Exhibit 5.1
MANAGEMENT CONTRACT
Management Contract executed as of June ___, 1997 between GMO TRUST, a
Massachusetts business trust (the "Trust") on behalf of its GMO Emerging Markets
L 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) 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) Subject to the provisions of the Agreement and Declaration of Trust
of the Trust and the Investment Company Act of 1940 (the "1940 Act"), the
Manager, at its expense, may select and contract with investment consultants or
sub-advisers (the "Consultants" or the "Sub- Advisers" as applicable) for the
Fund. So long as Dancing Elephant, Ltd. ("Dancing Elephant") serves as
Consultant to the Fund pursuant to a Consulting Agreement in substantially the
form attached hereto as Exhibit A (the "Consulting Agreement"), the obligation
of the Manager under this Contract with respect to the Fund shall be, subject in
any event to the control of the Trustees of the Trust, to determine and review
with Dancing Elephant investment policies of the Fund and Dancing Elephant shall
have the obligation of furnishing continuously an investment program and making
investment decisions for the Fund, adhering to applicable investment objectives,
policies and restrictions and placing all orders for the purchase and sale of
portfolio securities for the Fund. The Manager will compensate any Consultant or
Sub-Adviser of the Fund for its services to the Fund. The Manager may terminate
the services of the Consultant or Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Consultant or Sub-Adviser unless and until a successor Consultant or Sub-Adviser
is selected.
(d) 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 0.80% 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.
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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
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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
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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.
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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:
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