MANAGEMENT CONTRACT Management Contract executed as of January 23, 2004 between
GMO TRUST, a Massachusetts business trust (the "Trust") on behalf of its GMO
U.S. Quality Equity Fund (the "Fund"), and GRANTHAM, MAYO, VAN OTTERLOO & CO.
LLC, a Massachusetts limited liability company (the "Manager").
W I T N E S S E T H:
That in consideration of the mutual covenants herein contained, it is agreed as
follows: 1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust and to such
policies as the Trustees may determine, the Manager will, at its expense, (i)
furnish continuously an investment program for the Fund and will make investment
decisions on behalf of the Fund and place all orders for the purchase and sale
of its portfolio securities and (ii) furnish office space and equipment, provide
bookkeeping and clerical services (excluding determination of net asset value,
shareholder accounting services and the fund accounting services for the Fund
being supplied by Investors Bank & Trust Company or such other administrator as
the Fund may engage from time to time) and pay all salaries, fees and expenses
of officers and Trustees of the Trust who are affiliated with the Manager. In
the performance of its duties, the Manager will comply with the provisions of
the Agreement and Declaration of Trust and By-laws of the Trust and the Fund's
stated investment objective, policies and restrictions.
(b) In placing orders for the portfolio transactions of the Fund, the Manager
will seek the best price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the Fund
the most favorable price and execution available, the Manager shall consider all
factors it deems relevant, including, without limitation, the overall net
economic result to the Fund (involving price paid or received and any
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future and financial strength and stability of the
broker. Subject to such policies as the Trustees may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its having caused a
Fund to pay a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Trust and to other clients of the Manager
as to which the Manager exercises investment discretion.
(c) The Manager shall not be obligated under this agreement to pay any expenses
of or for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section
1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and employees
of the Trust may be a partner, shareholder, director, officer or employee of, or
be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and persons controlled by or
under common control with the Manager have and may have advisory, management
service, distribution or other contracts with other organizations and persons,
and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER. The Fund will pay to the
Manager as compensation for the Manager's services rendered, for the facilities
furnished and for the expenses borne by the Manager pursuant to Section 1, a
fee, computed and paid monthly at the annual rate of 0.33% of the Fund's average
daily net asset value. Such average daily net asset value of the Fund shall be
determined by taking an average of all of the determinations of such net asset
value during such month at the close of business on each business day during
such month while this Contract is in effect. Such fee shall be payable for each
month within five (5) business days after the end of such month. In the event
that expenses of the Fund for any fiscal year should exceed the expense
limitation on investment company expenses imposed by any statute or regulatory
authority of any jurisdiction in which shares of the Trust are qualified for
offer and sale, the compensation due the Manager for such fiscal year shall be
reduced by the amount of such excess by a reduction or refund thereof. In the
event that the expenses of the Fund exceed any expense limitation which the
Manager may, by written notice to the Trust, voluntarily declare to be effective
with respect to the Fund, subject to such terms and conditions as the Manager
may prescribe in such notice, the compensation due the Manager shall be reduced,
and, if necessary, the Manager shall bear the Fund's expenses to the extent
required by such expense limitation. If the Manager shall serve for less than
the whole of a month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This
Contract shall automatically terminate, without the payment of any penalty, in
the event of its assignment; and this Contract shall not be amended unless such
amendment is approved at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the Trustees
of the Trust who are not interested persons of the Trust or of the Manager.
5.
EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become
effective upon its execution, and shall remain in full force and effect
continuously thereafter (unless terminated automatically as set forth in Section
4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract by not more than
sixty days' written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the affirmative vote
of a majority of the outstanding shares of the Fund, and (ii) a majority of the
Trustees of the Trust who are not interested persons of the Trust or of the
Manager, by vote cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the continuance of
this Contract, then this Contract shall automatically terminate at the close of
business on the second anniversary of its execution, or upon the expiration of
one year from the effective date of the last such continuance, whichever is
later; provided, however, that if the continuance of this Contract is submitted
to the shareholders of the Fund for their approval and such shareholders fail to
approve such continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund. Termination of this Contract pursuant to this
Section 5 shall be without the payment of any penalty.
6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote
of a majority of the outstanding shares" of the Fund means the affirmative vote,
at a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of the Fund entitled to vote at such meeting are present in person or by proxy,
or (b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person", "control",
"interested person" and "assignment" shall have their respective meanings
defined in the Investment Company Act of 1940 and the rules and regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; and the phrase "specifically
approve at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the rules and regulations thereunder.
7. NONLIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Manager, or reckless disregard of its
obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder. 8.
INITIALS "GMO".
The Manager owns the initials "GMO" which may be used by the Trust only with the
consent of the Manager. The Manager consents to the use by the Trust of the name
"GMO Trust" or any other name embodying the initials "GMO", in such forms as the
Manager shall in writing approve, but only on condition and so long as (i) this
Contract shall remain in full force and (ii) the Trust shall fully perform,
fulfill and comply with all provisions of this Contract expressed herein to be
performed, fulfilled or complied with by it. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use said initials as part of a business or name is not exclusive
of the right of the Manager itself to use, or to authorize others to use, the
same; the Trust acknowledges and agrees that as between the Manager and the
Trust, the Manager has the exclusive right so to authorize others to use the
same; the Trust acknowledges and agrees that as between the Manager and the
Trust, the Manager has the exclusive right so to use, or authorize others to
use, said initials and the Trust agrees to take such action as may reasonably be
requested by the Manager to give full effect to the provisions of this section
(including, without limitation, consenting to such use of said initials).
Without limiting the generality of the foregoing, the Trust agrees that, upon
any termination of this Contract by either party or upon the violation of any of
its provisions by the Trust, the Trust will, at the request of the Manager made
within six months after the Manager has knowledge of such termination or
violation, use its best efforts to change the name of the Trust so as to
eliminate all reference, if any, to the initials "GMO" and will not thereafter
transact any business in a name containing the initials "GMO" in any form or
combination whatsoever, or designate itself as the same entity as or successor
to an entity of such name, or otherwise use the initials "GMO" or any other
reference to the Manager. Such covenants on the part of the Trust shall be
binding upon it, its trustees, officers, stockholders, creditors and all other
persons claiming under or through it.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. A copy of the
Agreement and Declaration of Trust of the Trust is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, GMO TRUST and GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC have
each caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
GMO TRUST
By_______________________________________
Title:
GRANTHAM, MAYO, VAN OTTERLOO
& CO. LLC
By_______________________________________
Title:
