk is particularly pronounced for below investment grade securities (also known as “junk” bonds). During periods of economic uncertainty and change, the market price of the Fund’s investments in below investment grade securities and the Fund’s net asset value may be particularly volatile. Although offering the potential for higher investment returns, junk bonds often are less liquid than higher quality securities, their issuers’ ability to meet principal and interest payments is considered speculative, and they are more susceptible to real or perceived adverse economic and competitive industry conditions. Junk bonds often also are subject to greater risk of loss, greater sensitivity to interest rate and economic changes, valuation difficulties, and a potential lack of a market. The market price of these securities can change suddenly and unexpectedly. The Fund is subject to this risk to the extent that it directly or indirectly acquires or holds below investment grade securities. Credit risk also is particularly pronounced for the Fund, as a substantial number of securities held by the Fund have suffered credit downgrades, and some are now rated below investment grade.

     In addition, the Fund is exposed to counterparty risk to the extent it uses OTC derivatives (such as repurchase agreements) or it lends its portfolio securities. See “Derivatives Risk” above for more information. If a counterparty’s obligation to the Fund under such an arrangement is not collateralized, then the Fund is essentially an unsecured creditor of the counterparty and there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market conditions. If the counterparty defaults, the Fund will have contractual remedies, but the Fund may be unable to enforce its contractual rights. The Fund is subject in particular to the creditworthiness of counterparties because certain types of swap contracts used by the Fund may have durations longer than six months. Counterparty risk is still present even if a counterparty’s obligations are structured to be secured by collateral because the Fund’s interest in the collateral may not be perfected, or the derivative may not be promptly marked-to-market and additional collateral may not be promptly posted. In addition, the Fund may have significant exposure to a single counterparty as a result of its use of swaps and other OTC derivatives.

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DERIVATIVES RISK

     The Fund may invest in derivatives, which are financial contracts whose value depends on, or is derived from, the value of underlying assets, reference rates, or indices. Derivatives may relate to securities, interest rates, currencies or currency exchange rates, and related indices. The Fund may use derivatives for many purposes, including as a substitute for direct investment in securities and as a means to hedge other investments. The Fund also may use derivatives as a way to adjust its exposure to various securities, markets, and currencies without actually having to sell existing investments and make new investments. This generally is done when the adjustment is expected to be relatively temporary or in anticipation of selling Fund assets and making new investments over time. The SAI contains a description of the various derivatives that the Fund may utilize.

     The use of derivatives involves risks different from, and potentially greater than, the risks associated with investing directly in securities and other more traditional assets. In particular, the use of derivatives exposes the Fund to the risk that the counterparty to an OTC derivative contract will be unable or unwilling to make timely settlement payments or otherwise to honor its obligations. OTC derivative contracts typically can be closed out only with the other party to the contract. If the counterparty defaults, the Fund will have contractual remedies, but there can be no assurance that the counterparty will meet its contractual obligations or that the Fund will be able to enforce its contractual rights. For example, because the contract for each OTC derivative is individually negotiated with a specific counterparty, the Fund is subject to the risk that a counterparty may interpret contractual terms (e.g., the definition of default) differently than the Fund. If that occurs, the cost and unpredictability of the legal proceedings required for the Fund to enforce its contractual rights may lead the Fund to decide not to pursue its claims against the counterparty. The Fund, therefore, assumes the risk that it may be unable to obtain payments the Manager believes are owed to it under OTC derivative contracts or that those payments may be delayed or made only after the Fund has incurred the costs of litigation. In addition, the Fund may invest in derivatives as to which the counterparty’s obligations are not secured by collateral (e.g., foreign currency forwards), that require collateral but in which the Fund’s security interest is not perfected, that require a significant upfront deposit unrelated to the derivative’s intrinsic value, or in which the derivative is not regularly marked-to-market (e.g., certain OTC derivatives). Even where obligations are collateralized, there is usually a lag between the day the collateral is called for and the day the Fund receives the collateral. When the counterparties’ obligations are not fully secured by collateral, the Fund will be exposed to the risk of having limited recourse if a counterparty defaults. Due to the nature of the Fund’s investments, the Fund may invest in derivatives with a limited number of counterparties and events that affect the creditworthiness of any of those counterparties may have a pronounced effect on the Fund. Derivatives risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions.

     Derivatives also are subject to a number of risks described elsewhere in this section, including market risk, liquidity risk, currency risk, and credit and counterparty risk. Many derivatives, in particular OTC derivatives, are complex and their valuation often requires judgment, which increases the risk of mispricing or improper valuation, and there can be no assurance that the pricing models employed by the Fund’s third-party valuation services and/or the Manager will produce valuations that are reflective of levels at which such swaps and other OTC derivatives may actually be closed out or sold. This valuation risk is more pronounced in cases where the Fund enters into swaps and other OTC derivatives with specialized terms because the value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. As a result, improper valuations may result in increased cash payments to counterparties, undercollateralization and/or errors in the calculation of the Fund’s net asset value.

     Derivatives also involve the risk that changes in their value may not correlate perfectly with the assets, rates, or indices they are designed to hedge or closely track. The use of derivatives also may increase the taxes payable by shareholders. Suitable derivatives are not available in all circumstances. For example, if a counterparty or its affiliate is deemed to be an affiliate of the Fund, the Fund will not be permitted to trade with that counterparty. There can be no assurance that the Fund’s use of derivatives will be effective or will have the desired results. In addition, the Manager may decide not to use derivatives to hedge or otherwise reduce the Fund’s risk exposures.

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MARKET DISRUPTION AND GEOPOLITICAL RISK

     The Fund is subject to the risk that geopolitical events may disrupt securities markets and adversely affect global economies and markets generally. The wars in Iraq and Afghanistan have had a substantial effect on economies and securities markets in the U.S. and worldwide. Terrorism in the U.S. and around the world has had a similar global impact and has increased geopolitical risk. The terrorist attacks of September 11, 2001 resulted in the closure of some U.S. securities markets for four days, and similar future events are possible. War, terrorism, and related geopolitical events have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, systemic market dislocations of the kind surrounding the insolvency of Lehman Brothers in 2008 may be highly disruptive to economies and markets. Those events as well as other changes in foreign and domestic economic and political conditions also could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of the Fund’s investments. At such times, the Fund’s exposure to the risks described elsewhere in this section, including market risk, liquidity risk, and credit and counterparty risk, can increase.

     The value of the Fund’s investments may be adversely affected by acts of terrorism and other changes in foreign and domestic economic and political conditions. The risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions. Such market disruptions might prevent the Fund from implementing its investment program for a period of time and achieving its investment objectives. For example, a disruption may cause the Fund’s derivative counterparties to discontinue offering derivatives on some underlying commodities, securities, reference rates, or indices or to offer such products on a more limited basis, or the current global economic crisis may strain the U.S. Treasury’s ability to satisfy its obligations.

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LARGE SHAREHOLDER RISK

     To the extent that shares of the Fund are held by large shareholders (e.g., institutional investors or asset allocation funds), the Fund is subject to the risk that these shareholders will purchase or redeem Fund shares in large amounts and/or on a frequent basis. These transactions will affect the Fund, since the Fund may have to make redemptions in-kind or sell portfolio securities to satisfy redemption requests or purchase portfolio securities to invest cash. This risk will be particularly pronounced if one shareholder owns a substantial portion of the Fund. A substantial percentage of the Fund may be held by other GMO Funds and/or separate accounts managed by the Manager for its clients. Asset allocation decisions by the Manager may result in substantial redemptions from (or investments into) the Fund. These transactions may adversely affect the Fund’s performance to the extent that the Fund is required to sell investments (or invest cash) at times when it would not otherwise do so. These transactions also may accelerate the realization of taxable income to shareholders if such sales of investments result in gains, and also may increase transaction costs. These transactions potentially limit the use of any capital loss carry forwards to offset future net realized gains and may limit or prevent the Fund’s ability to use tax equalization.

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MANAGEMENT RISK

     The Fund is subject to management risk because it relies on the Manager’s ability to achieve its investment objective. The Manager uses proprietary investment techniques and risk analyses in making investment decisions for the Fund, but there can be no assurance that the Manager will achieve the desired results. The Manager, for example, may fail to use derivatives effectively, choosing to hedge or not to hedge positions at disadvantageous times. The Fund generally does not take temporary defensive positions and instead generally stays fully invested in fixed income securities and related derivative instruments. The Fund may buy securities not included in its benchmark, hold securities in very different proportions than its benchmark, and/or engage in other strategies that cause its performance to differ from that of its benchmark. In those cases, the Fund’s performance will depend on the ability of the Manager to choose securities that perform better than securities that are included in the benchmark and/or to utilize those other strategies in a way that adds value relative to the benchmark.

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NON-DIVERSIFIED FUND

     The Fund is not a “diversified” investment company within the meaning of the 1940 Act. This means that the Fund is allowed to invest in the securities of a relatively small number of issuers and/or foreign currencies. As a result, the Fund may be subject to greater credit, market, and other risks, and poor performance by a single issuer may have a greater impact on the Fund’s performance than if the Fund were “diversified.”

MANAGEMENT OF THE FUND

     GMO, 40 Rowes Wharf, Boston, Massachusetts 02110, provides investment management and shareholder services to the Fund and other GMO Funds. GMO is a private company, founded in 1977. As of May 31, 2009, GMO managed on a worldwide basis more than $88.9 billion of assets for the GMO Funds and institutional investors, such as pension plans, endowments, and foundations.

     Subject to the approval of the Trustees, the Manager establishes and modifies when it deems appropriate the investment strategies of the Fund. In addition to its management of the Fund’s investment portfolio and the shareholder services it provides to the Fund, the Manager administers the Fund’s business affairs. The Manager does not charge the Fund a management fee for management and administrative services provided to the Fund.

     A discussion of the basis for the Trustees’ approval of the Fund’s investment management contract is included in the Fund’s shareholder report for the period during which the Trustees approved that contract.

     GMO’s Fixed Income Division is responsible for day-to-day investment management of the Fund. The Division’s investment professionals work collaboratively to manage the Fund’s portfolio, and no one person is primarily responsible for day-to-day investment management of the Fund.

     William Nemerever and Thomas Cooper are the senior members and co-directors of the Fixed Income Division. Each has been a senior member of the Division since 1993. As senior members and co-directors, Mr. Nemerever and Mr. Cooper jointly allocate responsibility for portions of the Fund’s portfolio to members of the Division, oversee the implementation of trades, review the overall composition of the portfolio, including compliance with its stated investment objective and strategies, and monitor cash.

     Mr. Nemerever and Mr. Cooper have been jointly responsible for overseeing the portfolio management of GMO’s global fixed income portfolios since 1993. In general, Mr. Nemerever focuses on investment strategy, while Mr. Cooper focuses on instrument selection.

     The SAI contains other information about how GMO determines the compensation of the senior members, other accounts they manage and related conflicts, and their ownership of the Fund.

Custodian, Fund Accounting Agent, and Transfer Agent

     State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111, serves as the Fund’s custodian, fund accounting agent, and transfer agent.

Expense Reimbursement

     As more fully described in the Fund’s “Annual Fund operating expenses” table under the caption “Fees and expenses”, the Manager has contractually agreed to reimburse the Fund for a portion of its expenses through at least the date shown in the table. As used in this Prospectus, “Excluded Fund Fees and Expenses” means fees and expenses of the independent Trustees of the Trust, fees and expenses for legal services not approved by the Manager for the Trust, compensation and expenses of the Trust’s Chief Compliance Officer (excluding any employee benefits), brokerage commissions, securities-lending fees and expenses, interest expense, transfer taxes, and other investment-related costs (including expenses associated with investments in any company that is an investment company (including an exchange-traded fund) or would be an investment company under the 1940 Act, but for the exceptions to the definition of investment company provided in Sections 3(c)(1) and 3(c)(7) of the 1940 Act), hedging transaction fees, extraordinary, non-recurring and certain other unusual expenses (including taxes).

Unlisted securities (if market quotations are readily available)

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Most recent quoted bid price

Note: There can be no assurance that brokers will be able to provide bid prices. If quotes are not used, the Fund would seek alternative valuation methodologies (e.g., valuing the relevant assets at “fair value” as described below).

Certain debt obligations (if less than sixty days remain until maturity)

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Amortized cost (unless circumstances dictate otherwise; for example, if the issuer’s creditworthiness has become impaired)

All other fixed income securities and options on those securities (except for options written by the Fund) (includes bonds, loans, structured notes)

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Most recent bid supplied by a primary pricing source chosen by the Manager

Options written by the Fund

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Most recent ask price

Shares of other open-end registered investment companies

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Most recent NAV

“Fair Value” Pricing

     For all other assets and securities, including derivatives, and in cases where market prices are not readily available or circumstances render an existing methodology or procedure unreliable, the Fund’s investments will be valued at “fair value,” as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees.

     With respect to the Fund’s use of “fair value” pricing, you should note the following:

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A significant percentage of the Fund’s assets may be “fair valued.” The value of assets that are “fair valued” is determined by the Trustees or persons acting at their direction pursuant to procedures approved by the Trustees. Some of the factors that may be considered in determining “fair value” are the value of other financial instruments traded on other markets, trading volumes, changes in interest rates, observations from financial institutions, significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the time that the Fund’s net asset value is calculated, other news events, and significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). Although the goal of fair valuation is to determine the amount the owner of the securities might reasonably expect to receive upon their current sale, because of the uncertainty inherent in fair value pricing, the fair value determined for a particular security may be materially different than the value realized upon its sale.

     The values of foreign securities quoted in foreign currencies are translated into U.S. dollars generally at 4:00 p.m. Eastern time at then current exchange rates or at such other rates as the Trustees or persons acting at their direction may determine in computing net asset value.

     The Manager evaluates pricing sources on an ongoing basis, and may change a pricing source at any time. The Manager normally does not evaluate the prices supplied by pricing sources on a day-to-day basis. The Manager monitors erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and has discretion to override a price supplied by a source (e.g., by taking a price supplied by another) when it believes that the price supplied is not reliable. Some securities held by the Fund may be valued on the basis of a price provided by a principal market maker. Prices provided by principal market makers may vary from the value that would be realized if the securities were sold, and the differences could be material to the Fund. In addition, because the Fund may hold portfolio securities listed on foreign exchanges that trade on days on which the NYSE or the U.S. bond markets are closed, the net asset value of the Fund’s shares may change significantly on days when shares cannot be redeemed.

DISCLOSURE OF PORTFOLIO HOLDINGS

          The Fund has established a policy with respect to disclosure of its portfolio holdings. That policy is described in the SAI. The largest fifteen portfolio holdings of some GMO Funds are posted monthly on GMO’s website and are available to shareholders without a confidentiality agreement. Information regarding the Fund’s portfolio holdings as of each month’s end is made available to shareholders of the Trust, qualified potential shareholders as determined by GMO (“potential shareholders”), and their consultants or agents through a secured link on GMO’s website approximately five days after month end. Periodically, in response to heightened market interest in specific issuers, a Fund’s holdings in one or more issuers may be made available on a more frequent basis to shareholders of the Trust, potential shareholders, and their consultants or agents through a secured link on GMO’s website. This information may be posted as soon as the business day following the date to which the information relates.

          To access this information on GMO’s website (http://www.gmo.com/america/strategies), shareholders, potential shareholders, and their consultants and agents must contact GMO to obtain a password and user name (to the extent they do not already have them) and enter into a confidentiality agreement with GMO and the Trust that permits the information to be used only for purposes determined by GMO to be in the best interest of the shareholders of the Fund. GMO may make portfolio holdings information available in alternate formats under the conditions described in the SAI. Beneficial owners of shares who have invested in the Fund through a broker or agent should contact that broker or agent for information on how to obtain access to information on the website regarding the Fund’s portfolio holdings.

          The Fund or GMO may suspend the posting of portfolio holdings, and the Fund may modify the disclosure policy, without notice to shareholders. Once posted, the Fund’s portfolio holdings will remain available on the website at least until the Fund files a Form N-CSR (annual/semiannual report) or Form N-Q (quarterly schedule of portfolio holdings) for the period that includes the date of those holdings.

HOW TO PURCHASE SHARES

     As noted above, the Fund is not currently accepting orders for the purchase of shares other than reinvestment of dividends. To the extent the Fund determines to accept new or additional subscriptions

other than reinvestment of dividends, under ordinary circumstances you may purchase the Fund’s shares from the Trust when the NYSE and the U.S. bond markets are open for business. In addition, certain brokers and agents are authorized to accept purchase and redemption orders on the Funds’ behalf. These brokers and agents may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for purchasing Fund shares through them. For instructions on purchasing shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com, or contact your broker or agent. The Trust will not accept a purchase request until it has received a GMO Trust Application deemed to be in good order by the Trust or its agent. In addition, the Trust will not accept a purchase request unless an IRS
Form W-9 (for U.S. shareholders) or the appropriate IRS Form W-8 (for foreign shareholders) with a correct taxpayer identification number (if required) is on file with GMO and such W-9 or W-8 is deemed to be in good order by the Trust’s withholding agent, State Street Bank and Trust Company. Please consult your tax adviser to ensure all tax forms provided to the Trust are completed properly and maintained, as required, in good order. GMO has the right to make final good order assessments.

          Purchase Policies. You must submit a purchase request in good order to avoid having it rejected by the Trust or its agent. In general, a purchase request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being purchased;
	•		The U.S. dollar amount of the shares to be purchased;
	•		The date on which the purchase is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number (if any) set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application; and
	•		Payment in full (by check, wire, or, when approved, securities) received by an agent of the Trust by 4:00 p.m. Eastern time or the close of the NYSE, whichever is earlier.

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If payment is not received prior to the close of regular trading on the intended purchase date, the request may be rejected unless prior arrangements for later payment have been approved by GMO.

       If the purchase request is received in good order by the Trust or its agent prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the purchase price for the Fund shares to be purchased is the net asset value per share determined on that day (plus any applicable purchase premium). If that request is received after the close of regular trading on the NYSE, the purchase price for the Fund shares to be purchased is the net asset value per share determined on the next business day that the NYSE is open (plus any applicable purchase premium). Purchase requests that are received on days when the U.S. bond markets are closed will not be accepted until the next day on which the U.S. bond markets are open, and the purchase price for the Fund’s shares to be purchased is the net asset value per share determined on that day (plus any applicable purchase premium). Purchase premiums (if any) are not charged on reinvestments of dividends.

       To help the U.S. government fight the funding of terrorism and money laundering activities, federal law requires the Trust to verify identifying information provided by each investor in its GMO Trust Application. Additional identifying documentation also may be required. If the Trust is unable to verify the information shortly after your account is opened, the account may be closed and your shares redeemed at their net asset value at the time of the redemption.

     The Trust and its agents reserve the right to reject any purchase order. In addition, without notice, the Fund in its sole discretion may temporarily or permanently suspend sales of its shares to new investors and, in some circumstances, existing shareholders.

     Funds advised or sub-advised by GMO (“Top Funds”) may purchase shares of the Fund after the close of regular trading on the NYSE (the “Cut-off Time”) and receive the current day’s price if the following conditions are met: (i) the Top Fund received a purchase request prior to the Cut-off Time on that day; and (ii) the purchase(s) by the Top Fund of shares of the Fund are executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

      Submitting Your Purchase Order Form . Completed purchase order forms can be submitted by mail or by facsimile or other form of communication pre-approved by Shareholder Services to the Trust at:

GMO Trust
c/o Grantham, Mayo, Van Otterloo & Co. LLC
40 Rowes Wharf
Boston, Massachusetts 02110
Facsimile: 1-617-439-4192
Attention: Shareholder Services

     Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your purchase order form. Do not send cash, checks, or securities directly to the Trust. A purchase request submitted by mail is “received” by the Trust when it is actually delivered to the Trust or its agent. A purchase request delivered by facsimile is “received” by the Trust when it is actually received by the Trust or its designated agent.

      Funding Your Investment . You may purchase shares:

•

with cash (via wire transfer or check)

4

By wire . Instruct your bank to wire the amount of your investment to:

State Street Bank and Trust Company, Boston, Massachusetts
ABA#: 011000028
Attn: Transfer Agent
Credit: GMO Deposit Account 00330902
Further credit: GMO Short-Duration Collateral Fund/Account name and number

4

By check . All checks must be made payable to the Fund or to GMO Trust. The Trust will not accept checks payable to a third party that have been endorsed by the payee to the Trust. Mail checks to:

•

in exchange for securities acceptable to the Manager

	4		securities must be approved by the Manager prior to transfer to the Fund.
	4		securities will be valued as set forth under “Determination of Net Asset Value”

•

by a combination of cash and securities

      Frequent Trading Activity. As a matter of policy, the Trust will not honor requests for purchases or exchanges by shareholders identified as engaging in frequent trading strategies, including market timing, that GMO determines could be harmful to certain other Funds and their shareholders. Frequent trading strategies are generally strategies that involve repeated exchanges and/or purchases and redemptions (or redemptions and purchases) within a short period of time. Frequent trading strategies may be disruptive to the efficient management of such Funds, materially increase portfolio transaction costs and taxes, dilute the value of shares held by long-term investors, or otherwise be harmful to such Funds and their shareholders. Notwithstanding the foregoing, these policies and procedures do not limit frequent trading of the Fund.

HOW TO REDEEM SHARES

     Under ordinary circumstances, you may redeem the Fund’s shares when the NYSE and the U.S. bond markets are open for business. Redemption requests should be submitted to the Trust unless the Fund shares to be redeemed were purchased through a broker or agent, in which case the redemption request should be initiated through that broker or agent. The broker or agent may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for redeeming Fund shares through it. For instructions on redeeming shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com , or contact your broker or agent. The Trust may take up to seven days to remit proceeds.

      Redemption Policies. You must submit a redemption request in good order to avoid having it rejected by the Trust or its agent. In general, a redemption request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being redeemed;
	•		The number of shares or the dollar amount of the shares to be redeemed;
	•		The date on which the redemption is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application or subsequent authorized signers list; and
	•		Wire instructions or registration address that match the wire instructions or registration address (as applicable) on file at GMO or confirmation from an authorized signatory that the wire instructions are valid.

     If a redemption request in good order is received by the Trust prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the redemption price for the Fund shares to be redeemed is the net asset value per share determined on that day (less any applicable redemption fee). Redemption requests in good order that are received on days when the U.S. bond markets are closed will not be accepted until the next day on which the U.S. bond markets are open, and the redemption price will be the

net asset value per share determined that day (less any applicable redemption fee). If that redemption request is received after the close of regular trading on the NYSE, the redemption price for the Fund shares to be redeemed is the net asset value per share determined on the next business day that the U.S. bond markets are open (less any applicable redemption fee) unless an authorized person on the account has instructed GMO Shareholder Services in writing to defer the redemption to another day. If you have instructed GMO Shareholder Services to defer the redemption to another day, an authorized person on your account may revoke your redemption request in writing at any time prior to 4:00 p.m. Eastern time or before the close of regular trading on the NYSE (whichever is earlier) on the redemption date. Redemption fees, if any, apply to all shares of the Fund regardless of how the shares were acquired (e.g., by direct purchase or by reinvestment of dividends or other distributions). In the event of a disaster affecting Boston, Massachusetts, please contact GMO to confirm receipt of your redemption request and whether it is in good order.

     Failure to provide the Trust with a properly authorized redemption request or otherwise satisfy the Trust as to the validity of any change to the wire instructions or registration address may result in a delay in processing a redemption request, delay in remittance of redemption proceeds, or a rejection of the redemption request.

     As with all GMO Funds, if the Manager determines, in its sole discretion, that paying redemption proceeds wholly or partly in cash would be detrimental to the best interests of the Fund’s remaining shareholders, the Fund may pay the redemption proceeds in whole or in part with securities instead of cash. In particular, if market conditions deteriorate and the Manager believes the Fund’s redemption fee (if any) is not fair compensation for transaction costs, the Fund may limit cash redemptions (honoring redemptions with portfolio securities) in order to protect the interests of all Fund shareholders.

     If a redemption is paid in cash:

•

payment generally will be made by means of federal funds transfer to the bank account designated in a recordable format by an authorized signatory in the GMO Trust Application to purchase the Fund shares being redeemed

4

designation of one or more additional bank accounts or any change in the bank accounts originally designated in the GMO Trust Application must be made in a recordable format by an authorized signatory according to the procedures in the GMO Trust Redemption Order Form

•

upon request, payment will be made by check mailed to the registration address (unless another address is specified according to the procedures in the GMO Trust Redemption Order Form).

     The Trust will not make payments to third-parties on behalf of a shareholder upon a redemption request and does not offer check-writing privileges.

     If a redemption is paid with securities, it is important for you to note that:

	•		the securities will be valued as set forth under “Determination of Net Asset Value”
	•		the securities will be selected by the Manager in light of the Fund’s objective and may not represent a pro rata distribution of each security held in the Fund’s portfolio
	•		you may incur brokerage charges on the sale of the securities

	•		redemptions paid in securities generally are treated by shareholders for tax purposes the same as redemptions paid in cash
	•		the securities will be transferred and delivered by the Trust as directed in writing by an authorized person on the account.

       The Fund may suspend the right of redemption and may postpone payment for more than seven days:

	•		if the NYSE or U.S. bond markets are closed on days other than weekends or holidays
	•		during periods when trading on the NYSE is restricted
	•		during an emergency which makes it impracticable for the Fund to dispose of its securities or to fairly determine the net asset value of the Fund
	•		during any other period permitted by the Securities and Exchange Commission (“SEC”) for your protection.

     Pursuant to the Trust’s Amended and Restated Agreement and Declaration of Trust, the Trust has the unilateral right to redeem Fund shares held by a shareholder at any time if at that time: (i) the shares of the Fund held by the shareholder have an aggregate net asset value of less than an amount determined from time to time by the Trustees; or (ii) the shares of the Fund held by the shareholder exceed a percentage of the outstanding shares of the Fund determined from time to time by the Trustees. The Trustees have authorized GMO in its sole discretion to redeem shares to prevent a shareholder from becoming an affiliated person of the Fund.

     Top Funds may redeem shares of the Fund after the Cut-off Time and receive the current day’s price if the following conditions are met: (i) the Top Fund received a redemption request prior to the Cut-off Time on that day; and (ii) the redemption of the shares of the Fund is executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

      Submitting Your Redemption Request . Redemption requests can be submitted by mail or by facsimile to the Trust at the address/facsimile number set forth under “How to Purchase Shares — Submitting Your Purchase Order Form.” Redemption requests submitted by mail are “received” by the Trust when actually delivered to the Trust or its agent. Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your redemption request.

PURCHASE PREMIUMS AND REDEMPTION FEES

     Purchase premiums and redemption fees are paid to and retained by a Fund to help offset estimated portfolio transaction costs and other related costs (e.g., stamp duties and transfer fees) incurred by the Fund (directly or indirectly through investments in underlying funds) as a result of the purchase or redemption by allocating those estimated costs to the purchasing or redeeming shareholder. At present, the Fund does not charge any purchase premium or redemption fee. However, the Manager may impose a purchase premium and/or redemption fee for the Fund at any time.

of securities held by the Fund for not more than one year (i.e., net short-term capital gains) or from the sale of securities held by the Fund for more than one year (i.e., net long-term capital gains), if any, at least annually. In addition, the Fund may, from time to time and at its discretion, make unscheduled distributions in advance of large redemptions by shareholders or as otherwise deemed appropriate by the Fund. Particularly in view of the Fund’s current practice of declaring and paying distributions when it has acquired a meaningful cash position, including from cash proceeds attributable to the receipt of principal payments on the Fund’s fixed income securities and to dispositions of portfolio holdings by the Fund, a significant portion of distributions by the Fund could constitute, for U.S. federal income tax purposes, a return of capital to shareholders. Shareholders should read the description below for information regarding the tax character of distributions from the Fund to shareholders.

     All dividends and/or distributions are reinvested in additional shares of the Fund, at net asset value, unless a shareholder elects to receive cash. Shareholders may elect to receive cash by marking the appropriate boxes on the GMO Trust Application or by writing to the Trust. No purchase premium is charged on reinvested dividends or distributions.

     The following is a general summary of the principal U.S. federal income tax consequences to shareholders investing in the Fund. The Fund’s shareholders may include certain other GMO Funds. The summary below does not address tax consequences to shareholders of those other GMO Funds. Shareholders of those other GMO Funds should refer to the prospectuses or private placement memoranda (as applicable) and statements of additional information for those Funds for a summary of the tax consequences applicable to them. It is important for you to note:

	•		The Fund is treated as a separate taxable entity for U.S. federal income tax purposes and intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.
	•		For U.S. federal income tax purposes, distributions of investment income generally are taxable as ordinary income.
	•		For U.S. federal income tax purposes, taxes on distributions of capital gains generally are determined by how long the Fund owned the investments that generated them, rather than by how long a shareholder has owned shares in the Fund. Distributions of net capital gains from the sale of investments that the Fund owned for more than one year and that are properly designated by the Fund as capital gain dividends generally are taxable to shareholders as long-term capital gains. Distributions of gains from the sale of investments that the Fund owned for one year or less generally are taxable to shareholders as ordinary income.
	•		Because of the Fund’s current practice of declaring and paying distributions when it has acquired a meaningful cash position, the Fund expects to make total distributions during a taxable year in an amount that exceeds the Fund’s net investment income and net capital gains for that year, in which case the excess generally will be treated as a return of capital, which will reduce a shareholder’s tax basis in its applicable shares, with any amounts exceeding such basis treated as gain from the sale of such shares. A return of capital is not taxable to shareholders to the extent such amount does not exceed a shareholder’s tax basis, but it reduces a shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares.
	•		If the Fund realizes capital losses in excess of capital gains for any taxable year, these excess losses will carry over and can be used to offset capital gains realized in succeeding taxable

years until either (a) the end of the eighth succeeding taxable year or (b) such losses have been fully utilized to offset realized capital gains, whichever comes first. The Fund’s ability to utilize these losses to reduce distributable capital gains in succeeding taxable years may be limited by reason of direct or indirect changes in the actual or constructive ownership of the Fund.

	•		For taxable years beginning before January 1, 2011, distributions of investment income properly designated by the Fund as derived from “qualified dividend income” will be taxable to shareholders taxed as individuals at the rates applicable to long-term capital gain, provided holding period and other requirements are met at both the shareholder and Fund levels. It is currently unclear whether Congress will extend this provision to tax years beginning on or after January 1, 2011. The Fund does not expect a significant portion of its distributions to be derived from qualified dividend income. Long-term capital gain rates applicable to most individuals have been reduced to 15% (with lower rates applying to taxpayers in the 10% and 15% rate brackets) for taxable years beginning before January 1, 2011. It is currently unclear whether Congress will extend this reduction to tax years beginning on or after January 1, 2011.
	•		Distributions by the Fund generally are taxable to a shareholder even if they are paid from income or gains earned by the Fund before that shareholder invested in the Fund (and accordingly the income or gains were included in the price the shareholder paid for the Fund’s shares). Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares.
	•		Distributions by the Fund to retirement plans that qualify for tax-exempt treatment under U.S. federal income tax laws generally will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax advisor to determine the suitability of the Fund as an investment through such a plan and the tax treatment of distributions from such a plan.
	•		Any gain resulting from a shareholder’s sale, exchange, or redemption (whether effected in cash or in-kind) of Fund shares generally will be taxable to the shareholder as short-term or long-term capital gain, depending on how long the Fund shares were held by the shareholder.
	•		Any investment by the Fund in foreign securities may be subject to foreign withholding taxes on dividends, interest, or capital gains. Those taxes will reduce the Fund’s yield on these securities. The foreign withholding tax rates applicable to the Fund’s investments in certain foreign jurisdictions may be higher if the Fund has a significant number of non-U.S. shareholders than if it has fewer non-U.S. shareholders. In addition, the Fund’s investment in foreign securities (other than equity securities) or foreign currencies may increase or accelerate the Fund’s recognition of ordinary income and may affect the timing, character, and/or amount of the Fund’s distributions. See “Taxes” in the SAI for more information.
	•		Certain of the Fund’s investment practices, including derivative transactions and hedging activities generally, as well as the Fund’s investments in certain types of securities, including debt obligations issued or purchased at a discount, asset-backed securities, assets “marked to the market” for U.S. federal income tax purposes, and, potentially, so-called “indexed securities” (such as inflation-indexed bonds), will be subject to special and complex U.S. federal income tax provisions. These special rules may affect the timing, character, and/or amount of the Fund’s distributions and may cause the Fund to liquidate investments at a time

when it is not advantageous to do so. See “Taxes” in the SAI for more information about the tax consequences of specific Fund investment practices and investments.

	•		To the extent the Fund invests in other funds of the Trust or other investment companies treated as partnerships or regulated investment companies for U.S. federal income tax purposes, the Fund’s distributions could vary, in terms of their timing, character, and/or amount, from what the Fund’s distributions would have been had the Fund invested directly in the portfolio securities and other assets held by the underlying investment companies. See “Taxes” in the SAI for more information.

     The above is a general summary of the principal U.S. federal income tax consequences of investing in the Fund for shareholders who are U.S. citizens, residents, or domestic corporations. You should consult your own tax advisors about the precise tax consequences of an investment in the Fund in light of your particular tax situation, including possible foreign, state, local, or other applicable taxes (including the federal alternative minimum tax).

     Most states permit mutual funds, such as the Fund, to “pass through” to their shareholders the state tax exemption on income earned from investments in certain direct U.S. Treasury obligations, as well as some limited types of U.S. government agency securities, so long as a fund meets all applicable state requirements. Therefore, you may be allowed to exclude from your state income tax returns distributions made to you by the Fund to the extent attributable to interest the Fund earned on such investments. The availability of these exemptions varies by state. You should consult your tax advisors regarding the applicability of any such exemptions to your situation.

     See “Taxes” in the SAI for more information, including a summary of certain tax consequences of investing in the Fund for non-U.S. shareholders.

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)

     The financial highlights table is intended to help you understand the Fund’s financial performance for the past five years. Some information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). Except as otherwise noted, this information has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with the Fund’s financial statements, is included in the Fund’s Annual Report, which is incorporated by reference in the SAI. The Fund’s unaudited financial statements for the semi-annual period ended August 31, 2009 are included in the Fund’s Semi-Annual Report, which is also incorporated by reference into the SAI. The SAI, Annual Report, and Semi-Annual Report are available upon request.

GMO TRUST

GMO Trust

Prospectus

October 30, 2009

§ GMO Taiwan Fund

		§ Information about other funds offered by GMO Trust is contained in separate prospectuses.
		§ Shares of the Fund described in this Prospectus may not be available for purchase in all states. This Prospectus does not offer shares in any state where they may not lawfully be offered.

Grantham, Mayo, Van Otterloo & Co. LLC

40 Rowes Wharf • Boston, Massachusetts 02110

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

		Page
FUND SUMMARY			1
DESCRIPTION OF PRINCIPAL RISKS			6
MANAGEMENT OF THE FUND			14
DETERMINATION OF NET ASSET VALUE			15
NAME POLICY			17
DISCLOSURE OF PORTFOLIO HOLDINGS			17
HOW TO PURCHASE SHARES			17
HOW TO REDEEM SHARES			20
PURCHASE PREMIUM AND REDEMPTION FEE			22
MULTIPLE CLASSES			23
DISTRIBUTIONS AND TAXES			26
FINANCIAL HIGHLIGHTS			29
INVESTMENT IN OTHER GMO FUNDS			30
ADDITIONAL INFORMATION		back cover
SHAREHOLDER INQUIRIES		back cover
DISTRIBUTOR		back cover

FUND SUMMARY

          This summary is not all-inclusive, and GMO Taiwan Fund (the “Fund”) may make investments, employ strategies, and be exposed to risks that are not described in this summary. More information about the Fund’s investments and strategies is contained in the Fund’s Statement of Additional Information (“SAI”). Except for policies identified in this Prospectus or the SAI as “fundamental,” the Board of Trustees (the “Trustees”) of GMO Trust (the “Trust”) may change the Fund’s investment objective or policies without shareholder approval. The Fund’s investment manager is Grantham, Mayo, Van Otterloo & Co. LLC (the “Manager” or “GMO”) (see “Management of the Fund” for a description of the Manager). The Fund, by itself, is not intended to provide a complete investment program, and investment in the Fund should only be considered as part of a diversified portfolio that includes other investments.

Investment objective

          Total return in excess of that of its benchmark, the MSCI Taiwan Index.

Principal investment strategies

          The Fund typically makes equity investments in companies doing business in, or otherwise tied economically to, Taiwan. The Fund may invest in companies of any market capitalization. When used in this Prospectus, the term “invest” includes both direct investing and indirect investing and the term “investments” includes both direct investments and indirect investments. For example, the Fund may invest indirectly by investing in another Fund or by investing in derivatives and synthetic instruments. When used in this Prospectus, (a) the term “equity investments” refers to investments in common stocks and other stock-related securities, such as preferred stocks, convertible securities, and depository receipts and (b) the term “total return” includes both capital appreciation and income.

          Under normal circumstances, the Fund invests at least 80% of its assets in investments tied economically to Taiwan (the “Name Policy”) (see “Name Policy” below for more information). An investment is “tied economically” to Taiwan if it is an investment in (i) an issuer that is organized under the laws of Taiwan or that maintains its principal place of business in Taiwan; (ii) securities that are traded principally in Taiwan; or (iii) an issuer that derived at least 50% of its revenues or profits from goods produced or sold, investments made, or services performed in Taiwan, or has at least 50% of its assets in Taiwan. This exposure may be achieved directly or indirectly, as described above. The Fund is not a “diversified” investment company within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

          The Manager uses proprietary quantitative models and fundamental analysis to evaluate and select stocks. The Manager’s evaluation and selection decisions for stocks are based on several factors,

including earnings and price momentum, price to earnings ratios, price to book ratios, and quality. The factors considered and the models used by the Manager may change over time.

          From time to time, the Fund may invest a significant portion of its assets in securities of issuers in industries with high positive correlations to one another (e.g., different industries within broad sectors, such as technology or financial services). (See “Principal risks of investing in the Fund—Focused Investment Risk.”)

          The Fund generally seeks to be fully invested, and normally does not take temporary defensive positions through investment in cash and cash equivalents. If the Fund takes temporary defensive positions, it may not achieve its investment objective. In pursuing its investment objective, the Fund is permitted to (but is not obligated to) use a wide variety of exchange-traded and over-the-counter (“OTC”) derivatives, including options, futures, warrants, and swap contracts, to (i) hedge equity exposure; (ii) replace direct investing (e.g., creating exposure through the use of futures contracts or other types of derivatives); (iii) manage risk by increasing or decreasing investment exposures; and/or (iv) adjust its foreign currency exposure. The Fund’s foreign currency exposure may differ significantly from the currency exposure represented by its equity investments. In addition, the Fund may take active overweighted or underweighted positions in particular currencies relative to its benchmark.

          The Fund may invest in unaffiliated money market funds in reliance on Rule 12d1-1 under the 1940 Act. Investments by the Fund in unaffiliated money market funds may exceed the limits expressed in Section 12(d)(1)(A) of the 1940 Act. Additionally, the Fund may (but is not required to) invest in GMO U.S. Treasury Fund (“U.S. Treasury Fund”), another series of GMO Trust described in a separate prospectus (see “Investment in Other GMO Funds” below for a more detailed description of U.S. Treasury Fund’s investment objectives and strategies).

          Unless otherwise specified in this Prospectus or the SAI, the Manager is not obligated to and generally will not consider tax consequences when seeking to achieve the Fund’s investment objective (e.g., the Fund may engage in transactions that are not tax efficient for shareholders subject to U.S. federal income tax). Portfolio turnover is not a principal consideration when the Manager makes investment decisions for the Fund. Based on its assessment of market conditions, the Manager may cause the Fund to trade more frequently at some times than at others. High turnover rates may adversely affect the Fund’s performance by generating additional transaction costs and may result in additional taxable income for its shareholders.

Benchmark

          The Fund’s benchmark is the MSCI Taiwan Index, an index of equity securities issued by Taiwanese companies that is independently maintained and published by Morgan Stanley Capital International.

Principal risks of investing in the Fund

          The value of the Fund’s shares changes with the value of the Fund’s investments. Many factors can affect this value, and you may lose money by investing in the Fund. Following is a brief summary of the principal risks of an investment in the Fund. For a more complete discussion of these risks, see “Description of Principal Risks” below.

•

Market Risk—Equity Securities – Equity securities may decline in value due to factors affecting the issuing companies, their industries, or the economy and equity markets generally. Because the Fund generally seeks to be fully invested and normally does not take temporary defensive positions,

		declines in stock market prices generally are likely to result in declines in the value of the Fund’s investments.
•		Foreign Investment Risk – The market prices of foreign securities may fluctuate more rapidly and to a greater extent than those of U.S. securities. Foreign markets often are less stable, smaller, less liquid, and less regulated, and the cost of trading in those markets often is higher, than in U.S. markets. The Fund may need to maintain a license to invest in some foreign markets. Changes in investment, capital, or exchange control regulations could adversely affect the value of the Fund’s foreign investments. These and other risks (e.g., nationalization, expropriation, or other confiscation) are greater for the Fund’s investments in emerging countries, the economies of which tend to be more volatile than the economies of developed countries. This risk is particularly pronounced for the Fund because of unique characteristics of Taiwan’s economy and Taiwan’s geographic location.
•		Currency Risk – Fluctuations in exchange rates may adversely affect the value of the Fund’s foreign currency holdings and investments denominated in foreign currencies.
•		Focused Investment Risk – Focusing investments in countries, regions, or industries with high positive correlations to one another creates additional risk. This risk is particularly pronounced for the Fund because it principally invests in investments tied economically to a single country.

          Other principal risks of an investment in the Fund include Large Shareholder Risk (risk that shareholders of the Fund, such as institutional investors or other GMO Funds, will disrupt the Fund’s operations by purchasing or redeeming Fund shares in large amounts and/or on a frequent basis), Liquidity Risk (difficulty in selling Fund investments), Smaller Company Risk (greater price fluctuations and liquidity risk resulting from investments in companies with smaller market capitalizations), Credit and Counterparty Risk (risk of default of a derivatives counterparty or borrower of the Fund’s securities), Derivatives Risk (use of derivatives by the Fund involves risks different from, and potentially greater than, risks associated with direct investments in securities and other investments by the Fund), Leveraging Risk (increased risks from use of derivatives and securities lending), Market Disruption and Geopolitical Risk (the risk that geopolitical events may increase market volatility and have adverse long-term effects on U.S. and world economies and markets generally), Management Risk (risk that the Manager’s strategies and techniques will fail to produce the desired results), and Fund of Funds Risk (risk that the underlying funds in which the Fund invests will not perform as expected). The Fund is a non-diversified investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and therefore a decline in the market value of a particular security held by the Fund may affect the Fund’s performance more than if the Fund were diversified.

Performance

          The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund’s annual total returns from year to year for the periods shown and by comparing the Fund’s average annual total returns for different calendar periods with those of a broad-based index. Purchase premiums and redemption fees are not reflected in the bar chart, but are reflected in the table; as a result, the returns in the table are lower than the returns in the bar chart. Returns in the table reflect current purchase premiums and redemption fees. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your tax situation and may differ from those shown. After-tax returns shown are not relevant if you are tax-exempt or if you hold your Fund shares through tax-deferred arrangements (such as a 401(k) plan or individual retirement account). After tax returns are shown for Class III shares only; after-tax returns for other classes will vary. Because Class VI shares had not yet completed a full calendar year of operations as of the date of this Prospectus, performance information for Class VI shares is not included. Performance results in the table reflect payment of Fund expenses; returns for the comparative index do not reflect payment of any fees, expenses, or taxes. Past performance (before and after taxes) is not an indication of future performance.

Annual Total Returns /Class III Shares
Years Ending December 31

Highest Quarter: 14.83% (3Q2003)
Lowest Quarter: -23.74% (4Q2008)
Year-to-Date (as of 9/30/09): 60.13%

Average Annual Total Returns
Periods Ending December 31, 2008

Fees and expenses

          The tables below show, for each class of shares, the expected cost of investing in the Fund.

Annual Fund operating expenses
(expenses that are paid from Fund assets as a percentage of average daily net assets):

DESCRIPTION OF PRINCIPAL RISKS

          Investing in mutual funds involves risk, including the risk that the Manager’s strategies and techniques will fail to produce the desired results (see “Management of the Fund” for a description of the Manager and “Management Risk” below for a more detailed discussion of this risk). The Fund is subject to risks based on the types of investments in its portfolio and the investment strategies it employs. Factors that may affect the Fund’s portfolio as a whole are called “principal risks” and are summarized in this section. This summary describes the nature of these principal risks and certain related risks, but is not intended to include every potential risk. The Fund could be subject to additional risks because the types of investments made by the Fund may change over time. The SAI includes more information about the Fund and its investments. You should keep in mind that an investment in the Fund is not a bank deposit and therefore is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. By itself, the Fund does not constitute a complete investment program.

•

MARKET RISK – EQUITY SECURITIES

          The Fund is subject to market risk, which is the risk of unfavorable changes in the value of Fund holdings. A principal risk of the Fund is that the equity securities in which the Fund invests will decline in value due to factors affecting the issuing companies, their industries, or the economy and equity markets generally. Equity securities may decline in value for reasons that directly relate to the issuing company, such as management performance, financial leverage and reduced demand for the issuer’s goods or services. They also may decline in value due to factors that affect a particular industry or industries, such as a decline in demand, labor or raw material shortages, increased production costs, regulation, or competitive industry conditions. In addition, they may decline in value due to general market conditions that are not specifically related to a company or industry, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, or adverse investor sentiment generally.

          The Fund invests a substantial portion of its assets in equities and generally does not take temporary defensive positions. As a result, declines in stock market prices generally are likely to reduce the value of the Fund’s investments.

•

FOREIGN INVESTMENT RISK

          Because the Fund invests in foreign (non-U.S.) securities, it is subject to additional and more varied risks, because the market prices of those securities may fluctuate more than those of U.S. securities. The securities markets of many foreign countries, including Taiwan, are relatively small, involving securities of a limited number of companies in a limited number of industries. Additionally, issuers of foreign securities, including Taiwanese issuers, often are not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, and auditing standards of Taiwan and other foreign countries, differ, in some cases significantly, from U.S. standards. Foreign portfolio transactions generally involve higher commission rates, transfer taxes, and custodial costs, and holders of foreign securities may be subject to foreign taxes on capital gains or on dividends and interest payable on those securities. For example, the Fund is currently subject to a Taiwanese security transaction tax of 0.30% of the transaction amount on equities and 0.10% of the transaction amount on corporate bonds and mutual fund shares, which must be paid by the Fund upon the sale or transfer of any portfolio securities subject to such tax. Also, nationalization, expropriation or confiscatory taxation, adverse changes in investment, capital, or exchange control regulations (which may include suspension of the ability to transfer currency from a country), political changes, or diplomatic developments could adversely affect the Fund. In the event of a nationalization, expropriation, or other confiscation, the Fund would lose its entire investment in a foreign security.

          Some non-U.S. markets, including Taiwan, require foreign investors to obtain a license to invest in such markets. The Manager is registered with the Securities and Futures Commission of Taiwan as a Qualified Foreign Institutional Investor (“QFII”) in Taiwan and is therefore authorized to invest directly in the Taiwanese securities market, subject to certain limitations including a maximum investment amount. The Fund is listed as a sub-account under the Manager’s QFII license and is authorized to invest directly in the Taiwanese securities market. The Fund’s ability to continue to invest directly in Taiwan is subject to the risk that the Manager’s QFII license or the Fund’s sub-account under the Manager’s QFII license may be terminated or suspended by the Securities and Futures Commission. If the license were terminated or suspended, the Fund could be required to liquidate or seek exposure to the Taiwanese market through the purchase of American Depositary Receipts (“ADRs”) and Global Depository Receipts (“GDRs”), shares of other funds which are licensed to invest directly, or derivative instruments. In addition, the maximum investment amount permitted under the Manager’s QFII license applies to investments by the Manager, the Fund, and any other entities listed as sub-accounts under the Manager’s license. Investments by the Manager and any other sub-accounts may limit the amount which the Fund can invest, and the activities of the other entities listed as sub-accounts could cause the termination or suspension of the Manager’s QFII license.

          In addition, because the Fund invests a significant portion of its assets in the securities of issuers doing business in, or otherwise tied economically to, Taiwan, a country with an “emerging market” economy, the Fund is subject to greater foreign investment risk than funds investing primarily in more developed foreign countries. Taiwanese and other emerging market securities may present market, credit, currency, liquidity, legal, political, and other risks greater than, or in addition to, risks of investing in more developed foreign countries. These risks, which are particularly pronounced for the Fund, include: greater fluctuations in currency exchange rates; increased risk of default (including both government and private issuers); greater social, economic, and political uncertainty and instability (including the risk of war or natural disaster); increased risk of nationalization, expropriation, or other confiscation; greater governmental involvement in the economy; less governmental supervision and regulation of the securities markets and participants in those markets; controls on foreign investment, capital controls, and limitations on repatriation of invested capital and on the Fund’s ability to exchange local currencies for U.S. dollars; unavailability of currency hedging techniques; companies that are smaller and more recently organized; differences in, or lack of, auditing and financial reporting standards and resulting unavailability of material information about issuers; slower clearance and settlement; difficulties in obtaining and/or enforcing legal judgments; and significantly smaller market capitalizations of issuers.

          Certain characteristics of Taiwan’s economy and Taiwan’s geographic location also make this risk particularly pronounced for the Fund. For example, Taiwan is a small island state with few raw material resources and limited land area and is reliant on imports for its commodity needs. Any fluctuations or shortages in the commodity markets could have a negative impact on the Taiwanese economy. Also, rising labor costs and increasing environmental consciousness have led some labor-intensive industries to relocate to countries with cheaper work forces, and continued labor outsourcing may adversely affect the Taiwanese economy. Taiwan’s economy also is intricately linked with economies of other Asian countries, which, similar to emerging market economies, are often characterized by over-extension of credit, frequent currency fluctuations, devaluations, and restrictions, rising unemployment, rapid fluctuation in, among other things, inflation, reliance on exports, and less efficient markets. Currency devaluations in any one country can have a significant effect on the entire region. Recently, the markets in certain Asian countries have suffered significant downturns as well as significant volatility. Furthermore, increased political and social unrest in some Asian countries could cause further economic and market uncertainty in the entire region. In particular, the Taiwanese economy is dependent on the economies of Asia, mainly those of Japan and China, but also the United States as key trading partners. Reduction in spending by any of these countries on Taiwanese products and services or negative changes in any of these economies may cause an adverse impact on the Taiwanese economy.

Taiwan’s geographic proximity to the People’s Republic of China and its history of political contention with China have resulted in ongoing tensions with China, including the continual risk of war with China. These tensions may materially impact the Taiwanese economy and securities markets. All of these risks could reduce the value of an investment in the Fund.

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CURRENCY RISK

          Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of the Fund’s investments. Currency risk includes both the risk that currencies in which the Fund’s investments are traded and/or in which the Fund receives income, or currencies in which the Fund has taken an active investment position, will decline in value relative to other currencies. In the case of hedging positions, currency risk includes the risk that the currency the Fund is seeking to hedge will decline in value relative to the foreign currency being hedged. Currency exchange rates fluctuate significantly for many reasons, including changes in supply and demand in the currency exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks, or supranational agencies such as the International Monetary Fund, and currency controls or other political and economic developments in the U.S. or abroad.

          The Fund may use derivatives to acquire a position in currencies whose value the Manager expects to correlate with the value of currencies the Fund owns, currencies the Manager wants the Fund to own, or currencies the Fund is exposed to through its investments. This presents the risk that the exchange rates of the currencies involved may not move in relation to one another as expected. In that case, the Fund could lose money on its holding of a particular currency and also lose money on the derivative. The Fund also may take overweighted or underweighted currency positions and/or hedge the currency exposure of the securities in which it has invested. As a result, its currency exposure may differ significantly from the currency exposure of its security investments and/or its benchmark.

          Because the Fund invests or trades in securities denominated in foreign currencies and may use related derivatives and have foreign currency holdings, it may be adversely affected by changes in the exchange rates of foreign currencies. Currency risk is particularly pronounced for the Fund because it may, for investment purposes, regularly acquire derivatives on foreign currencies and take active long and short currency positions through exchange-traded and OTC foreign currency derivatives. Derivative transactions in foreign currencies (such as futures, forwards, options and swaps) may involve leveraging risk, in addition to currency risk, as described below under “Leveraging Risk.” In addition, consistent with industry practice, the obligations of counterparties in currency derivatives may not be secured by collateral, which increases counterparty risk (see “Credit and Counterparty Risk” below).

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FOCUSED INVESTMENT RISK

          Funds whose investments are focused in particular countries, regions, or industries with high positive correlations to one another (e.g., different industries within broad sectors, such as technology or financial services) may be subject to greater overall risk than funds whose investments may be more diversified. Therefore, those funds should only be considered as part of a diversified portfolio that includes other investments.

          Because the Fund principally invests in investments tied economically to a single country, the Fund has more exposure to country and regional economic risks than funds making foreign investments throughout the world’s economies. The political and economic prospects of one country or group of countries within the same geographic region as Taiwan may affect other countries in the region, including Taiwan. In addition, a recession, debt crisis, or decline in currency valuation in one country within the

same region as Taiwan can spread to other countries in that region, including Taiwan. Furthermore, the Fund may be particularly vulnerable to events affecting companies located in Taiwan or other countries within the same region as Taiwan because those companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political, or other developments.

          Similarly, because the Fund may focus its investments in securities of companies in a particular industry, it may be especially vulnerable to events affecting those companies because those companies may share common characteristics, are often subject to similar business risks and regulatory burdens, and often react similarly to specific economic, market, political, or other developments.

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LARGE SHAREHOLDER RISK

          To the extent that shares of the Fund are held by large shareholders (e.g., institutional investors or asset allocation funds), the Fund is subject to the risk that these shareholders will purchase or redeem Fund shares in large amounts and/or on a frequent basis. These transactions will affect the Fund, since the Fund may have to make redemptions in-kind or sell portfolio securities to satisfy redemption requests or purchase portfolio securities to invest cash. This risk will be particularly pronounced if one shareholder owns a substantial portion of the Fund. A substantial percentage of the Fund may be held by separate accounts managed by the Manager for its clients and/or GMO Funds. Asset allocation decisions by the Manager may result in substantial redemptions from (or investments into) the Fund. These transactions may adversely affect the Fund’s performance to the extent that the Fund is required to sell investments (or invest cash) at times when it would not otherwise do so. These transactions also may accelerate the realization of taxable income to shareholders if such sales of investments result in gains, and also may increase transaction costs. These transactions potentially limit the use of any capital loss carry forwards to offset future net realized gains and may limit or prevent the Fund’s ability to use tax equalization.

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LIQUIDITY RISK

          The Fund is exposed to liquidity risk when low trading volume, lack of a market maker, a large position, or legal restrictions limit or prevent the Fund from selling securities or closing derivative positions at desirable prices. Investment in securities of companies with smaller market capitalizations, investment in foreign securities (in particular emerging market securities), and the use of derivatives (in particular OTC derivatives) tend to provide the greatest exposure to liquidity risk. These types of investments are more likely to be fair valued (see “Determination of Net Asset Value”). The Fund may not be able to initiate a transaction or liquidate a position in such investments at a desirable price. In addition, the Fund’s holdings in assets for which the relevant market is or becomes less liquid are more susceptible to loss of value. Less liquid securities also may fall more in price than other securities during periods when markets decline generally. The Fund is also exposed to liquidity risk when it has an obligation to purchase particular securities (e.g., as a result of closing out a short position). Additionally, although U.S. Treasury securities have historically been among the most liquid fixed income investments, there can be no assurance that the market will not become less liquid in the future. Liquidity risk is particularly pronounced for the Fund because it invests a substantial portion of its assets in equity investments in companies tied economically to Taiwan that are not widely traded and that may be subject to purchase and sale restrictions, and may make investments in securities of companies with smaller market capitalizations that are not widely held and trade less frequently and in lesser quantities than securities of companies with larger market capitalizations. See “Smaller Company Risk” below and “Foreign Investment Risk” above for more information on risks associated with securities of companies with smaller market capitalizations and emerging market securities, respectively.

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SMALLER COMPANY RISK

          The Fund may invest in equity securities of companies with smaller market capitalizations. Market risk and liquidity risk are particularly pronounced for securities of companies with smaller market capitalizations. These companies may have limited product lines, markets, or financial resources or they may depend on a few key employees. In addition, the securities of companies with smaller market capitalizations are less widely held than the securities of companies with larger market capitalizations. The securities of companies with smaller market capitalizations typically are less widely held, trade less frequently and in lesser quantities than securities of companies with larger market capitalizations, and have market prices that may fluctuate more than those of other securities. They also may trade in the OTC market or on a regional exchange, or may otherwise have limited liquidity. Investments in less seasoned companies with smaller market capitalizations may present greater total return opportunities but also involve greater risks than customarily are associated with investments in more established companies with larger market capitalizations.

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CREDIT AND COUNTERPARTY RISK

          This is the risk that the counterparty to a repurchase agreement or other OTC derivative contract or a borrower of the Fund’s securities will be unable or unwilling to make timely interest or settlement payments or otherwise to honor its obligations. This risk is particularly acute in environments in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers in 2008 and subsequent market disruptions.

          The Fund is exposed to counterparty risk to the extent it uses derivatives (such as repurchase agreements and, in particular, commodity swaps), or lends its portfolio securities. See “Derivatives Risk” below for more information. If a counterparty’s obligation to the Fund under such an arrangement is not collateralized, then the Fund is essentially an unsecured creditor of the counterparty and there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market conditions. If the counterparty defaults, the Fund will have contractual remedies, but the Fund may be unable to enforce its contractual rights. Counterparty risk is still present even if a counterparty’s obligations are structured to be secured by collateral because the Fund’s interest in collateral may not be perfected, or the derivative may not be promptly marked-to-market and additional collateral may not be promptly posted.

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DERIVATIVES RISK

          The Fund may invest in derivatives, which are financial contracts whose value depends on, or is derived from, the value of underlying assets, reference rates, or indices. Derivatives may relate to securities, interest rates, currencies or currency exchange rates, and related indices. The Fund may use derivatives for many purposes, including as a substitute for direct investment in securities or other assets and as a means to hedge other investments. The Fund also may use derivatives as a way to adjust its exposure to various securities, markets, and currencies without actually having to sell existing investments and make new investments. This generally is done when the adjustment is expected to be relatively temporary or in anticipation of selling Fund assets and making new investments over time. The SAI contains a description of the various derivatives the Fund may utilize.

          The use of derivatives involves risks different from, and potentially greater than, the risks associated with investing directly in securities and other more traditional assets. In particular, the use of derivatives exposes the Fund to the risk that the counterparty to an OTC derivative contract will be unable or unwilling to make timely settlement payments or otherwise to honor its obligations. OTC derivative contracts typically can be closed out only with the other party to the contract. If the counterparty defaults,

the Fund will have contractual remedies, but there can be no assurance that the counterparty will meet its contractual obligations or that the Fund will be able to enforce its contractual rights. For example, because the contract for each OTC derivative is individually negotiated with a specific counterparty, the Fund is subject to the risk that a counterparty may interpret contractual terms (e.g., the definition of default) differently than the Fund. If that occurs, the cost and unpredictability of the legal proceedings required for the Fund to enforce its contractual rights may lead the Fund to decide not to pursue its claims against the counterparty. The Fund, therefore, assumes the risk that it may be unable to obtain payments the Manager believes are owed to it under OTC derivative contracts or that those payments may be delayed or made only after the Fund has incurred the costs of litigation. In addition, the Fund may invest in derivatives as to which the counterparty’s obligations are not secured by collateral (e.g., foreign currency forwards; see “Currency Risk” above), that require collateral but in which the Fund’s security interest is not perfected, that require a significant upfront deposit unrelated to the derivative’s intrinsic value, or in which the derivative is not regularly marked-to-market (e.g., certain OTC derivatives). Even where obligations are collateralized, there is usually a lag between the day the collateral is called for and the day the Fund receives the collateral. When the counterparties’ obligations are not fully secured by collateral, the Fund will be exposed to the risk of having limited recourse if a counterparty defaults. Due to the nature of the Fund’s investments, the Fund may invest in derivatives with a limited number of counterparties and events that affect the creditworthiness of any of those counterparties may have a pronounced effect on the Fund. Derivatives risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions.

          Derivatives also are subject to a number of risks described elsewhere in this section, including market risk, liquidity risk, currency risk, and credit and counterparty risk. Many derivatives, in particular OTC derivatives, are complex and their valuation often requires judgment, which increases the risk of mispricing or improper valuation, and there can be no assurance that the pricing models employed by the Fund’s third-party valuation services and/or the Manager will produce valuations that are reflective of levels at which such swaps and other OTC derivatives may actually be closed out or sold. This valuation risk is more pronounced in cases where the Fund enters into swaps and other OTC derivatives with specialized terms because the value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. As a result, improper valuations may result in increased cash payments to counterparties, undercollateralization and/or errors in the calculation of the Fund’s net asset value. Derivatives also involve the risk that changes in their value may not correlate perfectly with the assets, rates, or indices they are designed to hedge or closely track. The use of derivatives also may increase the taxes payable by shareholders.

          Suitable derivatives are not available in all circumstances. For example, if a counterparty or its affiliate is deemed to be an affiliate of the Fund, the Fund will not be permitted to trade with that counterparty. There can be no assurance that the Fund’s use of derivatives will be effective or will have the desired results. In addition, the Manager may decide not to use derivatives to hedge or otherwise reduce the Fund’s risk exposures.

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LEVERAGING RISK

          The Fund’s use of derivatives and securities lending may cause its portfolio to be leveraged. Leverage increases the Fund’s portfolio losses when the value of its investments declines. The Fund’s portfolio also may be leveraged temporarily if it borrows money to meet redemption requests and/or to settle investment transactions. Since many derivatives have a leverage component (i.e., a notional value in excess of the assets needed to establish and/or maintain the derivative position), adverse changes in the value or level of the underlying asset, rate, or index may result in a loss substantially greater than the amount invested in the derivative itself. In the case of swaps, the risk of loss generally is related to a

notional principal amount, even if the parties have not made any initial investment. Some derivatives have the potential for unlimited loss, regardless of the size of the initial investment.

          The Fund may have temporary net long exposure in excess of its net assets as a result of futures and swap positions taken in connection with rebalancing of the Fund’s portfolios or in anticipation of cash flows (redemptions, subscriptions, payments of fees, etc.). The Fund may manage some of its derivative positions by maintaining cash or liquid securities with a value equal to the face value of those positions or by offsetting derivatives positions against one another or against other assets. To the extent offsetting positions do not behave in relation to one another as expected, the Fund may perform as if it were leveraged.

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MARKET DISRUPTION AND GEOPOLITICAL RISK

          The Fund is subject to the risk that geopolitical events may disrupt securities markets and adversely affect global economies and markets generally. The wars in Iraq and Afghanistan have had a substantial effect on economies and securities markets in the U.S. and worldwide. Terrorism in the U.S. and around the world has had a similar global impact and has increased geopolitical risk. The terrorist attacks of September 11, 2001 resulted in the closure of some U.S. securities markets for four days, and similar future events are possible. War, terrorism, and related geopolitical events have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, systemic market dislocations of the kind surrounding the insolvency of Lehman Brothers in 2008 may be highly disruptive to economies and markets. Those events as well as other changes in foreign and domestic economic and political conditions also could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of the Fund’s investments. At such times, the Fund’s exposure to the risks described elsewhere in this section, including market risk, liquidity risk, and credit and counterparty risk, can increase.

          The value of the Fund’s investments may be adversely affected by acts of terrorism and other changes in foreign and domestic economic and political conditions. The risk is particularly acute in environments (like those prevailing recently) in which financial services firms are exposed to systemic risks of the type evidenced by the insolvency of Lehman Brothers and subsequent market disruptions. Such market disruptions might prevent the Fund from implementing its investment program and achieving its investment objectives. For example, a disruption may cause the Fund’s derivative counterparties to discontinue offering derivatives on some underlying commodities, securities, reference rates, or indices or to offer such products on a more limited basis or the current global economic crisis may strain the U.S. Treasury’s ability to satisfy its obligations.

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MANAGEMENT RISK

          The Fund is subject to management risk because it relies on the Manager’s ability to achieve its investment objective. The Manager uses proprietary investment techniques and risk analyses in making investment decisions for the Fund, but there can be no assurance that the Manager will achieve the desired results. The Manager, for example, may fail to use derivatives effectively, choosing to hedge or not to hedge positions at disadvantageous times. The Fund generally does not take temporary defensive positions and instead generally stays fully invested in foreign equity securities. The Fund may buy securities not included in its benchmark, hold securities in very different proportions than its benchmark, and/or engage in other strategies that may cause the Fund’s performance to differ from that of its benchmark. In those cases, the Fund’s performance will depend on the ability of the Manager to choose securities that perform better than securities that are included in the benchmark and/or to utilize those other strategies in a way that adds value relative to the benchmark.

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FUND OF FUNDS RISK AND RELATED CONSIDERATIONS

          The Fund may invest in shares of other investment companies, including other GMO Funds and money market funds (“underlying funds”), and is exposed to the risk that the underlying funds will not perform as expected. The Fund also is indirectly exposed to all of the risks applicable to an investment in the underlying funds. Because the Fund bears the fees and expenses of the underlying funds in which it invests, total Fund expenses may increase if Fund assets are invested in underlying funds with higher fees or expenses than existing investments. In addition, the fees and expenses associated with an investment in the Fund will be less predictable and may potentially be higher than fees of funds that only invest in less expensive asset classes. In addition, funds that invest in shares of other GMO Funds also are likely to be subject to Large Shareholder Risk because underlying GMO Funds are more likely to have large shareholders (e.g., other GMO Funds).

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NON-DIVERSIFIED FUND

          The Fund is not a “diversified” investment company within the meaning of the 1940 Act. This means that the Fund is allowed to invest in the securities of a relatively small number of issuers and/or foreign currencies. As a result, the Fund may be subject to greater credit, market, and other risks, and poor performance by a single issuer may have a greater impact on the Fund’s performance than if the Fund were “diversified.”

MANAGEMENT OF THE FUND

          GMO, 40 Rowes Wharf, Boston, Massachusetts 02110, provides investment management and shareholder services to the Fund and other GMO Funds. GMO is a private company, founded in 1977. As of May 31, 2009, GMO managed on a worldwide basis more than $88.9 billion of assets for the GMO Funds and institutional investors, such as pension plans, endowments, and foundations.

          Subject to the approval of the Trustees, the Manager establishes and modifies when it deems appropriate the investment strategies of the Fund. In addition to its management of the Fund’s investment portfolio and the shareholder services it provides to the Fund, the Manager administers the Fund’s business affairs.

          The Fund pays the Manager shareholder service fees for providing client service and reporting, such as performance information reporting, client account information, personal and electronic access to Fund information, access to analysis and explanations of Fund reports, and assistance in maintaining and correcting client-related information.

          For the fiscal year ended February 28, 2009, the Manager received an investment management fee (after any applicable waivers) equal to 0.81% of the Fund’s average daily net assets.

          The Fund’s ability to invest directly in the Taiwanese securities market is a result of its being registered as a sub-account under the Manager’s Qualified Foreign Institutional Investor license. If the license were terminated or suspended, the Fund could be required to liquidate or seek exposure to the Taiwanese market through the purchase of ADRs and GDRs, shares of other funds which are licensed to invest directly, or derivative instruments.

          A discussion of the basis for the Trustees’ approval of the Fund’s investment management contract is included in the Fund’s shareholder report for the period during which the Trustees approved that contract.

          GMO’s Emerging Markets Division is responsible for day-to-day investment management of the Fund. The Division’s investment professionals work collaboratively to manage the Fund’s portfolio, and no one person is primarily responsible for day-to-day investment management of the Fund.

          Arjun Divecha is the senior member and director of the Emerging Markets Division. He has been a senior member of the Division since 1993. As senior member and director of the Division, Mr. Divecha allocates responsibility for portions of the Fund’s portfolio to members of the Division, oversees the implementation of trades, reviews the overall composition of the portfolio, including compliance with its stated investment objective and strategies, and monitors cash.

          Mr. Divecha has been responsible for overseeing the portfolio management of GMO’s emerging markets equity portfolios since 1993.

          The SAI contains other information about how GMO determines the compensation of the senior member, other accounts he manages and related conflicts, and his ownership of the Fund.

Custodian and Fund Accounting Agent

          Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, serves as the Fund’s custodian and fund accounting agent.

Transfer Agent

          State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111, serves as the Fund’s transfer agent.

Options written by the Fund

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Most recent ask price

Shares of other GMO Funds and other open-end registered investment companies

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Most recent NAV

“Fair Value” Pricing

          For all other assets and securities, including derivatives, and in cases where market prices are not readily available or circumstances render an existing methodology or procedure unreliable, the Fund’s investments will be valued at “fair value,” as determined in good faith by the Trustees or pursuant to procedures approved by the Trustees.

          With respect to the Fund’s use of “fair value” pricing, you should note the following:

	Ø		A significant percentage of the Fund’s assets are “fair valued.” The value of assets that are “fair valued” is determined by the Trustees or persons acting at their direction pursuant to procedures approved by the Trustees. Some of the factors that may be considered in determining “fair value” are the value of other financial instruments traded on other markets, trading volumes, changes in interest rates, observations from financial institutions, significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the time that the Fund’s net asset value is calculated, other news events, and significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). Although the goal of fair valuation is to determine the amount the owner of the securities might reasonably expect to receive upon their current sale, because of the uncertainty inherent in fair value pricing, the fair value determined for a particular security may be materially different than the value realized upon its sale.
	Ø		Many foreign equity securities markets and exchanges close prior to the close of the NYSE, and, therefore, the closing prices for foreign securities in those markets or on those exchanges do not reflect events that occur after that close but before the close of the NYSE. As a result, the Fund generally values foreign equity securities as of the NYSE close using fair value prices, which are based on adjustments to closing prices supplied by a third party vendor using that vendor’s proprietary models.

          The values of foreign securities quoted in foreign currencies are translated into U.S. dollars generally at 4:00 p.m. Eastern time at then current exchange rates or at such other rates as the Trustees or persons acting at their direction may determine in computing net asset value.

          The Manager evaluates pricing sources on an ongoing basis, and may change a pricing source at any time. The Manager normally does not evaluate the prices supplied by pricing sources on a day-to-day basis. The Manager monitors erratic or unusual movements (including unusual inactivity) in the prices supplied for a security and has discretion to override a price supplied by a source (e.g., by taking a price supplied by another) when it believes that the price supplied is not reliable. Some securities held by the Fund may be valued on the basis of a price provided by a principal market maker. Prices provided by principal market makers may vary from the value that would be realized if the securities were sold, and the differences could be material to the Fund. In addition, because the Fund may hold portfolio securities

listed on foreign exchanges that trade on days on which the NYSE is closed, the net asset value of the Fund’s shares may change significantly on days when shares cannot be redeemed.

NAME POLICY

          The Fund will not change its Name Policy without providing its shareholders at least 60 days’ prior written notice. When used in connection with the Fund’s Name Policy, “assets” include the Fund’s net assets plus any borrowings made for investment purposes.

DISCLOSURE OF PORTFOLIO HOLDINGS

          The Fund has established a policy with respect to disclosure of its portfolio holdings. That policy is described in the SAI. The largest fifteen portfolio holdings of some GMO Funds are posted monthly on GMO’s website and are available to shareholders without a confidentiality agreement. Information regarding the Fund’s portfolio holdings as of each month’s end is made available to shareholders of the Trust, qualified potential shareholders as determined by GMO (“potential shareholders”), and their consultants or agents through a secured link on GMO’s website approximately five days after month end. Periodically, in response to heightened market interest in specific issuers, a Fund’s holdings in one or more issuers may be made available on a more frequent basis to shareholders of the Trust, potential shareholders, and their consultants or agents through a secured link on GMO’s website. This information may be posted as soon as the business day following the date to which the information relates.

          To access this information on GMO’s website (http://www.gmo.com/america/strategies), shareholders, potential shareholders, and their consultants and agents must contact GMO to obtain a password and user name (to the extent they do not already have them) and enter into a confidentiality agreement with GMO and the Trust that permits the information to be used only for purposes determined by GMO to be in the best interest of the shareholders of the Fund. GMO may make portfolio holdings information available in alternate formats under the conditions described in the SAI. Beneficial owners of shares who have invested in the Fund through a broker or agent should contact that broker or agent for information on how to obtain access to information on the website regarding the Fund’s portfolio holdings.

          The Fund or GMO may suspend the posting of portfolio holdings, and the Fund may modify the disclosure policy, without notice to shareholders. Once posted, the Fund’s portfolio holdings will remain available on the website at least until the Fund files a Form N-CSR (annual/semiannual report) or Form N-Q (quarterly schedule of portfolio holdings) for the period that includes the date of those holdings.

HOW TO PURCHASE SHARES

          Under ordinary circumstances, you may purchase the Fund’s shares from the Trust when both the NYSE and the TSE are open for business. In addition, certain brokers and agents are authorized to accept purchase and redemption orders on the Funds’ behalf. These brokers and agents may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for purchasing Fund shares through them. For instructions on purchasing shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com , or contact your broker or agent. The Trust will not accept a purchase request until it has received a GMO Trust Application deemed to be in good order by the Trust or its agent. In addition, the Trust will not accept a purchase request unless an IRS Form W-9 (for U.S. shareholders) or the appropriate IRS Form W-8 (for foreign shareholders) with a correct taxpayer identification number (if required) is on file with GMO and such W-9 or W-8 is deemed to be in good order by the Trust’s withholding agent, State Street Bank and Trust Company. Please consult your tax adviser to ensure all

tax forms provided to the Trust are completed properly and maintained, as required, in good order. GMO has the right to make final good order assessments.

           Purchase Policies. You must submit a purchase request in good order to avoid having it rejected by the Trust or its agent. In general, a purchase request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being purchased;
	•		The U.S. dollar amount of the shares to be purchased;
	•		The date on which the purchase is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number (if any) set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application; and
	•		Payment in full (by check, wire, or, when approved, securities) received by an agent of the Trust by 4:00 p.m. Eastern time or the close of the NYSE, whichever is earlier.

4

If payment is not received prior to the close of regular trading on the intended purchase date, the request may be rejected unless prior arrangements have been approved by GMO for later payment.

          If the purchase request is received in good order by the Trust or its agent prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the purchase price for the Fund shares to be purchased is the net asset value per share determined on that day (plus any applicable purchase premium). If that request is received after the close of regular trading on the NYSE, the purchase price for the Fund shares to be purchased is the net asset value per share determined on the next business day that the NYSE is open (plus any applicable purchase premium). See “Purchase Premium and Redemption Fee” for a discussion of the purchase premium charged by the Fund, including circumstances under which all or a portion of the purchase premium may be waived. Purchase premiums are not charged on reinvestments of distributions.

          To help the U.S. government fight the funding of terrorism and money laundering activities, federal law requires the Trust to verify identifying information provided by each investor in its GMO Trust Application. Additional identifying documentation also may be required. If the Trust is unable to verify the information shortly after your account is opened, the account may be closed and your shares redeemed at their net asset value at the time of the redemption.

          The Trust and its agents reserve the right to reject any purchase order. In addition, without notice, the Fund in its sole discretion may temporarily or permanently suspend sales of its shares to new investors and, in some circumstances, existing shareholders.

          Minimum investment amounts (by class, if applicable) are set forth in the tables on pages 23 and 24 of this Prospectus. No minimum additional investment is required to purchase additional shares of a class of the Fund. The Trust may waive initial minimums for some investors.

          Funds advised or sub-advised by GMO (“Top Funds”) may purchase shares of the Fund after the close of regular trading on the NYSE (the “Cut-off Time”) and receive the current day’s price if the following conditions are met: (i) the Top Fund received a purchase request prior to the Cut-off Time on that day; and (ii) the purchase(s) by the Top Fund of shares of the Fund are executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

           Submitting Your Purchase Order Form . Completed purchase order forms can be submitted by mail or by facsimile or other form of communication pre-approved by Shareholder Services to the Trust at:

GMO Trust
c/o Grantham, Mayo, Van Otterloo & Co. LLC
40 Rowes Wharf
Boston, Massachusetts 02110
Facsimile: 1-617-439-4192
Attention: Shareholder Services

          Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your purchase order form. Do not send cash, checks, or securities directly to the Trust. A purchase request submitted by mail is “received” by the Trust when it is actually delivered to the Trust or its agent. A purchase request delivered by facsimile is “received” by the Trust when it is actually received by the Trust or its designated agent.

           Funding Your Investment . You may purchase shares:

•

with cash (via wire transfer or check)

4

By wire . Instruct your bank to wire the amount of your investment to:

State Street Bank and Trust Company, Boston, Massachusetts
ABA#: 011000028
Attn: Transfer Agent
Credit: GMO Deposit Account 00330902
Further credit: GMO Taiwan Fund/Account name and number

4

By check . All checks must be made payable to the Fund or to GMO Trust. The Trust will not accept checks payable to a third party that have been endorsed by the payee to the Trust. Mail checks to:

•

in exchange for securities acceptable to the Manager

	4		securities must be approved by the Manager prior to transfer to the Fund
	4		securities will be valued as set forth under “Determination of Net Asset Value”

•

by a combination of cash and securities

           Frequent Trading Activity. As a matter of policy, the Trust will not honor requests for purchases or exchanges by shareholders identified as engaging in frequent trading strategies, including market timing, that GMO determines could be harmful to the Fund and its shareholders. Frequent trading strategies are generally strategies that involve repeated exchanges and/or purchases and redemptions (or

redemptions and purchases) within a short period of time. Frequent trading strategies may be disruptive to the efficient management of the Fund, materially increase portfolio transaction costs and taxes, dilute the value of shares held by long-term investors, or otherwise be harmful to the Fund and its shareholders.

          The Trustees have adopted procedures designed to detect and prevent frequent trading activity that is harmful to the Fund and its shareholders (the “Procedures”). The Procedures include the fair valuation of foreign securities, periodic surveillance of trading in shareholder accounts, and inquiry as to the nature of trading activity. If GMO determines that an account is engaging in frequent trading that has the potential to be harmful to the Fund or its shareholders, the Procedures include prevention measures, including suspension of the account’s exchange and purchase privileges. There is no assurance that the Procedures will be effective in all instances. The Fund will not automatically redeem shares that are the subject of a rejected exchange request. The Fund reserves the right to reject any order or terminate the sale of Fund shares at any time.

          Each of the Procedures does not apply to all Funds or all Fund trading activity. The application of the Procedures is dependent upon: (1) whether a Fund imposes purchase premiums and/or redemption fees, (2) the nature of a Fund’s investment program, including its typical cash positions and/or whether it invests in foreign securities, and (3) whether GMO has investment discretion over the purchase, exchange, or redemption activity. Although GMO may not take affirmative steps to detect frequent trading for certain Funds, GMO will not honor requests for purchases or exchanges by shareholders identified as engaging in frequent trading strategies that GMO determines could be harmful to those Funds and their shareholders.

          In addition to the policies and procedures with respect to frequent trading, the Trustees have adopted pricing policies that generally provide for the fair valuation of foreign equity securities on a daily basis, as described in “Determination of Net Asset Value.” The fair value pricing of foreign equity securities reduces the profit potential of frequent trading strategies.

HOW TO REDEEM SHARES

          Under ordinary circumstances, you may redeem the Fund’s shares when both the NYSE and the TSE are open for business. Redemption requests should be submitted to the Trust unless the Fund shares to be redeemed were purchased through a broker or agent, in which case the redemption request should be initiated through that broker or agent. The broker or agent may impose transaction fees and/or other restrictions (in addition to those described in this Prospectus) for redeeming Fund shares through it. For instructions on redeeming shares, call the Trust at 1-617-346-7646, send an e-mail to SHS@GMO.com , or contact your broker or agent. The Trust may take up to seven days to remit proceeds.

           Redemption Policies. You must submit a redemption request in good order to avoid having it rejected by the Trust or its agent. In general, a redemption request is in good order if it includes:

	•		The name and/or CUSIP number of the Fund being redeemed;
	•		The number of shares or the dollar amount of the shares to be redeemed;
	•		The date on which the redemption is to be made (subject to receipt prior to the close of regular trading on that date);
	•		The name and/or the account number set forth with sufficient clarity to avoid ambiguity;
	•		The signature of an authorized signatory as identified in the GMO Trust Application or subsequent authorized signers list; and

•

Wire instructions or registration address that match the wire instructions or registration address (as applicable) on file at GMO or confirmation from an authorized signatory that the wire instructions are valid.

          If a redemption request in good order is received by the Trust prior to the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time), the redemption price for the Fund shares to be redeemed is the net asset value per share determined on that day (less any applicable redemption fee). If that redemption request is received after the close of regular trading on the NYSE, the redemption price for the Fund shares to be redeemed is the net asset value per share determined on the next business day (less any applicable redemption fee) unless an authorized person on the account has instructed GMO Shareholder Services in writing to defer the redemption to another day. If you have instructed GMO Shareholder Services to defer the redemption to another day, an authorized person on your account may revoke your redemption request in writing at any time prior to 4:00 p.m. Eastern time or before the close of regular trading on the NYSE (whichever is earlier) on the redemption date. Redemption fees apply to all shares of a Fund regardless of how the shares were acquired (e.g., by direct purchase or by reinvestment of dividends or other distributions). See “Purchase Premium and Redemption Fee” for a discussion of the redemption fee charged by the Fund, including circumstances under which all or a portion of the fee may be waived. In the event of a disaster affecting Boston, Massachusetts, please contact GMO to confirm receipt of your redemption request and whether it is in good order.

          Failure to provide the Trust with a properly authorized redemption request or otherwise satisfy the Trust as to the validity of any change to the wire instructions or registration address may result in a delay in processing a redemption request, delay in remittance of redemption proceeds, or a rejection of the redemption request.

          As with all GMO Funds, if the Manager determines, in its sole discretion, that paying redemption proceeds wholly or partly in cash would be detrimental to the best interests of the Fund’s remaining shareholders, the Fund may pay the redemption proceeds in whole or in part with securities instead of cash. In particular, if market conditions deteriorate and the Manager believes the Fund’s redemption fee (if any) is not fair compensation for transaction costs, the Fund may limit cash redemptions (honoring redemptions with portfolio securities) in order to protect the interests of all Fund shareholders.

          If a redemption is paid in cash:

•

payment generally will be made by means of federal funds transfer to the bank account designated in a recordable format by an authorized signatory in the GMO Trust Application to purchase the Fund shares being redeemed

4

designation of one or more additional bank accounts or any change in the bank accounts originally designated in the GMO Trust Application must be made in a recordable format by an authorized signatory according to the procedures in the GMO Trust Redemption Order Form

•

upon request, payment will be made by check mailed to the registration address (unless another address is specified according to the procedures in the GMO Trust Redemption Order Form).

          The Trust will not make payments to third-parties on behalf of a shareholder upon a redemption request and does not offer check-writing privileges.

          If a redemption is paid with securities, it is important for you to note that:

	•		the securities will be valued as set forth under “Determination of Net Asset Value”
	•		the securities will be selected by the Manager in light of the Fund’s objective and may not represent a pro rata distribution of each security held in the Fund’s portfolio
	•		you may incur brokerage charges on the sale of the securities
	•		redemptions paid in securities generally are treated by shareholders for tax purposes the same as redemptions paid in cash
	•		the securities will be transferred and delivered by the Trust as directed in writing by an authorized person on the account.

        The Fund may suspend the right of redemption and may postpone payment for more than seven days:

	•		if the NYSE is closed on days other than weekends or holidays
	•		during periods when trading on the NYSE is restricted
	•		during an emergency which makes it impracticable for the Fund to dispose of its securities or to fairly determine the net asset value of the Fund
	•		during any other period permitted by the Securities and Exchange Commission (“SEC”) for your protection.

          Pursuant to the Trust’s Amended and Restated Agreement and Declaration of Trust, the Trust has the unilateral right to redeem Fund shares held by a shareholder at any time if at that time: (i) the shares of the Fund or a class held by the shareholder have an aggregate net asset value of less than an amount determined from time to time by the Trustees; or (ii) the shares of the Fund or a class held by the shareholder exceed a percentage of the outstanding shares of the Fund or a class determined from time to time by the Trustees. The Trustees have authorized GMO in its sole discretion to redeem shares to prevent a shareholder from becoming an affiliated person of the Fund.

          Top Funds may redeem shares of the Fund after the Cut-off Time and receive the current day’s price if the following conditions are met: (i) the Top Fund received a redemption request prior to the Cut-off Time on that day; and (ii) the redemption of the shares of the Fund is executed pursuant to an allocation predetermined by GMO prior to that day’s Cut-off Time.

           Submitting Your Redemption Request . Redemption requests can be submitted by mail or by facsimile to the Trust at the address/facsimile number set forth under “How to Purchase Shares – Submitting Your Purchase Order Form.” Redemption requests submitted by mail are “received” by the Trust when actually delivered to the Trust or its agent. Call the Trust at 1-617-346-7646 or send an e-mail to SHS@GMO.com to confirm that GMO received, made a good order determination regarding, and accepted your redemption request.

PURCHASE PREMIUM AND REDEMPTION FEE

          The Fund charges a purchase premium and redemption fee to shareholders purchasing or redeeming shares. Please refer to the “Shareholder Fees” table under the caption “Fees and expenses” for details regarding the purchase premium and redemption fee charged by the Fund. The Fund’s purchase premium and/or redemption fee may change from time to time, as authorized by the Trustees. The purchase premiums and redemption fees are paid to and retained by the Fund to help offset portfolio

transaction costs and other related costs (e.g., stamp duties and transfer fees) incurred by the Fund (directly or indirectly through investments in underlying funds) as a result of the purchase or redemption by allocating those estimated costs to the purchasing or redeeming shareholder. Purchase premiums are not charged on reinvestments of distributions. Redemption fees apply to all shares of the Fund regardless of how the shares were acquired (e.g., by direct purchase or by reinvestment of dividends or other distributions).

Waiver of Purchase Premium/Redemption Fee

          If the Manager determines that any portion of a cash purchase or redemption is offset by a corresponding cash redemption or purchase occurring on the same day, it ordinarily will waive or reduce the purchase premium or redemption fee with respect to that portion. The Manager may consider known cash flows out of or into the Fund when placing orders for the cash purchase or redemption of Fund shares by asset allocation fund shareholders (“Asset Allocation Funds”) or other prospective or existing shareholders of the Fund for whom GMO provides asset allocation advice. Consequently, Asset Allocation Funds and those other shareholders for whom GMO provides asset allocation advice will tend to benefit from waivers of the Fund’s purchase premium and redemption fee to a greater extent than other prospective and existing shareholders of the Fund. The Manager may also waive or reduce the purchase premium or redemption fee relating to a cash purchase or redemption of the Fund’s shares if the Fund will not incur transaction costs or will incur reduced transaction costs. The Manager will waive or reduce the purchase premium relating to the in-kind portion of a purchase transaction except to the extent of estimated or known costs (e.g., stamp duties or transfer fees) incurred by the Fund in connection with the transfer of the purchasing shareholder’s securities to the Fund. In-kind redemptions are generally not subject to redemption fees except when they include a cash component. However, when a substantial portion of a Fund is being redeemed in-kind, the Fund may charge a redemption fee equal to known or estimated costs. Purchase premiums or redemption fees will not be waived for purchases and redemptions of Fund shares executed through brokers or agents, including, without limitation, intermediary platforms that are allowed pursuant to agreements with GMO Trust to transmit orders for purchases and redemptions to the Manager the day after those orders are received.

MULTIPLE CLASSES

          The Fund offers multiple classes of shares. The sole economic difference between the Class III and Class VI shares of the Fund is the shareholder service fee they bear for client and shareholder service, reporting and other support. Differences in the fee reflect the fact that, as the size of a client relationship increases, the cost to service that client decreases as a percentage of the client’s assets. Thus, the shareholder service fee generally is lower for classes requiring a greater minimum total investment under GMO’s management.

Minimum Investment Criteria for Class III Eligibility